In 2018, the difference between the yield of hryvnia and foreign currency deposits only increased. This became especially noticeable in the 3rd and 4th quarter of last year. Interest rates on annual deposits in hryvnia began to rise in July-August and by December reached values from 14.3% to 15.8% per annum.
The yield on dollar deposits for individuals reached a minimum level of 3.3% in June-July, after which, by the end of December, it had risen to 3.8%. Thus, the difference in rates between deposits in local and dollar by the end of the year reached 12 percentage points.
In the first half of 2018, banks significantly lowered interest rates on deposits. “This was due to the lack of a significant need for resources and the desire to reduce the cost of their cost in order to be able to lend to the population on more favorable terms, Forward Bank’s deputy chairman of the board Konstantin Koshelenko explains trends
At the beginning of 2019, deposits in the hryvnia also look more attractive than foreign currency deposits. This was facilitated by the February strengthening of the hryvnia and quite high interest rates on deposits in the national currency.
According to the Ukrainian index of rates on deposits of individuals, which publishes the NBU, the average return on annual deposits in UAH at the end of January 2019 was 16.15% per annum, in US dollars 3.76%, in Euro 2.45%.
When placing an annual deposit in the national currency in the first quarter of 2019, you can take the risk of fixing profitable returns for a long time. The rates that are currently set on the market should not only cover the expected inflation but also bring income to their investors. According to forecasts of the NBU, in 2019, its figure should be 6.3%. And according to the consensus forecast, which was made by the Ministry of Finance on the basis of expert estimates, the optimistic inflation forecast for the current year is 7.27%, the baseline is 9% and the pessimistic is 13.3%.
To make it easier to compare interest rates on deposits, we grouped banks depending on the “origin” and size of capital.
Starting in 2017, rates in state banks, including nationalized PrivatBank, were often set above the market averages. At the moment, the interest policy of state financial institutions is very moderate. At the same time, the level of interest rates on hryvnia deposits in banks controlled by the state should be quite enough to protect money from inflation.
The best rates on deposits in the national currency in this group of banks were in Ukreximbank (the product is “Classic Term”). And for placing foreign currency deposits, the most profitable deposit of Ukrgasbank is “Urgent with Continuation”.
Western Capital Banks
The terms of placing deposits in individual banks with Western capital look very unattractive against the background of average market rates. Obviously, they simply are not interested in local expensive resources. The daughters of Western banks rely heavily on the financial support of their parent structures.
Often rates in such banks balance on the verge of expected inflation. For example, we did not include in the table one of the largest banks with Western capital operating in Ukraine Ukrsibbank. For hryvnia deposits for 12 months, it offers only 5% per annum, which is noticeably lower than even the official NBU inflation forecast (6.3%). And the bank does not attract foreign currency deposits at all.
Against the general background, we can distinguish Procredit Bank, which, in terms of interest rates, is rather close to banks with Ukrainian capital.
The largest banks with Ukrainian capital
Large banks that are part of Ukrainian financial and industrial groups look much more generous against the background of state banks and western financial institutions.
In the absence of any force majeure, the rates on hryvnia deposits in these financial institutions fully cover inflation at 6-11% per annum.
Medium and small banks
In banks that are not in the top 25 in terms of assets, deposit rates are not too different from those operating in the largest financial institutions with Ukrainian capital.