Nonbank financial market continues slowly increasing volumes in Q1 – NBU

KYIV. May 26 (Interfax-Ukraine) – The nonbank financial market in January-March 2023 continued to slowly increase the volume of transactions, but, they are mostly still significantly below pre-war levels, according to a nonbank financial sector review on the website of the National Bank of Ukraine (NBU).

According to the regulator, traditionally at the beginning of the year, the volume of insurance premiums decreased slightly compared to the previous quarter. For the life insurance segment, they are even lower than a year ago, and for risk insurance they are only slightly higher, while payments have increased. At the same time, the performance ratio of insurers did not worsen, given the growth in income from investments in government bonds and deposits. According to the results of the quarter, insurers were profitable.

In the first quarter, lending to the population by financial companies gradually resumed, and the volume of factoring and leasing operations also grew. The activities of pawnshops revived: the volume of loans increased, incomes increased, and the activity became profitable.

At the same time, the credit union sector continued to stagnate. The assets of credit unions shrank, although more slowly than in the last six months. Rather, it happened with those institutions that attract deposits. New loans grew by 12% quarter-on-quarter mainly due to a sharp increase in lending to private farms. However, this did not stop the overall reduction in the loan portfolio by 3%. The share of non-performing loans remains significant (32%). Operating income, including net interest income from operations with credit union members, fell by more than a third compared to the first quarter of the previous year and by 17% compared to the previous quarter.

In addition to the reduction of the portfolio, the average interest rates on all types of loans and administrative expenses continued to contract. The ratio of operating expenses and operating income grew by 18 p.p., to 91%. Moderate operating income was not enough to cover the accumulated provisions for credit losses. The volume of the main types of funds attracted by credit unions continued to decline: additional share contributions by 6%, and deposits – by 5%. The number of institutions violating the capital adequacy ratio as of April 1, 2023 was 12 institutions, which is one institution less than at the beginning of the year. Two more unions operate with capital adequacy ratios close to the marginal level.

As for financial companies and pawnshops, despite a significant reduction in their number, the volume of the segment’s assets increased in the first quarter. For the third quarter in a row, there has been a recovery in the volume of financial services provided, but they still have not reached pre-war levels.

The volume of retail loans provided by financial companies has been growing for three consecutive quarters, including 37% in the first quarter. However, this is a fifth less than in the first quarter of 2022.

During the first quarter, the volume of factoring operations increased by a third. Financial leasing operations grew by almost 40% and were still mainly provided by lessors. Leasing agreements were concluded mainly for the purchase of trucks, and less for cars and agricultural machinery. As a result, in the first quarter of 2023, some financial companies made a profit.

The pawnshop sector showed signs of recovery. Assets and new loans increased in the first quarter, although capital was still at a low level. Interest income and income from the sale of property of pawnshops increased slightly, which made it possible to make a profit.

The regulator also said that in the first quarter the number of representatives of nonbank financial services decreased again: 79 financial companies, 12 pawnshops, nine legal-entity lessors, six insurers and five credit unions were removed from the register. Most financial institutions left the market, voluntarily having their licenses revoked. For the first time since August 2022, one financial company has been registered.

During the first quarter, 19 financial companies and one insurer voluntarily have part of their licenses revoked. By decision of the regulator, part of the licenses of four financial companies and four insurers were revoked. After the identified violations were eliminated, licenses were renewed in a number of financial companies, lessors and pawnshops.


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