Sberbank of Russia (SBER) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to Sber 2Q 2021 IFRS Results Call, hosted by Sber Management Bank team. [Operator Instructions] I must advise you that this conference is being recorded today on July 29, 2021. I would now like to hand the conference over to Anastasia Belyanina, Head of Investor Relations. Please go ahead.

Good afternoon, everyone. Hope you are safe and sound. Thank you very much for joining us for our regular call. We will discuss today our first half results with our senior speaker. We have our CFO, Alexandra Buriko with us; and our Chief Risk Officer, Dzhangir Dzhangirov. So obviously, there will be time to ask questions so make sure you prepare interesting questions, and we will be happy to address them. And before we move to this interesting part of our conversation, let me do some housekeeping. So please be aware that our call may contain some forward-looking statements regarding future events and performance and actual results may differ materially from those expressed or implied in the statements made during our call due to unknown and known risks and uncertainties. For more information, about that, please refer to Slide #2. Thank you very much. And I pass the floor to our CFO and member of the Management Board, Alexandra Buriko. Alexandra, over to you.

Thank you very much, Anastasia, and good day, everybody. Thank you for joining us today. I will briefly walk you through the key highlights and then we will discuss the key trends. So in the second quarter of 2021, we earned the highest quarterly profit ever of RUB 325 billion. This corresponds with the record of RUB 630 billion for the first half of 2021. Our earnings per share reached RUB 14.3, which is a growth by 84% year-on-year. Our return on equity reached 25.8% and return on assets, 3.4% in the second quarter. Our key client metrics also remained solid, 101.5 million active retail and 2.9 million corporate clients. Engagement improved as well to almost 69 million monthly and almost 34 million daily average users for our flagship mobile app. These solid results came on the back of noticeable recovery of the Russian economy to the precrisis level. After contracting by approximately 0.7% year-on-year in the first quarter, the Russian GDP posted almost 10% year-on-year rebound in the second quarter according to estimates of our macro think tank. Business turnover was well above the pre-pandemic levels across many sectors with just a few lagging behind most notably services sector due to COVID-related restrictions. Amongst primary drivers for the economy were construction and transport sectors. Industrial production grew by 10.1% year-on-year in the second quarter while retail trade volume was up by 23.5%. As production struggled to keep up with demand, prices were affected and inflation accelerated to 6.5% year-on-year in June. Rising commodity prices, which include metals, lumber and food, along with inflationary expectations for additional sources of inflationary pressure. Consequently, the Central Bank stepped in several times during the second quarter and delivered 225 basis points in hikes since March to date. Now let's look at our results. So in the second quarter, we saw pre-provision operating income growth by 22.8% year-on-year. And the first driver in absolute terms remains NII. NII increased by 10.3% year-on-year to RUB 439.5 billion in the second quarter due to business volume growth. Our retail loan book expanded by 7% in the second quarter to $10.4 trillion and accounted for approximately 40% of the combined loan portfolio. Solid dynamics were seen in both mortgages and consumer lending. Our consumer loan portfolio grew by 7.3% in the second quarter and over 70% of all originations were online. Mortgages were up by 7.7% amid elevated demand for subsidized mortgages before the program wrap up. The share of mortgages in retail portfolio approached 57%. We see solid growth in financial and nonfinancial services on our digital housing platform, DomClick, both amongst clients with and without mortgages. Income from supported real estate services increased by over 20% in the second quarter to more than RUB 3 billion. DomClick remains top 3 in Russia by number of listings, which reached RUB 1.8 million, and its monthly active audience with over 14 million users. It's worth mentioning booming advertising activity on the platform. As a result, revenues generated from advertising services totaled RUB 100 million in the second quarter, which was 30x more than a year ago. On the corporate front, our loan growth was up by 0.2% in the second quarter. But excluding the effect of foreign exchange revaluation, corporate loan portfolio grew by 2.2% year-on-year. Across sectors, lending was led mainly by real estate and construction, oil and gas, transport and logistics. Loan portfolio to developers of residential construction expanded by 21% to RUB 1.2 trillion for the period and over 80% of the lending was score-based. 51% of all short-term loans to medium and large businesses worth RUB 336 billion was approved in 7 [indiscernible], applying AI-based smart lending technology. As for funding, in the real estate segment, we saw inflows of 2.8% in the second quarter, which was mainly due to increased share of current accounts, 41% in the second quarter versus around 28% in the first. And corporate deposits increased by 3.8% in the second quarter driven by ruble account. Now let's turn to our net interest margin. As you can see, our margin increased by 40 basis points to 5.22% in the second quarter. That was due to gradual increase in yields on the corporate loans, approximately 20 basis points as floating rate ruble loans were repricing in response to the Central Bank rate increases. In the meantime, retail loan yields stayed unchanged due to the rising share of mortgages in the retail portfolio and maintaining the interest rates relatively set. Combined funding costs were up just by 10 basis points in the second quarter on the base of repricing of the corporate funding, along with the market. Retail funding showed limited response to the market rates so far. If we look further into the second half of 2021, we expect the following factors to play in for net interest margin formation. The cost of retail funding will start coming under pressure inevitably as the impact from site monitary policy setting. Starting from 1st of July, the Central Bank increased quarterly rate on deposit insurance to 12 basis points from 10 basis points, which will raise interest expense by approximately RUB 7.5 billion and affect our net interest margin in the second half of 2021. On a positive note, Sber has over 40% floating rate corporate ruble loans and a decent portion of the floating rate government bonds, which will move upwards in line with the market rate. As for retail loan book, we expect some repricing, but it will be subject to market competitive environment. With all these factors offsetting each other, we are improving our full year net interest margin guidance and expect net interest margins to stay relatively flat in comparison with the second quarter results at around 5.2%. Now let's look at our payments business and fees and commissions income. Our net fees and commissions income grew in the second quarter by almost 39% to RUB 157 billion. On the back of robust transactional activity and due to the low base effect of the previous year where business was down beat by COVID restrictions. Banking cards operations were the main driver and increased 42.6% year-on-year, while cash and settlement transactions were the second largest contributor and grew by 17% year-on-year. The total volume of acquiring, payments and transfer operations in the second quarter amounted to approximately RUB 14.8 trillion with meaningful growth across main areas. Acquiring volume expanded by 55% year-on-year to RUB 5 trillion as number of requiring transactions increased by 50% to almost RUB 8.5 billion in the second quarter. This growth stands both to offline and online acquiring. Our internet acquiring service, [ U KASKO ], works together with our retail team and merchants now can use their pay while our clients can get authorized with their IP. Payments and transfers reached RUB 9.5 trillion, a 40% increase year-on-year. As you know, the network effect that we have created in payments on our platform increased frequency of usage. Average clients nowadays performs a transaction in P2P or payments with Sber every other day. We also see growth in transborder P2P transfers, which account for over 1/3 of the market. As for our fees and commission guidance now, due to the strong recovery that we see in our transactional business, we upgraded our