Non-performing loans consistently reducing in volume in Ukraine – expert’s opinion
The relevant statement was made by Globus Bank Risk Management Director and Board Member Olena Yermolova in a commentary to Ukrinform.
According to the expert, since summer 2022, non-performing loans have been steadily reducing in volume. Meanwhile, more than 90% of the non-performing loans are those provided prior to the Russian full-scale invasion, whose recipients had lost the ability to repay the debt for objective reasons.
“There is a direct connection between the number of non-performing loans, wartime conditions, the volume of loans issued before the full-scale invasion and already after the restoration of lending. However, there is another important nuance: borrowers from the frontline areas are in a constant risk zone, as the war factor can significantly affect their ability to repay loans on time,” Yermolova explained.
In her words, according to the statistical data from the National Bank of Ukraine (NBU), the share of non-performing loans in the banking system had been practically unchanged over nine months of 2022, remaining at about 32%, which was explained by the NBU’s relaxed requirements for declaring loans as non-performing due to the full-scale war.
However, the actual dynamics of non-performing loan portfolio did worsen due to Russian armed aggression. In March 2022, more than 60% of bank clients did not make mandatory monthly payments. After the Kyiv, Sumy and Chernihiv regions were liberated from Russian occupiers (in April 2022), the servicing of loans and related debts gradually improved. Positive dynamics in reducing the number of non-performing loans is still underway.
Giving a forecast about the situation with non-performing loans in the banking sector, Yermolova emphasized that several factors should meet for their volume to further reduce, such as the improvement in the country’s economic situation; controlled situation at the front; reduction in the key policy rate as the main indicator of the cost of resources; improvement in the financial capabilities of individuals to take out and service loans; competition between financial institutions, and the implementation of borrower-friendly bank loan programs, namely the increased repayment term, the decreased initial contribution, etc.
A reminder that, according to the National Bank of Ukraine (NBU), the share of non-performing loans (NPLs) in the banking sector reached 36.6% as of March 1, 2024. In February 2024, the volume of NPLs reduced by UAH 788 million, while the volume of loans provided by banks increased by UAH 2.8 billion.
Photo: depositphotos
