Banks’ Retail Deposits to Continue to Grow – Bank Funding Survey

The volume of bank funding increased in Q3. Most of the banks noted a greater increase in retail deposits than in corporate ones. This is according to the quarterly Bank Funding Survey.

The banks expect that the growth in funding in Q4 will be driven by deposits from households. The volume of deposits from businesses will hold steady, and that of wholesale funding will edge lower.

Wholesale funding grew for four straight quarters, primarily in some of the large financial institutions. One-third of the banks expected to raise wholesale funding in the next 12 months from the EU and international financial institutions, including for recovery projects.

The average cost of funding overall declined for five straight quarters, and the cost of wholesale funding decreased for the second quarter in a row.

The banks expect a decrease in the cost of retail and corporate deposits in Q4, but such projections are more subdued than in Q1 and Q2 of this year.

The share of FX funding rose in half of the banks, but two-thirds of the respondents anticipate that the percentage of FX deposits will shrink in Q4.

Funding maturity has not changed, but will decline slightly in the next 12 months, the banks expect.

The overall volume of bank capital has risen over the past 12 months, about 95% of the respondents said, while two-thirds of the respondents believe this uptrend will persist in the next 12 months.

Since Q3 2022, the respondents have been citing profitability as the key driver of capital growth in the near term.

For four consecutive quarters, the respondents highlighted a small decrease in the cost of capital over the past 12 months. The banks project this downtrend will persist going forward.