Banks Expect Deposit Inflows and Further Growth in Cost of Liabilities – Bank Funding Survey

The banks reported marginal outflows of corporate deposits and growth in retail deposits in Q1. In Q2, the banks anticipate deposit inflows from clients and further increases in the cost of liabilities. This is according to the quarterly Bank Funding Survey.

In Q2, the financial institutions expect the volume of client deposits to rise, driven primarily by retail deposits.

The survey shows that the banks holding 42% of the system’s assets expected to raise wholesale funding in the next 12 months. In particular, they were counting on inflows from the EU and international financial institutions to finance recovery projects.

The vast majority of the banks reported growth in the cost of client deposits in Q1, most notably from businesses. By contrast, the cost of wholesale funding remained unchanged. Almost all of the banks expect the cost of both corporate and retail deposits to rise in Q2.

The share of FX funding did not change, but a large portion of the banks (owning 41% of the system’s assets) expect it to shrink.

The current survey detected a decrease in funding maturity, while the respondents that own about half of all assets expect funding maturity to grow in the next 12 months.

The vast majority of the banks highlighted an increase in total capital over the past 12 months, and most of them expect this uptrend to continue into the next year.

The respondents once again cited profitability as a key driver of capital growth in the near future. However, a number of banks (holding some 12% of the system’s assets) mentioned shareholders’ plans to ramp up capital in the next 12 months.

The banks posted growth in the cost of capital over the past year. The majority of them anticipate an increase in the cost of capital going forward.