In March 2018, households’ funds continued to replenish the banking system both in domestic and foreign currency. These trends are seen in the preliminary Monetary Statistics Data for March 2018.
Over the month balances on retail UAH deposits with solvent banks increased by 1.0%. A surge of household income and returns on UAH deposits due to hryvnia strengthening contributed to expansion of deposit accounts.
On the other hand, corporate deposits in hryvnia remained mostly at the previous month level. Significant additional payments are the reason, as well as corporate income tax and transferring the share of their income to state unitary enterprises and unions in 2017.
All in all, this month the total deposit portfolio in domestic currency of solvent banks rose by 0.4% or UAH 1.9 billion to UAH 484.2 billion.
Likewise, balances on foreign currency deposits (in USD equivalent) in solvent banks also did not vary essentially. Increased foreign currency household deposits were leveled off by a decrease in similar corporate deposits, since funds were used to pay for domestic government bonds and to transfer dividends abroad.
Total loan portfolio of banks in domestic currency in the end of March increased by 0.3% mom to UAH 581.8 billion. Banks continued to expand UAH household lending (monthly growth rate was 1.4%), while corporate loan portfolio did not change compared to the last month.
In response to the fourth consecutive increase in the key policy rate by the NBU earlier in March banks scaled up interest rates, primarily for businesses.
Interest rates on new hryvnia corporate deposits increased from 10.2% to 11.0% per annum over the month. Consequently, the borrowing costs for businesses have edged higher from 16.0% to 16.6% per annum.
At the same time, the interest rate trend for individuals took a different direction. Considering ongoing impact of household funds, banks avoided increasing interest rates on new UAH household deposits, instead the rates took a downturn from 11.4% to 10.8% per annum. This also caused a moderate decline of borrowing costs for new retail loans.
See the Macroeconomic and Monetary Review (April 2018) for more details on money market developments in March 2018.