Banking Sector 2025: Why Profits Are Declining Despite Revenue Growth
Financial results of Ukrainian banks for January–July 2025 at first glance look convincing: UAH 95.50 billion in net profit, steady growth in interest and commission income, and continued dominance by state-owned institutions. However, behind these numbers lie a number of problematic trends, which indicate not so much weakness in the system as overburdening by risks and regulatory pressure.
Compared to the same period in 2024, banks earned 1.2% less net profit. This is not a crisis, but also not just a statistical fluctuation. The decline occurred against the backdrop of increasing core income sources:
- Net interest income rose by 14.3%, reaching UAH 151.74 billion.
- Commission income increased by 12%, totaling UAH 35.41 billion.
- In July, these figures showed even stronger dynamics: UAH 22.84 billion and UAH 5.30 billion, respectively.
However, the financial result in July was UAH 14.42 billion, which is 1.9% lower than in July 2024. This gap contains the answer to the key question: revenues are growing, but expense growth is faster.
Main Reasons for the Decline in Profit
1. Collapse in Income from FX and Government Bonds Revaluation
This segment dropped by 28.1%, down to UAH 17.24 billion over seven months. In July alone only UAH 1.77 billion, three times less than in the same month last year. Banks lost part of the “buffer” income that had traditionally helped balance their structure.
2. Sharp Increase in Reserves
In 2024, banks allocated only UAH 380 million to reserves. In 2025 UAH 4.93 billion. This is direct pressure on net financial results. Banks are preparing for potential losses, even while indicators appear stable. This is a sign of preventive caution, but at the same time, a factor that suppresses profitability.
3. Rising Administrative Expenses
Total administrative expenses reached UAH 72.24 billion (+20.8%), while other operating expenses were UAH 11.92 billion (+15.5%). The share of administrative costs in total revenues rose from 29.9% to 31.2%. Within the expense structure, they continue to push out less critical items.
Is Financial Monitoring to Blame?
The new financial monitoring practices introduced in summer 2025 are not the main reason for the decline in profits, but they have significantly influenced bank behavior. The regulator shifted from warnings to sanctions:
- Industrialbank was fined UAH 800,000.
- Nonbank institution Lineura received a record fine of UAH 9.63 million.
- Requirements for client verification increased, along with operational restrictions and account blocking.
“In July 2025, the National Bank applied enforcement measures against one bank and six non-bank financial institutions for violations in the area of financial monitoring and currency legislation,” stated the NBU press service.
In effect, compliance burdens on banks have risen, leading to transaction delays and increased costs for compliance.
State-Owned Banks: Profit Drivers, But No Guarantee of Stability
- PrivatBank is the sector’s top profit generator: UAH 34.8 billion in just half a year.
- Oschadbank UAH 8.27 billion, Ukreximbank UAH 4.22 billion.
- The share of state-owned banks in total sector profits 65.9%.
This allows the system to appear stable but also creates a concentration risk, where the financial health of a few institutions defines the overall situation.
The Market Remains Tense
The banking sector continues to be highly profitable compared to pre-war years, but amid high wartime risks, regulatory pressure, and slow economic recovery, even a slight profit decline is a signal.
“This is not a crisis dynamic, but the market is moving out of a phase of windfall profits and into a mode of cautious optimization,” is the conclusion drawn from NBU financial reports.
From a financial expert’s perspective, this situation is not about a loss of profitability, but rather a transition into margin protection mode. Banks are maintaining high income levels, but expenses (including mandatory reserves, risk preparation, and financial monitoring costs) are consuming a share of the profits.
The system is not degrading it is maturing. And banks’ responses to new requirements show resilience, not weakness. But if fiscal and regulatory pressure continues to intensify without well-thought-out compensatory mechanisms we will face another downturn, one that will not be preventive, but forced.
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