How Russia is becoming impoverished: experts at Alfa Bank

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

The share of funds that Russians keep in banks in current accounts, and not in deposits, has reached a record in 10 years, found out in Alfa-Bank. Experts associate this with the flow of money from deposits and with the refusal of banks to open deposits in euros.

The share of individuals' funds on current accounts with Russian banks in 2019 reached 26% of the total volume of attracted retail resources - this is a record since at least 2010, according to a review by analysts of Alfa-Bank (RBC has it). In absolute terms, the amount of funds in current accounts reached 8 trillion rubles, which is 19.4% more than the balances at the end of 2018. Over the past three years, the volume of Russian savings in current accounts has practically doubled.

Why do Russians keep money in accounts

The growth in personal savings on current accounts can partly be explained by the flow of funds from deposits, notes the chief economist of Alfa-Bank Natalia Orlova: “On the one hand, part of the population has become impoverished, and these clients can no longer save, so they keep money in current accounts. On the other hand, low rates force clients with significant savings to look for alternative instruments, and checking accounts can often be a transit instrument until a decision on new investments is made.”

The increase in the share of individuals 'funds on current accounts is associated with an increase in banks' proposals for savings accounts, suggests Ekaterina Shchurikhina, Junior Director for Banking Ratings at Expert RA. She draws attention to the fact that the rates on such products are already close to the profitability of term deposits. “The savings account is convenient for the client because it has much more flexible terms for replenishing and spending funds. For banks - by the fact that the rate on it can be revised when the tariff policy is changed unilaterally with the notification of the client, while the rates on the deposit are fixed in the contract during its validity period,”the analyst notes.

The choice of consumers last year could have been influenced by the policy of credit institutions in terms of attracting foreign currency deposits, says Semyon Isakov, senior analyst at Moody's. “Many banks have stopped opening deposits in euros. Clients are increasingly forced to keep Euros exclusively in checking accounts. Interest rates on dollar-denominated deposits also dropped significantly, which made it less attractive to open long-term dollar deposits,”he explains.

Clients are really more and more often keeping money in accounts, and not in deposits, most of the surveyed banks from the top 20 in terms of attracting funds from individuals confirmed to RBC.

• “We do not see the flow - that is, the closing of a fixed-term deposit with the subsequent deposit of these funds into the accounts - we do not see massive amounts of money, but clients are increasingly choosing savings accounts for investing,” says Alexander Borodkin, head of the Savings and Investment Business Department of Otkritie Bank. According to him, over the year Otkritie has risen from ninth to fifth place in the portfolio of current accounts of individuals.
• VTB associates the trend with the growing popularity of card payments and the popularization of savings accounts, said a bank representative.
• Raiffeisenbank explains the growing interest of clients in savings accounts by lower rates on deposits, said Maxim Stepochkin, head of the bank's non-credit products department.
• “The redistribution of flows in the case of MKB is explained by the introduction of a savings account in the product line in January 2019. It is premature to talk about the full replacement of time deposits with current (accumulative) ones,”says Alexei Okhorzin, Head of the Directorate for the Development of Retail and Electronic Business of the Moscow Credit Bank.
• Alfa-Bank recorded the flow of funds from deposits to current accounts only for products in euros, said a representative of the credit institution. “Since June 2019, the bank has not been attracting time deposits in euros, like many other banks on the market, and therefore customers place their funds in euros in current / savings accounts,” he explained.
• Uralsib Bank recorded an increase in attracting individuals on current accounts, but does not associate this with a decrease in clients' interest in deposits. “Undoubtedly, some of the clients at the end of the terms of deposits make a choice in favor of current accounts of different types. But the deposit portfolio today remains revolving”, - said the representative of the credit institution.
• Sovcombank records the growth of client funds both in deposits and balances on its main card "Halva", says the first deputy chairman of the bank's board, Sergei Khotimskiy.

Are the risks for banks growing?

The growing share of current accounts in retail funding indicates that banks are adapting to the cycle of lowering interest rates, Orlova notes. From the point of view of the cost of raising funds, current accounts are preferable for banks than deposits with a fixed rate, but this approach carries certain risks.

In the review, analysts at Alfa Bank point to a growing discrepancy between the maturity of assets (issued loans, in particular, mortgages) and liabilities in key banking markets. “The problem is that due to this, interest rate risks accumulate in the system: liabilities become shorter, and assets longer. So far, short-term funding is beneficial to banks, but when the rate cycle changes, it can create problems,”Orlova explains. Earlier, the Bank of Russia also indicated an increase in the maturity of the active and passive sides of banks' balance sheets: in the event of an increase in interest rates, liabilities can be revalued faster than assets.

Sberbank's chief analyst Mikhail Matovnikov sees no threat in terms of interest rate risk, but believes that the current situation with the flow of funds to accounts indicates the accumulation of liquidity risks. “Although I would not say that it is a dramatic increase,” he emphasizes.

“As for the risks of a possible outflow of funds, in conditions of turbulence in the banking system, they are comparable both in current accounts and in term deposits. Individuals are traditionally sensitive to the information background around banks and, when negative information appears, they prefer to withdraw funds, including terminating deposits ahead of schedule with a loss of interest,”Shurikhina agrees.

According to Matovnikov, the growth of savings on current accounts did not have the effect that banks expected. “There is a growing number of banks that pay on current accounts as well as on deposits. For example, interest is charged on the card balance. These are such "quasi-deposit" products. The turnover on such accounts is low, so current accounts for banks are becoming expensive. Some banks believed that they could save on funding costs, but not all of them benefited from this. On average, the cost of funding for banks in retail has grown,”sums up the analyst.