Andriy Volkov: The share of non-performing loans in the banking sector will decrease
The reduction in the share of non-performing loans (NPL) in the banking sector in August from 36.3% to 35% was facilitated by the correct regulatory policy of the National Bank and less risky new loans that banks are issuing now. Andrey Volkov, founder and partner of Investohills Group of companies, commented on the National Bank’s NPL statistics for August to the media.
“The fact that the share of problem loans in the banking system is declining is a natural process, and it is associated with several reasons. Firstly, the NBU has introduced rather strict rules on the assessment and reservation of the loan portfolio. After that, the banks began fruitful work aimed at restructuring the NPL, collecting them or selling them to specialized companies. Secondly, lending, both retail and corporate, is gradually resuming in Ukraine again. But, with the submission of the risk management of banks and the requirements of the National Bank, now it is less risky and produces much less non-performing loans. Accordingly, the portfolio of banks began to grow again, which means that the share of old problem debts began to decrease,” A. Volkov announced the reasons for the decrease in the share of NPL.
According to his forecasts, this trend will continue, and the share of non-performing loans will decrease further.
At the same time, he drew attention to where these problem debts are concentrated.
“Commercial banks, for the most part, have solved or are successfully solving issues with non-performing loans: they have restructured more or less living debts or debts related to shareholders and management of banks, collected collateral from non-performing loans, sold or are selling loans that they cannot handle on their own. Therefore, the bulk of the problem debt was concentrated in state-owned banks. And this is the next point of development for the NPL market of Ukraine, in which changes must occur – the system of working with distressed debts of state banks will change or, more realistically, the sale of distressed debt obligations will begin, since without this neither the development nor the sale of state banks is impossible,” the financier believes.
In addition, according to him, the solution of issues with problem debts in state-owned banks is also on the agenda of international creditors and donors of Ukraine. And therefore, the government, as a shareholder, the NBU, as a regulator, as well as the supervisory boards of state banks are forced to pay sufficient attention to them.
Recall, as reported in the Telegram channel of the NBU, the share of non-performing loans (NPL) in the banking sector on September 1, 2021 decreased to 35% (36.3% on August 1). Since the beginning of the year, the decrease in the share of NPL amounted to 6 p.p. and occurred in banks of all groups. At the same time, two years ago, the NPL index exceeded 50%.