Page 64 - RUSRptOct18

The sector liquidity surplus (defined as liquidity that banks keep on interest-bearing deposits with the CBR) was RUB2.5 trillion at end-July, down slightly from RUB2.6 trillion at end-June, although it reached RUB4 trillion during the month. These deposits are mainly placed by Sberbank and foreign banks, while some other large banks remain reliant on state funding amounting to RUB6.1 trillion at end-7M18 (excluding RUB0.5 trillion CBR subordinated debt provided to Sberbank and RUB2 trillion of CBR deposits in rescued banks). The largest users of this were VTB group (RUB2.2 trillion, 20% of total liabilities), Gazprombank (RUB0.7 trillion, 13%) and Rusag (RUB0.6 trillion, 21%)
Russians pulled $1.5bn out of bank currency deposits in August, with Russia’s largest state-controlled bank Sberbank accounting for $1.2bn of the total, Bloomberg reported citing the data by the Central Bank of Russia (CBR) and Frank RG. Most recently the head of Russia's second-largest bank VTB Andrei Kostin caused a flurry by speculating in public that the bank could have to convert foreign currency deposits into rubles in case of expanded US sanctions, which had to be specifically refuted by the governor of CBR Elvira Nabiullina . The comments were seen as very strange at the time as they undermine confidence in the banking sector and jibe with the general recovery in the banking sector as the CBR’s clean up progresses. Reportedly Sberbank saw its currency deposits shrink by 10% year-to-date as of end of August, which was more than the sector average. The bank accounts for 45% of all deposits in Russia's banking system. Sberbank representatives brushed off concerns of currency deposit run telling the RBC business portal that the "the inflow or the outflow of $1bn given the $94-95bn currency balance must be seen as a controlled evolution of bank's operations." Analysts surveyed by RBC relate the currency deposit outflow not only to the concerns over sanctions risks that peaked in August, but also to the vacation season that had Russians pull the currency for their vacations abroad. Some could have pulled the deposits to convert into rubles amid the national currency weakening to make large front-loaded purchases ahead of the anticipated price growth due to planned VAT hike. In the corporate sector, the clients reportedly pulled $4.9bn of currency in August and $3bn in July from banks, Raiffeisenbank analysts estimated. The deposit outflow could continue in September, especially given recent speculations on conversion of currency deposits into rubles. Both the largest banks and the CBR have enough Fx liquidity to withstand the outflow, Alexander Danilov of Fitch Ratings argued to RBC, reminding that in 2014 the CBR stepped in with repo auctions with $50bn limits amid extreme ruble volatility.
64 RUSSIA Country Report October 2018 www.intellinews.com