Despite the start of a full-scale war, deposits grew in Q1 2022. The banks said that this growth had been mainly generated by household deposits. Overall, the cost of borrowing increased, driven by the higher cost of corporate and wholesale funding. The share of foreign currency liabilities shrank, while the total maturity of deposits decreased. Although capital has for the most past increased over the last 12 months, most banks expect a drop in capital over the next year.
The volumes and cost of funding increased, while maturities declined
Most banks assessed the dynamics of funding in January–March 2022 as positive, with 83% of them reporting growth in household deposits. Conversely, 67% of those surveyed said that corporate deposits had declined. Wholesale funding – which includes issuing bonds, taking out loans from international financial institutions (IFIs) or parent banks, receiving long-term refinancing, and so on – increased only in one out of five banks.
The banks were pessimistic about funding growth in Q2 2022, as they expected outflows of deposits (mainly corporate ones). Funding raised from households was also expected to decrease slightly. In contrast, wholesale funding will surge.
The average value of liabilities increased overall in Q1, propelled mainly by the higher cost of corporate and wholesale funding. At the same time, respondents have reported a decline in household deposit rates for four quarters running. The banks expect these trends to continue into the next three months.
The trend towards the dedollarization of deposits continues unchecked, with 58% banks reporting a drop in the share of their FX deposits over the last three months. 80% of those surveyed said that the maturities of raised funding had decreased. The banks expect that the share of FX deposits and the maturities of deposits will drop further in Q2.
Financial institutions say that the volume of capital will decline, while the cost of capital will rise
The capital of most banks has increased over the past year. That said, 81% of financial institutions expect a reduction in capital over the next 12 months, mainly due to expected losses and negative changes in the economy.
The banks said that the cost of capital has on average increased slightly. They expect that this trend will continue into the future.
This Bank Funding Survey was conducted from 18 March through 8 April 2022 among 27 bank liability managers. The polled financial institutions account for 93% 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 survey’s findings are based on the views of respondents and do not necessarily reflect NBU assessments or forecasts. The next Bank Funding Survey, featuring expectations for Q3, will be published in July 2022.
The NBU highly appreciates the banks’ participation in the survey under conditions of martial law.