The FINANCIAL — Georgian Liberty Bank and Progress Bank offer the highest interest rates on term deposits with Annual Percentage Yield (APY) of 13.5%. Bank Constanta has the next most attractive offer (13.5%) for depositors. With 8.75% APY TBC Bank has the lowest interest rate on deposits.
Total volume of deposits at Georgian commercial banks in the national currency amounted to GEL 952,889,000 in June 2013, NBG statistics revealed. The figure was GEL 656,048,000 in the same period of last year. The amount of individuals’ deposits in foreign currency was GEL 3,209,205 thousand in June 2013. It was GEL 2,645,544 thousand in June 2012.
As of 22 July, the deposit portfolio at Progress Bank amounted to GEL 24,321,609, the comparatively small, local bank co-owned by the Prime Minister Bidzina Ivanishvili and Deputy Prime Minister and football star Kakha Kaladze.
The deposit portfolio at Liberty Bank, co-owned by former PM Lado Gurgenidze and billionaire Dinu Patriciu, amounted to GEL 247 million.
Bank Republic, SocGen Group, offers the lowest interest rate on consumer loans, the most popular type of loan, with 11.95%; the record highest rate is offered by Progress Bank at 20-28%.
Bank of Georgia offers term deposits with 9.25% APY in the national currency; Bank Republic, SocGen Group – 9.25%, Procredit Bank – 9.25%, KSB Bank – 10%; PrivatBank – 12%, Halyk Bank Georgia – 10%, VTB Bank – 9.25%, BTA Bank – 12%, Cartu Bank – 9.5% and Basis Bank – 9.25%.
According to the International Deposit Rates Exchange (IDRE), which promotes national and international banking competitiveness for savings and deposits, the list of the highest deposit interest rates around the world is as follows: Argentina – 20.88%, Iran – 18.03%, Ukraine – 16.50%, and Mongolia – 15.1%. The lowest interest rates on deposits are in Bermuda, Kenya and Japan with less than 1%.
The APY at Georgian commercial banks is higher than it is in Russia (9.22%), Armenia
(9%) and Turkey (7%).
The data provided by IDRE was last updated in June 2013.
“13.5% is the maximum rate on deposits at Progress Bank. Raising awareness and expanding our consumer base on the market is our main goal at this stage. We maintained a relatively high interest rate on deposits in the Georgian banking sector in order to effectively achieve this goal,” an official from Progress Bank told The FINANCIAL.
The source said that at Progress Bank as well as at other Georgian banks, there is a tendency of reducing deposit rates. Hence a decrease is expected in the near future.
“Deposit rate determination at Progress Bank as well as around the world depends on the interest rate policy on loans. In terms of this our bank maintains its margin and invests +5-8% of attracted resources,” official said.
“There is currently excess liquidity in the Georgian banking sector. This encourages the reduction of deposit rates. Accordingly, from today’s perspective we will also continue the reduction of interest rates on deposits,” she added.
The source avoided naming the exact number of depositors due to the Bank’s interests. However, she did say that the number of depositors is growing rapidly and its growth rate is the fastest in the history of the Bank.
Bank of Georgia offers consumer loans with a 15% interest rate, TBC Bank – 17%, ProCredit Bank – 15%, KSB Bank – 12.9%, Constanta – 16%, PrivatBank – 18%, Halyk Bank Georgia – 14%, VTB Bank – 14.9%, BTA Bank Georgia – 16%, Liberty Bank – 16% and BasisBank – 14.9%.
“While high interest can be the result of economic growth in a country, very high interest can be because of inflation. The real rates consumers are receiving after the inflation number is deducted are important because high rates can sometimes not compensate an investor because of the inflation rate. How it affects the economy is that when deposit rates are high it compensates savers but since loans would be higher than deposit rates it penalizes borrowers by making borrowing costs high,” Peter Fiasco, Founder and Director of Deposits.org, told The FINANCIAL.
“Similar to most countries in the world, the factors that influence deposit rates include the influence of the monetary policy of the central bank, such as the Federal Reserve (independent central bank of the United States). When an economy has high inflation it can increase interest rates to keep it under control, e.g. in Georgia in 2011 its inflation was 8.5% relative to the US 3.1%,” said Fiasco.
“Banks in general are dependent on the interest rates set by the central bank. They are also influenced by funding and liquidity requirements, regulations, competition for deposits and loan to deposit ratio profiles,” Fiasco added.
According to Fiasco, deposit products are considered liabilities for banks and bank profitability is usually based on the spread between its loans and its funding which includes deposits as well. While this spread may be high, it could be because of high loan and credit card defaults which may force them to do this to maintain profitability.
In Fiasco’s words, worldwide deposit rates for major economies have been falling in early 2013 and might not go up again until the US and Europe recover further.
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