The FINANCIAL — With a 12.5% annual interest rate on term depositsin the national currency Ukrainian PrivatBank leads the list of banks’ best offers for Georgian depositors. Liberty Bank has the next most attractive offer (12%) for depositors, followed by BTA Bank with 11%. With 6.75% APY Bank Republic and Cartu Bankhave the lowest interest rates on term deposits. Georgia has the second highest deposit rates in Europe.
However last week Bank of Georgia announced about the purchase of 100% shares of Ukraine’s PrivatBank Georgia for USD 51 million. Accordingly the dominance of PrivatBank due to the most attractive deposit rates might be ended soon.
The total volume of deposits at Georgian commercial banks in the national currency amounted to GEL 4,644,647 thousand as of1 November, 2014, NBG statistics revealed. The figure was GEL 3,945,229 thousand in the same period of last year. The amount of deposits in foreign currencies was GEL 6,780,935 thousand in November 2014. It was GEL 5,783,470 thousand in November 2013.
Interest rates on deposits have been characterized with a reducing tendency recently. The average interest rate on time deposits in the national currency was 9.5% in November 2013, while currently it amounts to 8.9%. As for the interest rate on time deposits in a foreign currency, savers receive on average 5.8% at the moment, while their benefit was 7.3% in the same period of the previous year.
PrivatBank has the best offer for depositors not only in the national currency, but also in foreign ones. With 6.5% for USD and EUR deposits the Bank has the highest rate. The less attractive offer on USD deposits is delivered by Cartu Bank, ProCredit Bank and Bank Republic where the rate amounts to 4.75%.With an annual 4% on EUR deposits Bank of Georgia leads the list of lowest rates in the European currency.
Liberty Bank Georgia offers term deposits with 12% APY in the national currency; BTA Bank – 11%; Progress Bank – 10.25%; Bank Constanta – 10%; Capital Bank – 9.5%; KSB Bank, Bank of Georgia, BasisBank andHalyk Bank offer 9%; TBC Bank – 8.50%; ProCredit Bank and International Bank of Azerbaijan – 8%; VTB Bank Georgia – 7%; Bank Republic, SocGen Group and Cartu Bank – 6.75%.
According to deposits.org, providing the International Deposit Rates Exchange (IDRE) globally, Georgia has the second highest deposit rates after Ukraine. Against the background of ongoing economic recession Ukraine offers 21% for depositors. APY in Turkey is 9.50%; in Russia it is 8.60%; Serbia – 7%; Iceland – 5.10%; Macedonia – 2.90%; Hungary – 2.54%; Norway – 2.50%; Romania – 2%; Bulgaria – 1.90%; Greece – 1.90%; the UK – 1.80%;and Malta – 1.75%. The lowest rate has been shown at Swiss and Italian banks, measuring 0.05% and 0.10% respectively.
“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,” 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.
Contrary to its less attractive deposit rate, Bank Republic has the best offer for consumer loans. With an annual 7.5%, the Bank leads the list of the best options for lenders. It is followed by BasisBank with 8.8%; KSB Bank – 8.9%; Bank of Georgia – 9%; TBC Bank – 11%; Halyk Bank – 12%; VTB Bank Georgia – 13.5%; Liberty Bank – 14%; ProCredit Bank – 14.5%; BTA Bank, Constanta and Capital Bank – 16%. Meanwhile,the leaders inthe best offers for depositors have less attractive options for borrowers. PrivatBank and Progress Bank offer consumer loans with 18%.
According to NBG, the total credit portfolio, including overdue loans, amounted to GEL 11,859,607 thousand as of1 November, 2014. The sum was GEL 9,686,924 thousand last year. The annual weighted average interest rate on commercial banks’ loans amounted to 14% for the third quarter of 2014, down from 15.7% from the prior-year period.
The volume of overdue loans reached GEL 527,512,000 by November 2014, up from the 498,926,000 from the same period of the previous year.
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