Banks have stepped up lending to businesses and households, according to the NBU's December report on financial stability, UNN reports.
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The financial sector operated in a favorable environment, with much higher than expected GDP growth and slowing inflation. The key policy rate was cut but remained attractive for hryvnia savings. The transition to managed exchange rate flexibility was successful, without causing risks to the foreign exchange market and financial sector. However, a full-scale war remains a key risk, the NBU said.
Risks of uneven inflows and insufficient international aid are the main threats to macroeconomic stability. However, there are high chances that aid packages will be successfully agreed upon by partners. The baseline scenario for 2024 assumes stable economic growth, single-digit inflation, controlled foreign exchange market, and continued attractiveness of hryvnia assets, the NBU said.
Inflows of funds to banks continue, although the pace has slowed somewhat.
Lending to businesses in hryvnia has been growing for six months in a row. The program "Affordable Loans 5-7-9%" actively supports this market, but needs to be revised to restore its focus on supporting small and medium-sized enterprises and to ensure efficient use of budget funds.
At the same time, as noted, there is demand not only for preferential lending, but also for banks that do not participate in government programs.
The volume of unsecured retail consumer and mortgage loans is increasing. Two banks dominate unsecured consumer lending, leading to increased concentration in this segment. As for mortgage lending, it is almost exclusively provided by state-owned banks under the eHouse program.
Banks' operating efficiency remains high, with low provisioning costs. Credit risk losses are normalizing in all segments, and banks are prepared to cover credit losses with current operating profits. New laws regulating the non-banking sector are leading to transformation, particularly in the insurance and payments sectors.