Deposit formation in Romanian banks eases amid slower income gains

Deposit formation in Romanian banks eases amid slower income gains
By bne IntelliNews July 26, 2017

The stock of deposits held in Romanian banks by non-government customers increased by a robust rate of 7.5% y/y, to RON279bn (€61.2bn) at end-June, according to central bank data released on July 25. The rate weakened from 8.2% y/y at the end of last year. 

The slow deposit accumulation reflects the dynamics of households' incomes and possibly weaker propensity for saving.

The formation of household deposits weakened from 11.4% at the end of 2016 to 9.2% y/y in June. This reflects the deceleration in the growth of the overnight deposits from 39% y/y to 30% y/y, which is a result of slower increase in households’ incomes and possibly higher propensity for consumption driven by consumer confidence and low deposit interest rates. 

However, the stock of term deposits keeps rising, by 11% y/y as of June (though down from 13% y/y in December) for local currency deposits with maturities of over one year. Indeed, such deposits were only RON14.8bn at the end of June, out of RON168.7bn total household deposits. Term deposits with maturities of over one year denominated in euros were even smaller, RON2.5bn at the end of June. Nonetheless, the double-digit growth in the stock of local currency term deposits reveals households’ resilient propensity for saving despite the very low deposit interest rates.

From a bank’s perspective, the slower accumulation of deposits coupled with stronger lending (the stock of loans increased by 4.2% y/y as of June, compared to 1.2% y/y at the end of last year) means that the banking system’s balance with its non-government customers is shifting toward a net lender position.

At the end of June, the banks were still in a net borrower position versus the non government sector (meaning banks held more deposits than the portfolio of loans) but the position narrowed to €11.45bn from €11.93bn at the end of last year. In October 2008 before the credit crunch, banks held a net lender position versus the non-government sector amounting to €14.3bn. The net borrower position at the end of June this year must be, however, regarded in the perspective of the large share of sight, hence volatile, deposits (some 45% of total deposits).

Data

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