Ukraine Banking & Financial Services Q3 2019
We continue to hold a broadly positive view on the Ukrainian Banking & Financial Services market; however, we cautionthat the downside risks to bullish view have increased since our last quarterly update. While they remain underdeveloped on a globalscale, we highlight that both the banking and insurance sectors are on a strengthening growth trajectory at a time when bothsectors are undergoing a degree of regulatory transition under the supervision of the IMF, and numerous other measures toimprove stability. We see such developments as positive both over the long term, and in the near term where they will serve to boostboth asset and client lending growth. On a less positive note, the outlook for the country's institutional investment sector remainsfragile across our forecast period. While capitalisation remains low in the country's capital markets, a focus on reforms to make iteasier for foreign investors to enter the arena as well as for domestic companies to borrow would support the necessary growth ofthe country's capital markets going forward. Hanging over our positive view on the sector is a key downside risk to financial stability,which exists in the form of the growing uncertainty surrounding the legal ownership of the country’s largest lender PrivatBank. Wehighlight that a potential denationalisation of the bank would substantially weigh on macro-financial stability. Meanwhile, over thelong term plenty of structural risks remain elevated, including poor asset quality.
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