Banks’ profitability in Ukraine is growing: what has changed in the structure of income
20 May 07:48
The banking sector is showing a recovery in profitability, approaching pre-war levels. In the first quarter of 2025, solvent banks received a total of UAH 40 billion in net profit, with the lion’s share (65.7%) provided by state-owned financial institutions. This is reported by "Komersant Ukrainian" with reference to the National Bank.
Lending as the basis for growth
In the reporting period, lending was a key factor that supported banks’ assets and ensured profitability. This was made possible by maintaining high operating efficiency and low provisioning costs.
“For the first quarter, net interest income increased by 13.7% year-on-year, despite a slight narrowing of the interest margin to 7.4%, which was due to an increase in the cost of liabilities primarily in the corporate segment,” the regulator said in a statement.
The increase in asset yields was facilitated by the growth in the yield of the NBU’s highly liquid deposit certificates, which accompanied the key policy rate hike cycle. At the same time, the yield on loans and government bonds remained almost constant
Increase in fee and commission income
Net fee and commission income grew by 10.4% year-on-year, primarily due to an increase in income from payment transactions.
An additional contribution to the growth of operating income was provided by the positive result of revaluation of government bonds.
Costs reduced, efficiency increased
Reducing expenses across all major items allowed banks to improve their operating efficiency. Out of 60 banks, only 11 ended the quarter with operating losses.
The accumulated profits strengthen the banking sector’s capital, allowing financial institutions not only to meet regulatory requirements, including those based on the results of the resilience assessment, but also to increase lending to the economy.
However, uncertainty over taxation continues to hamper banks’ investment plans. Thus, during the first quarter, capital adequacy declined as banks took into account the increased income tax.
Tax policy and impact on financial results
According to the updated data for 2024, banks received UAH 91 billion in net profit after paying UAH 96 billion in tax at a rate of 50%.
For comparison, in 2023, the financial sector reported UAH 83 billion of net profit after paying UAH 77 billion of income tax at the same rate.
