Page 82 - RusRPTMar21

Despite a significant decline in real incomes, household bank deposits grew by 4.2% last year, which was only a tad lower than the inflation rate (4.9%). Household assets represent about a third and corporate assets about 31% of the banking sector’s total liabilities.
These shares have remained fairly steady, but over the past year the structure of savings shifted a bit. Despite ruble devaluation, the popularity of foreign currency accounts has diminished.
Rising uncertainty and the drop in deposit interest rates are reflected in the increasing popularity of keeping money on current account. At the end of December, assets held in household accounts were up 50% y/y. The volume of household term deposits, in contrast, contracted slightly, reflecting the increased enthusiasm of households to invest in the stock market last year.
The pressure caused by the coronavirus pandemic is manageable for most Russian banks, Fitch said in a banking review release in February.
Fitch also reports that banks’ metrics improved in 3Q20 and were broadly stable in 4Q20. While banking profits were down on 2019 at the end of 2020, they were still up on 2018 and 2017.
“We expect pressure on banks’ credit profiles will continue in 2021, as a result of high loan impairment charges (LICs) undermining profitability. However, most lenders will be able to absorb these higher credit costs without significant pressure on capitalisation given their reasonable pre-impairment profit cushions, Fitch said.
Stable Liquidity; Increased OFZs: The daily average balance of funds placed by banks on short-term deposits with the CBR and invested in CBR bonds decreased to RUB2.1 trillion (2% of assets) in 4Q20 from RUB2.4 trillion in 3Q20.
The sector’s investments in bonds (excluding CBR notes) increased by RUB2.2 trillion (18%) in 4Q20; this was driven mainly by growth in government bonds. The Ministry of Finance (Minfin) issued RUB2.4 trillion of local bonds (OFZs) in 4Q20 and we believe a large proportion of these bonds were purchased by banks.
However, this was neutral for sector liquidity as the CBR increased ruble repo facility limits, and banks pledged a part of their purchased OFZs against new repo funding from the CBR, which increased by RUB1.2 trillion in the same period,and Minfin partially placed proceeds from the OFZ issues in the form of deposits with banks, which increased by RUB1.2 trillion in October-November. In December, Minfin’s deposits decreased by RUB1.7 trillion as it preformed
82 RUSSIA Country Report March 2021 www.intellinews.com