Assessment of the efficiency of investment activity of Ukrainian banks on the stock market

Zherdetska Liliia
D.Sc. (Economics), Associate Professor, Head of the Banking Department, Odessa National University of Economics, Odesa, E-mail:lzherdetska@gmail.com, ORCID ID: https://orcid.org/0000-0003-2783-186X

Cite this article:

Zherdetska L. (2021) Assessment of the efficiency of investment activity of Ukrainian banks on the stock market. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Otsinka efektyvnosti investytsiinoi diialnosti bankiv Ukrainy na fondovomu rynku; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 9-10 (286-287), pp. 11-17.

Abstract

Introduction. The modern financial system is a close interaction of the infrastructure of the securities market and the banking system. And now banks occupy a prominent place in the formation of the infrastructure of the Ukrainian stock market. Therefore, the effective operation of banks is one of the prerequisites for the development of the stock market in Ukraine. The development and improvement of methodological approaches to assessing the effectiveness of the banking business as a whole and its individual areas is an issue that permanently retains its relevance and requires constant scientific research. Purpose. Improvement of methodological approaches to assessing the effectiveness of investment activities of Ukrainian banks in the stock market. Results. The effectiveness of active investment operations of banks in the study was assessed in terms of their volume (market share is in line with the strategic objectives of most banks); profitability (the most important aspect of efficiency), and risk (a key element of banking, which depends on future performance indicators). According to the results of the analysis, the following generalizations has been made. Firstly, banks develop investment activities, as evidenced by the share of investment in net assets, which, in turn, means the diversification of risks and sources of income. Secondly, a significant share of investments in securities refinanced by the National Bank of Ukraine (including government bonds) indicates the quality of banks' investment portfolios but is not a consequence of the existence of a developed stock market, but only the benefits of these investments. Thirdly, the profitability of investment operations is much lower compared to lending. And finally, efficiency of active investment operations of banks with foreign capital due is higher to the low cost of resources; however, the efficiency of their lending activities remains higher compared to investment. Conclusions. Based on the existing definitions of the concept of "efficiency" and the available information base, the efficiency of investment activities of Ukrainian banks in the stock market has been assessed. The efficiency of active investment operations of banks is assessed in terms of their volume, profitability, and risk. The share of investments in banks' net assets indicates the diversification of risks and sources of income. At the same time, the structure of investments testifies to the qualitative composition of banks' investment portfolios but is not a consequence of the existence of a developed stock market. A significant share of Government bonds in the assets of Ukrainian banks creates an additional source of systemic risk and diverts banking resources from lending. At the same time, bank investments are characterized by positive returns, high liquidity, and insignificant risk.

Keywords

bank, bank investments, efficiency, stock market, securities.

JEL classification: G240; DOI: 10.32680/2409-9260-2021-9-10-286-287-11-17

UD classification: 336.763

References

1. Shudruk, TM, Ilyushik, Yu.S. (2015).Development of the stock market of Ukraine. Economic analysis: Coll. Science. wash. Ternopil National Economic University. Publishing and Printing Center of Ternopil National Economic University "Economic Thought", 20, 226– 231. Retried from https://www.econa.org.ua/index.php/econa/article/view/782/595 [in Ukrainian]
2. Kolupaev, Yu. B. (2018) Substantiation of the direction of perspective development of the stock market of Ukraine. Efektyvna ekonomika, 8, 45-51. [in Ukrainian].
3. Melnyk, O.I., Kapitan, I.M. (2019) Modern tendencies of stock market development of Ukraine. Efektyvna ekonomika, 12. . Retried from www.economy.nayka.com.ua/pdf/11_2019/60. pdf [in Ukrainian].
4. Tsyganov, S.A. (2006). The role of commercial banks in shaping the infrastructure of the stock market. Scientific works of IAPM, 8, 258 - 260. [in Ukrainian].
5. Zhelikhivska, A.M. (2009). The role of banks in the development of the stock market infrastructure of Ukraine. Investments: practice and experience, 22. Retried from http://www. investplan.com.ua/pdf/22_2009/14.pdf . [in Ukrainian].
6. Onishchenko, Y.I. (2018). Prospects for the formation of the bank's securities portfolio using fundamental analysis. Ekonomyka ta suspylʹstvo, 16. Retried from http://www.economyandsociety. in.ua [in Ukrainian].
7. Onishchenko, Y.I. (2018). Bank investment management: theory and practice. Infrastruktura rynku, 25. Retried from http://www.market-info.od.ua. [in Ukrainian].
8. Avanesova, N.E. (2021). Basic approaches to determining the category of efficiency Retried from http://www.confcontact.com/2008dec/6_ avanesova.htm. [in Ukrainian].
9. Berger, А., Humphrey D. (1992) Measurement and Efficiency Issues in Commercial Banking. Output Measurement in the Service Sectors.
10. Xavier, F., Rochet, J. (1999). Microeconomics of banking. Massachusetts institute of technology.
11. Business dictionary: economics, finance, banks, investments, loans: English-Ukrainian more than 12,500 terms (2002). [ed. S. Ya. Yermolenko, V.I.Yermolenko]. K.: Shkola, [in Ukrainian].
12. Supervisory statistics of the National Bank of Ukraine Retrieved from https://bank.gov.ua/ ua/statistic/supervision-statist. [in Ukrainian]