Customers’ deposits grew in Q3 2022, according to estimates of banks. Their cost increased, mostly due to higher interest rates on corporate deposits. The overall maturity of deposits declined somewhat, and the share of foreign currency liabilities rose. Capital has remained almost unchanged over the last 12 months. At the same time, less than a quarter of banks expect an increase in the cost of capital in the next 12 months.
Funding volumes grew, and maturities declined slightly
Despite the lasting war, banks assessed the dynamics of funding in July–September 2022 as positive, with 75% of them reporting growth in household deposits and 65% in corporate ones. In contrast, volumes of wholesale funding, which includes NBU refinancing, has been on the decline for two quarters running.
In Q4, the financial institutions expect an increase in deposits, especially from households, and forecast wholesale funding to decrease further.
The average cost of funding in Q3 increased, driven mainly by higher rates on corporate deposits. In the next three months, banks project the cost of corporate and retail funds to rise considerably and the growth in prices of wholesale funding to moderate.
The share of banks’ FX liabilities has increased for the first time since the launch of the survey. However, respondents see this trend as temporary. The maturity of funding decreased less compared to previous periods. Banks expect this trend to persist at the end of the year.
The financial institutions improved their expectations about the dynamics and cost of capital
Banks estimate total capital has remained almost unchanged over the year. For the next 12 months, only 45% of the financial institutions (compared to 63% in Q2) forecast a decrease in capital, mainly due to negative developments in the economy, a decline in assets, and regulatory requirements.
The majority of respondents say that the cost of capital has slightly rose on average. At the same time, a further increase is expected by less than a quarter of respondents.
The current bank funding survey was carried out from 16 September through 7 October 2022 among 27 bank liability managers. The polled financial institutions accounted for 95% of the banking system’s total assets. The report compiles aggregate assessments and expectations of respondents regarding the volumes, costs, and maturities of various types of funding and bank capital, as well as the drivers of these indicators. The results of the survey reflect the opinions of the respondents, and are not estimates or forecasts of the NBU. The next bank lending survey, on expectations for Q1 2023, will be published in January 2023.
The NBU highly appreciates the banks’ participation in the survey under conditions of martial law.