This study examines the effects of domestic political risk and global economic policy uncertainty factors on the profitability of Ukrainian banks during the 2005–2015 period. The empirical results underscore that the domestic political stability and global economic policy uncertainty have significant positive and negative effect on Ukrainian banks’ profitability, respectively. Results suggest that a rise of Ukrainian banks’ profitability depends significantly on decreasing domestic political and global risk levels. Likewise, the results of traditional determinants indicate that the profitability of Ukrainian banks is shaped by the bank and industry-specific determinants. The results are robust and consistent when alternative model specifications are conducted. The findings of this study have important policy implications for policymakers, banks’ managers, and analysts.

This study aims to fill the gap in the literature by specifically investigating the impact of country risk on the credit risk of the banking sectors operating in Brazil, Russia, India, China, and South Africa (BRICS), emerging countries. More specifically, we explore whether the country-specific risks, namely financial, economic, and political risks significantly impact the BRICS banking sectors’ non-performing loans and also probe which risk has the most outstanding effect on credit risk. To do so, we perform panel data analysis using the quantile estimation approach covering the period 2004–2020. The empirical results reveal that the country risk significantly leads to increasing the banking sector’s credit risk and this effect is prominent in the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.105, Q.50 = − 0.131, Q.75 = − 0.153, Q.95 = − 0.175). Furthermore, the results underscore that an emerging country’s political, economic, and financial instabilities are strongly associated with increasing the banking sector’s credit risk and a rise in political risk in particular has the most positive prominent impact on the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.122, Q.50 = − 0.141, Q.75 = − 0.163, Q.95 = − 0.172). Moreover, the results suggest that, in addition to the banking sector-specific determinants, credit risk is significantly impacted by the financial market development, lending interest rate, and global risk. The results are robust and have significant policy suggestions for many policymakers, bank executives, researchers, and analysts.