Determinants of bank deposits under changing economic conditions in South Africa

Richard Apau and Athenia Bongani Sibindi
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Richard Apau: University of South Africa
Athenia Bongani Sibindi: Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

International Journal of Research in Business and Social Science (2147-4478), 2025, vol. 14, issue 2, 241-251

Abstract: This study assesses the determinants of bank deposit flows under changing economic conditions by applying the dynamic panel two-step generalized methods of moments technique to annual observations covering 2007 to 2022 of 12 commercial banks in South Africa. The analysis revealed past deposit flow, profitability, bank size, and capital adequacy ratio as constituting a set of bank-specific variables with a positive predictive influence on deposit flows. At the same time, expenditure drives an adverse impact on deposits. These dynamics posit important implications for efficiency in bank expenditure management to sustain the inflow of depositors’ flows. Also, the results show the existence of a positive relationship between the unemployment rate and deposit flow, which is unexpected in practice, as an increase in joblessness in the country implies a decline in the financial capacity of the population to contribute to bank saving portfolios. However, the unexpected interaction between unemployment and deposit flow in this context can be explained by the adaptive principles of market interactions as the relationship between financial variables is unlikely to be the same under different economic conditions. Moreover, the analysis shows a positive effect of the economic condition on deposit flows which implies that an increase in national productivity exerts an impressive on the flow of depositors' funds to the banks based on market expansion and rapid growth momentum. Based on the findings, strategies to ensure the sustenance of a conducive macroeconomic environment should be reinforced by policymakers as the dynamics of bank deposit flows are linked to the direction of the current economic condition. Key Words:Deposit flow, Expenditure management, Unemployment, Inflation, Economic condition

Date: 2025
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