outlook for the fee income to about 10% for the full year. Now let's look at our fast growth in wealth management and risk control segments. In the wealth management business, operating income before provisions grew by 12% in the second quarter to RUB 16.8 billion. We focus on developing mass market products and roll out them online. Assets under management increased in the second quarter by 3.8% and totaled RUB 1.9 trillion. Our asset management company increased its market share and maintained the leading position at the end of the second quarter. This was the result of active marketing campaign from our client as well as successful launch of individual investment strategies for high net worth individuals. We also renewed our investment life insurance products, introduced coupon strategies and ensured net client yields above the benchmark. Our client assets on brokerage and individual investment accounts exceeded RUB 2.1 trillion in the second quarter. In the risk insurance segment, operating income before provisions was up by over 50% year-on-year in the second quarter. As we entered in new insurance markets, expanded product range and rolled out products and digital channels. In the second quarter, we launched a new self-tailored credit life insurance for cash loans in our digital channels, which resulted in a 70% increase in premiums for this product. We also started a subscription offering for our standardized protection products, such as cards, [indiscernible] and housing protection, which raised premiums by about 40%. In July, Sber capped the second largest risk insurance market of voluntary health insurance. New product launches were also made on the car insurance market, including Sberkasko 2.0 and car insurance for vehicles pledged under loan agreements in KASKO. We also rolled out mandatory car insurance sales in our physical branch network. In the corporate insurance segment, we started offering insurance products for owners of smart terminals, Evotor, and pollution liability insurance, within umbrella for companies operating with [ Casarte's ] materials. Now last but not least, let's look at our nonfinancial segment. The revenues from Sber's nonfinancial business grew 2.5x year-on-year in the second quarter and reached RUB 41.1 billion. In the first half of '21, revenue amounts now to almost RUB 75 billion that surpassed the full year revenue for 2020. Let me give you some insights on the key verticals. First, let's look at our e-commerce business. GMV of our e-commerce business was up 9x year-on-year to almost RUB 20 billion driven largely by our e-grocery delivery services by SberMarket and Smartcard. According to our estimates, these 2 e-grocery businesses lead the segment with a distant gap and accounts for about 30% market share. The market tripled GMV in the first half 2021 to over RUB 20 billion, and the number of its completed orders doubled year-on-year to $7.4 million. The company extended geographic footprint to 150 cities and engaged with new retailers in the second quarter. Time to delivery from hypermarkets countrywide was decreased to 1 hour. The markets B2B delivery services grew GMV 2.5x in the first half and accounted for about 6% of total turnover. B2B clients exceeded 40,000. Some of that, in the meantime, expanded coverage by 12 new cities, total around 20 cities with access to 25% of the local population. And its completed orders grew 4.3x year-on-year to almost RUB 159 million in the second quarter. Sber store base increased 3.3x year-on-year to almost 700 and private label SKU base expanded to 500. We also launched our multi-category marketplace, SberMegaMarket, which increased the audience by 40% in the second quarter. The platform's integration into ecosystem is on track. Our clients can plug in to their ID, use their pay and [indiscernible] bonuses. Recently SberMegaMarket also joins their prime subscription plan. SberEApteka, our e-Pharma platform, showed the full quarter performance in the second quarter and generated $1.7 billion in revenues on pro-rata base. It has 70 Russian cities under coverage and 7 million daily active users. Let's now look at foodtech&mobility business. They increased 3.7x year-on-year and reached RUB 3.9 billion. Number of restaurants and shops serviced by Delivery Club exceeded 45,000, which indicates 84% year-on-year. DC maintains leading position in ready to deliver. In the meantime, city mobile rides grew 8.5x in the second quarter to [ RUB 62 million ]. In our Entertainment industry, we generated over RUB 3 billion in revenue, which has increased by 2.7x year-on-year. Paying users of our downstreaming service [indiscernible] increased 2.4x year-on-year in the second quarter to $1.9 million. In the meantime, number of video streaming users slightly decreased in the second quarter to $1.7 million on the back of regular summer seasonality and some adjustments in timing for our marketing activities. Our SberCloud, our cloud business revenue, grew 3.3x year-on-year in the second quarter to RUB 2 billion and showed a fivefold growth to RUB 3.7 billion in the first half of 2021. Our SberHealth revenues increased 1.9x year-on-year for the quarter to RUB 0.8 billion and 2.3x to RUB 1.8 billion in the first half. This strong performance was due to telemedicine services and online medical appointments, the number of which more than doubled and surpassed all calls handled in 2020. In the second quarter of 2021, we also had a new addition to our SberTech segment as we acquired a 25% stake in the largest player on the tech book publishing market, [indiscernible]. We keep on developing the integration tool. Number of SberPrime users reached 1.5 million in the second quarter. We launched an upgraded version of subscription, SberPrime Plus, which was enriched by our financial services. Subscription includes a set of lucrative offerings like Smartcard and P2P transferring. SberID unique user login registered almost 23 million users in the second quarter 2021. And the placebo loyalty program coverage exceeded RUB 50 million. Now let's look at our tech advancement. Active development and rapid growth of our banking and nonbanking businesses owed significantly to Sber technological transformation. The first half of 2021 was marked by an important step forward for a rollout of a SberTech solutions, including Platform B, SmartMarket and SberCloud. and total number of their external developers reached 25,000 or 9x increase year-to-date. In our marketplace for Smartcard, SberMarket, which engaged voice assistance cell for new skill training, we released over 500 applications. In the second quarter, we launched a number of new tech solutions, including video conference platform, Jazz by Sber, a platform to develop our own visual characters. We keep on exploring visibility of our voice assistant salute, which reached 6 million monthly users in the second quarter. In July, we started selling TV media centers with Smartcard [indiscernible] and operating system SaluteTV adopted for partner devices. Also, we launched sector-tailored Sber solution, Salute for Hotels, and integrated Salute to help clients get access to financial information [ installing ]. Now let's look at our operating expenses. As you can see, our operating costs were up by 17.2% year-on-year to RUB 201.6 billion in the second quarter. As low base effect from 2020 was in the numbers as well as growing costs for nonfinancial businesses, which accounted in the first half of 2021 for over 6% of our operating costs in comparison with 2.1% in the first half of 2020. In the first half, cost growth was just 12.2% year-on-year, which was mainly due to continued efficiency improvement of our financial business. Cost-to-income ratio for the financial business came down by 1.8 percentage points year-on-year to 30% and by 1.5 percentage points to 29.7% in the first half. We keep our cost guidance unchanged at low to mid-teens growth for the full year. Staff cost expansion year-on-year in the second quarter was due to contribution from our nonfinancial businesses, which were not in the frame of consolidation last year that includes their mega markets, groundless and other businesses. We continue vigorously with our operational efficiency program and have recently launched a number of initiatives. Their annualized impact is estimated at over RUB 19 billion. The most significant impact comes from shift to digital channels, around RUB 7.5 billion and engagement of AI-based instruments such as process mining and others, which we estimate in annualized terms at RUB 3.3 billion. Now I would like to pass the floor to our Chief Risk Officer, Dzhangir Dzhangirov to discuss our cost of risk and asset quality. Dzhangir, please go ahead.

