All ten members of the the Monetary Policy Committee (MPC) of the National Bank of Ukraine (NBU) following the meeting on April 14, spoke in favor of raising the discount rate by 1 percentage point (p.p.), to 7.5% per annum in order to bring inflation to the target.
“The MPC members unanimously supported the increase in the discount rate to 7.5%, which is necessary for a gradual slowdown in inflation and its return to the target of 5% in the first half of 2022,” the NBU said in a statement.
According to the document, the participants in the discussion agreed that the forecast trajectory of inflation exceeding expectations, high inflationary expectations, as well as increased inflationary risks on the horizon of monetary policy require a decisive response from the National Bank.
The MPC several members said that temporary shocks related to the rise in fuel and food prices have largely been implemented, and therefore their impact will gradually weaken.
It is noted that the market’s reaction to the increase in the discount rate in March indicates its readiness of the market to perceive the signals of the National Bank, in particular, since the beginning of April, most rates on deposits of various maturities have stopped decreasing, and some of them have slightly increased.
The committee’s members expect that the current increase in the key rate will strengthen the transmission momentum through the interest rate channel, which will first affect interbank rates and rates on corporate deposits of banks, and from the middle of the year – on the profitability of deposits for the population, which will affect the reorientation of part of consumer demand in favor of deposits in banks and, accordingly, will contain its pressure on inflation.
One of the participants in the discussion noted the growth of bank savings of citizens due to the decrease in spending on tourism and certain types of services, access to which was complicated by lockdown.
According to this member, the high liquidity surplus in the banking system weakens the effectiveness of the monetary transmission mechanism: there is no urgent need for banks to strengthen the price competition of deposit resources.
At the same time, another participant in the discussion said that despite the increase in the discount rate, the NBU monetary policy remains soft, since, given the increased inflationary expectations, the level of the neutral discount rate is now from 9% to 9.5%.
He said that if the situation develops according to the basic scenario of the macro forecast, the transition of the National Bank to a neutral monetary policy will take place only in late 2021 or early 2022.
At the same time, he said that the baseline scenario provides for the resumption of cooperation with the IMF in the summer and does not imply an aggravation of the military conflict.
Most of the participants in the discussion believe that the decisions to increase the discount rate in March and April are sufficient to bring inflation to the 5% target in the first half of 2022. At the same time, several participants in the discussion said that inflationary pressures may be underestimated due to the high level of uncertainty, so they did not rule out the need to continue the cycle of increasing the discount rate.
The NBU press service said that the meeting was attended by all ten members of the MPC, including NBU Governor Kyrylo Shevchenko; First Deputy Governor Kateryna Rozhkova; Deputies: Yuriy Helety, Yaroslav Matuzka, Dmytro Solohub and Oleksiy Shaban, as well as department directors: Vitaliy Vavryschuk (financial stability); Volodymyr Lepushynsky (monetary policy and economic analysis); Oleksiy Lupin (open markets) and Yuriy Polovniov (statistics and reporting).
The loan portfolio of Ukrainian banks in April 2021 grew by 1.7%, to UAH 1.076 trillion, and the volume of non-performing loans (NPL) – by 0.8%, to UAH 425.88 billion, according to reports posted on the website of the National Bank of Ukraine (NBU).
According to its data, the share of non-performing loans in the banking system in April fell from 39.93% to 39.57%.
The National Bank indicated that over the month the portfolio of loans in the corporate sector increased by 1.9%, to UAH 807.408 billion (including the NPL volume in it – by 0.8%, to UAH 369.615 billion), and the portfolio of loans issued to individuals – by 1.6%, to UAH 218.678 billion (NPL – by 0.7%, to UAH 52.289 billion).
At the same time, the volume of interbank loans increased by 0.6%, to UAH 39.388 billion (including NPL decreased by 0.1%, to UAH 980 million), while the volume of loans issued to state and local authorities decreased by 3%, to UAH 10.909 billion (NPL remained at 0).
According to the National Bank, in April, the share of NPL in the portfolio of loans provided to the corporate sector decreased by 0.5 percentage points (to 45.78%), loans to the population – by 0.2 percentage points (to 25.28%), interbank loans – by 0.2 percentage points (to 2.49%), and loans to state authorities remained at the level of 0%.
The central bank report indicates that the loan portfolio of state-owned banks excluding PrivatBank in April 2021 increased by 0.2%, to UAH 299.733 billion (the NPL volume in it increased by 1.8%, to UAH 131.15 billion), while PrivatBank’s loan portfolio grew by 0.4%, to UAH 246.337 million (NPL remained at the level of UAH 177.99 billion).
