Summer is gone, but the money remains

Seasonal deposit: banking pros and cons

Many banks try to offer special deposits for each season and holiday. As a rule, these are deposits for a short period - up to a maximum of six months, but the rates on them are slightly higher than on the traditional offer. The fact that seasonal promotions attract attention is recognized even by skeptical bankers - those who decided to abandon the practice of attracting seasonal deposits. For a bank, a seasonal or holiday deposit is another advertising opportunity. And promotions and prize draws help build depositor loyalty. But not all banks feel the need for seasonal deposits. Some, especially credit institutions with state participation, can do without seasonal promotions by establishing one permanent line that is convenient for different groups of clients.

“The main difference between seasonal and all-season deposits is in secondary conditions: provision is made for the replenishment of deposits and the possibility of capitalizing interest, or the amounts of minimum and additional contributions are reduced,” says Marina Saltovskaya, head of the deposit products department of the First Republican Bank. Among the banks there are those that have made holding promotions a rule: when one ends, another begins. For example, the First Republican Bank holds drawings for valuable prizes among depositors on almost all holidays (New Year, March 8, etc.) or offers other products (bank cards, safe deposit boxes) for free or at a good discount. Now the bank has a promotion “Happy Knowledge Day”: all individuals who opened a time deposit during the period from August 20 to September 20, as well as old depositors who replenish their deposits during this period, participate in it. All private borrowers of the bank who received a loan during the campaign will also participate in the promotion. The prize fund is gift cards from a large retail chain of stores for children.

“Over the past years, on the eve of the New Year holidays, BINbank has traditionally held promotions to draw various prizes among its depositors,” says Alexander Efremov, head of the deposits and savings department of BINbank. And this year, during the summer holidays, BINbank offered its clients the “Super Summer” deposit, which made it possible not only to smooth out the seasonal decline in activity on the part of depositors, but also to increase the retail passive portfolio. Director of the retail business development department of Promsvyazbank Alexey Mikhailik agrees with his colleague: “In the winter of this year, Promsvyazbank launched a special deposit “Morozko” with an increased interest rate. The results of the action were very good: “Morozko” accounted for approximately a third of the volume of private deposits in the bank during the period the deposit was valid.” “We will use this experience both in the area of ​​attracting liabilities and in promoting credit programs,” promises Mr. Mikhailik.

The bank's birthday is an excellent occasion for another promotion. Special deposits on more favorable terms and with increased interest were offered in honor of the birthday of the First Republican Bank. Tatfondbank offers deposits dedicated to the bank’s next birthday every summer.

Banks have different strategies: some offer increased rates on seasonal deposits, others focus on drawings. Many people do both. “In our bank, interest on seasonal deposits is 0.5% per annum higher than on standard offers with similar conditions. In addition to increased rates of seasonal deposits, we offer our clients bonuses and gifts: plastic Visa cards with free service, rental of safe deposit boxes with reduced rent, or pleasant souvenirs from the bank. In addition, we regularly hold lotteries among depositors with prizes and gifts,” says Galina Fedorova, leading specialist in the retail product development department of Tatfondbank. Tatfondbank offers its clients seasonal deposits several times a year.

“The most successful are shares with New Year and spring deposits,” Vitaly Babenko, head of the financial and economic department of Moscow Capital Bank, shares his experience. -- This is explained very simply: at the end of the year, the 13th salary, annual bonus or other bonuses are usually paid. Most often, money is not spent immediately, and we try to attract it for a short period of time (3-6 months). In the spring they usually start saving for a summer vacation, so during this period we also offer deposits for a period of three to six months.” Most banks follow a similar strategy, so the proposals are quite similar, he summarizes. “During the summer holidays, there is traditionally an outflow of funds from deposits, so banks, by offering increased deposits with higher rates, strive to reduce this outflow of funds,” says Mr. Mikhailik about the benefits of summer deposits.

“This period fully covers the pre- and post-holiday period and allows clients who are not ready to give money to the bank for a long time, not only to preserve their savings, but also to receive a little more income than on regular deposits,” says Galina Fedorova from Tatfondbank about the advantages of short-term seasonal deposits.

A seasonal deposit is also a way to increase customer attention to the bank’s ongoing offers. “We focus our seasonal offers primarily on new customers. When placing funds on a seasonal deposit, the client has the opportunity to evaluate the quality of the service we provide and check the reliability of the bank. In the future, the client will have at his disposal a very convenient line of basic deposits, rich in additional options, with high interest rates and various terms for placing funds,” says Dmitry Orlov, head of the department of marketing and banking products of the Russian Development Bank. “Experience shows that even after the special deposit expires, people transfer funds to another bank deposit and thus remain its clients,” agrees Mr. Mikhailik from Promsvyazbank.

Naturally, this method of attracting new customers, like any advertising campaign, requires certain costs from the bank. “The cost of raising money for a bank usually increases. Growth values ​​depend on many factors: whether the interest rate has been increased, what the advertising costs are, etc. In addition, when calculating the cost, it is necessary to take into account what part of the clients remained in the bank for service after the expiration of the seasonal deposit,” says Andrey Bocharov, advisor to the chairman of the board of Stroycredit Bank.

“The use of seasonal deposits brings with it, in addition to the positive effect in the form of additional client flow, a number of negative aspects,” notes Marina Baranova, head of the market analysis and sales support department of Rus-Bank (the bank focuses on a permanent line of deposits). In her opinion, seasonal and special deposits have three negative qualities. Firstly, the seasonal offer increases the cost of borrowed funds for the bank - interest rates on seasonal deposits are 0.5-2% higher than on standard deposits. Secondly, if seasonal deposits are offered for the same terms as deposits from the standard line, for the duration of the seasonal offer the standard deposits stop working, since their profitability is lower for the client. Thirdly, banks offering this kind of deposits in some way bear image risks, because this measure can be considered as attracting liabilities at any cost.

“Many large banks with an established product line refuse to offer seasonal deposits,” sums up Ms. Baranova. “It is beneficial for the bank not only to attract funds, but also to maintain a balance between attracted and placed funds,” adds Albert Andrianov, head of the business development department of the Bank of Moscow. “Today, the Bank of Moscow has a sufficient amount of attracted funds to maintain this balance, so the introduction of seasonal deposits is not planned for now.” “The feasibility of carrying out such promotions depends on the deposit policy of a particular bank, and few banks in the market as a whole raise rates,” agrees with him, member of the board of Raiffeisenbank, head of the directorate for servicing individuals, Roman Vorobyov. But he was convinced in practice that seasonal offers work very well. Impexbank, part of the Raiffeisenbank group, regularly held special promotions to additionally attract funds to deposits. For example, last year the bank offered depositors participation in a promotion for clients of the bank’s mini-offices, during which deposits were presented with a rate 1% higher than the standard line. And in 2005, Impexbank held a successful campaign “Deposit money for the New Year!”, which made it possible to raise several tens of millions of dollars. “The New Year 2007 deposit of Uniastrum Bank for three months - from November 2006 to February 2007 - brought us 43 thousand depositors, and the volume of deposits under this offer amounted to 5.2 billion rubles,” - Dmitry Khilko, Director of the Deposit Products Department at Uniastrum Bank, shares his experience. The costs of a seasonal contribution pay off handsomely, he is sure.