Russian banks experienced a strong outflow of premium customers, which led to a significant drop in capital in the respective segments of the banking business. This is reported by the Frank RG publication, which conducted a large-scale study "Premiun banking in Russia 2022".
Since the beginning of 2022, the "premium capital" of Russian banks has fallen by 14% and by the fall amounted to 7.53 trillion rubles. At the beginning of 2022, it totaled 8.78 trillion rubles – thus, the fall in less than a year amounted to 1.25 trillion rubles. Analysts of the publication note that rich clients of Russian clients wished to withdraw money from their accounts. Some of them took the cash, some transferred the money to real estate or other assets outside of Russia.
The outflow of client funds had a negative impact on the entire banking segment – the average volume of funds of premium banks fell significantly. The beginning of the trend was recorded in 2021, however, then analysts associated this with the arrival of more less wealthy clients, who diluted the share of the super-rich. 2022 has dramatically changed the dynamics: now the outflow of wealthy clients has increased by almost 10 times.
If in 2021 the average bank capital of a premium client was 2.28 million rubles, then in 2022 it fell by 20.6% to 1.81 million. The total number of clients with capital over 4 million rubles the first half of 2022 fell by 9%. The reduction in the number of premium customers has intensified competition among banks, the newspaper notes, now they are expanding their programs, increasing benefits and expanding the functionality of the programs. The total number of programs also increased on average – from 1.56 to 1.61, while the clients themselves became more selective.
“Next year is expected to be challenging in terms of business profitability, so banks will not be able to deliver the value of a premium service by increasing product value. The main focus in 2023 should shift from product to service,” says Lyubov Prokopova, project leader at Frank RG.
The view of “premium” has also changed: now it is a very specific list of benefits, and not some kind of comprehensive offer. Clients expect banks to be ready to advise them on non-banking issues, as well as provide preferential lending conditions, including credit card servicing; an additional condition is the willingness to work with foreign currency, which has become difficult for many banks under the sanctions.
A separate trend is a drop in customer interest in investments and the stock market, which was previously included in many premium packages. Analysts note that interest fell significantly after the freezing of assets of Russian investors, as a result of which the share of clients with exchange-traded assets among premium clients decreased by 1.7 percentage points, and the share of capital in investments of premium clients fell by 7.2 percentage points. In 2021, stocks and other assets in their portfolios accounted for about 34% of the capital of premium clients, in 2022 this share fell to 26.8%.
Against the background of the war with Ukraine, the Russians, who have significant funds, are trying to diversify their assets and withdraw at least part of the funds to foreign jurisdictions. The outflow of capital from the country against the backdrop of the war reaches record levels and continues to grow.