Russia Banks Need $35 Billion Deposit Boost, Sberbank CFO Says

Russia’s banks, hit by deposit withdrawals last year, need to lure about $35 billion in funds to bolster stability, said OAO Sberbank Chief Financial Officer Alexander Morozov.

“Most of those funds still remain in safe-deposit boxes and bedside tables,” Morozov said in an interview. “The aim for the whole system now is to get that money back.” Sberbank, Russia’s largest lender, has a 44 percent share of the nation’s consumer deposits, and saw the value of the accounts fall 5 percent in 2014.

The Russian currency’s plunge last year prompted a bout of capital flight, while consumers rushed to buy big-ticket items, such as cars and residential property before their rubles lost more of their value. Banks are seeking to boost deposits to replace expensive funding they receive from the Bank of Russia, while souring loans erode capital.

The net outflow of deposits reached 3.7 percent last year, or 626 billion rubles ($11.8 billion), according to Uralsib Capital estimates, as savings were removed from bank or spent elsewhere.

Some of those withdrawals contributed to Russia’s $154 billion of capital outflows last year, as residents moved funds abroad, according to Morozov. As long as there won’t be any “new serious negative” events this year outflows will slow, he said.

Rate Drop

Retail deposits in Russia rose 1.9 percent in the months to end March to 19.1 trillion rubles, central bank data show. Sberbank’s deposits stood at 8.62 trillion rubles at April 1.

“Sberbank may win back some retail clients just due to the return of the trust to the sector and as smaller players will quit the market,” Natalia Berezina, a Uralsib Capital analyst, said by e-mail.

Rates on deposits are linked to the key rate of the Bank of Russia, which rose six times to 17 percent last year. Rates on ruble accounts averaged 15.6 percent in December and fell to about 13 percent this week, according to central bank data. Russia cut the key rate to 14 percent in March.

Morozov’s sees the key rate dropping to between 10 percent and 12 percent by the year end.

The lower key rate will improve the quality of credit portfolios, the “main headache” for the bank now, Morozov said.

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