According to the NBU’s latest financial stability report, all domestic banks except state-owned Ukreximbank are currently in compliance with minimum capital adequacy requirements. However, Ukreximbank is proceeding with its recapitalization program in order to bring its regulatory capital indicators back to required levels.

Russia conducted another attack on the Ukrainian energy system last night, its seventh strike specifically targeting energy assets since end-March. The attack involved four cruise missiles, two guided missiles, three ballistic missiles and 27 kamikaze drones, of which the Ukrainian air defense intercepted five missiles and all 27 suicide drones. Authorities reported attacks on energy infrastructure assets in the Kyiv, Dnipropetrovsk, Donetsk and Vinnytsia regions. DTEK said one of its power plants was hit. On a related note, state hydroelectric power plant operator Ukrhydroenergo said it planned to repair 1 GW of power generating capacity before the heating season (out of 3 GW reportedly damaged). Also, the State Energy Supervision Inspection projected some easing of energy consumption caps in August as additional nuclear power units are due to be restarted following scheduled maintenance.

Monthly salaries paid to staff workers in Ukraine averaged UAH 18,903 ($495) in 1Q24, up 22.5% y-o-y in UAH terms and 17.3% in USD terms.

The Ministry of Finance placed UAH 8.4bn ($205m) of hryvnia-denominated bonds and $200m of USD-denominated paper at a primary auction yesterday.

State rail monopoly Ukrainian Railways (RAILUA) has signed a memorandum with the EBRD on EUR 300m of funding to purchase locomotives. Together with a previously secured $190m World Bank grant under the Repairing Essential Logistics Infrastructure & Network Connectivity (RELINC) project, the company expects to acquire up to 80 electric freight locomotives.

Ukraine’s merchandise trade deficit narrowed to $2.2bn in May from $2.6bn in April as imports dropped by 5.6% m-o-m to $5.6bn (+11% y-o-y) and exports were flat at $3.4bn (+8.6% y-o-y).

Ukraine’s iron ore exports fell by 8.0% m-o-m to 3.1 Mt in May (yet +106% y-o-y), bringing the 5M24 volume to 15.5 Mt (+127% y-o-y). In value terms, iron ore exports dropped by 10% m-o-m to $239m (+48% y-o-y), totaling $1.4bn in 5M24 (+82% y-o-y). May steel exports surged by 25% m-o-m to 361 kt (+8% y-o-y), bringing the 5M24 volume to 1.7 Mt (+74%% y-o-y). In value terms, monthly steel exports went up by 21% m-o-m to $213m (-4% y-o-y), but were up 53% y-o-y to $1.0bn in 5M24.

Hryvnia-denominated deposits at Ukrainian banks increased by 0.9% m-o-m to UAH 1,671bn in May after rising by 1.4% in April, bringing the y-o-y rate of growth to 26%. F/X deposits rose by 0.8% m-o-m to $19.8bn (+6.1% y-o-y), slowing from +1.6% m-o-m in April. Gross UAH loans increased by 1.5% m-o-m on top of +1.4% in April, to UAH 770bn (+11.7% y-o-y), while F/X loans picked up by 0.3% m-o-m to $6.3bn (-6.4% y-o-y).

The Ukrainian Finance Ministry has published a cleansing statement disclosing the details of its first round of negotiations with the ad hoc committee of holders of sovereign Eurobonds. The talks were held between Jun. 3-14 and ended without an agreement.

Switzerland hosted the Summit on Peace in Ukraine over the weekend, which was attended by 93 states (close to half of them from Europe) and 8 organizations (UN, OSCE, European Council and Parliament, etc.). Of those, 78 countries and four EU-based organizations signed the summit's declaration, which endorsed three points of President Volodymyr Zelensky’s previously publicized 10-point peace plan: on nuclear safety (including returning the Zaporizhya Nuclear Power Plant under Ukraine's control), food security (safe commercial navigation in the Black and Azov Seas to ensure Ukraine can freely export its food products), and “all for all” prisoner-of-war exchange and return of deported Ukrainian children and other unlawfully detained Ukrainian civilians.

Key highlights from last week: Most front lines stable but situation in Donetsk region remains precarious as Russian forces continue advancing NATO approves plan to assume lead role in coordinating military aid for Ukraine and make it “Trump-proof”; US reportedly to provide another Patriot air defense system for Ukraine

According to Ukrainian Energy Minister German Galushchenko, Ukraine’s foreign partners will provide more than $1bn in energy sector, including $0.8bn from the US under ($0.5bn from a recently approved $61bn aid package and $0.3bn of repurposed previously approved funds), EUR 0.3bn of additional financing from the EBRD, EUR 70m of grants, and a grant of at least $47m from the World Bank. The financing will go towards improving the physical defense of the power grid, rebuilding thermal power infrastructure and repairing damaged equipment, accelerating renewable energy projects, increase power import capacities, and installing distributed power generation ahead of the next heating season.

US President Joe Biden and Ukrainian President Volodymyr Zelensky signed a 10-year security agreement during the annual summit of G7 countries yesterday. Ukraine also signed a similar support and cooperation pact, covering the defense, humanitarian and reconstruction fields, with Japan.

The NBU Board cut the central bank’s key rate by another 50bp, to 13.0%, following 150bp of cuts earlier this year and -1,000bp in 2023 (including -400bp due to a change in operational design), in line with its forward guidance from April. The Board cited moderate inflation dynamics, the resumption of foreign aid inflows and still high demand for UAH-denominated assets as the main reasons for further easing. It said that recent headline inflation levels of 3.2-3.3% y-o-y were below NBU expectations, due mainly to fluctuations in raw food prices. However, core inflation, which stood at 4.4% in May, was in line with NBU projections. The Bank said that its latest guidance from April assumed the key rate remaining at 13% by end-2024 but added that it was ready to adapt its monetary policy in case the balance of risks for inflation and exchange rate changed.

The leaders of G7 countries reached political agreement on providing $50bn of additional financial support for Ukraine backed by earnings from immobilized Russian sovereign assets. According to President of the European Commission Ursula von der Leyen, financing will be available by the end of this year.

According to the latest monthly survey of manufacturing enterprises conducted by the Ukrainian Institute for Economic Research (IER), the share of companies operating with a capacity load of 75% or higher (compared to pre-war level) stood at 57% in May, flat m-o-m, with the share of idle firms remaining virtually unchanged at 5%.