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Why Russian banking market remains attractive for foreign groups and do mass customer negative rates in the Euro? Says the Chairman of the Board of ROSBANK Ilya Polyakov.
— the Fitch analyzed the growth of assets in different groups of banks: retail, government, reorganized and "daughters" of foreign banks. It turned out that the latter category of banks was minimal asset growth since the beginning of year zero. What, in your opinion, is the reason and how things are with you?
— If we're talking about efficiency or how it develops, the growth of assets is not the only indicator that should look. Sometimes the decrease in assets is even a positive factor. If you look at the financial performance of international banks in Russia in recent years they improve.
of Course, it is recognized that the state's share in our banking sector is quite high — 70% and more depending on the segment. But this does not mean that the Russian banking market is not interesting for other players. On the contrary, it allows other credit institutions more to differentiate. We see many opportunities in this market, because not all clients want to work only with state-owned banks.
Several times Chairman of the Central Bank said that the development of competition in the Russian banking market is one of the priorities for the Bank of Russia. If we are talking about statistics Fitch, the decline in the share of state banks is not visible, but in the future is the task.
the regulator promotes competition by introducing new technological solutions. And in this respect, infrastructure projects, such as System of quick payments and a single biometric system is a real breakthrough from the point of view of competition development. We support these projects and actively participate in them. I believe that in the medium term, competition in the market will be accelerated through the establishment of key infrastructure platforms, which all players have equal access.
— However, in Russia reduced the key rate, the business margins falling, the regulation is tightened. Reduced if the interest of subsidiaries of foreign banks to the Russian market?
— In my example, we see that this market remains promising. In recent years we have significantly improved the performance according to various metrics, primarily from the point of view of profitability, return on capital, correlation of income and expenses. European banks for some time living in the reality of negative rates. Moreover, this period dragged on, and it is difficult to predict when to expect a trend to increase interest rates. For the banking business this is probably the most difficult task — to work, to grow and to invest in a situation when interest rates are negative. In this respect, the Russian market despite the current decline rates, which is likely to continue, given the recent decision by the Bank of Russia — is still much more interesting and attractive for the banks compared to Europe.
it is Also important to understand that the banking market in Russia is growing much faster than GDP and faster than many markets in Western Europe and around the world. Russia is the second country in the world after China among the major economies with investment rating (from Fitch) the growth rate of Bank assets for the 12 months (as at 30 June 2019). Our market, for example, has a low penetration of the mortgage, and there is great potential. In Western countries the ratio of mortgage portfolio to GDP in the middle reaches 50%, while in Russia this figure is even after last year's growth rate is only 6.2% of GDP. For the combination of these factors, we continue to believe in the Russian market.
— You mentioned that we have a low penetration rate of the mortgage. And in a dispute about the presence of a bubble in the consumer credit market whose side are you on?
— In the last few years unsecured consumer lending grew more than 30% per year, while real disposable incomes increased much more slowly. In our opinion, to talk about the bubble in the market of consumer crediting is not necessary, however, we see some signs that the rise in arrears on unsecured loans can lead to "overheating" in some segments. Therefore, the introduction of PD in addition to the measures that were previously adopted by the regulator will undoubtedly improve the market, as this will allow you to cool the pace of consumer credit growth. We expect that the growth rate will slow to the level of 10-15% in the medium term. It's still a fairly high figure compared to other countries, so lending will remain an attractive business for banks.
— have You see any effect from October 1, increased the debt burden? You have issuance decreased significantly?
— it is difficult to draw conclusions since October 1, it took very little time. However, you need to understand that ROSBANK in this case, probably not a reference player, so as before the introduction of PD, we conducted a rather careful credit policy in terms of calculation of credit load customers. So we haven't tried before 1 October, as some market players, to increase the consumer lending portfolio. This is a very short-term measure, which does not give much effect.
Some analysts say that the introduction of PD could trigger a local crisis in the market of refinancing. As a result, I understand that for many borrowers the repayment of the existing loans related to new loans. In your opinion, there is such a risk?
— Crisis or bubble we do not expect, however, it is likely that a certain category of borrowers who have high PD in the future will not be able to take the opportunity of refinancing their loans. On the other hand, we see that banks still behave differently, and players have a large stock of capital and theoretically can continue to lend to this segment, thus taking a big load. A direct ban on any financing and even refinancing clients with PD greater than a certain value would entail, perhaps more serious consequences.
