Banks recording lower business deposit rates and cheaper equity - survey on bank funding

The cost of attracting liabilities by banks decreases for two consecutive quarters primarily due to cheaper deposits of corporations.

This is evidenced by the results of a quarterly survey of banks on the conditions of funding, Ukrainian News Agency reports.

In the 1st quarter of 2024, banks expect a reduction in business and household rates for sustainable volumes of customer funds.

Bank liabilities increased during the 4th quarter of 2023 mainly due to raising funds from households and corporations.

At the same time, for the first time in two and a half years, the volume of wholesale funding (bonds, loans from international financial institutions or parent banks, long-term refinancing, etc.) increased slightly in some large banks.

More active attraction of household funds by banks was facilitated primarily by regulatory requirements.

Business engagements mainly grew due to the offer of the customers themselves.

At the same time, the impact of interest rates decreased significantly, which in 2023 was the determining factor in the growth of customer deposits.

According to the results of the current survey, mainly large banks planned to attract wholesale funding, and expected to do this already in the 1st quarter.

Almost two-thirds of respondents reported a decrease in the cost of business funds in the quarter, while the price of deposits of the population and wholesale investments did not change significantly.

69% of respondents expect a further reduction in the funds of corporations in the 1st quarter, 50% - the funds of the population.

The price of wholesale funding, according to banks, will not change.

The share of funding in currency decreased during 2023.

More than half of respondents expect this trend to continue in the 1st quarter of 2024.

The urgency of funding in the 4th quarter has slightly decreased, but in the next 12 months banks do not expect changes.

For the first time in two and a half years, almost half of respondents reported a decrease in the cost of capital.

Banks expect a further decrease in the cost of capital.

The survey on bank funding was conducted from December 15, 2023 to January 12, 2024 among bank managers responsible for managing liabilities.

26 financial institutions provided answers, their share in the total assets of the banking system is 96%.

The survey results reflect the opinion of respondents and are not estimates or forecasts of the National Bank of Ukraine.

As Ukrainian News Agency earlier reported, the volume of funding of banks in the 3rd quarter of 2023 continued to grow, while in the 4th quarter most financial institutions expected the trend and a decrease in the cost of deposits.