In addition, over the month, the loan portfolio of banks with foreign capital grew by 3.5% (to UAH 352.736 billion), and with private capital – by 2.6% (to UAH 177.577 billion), while the NPL volume in them decreased by 0.6% (to UAH 93.55 billion) and by 1.7% (to UAH 23.2 billion).
The National Bank of Ukraine (NBU) has revised its inflation forecast from 7% to 8% in 2021, expecting inflation to return to the 5% target in H1 2022.
“Considering the fast-paced recovery of the global economy and higherinflationary pressures, the NBU revised its inflation forecast from 7% to 8% in 2021, expecting inflation to return to the 5% target in H1 2022 and settle at this level further on,” the NBU said on its website on Thursday.
The central bank said that inflation will peak in Q3 2021. Inflation will start to decelerate in autumn, return to the 5% ± 1 pp target range in H1 2022, and subsequently remain there.
The steep rise in inflation was largely driven by temporary factors, such as growing global prices for food and energy. A revival in the global economy and the effects of smaller harvests continued to push up prices. A low comparison base also played an important role.
Underlyinginflationary pressures increased due to sustained growth in consumer demand, which was, among other things, fueled by higher wages, the NBU said.
Retail turnovers consistently exceeded pre-crisis levels, being 5.6% year-over-year larger in February, the central bank said.
The growth of consumer prices in Ukraine in March 2021 accelerated year-over-year to 8.5% from 7.5% in February, from 6.1% in January and from 5% in December 2020.
According to the State Statistics Service on Friday, in March inflation increased to 1.7%, while in February it was 1%, in January 1.3%.
In addition, the State Statistics Service in March 2021 recorded underlying inflation of 1.6% compared to the previous month and 2.4% from the beginning of the year.
The Ukrainian government expects inflation of 7.3% in 2021, while the National Bank of Ukraine (NBU) 7%. At the same time, the NBU said that inflation in the first quarter was higher than its expectations. According to the NBU, a turning point ininflationary dynamics may occur in August or September 2021.
The largest number of branches of insurance companies (per 100,000 population) is located in Kyiv – 115, Kherson region – 124 representative offices, Zaporizhia – 49, Mykolaiv – 36, Khmelnytsky – 33, Cherkasy – 31, Ternopil-30, Chernivtsi – 28, according to the website of the National Bank of Ukraine (NBU).
At the same time, it is emphasized that in these regions the representation of insurers is 12.2 per 100,000 population.
The NBU also notes that in another eight regions of Ukraine the presence of insurers is significant (2.48 per 100,000 population). These are Lviv region with 57 representations, Odesa – 57, Vinnytsia – 34, Zakarpattia – 31, Ivano-Frankivsk – 28, Chernihiv-22, Kirovohrad – 20.
The smallest concentration of insurers (1.97 per 100,000 population) the NBU notes in Dnipropetrovsk region – 61 representative offices, Kharkiv – 44, Donetsk – 43, Poltava – 27, Rivne – 21, Zhytomyr – 20, Sumy – 20.
As reported, according to the NBU, as of March 31, 2021, the total number of insurance companies in Ukraine was 208, while on the same date a year earlier – 225. In particular, 20 insurers specialize in life insurance.
The net profit of UkrSibbank (Kyiv) in 2020 amounted to UAH 1.324 billion, which is two times less than in 2019 (UAH 2.615 billion).
According to a report on the bank’s website, net interest income for 2020 decreased by 1.3 times, to UAH 3.295 billion, while net commission income remained at UAH 1.7 billion.
By the end of 2020, the bank’s assets increased by 36%, to UAH 72.298 billion, including funds in other financial institutions – by 2.3 times, to UAH 23.5 billion, securities and investments – by 1.4 times, to UAH 18.3 billion, while loans to customers remained at the level of UAH 21 billion.
The bank’s liabilities last year increased by 1.4 times, to UAH 64.13 billion, including customer funds – by 1.4 times, to UAH 63 billion.
The bank’s equity capital in 2020 increased by 19.1%, to UAH 8.17 billion.
The charter capital remained at the level of UAH 5.07 billion.
UkrSibbank was founded in 1990. Its shareholders are BNP Paribas S.A (France), which owns 60% of the bank’s charter capital, and the European Bank for Reconstruction and Development with 40%.
According to the NBU, as of March 1, 2021, in terms of total assets (UAH 70.322 billion), UkrSibbank ranked eighth among 73 operating banks in Ukraine.
