The National Bank of Ukraine’s second-quarter Banking Sector Review shows that growth in net hryvnia business loans accelerated to 9.4% quarter on quarter from 6.3% in the previous quarter, taking annual growth above 30%. Banks’ net assets rose 3.4% over the quarter and 16.4% year on year, while the nonperforming loan ratio declined to 12.5%, with portfolio quality in both the business and household segments exceeding pre-full-scale invasion averages. Foreign-owned banks recorded the fastest business lending growth for a second consecutive quarter, led by loans with maturities of one to three years and financing for construction, industrial and manufacturing companies. Loans under the state-supported Affordable Loans 5–7–9% program reached one-third of the business loan portfolio. Household and business deposits increased 7.1% and 4.2% quarter on quarter, respectively, while higher deposit rates had little effect on overall funding costs because of a shift in the funding structure. The banking sector remained profitable and met applicable minimum capital adequacy requirements, although quarterly net profit fell 30% year on year because of the 50% corporate income tax rate. Regulatory capital rose 20.5%, primarily through the inclusion of the previous year’s profit. The National Bank proposed greater flexibility for restructuring loans to borrowers facing temporary financial difficulties, while identifying a possible extension of the windfall tax on bank profits into next year as a potential challenge.

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