Private clients of banks supported the demand for gold

By the beginning of June, the balances on the “gold” accounts of clients in banks amounted to 70 tons, having decreased by almost 17% since February 1 last year (after this date, banks temporarily stopped disclosing financial statements). However, this reduction is explained by the months available for comparison – when comparing the results of any January and May, the seasonality of gold miners will affect. Demand for metal accounts and bullion from individuals during this period was steadily growing, fueled, among other things, by the closing of deposits in dollars and euros.

Balances in precious metals on customer accounts in Russian banks in terms of physical gold as of June 1, 2023 amounted to 69.7 tons. This follows from the 101st reporting form (excluding PSB and a number of other banks that do not disclose their data). In relation to February 1, 2022 (the last disclosed financial statements of banks before the break in publication), the total balances decreased by 13.9 tons. As follows from Kommersant’s calculations, Sberbank remains the leader in terms of account balances (53.8 tons), while the decrease in customer accounts over 16 months turned out to be insignificant – just over 2%. Other large banks that have unallocated metal accounts (OMS) of clients, including VTB, FC Otkritie, Sovcombank, ATB, had their balances reduced by 12–57%.

The decrease took place against the backdrop of increased demand from individuals since last year, both in relation to the opening of OMS (see Kommersant of May 30) and the purchase of gold bars (see Kommersant of May 15). However, as the bankers point out, the published reports do not provide a breakdown into individuals and legal entities, in addition, there is no division by types of precious metals. And in the vast majority of cases, the decrease in balances was due precisely to the reduction of liabilities to legal entities – subsoil users. According to Elena Magera, Head of the Department for Operations with Precious Metals at Sovcombank, “since we are comparing February and June, the decline is primarily due to the seasonality of the business of gold mining enterprises”: at the beginning of the year, they form significant balances on their metal accounts in banks, passing from the past of the mining season, by June, as a rule, they begin to be sold. Client balances on unallocated metal accounts at ATB, which serves subsoil users in the Far East and Siberia, traditionally decrease from January to May every year. “This is due to the fact that subsoil users are selling off their balances before the start of the gold mining season,” the bank says.

However, Rosbank notes that some wealthy clients during this period “choked to transform their assets from precious metals into rubles.” “The bank is not currently developing the direction of depersonalized metal accounts, and the volume of balances was insignificant,” they indicate.

At the same time, according to published reports, a number of banks began to actively develop this area. In particular, MTS Bank, Expobank, Ingosstrakh Bank (former Soyuz Bank), and Realist Bank appeared or sharply increased their balances on OMIs. “Against the backdrop of reduced opportunities for currency transactions, exchange transactions with gold are becoming increasingly popular in the market,” says Expobank CFO Ernst Becker. MTS Bank noted that the opening of accounts in gold made it possible to “satisfy the needs of customers in the redistribution of foreign currency balances and ruble income.” At the same time, the bank expanded the offer of compulsory medical insurance at the expense of silver, platinum and palladium. Clients of Ingosstrakh Bank were also interested in buying precious metals “as a tool for diversifying foreign exchange assets.” At the same time, the bank did not note an increased interest in palladium and platinum, gold dominated. However, as Nikita Likov, director of public relations at Ingosstrakh Bank, noted, at present there is a “flow of client interest in favor of cash currency transactions”.

At the same time, the disclosed indicators of bank balance sheets do not show the volumes of precious metals sales. For example, a bank may sell gold bullion but does not record it in accounts because the customer keeps the gold outside the bank. Therefore, despite the decrease in VTB’s balances under compulsory medical insurance, in 2022 the bank sold 34 tons of physical gold. The situation is similar in MCB, which sells gold bullion, but there are no client account balances. According to the results of the first half of 2023, physical gold is in higher demand compared to buying gold on a brokerage account, said Arina Kostryukova, head of the Precious Metals Department of the MCB.

As Yury Belikov, Managing Director for Validation of the Expert RA agency, notes, “the demand for precious metals and compulsory medical insurance is stimulated by the inertia of rates on deposit products, the release of funds that were previously placed in products denominated in foreign currency, the shortage of predictable and profitable alternative investment instruments, and a decrease in confidence in the stock market following lockdowns, caps and falls in the fair value of public debt instruments last year.” After the departure of deposits in dollars and euros (see Kommersant of July 3), “CBOs can be much more popularized among all categories of clients, and not just VIPs,” the expert believes. And even a general increase in the debt burden and a reduction in the savings rate “will not interfere with some redistribution of savings in favor of compulsory medical insurance in the medium term,” summed up Mr. Belikov.

Olga Sherunkova