After increasing the key rate, the Central Bank expects a flow of household funds into deposits

After the next increase in the key rate, the Central Bank expects a flow of household funds from savings accounts to time deposits. A number of banks have already announced plans to raise rates on deposits and savings accounts. But in general, market participants do not plan for a significant increase in profitability for these instruments. Experts believe that banks may begin to raise yields on long-term deposits, as the Central Bank warned that the period of high key rates could be long.

The decision to increase the key rate by another 1 percentage point, to 13%, announced on Friday, September 15, by the Bank of Russia, provoked similar actions by commercial banks. Alfa Bank announced that it was increasing the rate on deposits, Gazprombank promised an increase in rates on deposits and savings accounts. The banks did not specify the size of the increase, but noted that their deposits are already the most profitable on the market – at 12.5% ​​per annum. FC Otkritie Bank also promised to increase rates on its savings products.

Since the beginning of the year, the average maximum rate on deposits of the ten largest banks has been close to 8% per annum and began to grow noticeably in the second ten days of August after a sharp increase in the key rate. By the first ten days of September it reached 9.7% per annum. The maximum average rate on deposits for three to six months reached 10.4% per annum.

At the same time, according to the head of the Central Bank, Elvira Nabiullina, the Bank of Russia plans to keep the key rate at a high level for a long time. And, according to her, “in the deposit market there is a flow of household funds from current accounts to time deposits; we expect this process to accelerate due to the further increase in the attractiveness of ruble savings.”

But not all banks are ready to join the new rate race yet. Thus, VTB reported that the bank is still maintaining the current conditions for its clients, but will respond to changes in the market situation. “For savings products, VTB offered its clients an increased yield of up to 12% per annum back in August, further decisions could follow within two weeks,” the bank reported. The head of the liability and commission products service at Pochta Bank, Gennady Chausov, does not expect a further significant increase in deposit rates, since in many respects it has already been included in recent rate increases by banks. “Their growth potential is almost exhausted at the moment; in the short term, the market may react with a slight increase in rates on savings and safe accounts, since rates on them are more flexible to changes in the market,” he said.

Experts also do not expect a sharp increase in rates on deposits and savings accounts. According to the Managing Director for Validation of the Expert RA rating agency, Yuri Belikov, the maximum interest rates for the ten largest banks, taking into account the next increase in the key rate, may add 0.8–1 percentage points over the horizon of the month. “In November-December, growth may continue, but most likely it will be restrained,” he believes. In addition to pro-inflationary factors and the mentioned likelihood of an additional increase in the key rate, the increase in deposit rates is supported by the tightening of competition among banks for sustainable funding. “The restraining factor will be the unwillingness of banks to lose too much in net interest margin, since rates on active operations cannot be quickly adjusted to changes in the key rate due to decreased asset mobility and the high debt burden of borrowers,” notes Yuri Belikov. A further increase in the burden of interest payments is “excessive credit risks for banks,” the expert believes.

The drivers of the segment, according to Gennady Chausov, will continue to be short-term and medium-term deposits, for which the highest rates currently remain, as well as savings accounts. However, Yuri Belikov does not exclude an increase in profitability on longer-term deposits. Firstly, the main volumes of deposits are distributed across two opposite poles – in clusters on demand and for a period of more than six months – intermediate products are poorly developed and not in great demand, he notes. Secondly, the regulator hints that the period of high rates will not necessarily be short; this is a question of the effectiveness of inflation targeting, and there are uncertainties with this. Thirdly, banks need to extend and stabilize their funding, the expert concluded.

Maxim Builov