The Ukrainian banking sector has by no means been so resilient. By way of capital, liquidity, profitability, and technological innovation, the nation’s banks have confirmed greater than a match in latest months for the challenges offered by the coronavirus pandemic.
Whereas these indicators are all individually vital, probably the most putting characteristic of at this time’s Ukrainian banking system is the return of public belief. The temporary outflow of deposits witnessed through the first weeks of quarantine circumstances in March 2020 is now a distant reminiscence. As an alternative, we’re experiencing a interval of fast development. At current, the annual development fee for family deposits in home forex is 27%, whereas the speed for overseas forex accounts is 5%.
This development is especially putting provided that it’s happening in opposition to a backdrop of declining rates of interest. The Nationwide Financial institution’s choice to scale back the important thing coverage fee from 11% to six% has led to single digit charges on deposits and loans for the primary time in Ukraine’s historical past.
The present favorable circumstances are offering Ukrainian companies with entry to extra inexpensive loans. That is permitting them to cowl short-term wants and finance large-scale initiatives. The final two months of the summer time 2020 interval supplied trigger for guarded optimism on this respect, with a 2.2% rise in enterprise loans alongside a 3% enhance in family loans. It’s nonetheless far too early to speak a couple of leap in financing, however we’re clearly transferring in the correct path.
There’s little signal that decrease rates of interest are harming revenue margins in Ukraine’s banking sector. Whereas the figures reported to this point this 12 months are barely decrease than for a similar interval in 2019, they continue to be comparatively excessive. Throughout the first eight months of 2020, the Ukrainian banking sector posted earnings of UAH 33 billion, with a slight year-on-year decline attributable to decrease public demand for banking companies because of the coronavirus-related financial downturn.
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Within the present pandemic circumstances, the digitization of economic companies has turn into a precedence for banks around the globe. The Ukrainian banking system is more and more on the forefront of this world digital transformation. An increasing vary of funds, together with for on a regular basis gadgets resembling utilities, can now be made by way of the cell purposes of any Ukrainian financial institution.
Since August 2020, we have now launched our system of digital funds (SEP) in 24/7 mode. This provides banks working in Ukraine the chance to make funds to the recipient across the clock.
The velocity of the Ukrainian banking system’s digital transformation owes a lot to the readiness with which the Ukrainian public embraces new applied sciences. Because of the customarily fast tempo of change through the post-Soviet interval, the Ukrainian public has developed a powerful worldwide repute as enthusiastic adopters of innovation.
This development is clear within the development of contactless funds by way of smartphones. In accordance with figures launched by Mastercard in 2019, Ukraine ranked fourth globally by way of the variety of contactless transactions. In the meantime, the recognition of contactless funds is fueling the event of Ukraine’s fee infrastructure. Round 85% of economic POS terminals within the nation at the moment supply the choice of contactless fee.
The identical development developments are seen in Ukraine’s banking card section, with regular will increase within the variety of non-cash transactions. The share of non-cash transactions within the first eight months of 2020 was 55%, which is a slight enhance on the 50% determine registered originally of the 12 months.
All through the Ukrainian banking sector, we’re seeing additional indications of the monetary system’s swap to digital mode. Just some years in the past, the concept of opening a checking account with out visiting a bodily department workplace would have appeared far-fetched. That is now one thing anybody can do by way of their smartphone and a digital passport.
A mix of digital improvements and rising public belief is enabling Ukrainian banks to increase their buyer base and compete for brand new purchasers. That is bringing increased returns for shareholders. It is usually making the sector considerably extra enticing to worldwide buyers. Given the big present state presence within the Ukrainian banking sector and our formidable privatization plans, Ukraine’s state-owned banks are set to draw growing consideration within the worldwide enterprise media over the approaching few years.
At current, Ukrgasbank is working with the Worldwide Finance Company (IFC) and is the state-owned financial institution that’s closest to partial privatization. An settlement is already in course of and talks at the moment are targeted on technical features, with expectations of a profitable closure. We additionally count on a world monetary group to accumulate a stake in Ukraine’s largest state-owned financial institution, Oschadbank, however there may be nonetheless important work to be completed to revise the related laws and develop the financial institution’s enterprise mannequin.
Regardless of the difficulties at the moment dealing with the worldwide financial system, we intend to proceed with privatization and meet our targets for the deliberate discount of the state-owned stake in Ukraine’s banking market. We now have already mentioned plans for a smaller state presence within the Ukrainian banking sector with representatives of the London Inventory Alternate. Our present technique for the partial privatization of Ukraine’s state-owned banks envisages that steps in direction of gross sales will start no later than by the tip of 2024.
I’m assured that by then, the reform of company governance at state-owned banks may have introduced the specified outcomes. This may imply improved operational effectivity and better transparency, together with a discount in drawback loans. We are going to then have the ability to privatize the Ukrainian banking sector and construct on the progress that has already been achieved lately.
Kyrylo Shevchenko is the Governor of the Nationwide Financial institution of Ukraine.
Tue, Oct 13, 2020
Because the wrestle over the Kremlin’s Nord Stream 2 pipeline continues, a gaggle of Ukrainian MPs has issued a joint letter highlighting the worldwide safety menace posed by the strategic power mission.
The views expressed in UkraineAlert are solely these of the authors and don’t essentially mirror the views of the Atlantic Council, its workers, or its supporters.
The Eurasia Center’s mission is to reinforce transatlantic cooperation in selling stability, democratic values and prosperity in Eurasia, from Jap Europe and Turkey within the West to the Caucasus, Russia and Central Asia within the East.