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Volume of non-bank financial services remains much less in late 2022 than pre-war – NBU

KYIV. April 3 (Interfax-Ukraine) – The resumption of activities of non-bank financial services in the fourth quarter of 2022 was slow and uneven, the volume of services remained much less than pre-war, according to a review of the non-bank financial sector, published on the website of the National Bank of Ukraine (NBU).

It also notes that over the year, the number of non-bank financial institutions (NBFIs) declined by 422, mainly due to some finance companies and credit unions exiting the market.

According to the NBU, in the fourth quarter, 88 financial companies, 17 credit unions, 11 insurers, and eight pawnshops and lessors were excluded from the registers. In addition, all licenses of 121 institutions, mainly financial companies and credit unions, were canceled during the quarter. A third of companies are deprived of licenses by decision of the regulator.

Over the last three months of 2022, asset volumes in most market segments declined. Only financial companies showed an increase in the volume of assets, despite a significant reduction in the number of institutions.

During the year, the segment of credit unions suffered the most from the shocks of the war, losing about 45% of their assets. The volume of assets of pawnshops decreased by 5%, while those of insurers and financial companies even slightly increased.

In general, the share of NBFIs in financial sector assets supervised by the NBU gradually decreased during the year to 11.97% as of December 31.

According to the regulator, the NBFI loan portfolio decreased by 14% over the quarter. New lending declined even faster, primarily through loans for consumer purposes (by 23%). Late repayment of loans worsened their stated quality. The share of overdue loans for more than 90 days increased by 1.8 times. The reduction in operating income along with high administrative expenses also had a negative impact on the financial result.

The negative financial result of the majority of credit unions led to the formation of accumulated losses and a decrease in reserve capital. During the quarter, the number of violators of the capital adequacy ratio increased fivefold, to ten credit unions as of January 1, 2023.

The NBU reports that despite the exclusion of a significant number of financial companies from the register, the volume of assets in the segment increased in the fourth quarter. Also, the recovery of the volume of services provided, which began in the third quarter, continued. The volume of transactions in basic financial services increased, but remained several times lower than the pre-war level.

In the fourth quarter, the volume of loans to the population increased by 42%, and to enterprises by a third. At the same time, in general, for 2022, the volumes of loans provided were half as much as in 2021.

At the end of the year, the leasing market was actively recovering: the volume of services increased by 2.6 times compared to the third quarter. In particular, there was a rapid increase in the volume of financial leasing provided by financial companies; their market share reached 55% as opposed to about 1% in previous years.

Transactions of legal entities-lessors for the quarter increased by 16%. Leasing agreements were concluded mainly for the purchase of cars, and less for trucks and agricultural equipment. For two quarters in a row, the volume of issued guarantees and factoring transactions increased.

Over 2022, financial companies were generally profitable, the NBU notes.

The pawnshop sector practically did not develop during the year. The volume of assets and new loans decreased, the capital of institutions fell significantly. In general, in 2022, the volume of lending by pawnshops fell by 36%. In the second half of the year, the income of pawnshops increased, but during the year the institutions were generally unprofitable.