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. Last Updated: 07/27/2016

With Boost On Interest, Sberbank Bucks Trend

Sberbank, the state savings bank, has announced it will raise interest rates on its most popular types of deposits starting next week, signaling a round of increased competition in the retail banking market and undermining government promises that interest rates are on the way down.


Dmitry Vanin, a spokesman for Sberbank, said that the main reason behind the increase, which is expected to have a knock-on effect with other banks, was competition on the retail market.


From May 12 the interest rate on the most popular type of ruble deposits at the Moscow Sberbank will increase from 3.2 percent to 4 percent a month, while rates over a minimum deposit of 20 million rubles ($4,070), will increase from a monthly 4 to 4.5 percent. According to Vanin the increase is so far effective only in Moscow, where competition is particularly intense.


Sberbank's competitors Sunday put a brave face on the rate increase in spite of recent figures from the Central Bank suggesting that Sberbank continues to increase its share of the market. By April 1 Sberbank controlled 68.4 percent of all household deposits, up from 65.7 percent at the beginning of the year.


"We don't want to dramatize the situation," said Nina Petrova of the Stolichny Savings Bank, a major player on the Moscow retail market. According to Petrova, it is against Stolichny's policy to change its interest rates in reaction to such moves by other banks. Stolichny offers up to 5.4 percent a month on deposits over 1 million rubles, Petrova said.


The increase marks a U-turn on a Sberbank decision in March to cut interest rates, but Vanin said the decision to raise deposit rates did not mean rates were trending up generally. "The banking market is normalizing with the refinancing rate of the Central Bank coming down," he said.


Although the Central Bank cut its refinancing rate from 160 percent to 120 percent in March, this has little influence on market rates.


Analysts said that state-controlled Sberbank's decision to raise its rates should be seen in the context of the government's policies on the treasury-bill market, where Sberbank controls at least one-third of the market.


The government, which is facing sharply higher borrowing costs, is trying to attract money to the T-bill market and may be pushing Sberbank to buy more government paper.


"It is rumored that Sberbank has increased its activity on the market," said a source at a major Moscow investment house. "Now Sberbank is certainly in a position to pay higher interest on deposits," the source said, pointing to the steep increase in yields last month. It would make sense for Sberbank to boost rates on deposits and channel the money into the GKO market, which over the last four months has given a 25 percent yield in real terms, the source said.


Following Sberbank's rate cut in March, Sergei Dubinin, the governor of the Russian Central Bank, linked deposit rates explicitly to the situation on the GKO market.


"Because a large part of Sberbank's assets is in T-bills we have to make adjustments," Dubinin said. "If T-bill rates increase we may consider changes."