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bne October 2018 Special focus I 33
The knock-on effect is that whereas the Central Bank of Russia (CBR) has been easing its monetary policy with a series of cuts in interest rates this year, it is likely to hike rates for the first time in a year at its next meeting on September
higher (from 9.7% in July to 9.9% in August for the one-year-ahead gauge) and there’s a multitude of other risks around. With that said, we feel the CBR will not haste to deliver such a decision as early as the September 14 MPC meeting,” Yuri
growing faster, and the relative gains of the last decade will be lost.
Indeed the Kremlin is well aware of the problem as amongst the many demands made by Putin in his state of the nation speech in April is that Russia’s growth should be raised to well ahead of the global average by 2024. The May Decrees are supposed to provide the impetus, but with the OFZ sanctions it becomes unclear how the Ministry of Finance will be able to fund the dozen gargantuan national projects in the programme.
Moreover the CBR’s attempt to support the ruble with a rate hike will be
less effective than usual as none of
the factors driving the ruble down – investors dumping OFZs on sanction fears, higher petrol prices following
oil prices upwards, a weaker harvest,
a recent 2% hike to VAT rates – are monetary factors and all of them are out of the central bank’s control so hiking interest rates won’t help solve any of these problems.
Gref invested $1.2bn into a state-of-the- art IT system that allows the head office to manage a branch network that stretch- es over eight time zones in real time, and has embraced fintech as the future of the bank. Out are the sober blue suits and in are the polo shirts and loafers, as Gref explores new and innovative ways to develop traditional banking services. He even dressed up in an exoskeleton that hindered his motion and wore opaque glasses before marching Robocop-like into a Sberbank branch to see how well the team could cope with serving some- one with physical disabilities.
All this, plus Sberbank’s almost guaran- teed profits by dint of its copper-plated
“Foreign investors, including Americans, make up a big part of the holders of OFZs”
14, to contain the fall of the ruble. The falling ruble also started to feed through into inflationary pressure, which ticked up in August to break above the 3% level for the first time in a year. Inflation was expected to rise towards the CBR target of 4% anyway, helped along by those higher oil prices, but it is rising a lot faster than it was supposed to now.
“The ruble is plummeting by the stagger- ing weekly pace of 3.4%, headline infla- tion is notably accelerating (from 2.5% y/y in July to 3.1% in August), people’s inflation expectations are starting to edge
Tulinov and Phoenix Kalen, analysts with Societe General, said in a recent note.
A rate hike and the end of the CBR’s easing cycle would be unwelcome news for the government that is working
hard to boost growth. The Ministry of Economy recently downgraded its GDP growth forecast for this year for a second time to 1.8%, which is, for an emerging market, a stagnation level of growth. Russia’s economy has been recovering but with growth stuck at around 2% for the foreseeable future Russia will slowly fall behind the rest of the world, which is
Banking’s David and Goliath
Ben Aris in Berlin
Sberbank is half of Russia’s bank- ing sector by itself, while Tinkoff is a tiddler that is only 11 years old and started out offering a single product: credit cards. Between them this David and Goliath pair take up all the attention of portfolio investors into Russia’s financial sector.
Sberbank is huge. It accounts for half of all the deposits in the country and the bulk of the banking sector’s profits. It has some 25,000 branches whereas the next biggest bank has 1,000 at most. During the worst of the “silent crisis” in 2015 the banking sector made a profit of RUB109bn, including Sberbank’s RUB119bn: in other words the rest of
the banking sector lost RUB10bn and all of the sector’s profits were made by Sberbank alone.
With its massive market share that is based on serving the average Russian, the bank has become a proxy for the rise of the middle class and the Russian growth story.
And despite being the Soviet brontosau- rus of the banking world, Sberbank is surprisingly well run by former economy minister German Gref, the author of President Vladimir Putin’s liberal reform plan in 2002 that led directly to Russia’s boom at the start of the noughties.
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