Banks Report an Increase in Funding Maturity for the First Time since 2021 – Bank Funding Survey

The maturity of bank funding has increased for the first time since the survey was launched in 2021, and this trend will continue over the next 12 months. This is evidenced by the results of the quarterly Bank Lending Survey.

According to the respondents, the average cost of funding increased in Q1 2023. The financial institutions noted that retail deposit rates have been growing steadily since the survey was launched in 2021.  In the latest survey, 93% of the banks reported an increase in the cost of retail funding, which is a record-high percentage.

The respondents continue to expect an increase in the cost of client deposits in Q2, mainly in retail deposits. The price of wholesale funding, which includes issuing bonds, taking loans from international financial institutions (IFIs) or parent banks, and long-term refinancing, will also rise.

Volumes of bank funding generally grew in Q1. This was also evidenced by the survey results. However, estimates of growth in liabilities were more reserved compared to the record high of Q4 2022.

The respondents saw higher deposit interest rates and regulatory requirements as the main factors behind the growth in client deposits. This was additionally driven by businesses’ intentions to change the structure of funding and by supply from corporations.

Overall, the banks forecast an increase in funding in Q2 from both households and corporations. Volumes of wholesale funding should remain unchanged.

Speaking about capital, its total amount has risen over the past 12 months at the majority of the banks. At the same time, this trend is expected to hold in the next 12 months.

Around 80% of the respondents noted an increase in the cost of capital in the previous 12 months. However, it is not expected to rise further on.