Russia’s biggest bank, cut off from international credit markets, has gone from the threat of dollar famine to feast.




After almost two years of sanctions, Sberbank PJSC has more dollars than it knows what to do with. The state-run lender has cut interest rates on short-term dollar deposits to almost zero in an attempt to stem foreign-currency inflows from clients, its Chief Financial Officer Alexander Morozov said in an interview.


“We’re not yet mentally prepared for sub-zero rates but they might be cut to several hundredths of 1 percent this year,” Morozov said. “When the sanctions were imposed, our expectations were different. Without access to capital markets and given capital outflow, we anticipated a foreign-currency liquidity deficit.”


Banks’ coffers are overflowing with dollars as Russia endures its second year of recession, pushing companies and individuals to save more, while the ruble’s volatility remains near the world’s highest. At the same time, the regulator has tightened rules to create disincentives for lending in foreign currency. Sberbank is enjoying a surplus of dollars even as U.S. sanctions over the conflict in Ukraine have kept it from raising money on international markets since 2014.


New Regulations


The Russian central bank has been encouraging lenders to reduce dollar operations, imposing rules such as higher reserve requirements for foreign-exchange deposits from April 1 to reduce currency risks.


The share of non-ruble savings grew among retail customers and businesses over the last year, with companies holding 51 percent of their funds in foreign currencies as of March 1, up 4 percentage points from a year earlier, according to the central bank.


“Lenders will move toward ruble credit,” Bank of Russia First Deputy Governor Ksenia Yudaeva said in Washington last week. “This is connected to new regulations and with the fact that banks and borrowers understand that there were big risks associated their previous strategy.”


Sberbank’s chief Herman Gref has criticized the central bank’s moves to discourage savings in foreign currencies as a misguided bid to boost investment, blaming a deficit of projects to finance rather than a liquidity shortage for the lack of capital spending.


Ruble’s Swings


Many Russians prefer to save in foreign currency given the historic volatility of the ruble, which has lost about half of its value to the dollar since June 2014. The ruble has rebounded this year as oil prices stabilized, gaining more than 7 percent. It was down 3.1 percent to 68.4890 against the U.S. currency as of 10:14 a.m. in Moscow after talks between major crude producers ended in Doha without any agreement on limiting output.


Sberbank has lowered rates on all new dollar liabilities by 2 to 3 percentage points this year, according to Morozov. Even so, its loans-to-deposits proportion for dollars is about 70 percent, an eight-year low, he said. That compares with the equivalent ratio of 98 percent for rubles, which Morozov calls close to optimal.


The bank’s foreign-currency holdings increased 23 percent in 2015 to $97 billion, and reached $100 billion by March 1, according to calculations of Moscow-based Frank Research Group.


As the recession drags on, clients are avoiding new loans, a trend that will continue to pressure deposit rates and bond returns, Morozov said.


‘Recession Period’


“Deposits will continue to exceed the amount of loans as long as deleveraging is in progress, and it normally matches the recession period,” Mikhail Nikitin, an analyst at VTB Capital, said by e-mail.


Most of Sberbank’s foreign-currency surplus is held in corporate accounts, which now offer rates of just 0.1 percent. Retail dollar deposits for up to 12 months also pay less than 1 percent.


The decreases in rates this year haven’t yet encouraged clients to place more money in rubles, Morozov said. More than a third of all deposits are held in foreign currency, according to Sberbank.


“I think the flight from rubles is now over and the share of foreign-currency deposits will gradually decrease on expectations of further rate cuts and a moderate ruble strengthening to 60-63 rubles per dollar by the end of the year,” Morozov said.






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