Ukraine sees NPL share shrink to 30% in 2021

The share of non-performing loans in Ukrainian banks shrank by 11% in 2021, to 30%, the press service of the National Bank of Ukraine (NBU) has said.

"The stock of non-performing loans (NPLs) in Ukrainian banks fell by UAH 85.2 billion in 2021. The share of NPLs in the loan portfolio decreased by 11 percentage points over the year -- from 41% on January 1, 2021 to 30% on January 1, 2022," the statement reads.

The central bank said the current figure is the best result since the beginning of 2017, when NPL stocks were determined according to the updated methodology.

The quality of loan portfolios has improved in banks of all groups.

In 2021, state-owned banks reduced non-performing loans by UAH 56.2 billion, which is almost two-thirds of the total reduction in the banking sector. As a result, the share of non-performing loans in state-owned banks decreased from 57.4% to 47.1% over the year. At the same time, they still accumulate more than 70% of the gross NPL portfolio. State-owned banks continue to implement NPL reduction plans approved by the Financial Stability Board. This is a necessary prerequisite for increasing their investment attractiveness and one of the structural benchmarks in Ukraine's cooperation program with the IMF.

"In 2021, the most significant decrease in the share of NPLs in recent years was due to banks writing off the reserved non-performing loans and intensified lending. Further effective settlement of non-performing loans requires joint work of state institutions to improve the relevant legislation, introduce the institution of securitization of distressed assets, create an NPL secondary market infrastructure, etc. The implementation of these initiatives combined with the growth of a new high-quality loan portfolio will allow for a steady reduction in the share of NPLs to target figures," said Kyrylo Shevchenko, Governor of the National Bank of Ukraine.

According to the NBU, the share of non-performing loans (NPLs) in Ukrainian banks decreased from 48.4% (as of January 1, 2020) to 41% (as of January 1, 2021).

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