Interview with the head of the National Bank of Ukraine's office in the Volyn region, Oleksandr BIELIK.
– What were the results of 2005 for the region's banking system?
– The past year was notable for both quantitative and qualitative indicators of the region's banks' development. Thus, the number of banking institutions grew from 322 to 354. At the beginning of the year, 2 banks as legal entities, 24 branches and 328 balance-sheet-free branches of banks operate in the region. 3.2 thousand people are employed in the banking sector. In the second half of 2005 alone, the number of individuals with deposit accounts in the region's banks grew from 433 to 481 thousand people, and the number of business entity clients serviced in the region's banks – from 24 to 27 thousand. As of the first of January 2006, banks provide credit support to 2.5 thousand business entities and 103.3 thousand citizens.
– Volyn residents will probably be interested to know how the region looks against the backdrop of Ukraine's banking system as a whole.
– Although in absolute terms the region is not a leader, Volyn consistently ranked 10th-11th among other regions in 2005 by the indicator of loans granted per capita. In the western region, among 8 regions, Volyn is in third place by volume of loans granted per capita and in fourth place by volume of liabilities for funds of business entities and individuals per capita.
Interest rates on banks' operations for granting loans and attracting funds on deposit are somewhat higher than the average for Ukraine, namely: for loans in national currency across Ukraine – 16.39 percent (in the region – 18.48), in foreign currency – 11.71 percent (in the region – 13.51); for term deposits in national currency across Ukraine – 10.20 percent (in the region – 13.20), in foreign currency – 8.22 percent (in the region – 9.29). Across Ukraine, the average rate is influenced by significant volumes of operations and the traditionally cheap resources of the capital region.
The absolute indicators of the banking sector's activity in the region's economy are as follows: the loan portfolio of banking institutions grew by 585.2 million hryvnias in 2005 and amounted to 1566.6 million hryvnias, long-term loans grew since the beginning of the year by 402.9 million hryvnias and amount to 991.3 million hryvnias (63.3 percent of the loan portfolio); loans granted to the population amount to 408.2 million hryvnias; loans granted to business entities amount to 1158.3 million hryvnias; funds attracted by banks from legal entities – 334.7 million hryvnias, from citizens – 883 million hryvnias. Since the beginning of the year, the growth of population deposits in national currency in absolute terms exceeded the growth of deposits in foreign currencies by 3.4 times. The share of population deposits in national currency grew over the year from 48.5 percent to 59.5 percent. Term funds of citizens amounted to 763.7 million hryvnias, of which long-term deposits grew over the year by 214.6 million and amount to 558.8 million hryvnias.
– How tough is competition today between the region's banking institutions and how does this affect the quality of client service? Which banking institutions are currently leaders in lending and attracting citizens' funds?
– The year 2005 became the year of greatest activity in opening banking institutions in Volyn in recent times – their number grew by 32 institutions (in 2004 – by 17, in 2003 – by 9, in 2002 – by 18). In 2005, such banks as: JSCB "TAS-Komertsbank", OJSC "Kreditprombank", OJSC AB "Ukrgazbank", JSCB "Imeksbank", JSCB "Forum", JSCB "Raiffeisenbank Ukraine" entered the region's banking market. Today, institutions of 26 banks of Ukraine operate in the region. Oshchadbank traditionally has the most extensive network, followed by PryvatBank, JSCB "Aval", Zakhidinkombank, JSCB "Mriya", OJSC CB "Nadra", UkrSibbank.
Competition, of course, exists and we see a fairly wide range of interest rates offered by banks both on loans and deposits. Here clients have an opportunity to choose. We also see that the arrival of new banks in the banking services market contributed to the growth of lending volumes to individuals.
The leaders in lending to legal entities are Zakhidinkombank, PryvatBank, Ukreximbank, Prominvestbank; in lending to the population – PryvatBank, JSCB "Aval", Oshchadbank, UkrSibbank. In attracting funds from legal entities – Zakhidinkombank, PryvatBank, JSCB "Aval", Prominvestbank; in attracting funds from individuals – PryvatBank, JSCB "Aval", Zakhidinkombank, Oshchadbank, JSCB "Nadra".
– Which sectors of the region's economy feel the demand for credit resources the most and to what extent is it possible to satisfy it? How do banks work with citizens?
– The largest growth over the year was in credit investments in wholesale trade, processing industry (especially food), agriculture and in types of activity related to real estate and leasing. Today, the following sectors are mainly being credited: agriculture – 119 million hryvnias, wholesale and retail trade – 649.8 million hryvnias, processing industry – 285.1 million hryvnias, transport – 29.2 million hryvnias, construction – 18.9 million hryvnias, and others.
Compared to 2004, preferential lending (using the loan cost reduction mechanism) by banks to agro-industrial complex enterprises grew from 79.8 million hryvnias to 94.9 million hryvnias, including: short-term loans granted – 64.9 million hryvnias, long-term – 30 million hryvnias. The demand for credit resources cannot yet be fully satisfied, however, the situation is being improved by the tendency toward lower interest rates on loans both in national currency and in foreign currency: from 32.9 percent and 16.4 percent respectively in December 2001 to 18.0 and 13.5 percent in December 2005. Trust in banks on the part of the population is growing, and consequently so are the resource base and lending opportunities of banks: the growth of population deposits in 2005 was the largest in recent years: in 2002 – 103.8 million hryvnias, in 2003 – 188.4 million, in 2004 – 97.9 million, in 2005 – 338.3 million hryvnias.
The population is gradually becoming not only the main creditor of banks but also an important borrower (the annual growth of lending volumes to citizens in 2005 was the highest since 2002: in 2002 – 20 million hryvnias, in 2003 – 69 million hryvnias, in 2004 – 68 million hryvnias, in 2005 – 242.9 million. Moreover, the share of overdue loans in the total volume of lending to the population is smaller (0.53%) than in the structure of lending to business entities (7.7%).
– The National Bank, as is known, is the bank of banks, performs the function of control and regulation, determines state policy in the banking sector of the economy and works directly only with banks. Does the NBU have feedback from economic entities to study their reaction to economic processes?
– It should be said that the NBU indeed does not carry out operations for lending and attracting funds from legal entities and individuals, however, studying the dynamics of the volumes of these operations across banks as a whole, the dynamics of interest rates, including by sectors of the economy, analysis of the state of loan portfolios of banking institutions during bank inspections – all this gives an idea of the activity and dynamics of development of both the banking sector and other sectors of the economy. In addition, the NBU conducts surveys of enterprises in various sectors in all regions of Ukraine in order to ascertain their assessments regarding current and future business activity, inflation and exchange rate expectations and the economic situation in the country. The survey results are used by the National Bank of Ukraine for monitoring economic activity and short-term forecasting.
Oksana KRAVCHENKO