|Russians opt for putting their money
in the bank
MOSCOW. (Anatoly Gorev for RIA Novosti) - The year 2006 has been quite a
successful one for Russian banks on the individual deposits market.
Between September 2005 and September 2006, the value of Russians' deposits
grew by more than 30% from 2.41 trillion rubles ($91.35 billion) to 3.26
trillion rubles ($123.72 billion).
Experts say that the market's potential is not exhausted yet.
At present, only one fourth of Russians keep their savings in bank
accounts. The rest prefer to keep money at home, spend it right away or
invest in more profitable tools than a bank deposit. However, experts from
Tsirkon, a research group, believe that as the economic situation in the
country improves and people's incomes grow, the share of people using bank
deposits as a financial tool for keeping their savings will increase. So
the growth in deposits is very likely to continue in 2007.
This is good news for Russian banks. Attracting individual deposits is a
priority for them, especially those banks that are not among the top
20-30. This money is necessary for financial organizations to develop
their loan activities and expand on the mortgage, consumer, car and
corporate loan markets. The problem is that for banks to increase lending,
they are required to increase the amount reserved for possible losses. The
bigger the amount set aside for reserves, the smaller a bank's available
capital becomes, threatening to fall below the capital adequacy
requirement set by the Central Bank.
It is important to note that the problem is more complicated than it may
seem. In order to prevent these negative developments, banks have to do
one of three things: refinance their loan portfolios by attracting
people's deposits, find cheaper - and, better, in the long term -
borrowing on the capital market, or receive financing from their founders.
The truth is that even large Russian banks sometimes cannot refinance
their loan portfolios through cheap borrowing, because not all of them
have the necessary credit ratings and not all of them have a chance of
profitably placing their assets on the capital market. Moreover, very few
banks can hope that their founders will keep increasing their capital.
So the best way for banks to avoid problems with capital adequacy is to
attract deposits from private investors. The above quoted figures
testifying to a bigger influx of money into bank deposits should make them
happy. Yet analysts say that the situation is not as bright as it may
seem. Sberbank has profited more than others from the deposit boom in
2006. Its individual deposits surged by 30.7% in one year from November 1,
2005 to November 1, 2006. This growth was likely caused by people's
confidence in the successor to the Soviet Savings Bank. It also helped
that Sberbank took steps to increase the competitiveness of its deposit
line for the general population.
It would be fair to note that other banks, including Sberbank's direct
rivals among Russian lending institutions and subsidiaries of large
foreign financial groups, have also made the most of the deposit boom.
However, Sberbank benefited not only from a net increase of attracted
funds. The value of its long-term deposits - those made for more than
three years, which are the most important ones for any bank - has surged
Other banks cannot boast such achievements. Analysts acknowledge that
Russians do not usually risk making long-term deposits with private banks.
Although it has been eight and a half years since the latest banking
crisis in Russia and a deposit insurance system has been set up, people
are afraid to leave their money with banks for a long time. Sberbank is
the only exception, as Russians still associate it with the highest degree
Perhaps, the only institutions that have a chance of catching up with
Sberbank in this area are the Vneshtorgbank (VTB), which is seen by
private investors as a state-owned bank, and subsidiaries of foreign
lending institutions that represent well-known brands and are respected by
Russians as foreign banks. -0-