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 by 45.5%.
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 of reliability.
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.
The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.
