Banking Sector

The NBU became more active in improving compliance of commercial banks with the NBU’s minimum capital requirements and reserves under credit risks.
Profits of commercial banks for 1999 totaled UAH 512.7 million. Taking inflation and hryvna devaluation into account, the real profitability of the banking system in 1999 was lower than in 1998, when banks made profits of UAH 449 million. However, over the year banks actively formed reserves to cover risks.

Out of 165 operating banks 151 finished the year with positive financial results, while 13 banks suffered losses. Over the last year banks’ profits rose following the sharp fall at the close of 1998, and although the half year profits were UAH 136.6 million, profits in the 3rd and 4th quarters reached UAH 182.9 million and UAH 193.2 million, respectively.
The volume of funds, which the government owes to banks, went down from UAH 1,380 million to UAH 836 million at the end of the year. The newly elected Prime Minister, Victor Yushchenko, promised to repay UAH 200 million (USD 35 million) during this year. This task looks realistic.
By the end of 1999 the dollar value of government’s indebtedness to banks fell to just USD 165 million.

The refinancing rate of the National Bank of Ukraine remained at the level of 45 percent since May 24, 1999. However, the weighted average credit rate of Ukrainian banks varied from a low of 38.8 percent in July 1999 to a high of 53.0 percent in March 1999.
The volume of banks’ credits to the economy grew from UAH 8.9 billion at the end of 1998 to UAH 11.8 billion by January 1, 2000. This amounts to a very insignificant credits to GDP ratio of 9.3 percent.

The total volume of deposits is approximately equal to that of credits. At the same time, confidence of certain strata of population to the Ukrainian banking system seems to have improved slightly. Household deposits are still small at 3.4 percent of GDP, compared to 3.0% in the previous year