Kyiv, March 3 (Interfax-Ukraine) – The share of bad loans and non-performing loans (NPLs) issued by Ukrainian banks shrank to 32.4 percent in 2011 from 40.1 percent (to Hr 243 billion from Hr 296 billion in absolute terms), according to a Credit-Rating study ordered by the International Finance Corporation.
The share of NPLs issued to legal entities fell to 30 percent as of December 1, 2011, from 36 percent as of October 1, 2010, Credit-Rating Director Stanislav Dubko said in Kyiv at an investment conference, Conference Investing in Distressed Assets in Ukraine – Opportunities and Challenges.
Legal entities’ bad debts in absolute terms fell to Hr 172 billion, down from Hr 188 billion.
The share of individuals’ NPLs was shrinking even faster – to 40 percent from 50 percent (to UAH 243 billion from 296 billion in absolute terms).
"We forecast corporate NPLs will decline to 25 percent, and individual NPLs to 35 percent in 2012," Dubko said. However, he said the forecast does not take into account the scenario of critically unfavorable changes in the economic environment.
He said the improvement in the quality of the banks’ loan portfolios last and this year is connected with an improvement in the quality of bad loan management, the polishing of internal banking procedures, the creation of a mechanism to detect potential bad loans, and the analytical accounting of toxic assets.
Among last year’s trends, Dubko mentioned a restrained lending policy, more active writing-off of bad debts, the sale of assets on collateral, restructuring with the partial writing-off of debts, and the appearance of proposals to sell collateralized loan portfolios.
He said that the formation of an objective system of price formation for the sale of loans, as well as the development of legislation in the direction of the sale of collateralized property and assignment of legal claims of loan portfolios to third parties should also make loan portfolios better.
In keeping with an EOS Group report presented at the conference, the amount of debts sold last year was $1.1 billion, and the estimated amount of investment in their purchase was $165 million.
A peak of the activity was seen in the third quarter of 2011 ($1.01 billion and $151.8 billion respectively), whereas the figures in the fourth quarter were considerably lower ($60.7 million and $6.2 million).
