In 2014, the value of total assets in the Ukrainian banking sector had been increasing and amounted to UAH 1 317 billion as at the beginning of December (an increase of UAH 39 billion compared with the end of 2013). The increase in the value of assets was due to an increase in the value of the loan portfolio.
The recession in Ukraine deepened in the consecutive months of 2014 as the conflict with Russia in the eastern part of the country exacerbated. In the first quarter of 2014, the GDP growth rate amounted to -1.1% y/y and then dropped to -4.7% y/y in the second quarter and to -12.5% y/y in the third quarter of 2014. The areas around Donetsk and Luhansk, which are a war zone, were one of the most important industrial districts in Ukraine, accounting for a total of approx. 15% of its GDP. Throughout 2014 the Ukrainian economy may have shrunk by as much as -8.2% (according to an IMF forecast). It is also expected that GDP will drop further in 2015 (-2.3% according to the IMF, -4.3% in the budget assumptions). The inflation rate, measured with the consumer price index, amounted to 21.8% y/y in November, and the foreign exchange reserves dropped below USD 10 billion. The further functioning of the state is closely dependent on the provision of international aid – in the first quarter of 2015, the IMF is to disburse two more tranches of financing which will total to USD 4.8 billion. In spite of this, it is already known that the aid programme will almost certainly have to be expanded so as to save Ukraine from default.
In accordance with the data of the NBU, the number of banks operating in Ukraine decreased in 2014 (the last available data on 1 December 2014) from 180 to 165. Bankruptcy proceedings are pending against 28 banks. In banking sector of Ukraine the trend of outflow of foreign capital initiated in 2013 is continued – from the beginning of the year its share decreased from 34.0% to 32.2%.
In 2014, the value of total assets in the Ukrainian banking sector had been increasing and amounted to UAH 1 317 billion as at the beginning of December (an increase of UAH 39 billion compared with the end of 2013). The increase in the value of assets was due to an increase in the value of the loan portfolio which amounted to UAH 134.6 billion (+14.7%) till the end of November 2014. The increase in the loan portfolio was mainly the result of an increase in the indebtedness of enterprises (financial enterprises of +14.7%, non-financial enterprises of +11.2%) of UAH 80.4 billion till the end of November 2014 compared with December 2013 and foreign exchange effects (an increase in the USD loan portfolio of UAH 30.1 billion, +46.6%). During the same period the amounts due of the household sector to banks increased by UAH 18.1 billion (+9.3%). As at the end of November 2014, the total value of the loan portfolio in the Ukrainian banking sector amounted to UAH 1 047.8 billion, of which UAH 1 008.2 billion represented loans to residents. The largest increase in loans occurred in the 1-5 years segment (+24.8%), and a slightly smaller one – in the long-term loan segment (+22.6%). The short-term loan portfolio (of less than one year) shrank by 4.4%.
In 2014, the deposit base of the banking sector in Ukraine increased by merely UAH 0.2 billion (to UAH 701.8 billion as at the end of November). Household deposits dropped by UAH 51.8 billion by November (a drop of -20.2% to UAH 206.0 billion). However, a serious increase was recorded in deposits from non-financial enterprises (+UAH 12.8 billion, +6.8%) and financial enterprises (+UAH 2.6 billion, +10.5%). The amount of deposits from residents in the domestic currency dropped by UAH 60.2 billion (-14.6%), and the strong drop in the deposit base was stopped by an increase in deposits denominated in foreign currencies of UAH 54.5 billion (+22.4%). A move away from deposits in UAH was due to the strong depreciation of the domestic currency – throughout 2014 it depreciated by 47.9% against USD.
The strong depreciation of the hryvnia contributed to the strong deterioration of the loans to deposits ratio, which amounted to 149% in November 2014 (compared with 131% a year before). The share of foreign currency receivables in the loan portfolio increased to 46% (compared with 34% as at the end of November 2013).