The assets of pawnshops decreased most significantly in the fourth quarter of last year among all non-bank financial institutions (NBFIs) – by 16.3% to UAH 3.85 billion, while the assets of financial companies decreased by 1% to UAH 250.63 billion, according to data from the National Bank of Ukraine (NBU) released on Friday.
According to a review of the non-banking financial sector released on Friday, the assets of credit unions increased by 0.3% to UAH 1.42 billion in the fourth quarter, insurers by 5.7% to UAH 74.33 billion, and banks by 11.1% to UAH 2 trillion 942.81 billion.
Over the past year, the assets of pawnshops decreased by 6.2%, credit unions – by 1.9%, while financial companies grew by 2.7%, insurers – by 5.7% and banks – by 25%.
As noted by the National Bank, the total assets of non-bank financial services providers decreased by 0.7% in the fourth quarter of 2023, although they increased by 3.2% over the year. Their share in the financial sector assets supervised by the NBU decreased by 1.1 percentage points (pp) to 10.1% during the quarter.
“In the fourth quarter, the number of non-banking financial services providers decreased, as it has been doing throughout the year. 36 financial companies, 16 pawnshops, ten credit unions and insurers, as well as seven lessors were excluded from the Register,” the NBU said.
It is specified that most of the financial institutions left the market by the regulator’s decision, in particular due to non-compliance with license conditions. 14 financial companies voluntarily gave up part of their licenses, and two insurers had their individual licenses renewed after they eliminated violations of the regulator’s requirements.
At the same time, four pawnshops, a financial company, and a lessor were registered in the fourth quarter of 2023, compared to two financial companies and one lessor in the three previous quarters.
In total, more than 320 institutions, mostly financial companies and pawnshops, left the market in 2023, and only nine new NBFIs were registered: four pawnshops, three financial companies, and two lessors.
According to the NBU, 29 credit unions left the market over the year, mostly those that did not attract deposits.
“The volume of new loans decreased by 2% in the (fourth – IF-U) quarter due to a decrease in the volume of all loans, except for business loans. This was reflected in a 3.5% reduction in the loan portfolio compared to the third quarter (2023 – IF-U) and 2% compared to the end of 2022,” the review says.
The declared average share of the principal amount of loans overdue by more than 90 days decreased by 2 percentage points to 26% in October-December 2023.
It is noted that the net interest income of the CS decreased by 11%, primarily due to lower interest rates on all types of loans and an increase in administrative expenses by 23%, which exceeded operating income.
“Despite their operational inefficiencies, the institutions made a moderate profit due to lower loan loss provisions. The small profit has increased the role of own funds in funding credit unions,” the NBU commented.
The volume of share contributions due to the return of funds to depositors and the withdrawal of institutions from the market decreased by 12%, and deposits decreased by only 1%.
It is also indicated that in 2023, the number of violators of standards among the CS decreased by half – to 21. As of the beginning of this year, eight credit unions violated the capital adequacy ratio, while in the previous quarter there were ten, the National Bank reports.
“Most credit unions violate the limit on the share of unproductive assets,” the regulator emphasized.
Financial companies are in the opposite situation: while in the fourth quarter, the segment’s assets decreased by 1%, in annual terms, they grew by 2.7%.
“The volumes of all types of financial services, except for loans, decreased. For the second quarter in a row, financial companies have been increasing lending. In the fourth quarter (2023 – IF-U), the volume of loans increased by 10.7%: the volume of new business loans increased by 10.5%, and the population – by 11.1%.
It is noted that over the past year, 70% more loans were granted to the population than in 2022, but this is still 40% less than in 2021.
Speaking of leasing transactions, their volume decreased by 18% in the fourth quarter of 2023, primarily among legal lessors (financial or operating leases).
“New leasing agreements, as before, were concluded, as before, for the purchase of cars, agricultural machinery and trucks,” the central bank noted.
Last year, financial companies earned UAH 8.5 billion in profit, more than half of which was earned by the operator of the eHouse program, state-owned Ukrfinzhytlo, whose main income comes from interest payments on government bonds in the capital.
According to the data, three-quarters of financial companies were profitable in 2023.
The review says that in the fourth quarter of last year, pawnshops’ activities stagnated: the volume of assets and new loans decreased, and interest income fell. However, the segment made a profit by reducing administrative expenses.
“Profitability indicators declined slightly at the end of 2023. Equity decreased over the year,” the regulator summarized.
