Ukrainian banks could raise deposit interest rates as high as 18% a year this autumn as they compete harder for savers' money, according to Serhiy Mamedov, vice president of the Association of Ukrainian Banks and chairman of the board of Globus Bank.
Mamedov told UNIAN that competition for depositors is likely to intensify in September. He said banks had gained extra incentive to review returns on term deposits after the National Bank of Ukraine raised its key policy rate to 15.5%.
Rates Could Reach 13.5-18%
Mamedov estimated that average rates on hryvnia deposits would mostly range between 13.5% and 15% a year, while the most attractive offers with bonus conditions could reach 17.5% to 18%. He said some banks could raise yields by roughly 0.3 to 0.5 percentage points compared with summer levels.
Banks need predictable hryvnia funding, so the fiercest competition is likely to unfold in the term deposit segment, Mamedov said. He added that interest rate levels would not be the only factor, with deposit terms, the ability to top up savings, early withdrawal conditions and additional bonuses also playing a role.
Impact on Loan Rates
Mamedov said the more expensive funding would also affect the lending market. Under a baseline scenario, rates on standard bank loans could rise by about 0.5 to 1 percentage point.
However, he said pricier loans would not mean a pullback in lending. Banks would continue competing for creditworthy clients by offering flexible programmes and special terms for certain categories of borrowers.
Mamedov said banks would effectively face two competing tasks this autumn: offering depositors sufficient returns to keep hryvnia savings attractive, while avoiding making loans too expensive for borrowers. He said finding that balance would largely shape the situation on the banking market.
Background on the Rate Rise
The National Bank of Ukraine raised its key policy rate from 15% to 15.5% in July, citing persistent underlying price pressure and an expected further acceleration of inflation by the end of the year.
Dmytro Zamotaiev, director of the retail business department at Globus Bank, had said that following the central bank's decision to raise the key rate to 15.5%, Ukrainian banks could review interest rates on both deposits and loans.