Thank you. Thank you very much, Alexandra. Good afternoon, everyone. There are not so many news on my front, which I assume are good news by itself. First of all, I'd like to mention that the share of nonperforming loan of 90-plus and share of Stage 3 in total portfolio decreased by 0.6 percentage points, mainly due to the settlement of a few large corporate cases. We made a decision that taking ownership of the assets is more reliable than having exposures to the loans. We have expertise in managing for growth assets as in the case of Eurocement. As a result, the total provision coverage increased to 101% as of the end of the second quarter. I also would like to mention that Stage 1 in corporate and retail segments increased due to the growth in loan originations during the first half of the year. Stage 2 decreased mainly due to improvement of credit quality of some corporate clients and the reclassification to Stage 1. Most important, cost of risk was just 43 basis points in second quarter and it is close to our first quarter 2021 results. Q1, Q2 results are mainly driven by significantly better performance of our corporate loan portfolio than it was expected in the previous year. In the second half of the year, we expect some pickup in corporate lending and robust retail loan originations, which should result in cost of risk level for the year between 70 to 90 basis points This range does not take into account the profit on disposal of Eurocement. If this disposal is included in the cost of risk on an annualized basis, then cost of risk would be 25 to 30 basis points lower. RWA. In the second quarter, Sberbank switched to the standardized approach in calculating operational risk, and I already announced that in Russian accounting standards, we will have economy in RWA of RUB 1 trillion. In IFRS, we also have economy which is slightly lower at RUB 700 billion, and the difference is due to the different base levels of IFRS and Russian accounting standards, operational risk RWA. Central Bank changed macro add-ons for mortgages with LTVs between 80% and 85% issued after 1st of August, 2021. New add-ons are in range between 50 and 100 basis -- 100 percentage points instead of 20 to 80 depending on regulatory payment fee income. This would not have significant outcome on our portfolio. So since the beginning of the third quarter, the Bank of Russia canceled macro add-ons for uncollateralized consumer loans and credit cards issued before 1st of April 2020, but increased macro add-ons for uncollateralized consumer loans and credit cards issued after 1st of July, 2021. The net effect will be immaterial until the end of the year. This is all. I pass the floor back to Alexandra.

Dzhangir, thank you very much. And let me finish with just a few more comments on capital, ESG and the guidance update. First, on our capital. As you remember, in the second quarter, we distributed a record dividend of RUB 422 billion from the profit of 2020. As a result, our capital adequacy ratio decreased by 25 basis points to 14.05% for CET1 and 14.49% for Tier 1 for the quarter. While the total capital adequacy ratio was down by 25 basis points to 15.04%. Now let's turn to our ESG. And let me briefly recap our recent developments in this area. Two days ago, we disclosed our ESG policy, which was early approved by our Supervisory Board and established a high-level framework for all their ESG activity. The policy sets the main objective and defines major areas of development where we see impact from their business as meaningful. Their current exposure to green loans totaled BRL 75 billion, while ESG loan portfolio has exceeded RUB 50 billion. Sber is focused on progressive development of expertise in green and sustainable lending. Thus far, we introduced ESG classification for loan products and improved pricing terms measures against respective ESG metrics. In the meantime, they're actively developed a new market for renewable energy certificates on its own cloud-based blockchain platform. In the second quarter, we executed the third deal. Sber was top ranked amongst Russian banks for inclusivity across all service chains. Sber sets a target to render branch network carbon neutral by 2030. And last but not least, we have just submitted application to the CTP database. It's been for the first time ever as we have made preliminary assessment of our Scope 1 and Scope 2 emissions. Now let's finalize this part with the guidance update. Further to the most recent rate hike of 100 basis points last Friday and fairly hawkish comments from the Central Bank Chief, we significantly revised our forecast for inflation and interest rates. We expect the Central Bank to raise the key rate by another 50 basis points to 7% in September. While momentum in inflation will remain high in the coming months for this further rate hike, the frontload policy tightening will eventually take effect and put breaks on inflation into the end of the year, and we forecasted to slow down to 5.8%, although higher than our previous estimate of 5.4%. Minor adjustments were made to ruble exchange rate and oil prices, and we forecast GDP growth at 4.2%. Based on the recent trends, we have revised upward our outlook for the sector and now expect that retail lending growth will be in the range of 18% to 20% and corporate deposit growth will be between 17% and 19%. We expect to perform in line with the sector across all segments and retain our market share. And to recap on the back of all changes that I have mentioned earlier, we continued our track record of rising our guidance on return on equity. We now expect to exceed 22%. Thank you very much for your attention, and we're happy to turn to questions.

Thank you, Alexandra. We are ready to take questions.

[Operator Instructions] And we take our first question from Gabor Kemeny of Autonomous Research.

My first question is on your margin guidance. You seem to be guiding for flat net interest margin in the second half relative to the first half. Can you give us a sense of kind of what level of conservatism has been built into it? And perhaps on where you see competitive pressure on your margins, which would prevent the recent interest rate hike from the margins to expand? Second question would be on the ecosystem regulation. The CBR apparently submitted this consultation paper recently on regulating banking ecosystem. Could you please give us your view on this document, the proposals? And how could this potentially impact your capital requirement going forward? And just last question, it seems that the Subprime -- the SberPrime subscribers flattened out in the second quarter. Was this driven by seasonality? And what's the outlook for the second half?

