Key trends in Ukraine’s banking sector
Ukraine’s banking sector has undergone a process of deep and comprehensive reforms over the last few years. As a result, the number of banks dropped significantly to 74 currently, down from 180 in 2013. Bank assets have somewhat increased, but slower than Ukraine’s nominal GDP. Therefore, the banking sector (21% of GDP) declined and remains small in regional comparison. The banking clean-up involved the nationalisation of Privatbank, the market leader with a 28% asset share, and led to the dominance of state-owned banks, representing 59% of the market. The reforms also contributed to improving the capital adequacy ratio, thereby strengthening resilience and supported profitability of the sector. As a result, Ukraine’s banks are facing the negative economic consequences of the COVID-19 pandemic much better prepared than in the past.
Still, the amount of non-performing loans remains a risk. Though the share has gradually declined since 2017, it remains on a very high level compared to peers. Ensuring a significant reduction of the NPL stock and maintaining the independence of the National Bank are two key priorities within the current IMF Stand-By-Arrangement.