The share of non-performing loans (NPLs) in Ukraine's banking sector increased for the first time in around three years at the beginning of the summer, reversing a prolonged period of improvement as lending to households and businesses accelerated, reported Ukraine Business News.

As of June 1, non-performing loans accounted for 12.8% of the banking system's total loan portfolio, up by approximately 0.2 percentage points from a month earlier.

The increase marked the first monthly rise in the NPL ratio since 2023, when Ukrainian banks began steadily reducing their stock of distressed assets following years of balance sheet clean-up and the economic disruptions caused by war.

The latest uptick comes against the backdrop of rapidly expanding lending activity to both consumers and companies. As banks increase credit issuance, a modest rise in problem loans is not unusual, particularly during periods of strong portfolio growth.

The increase interrupts what had been an almost uninterrupted downward trend in the NPL ratio over the past three years. During that period, banks benefited from improving asset quality, loan restructuring programmes and the gradual stabilisation of the financial sector despite wartime conditions.