The fact that Western European banks are leaving Ukraine is linked to the absence of improvements in the business climate and prospects for the development of the country's economy, Standard & Poor's Ratings Services says.
"Ukrainian banks are operating in conditions of high economic risk… The economic situation in the country does not have preconditions for revival in 2013," reads a report of a leading analyst of the Frankfurt office of S&P, Annette Ess, which was presented at an S&P conference in Kyiv on Tuesday.
The document says that Ukraine has lower GDP per capita and a lower pace of GDP growth than in Russia and Kazakhstan: in 2013-2015 it is expected that it will rise by 2-3%.
S&P said that the increase in competition on the Ukrainian market thanks to the operation of subsidiary banks of Russian banks, which have advantages from the point of view of access to funds, is compensated for by the continuous withdrawal of Western European banks.
According to S&P, the market positions of key players remain stable, although Ukrainian private banks have seen the most rapid growth in the sector in the post-crisis period.
“State banks are still playing the important role, although the medium-term strategy of the state is unclear,” reads the report.
S&P said that credit risks are still influencing the indicators of bank profit, while the increase in competition and the high cost of deposits put pressure on the indicator of net interest margin.
“There is no large reduction in the number of bad credits, and their volume amounts to some 20% of the total volume of credits,” says the report.
According to the document, most banks have not ensured they have adequate volumes of reserves, which can be required if there is an unpredicted economic recession and a potential worsening of the credit quality of borrowers.
“The rapid growth in debt burden of households… could be a large risk in the future if appropriate measures towards price formation and monitoring are not taken,” Ess said.
“The country’s banking system is in a stage of deleverage, although it still faces hardships linked to economic misbalances seen in the previous decade,” reads the report.
