Bank deposits grow by 25% y-o-y; assets by 8.8% y-o-y over 2010

Total bank deposits in Ukraine were up 25% during 2010 (by UAH 61 bln or USD 7.7 bln) vs. -1.7% in 2009, according to data released by the National Bank of Ukraine yesterday. Personal deposit growth of +28.5% outpaced that of corporate/municipal deposits (roughly +22%). Mykyta Mykhaylychenko: Importantly, retail deposits in local currency hryvnya advanced by a marked 41.5% during the year (reached 52% of all household deposits), while those in foreign currency – by much smaller 17%, testifying to a restoration of confidence in the hryvnya. Deposit resources for banks effectively replaced (i) funding from abroad (gross foreign liabilities shrank by 9.7% over 11M10, to ~21.8% from ~26.4% of total assets); and (ii) central bank funding (it shrank from 9.8% to 7.7% of total assets over 11M10 or by 14.3%). At the same time, total bank assets grew 8.8% over 2010 (+2.9% in 2009) and gross loans – by only 1% (retail loan portfolios decreased 13%). Simultaneously, banks expanded their UAH sovereign debt holdings by 2.7 times or UAH 34 bln (USD 4.3 bln) during 2010. As a result, the total banking system’s Loans/Deposits ratio declined to 163% as of end-2010 from 193% as of end-2009 (Ukraine entered the crisis with Loans/Deposits of ~150% in mid-2008, which then deteriorated significantly due to deposit outflow). For 2011, we envision total bank assets growth of 15%-20% on the back of lending recovery, supported by continuous deposit inflow and tapping, by some banks, of wholesale funding markets (local and FX bonds).