Small banks are reviewing deposit rates, some of them have significantly reduced the yield on deposits. Let's consider what conditions banks with deposit portfolios of up to UAH 2 billion are currently offering to private clients.
Inflation in Ukraine accelerated to 3.3% year-on-year in May, compared to 3.2% in April. Inflation is expected to increase further in June following the increase in electricity tariffs, which will negatively affect deposit yields.
The profitability of deposits will also be affected by a possible tax increase, which is being discussed in government offices. Danylo Hetmantsev, the chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, noted that “personal income tax, military levy, value added tax” may change.
According to preliminary data, the military levy may increase from 1.5% to 5%. This will directly affect the profitability of deposits, since individuals pay this tax along with personal income tax when receiving income from deposits. If the total amount of taxes is now 19.5%, then after the changes it may increase to 23%.
Ivan Mychlo, head of the Lviv branch of RVS Bank, agrees that the increase in military duty will affect the profitability of deposits, but does not believe that this will make deposits less popular.
“I do not think that the increase in military duty will significantly affect the profitability of deposits and their demand among the population. Since the military duty was first introduced (1.5%), there has been no outflow of customers. Now an increase to 5% is planned, but this is only a forecast. After a certain period of adaptation, demand may recover,” explains Ivan Mychlo.
Ivan Svitek, Chairman of the Board of Directors of Unex Bank, also believes that an increase in military fees is likely.
“Any tax increase complicates the situation, even for classic deposits. Market competition and economic conditions limit the opportunities for reviewing deposit rates. An increase in taxes will affect the real profitability for the depositor, since more of the accrued interest will be transferred to the budget,” he notes.
According to him, raising taxes may encourage people to invest in government bonds or keep money at home or in current accounts. The depth of this process will depend on the level of tax increases and the resource situation in the market. On the other hand, filling the budget, a significant part of which goes to the country's defense, may have priority.
As a reminder, on June 18, the Ministry of Finance placed military bonds for 8.6 billion hryvnias and 204 million dollars.