Gabor, thank you for your excellent questions, as usual. Let me start with the net interest margin. You're absolutely right. We are guiding that net interest margin will remain relatively flat in comparison to where we see it in the second quarter. And there are several reasons for that. As we have previously discussed, we are positively sensitive to the rate hike, in general. However, we need to take into account that the interest rate curve has flattened quite significantly in the recent months as a result of the Central Bank policy. And that also, at the same time, as we are positively sensitive but also had a certain negative impact on our net interest income and net interest margin. So while our corporate book floating rate, corporate book will reprice. As I said, we expect that pressure will come towards our cost of funds. And while this year, the impact will be reasonably small, we expect that we will need to start hiking the rates there depending on what the competition does. And at the same time, you have to take into account that on our retail book. That book is still yielding higher than the front book. And despite the recent hikes in the rate, the situation is likely to continue still for some time. And here, we also have a certain competitive pressures, and we will not do any rapid moves in this area, depending on the market condition. So I hope this addresses your question. We have been quite realistic in our NIM guidance. We do not believe that we are very conservative there in the series. Now let me take your next question. I will start and perhaps Dzhangir would like to add a few comments. As you've seen from the recent publication, this is only a paper for consultation. And in any event, all the changes are not due to -- give any significant impact until after 2023. So at least on our strategy horizon, we do not expect any impact whatsoever on our capital adequacy ratio or on our strategy in terms of development of equity. And we are currently in the active and fruitful discussion with the regulator on how to basically adopt this consultation paper to the reality of the recent development in the financial sector of Russia. Dzhangir, would you like to add anything on the ecosystem regulation policy?

Yes, thank you Alexandra. Let me add a couple of points here. We are indeed in very close discussion with Central Bank, and Central Bank is now collecting the views from the market participants and we had the call with them last week, together with other major banks. And it seems that they are ready to calibrate further coefficient that they published recently. And we specifically discussed the coefficients on the fixed income and bad assets. So it seems like they are flexible, and we will continue those discussions with them. Additionally, we introduced them our view that the regulation of immobilized assets might be done through as the way it was done in Europe, basically by the extension of ICAP, which is set supervisory review and evaluation process in case it's down through that way. There is no need for additional capital restrictions. So we're in discussions, and I believe by the end of August, there will be news.

Thank you very much, Dzhangir. Let me briefly comment on the third question on our subscription front. In fact, we do not see any slowdown in the number of active subscribers. If we compare the kind of the -- the active users at the end of the second quarter with the number of active users at the end of the first quarter, it's almost 2x increase. And in fact, the rate of increase is 15% to 20% every month. So we expect that it will only get better, especially as we have now the new subscription SberPrime Plus that includes our financial services most importantly P2P and [ Smartcard ]. And also, we now include our SberMegaMarket as part of our subscription, which is, as I said, a new multi-statutory marketplace that we are developing as part of our e-commerce offering.

And we take our next question from Stephan Potgieter of UBS.

Just a couple of questions. Some of them have been answered already. Just on the corporate cost of risk declined to around 9 basis points as a result of the recovery strategies that you've mentioned. Could you maybe just provide some more color around these corporate recoveries where I think you mentioned there were a few big names, or was it more broad-based? And also, if you can provide an update on the restructured loan book, maybe in this context as well, if you can just comment around where do you see corporate cost of risk then go from here. So obviously, it's currently at a very low level. Maybe just that as the first question.

Yes...

Please go ahead. Yes, yes, please go ahead.

Yes. So the recoveries on the corporate side are not really driven in the first half of the year, by just big names. We sold migration of the corporate clients to the better ratings in the full first half of the year. The corporate clients performed much better than we expected in the beginning -- in the end of last year and the beginning of this year due to the COVID. So it performs much better. And we believe that this effect is already priced in the provision as of the end of second quarter. So we do not see further room for improvement, which we saw in the first half of the year. And therefore, our view on the corporate loan portfolio today is close to the pre-COVID conditions. On the restructuring side, on the retail -- in the retail portfolio, 98% of the restructuring's already -- 98% of the restructured portfolio already. There's a [ holiday ] for the restructured portfolio already expired, and we see that the performance return to the normal level. On the corporate side, in the second quarter, there was no significant change in the share of the restructured loans. So the restructured additionally RUB 11 billion of exposure, only RUB 11 billion of exposure with first retraction turn [indiscernible]. So all that is in the schedule.

That's very clear. Maybe just another question on the mortgage book, which -- mortgage credit growth obviously remains very, very strong, helped by the subsidy program. I was just wondering how you view that in terms of maybe you are concerned that, that could result in some credit quality issues down the line. It looks like credit quality mortgages in Russia is very good. And what would your view be on through-the-cycle credit loss ratio for mortgages?

Yes, you are right. The mortgage portfolio in Russia performed very well. And actually, today, we see the minimum levels of any other trade, other trade is the current level of NPL 90-plus increase. So now the levels are close to what we had in 2019. So going forward, since our lending strategies were as conservative as they were before, we do not see a tendency for a deterioration of the portfolio.

Maybe just a last question on the nonfinancials. Just in terms of the gross margin, and if you just look at the overall nonfinancials business, I think the gross margin has gone down to about 17%. Where do you see that going forward?

Thank you very much for your question. As we have stated previously, for us, the key -- kind of the key metric right now for our nonfinancial business is growth in revenues and GMV. And of course, we watch our unit economy which will inevitably change over time as we launch new businesses that operate on the lower gross margin. And as we launched new stores in the new locations, for example, in our e-grocery services and other segments. So we still work on churning our nonfinancial business to break even on the horizon of our strategy 2023. And we believe that it is still entirely possible. However, in the meantime, while we're growing really fast, we will inevitably experience losses and negative EBITDA churn and decreases in gross margin as well. So this is not a matter for us for a concern. We really are pleased with the performance of our e-commerce segment where we have, as I said, the leading position in e-grocery and have almost 30% market share. So in these terms, we expect that it will be a good place to turn it into breakeven and profitable business that also contributes additional income to our financial services.

We take our next question from Elena Tsareva of BCS.

Congratulations on very good results, and thank you for very detailed press release. I have a question on your long-term guidance on margins. So given we have recent hikes by the Central Bank, how you may enter your views on margin like [indiscernible]. That will be my first question.

Elena, thank you very much for your question. We discussed the guidance for the second half of 2021. We believe that in the longer term, we will continue to have kind of opposite effects. Inevitably, our loan book yields will stabilize and front book will start yielding higher. As we go forward, if the key rate remain around 6% than what we saw during last year. However, it will also put additional pressure on cost of funds inevitably. So we believe that the margin should remain relatively stable with some downward pressure potentially as the key rate becomes closer to 6% or slightly below the normalized one.

