Banks switch attention to savings products

Newsroom 21/09/2009 | 15:17

The current financial and economic crisis hit all banks worldwide so violently that they needed to go back to the drawing board with both their regional and international strategies. Even though Romania felt the crisis later than other countries, the consequences are manifest and dramatic. Along with massive layoffs and bankruptcies of small local firms, the freeze in lending activity was one of the most significant negative effects. Although most financial analysts anticipated last year that the first green shoots for lending in Romania would probably appear in the first quarter of 2009, the recovery is still awaited. In spring, specialists tipped borrowing to recover in summer, but later shifted their predictions to this fall. Banks have continued to suffer from the crisis and needed an escape route from this nightmare. In this context, bank deposits seemed to be a breath of fresh air. Lenders have also adapted their marketing strategies to the new conditions. From a “sell as many loans as you can” approach, they have moved to a “get as many deposits as possible” policy. In fact, launching new savings products and offering more and more attractive interest rates to existing account holders have been the main ways that banks have used to communicate their new approach. Last but not least, banks' strategy to persuade customers to put some money aside has been pretty aggressive. At least one lender a month has launched a new savings product or offered savers a more attractive interest rate, both for RON and foreign currency deposits. Banks' switch to savings has had a two-fold effect on the market: both educating people on the benefits of saving and generating extra revenue for lenders during the crisis. An underdeveloped savings product market – like Romania – brings risk as well as opportunity: banks see great potential on the local market from this point of view. Another well-known feature of the Romanian banking scene is the lack of choice in savings products. Financial products that serve as an alternative to classic deposits account for just 3 percent of the total financial products market at present, according to specialists. “Fixed-term deposits will remain the main savings product, but will never offer high earnings on the long term,” said the executive director of the business development and retail products division of BCR, Sorin Mititelu, recently. He added that players now have the opportunity to create and bring onto the market products that offer savers higher returns. One such example is Garant, recently launched by BCR along with BCR Asigurari de Viata Vienna Insurance Group. It offers a safe investment, a minimum guaranteed return and life insurance.

Specific strategies
Some banks offer savings products for the mass market, while others go more exclusive, targeting a specific, richer segment of customers. While the first strategy brings volume, the second ensures value. BCR and BCR Asigurari de Viata Vienna Insurance Group chose to address a limited number of clients – high earners. The minimum deposit is RON 9,000 or EUR 2,250. When the savings deal comes to an end, BCR Garant offers a minimum guaranteed return of 84 percent for RON investments and 45 percent for EUR ones.

… But Romanians still won't save
But despite banks' best efforts and the market potential, it seems that Romanians are still reluctant to save their pennies for a rainy day. Some 40 percent of parents have considered setting money aside for their children's future education, although almost two thirds of them say they are concerned about their kids' professional future, according to an online survey recently conducted by insurance company Aviva Romania. The research also found that the annual cost of putting a child through higher education varies from EUR 1,000 to EUR 5,000. The study was conducted on 1,000 individuals nationwide. “The Romanian market for savings products for children is still emerging, but it is increasing and we hope that in a few years it will be as mature as other comparable foreign markets,” said the CEO of Aviva Romania, Shah Rouf.

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