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Banks Expect Deposit Inflows, Plan to Build Up Capital – Bank Funding Survey

Banks Expect Deposit Inflows, Plan to Build Up Capital – Bank Funding Survey

The volume and average cost of funding did not change overall in Q3, while the share of FX liabilities and the total maturity of deposits declined, banks estimated. Capital has marginally risen over the past 12 months, and banks are still planning to scale up capital going forward.

Funding volumes are almost unchanged, and maturity is lower

Banks gave restrained assessments of funding dynamics in July–September 2021, with 46% of respondents saying that the volume of deposits had risen, and the rest saying it had shrunk. Overall, retail deposits were down marginally, while corporate deposits were up.

Most banks expect an increase in both retail and corporate deposits in Q4.

Two-thirds of respondents noted a decrease in the cost of retail deposits. At the same time, the cost of corporate deposits inched higher. Banks expect the cost of deposits to rise slightly in Q4 due to higher interest rates on corporate deposits.

The share of FX funding has declined over the past three months, one-third of banks indicated. The maturity of deposits decreased marginally. Banks expect that the share of FX deposits will shrink further at the end of the year, and that the maturity of deposits will either not change or grow slightly.

Financial institutions plan to build up capital

The capital of most banks has increased over the past year, its cost having edged higher on average. Respondents expect an increase in capital and a slight decline in its cost in the next 12 months.

Banks named profitability as the main factor that would drive capital growth, while some banks said their strategic growth plans would also be a primary driver. However, regulatory requirements and changes in the economic environment may act to reduce capital, banks suggested.

For reference

The current bank funding survey was carried out from 17 September through 8 October 2021 among 24 bank liability managers. Polled financial institutions account for 89% of the banking system’s total assets. The report compiles aggregate assessments and expectations of respondents regarding volumes, costs, and maturities of various types of funding and capital of banks, as well as drivers of these indicators. Survey findings are based on the views of respondents and do not necessarily reflect NBU assessments or forecasts. The next bank funding survey, on expectations for Q1 2022, will be published in January 2022.

 

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