Banks improve marketing, drawing larger personal savings
Commercial banks saw deposits by individual account holders soar by 72 percent last year to Hr 19.1 billion. That figure represents a more than six-fold increase over the last five years. Bankers said the trend reflects the population’s growing confidence in the country’s banking system.
Ihor Smetanin, deputy chairman at Finance and Credit bank, said that the growth stemmed from the central bank’s success in stabilizing hryvna. There was 0.6 deflation percent last year as compared to 6 percent inflation in 2001.
Oleksandr Suhonyako, president of the Ukrainian Association of Banks, said that bankruptcies of Ukraina and Slovyansky banks failed to shatter the population’s growing trust in the banking system. Both banks, among the largest in the country, recently went under, causing losses to private depositors.
Personal deposits have been on the rise since 1998 when the total figure for Ukraine’s banking system stood at a mere Hr 3 billion. Since then, Ukrainians have saved another Hr 16 billion in banks, half of it last year.
Ukrainians’ changing attitude towards personal savings was also a factor, said Suhonyako.
“People start realizing money has no value when it is not working,” he said. “Besides, it’s a legal way to earn money [on interest rates].”
Apart from favorable macroeconomic conditions, improved marketing among commercial banks also played a role.
Finace and Credit, which saw personal deposits rise by 88 percent last year, made retirees its primary target group. Smetanin said the bank offered pensioners 1 percent to 1.5 percent higher interest rates on deposits than it offered regular clients. The bank also gave retirees debit cards for ATM withdrawals of earned interest. The maneuver spared elderly people a trip to the bank as well as time they would otherwise have spent waiting in line.
“We developed special flexible programs for pensioners that decreased the size of average deposits but increased the overall number of depositors,” he said.
The bank also struck a deal with Viking Motors car dealer and Aprel computer hardware manufacturer allowing new customers to qualify for loans with privileged interest rates. The loans were to be spent on purchasing Renault cars and computer hardware.
“The customer therefore received an opportunity to get a loan almost without an interest fee,” said Smetanin.
Ukrainians are also willing to entrust their savings to banks for longer periods of time. Smetanin said long-term deposits now account for about 90 percent of all deposits by individuals, while in 2001 they accounted for only 20 percent.
Suhonyako said an increase in long-term deposits has also allowed banks to lend more.
Deposits in national currency are also becoming more popular. Suhonyako said the major reason is higher interest rates for deposits in hryvna than in hard currency. He said that last year, commercial banks offered to pay between 19 percent and 21 percent in interest rates for deposits in hryvna as compared to only about 8 percent for savings in hard currency.
Suhonyako said the strengthening hryvna and devaluing dollar are behind a continuing trend that has led customers to shun dollars in favor of national currency. The share of hryvna deposits in banks has now reached almost 70 percent.
Smetanin doubts the tendency will continue.
“The last several months have brought a totally different trend,” he said.
A government reshuffle and a change in central bank’s management have shattered the population’s confidence in hryvna.
“In December and January, two-thirds of deposits were made in hard currency,” he said.
He also said that growth in personal deposits is likely to slow down this year as inflation is expected to rise.
“People will continue bringing their money to the banks,” he said. “But increase will not be so striking,” Suhonyako said.