And another question on your deposit pricing strategy. So what's your plans here to catch up with the hike of business center but key rate to try to have a prorate or something else is what you see the peers are doing with the pricing strategy?

Our strategy is to wait and see. Here, you have seen that we enjoy having quite a large share of current accounts. And that is thanks to large growth in escrow as well as good growth in transactional activity that also drives the increase in current count. At the same time, inevitably with the rate going up to 6.5% or 7%, we will see some repricing. But here, we will look at our competition and behave accordingly.

And another question on like e-commerce, nonfinancial businesses. So if you just provide -- can you provide any update on good though, how it's integrated, anything you see how...

Yes, thank you. This superb new multi-category marketplace, SberMegaMarket, that I have talked about is the new goods for us. So we have rebranded our newly acquired business in April. And now with more branches of SberMegaMarket. And indeed, we are fully integrating it with our other e-commerce players tha is the market [indiscernible]. And of course, we included into provider ecosystem. And I mentioned that now the clients can use their payer ID and pay with our bonus as part of our loyalty program. So -- and we included in the Prime subscription. The audience in the second quarter increased by 40% with SberMegaMarket in comparison with the previous quarter.

Our next question comes from Andrzej Nowaczek of HSBC.

I have a couple of questions. First, has there been any impact of the rising number of COVID cases and whatever associated restrictions measures were implemented only on your transactional activity and loan growth or loan origination in July?

Thank you very much for your question. Indeed, the rising number of COVID cases is quite a concern generally speaking. At the same time, as you have probably seen, there were no significant restrictions put in place, the resin restrictions in Moscow. But they were relatively short and have been listed already. So it didn't really have any significant impact. And generally speaking, the consumer activity in July was quite a bit albeit with some seasonal impact from holiday season and so on. But at the same time, you know that due to COVID restrictions, now we see more people stay in and spending money in Russia during holidays. So that also drives our fees and commission income upwards compared with the prior years when people traveled abroad. And in terms of lending activity, the retail segment remains the key driver in July, and it's come quite strong. We don't see any significant slowdown there. And the corporate book is doing quite well as well. So far, it's been quite good despite the rising number of COVID cases. And what we see right now is that actually, this set curve flattens. And we expect that the third wave will gradually go down in the next few weeks.

And my other question is to Dzhangir, perhaps. What you call a loan settlement, is that debt for equity swaps? So why would this be better than anything else? What has the Eurocement case thought you? Will there be more of those type of cases next year?

Yes. Thank you for your question. Actually, when we consider settlement for the bad assets. So the acquisition of the assets is not really at the most preferred way. However, in some cases, this is the preferred way, which provides the largest recovery, which actually happened in the Eurocement case. So in the second quarter, we had some of those cases in our work portfolio. And we believe that this strategy should work in the best way for those particular cases. But as I said, this is not the preferred strategy, just coincidence that in second quarter, we had concentration of such cases.

We take our next question from Alan Webborn of Societe Generale.

A few questions, if I may. Firstly, on corporate demand in the second half. I mean you're suggesting that the market is going to grow 6% to 8% annually. And I can't see that you had really any growth in the first half. So that suggest a much stronger performance in the second half. Is that something you can see in your pipeline? Or is that sort of hope in terms of things picking up. I mean I hear your comments about July, but perhaps you could talk a little bit about the dynamics on corporate demand. And secondly, on mortgage demand, I mean, it seems pretty clear that the incentives are no longer relevant as far as the big mortgage markets go? And should we expect to see quite a fall off in terms of volume and new sales in the -- towards the end of this year and certainly, if we compare next year to this year. And I'd be interested in your view on that. Third in terms of what was the brokerage activity like in the second quarter? It's been quite a strong phenomenon in Russia? And clearly, with these quite sharp rises in interest rates, risk-free investments will soon be looking better than they were. And I wondered what your feeling was about momentum there going forward. So there were 3 questions. Just a point of detail. I didn't think that Eurocement was a loan on spares books. So why do you talk about a write-back in your guidance in terms of risk costs for full year '21? I mean I think we know that there will be a one-off profit, but I just didn't quite understand what that was referring to. So if you could clarify that, that would be great. And then last question on ESG. I guess it's an ask more than anything. I mean, yes, your ESG policy statement is very detailed and very interesting, but we struggle to find any measurable targets in it at all and branch carbon neutrality by 2030 is fine, but it's not the major issue. And I just wondered what you feel now your timeline is towards giving the market more measurable and perhaps more serious targets in terms of what's clearly a big effort that you're making in terms of leading Russia towards a more ESG-friendly future? And that's it.

Thank you very much for your questions. I hope that I will not miss anything, but please if I do, I apologize. So please remind me if I don't go over anything. So the first one is on the corporate loan growth. If we exclude the impact of foreign exchange rate changes, our corporate loan grew by 2.2% in the first half and -- in the first half of 2021. And if you look at the kind of historical pattern, we have kind of skewed towards the second half or even the end of the year in the corporate loan book growth. So historically, we always have the second half much stronger than the first in terms of this growth. So we do not have any concerns. Here, we expect that we will catch up in the second half of the year, in line with our forecasted sector growth. Also, it's important to mention that during the first half, we had the write-off of RUB 230 million of the loans under the state zero-interest rate program. which also negatively impacted this growth by about 2%. So this will not -- this will basically be recovered in the second half of the year. So that's, I think, on the first question. The second question was on the mortgages and the impact of the state subsidy program. Indeed, quite a large share of the new issuances before the 1st of July was under the state subsidy program. But I think it is important to mention that we have now this newly formed state subsidy program that albeit is more restrictive but still it's quite attractive for many of our customers, including young families. And we believe that it will continue to drive demand for mortgages quite strongly. So -- and the rates are acquired resilient on mortgages as you have seen to the recent hike. We do expect that there will be some rises indeed, but they're not as quick to come as the hikes of the Central Bank rate. So all that being said, basically, the mortgages remain still very attractive. And the new subsidy program that is now in place is going to continue driving the demand. So we expect that this year, and in fact, in the next several years, during which this new subsidy program will be in operation. We will see elevated demand for mortgages in the country. Now I was not sure that I quite got the gist of your third the sharp rate of the interest rate by the Central Bank. Can you just repeat the question?

What I was asking was how the trends in brokerage activities had gone? I mean clearly, Russians have been opening brokerage accounts as if they were going out of fashion. And I think part of that is probably, in my view that having fairly low rates on deposit accounts and has pushed people in that sort of direction. But now we're reversing that, and you've had quite a sharp increase in policy rates and therefore, interest rates will get higher in terms of nonrisky assets. I just want to...

