The development of bank lending to corporate clients in Ukraine in times of economic cycles

Abstract

The article considers bank lending to corporate clients in Ukraine overcoming the issues related to economic cycles. The dynamics of gross domestic product, total assets, and credit portfolios of Ukraine’s banks over the period between 2012 and 2016 is analyzed. The changes in the composition of bank loans to non-financial corporations are analyzed in terms of scheduled payments, forms of currencies, target allocation and economic activities. Additionally, the dynamics and composition of residents’ deposits mobilized by deposit-taking corporations are considered in terms of scheduled payments over the above period. The major factors that hinder the recovery of bank lending to corporate clients are identified. It is highlighted that the main obstacles to the development of banking lending to corporate clients in Ukraine in times of economic cycles are as follows: high interest rates; a significant percentage of unprofitable enterprises and loan arrears in bank loan portfolios; an increase of non-performing loans (NPL); the fact that banks, having sufficient liquidity for lending to economy-boosting projects, prefer to purchase government securities; corrupt practices of granting loans to affiliated companies (insider loans). The percentage of unprofitable enterprises in Ukraine in 2016 is determined and analyzed by type of economic activity. Based on the analysis performed, some assumptions are made about the trends of the development of bank lending to corporate clients in Ukraine and proposals on further harmonization of bank lending to corporate clients in times of economic cycles are set out.