Excerpt from Russian Petroleum Investor by Svetlana Milyaeva
| As soon as the financial crisis started, Russian private bank customers rushed to withdraw money and move funds to state banks – Sberbank, VEB (Vnesheconombank) and VTB (former Vneshtorgbank). During September, the population withdrew from private banks nearly R40 billion ($1.4 billion). Sberbank and VEB do not disclose how much was transferred to them, but the volume of fixed deposits in VTB-24 (the VTB retail banking division) increased in September by R13 billion to R211.3 billion. |
After a round of ratings cuts in October, six of the 10 largest banks in Russia by net assets now have a negative outlook, including subsidiaries of major European lenders Raiffeisen (Austria) and UniCredit (Italy). “We have a negative outlook on many banks, but the ones most at risk are those with short-term debt that is difficult to refinance and exposure to sectors considered risky, such as construction and retail,” said Yevgeny Tarzimanov, an analyst at S&P in Moscow. As if the shutting of debt markets were not enough, clients have taken more than 10 percent of funds out of the country’s private banks over the past six weeks, Tarzimanov said. The outflow makes it more difficult to maintain capital ratios, service existing debt and attract new financing, all of which banks need to keep lending and create more revenue.
Mikhail Zadornov, CEO of VTB-24, said that households pulled 1.5 percent of deposits from banks in September and warned that the figure would be even higher in October. The commercial bank model depends on having money to create money. With profits dropping because of securities-trading losses and a shortage of financing, banks are freezing lending, raising interest rates and cutting expenses to stay afloat.
“Although many banks have not officially announced their plans to reduce personnel,” Tarzimanov said, “this is going to happen in an environment where banks are unlikely to see any growth for the next year.”
In what would have been seen as an act of madness just a few months ago, banks are now offering very high rates on deposits to stop their individual and corporate clients from leaving.
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