I get you. Yes. Clear, clear. Thank you, Alan, for clarification. Indeed, we've seen some slowdown in the number of new active accounts even before the last hike in the rate. So there is definitely some saturation, I think, in demand. At the same time, we expect that it will remain a very fast-growing segment. We see quite great activities as you can see from our results in the interest from both mass market and high net worth individuals and our assets under management demonstrates strong growth. And what we also see in that launch of the new program -- product that are clear and simple for our customers driving the interest as well. So I think that the interest will remain. The people have acquired some taste for the investments. And while maybe the growth in the number of active investors will not continue to be as fast. It will still remain a very interesting area in the fast growing segment for us as well. Your question number 4 was on Eurocement. What we did is we just basically our guidance of 70 to 90 basis points does not include any write-back or any positive impact from the sale. The sale and the gain on the disposal, of course, it will positively impact our P&L. But since we have accounted for the discontinued operations, it will not be part of the reversal of the provisions. However, it was previously part of our cost of risk. So we believe that it was a relevant information to disclose what impact it would have had on our cost of risk if it was still a part of it. And that impact was just disclosed for your information as a relevant number.

So when that's taken -- when the gain is taken, presumably it's going to be in Q3, I think is that's what you indicated?

Yes, that's right.

It will be a profit on sale of a discontinued item rather than a positive impact on your cost of risk in that quarter. Is that right?

That's correct. That's right. Yes. And the last question, but a very important one is on our ESG strategy. And if I may, I'll ask Dzhangir to comment on it. Dzhangir?

Yes. Thank you, Alexandra, and thank you for your question. On ESG side, what we do right now, we've developed the questionnaire on ESG for our corporate clients and we distributed to them in the beginning of the year, and now we collect the responses, and we have more than -- already we have more than 1,000 filled questionnaires. So we are now at the point when we may develop our model for ESG score. And based on that model, we are going to quantify the risk in the corporate portfolio risk related to ESG. Before that, we were not able to do this. And frankly speaking, the data in Russia on ESG risk is not very much presented. So we have to develop our own models based on our own data. So by the end of the year, we will have those ESG scores, and we are going to color the portfolio in green, yellow, red zones. And based on that, we will be able to develop quantified targets after that. Today, it would be quite responsible from our side to make quantified targets without that data.

That's helpful. I think we're looking forward to seeing the results of your work on this. So good luck.

Our next question comes from Nida Iqbal of Morgan Stanley.

I just have one question. Firstly, on the strong growth in consumer loans in Russia, we are starting to hear the central bank about -- talking about cooling down measures quite possibly. So if you can give some color on any expected regulatory changes in your view? My second question is about the NIM outlook to 2023. I might have missed it, but previously, the guidance was 80 to 100 bps decline between 2020 and 2023. What is the updated guidance on that, please? And then the third question is on the nonfinancial investments. If you can just talk about your plans in terms of infrastructure development for these assets? That would be helpful.

Thank you very much for your questions. Dzhangir, would you like to take the question on regulation, consumer loans, potential macro add-ons by the Central Bank.

Yes. Sure, Alexandra. Sure. Indeed, consumer loan growth is strong. And we believe because of that Central Bank increased the macro add-ons. I already mentioned that starting from the 1st of July, 2021. This will be applied for the new originations. At the same time, central banks canceled the macro add-ons for the previously generated portfolio. So we believe this is the kind of strategy of Central Bank when they see the performance of the loans that were originated in the previous period, if they see that the performance is strong then they cancel the macro add-on. This strategy was not announced by them, but we've seen such measures from them already several times, both for consumer loans and for mortgages. So now they increased the macro add-ons for -- starting from the third quarter. But as I said again before, those 2 effects on the cancellation of previous add-ons plus this increase add-ons, the total effect until the end of the year will be just close to 0. On our side, we do not see the signs of bubble in consumer lending. The only thing that I can -- that might be helpful for you here is that payment to income slightly increased since the beginning of the year. But our lending strategy is based on risk reward, and we continue to see potential in the consumer loan market going forward. Thank you.

Dzhangir, thank you very much for your comments. Now let me address your second question on net interest margin. Indeed, during our strategy, we guided the decrease of net interest margin by 80 to 100 basis points over the 3-year horizon, out of which we expected around 50 basis points decrease will come in 2021. As we can see now our improved guidance includes only 30 basis points decrease for this year. And we probably will likely stay this much on the 3-year horizon as well. Whether there is any more upside potential here, I think it's too early to say. We will continue to basically look at the Central Bank strategy and the competitive environment, and we'll update you as we go forward with that. And your last question was on the infrastructure. Let me just clarify, was it on our investments in the infrastructure, what -- like what would you like us to address, please?

Yes. You've previously spoken about investments into SberLogistics. So if we can have any color around that, please?

Yes. Thank you very much. Indeed, our plan is to develop quite a wide network of warehouses basically on a federal scale in all the major cities and towns to allow basically next day or same-day delivery or express delivery in case of larger cities. And we are in the process of that. On the 3-year horizon, our expected investments are around RUB 200 million into this infrastructure. And this year, we expect to invest around RUB 20 million -- sorry, RUB 200 billion and around RUB 20 billion this year, sorry about that.

Our next question comes from Mikhail Butkov of Goldman Sachs.

Congratulations on the strong results. So the first question is on the deposit rates. There was a number of comments made on the actions of competitors and central bank actions. However, so far, looking at the first half, the increase in funding yields of Sber was less pronounced than the increase in policy rates and probably also reflecting the competitive environment. So maybe based on the last few weeks and another rate hike, do we see any changes in the competitive landscape right now? And maybe what yields are incorporated in your 2021 guidance on the net interest margin? May be more competitive landscape in other words? Yes. So this is the first question.

Yes. Thank you very much. Indeed, you're right, despite certain changes during the first half, we still didn't need to actively reprice. And as you can see, our share on the retail deposits was relatively flat or even slightly increased especially in comparison with the last year, and it's now above 45%. So we feel quite comfortable there. In the last week, there were no drastic changes that we have seen in the environment since the last hike, I mean, that was last Friday. But as I already said, of course, we expect that some pressure will come our way. It is inevitable. We are ready for that. But here, we will basically look at the competitors and watch our market share and act accordingly.

Another question is on infrastructure investments, the follow-up. So maybe could you comment -- could you provide some color on what are the existing logistics capabilities of SberMegaMarket? And how is that integrated with, for example, SberLogistics, which is the logistics arm? And also did I understood that correct that the major part of your investments into the logistics will come from the next year, given that this year, it is RUB 20 billion and next year, it is RUB 200 billion over next 2 years?

