Share of doubtful loans among top 20 Ukraine banks is 53%, NBU says

About 53% of the loan portfolio of Ukraine’s top 20 banks is of a low quality with the probability of default exceeding 50%, the National Bank of Ukraine (NBU) reported in its June 9 Financial Stability Report. Such conclusion was made by the NBU based on stress tests performed in 2015. This is in contrast to the data provided by the banks themselves, which estimated their share of low-quality loans at 27%, the NBU said. About 33% of the loans of the top 20 banks were classified by the NBU as default loans, according to the report.

As a result of this stress test, the NBU concluded that only four of 20 banks do not need additional capital. Two of the tested banks were later recognized as insolvent, and five have already completed their recapitalization programs that were designed for three years, NBU Head Valeriya Gontareva told journalists on June 9, providing no bank names.

Alexander Paraschiy: The results of analysis of loan quality are reflective of Ukraine’s entire banking system, given that the share of top-20 banks in the gross loan total of the banking system was 77% as of end-1Q15, when the stress tests started. With such poor quality of loans, it comes as no surprise that over 70 of total 180 banks exited the market during the last two years.

The NBU did not provide the names of nine of the top 20 banks that either completed their recapitalization program or did not need additional capital. But we estimate this list does not include any of the banks with traded Eurobonds: Privatbank (PRBANK), Oschadbank (OSCHAD), Ukreximbank (EXIMUK) and PUMB (PUMBUZ).