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Banks See Slowdown in Income Growth – H1 2020 Results

Banks See Slowdown in Income Growth – H1 2020 Results

In January-June 2020, solvent banks gained UAH 23.8 billion of net profit, which was by 23% less compared with the same period last year when the banking sector earned over UAH 31 billion.

In Q2 2020, banks reported UAH 7.7 billion of net financial result, which was twice less compared with the previous quarter and 2.4 times less compared with Q2 2019.   It was mainly caused by forming pre-emptive loss allowances in the amount of UAH 13.1 billion for the quarter in accordance with the International Financial Reporting Standards.

Overall economic downturn during the quarantine, drop in demand for loans and banking services, and increase in nonpayments on loans have negative impact on interest and commission income of banks.  Therefore, for the first time in the last four years, net commission income of banks decreased by 1.5% to UAH 20.5 billion this year compared with the same period last year.  In Q2, it fell by 10.2% yoy.  Growth of net interest income slowed down to the lowest figures in four years: 3.9% yoy for H1 and 1.1% yoy for Q2.  At the same time, net interest and commission income is sufficient to cover administrative expenses of most banks today.

"Thanks to the NBU efforts, banks were able to create their margin of safety at good times and today they are using their capital buffers to absorb credit losses. To relieve the burden for banks in such trying times, we should give them more clarity about the duration of loan holidays," said Kateryna Rozhkova, NBU First Deputy Governor.

As of 1 July 2020, 59 banks out of 75 solvent banks were profitable and made net profits of UAH 26.3 billion covering losses of 16 banks for the total amount of UAH 2.5 billion.

In H1, profits were mainly attributed to PrivatBank (UAH 14 billion or 59% of total profits) and the group of foreign-owned banks, excluding Russian banks (UAH 5.6 billion).

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