Russian banks have found a way to circumvent Western sanctions

Gone under the sanctions of state banks attract currency in the West. Sberbank and VTB received billions of euros through online banks in Germany, surprising European customers with unusually high rates.

Russian bet

Since July last year, Sberbank, through its European subsidiary Sberbank Europe AG, began to attract deposits in Germany. The launched Sberbank Direct project provides services only online, without opening traditional service offices, but this is what turned out to be very popular on the market, said German Gref, President of Sberbank, at a shareholders' meeting held on Friday, May 29. The project turned out to be "very timely" and allowed the bank "to mobilize the attraction of foreign exchange resources at the most critical moment, when they were vital for the bank," Gref added.

For six months since the launch, 25 thousand people have become clients of the bank, the volume of deposits amounted to €700 million. As of June 2, 2015, the number of clients almost doubled, increasing to 46 thousand people, the volume of deposits amounted to €1,6 billion, the press bank service. This allowed Sberbank Europe to return a loan of €1 billion to the parent structure, said Alexander Morozov, financial director of Sberbank.

VTB was the first to start working with individuals in Europe according to this model, says Mikhail Yakunin, head of the department of VTB subsidiaries: “VTB Direct is an online bank focused on attracting deposits from individuals that has been operating in Germany and France since the end of 2011.” By the end of 2014, the volume of deposits attracted by VTB Direct amounted to 3,9 billion euros. The press service of VTB24 reported that by the end of 2013 the portfolio amounted to €2,5 billion. It turns out that the bank raised €2014 billion for the sanctioned 1,4.

German state-owned banks are attracting German customers with unusually high rates - you can place funds for a year in them at 1,4% per annum. For a three-year contribution, Sberbank Direct offers investors 2,2% per annum. For comparison: the highest rate offered by the largest German bank Deutsche Bank on an eight-year deposit is 0,6%.

You can't share with Russia

“Of course, one and a half billion euros for Sberbank is not a large amount at all. But, firstly, this is funding, which the bank raises much cheaper than in Russia. Secondly, both in size and in rate, this money is comparable to some issue of Eurobonds that Sberbank could not place due to EU sanctions. We can say that this is an interesting alternative in closed capital markets,” says UBS analyst Mikhail Shlemov. The last issue of Eurobonds was placed by Sberbank in June 2014, shortly before the introduction of EU sectoral sanctions. Then the bank attracted €1 billion for 5,5 years at 3,35% per annum. Now this issue is traded with a yield of 4,7% per annum.

Fitch analyst Konstantin Yakimovich says that while €1,6bn is not very significant on the scale of Russia's Sberbank, it is significant on the scale of the European subsidiary of Sberbank Europe: is replaced by deposits attracted through Sberbank Direct, which is generally positive for the European subsidiary.

The potential for attracting deposits using the Sberbank Direct model is large, says Yakimovich: “The European market is quite capacious, households in Germany are quite wealthy, they have a lot of savings. If a bank offers a higher rate than its competitors, it can count on a good inflow of deposits.” The question is whether the European “daughter” needs to attract a lot: this money cannot be issued on credit to the Russian Sberbank for a period longer than 30 days, since the “daughter” is subject to the European regulator and is obliged to comply with the sanctions regime.

“Sberbank Europe can only repay the loans that Sberbank once issued to it, but these are quite limited amounts. But in general, Sberbank can use the funds raised for the development of its European business, but now it is hardly necessary to use some very large sums - the assets of Sberbank Europe do not reach € 15 billion, ”Yakimovich notes.