NBU: Key risks of Ukrainian banks are low operation efficiency of state-owned banks, low quality of assets

The key risks of the Ukrainian banking sector are low operation efficiency of state-owned banks and low quality of their assets, according to the banking sector review published by the National Bank of Ukraine (NBU) on its website.

"Largest state-owned banks require the radical change of their business models and designing long-term development strategies. The important step in this sphere should be amendments to legislation that would allow creating independent and professional supervisory boards and reshuffle managers of the banks if it is required," the NBU said.

The central bank said that along with retaining of macroeconomic stability in Ukraine in the first quarter of 2017, the upward trends of the previous periods strengthened in the banking system.

The NBU pointed out restoration of demand on banking services.

"First since the start of the crisis the hryvnia-pegged crediting of the public has stirred up. Not taking into account PrivatBank, which partially replaced retail credits in the P2P segment by the balance sheet crediting, growth was 2.8%," the NBU said.

In addition, deposit rates fell for 12 month deposits of individuals by 1.7 percentage points, to 15.7% per annum in hryvnias and by 1 percentage points, to 4.6% per annum in the U.S. dollars.

The driver for cutting hryvnia-pegged deposit rates was the interest policy of state-owned banks.

The central bank said that in January-April 2017 six banks were removed from the market, and the share of 20 largest banks in terms of net assets was 90.6%.