Экономические науки/1. Банки и банковская система
Inna Taranukha
Taras Shevchenko National University of Kyiv
under the Ministry of Education and Science, Youth
and Sport of Ukraine
The quality of Ukrainian Banks’ Loan Portfolio
The most important indicator which characterizes the doubtfulness of the
loan portfolio is the share of overdue loans in the whole bank’s credit
portfolio. Overdue debts most clearly indicate the existence of problems in the
loan portfolio of the banking institution, because it is a direct reflection of
the borrower`s problems and his inability to repay the debt to the bank.
Statistics of banks
activity in Ukraine indicate that by 2008 a steady decline in the share of bad
loans in the loan portfolio was traced and a significant improvement in the
structure of the loan portfolio of domestic banking institutions was observed.
At the beginning of 2008, NPLs accounted for only 1.3% of total credit
portfolio and in absolute terms it amounted to 6.4 billion UAH.
Source: developed
by the author on the basis of National Bank of Ukraine
Figure
1. Dynamics of the loan portfolio and the share of overdue debt in the banking
system of Ukraine
The financial
crisis 2008 led to hasty growth of troubled debts. According to statistics of
the National Bank of Ukraine, the period of most active growth of overdue debts
was in 2009, during this period their level increased in 3.9 times. This was
due both to the growth of the absolute amount of arrears, as a share of total
loan portfolio increased by 7.1 percentage points - to 9.4% from 2.3% at the
end of 2008, as well as with a gradual decrease of the size of loan portfolio
as a result of almost complete suspension of issuing new loans.
In 2010 in a certain extent because of the high effect of the comparison
base and also due to the improved economic situation, growth in the balance of
overdue loans slowed to 21.3%.
In 2011 growth in overdue loans was restrained by higher requirements to
the borrowers and strengthening the risk assessment by the banks. During that
year, the dynamics of overdue loans was diverse, but in general the results of
2011 were the balance of overdue loans decreased by 5.6 billion UAH or 6.5%,
and as of 01.01.2012 amounted to 79.3 billion UAH. As of 01.03.2012, the value
of this indicator increased to 81.7 billion UAH and 9.9% in relative terms.
Also, conclusions on the level of troubled
loan portfolios of the banks can be drawn by the capacity of reserves for possible losses on credit
operations reflected in the balance sheets of banks and by the coefficient of
securing of credit exposure by reserves.
Ratio of reserves for lending characterizes the quality of the bank’s
loan portfolio, and the average size of reserves required for each unit of
loans. Positive trend of this indicator is the reduction of its value.
According to the NBU before 2008 the trend for the reduction of the
ratio of reserves for lending transactions was traced. But the financial crisis
2008 has led to a rapid increase in this ratio, and the period of the most
active growth of reserves made for possible losses on lending transactions was
in 2009. During this period their level increased by 2.2 times in the banking
system of Ukraine (Table 1). This was due to the growth of the absolute amount
of non-standard loans and with a gradual decrease in lending. According to the
NBU, as of 01.03.2012, the total reserves for loan impairment in 176 banks
totaled to 119.1 billion UAH, or 14.5%, and the total reserves of the 17
largest banks – to 107.0 billion UAH or 23.0% in relation to the outstanding
loans. This indicates of the retention of the low quality of the loan portfolio
of the banking system of Ukraine.
Table
1. The dynamics of loan loss provision in the Ukrainian banking system
|
Date |
Total Ukrainian banks |
Total І group of major banks in Ukraine |
||||
|
Credit portfolio, UAH billion |
Loan loss provision, UAH billion |
Loan loss provision to cretit portfolio ratio, % |
Credit portfolio, UAH billion. |
Loan loss provision, UAH billion |
Loan loss provision to cretit portfolio ratio, % |
|
|
01.01.2005 |
97 197 |
6 367 |
6,6 |
47 890 |
3 773 |
7,9 |
|
01.01.2006 |
156 385 |
8 328 |
5,3 |
84 689 |
5 250 |
6,2 |
|
01.01.2007 |
269 294 |
12 246 |
4,5 |
160 925 |
8 250 |
5,1 |
|
01.01.2008 |
485 368 |
18 477 |
3,8 |
291 769 |
12 104 |
4,1 |
|
01.01.2009 |
792 244 |
44 502 |
5,6 |
521 997 |
31 748 |
6,1 |
|
01.01.2010 |
747 348 |
99 238 |
13,3 |
526 177 |
76 486 |
14,5 |
|
01.01.2011 |
755 030 |
112 965 |
15,0 |
524 602 |
96 131 |
18,3 |
|
01.01.2012 |
825 320 |
118 941 |
14,4 |
570 967 |
108 153 |
18,9 |
|
01.04.2012 |
823 181 |
119 125 |
14,5 |
465 155 |
107 022 |
23,0 |
Source: developed
by the author on the basis of National Bank of Ukraine
Official data on reserves for loans not
fully reflect the quality of bank loan portfolios. It is unfavourable for the
management of the banks to acknowledge the debt problem because, according to
the regulations of the NBU, it should be covered with adequate reserves.
Provisioning in large amounts causes losses that shareholders of banks are
forced to compensate by the increase of in authorized capital.
Bibliography
1.
Основні показники діяльності банків України
[On-Line Source] // Національний банк України: [web-site]. – Available at:
http://www.bank.gov.ua/Bank_supervision/dynamics.htm.