Money loves silence. Without significant shocks in the economy, currency markets do not experience significant fluctuations, and GDP gradually increases. It seems that despite the war, Ukraine managed to enter a period of relative economic stability. Currency restrictions are reduced, the interest rate of the National Bank is reduced. The banking sector is reacting positively to all this – opportunities for lending are increasing, and the number of hryvnia deposits is breaking records. How long will this positive trend last and which banks are the most reliable today?
Good news from the National Bank
The lower-than-expected inflation rate in the first quarter of 2024 and the next tranches of financial support from international partners in April allowed the National Bank to lower the interest rate and move to the next step of deregulation of the foreign exchange market.
These are positive developments for the banking system, because money has become cheaper for financial institutions, so the conditions for loans should become more favorable, and the overall level of lending will increase.
Special international and state programs also contribute to the revival of lending.
For example, the other day the European Bank for Reconstruction and Development (EBRD) granted the companies “OTP Leasing” and “ProCredit Bank Ukraine” access to an unfunded portfolio risk-sharing mechanism. In particular, the first banking institution received a loan in the amount of EUR 80 million. At the same time, the EBRD will cover up to 50% of the credit risk of “OTP Leasing”. At the same time, 27.5% of the received amount should be used for lending to small, medium and micro businesses. Such companies, in addition to credit, will receive investment incentives and technical assistance from the European Union.
As for “ProCredit Bank Ukraine”, the financial institution will receive EUR 70 million from the EBRD for providing loans in the private sector. In this case, the European Bank for Reconstruction and Development also covers up to 50% of the bank’s risks.
The confidence of the population and business is growing
Improvement of the investment climate and financial stabilization restore confidence in the banking sector. Currently, the volume of household deposits in hryvnias is a record – more than 1.6 trillion. In the ratio of hryvnia to GDP, this is the highest indicator in the last 10 years.
In particular, at the end of April, Ukrainians had 29.8 billion hryvnias (or 1.8%) more in their deposits than at the beginning of the year. Deposits in foreign currency also increased by 1.8% since the beginning of the year. In general, since 2022, the volume of hryvnia deposits of the population has increased by 80%.
Saving money in Ukrainian banks has really become less risky. During the first quarter of 2024, not a single banking institution was closed. Today, 63 banks operate in the country. At the same time, 6 institutions are state banks. “Pinbank” was the last to be added to this list in January of this year.
The top 5 “richest” banks (the largest in terms of net assets) include “PrivatBank” (672.7 billion UAH of net assets), “OshchadBank” (372.1 billion UAH), “Ukreximbank” (270.3 billion UAH), Raiffeisen Bank (UAH 195.6 billion) and Ukrgasbank (UAH 172.3 billion).
Alpari Bank can be considered the weakest player in the financial services market. A few years ago, Ukrposhta planned to purchase this asset in order to use it as its own bank to conduct various types of financial transactions. However, these plans were abandoned. In December of last year, the shareholders of “Alpari” submitted an application to terminate the banking activities of the company, however, the license of this bank is still valid.
Citizens trust state banks the most. Almost 390 billion hryvnias of the population are currently kept in “PrivatBank”. Also market leaders include “OschadBank” and “Monobank”.
What happens next?
Currently, the situation in the Ukrainian economy is stable. And although the inflation rate will remain quite high (8-9%) until the end of the year, according to the forecasts of the National Bank, it will decrease to 6% already in the fourth quarter of 2025. Interest rates on deposits in Ukrainian banks currently range from 10 to 16% per annum. That is, by keeping funds on deposit, citizens will definitely not lose from the devaluation of the hryvnia.
Currently, the National Bank of Ukraine is completing the first stage of the currency liberalization plan and has started to implement the steps provided for in the second stage. The head of the National Bank, Andriy Pyshnyi, notes that things in the economy are going better than expected, so the liberalization plan is being implemented faster.
The result of the implementation of the third stage will be a return to the conditions of the deregulated currency market, which will function under the same conditions as before the full-scale war. It is not yet known when it will start. Everything will depend on the general state of the economy and the behavior of Ukrainian business. If, for example, after the introduction of relaxations on foreign exchange transactions, companies start to transfer funds abroad en masse, some currency restrictions will have to be returned. However, for now the head of the National Bank is optimistic.
If the situation in the economy will continue to improve, and the National Bank’s discount rate will decrease (as well as the inflation rate), then now it is profitable to put money on a long-term deposit. This may be a more profitable solution, since now deposit rates are higher than they will be, for example, at the beginning of 2025 (if, of course, the forecasts of the National Bank come true).
