Ukraine Maintains Record-Low 11.5% NPL Ratio

An NPL ratio measures the share of a bank’s outstanding loans that borrowers are not properly repaying. A sector-wide ratio of 11.5% means roughly 11.5 hryvnia of every 100 hryvnia in bank loans were classified as non-performing on Oct. 1.

The figure matters because bad loans can weaken banks, limit new lending, and create losses. Ukraine’s ratio reached 39.1% after Russia’s full-scale invasion, so the current level represents a major improvement. The NBU also said 11.5% was the lowest level in 17 years.

This does not mean all problem loans have disappeared. Total NPLs still stood at Hr.187.8 billion, even after falling 0.8%. The ratio has declined because banks added many higher-quality loans and resolved older bad debts. It was down 2.5 percentage points since the start of 2026 and 15.1 points since March 2022.

Ukraine’s banking system expanded its gross loan book by 20.5% during the first nine months of 2026. That equals an increase of Hr.278.8 billion, bringing total gross lending to Hr.1.64 trillion. The growth shows that banks were issuing substantially more credit.

At the same time, the total volume of non-performing loans moved in the opposite direction, but only slightly. NPLs decreased by 0.8%, or Hr.1.5 billion, to Hr.187.8 billion. This was a modest reduction compared with the growth in overall lending.

The contrast helps explain why the NPL ratio fell to 11.5%. The denominator, or total lending, grew quickly, while the amount of bad debt remained broadly stable and edged down. The central bank attributed the improvement to stronger growth in higher-quality new loans and active resolution of legacy NPLs.

An NPL ratio compares bad loans with all loans. It can therefore decline even when the absolute amount of bad debt changes very little. The key is that the total loan portfolio, which forms the denominator, may grow faster than the problem-loan balance.

Ukraine’s banking sector illustrates this clearly. During the first nine months of 2026, gross lending increased by Hr.278.8 billion, or 20.5%. Total NPLs declined by only Hr.1.5 billion, or 0.8%, to Hr.187.8 billion. New lending was described as higher quality.

That combination lowered the share of loans classified as non-performing. Banks also actively resolved legacy bad debts, which helped reduce the numerator. As a result, the overall NPL ratio dropped to 11.5%, even though a large stock of non-performing loans remained in the system.

Businesses recorded the biggest improvement in NPL ratios during the first nine months of 2026. Their non-performing loan share fell by 3.3 percentage points, a substantially larger decline than the 1.2-point reduction among individual borrowers.

After those changes, corporate NPLs stood at 13.7%. The NPL ratio for individual borrowers was lower, at 9.6%. These figures describe the share of each segment’s loan portfolio classified as non-performing, rather than the total amount of bad debt in each group.

The improvement came as the banking system expanded lending and worked through legacy problem loans. The article does not provide a detailed reason for the different segment declines. It does report that business loans had surged 30% year-on-year in 2025, while household loans rose about 36%, according to earlier central-bank estimates.

Russia’s full-scale invasion severely disrupted borrowers and the banking system. The NBU reported that default rates peaked at nearly 20% during the first year of the invasion. As more borrowers failed to meet their obligations, the overall NPL ratio climbed to 39.1%.

That peak shows how quickly a crisis can damage bank assets. Loans that had previously performed became non-performing, while existing problem loans added to the burden. The article does not identify individual causes for each default, but it links the peak directly to the first year of the invasion.

Conditions later improved. The overall ratio has declined steadily since mid-2023, reaching 11.5% on Oct. 1, its lowest level since Oct. 1, 2009. The recovery was supported by higher-quality new lending, active debt resolution, and a major state-bank write-off in late 2025.

A loan write-off removes a debt that a bank no longer expects to recover from its reported loan assets. When state banks wrote off more than Hr.170 billion in legacy non-performing assets, they sharply reduced the stock of NPLs counted in the banking system.

The timing was important. The major write-off occurred in late 2025, and the NBU identified it as one factor behind the ratio’s decline since mid-2023. It helped clear old problem loans rather than relying only on new lending to dilute their share.

Write-offs did not mean borrowers repaid those debts or that all economic losses vanished. They changed the amount of legacy NPLs reported by banks. Combined with higher-quality new lending and other active resolution efforts, the write-off helped bring the overall NPL ratio to 11.5% by Oct. 1.

Banks make loans because lending is a core activity of the banking system. It supplies money to businesses and households, while giving banks a loan portfolio that can generate income. The article shows this activity through Ukraine’s 20.5% lending expansion during the first nine months of 2026.

The central risk is repayment failure. When borrowers cannot meet their obligations, loans become non-performing. Banks may then face losses, must manage or write off bad assets, and can have fewer resources available for new credit. A larger NPL share signals greater pressure in the loan portfolio.

Ukraine’s experience shows both sides of this risk. The invasion pushed default rates near 20% and the overall NPL ratio to 39.1%. By Oct. 1, stronger new lending and active resolution of old debts had reduced the ratio to 11.5%, although Hr.187.8 billion in NPLs remained.