In January–September 2019, solvent banks earned UAH 48.35 billion of net profit, 4.4-times more yoy. In three quarters of 2018, the banking system made UAH 10.9 billion of net profits.
In general, banks’ income increased by 28% to UAH 184 billion and expenses – by 2% to UAH 135.6 billion over the last nine months.
A positive trend in banks’ income is attributed to an increase in interest income and fee and commission income by 18% to UAH 59.5 billion and by 14% to UAH 32.3 billion respectively due to a surge in consumer lending and retail non-cash transactions.
Significant gains from trading operations by state-owned banks, in particular through the revaluation of FX instruments, were another contributor to the banking sector’s high profitability. Generally, banks’ profit from revaluation of trading transactions amounted to UAH 14.8 billion, while the same period last year was noted for a negative result of UAH (-2.2) billion. Furthermore, loss allowances decreased by 2.4% from UAH 19.9 billion over nine months in 2018 to UAH 8.3 billion over the same period in 2019.
“The cycle of rate cuts initiated by the NBU will have a positive effect on banks' profitability. Cost of funding reduces, if the banks are free from the media and legal pressure, and high household demand for lending insures high profitability in the retail sector. The increase in deposits will remain sufficient to cover retail lending. Overall, banks’ profitability is expected to somewhat scale down in the mid-term, but will be high enough to sustain investors’ interest,” noted Kateryna Rozhkova, the First Deputy Governor of the NBU.
At the same time, the number and the share of loss-making banks declined significantly in January–September 2019. As of 1 October 2019, 66 banks out of 76 solvent banks were profitable and made net profits of UAH 49.6 billion covering losses of 10 banks amounting to UAH 1.3 billion. As a reminder, according to the results of 2018,14 of 77 operating banks were loss-making.
Over nine months profits were majorly attributed to PrivatBank (UAH 27.4 billion) and the group of foreign-owned banks (UAH 12.8 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 information on the structure of income and expenses of Ukraine’s banks in nine months of 2019 is available in statistical data published.