Banking sector recovery continues, but risks remain
Banks operating in Ukraine have considerably improved their performance during the last few years. While the sector as a whole recorded a record loss of UAH 160.5 bn in 2016 (after the nationalisation of PrivatBank, the biggest bank in the country), the corresponding figure for the first eight months in 2019 is a profit of UAH 44 bn, also in part due to a turn-around in PrivatBank.
The massive clean-up of the system, which cumulated in the nationalisation of PrivatBank, seems now largely to be over. The number of banks – currently 75 – is quite stable. Reforms improving the corporate governance of state banks and the supervision of the non-banking sector (the “split law”) have been enacted, which is a positive sign.
However, risks remain. The still high level of NPLs (53% of gross loans, in particular concentrated in state banks) needs to be addressed. Furthermore, recent events that threaten the nationalisation of PrivatBank raise new question marks, as this was considered the key cornerstone of the whole banking sector reform.