Russian capitals love silence abroad

Russian millionaires hold less than a third of their financial assets in banks in the country — $ 140 billion versus $ 315 billion abroad. Sanctions threats do not lead to the repatriation of funds, but contribute to the creation of reserves abroad.
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Wealthy Russians who own no less than $ 1 million of financial assets (in cash, deposits and securities, excluding real estate and business) keep about 30% of their funds in Russian banks, according to a study by Frank RG on private banking in Russia. Frank RG experts estimated the total amount of financial assets at $ 455 billion, of which in Russia there are $ 140 billion, and $ 315 billion - abroad.

The study was conducted from April to October 2018 based on data from 11 Russian banks and their private banking departments specializing in providing services to wealthy clients. We are talking about 27 thousand people.

At the end of 2017, Frank RG estimated the amount of funds placed in the private banking segment managed by banks registered in Russia at about 7 trillion rubles, or $ 112 billion. In the first half of 2018, this figure rose to 7.72 trillion rubles. and by the end of the year it will grow by 22.3% in comparison with year to year and will reach 8.67 trillion rubles, predicted in Frank RG.

Taking into account the currency revaluation of assets, real growth will be less - 15.1%, experts say, noting that only 5% of this growth provided a return on capital from abroad.

Store in currency

Russian private banking clients hold about 60% of their portfolio in foreign currency assets, calculated in Frank RG. The share of currency in the asset structure of Sberbank Private Banking clients (Sberbank's divisions for working with wealthy clients with a threshold of 100 million rubles) is 64%. According to RBC head of Sberbank Private Banking Evgenia Tyurikova, by the end of September 2018, the share of clients' ruble assets rose to 36%, while as of January 1, 2018 different types of foreign currencies (mainly dollars, euros, pounds) accounted for 72% of the balance, and on the ruble - about 28%. At the same time, the portfolio of assets of Sberbank PB clients in US dollars decreased by 11 percentage points. - up to 46%, while the share of the euro increased by 3 percentage points, said Tyurikova.

In VTB Private Banking (entry threshold - 30 million rubles.), Managing 1.7 trillion rubles. customer funds, on the contrary, note an increase in the share of currency in their portfolio - in the third quarter from 55 to 58.3%, a representative of VTB told RBC. At the beginning of the year, the share of foreign currency assets of wealthy clients was 53%. At the same time, 73% of foreign exchange assets of VTB VIP clients are placed in US dollars. Alfa-Bank and Citibank declined to comment, Gazprombank did not respond to a request from RBC.

Frank RG notes a clear upward trend in the share of currency in the portfolios of wealthy Russians. “The fact that three years ago the ruble exchange rate doubled against the dollar could not but influence the decision of wealthy Russians to keep their savings in dollars,” says Frank RG Project Manager Frank & R Banking Lyubov Prokopova. Over the past three years of observing the private banking market, the share of foreign currency investments in the capital of wealthy clients has increased from 55 to 60%, the expert says. The share of foreign currency investments in deposits is higher, and in the investment portfolio - 55%, she added.
Sanctions: return or withdraw

For wealthy clients, it is normal to place funds in different currencies and jurisdictions in order to diversify, says Lyubov Prokopova. The distortion of preferences of the Russian client in favor of foreign banks is associated not so much with the problems of domestic banks, as with the desire to get away from Russian risks, she said. “Unfortunately, a wealthy client, earning money in Russia, prefers to keep them abroad - in the opinion of many clients, this is safer,” says Prokopova.

Those who fear tougher sanctions and the fact that they somehow affect their business can start or have already begun to transfer part of the capital to Russia, said Donat Podniek, partner of the HR and Taxation Group for Individuals in Russia and the CIS KPMG. “Something similar happened at the very beginning of 2018, when banks fixed capital inflows. If the situation with sanctions is again forcing, we may again see such a situation, ”the expert notes. However, when the sanctions rhetoric subsides, the money is returned back abroad - distrust of the banking system persists, the sector's recovery process is not complete and is associated with direct risks of capital loss, he believes. The exception is state-owned banks, but when sanctions rhetoric is tightened and directed against them, it can be inconvenient for foreign settlements to keep their money to wealthy clients, Podniek suggests.

Capital on the background of sanctions and rhetoric around them, on the contrary, is leaving Russia: people are afraid that Russian banks will not be allowed to work with dollars, and people don’t want to stay in rubles, says partner EY ION. The expert believes that toughening of sanctions will only point out the return of capital only to those persons against whom sanctions will be directed. “The population still sees that the risks are increasing, and they are withdrawing money from Russia in order to have a package of foreign securities and funds in foreign currency in case the situation worsens,” he notes. Do not forget about the opposite effect of sanctions: some clients make a decision about complete non-association of capital with Russia and go to foreign banks, Lyubov Prokopova agrees.

The growth of the private banking segment in Russia will for the most part be driven by new customers. “Increasing transparency in offering services and products, customer understanding and professionalism can attract new customers to private banking,” says Anton Ionov.