When and why Ukrainian banks will raise deposit rates
5 November 2024 17:55
Small banks in Ukraine have started raising deposit rates for their customers, thus responding to inflation and the devaluation of the hryvnia. This is reported by "Komersant Ukrainian" with reference to the Finance Ministry’s website on finance and investments.
Financial experts are already saying that the level of the discount rate to be announced by the National Bank of Ukraine is likely to remain unchanged, despite suggestions by some economists to raise it to curb inflation. Consumer price growth has already reached 8.6% year-on-year, and the country will not be able to keep inflation at the level of the NBU’s forecast.
Nevertheless, banks continue to expect households to deposit money in the fourth quarter, despite the decline in their profitability. Average interest rates on time deposits in the national currency have already fallen, and small banks are offering more attractive terms than large ones. However, only one of the small banks cut its rates over the past two weeks.
Thus, Asvio Bank and Unex Bank increased the yield on hryvnia deposits. Asvio Bank raised rates for six months and one year by 0.75%, while Unex Bank increased them by 0.25% for 6 and 9 month deposits and by 0.5% for annual deposits. However, there are differences among the banks that have raised rates as to what Ukrainians expect in the current environment.
Commenting on this issue, Ivan Svitek, CEO of Unex Bank, said that the decision to raise rates in the hryvnia deposit line has several reasons. It is related to depositors’ expectations, hryvnia devaluation and accelerating inflation. The bank is trying to lengthen its resource base by offering maximum rates on deposits with a term of 1 year. However, the greatest interest of the population still remains in medium-term deposits, such as three-month deposits. Households’ interest in term deposits has declined due to accelerating inflation, the rising dollar, and increased consumer spending. Future trends will depend on macroeconomic indicators and market rates. If the regulator decides to raise the key policy rate, we may see a more significant increase in deposit interest rates, while the dollar remains stable and inflation is kept at target. Banks will have more room to raise deposit rates when lending revives. However, the maximum market rates will not exceed 16-17% per annum.
