In November 2023, the volume of deposits in Kazakhstan set a new record, reaching 32.2 trillion tenge, which was +0.5% compared to October, +9.1% year-on-year. The amount of household deposits accounts for 17.3 trillion tenge of the total.
The share of foreign currency deposits in the deposit portfolio of Kazakhstani banks fell to 24.5%. This trend has been observed for several years and has intensified in 2023. Analysts link this trend to the high base rate of the National Bank, affecting the attractiveness of tenge deposits, as well as to the relative stability of the national currency and low rates on foreign currency deposits.
The editorial team of "Kursiv" spoke with the Chairman of the Management Board of JSC "Nurbank" Gulnara Musatayeva about how Kazakhs choose deposits and save money.
What trends have been observed in the deposit market in 2023? How has the situation changed compared to 2022?
Deposits are the most convenient and understandable financial tool for investing free funds. Legal entities place money in savings accounts to protect them from inflation.
The most popular among the population are non-term deposits with replenishment and early withdrawal options (up to the non-reducible balance) at any time. This type of deposit is the most convenient and understandable for the majority. In second place are savings deposits, which have a high level of return.
Corporate clients last year chose flexible deposits that allow for unlimited replenishment and withdrawal of funds within the minimum non-reducible balance.
For representatives of the SME sector, many banks have added the "Overnight" product to their product line. The remuneration rates on this product are almost equal to those on classic deposit products. "Overnight" is a short-term deposit that typically allows money to be placed for one day. Thus, the client receives remuneration the next morning.
Speaking about the market as a whole, in 2023, the volume of retail deposits increased dynamically. The increase in the base rate in 2022 and, accordingly, the increase in deposit rates significantly stimulated the inflow of household deposits. The state program for the protection of tenge deposits, thanks to which compensation was accrued on household deposits, also contributed to the increase in the deposit portfolio in 2023 compared to 2022. The share of foreign currency deposits continued to decline – this is associated with the relative stability of the dollar exchange rate and low rates on them. This trend has been observed over the past few years and intensified in 2023.
How did Nurbank's deposit portfolio change in 2023?
By the end of 2023, Nurbank's legal entity deposit portfolio amounted to 156.9 billion tenge. Household deposits accounted for 172.7 billion tenge. We strive to diversify the resource base and balance it with the loan portfolio – legal entity deposits accounted for 48%, household deposits – 52%.
What trends in the retail deposit sector are expected in 2024? Are there any growth forecasts?
From January 2024, the Kazakhstan Deposit Insurance Fund (KFGD), together with the National Bank, introduced a new mechanism for regulating rates on household deposits. Maximum rates for household deposits with a fixed interest rate in national currency will be set only for a certain category of banks most exposed to liquidity risks and, accordingly, inclined to implement aggressive deposit policies. Well-capitalized banks will set rates on deposit products independently, but at the same time will pay a systemic risk contribution depending on the difference between the bank's rate and the weighted average market rate. The greater the deviation of the bank's rates from the market rate, the larger its contribution to the KFGD reserve.
We forecast increased competition among banks in the deposit product market. As this change came into effect on January 1, 2024, it is difficult to predict how much the volume of attracted deposits will change.
Is it worth expecting a mass withdrawal of money from household deposits in the case of a further decrease in the base rate?
We believe that the stability of the deposit portfolio in tenge is largely ensured by the increase in public confidence in the national currency. Despite short-term fluctuations, the dynamic of household deposits remains positive. The majority of deposits in Kazakhstani banks are term and savings deposits.
In Kazakhstan, there is no alternative to deposits as a tool for preserving and increasing capital. Therefore, we do not expect a mass withdrawal of money.
How does the tenge exchange rate affect deposits in Kazakhstan? Do Kazakhs convert deposits into tenge during periods of national currency strengthening?
The exchange rate is not a decisive factor when choosing the currency for savings. According to the First Credit Bureau for 2023, inflows to dollar deposits in Kazakhstan decreased by 18%: at the end of the year, Kazakhs held just over 8 trillion tenge in foreign currency on deposits. This is less than in 2022 by almost 2 trillion. At the same time, the number of deposits increased by 26%. We believe that the population chooses tenge deposits for two reasons – high rates and the stability of the national currency. It is worth noting here that the volatility of the USD/KZT exchange rate has not exceeded 13% since July 2016. Therefore, it is currently an excellent period to open a deposit in the national currency at a fairly high rate.
In the event of a further reduction in the base rate or tightening of monetary policy, tenge deposits may become less in demand. But it is too early to talk about this now.
For what purposes and in which currency do legal entities choose deposits during economic turbulence? Is there a noticeable difference in strategies between households and legal entities?
For legal entities, the main purpose of placing money on deposits is to preserve and protect temporarily free funds from inflation. Considering currency legislation restrictions on them, during economic turbulence, entrepreneurs with foreign currency contracts try to have deposits in foreign currency to fix the contract expenditure amounts. Moreover, given that legal entities pay a 15% income tax on deposit remuneration and have financial specialists on staff, they are less prone to emotional actions with funds placed on deposits, meaning frequent shifts between currencies are minimized. Households may act more emotionally.
Nurbank offers several types of deposits, all designed for different purposes. What is the specificity of a savings deposit?
We offer competitive rates on deposit products. At Nurbank, you can open a savings deposit with a rate of up to 17.5% APR when saving for six months. Such a deposit allows you to achieve maximum returns in a short period. Additionally, the guarantee amount on it is 20 million tenge. The peculiarity of a savings deposit is that funds cannot be withdrawn early without losing the remuneration. Everyone knows that it is challenging to save on a deposit with partial withdrawals – there is always a need to make an unplanned purchase, and the deposit amount begins to decrease rapidly. A savings deposit does not give you this opportunity, and the savings goal will be reached.
I'd also like to talk about the AQYL educational deposit. AQYL is a unique deposit product. This type of deposit allows you to save money for children's education while receiving remuneration both from the bank and the state. It has high returns in the deposit market.
Nurbank JSC has license No. 1.2.15/193 dated February 3, 2020, issued by the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market
Source: https://kz.kursiv.media/2024-02-22/skvr-nurbank-mus/#:~:text