Yes. I will try to be as clear as possible here. The MegaMarket historically operated under a 3P model. So basically, it was a marketplace that did not provide delivery services as such. And, yes, you're absolutely right. Sberlogistics will handle the logistics for SberMegaMarket as a service. And majority of our investments and development will take place in '22, '23. Right now, we are determining the key locations and kind of the square footage, so to speak, of the relevant warehouses. And as I said, the estimate for this year of the investments in warehouse development is around RUB 20 billion. And the majority of the amount will be split between the '22, '23 of the RUB 200 billion. Okay?

Yes, yes. And the last question is on nonfinancial businesses. So you recorded around RUB 75 billion revenue in the first half, and you guided more than RUB 200 billion for the full year. So basically doubling the revenues in the second half, where do you expect the biggest growth? What will be the key growth driver? Is that SberMarket or some other e-commerce, health care and entertainment assets? Yes, if any color here, that would be helpful.

Yes, certainly. As you can see, we are growing quite well quarter-on-quarter, not only year-on-year. And of course, our e-grocery segment takes the lead here, both companies, SberMarket and Samokat are performing extremely well, and in line with our expectations. And we expect that this growth will continue into the second half of the year plus seasonality also plays an important role here. The second quarter usually somewhat of a slowdown for just generally this segment, and we expect that it will pick up and grow quite rapidly in the third and fourth quarter. But of course, the MegaMarket is going to pick up as well. We've only launched it in the second quarter. We branded in April. So it was operational only for 1 quarter and the significant growth will come from SberMegaMarket in terms of revenue and the GMV as well. And the EAPTEKA is also growing quite fast. And it also was consolidated only for a part of basically of the first half. And it is showing really good results. The demand for their services is really good. And they're acquiring new clients, very fast, thanks to the ecosystem. And of course, they will show impressive results in the second half as well. So -- but e-grocery will definitely remain kind of in absolute terms, the main driver of the e-commerce business this year.

We take our next question from Andrew Keeley of Sber CIB.

I guess quite a lot of questions have been answered, but I have a few small ones left. The first one is you showed very good profitability in your insurance segment in the second quarter. And it sounds like from your comments, you've got a pipeline of kind of new products coming through. I just wondered, I mean, are you pretty bullish on this segment for the second half and beyond? And do you expect that its share of the profits of the group is likely to keep rising? That would be my first question. And then the second question, again, it's coming back to the kind of mortgages. It seems to me like the Central Bank is most worried about the kind of increase in higher loan-to-value mortgages. Just wondering if you can give us any color on how your mortgage loan to value is evolving? The third question is does your above 20% -- 22% ROE guidance -- I assume that includes the gain you're going to book on Eurocement in the third quarter? If you could just clarify that. And then the fourth question is on the cost of risk on the -- or the positive revaluation of the fair value loans. We've seen a couple of quarters of positive revaluation. Just be good to hear from Dzhangir whether kind of given the composition of this book now, you kind of feel reasonably comfortable that big fluctuations in the fair value of this segment is kind of behind us? Or is that just very hard to say and it's more tied to commodity prices, et cetera? Those are my questions.

Thank you for your great questions. The first one on insurance business. Indeed, it grew by over 50% in the second quarter. And you're absolutely right. We've launched a number of new products, and we've seen very good response from our customers and really good pickup of customers online. And I think during our Strategy Day at the end of last year, we've announced that it will be one of our faster growing segment. We have quite an aggressive strategy there and expect to take a solid market share in different areas, including car insurance and health insurance as well. And of course, we will develop further our traditional products that remain the key revenue drivers profile. So of course, it's still a relatively small part of the overall business if you compare it to our net interest income. But yes, we expect that its share will gradually increase as we implement our strategy in this period. If we look at our loan-to-value in mortgages, I believe this was your question. And I think that Dzhangir already addressed that the situation is quite stable. And this is what we also see in our PTI and loan-to-value ratios that do not really show any signs of decay in credit quality. So no issues really that we see there or no signs of overheating. The LTV on the portfolio is around 64%, which is basically kind of a very comfortable level [ this year ]. Indeed, our return on equity guidance does include, of course, the result from sale of Eurocement that we expect to book in the third quarter. And on the cost of risk and the fair value, I'm not sure if Dzhangir wants to add anything here. But generally speaking, of course, the credit ratings and the fair value adjustments for the reserves will continue to be impacted by any market changes that we see. If we see any significant fluctuations in price of commodities and so on, there will be significant if the situation remains relatively stable, it should basically not show any significant things either way. But generally, those revaluations should reflect kind of the credit quality is embedded in the portfolio that is estimate of fair value. Dzhangir, please go ahead and add anything that's...

No, Alexandra. Everything was correct. In the second quarter, there was no significant effect on the cost of risk coming from fair value loans, and we do not expect further impact to be significant on cost of risk.

We take our next question from Olga Veselova of Bank of America.

I have several questions remaining. My first question is about Eurocement, again. Media reported that Sber [ might ] issued a loan to the buyer of Eurocement. Do you think such a long shall deserve elevated provisioning given Eurocement was a troubled asset? And if yes, then could you give us maybe a rough estimate of fair coverage of such a loan? So this is my first question, potential expert provisioning. My second question is about floaters. Could you remind us what's the share of floaters in your loan book now. And also, in ruble loans, I assume the main benchmark is the policy rate, what's the most usual benchmark for dollar loans to the floaters in your loan portfolio? This is my second question. And my third question is again about subsidized mortgage program. How does demand from mortgages after the 1st of July compared to demand before the program was extended? And maybe the other way to ask this question is what share of new mortgage issuance is made now through the subsidized mortgage program?

Thank you very much for your questions. Indeed, we have disclosed lending to the buyer of Eurocement. It will be assessed as part of our general procedures and the risk policies and an adequate provision will be created accordingly. We will not disclose any particular rates or provisions related to an individual client. If we move to your second question on the share of floaters. Over 40% of our corporate book is now floating rate. Key rate, indeed, the policy rate is the reference rate for the absolute majority of ruble floating rate, LIBOR historically was the reference for USD loans since now we're -- it's part of our -- as part of our overall change of LIBOR, we are moving to SOFR, and we have already issued our first deal with the reference to this [ deal ]. I believe that we were first [indiscernible] on the Russian market and not only on the Russian market here. And on mortgages, I think generally, I have provided the comment already that there is a new subsidy program that relates to the families. Previously, it was to families with 1 child. Sorry, with 2 children now it covers family with 1 child. And basically, we expect that it will provide much wider coverage now than the previous subsidy program for families. And while we see some reduction in July in the number of requests for mortgages, it is more of the kind of the impact of the front-loading in May and June where people were running to do it under the old program. But we expect that this demand will come back. As I already said, the rates still remain attractive. There are many families that will fit under the new subsidy program, and we expect that the demand for mortgages will continue to be very strong, not only in the second half of this year, but going into '22 and '23 as well. And you can see that we upgraded our guidance for demand for retail loans to 18% to 20% this year. And of course, the mortgage loans remain the key driver there.

