Sberbank increased rates on large dollar deposits. Will they become even more profitable?

Sberbank has raised rates on dollar deposits for wealthy clients by a third, writes RBC. Experts explain this decision of the bank by the rise in price of the dollar due to the increase in the US Federal Reserve rate, as well as the need to refinance large companies that were previously financed by Western banks.

Details

• The increased rates will last until the end of August 2018, as follows from the conditions for deposits for clients who use services from the Sberbank First package.
• The highest rates are set for deposits for 3 years in the amount of $300 million or more - 3.05% per annum (previously it was 2.2%). Rates on the same two-year deposits will increase to 3%, on two-year deposits from $50 million - from 2 to 2.9%. Rates and deposits in the amount of $1 million to $50 million will increase - from 1.65 to 2.6% for annual deposits, and from 2.15% to 2.9-3% for three-year deposits. For annual deposits over $150 thousand, the bank is now ready to charge 2 instead of 1.65%.
• Sberbank explained to RBC that over the past few months the bank has been observing an increase in rates on dollar deposits for wealthy clients from competitors - for example, VTB, Rosselkhozbank and Uralsib.

Why is Sberbank raising rates?

• An increase in rates on dollar deposits is a general market trend, caused by an increase in the Fed rate and expectations of a further increase in the Fed key rate, Denis Davydov, chief analyst at Nordea Bank, told The Bell. Over the past year and a half, the Fed has raised rates 5 times; since March 2017 it has doubled - from 1% to the current 2%. In addition, the American regulator continues to reduce its balance sheet, which also leads to increased demand for dollar liquidity at the global level and a corresponding increase in rates.
• Sberbank needed dollar liquidity to refinance foreign currency loans from exporters and banks, which were previously financed in the West, but now, due to sanctions, are refinanced to Russian banks, says Expert RA analyst Ivan Uklein. “He believes that the trend of increasing rates will not be long-term and will primarily affect large deposits,” he noted in a conversation with RBC.
• Two bankers who requested anonymity in a conversation with The Bell suggested that the rate increase may be due to the expectation of newsanctions against the Russian banking system. This is also pushing Russian banks to seek additional foreign exchange liquidity. But it is premature to talk about a connection with yesterday's Barclaysreport on new sanctions against them, they say.

What's in it for me?

American rates, which push up the yield on dollar deposits, will continue to rise: the median forecast of Fed officials is 3.375% by 2020. The need of Russian companies for foreign exchange liquidity with the introduction of new sanctions will also likely grow. All this means that foreign currency deposits are becoming an increasingly profitable investment instrument.

Liana Faizova