MOSCOW (Reuters) – Russia’s second largest lender VTB Bank
The central bank cut its benchmark interest rate to a record low of 4.25% in July. With inflation seen rising towards the bank’s 4% target from 3.2% in the coming months, deposit rates have become less lucrative and the cost of borrowing has come down.
Deputy Chairman of VTB’s management board Anatoly Pechatnikov said the bank expects mortgage loans to grow by 12% this year, but stressed that the uncertainty caused by the COVID-19 pandemic meant it was too early to give any exact forecasts.
In May, VTB board member Dmitry Pyanov said the bank ran two scenarios, with retail lending increasing by 1.8% in the base scenario and declining by 2.7% in the worst-case scenario.
Pechatnikov said the short-term savings market was shrinking, forecasting a decline of 2% for the year. He added that inflation and interest rate dynamics could encourage outflows from deposit accounts.
“We, of course, run the risk that our real return on deposits, taking inflation into account, will return to the situation of 1995-1996, when no one took deposits seriously as a source of savings and growth because inflation exceeded the deposit rate,” he said.
“If this continues, people will look for an alternative to deposits as forms of saving.”
(Reporting by Tatiana Voronova; Writing by Alexander Marrow; Editing by Kim Coghill)
