In Q1 2019, solvent banks earned UAH 31 billion of net profit. The banking system made UAH 8.3 bпоillion of net profits for the same period last year.
In general, banks’ income increased by 31% to UAH 121 billion and expenses – by 7% to UAH 90 billion over the last six months.
Substantial income growth in H1 2019 can be attributed to the increase in net interest and fee and commission incomes of banks by 20% to UAH 39.3 billion, and by 17% to UAH 20.8 billion.
Major upward trend of interest income is associated with the following targets: high spread between interest rates on bank’s assets and liabilities in the retail sector and strong demand for retail loans. The growth of fee and commission income has been driven by growth in the volume of cashless payments, and the rapid development of consumer lending, which generates substantial fees and commissions.
At the same time, banks profit from revaluation of trading transactions amounted to UAH 10.4 billion, while the same period last year was noted for a negative result of UAH (-2.1) billion. Furthermore, the amount of loss allowances decreased by 31% from UAH 9.4 billion in Q1 2018 to UAH 6.4 billion in Q1 2019.
“Banks are making high profits for the second consecutive year on the account of rapid growth of consumer lending, that increased by nearly 30% yoy. Also, the strong results were driven by a high net interest margin and growth in fee and commission income on the back of stronger demand for banking services. At present, the banking sector operates in favorable conditions, since after the recovery of the sector in 2015–2017 there are virtually no more week financial institutions left in the market. According to NBU estimates, the high operating efficiency and profitability will last over the medium term,” noted Kateryna Rozhkova, First Deputy Governor of the NBU.
At the same time, the number and the share of loss-making banks declined significantly in H1 2019. As of 1 July 2019, 66 banks out of 76 solvent banks were profitable and made net profits of UAH 31.9 billion covering losses of 10 banks amounting to UAH 0.9 billion. As a reminder, according to the results of 2018,14 of 77 operating banks were loss-making.
In H1, profits were majorly attributed to PrivatBank (UAH 18.3 billion) and the group of foreign-owned banks (UAH 9 billion).
Please be reminded, in 2018 banking system profit hit all-time high. For the first time the profit can be called real and not resulting from window dressing the financial reports and deliberately reducing provisioning.
More details on the structure of income and expenses of Ukraine’s banks in H1 2019 is available in the published statistics.