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government to execute the structural reforms and hence achieve the economic growth projected, should allow the access of the Ukrainian enterprises to the European market and lead to further consolidation in the banking market.

In particular the loans market should increase and is projected by IMF at US$17.5 billion in the period 2018-2021 (9.9% CAGR). It is anticipated that there will be a significant demand for investment loans so that SMEs and large corporates invest in infrastructure in order to produce products and services at standards accepted in the EU countries.

Deposits are increasing (1Q17: 1.3% comprising increase in UAH deposits of 3.8% and decrease in FC of 1.9% mainly due to the repayment of foreign currency guaranteed deposits of liquidated banks back in hryvnia). The trend is expected to increase because of the return of trust to the public (estimated money “under the mattresses” US$6-10 billion).

▪ Potential for high commission income

Commission income in 2016 amounted to US$922 million representing 34% of the total banking revenue (25% for banks with foreign capital) exceeding the average of the European banks. The most significant types of commission are related to foreign exchange and money transfers. The difference in the share of commissions in the banking revenue between the banks with foreign capital and the banking sector average is mainly due to the fact that state owned banks are the exclusive banking providers for the government organisations. There are actions from the Banks’ Association to change to ratings criteria to introduce fair competition.

In 2016 total commissions returned 2.8% on assets. Considering that the sector’s balance comprises 37% cash and securities, this return is deemed high. In general Ukrainians are accustomed to high commissions and in paying for services. Commission income is expected to grow even further as exports and disposable income would be growing.
▪ Consolidation prospect
Opportunity to participate in the forthcoming consolidation of the sector, ripping the benefits of acquiring customers from state owned banks at least and grow organically.

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