In October two-month credit growth ceased and was replaced by a 0.3% decline (compared to September, with an adjustment for the FX rate). However, slight increase of 1.2% from the beginning of the year is still maintained. Deposits of the banking sector showed deeper decline of 1.9% in a month.As main outflow of deposits occurred in national currency, the adjusted dollarization of deposits in October rose by 1.1pt, reaching 49.3% (against 48.2% in September). Despite the fact that the weighted average yield for notes has been in a decline throughout the year: by October to 9.45% (-0.52ppt), the volume of banks excessive liquidity withdrawal by NBRK's instruments once again rose to T2.85 trillion (21% of the sector's loan portfolio). The share of liquid assets of the banking sector slightly decreased by 0.06ppt in October to 35.1% of all assets, but it continues to provide more than sufficient level for the system. At the same time, the allocation of free funds to lending is still limited by the risks of deterioration in the quality of banks' assets and capitalization. During the month several banks from the top-10 received funding in the form of subordinated bonds at a low rate. Apparently, as a result of this, some banks recognized significant one-off amounts of net income (for one month: Eurasian - T73.2 billion, Tsesnabank - T31.1 billion), which provided for the first time in 3 months a positive value of net income for the whole sector. At the same time, profitability of the banking sector, in a view of neutral dynamics of rates in the money market, did not show significant improvement – net interest margin and spread remained practically unchanged in October, remaining at the level of the previous month. We believe that, despite the decline in cost of funding, necessary expenses on provisions will be a limiting factor for recovery of the sector's profitability.
- Monetary policy and FX market;
- Assets of the banking sector, deposits of the banking sector;
- Loans of the banking sector and credit to economy;
- Banking sector's liquidity;
- Banking sector's profitability;
- Top 10 banks major changes.
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