Are sanctions having no Impact on Sberbank?
The imposed sanctions against Russia have not achieved their intended effect, as it has been revealed that Sberbank is currently facing an unexpected surplus of dollars instead of a scarcity. The bank now finds itself with an excessive amount of dollars, creating a situation where it doesn’t know how to effectively utilize them. To address this influx of dollars, Sberbank has significantly reduced interest rates on short-term dollar deposits, nearly reaching zero.
“We’re not yet mentally prepared for negative interest rates, but they might be reduced to a fraction of a per cent this year,” said Morozov, the CFO of Sberbank. “When the sanctions were imposed, our expectations were different. Due to limited access to capital markets and capital outflow, we anticipated a shortage of foreign currency liquidity.”
As Russia experiences its second year of recession, banks are accumulating a surplus of dollars. The economic downturn has prompted individuals and companies to save more, while the ruble’s volatility remains among the highest globally. Meanwhile, the regulator has implemented stricter regulations to discourage lending in foreign currency. Despite being unable to raise funds from international markets since 2014 due to U.S. sanctions related to the conflict in Ukraine, Sberbank is still benefiting from an abundance of dollars. Full Story
Russia is directing its companies to wean themselves off Dollars
It may come as a surprise, but the Russians have devised a strategy to reduce their reliance on the dollar, and this holds significant implications for the future of the currency. Through collaboration with China, they have formed a formidable alliance where Russia possesses military power and China boasts financial strength. The control of both guns and money gives them an influential position. As part of this strategy, both countries are likely to witness a substantial decline in their dollar reserves in the coming years. While the media might portray this as a negative development, it actually signifies a positive shift as they divest from the dollar and lay the foundation for a new global reserve currency.
Sberbank Outlook 2019
Sberbank, the state-owned retail banking giant, has regained its position as the most valuable stock on the Russian equity capital market, with a staggering worth of $69.4 billion as of February 22. Investors favour Sberbank due to its representation of the entire Russian economy, and over the past decade, it has successfully transformed its image. Despite being a massive state-owned company, Sberbank is regarded as one of the most progressive and innovative companies in the Russian market.
CEO German Gref deserves much credit for this achievement. As a former economics academic, he formulated the Gref Plan in 2000 and was personally tasked by Russian President Vladimir Putin to implement it. Although Gref encountered mixed results, this marked the first systematic attempt to reform the Russian economy since the collapse of the Soviet Union. While his predecessor, Yegor Gaidar, focused on significant reforms such as price liberalization, Gref concentrated on smaller-scale improvements, including streamlining the process of starting a business by reducing permit requirements. Full Text
Other stories of Interest
Plain evidence that financial experts know even less than Jackasses (April 27)
Negative rates fantastic for speculators but terrible for the global economy (April 16)
How will Gold fare in a negative interest environment (April 14)
Electric Vehicles set to wreak havoc on Crude oil market (April 13
