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NBU Council Approves NBU’s Consolidated Financial Statements for 2023 and Profit to Be Distributed

NBU Council Approves NBU’s Consolidated Financial Statements for 2023 and Profit to Be Distributed

On 26 April 2024, the NBU Council approved the NBU’s Consolidated Management Report and Consolidated Financial Statements for 2023.

As of 31 December 2023, the NBU’s balance-sheet total was UAH 2,392.6 billion (UAH 1,958.6 billion in 2022).

The main components of the NBU’s assets as of the end of 2023:

  • assets that form international reserves, which mostly consisted of:
    • nonresidents’ securities amounting to UAH 1073.0 billion
    • funds and deposits in foreign currency amounting to UAH 373.4 billion
  • domestic securities – UAH 728 billion

Main changes in the NBU’s assets in 2023 were driven mainly by:

  • an increase in international reserves by 42%, to USD 40.5 billion as of the end of H1 2023 (versus USD 28.5 billion at the end of 2022), including an increase in foreign securities by 54%
  • a decrease by 7 times of the credit portfolio, primarily as the banks repaid long-term debts on performing loans.

The NBU’s liabilities as of 31 December 2023 were UAH 1,972 billion, accounting for 82% of the balance-sheet total (liabilities).

The NBU’s liabilities changed as follows:

  • Banknotes and coins in circulation grew by 7%, to UAH 765 billion.
  • Accounts of banks increased by 2.5 times, to UAH 216 billion.
  • Certificates of deposit issued by the NBU increased by 36%, to UAH 621.7 billion.
  • Accounts of state institutions and other institutions increasedby 2.6 times, to UAH 140.1 billion

An increase by 28% in the NBU’s equity in 2023, from UAH 328.2 billion to UAH 420.1 billion, resulted from an increase in revaluation reserves, which was mostly attributed to the change in the official exchange rate of the hryvnia against foreign currencies.

The NBU’s financial result for 2023 amounted to UAH 130.6 billion.

The main components of the NBU’s financial result were:

  • interest income of UAH 27.6 billion.
  • revaluation gain on financial instruments in the amount of UAH 97.8 billion due to a change in the official exchange rate and the fair value of the financial instruments. A portion of this revaluation gain – UAH 37.7 billion – was unrealized (previous) gain from changes in the official exchange rate, which, according to the Law of Ukraine On the National Bank of Ukraine, is accumulated as revaluation reserve in the NBU’s equity.

In 2023, the NBU’s costs related to the production of banknotes, coins, and other products, administrative expenses, and staff costs were UAH 7.0 billion (UAH 6.7 billion in 2022).

The NBU Council, agreeing with the validity of the approaches, estimates, and judgments applied by the NBU, approved the NBU's Consolidated Financial Statements for 2023, taking into account the report of the independent auditor.

Thus, the NBU’s distributable profit for 2023 was UAH 76.6 billion.

Today, on 26 April 2024, in line with the Law of Ukraine On the National Bank of Ukraine, the NBU has allocated UAH 37.97 billion to increase the central bank’s general reserves, which must equal 10% of the average annual monetary liabilities of the NBU. The remaining part of distributable profit was transferred by the NBU to the State Budget of Ukraine.  

Today, NBU has transferred UAH 38,64 billion to the State Budget of Ukraine. These funds will strengthen our country's capabilities and support the wartime budget,” said NBU Governor Andriy Pyshnyy.

As a result of the external audit of the NBU's Consolidated Financial Statements for 2023, the auditor Ernst & Young Audit Services LLC issued a qualified opinion about provisions for expected losses from the hryvnia-denominated domestic government debt securities held in the NBU's portfolio and accounted for at amortized cost.

As stated in Note 5 of the Consolidated Financial Statements, the NBU believes, based on the analysis of all available information, that the domestic government debt securities are conditionally free of credit risk and thus do not require provisioning. The government of Ukraine always meets its liabilities on domestic government debt securities. Taking into account the unprecedented volumes of external financial assistance, the NBU believes that the issuer of government securities has the potential to meet its contractual obligations in domestic currency to the NBU in the short term.

The auditor's report by Ernst & Young Audit Services LLC also contains an explanatory paragraph on the uncertainty of the impact of russia's military aggression against Ukraine on the NBU's operations. The audit opinion was not modified in this regard.

For reference:

In accordance with the law, the NBU compiles its financial statements in line with the International Financial Reporting Standards (IFRS).

Relevant estimates of assets, liabilities, income, and expenses in accordance with the IFRS (including the principle of prudence) must be made even under conditions of high uncertainty and involve the use of judgment and assumptions, analysis of all available information about past events, current circumstances, and the use of forward-looking information about the possibility of future economic benefits. The NBU's main judgments used in making the estimates are given in the notes to the Consolidated Financial Statements.

In particular, domestic securities (hryvnia-denominated domestic government debt securities) held by the NBU to receive payments from the issuer are classified into “at amortized cost” category. In this case, the IFRS requires mandatory assessment of probable credit losses, i.e., an assessment of potential shortfalls in payments envisaged by the terms of the issue. Given its special status, special relations, and cooperation with the Government of Ukraine, the NBU has access to and practical ability to analyze the most complete and up-to-date information. Based on the performed analysis, despite the difficult economic conditions in Ukraine and the ongoing military aggression of russia against Ukraine, the NBU reasonably expects to receive all payments on the domestic government debt securities in time. In view of the above, the NBU does not recognize any potential losses and has not created any provisions for hryvnia-denominated domestic government debt securities in its portfolio. The NBU continues to regularly and thoroughly analyze information to maintain an up-to-date assessment of the issuer's ability to repay its liabilities.

In accordance with Ukrainian legislation, the Consolidated Annual Financial Statements are subject to mandatory external audit, which was conducted by Ernst & Young Audit Services LLC, a member of the EY global network of firms with experience in auditing central banks.

Given the large share of the item “Domestic Securities" in the NBU's balance-sheet total, the issue of the used valuations of domestic government debt securities in the national currency, judgments, and their compliance with the IFRS was studied in detail by Ernst & Young Audit Services LLC as the key audit issue. Provisions for domestic securities should have been recognized, in the opinion of Ernst & Young Audit Services LLC. However, given the existence of several possible scenarios and the uncertainty regarding their probability, the audit firm was unable to determine the adverse impact of this issue on either the NBU's financial standing or its financial performance. Given the materiality of this issue, the audit firm has given a qualified opinion.

Therefore, in the opinion of the audit firm Ernst & Young Audit Services LLC, except for the effect of the issue of recognizing provisions for expected credit losses from securities of Ukraine, the NBU’s Consolidated Financial Statements present fairly, in all material respects, the consolidated financial standing of the NBU as of 31 December 2023 and its consolidated financial performance and cash flows for the year ended 31 December 2023, in accordance with the international financial reporting standards (IFRS), and meets the requirements of the Law of Ukraine On Accounting and Financial Reporting in Ukraine with regard to compiling financial reports (Accounting and Financial Reporting Law)


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