BUSINESS

Bank deposits post unexpected growth

By Yiannis Papadoyiannis

Deposits posted a significant increase of about 1 billion euros in December according to data collected by the country’s major commercial banks, to reach 162 billion euros.

Bank officials say that while this rise in deposits is a positive development, it can be attributed mainly to seasonal factors. They argue that before banks can see a substantial increase in deposits the country will have to return to a state of complete social and political stability and that expectations for a rebound of the economy will have to be vindicated with an end to the recession this year.

The same sources say that current liquidity conditions are far from satisfactory as deposits have grown by just 15 billion euros from their lowest recent level, reached in June 2012 when twin general elections led the bank account balance to just 150.58 billion euros – the lowest since 2005. In fact, deposits remained stagnant at a level that is 75 billion euros below what it was before the outbreak of the financial crisis. In end-2009 households and corporate deposits added up to 237.5 billion euros.

Other, more optimistic, credit sector professionals say that the containment of the outflow and the small increase in inflows to bank accounts – against expectations for a decline in the total balance last month due to the payment of multiple taxes – is definitely positive and constitutes the first step toward smooth cash flow. This will happen, they say, once the number of depositors grows, leading to liquidity passing on to the real economy.

In a recent analysis JP Morgan estimated that in the coming years deposits in Greek banks could grow by as much as 30 billion euros.

Bankers say that for capital to start returning in a significant way to accounts, the factors that produce and sustain the uncertainty – such as the risk of political instability or of a bank account haircut – have to be eradicated, while the economy returns to growth. Simply put, the end of the recession will lead to an increase in incomes and therefore to savings.

From the June 2012 low deposits grew slowly to 164.14 billion euros in March 2013 and since then have taken a declining course, with the latest official data by the Bank of Greece showing a sum of 161.94 billion euros in November 2013.

Loan balances, meanwhile, added up to an estimated 221 billion euros, meaning a gap between loans and deposits amounting to about 60 billion euros.

Online