The short-term liquidity crisis and the subsequent rise in lending rates have not impacted negatively on banks’ earnings as they benefited from higher net interest margins and increased their earnings by a solid 70% y-o-y in 4M08. The funding deficit remained the core problem for domestic banks, which raised share capital by 15.8% in 4M08 compared with 9.9% asset growth.
Difficulties in obtaining funds from abroad resulted in a rise in households’ deposits to 32.1% from 31.5% a month ago. Higher deposits were accompanied by a drop in the share of foreign funding in banks’ total liabilities. Private deposits grew by 3.8% m-o-m in April despite rising CPI.
We believe the importance of private deposits as a source of funding will increase in 2H08 when annual CPI is expected to moderate. The earnings growth rates of our top picks will likely once again exceed that of the rest of the banking sector in 2008.
Sergiy Kulpinsky, Ph.D Strategist(380 44) 490-1647
