10 November 2011
Ukrainian banking system deposits rose 1.1% m-o-m in October and 14.5% YTD in 10M11, according to preliminary data published by the National Bank of Ukraine yesterday. Retail UAH deposit outflow slowed by 6.7x m-o-m to just UAH 420 mln vs. UAH 2.8 bln in September. The loans portfolio advanced 0.7% m-o-m and 10.3% YTD, with corporate sector inching up by 1.1% and 14.8%, respectively. The retail loan portfolio decreased 0.2% m-o-m and 1.3% YTD. Svetlana Rekrut: The slowdown in deposit outflow is attributed to an increase in short-term deposit interest rate from 12.5% to 13.7% in UAH for the retail at the majority of Ukrainian banks on the back of the recent liquidity deficit. Since monetary conditions are unlikely to ease in the coming months, we expect Ukrainian banks to keep the deposit rates high to prevent further fund outflows. In our view, the increase in banks’ funding costs should have a limited negative effect on lending, while this year’s modest loan portfolio growth (10.3%) is mainly derived from lending to large corporate and linked structures.