— Now this is being discussed. The Bank of Russia's fishing — offered to give him the opportunity to introduce a direct prohibition on lending to certain segments. What do you think, do I need to give the Bank such a right?
— currently, the ratio of consumption of capital is already sufficiently limits the appetite of banks to lend to borrowers with a high value of PD. The market needs time to learn to work under the new rules, and the regulator — to ensure that all players properly use them. Is seen that the introduced measures are already sufficient to reduce the issued high-risk loans. Just looking at the situation, we can talk about how necessary instrument of an outright ban on lending to certain segments. In any case, it should be introduced very steadily and carefully, with consideration of various scenarios and their consequences. Conventionally, if a restriction from 1 January, it could trigger a bigger problem than the ones now.
— about tools in the hands of the Central Bank. You mentioned the negative rates in the European Union. How you think, whether in Russia to provide banks with the opportunity at the legislative level, introduce negative interest rates on deposits in euros?
— We believe that it is, indeed, an important issue that requires attention. The discussion relates primarily to the deposits of legal entities. the Introduction of negative rates on foreign currency deposits in the retail segment, yet, as far as we understand, is not considered. Even in Europe where this is possible. Societe Generale, for example, in France uses an approach in which negative rates for retail customers are entered automatically for all segments. This is a very serious step, because it is quite difficult to explain to clients who entrust their savings to the Bank that the European Central Bank introduced negative rates, so they will have to pay for storage of their tools. And probably would be more fair to enter such rates in certain categories of deposits, for example, in the segments of private banking or premium, starting at a certain amount.
— do I understand correctly that you have in the line there are now deposits in euros and, if we hypothetically imagine that will be allowed to set negative interest rates for individuals, you do not enter these deposits?
— today we do not offer Euro deposits, but customers have the option to place the Euro on current accounts without additional fees. If the banks were allowed to set negative interest rates, we will examine this possibility.
However, if you want to answer the question in the current reality, for the mass customer segment, we would not have introduced negative interest rates on deposits in euros.
— Recently, the Bank announced a reduction of a quarter of its offices. ROSBANK is comparable in size, however, you have two times more branches. What do you think about this? Do I need to drastically reduce the number of offices?
— Indeed, we are today the only player with international participation, which has such a broad presence throughout the country. And there is a certain historical roots, because in the beginning of the XX century, Societe Generale was already the main shareholder of the Russian-Asian Bank, which had a wide network of branches in Siberia and the far East.
of Course, we follow the decisions of our colleagues, and take into account market realities. All banks are now looking for a balance between the rate of reduction of physical presence and increase digital sales. We are working on optimizing our network from 2014, but without any sudden, mass approach, taking decisions on each Department individually, because we assume that the penetration of digitization will also increase steadily. We therefore, on the one hand, we see the logic in those decisions that were taken by our colleagues, but our vision is more gradual. And of course, in some cases, we see an additional advantage when these players announce the departure of some cities, because many clients come to us in this situation.
— with regard to digitization — may be, share of priority projects in the Bank?
— we Have very ambitious plans. We work hard to ensure all our products are made available to customers via remote channels, and in General in the nearest future, we plan to gradually increase the share of digital sales.
this year we have introduced some interesting digital products. One of the last digital card. We also planned before year's end to introduce a first product using a remote identification using a Single biometric system. This will make online loan. This product is available without biometrics with our payroll clients in the Internet Bank or mobile app. The entire process from filing to receiving the money on our account — takes place online and takes no more than 15 minutes. In the near future we plan to provide this opportunity to new customers.
of the important events of the year 2020 we plan to introduce a new mobile application with the broadest possible functionality, which is already for some time active work. While we assume that the first customers will get access to it in the second quarter of 2020, and in the third quarter, all customers will be able to upgrade to the new version.
we Also do not forget that digitization affects not only our retail business but also corporate. And here we also are actively working. This year we have released a new mobile application "Bank Business", which already have appreciated customers. In addition, brand new universal Internet Bank for large corporate customers and for small and medium businesses has already been released and is now in pilot operation. Next year we will make it available to all of our customers. We are also working on developing a number of solutions for direct integration of a class of host-to-host and promotion of such solutions among all segments of the corporate business.
Interviewed by Evgenia OGURTSOVA, Banki.ru
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