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Banks Give Lowkey Assessments of Further Funding Dynamics, Expect to Increase Capital – Bank Funding Survey

Banks Give Lowkey Assessments of Further Funding Dynamics, Expect to Increase Capital – Bank Funding Survey

Deposits rose in Q4 2021, their cost having slightly increased due to higher interest rates on corporate deposits, banks reported. The share of FX liabilities shrank, while the total maturity of deposits remained unchanged. Capital has risen over the past 12 months, and banks are planning further increases going forward.

Volumes and cost of funding increased, while maturity didn’t

Banks assessed the dynamics of funding in October–December 2021 as positive: 72% of them reported growth in deposits. This growth was primarily driven by an increase in the supply from depositors. Increases in retail deposits were highlighted by a much larger share of banks compared to those reporting growth in corporate deposits.

Expectations for deposit growth in Q1 2022 have been more restrained: banks anticipate that most of deposit inflows will come from corporate clients, but no deposit increases are expected from households.

The average value of liabilities in Q4 overall increased slightly, driven mainly by higher corporate deposits. Banks expect this trend to continue into the next three months.

The dedollarization of deposits has trended higher for three quarters running: 57% of banks reported a shrinking share of FX deposits over the past three months, up from 35% in the previous survey. The maturity of deposits has not changed. At the start of 2022, banks are still expecting a reduction in the share of FX deposits, while one-third of respondents believe that maturity will edge higher.

Financial institutions scaled up capital, plan to do so in future

Over the past year, the capital of almost all banks has grown, its cost having increased somewhat, on average. In the next 12 months, respondents expect this trend to persist.

Profitability stands to be the main driver of the growth in capital. Some banks are also guided by their strategic growth plans. However, regulatory requirements may become a factor in reducing capital.

For reference

The current Bank Funding Survey was conducted between 17 December 2021 and 11 January 2022 among 24 bank liability managers. Polled financial institutions account for 89% of the banking system’s total liabilities.  The report compiles aggregate assessments and expectations of respondents regarding the volumes, costs, and maturities of various types of funding and capital of banks, as well as drivers of these indicators. The survey’s results reflect the views of respondents and are not assessments or forecasts by the NBU. The next Bank Funding Survey, featuring expectations for Q2, will be published in April 2022.

 

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