Ivanovs and Financial Markets - Massive Potential for Retail Brokerage

In 1H21, the number of individual brokerage accounts among the top-25 brokers in Russia grew by 50% H-o-H, which illustrates the continued growth in the popularity of financial instruments among Russians. This comes amid a declining share of Ivanovs who prefer cash savings and a growing share who invest in financial markets. However, with household disposable incomes still under pressure and low financial literacy among the population, deposits and cash accounts remain the main way of saving. About 14% of the respondents had a brokerage account, while only 6% noted investments in stocks or bonds as a preferred way to save or increase their wealth. More than half of investors said they do not trade speculatively but rather lean toward medium and long-term time horizons, and on average they said they expect to make a 14% return. About 60% have less than R10k in their brokerage accounts but plan to invest more. The main reasons they state for investing in the stock and bonds markets are the higher returns and the increasing ease of use of online brokerage accounts.> Ivanovs switching from cash holdings to deposits and financial instruments as a preferred way to save. The share of Ivanovs citing holding cash as their preferred way of saving declined 3 pp from December 2020 to 43% in 2Q21. The share who preferred deposits or financial instruments increased 4 pp and 1 pp H-o-H to 19% and 6%, respectively, which we attribute to accelerated inflation and rising interest rates. In terms of the duration of financial investments, the majority of Ivanovs noted that they invest for more than 1.5 years. > Retail brokerage retains massive long-term growth potential. The share of Ivanovs with a brokerage account in 1H21 increased by 3 pp H-o-H to 14%, which seems to closely correspond with the 4 mln unique client accounts opened in 1H21 (reported by the Moscow Exchange for the top-25 brokers). Another 23% of respondents (flat H-o-H) said that they planned to open an account, indicating significant long-term potential. Naturally, the wealthier part of the population (over R60k monthly income) has the highest share of respondents with brokerage accounts (23%). Meanwhile, 1H21 marked the fastest pace of new account openings (up 6 pp H-o-H) among the R30-40k income group. Regarding the propensity to open an account, the most notable increase was seen for the groups with income per household member of more than R60k (up 10 pp H-o-H). As the Ivanovs are likely to be overly ambitious in their plans, we expect further growth to be in line with the average growth seen over the last quarter (up 1 pp Q-o-Q), with the groups mentioned above contributing the most.> Majority of retail investors among Ivanovs have less than R10k on their brokerage accounts, but plan to invest more. According to our latest survey, 60% of retail investors among Ivanovs had less than R10k on their brokerage account. However, 55% of the respondents with a brokerage account or with plans to open one intended to invest more in the stock market over the next 12 months, while only 17% said they would not (down 1 pp H-o-H). In terms of the reasons for investing in the stock market, higher returns from the securities markets and the increasing ease of use of online brokerage accounts were cited as important reasons by 56% and 53%, respectively. Low deposit rates also remained the key motivation for putting savings in the stock market (52%). > About 30% of Ivanovs expect a return from their investments of more than 12%. We asked our respondents to estimate the return they anticipate obtaining on their investments investing in stock and bonds. Some 24% estimate 3-5%, while another 28% expect to earn more than 12%. This corresponds with higher expected return being cited as the most popular reason for investing in the financial market. Meanwhile, 16% of Ivanovs with a brokerage account trade daily, while the share of inactive users stood at 26% (flat H-o-H). > Sber and Tinkoff are the key brokers among Ivanovs. In line with the Moscow Exchange data, our survey shows that Sber and Tinkoff have the highest share of registered brokerage account holders. The latter saw a significant increase in the number of clients in 1H21 on the back of a decline in the market share of other brokers. A similar dynamic was seen among Ivanovs: the share of respondents who cited Tinkoff as their broker increased 3 pp H-o-H. At the same time, among Ivanovs with R30-40k in income per household member (which showed the highest growth in the number of users in 1H21) Sber and Tinkoff accounted for about 70% of clients. However, as for active users, in June, the Moscow Exchange reported that VTB was the second broker (14.0% of all active users, Sber - 13.6%) after Tinkoff which covered 67% of active clients. In terms of key considerations to choose an online brokerage account, the Ivanovs cited pricing and ease of placing trades, with the range of available securities and access to research materials and analytical support not far behind.