Financial sector news

Hryvnia loans in Ukrainian banks continue to grow rapidly, making a major contribution to the increase in banking assets. This is stated in the National Bank of Ukraine's review of the banking sector for the third quarter.

Market lending outside of state support programs continued to prevail, the high quality of the portfolio was maintained, and loan rates declined.
The review notes that after a pause since the start of the full-scale invasion, loan penetration into GDP has been growing at an increasingly rapid pace for three consecutive quarters (net loans to businesses already account for 8.4% of GDP, and to households – 3.2%).
During the third quarter and beyond, loans to private and selected state-owned companies continued to grow rapidly. Among the largest recipients were the trade, financial services, engineering, agriculture, energy, and food industries. All groups of banks continued to increase their loan portfolios, with state-owned banks growing the fastest.
In annual terms, long-term loans for capital investments grew faster, so the share of long-term loans in the net hryvnia business portfolio increased and exceeded 25%.

Thanks to favorable conditions, the portfolio is growing primarily outside the scope of state support, so the share of subsidized loans in the hryvnia business portfolio decreased to 27.4%. At the same time, the volume of loans to defense and industrial enterprises provided under the state support program reached about UAH 5 billion.
Unsecured loans dominate the retail loan portfolio, and the share of mortgages in this portfolio has grown to 13.4%.
Also, in the third quarter, banks increased their own portfolio of government bonds for the first time since the beginning of the year, responding to a larger supply from the government, while the volume of deposit certificates decreased.
Bank liabilities continue to grow, primarily due to an increase in household funds. The share of term deposits for the quarter remained virtually unchanged (33.9%), while the dollarization of household deposits declined to 33.6% due to faster growth in hryvnia deposits.
The volume of business funds resumed growth after a temporary decline due to significant expenditures by state-owned companies on the purchase of energy and equipment from accounts in state-owned banks.
Banks generally did not revise their rates on customer funds during the quarter, and the cost of deposits was primarily influenced by their term structure and the distribution of funds among banks.

Market rates on hryvnia-denominated business loans fell from a situational peak of 16% per annum in July to 15.3% per annum in September. Foreign banks offered the lowest average rate of 13.7% per annum.
The banking sector earned UAH 39.9 billion in profit in the third quarter. Lending remains its driving force, with the share of interest income from loans in total interest income for the quarter increasing to 47.8%.
Currently operating banks do not violate the applicable minimum capital requirements, including the leverage ratio, the regulator concludes.
At the same time, the introduction of an increased income tax rate of 50% in 2026 could pose a real challenge for the banking sector. If adopted, such a decision would have a negative impact on the sector's stability, its lending activity and investment attractiveness, and the prospects for privatization of state-owned banks.