Analyst Osadchy told when to expect the highest rates on deposits

In September and October, Russians returned 200 billion rubles to bank deposits. The head of the Central Bank of the Russian Federation, Elvira Nabiullina, spoke about this while speaking in the State Duma. She recalled that in the spring and autumn of last year there were large outflows of household funds from banks, but now the situation is the opposite. People understand that placing “deposits at 13%, 14% and even 15% is profitable.” This is exactly the result that the Bank of Russia expected when it began tightening monetary policy in July. However, the most profitable offers for placing deposits are yet to come. What rates can be expected on ruble deposits and whether it is time, in this case, to convert dollars into rubles to place them on deposits, Maxim Osadchiy, head of the analytical department of BKF Bank, told MK.

— What is happening in the deposit market in our country?

— In the first ten days of November, there was a record increase in the maximum interest rate on deposits in Russian rubles of ten credit institutions that attract the largest volume of individual deposits over the past twenty months. The rate increased by one and a half percentage points – from 12% in the third ten days of October to 13.6% in the first ten days of November. This growth was the market’s reaction to an increase in the key rate by two percentage points: from 13% to 15% from October 30, 2023.

— What does “increased by so many percentage points” mean? Why can’t it be said more simply: “it grew by so many percent”? Why do you, economists, bother people with your incomprehensible words? When they write that the key rate has increased by 2% – from 13% to 15%, is this wrong?

– Completely wrong. Sometimes simplicity is worse than theft. If a certain value is increased by 2%, this means that it has increased by 1.02 times. Increasing 13% by 2% will give us only 13.26%, not 15%. But an increase of 13% by 2 percentage points will give us the required 13% + 2% = 15%. So interest is not apples, you need to add it up wisely.

— An increase in the rate on deposits in the top 10 largest banks by one and a half percentage points is clearly not a historical record?

– Of course. The historical record for the growth of the maximum rate on deposits of the top 10 largest banks was recorded in the first ten days of March 2022. Then it increased by 11.9 percentage points – from 8.6% to 20.5%. This is how the market reacted to a sharp increase in the key rate of the Bank of Russia by 10.5 percentage points – from 9.5% to 20% from February 28, 2022.

— The influx of deposits is a positive trend for banks. It’s good for depositors too: the profitability of deposits increases. Will the increase in rates somehow affect those who do not have deposits?

– Certainly. Firstly, an increase in deposit rates increases the influx of household funds into banks and, thereby, helps to weaken inflation, because the more they save, the less they spend. Secondly, interest rates on loans are also rising. But many Russians, mostly with low incomes, have no deposits, and loans are through the roof! They are not at all happy about the rate increase.

— Has the latest increase in the key rate already affected inflation?

– Not yet. More time must pass. The economy is like a dinosaur: by the time the signal from the burning tail reaches the brain, the tail has long since burned out. So far, inflation in Russia in the first week of November (from October 31 to November 7) in annual terms accelerated to 7%, moving further away from the target of 4%, while in April it was only 2.3%. And this is a signal for further tightening of monetary policy. Accelerating inflation increases the likelihood that on December 15, at the last regular meeting of the Board of Directors of the Bank of Russia this year on the key rate, it will be increased, say, by half a percentage point – from 15% to 15.5%. In addition, before the New Year, banks traditionally offer deposits with increased rates. Therefore, in the remaining days of this year, a further increase in interest rates on deposits is likely.

— How much more can deposit rates rise?

— The maximum rate on deposits of the top 10 largest banks may rise to 15% by the end of the year, which is twice as high as the 7.5% inflation forecast for the year. So Russians can expect more favorable offers on deposits from banks closer to the New Year.

— Maybe those who want to open deposits should not rush and wait until January?

— The market expects a reversal of the trend, a transition to a reduction in the key rate within 3-6 months. Accordingly, many banks have the highest rates on deposits for a period of 6 months. As a result, there is not only an influx of household funds into banks, but also a flow from individual deposits with a maturity of more than a year to deposits with a maturity of less than a year. Thus, in September, deposits of individuals in rubles for a period of more than a year decreased by 0.5 trillion rubles, and for a period of one month to a year increased by 1.5 trillion rubles.

— And what is the best strategy for increasing savings for Russians in this case?

— Wait until December and open deposits for six months at the highest rates. Remember the principle of diversification: “don’t put all your eggs in one basket.” You should not keep more than 1.4 million rubles in banks that do not belong to the state – this is the amount insured by law. Scatter your savings across many banks, if, of course, you have something to scatter. Moreover, there are very few banks left in the country: only 324.