Banks generally expect an increase in the volume of deposits from households and businesses in Q2. Wholesale funding volumes will not change significantly. This is according to the quarterly Bank Funding Survey.
The amount of bank liabilities in Q1 as a whole increased primarily due to the growth in corporate deposits. At the same time, in a first since Q3 2021, the banks noted a drop in the volume of retail deposits. Wholesale funding has been on the rise for two quarters running, primarily at certain large banks.
The banks attributed the drop in retail deposits to a contraction of their supply. They viewed the interest rate level as an insignificant factor for the deposit volume change.
Overall, the average cost of funding has been declining for three quarters in a row. Almost three in four respondents reported a decrease in the cost of corporate funding. Meanwhile, the cost of retail deposits was up, primarily at certain large banks. The cost of wholesale funding remained unchanged.
Almost all banks expect a decrease in rates on deposits from both households and corporations in Q2. At the same time, the cost of wholesale funding should not change.
The share of FX funding was almost flat in Q1 after a steady decline in the previous three quarters, the banks estimate. Three quarters of the respondents expect the downtrend to resume. The share of FX funding will shrink in Q2, they said.
Funding maturities edged lower for the second straight quarter, and the banks anticipate this trend will persist over the next 12 months.
The capital of most banks has risen over the past 12 months, and 70% of the respondents expect it to rise in future. The respondents once again cited profitability as a major capital growth driver.
A reduction in capital is possible if regulatory requirements change or if macro forecasts deteriorate, some banks said. Only 15% of the financial institutions mentioned shareholder plans to ramp up capital in the next 12 months.
For the second quarter in a row, the respondents pointed to a decline in the cost of capital over the past 12 months and expect this trend will continue.
This Bank Funding Survey was conducted from 18 March through 8 April 2024 among bank liability managers. The answers were provided by 26 financial institutions, which together held 96% of the banking system’s total assets. Survey findings are based on the views of respondents and do not necessarily reflect the NBU’s assessments or forecasts. A survey featuring expectations for Q3 2024 will be published in July.