The National Bank of Ukraine’s Financial Stability Report says the banking sector is in its longest period of credit expansion in more than 15 years, with hryvnia loans to businesses rising by about one-third for more than a year and household lending growing at a similar pace for two consecutive years. Loan quality is also improving. But the report says a weaker macro backdrop and higher taxes on bank profits are reducing profitability, constraining banks’ ability to generate capital and limiting how fast they can keep expanding. Even if profitability stays at current levels, banks would not be able to grow faster than 15%–20% a year. Macroeconomic conditions worsened over the past six months as growth slowed, the current account deficit widened and inflation pressures intensified, prompting the central bank to keep monetary policy relatively tight and smooth excessive foreign exchange volatility. Banks are adding new borrowers and still have room to lend more, with only one-third of companies by asset volume currently using bank loans, but the report says they need to expand market-based lending through unsubsidized products such as consortium loans and factoring. That need is reinforced by an expected increase this year in overdue compensation under the Affordable Loans 5–7–9% program. The report points to credit guarantees from international partners as a more effective alternative to subsidized lending. Household credit risks remain contained because banks are underwriting conservatively, while non-bank lenders face higher over-leveraging risks and need to improve practices and loan terms. Asset quality continues to strengthen, with the banking sector’s nonperforming loan ratio falling to 12.6% as of May 1, 2026, and default rates on hryvnia business loans remaining below 3%. The report says reforms need to accelerate to maintain external financing inflows that offset war-related imbalances, and that an updated strategy for state-owned banks should clarify dividend expectations, privatization plans and each bank’s role in financing the economy.
National Bank of Ukraine2026-06-29
National Bank of Ukraine flags tax pressure as a brake on bank capital and lending despite roughly 30% hryvnia credit growth
The National Bank of Ukraine’s Financial Stability Report says banks are in their longest credit expansion in more than 15 years, with hryvnia business and household lending each growing by about one-third. Asset quality is improving, but weaker macro conditions and higher taxes on bank profits are reducing profitability and limiting capital generation, which the report says could cap annual bank growth at 15%–20%. It also calls for more market-based lending, wider use of credit guarantees and clearer strategy and privatization plans for state-owned banks.