As of January 1, 2005, there were 186 banks registered in Ukraine. Among them, 165 have licenses for banking operations. 126 banks are members of the Association of Ukrainian Banks.
The number of banks with foreign capital increased over the first eleven months of 2005 from 19 to 23. There are 9 banks with 100% foreign capital compared to 7 in 2004. The share of foreign capital in the registered charter capital of Ukrainian banks was 14%.
Six banks were registered in State bank register in 2005.
Twenty banks are in a stage of liquidation (10.8% of the total amount of banks in the State bank register).
Operations of the banking system have stabilized to some extent over the last several years. Its positive influence on the social and economic development of the state has strengthened. At the same time, the tendency of bank operations’ main indices to increase was maintained: balance capital of banks increased by 37.6% and constituted UAH 25.7 bn as of January 1, 2006 against UAH 18.6 bn. Increases took place mainly due to the charter fund’s expansion by UAH 4.5 bn (from UAH 11.6 bn in 2004 to UAH 16.1 bn).
The structure of balance capital is as follows: charter capital with the largest share in it (62.7%), results of previous years (4.4%), results of fixed assets revaluation, non-material assets, and investments to associated companies and subsidiaries (9.9%), results of the current year (9.4%), as well as general reserves and banking funds (11.5%).
Banking liabilities in 2005 increased by 62.4% (compare to 32.7% in 2004) and amounted to UAH 188.2 bn as of January 1, 2006. Liabilities of non-residents made up 16.7% of the total volume.
Individual deposits occupy the largest share of liabilities (38%). They increased by UAH 31.3 bn over the year and constituted UAH 72.5 bn including UAH 55.2 bn of term deposits (or 76.2% of the total deposits) and UAH 17.3 bn or 23.8% of call deposits. Individuals prefer deposits in the national currency, which amounted to 57.3% of the total individual deposits.
Assets of business entities constituted 32.5% of the total liabilities. They increased by UAH 21.1 bn up to UAH 62.3 bn in 2005.
Term deposits of other banks and credits obtained from other banks increased by UAH 14.6 bn or 2.1 times versus the results of 2004. Credits of international and other financial organizations increased by 1.8 bn, bonds of own debt – by UAH 2.2 bn or 4.6 times, and subordinated debt – by UAH 1.2 bn or by 89.6%.
Positive tendencies in the structure and dynamics of banks’ liabilities indicated that they now have more possibilities for long-term crediting of the national economy and investments. They also reflect financial institutions’ trust in the national monetary unit and the domestic banking system.
Net assets (assets minus formed reserves on active operations) added 59.2% over 2005 and amounted to UAH 213.9 bn. General assets increased by 57.6% up to USD 222.9 bn (by 34.1% over 2004) including 5.5% of non-resident assets.
Expansion of assets occurred due to an increase of credits provided by banks (by UAH 59.2 bn or 60.9%), specifically credits provided to business entities increased by UAH 36.2 bn (49.6%) and to individuals – by UAH 18.6 bn or 2.3 times. As of January 1, 2006 volume of credit portfolio constituted UAH 156.3 bn.
Credits provided to business entities constituted 69.7% of the total allotted credits, and credits to individuals – 21.2%.
Long-term credits and credits to investment activities continued to grow. Long-term credits increased by 89.4% over 2005 and reached UAH 86.2 bn as of January 1, 2006. Credits to investment activities increased 2.2 times up to UAH 13.5 bn (12.4% of credits provided to business entities).
Profitability of assets increased from 1.07% to 1.31% and capital profitability from 8.43% to 10.28% over the first 11 months of 2005.
Bank profit constituted UAH 2.4 bn in 2005, thus surpassing the results of 2004 1.9 times (when it amounted to UAH 1.3 bn). The fact that revenues of banks increased at higher rates than expenses is positive.
One of the most important tasks is fulfillment of the “Complex program for development of the Ukrainian banking system”, in compliance with EU standards. Special attention will be paid to securing the banking system’s stability and reliability, its capitalization, expansion of long-term credit mechanisms (including those for long-term crediting of individuals) and banking instruments. Banking institutions are supposed to expand their cooperation with other financial institutions like pension funds, insurance organizations, and investment funds.
Further development of the national banking sector will be a responsibility of coordinated actions by the National Bank, the Government, and the Association of Ukrainian Banks, based on a complex and systematic approach.
Approaching the EU criteria and requirements, and gradual integration into the global financial environment is a top-priority task in reforming the banking system. Strengthening of Ukrainian banking capital’s competitive capacity is extremely important as a result. The strategic line will be targeted, first of all, at making the maximum use of foreign banking capital’s potential to strengthen the Ukrainian economy’s investment potential. On the other hand, it will be aimed at proper restriction of this process, and employment of latent protection measures, which would support strengthening of the national bank’s capital.
Aiming at strategic goals of Ukraine’s national economy in 2004-2015, the national bank system should secure the following:
Prepared in accordance with the materials of Association of Ukrainian Banks, Information and Analytical Center