Share of NPL down by 2.8 p. p. to 34.6% in H1

The share of non-performing loans (NPL) in the banking sector as of July 1, 2024, was 34.6%, down 2.8 percentage points lower than at the beginning of the year.

This follows from the National Bank of Ukraine (NBU) data, the Ukrainian News agency reports.

The volume of NPLs decreased for the first half of 2024 by UAH 4.2 billion to UAH 418.2 billion.

The share of NPL of retail loans during this time decreased by 3.9 percentage points to 19.6%.

The decrease in the share of NPLs in the corporate credit portfolio also accelerated significantly - by 1.9 percentage points to 42.2%.

The key factors in reducing the share of NPLs are the banks' further increase in the volume of high-quality hryvnia loans and the write-off of non-performing retail loans, primarily by banks with Ukrainian private capital.

Banks are actively using available sufficient tools for NPL settlement.

The most common tools for banks to deal with NPLs are out-of-court restructurings.

They are designed to ease the client's debt burden and enable him to restore his solvency.

Banks have restructured about half of all corporate NPLs that remain on their balance sheets today.

Excluding loans to former owners of PrivatBank, this share exceeds 90%.

(The NPL share of corporate loans excluding loans to former owners of PrivatBank is 29.3%, i.e., 12.9 percentage points less than with them included).

A thorough analysis of the conditions and effectiveness of restructurings from 2020, which was carried out in the June Financial Stability Report, shows the following:

• before the full-scale invasion, the most common concession to customers with NPLs was the extension of the debt, occasionally with a grace period for paying interest on the loan;
• over the period of the full-scale war, banks became more flexible. In order to leave more resources for the client to recover his financial situation faster, they combined several tools at the same time. In 62% of cases, it is a combination of loan extension tools and providing a grace period for interest payments;
• most often, at least two or three successive relatively short restructurings are applied to NPL. Usually, each subsequent one has a longer term than the previous one;
• at the same time, banks rarely reduce rates; the exceptions were restructurings carried out in accordance with the Law of Ukraine "On Financial Restructuring," which were mostly carried out until 2022;
• the measure of "last hope" in the settlement of NPLs is the collection and sale of collateral by the bank. "Military" NPLs are better secured than the old portfolio due to the stricter lending standards of recent years. However, the generally low collateral coverage of loans makes voluntary settlement measures even more important for banks.

As the Ukrainian News agency earlier reported, before russia's full-scale invasion of Ukraine, the share of NPLs in Ukrainian banks began to decrease from 2018: from 55% to 27% as of March 1, 2022.

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