The Ukrainian banking sector continues to face challenges in credit growth due to the burden of unresolved problem loans and solvency issues, Fitch Ratings has said in a press release referring to its report "Ukrainian Banks Dashboard 3Q16."

"We expect sector performance to remain under pressure from high provisioning needs, while solvency recovery is likely to be a long process, as permitted by the regulator, with some larger banks likely still requiring further support," Fitch said.

Additionally extended regulatory forbearance on capital levels remains important for the sector's ability to function, Fitch said.

The sector's sovereign debt exposure has grown in 9M16; however, this is largely held by state-owned banks, in part due to state securities received as recapitalization instruments. Banks' funding profiles have stabilized following external debt restructuring in 2015 and deposit funding is recovering gradually, driven by lower volatility of the hryvnia, Fitch said.