Loan Portfolio Quality (NPLs)

NPLs Declining in Ukraine Despite Continuing Full-Scale War

The full-scale russian invasion on Ukraine has reversed the gradual downward trend of NPLs that continued since 2018. The banks incurred peak losses on defaulted borrower debts, who suffered due to russia’s armed aggression, during the first year of the full-scale invasion. At that time the banks reported major credit losses. In contrast, in 2023, the quality of the new portfolio improved, lending recovered, so NPLs began gradually declining.

The quality of the performing portfolio remains high: the rates of migration of hryvnia retail and corporate loans to NPLs are comparable to the pre-war levels. The analysis of the financial standing of corporate borrowers indicates that banks’ portfolios are dominated by quality loans.

As part of the EU integration efforts, since January 2025, the NBU has brought NPL definition in full compliance with the EU standards. Before that the “nonperforming assets” category included only default exposures in line with the Regulation On Measuring Credit Risk of Exposures by Banks of Ukraine. Since then, the Regulation On Organization of Problem Assets Management in Ukrainian Banks introduced the term “nonperforming assets”. Components of these assets are set out in Article 47a “Nonperforming exposures” of Regulation of the European Parliament and of the Council (EU) No. 575/2013 dated 26 June 2013.

According to the revised requirements, the list of non-performing assets of a bank includes:

  • defaulted assets,  for which signs of default were identified under іprudential requirements, including impaired assets under the IFRS. Only some categories of default assets can be considered performing based on the bank’s judgement
  • purchased or originated credit-impaired financial assets according to the classification of International Financial Reporting Standards
  • restructured assets that, having ceased to be recognized as non-performing, are restructured by the bank again and/or restructured assets the debt on which is more than 30 calendar days delinquent.

The introduced amendments brought NPL statistics in line with European practices increasing the transparency of Ukraine's financial sector. At the same time, banks’ transition to European approaches to non-performing assets valuation has little effect on NPL ratio and did not disrupt the gradually declining NPL trend.

Top 25 banks, million UAH

 
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NPL ratio of the top 25 banks in terms of loan portfolio, %

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NPLs ratio of the top 25 banks in terms of loan portfolio, %

The three following factors contributed to the major growth of NPL in 2015–2023:
  1. russia’s full-scale invasion of Ukraine in 2022
  2. introducing a clear term “non-performing loans (NPLs)” in line with the international practices (NBU Resolution No. 351) in 2017
  3. recognizing non-performing loans by PrivatBank after nationalization in 2016. 

 

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Details on NPLs definition in different years:
  • Starting from 1 February 2017, NPLs are determined in accordance with the NBU Board Resolution No. 351 of 30 June 2016. NPLs are the defaulted loans. The default is determined by the fact of payments on the asset past due 90+ days, or the inability of the borrower to repay the debt without repossession of collateral.
  • From 1 January 2013 NPLs are determined in accordance with the NBU Board Resolution No. 23 of 25 January 2012. Non-performing exposures (previously defined as negatively classified assets) were determined as exposures with payments past due 90+ days; individual exposures past due 30+ days with low counterparty financial class (the last two of the five quality categories).
  • Starting from 1 January 2001, NPLs are determined in accordance with the NBU Board Resolution No 279 of 6 July 2000. Loans classified as "doubtful" or "bad" are determined as negatively classified loans. Negatively classified loans are loans for which debt service is at high risk (taking into account the borrower’s financial condition and the quality of the collateral), and the likelihood of full repayment of the outstanding debt is low or practically negligible.
Details regarding the disclosure of NPLs

The NPLs data has been published on the website of the National Bank of Ukraine since September 2017. Prior to that, disclosure of NPLs data accompanied the banksʼ quarterly financial statements.

1. Monthly from 1 September 2017 on the official website of the National Bank of Ukraine according to:

  • On establishing a list of information subject to mandatory disclosure by banks of Ukraine (NBU Board Resolution No 11, of 15 February 2018);
  • On publication of certain information on the activities of Ukrainian banks (NBU Board Resolution No 85 dated 31 August 2017).

2. On a quarterly basis, from 1 January 2012, banks are required to publish interim financial statements (including the Note "Certain Bank Performance Indicators" with data on loans by quality categories) by posting on the Bank’s website according to:

  • Guidelines on the procedure of preparation and disclosure of the financial statements of Ukrainian banks (NBU Board Resolution No 373 of 24 October 2011).

3. On a quarterly basis, since 1 April  2005, banks are required to publish quarterly financial statements (including the Note "Certain Bank Performance Indicators" with indication of loans by risk categories) in the newspaper of Cabinet of Ministers of Ukraine, "Government Courier", or the parliament’s (Verkhovna Rada of Ukraine) "Voice of Ukraine" according to:

  • Guidelines on the procedure of preparation and disclosure of financial statements of Ukrainian banks (NBU Board Resolution No 480 of 27 December 2007);
  • Guidelines on the procedure for preparation and disclosure of financial statements of Ukrainian banks (NBU Board Resolution No 598 of 7 December 2004).

Useful Materials

Macroprudential Policy Strategy of the National Bank of Ukraine
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Data on the volume of loans and NPLs ratio by the Ukrainian banks since 2006
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