Ukrainian banks see NPL grow to 38% of loan portfolio in 2022 - NBU

MOSCOW. Feb 9 (Interfax) - The share of nonperforming loans (NPL) in Ukraine's banking sector grew to 38% as of January 1, 2023 from 30% a year earlier, Ukrainian media reported, citing a statement from the National Bank of Ukraine (NBU).

The amount of NPL grew by 25% to UAH432 billion.

Loss of income and deteriorating solvency are reducing borrowers' ability to service loans, worsening the quality of bank's loan portfolios and leading to an increase in loan loss provisioning, the NBU said. Banks have already taken substantial credit losses, with provisioning topping UAH100 billion since February 2022 and amounting to more than 12% of the loan portfolio (as of the end of February 2022).

Banks' potential loan portfolio losses as a result of the special military operation, and economic and energy crises could reach 30%, the NBU said.

The NPL coverage ratio was 95% at the end of 2022. Recognition of the actual quality of assets will continue, so the amount of NPL could grow further, NBU first deputy governor Yekaterina Rozhkova said in the statement.

The NBU expects banks to have a balanced approach to assessing credit risk, particularly as regards borrowers who have lost their income and cannot resume servicing their debts, she said. Banks must carry out flexible restructuring for borrowers with prospects of restoring their businesses and must properly assess the value of property used as collateral, recognizing the loss of access to property, its damage or destruction in a timely manner, Rozhkova said.

The NBU will do an appraisal of asset quality in 2023 in order to make sure that banks are taking the correct approach to credit risk assessment.