So the share of subsidized mortgages in new issuance were roughly the same around, is this right?

It was around 30% in the second quarter. In July and August, perhaps it will reduce, but we expect that gradually come back towards the end of the year under the new program.

We do not have any additional questions on the English line. We will now move to Russian line.

Thank you all our participants from the English line. Thank you very much for staying with us for this 1.5 hour. And we've reached the Russians.

[Operator Instructions] First question from [indiscernible]

[Interpreted] My question is, could you confirm that this year, you expect your revenue to achieve RUB 1 trillion. Previously, this was mentioned -- this was indicated in the strategy then because of the pandemic, you had to adjust your plans. And Mr. Gref said that this might be achieved not earlier than 2022. So are you more optimistic about achieving it now? That's my first question. And the second question, you mentioned Eurocement, but I just wanted to clarify what is the amount that you issued the loan amount that you disbursed to the Eurocement acquirer. And the Eurocement claims, what was the amount of the claims because I don't think you disclosed it. And my third question, when do you expect the nonfinancial business O2O, to achieve the breakeven point?

[Interpreted] Thank you very much for your questions. About the net profit. After the 2023 strategy, we instead provide now the ROE guidance instead of the net profit guidance. And mathematically, it's quite easy to determine that if this is above [ 23% ], the net profit will be RUB 1 trillion inevitably. Why are we so optimistic? We have our current results in the first half year. We earned RUB 630 billion already. And also our economic growth outlook, our forecast for the second half year. So these are the key factors that drive our guidance regarding ROE. About Eurocement Group. We are not disclosing the amount of specific loans and provisions connected to them. We were selling not right of claim, but the company itself, the shares themselves, which were in our books. Now on our balance sheet. The amount was around RUB 160 billion. That was the cost of sales. But that, once again, was disclosed in our press releases when the transaction was actually concluded. And your third question about the nonfinancial business. So we've said that we are targeting our nonfinancial business is achieving the breakeven point on the 2023 horizon. This is still one of our key priorities. Right now, we are mid-2021, and most businesses, especially B2C businesses are growing rapidly. They are acquiring customers, engaging customers and increasing their market share. So at the current stage, we are generating negative financial results. This is fully in line with our expectations. And in terms of growth rate, which is our priority for now, these businesses are performing once again in compliance with our expectations. When it comes to the Grocery segment, with Sbermarket and Samokat, we are exceeding our original expectations in the first half year. And as we said before, a number of nonfinancial businesses, are already in the green, generating positive EBITDA. A good example is our cloud business and also a number of other businesses in the B2B segment, which is a bit more mature and which has been in the market already for several years.

[indiscernible]

[Interpreted] I have the following question. The loss of your Mail Group JV grew. What were the factors behind that? Also, the net assets for that JV dropped 1.6x. What were the reasons for it? And also at the beginning of the year, you had the commitment to make additional investments, RUB 10 billion to O2O, what is the status of this investment? And what is the overall amount of the investment in the holding?

[Interpreted] Thank you for your question. So the first question about the losses. What are the main assets in the O2O JV Samokat, which we have mentioned several times already, a readily growing player. In the e-grocery segment, then Delivery Club, the company that is the leader in food delivery from restaurants also developing the e-grocery segment. Citymobil, the [indiscernible] handling service and a number of other smaller businesses. The businesses are experiencing a phase of rapid growth and they are generating losses. I've just made a comment about this. And as for the reasons for the losses, there's gaining market share, costs on customer acquisition, expansion on to the federal level. All of this is an investment stage. And therefore, we are working hard to make sure these businesses reach the breakeven point within our strategy horizon. But this is the status quo. It is in line with our expectations. And this results in the net losses that you're seeing in the financial statements and this decreases net assets, of course. During the first half year, we continued investing. I'm afraid I don't have the exact number at hand right now. The investment in O2O, I think are approximately RUB 40 billion and maybe a little less as of the end of June 2021. And what was the last question? Oh, yes, about our investments. So yes, we continued investing together with our partner, with Mail.ru Group, we invested on a parity basis throughout the year. And regarding the RUB 10 billion, as we said, at the end of the first quarter, the RUB 10 billion, this investment was subject to a number of KPIs that had to be fulfilled. So right now, there are determinations from independent consultant saying that those KPIs have not been achieved which is why the RUB 10 billion investment was not made. All the investments made during this period were made on a parity basis. I hope this answers your question.

[Interpreted] Next question [indiscernible].

[Interpreted] My question is this. You mentioned in your interview with [indiscernible] that Sberbank is planning to invest in developing its ecosystem up to RUB 350 billion over the reporting period. Have you made any investments in this ecosystem development? And this year, then what would be amount?

[Interpreted] Thank you for your question. Yes, of course. During the first half year, we invested heavily. We invested in the O2O holding. We also acquired goods.ru, which we rebranded into SberMegaMarket. We acquired [indiscernible]. We closed the deal on the EAPTEKA. And the total amount of investment in the first half year, does anyone have the number? Okay. Maybe we will just send you a follow-up so that we don't give you any misleading information about the investments. RUB 30-something billion. That was the goods.ru cash in. And the EAPTEKA deal, I think it was a little less than RUB 10 billion plus the investments into O2O and [indiscernible], a little less than RUB 30 billion. So I think those are the numbers. But once again, let me clarify, and I will get back to you with the exact number.

[Interpreted] And another question from [indiscernible].

[Interpreted] Just 1 quick question about June. The NPL for foreign companies grew from over RUB 30 billion to RUB 57 billion. Could you give us the reasons why? And which client does that relate to?

[Interpreted] Dzhangir, could you take this one?

[Interpreted] And this is in reference to which statements?

[Interpreted] This is according to the CBR for June.

[Interpreted] You mean under RAS. I think that was -- there was some reclassification. But I would do that, if I understood it correctly, that was an old default loan. Now there an overdue debt appeared.

[Interpreted] And who was the borrower?

[Interpreted] We cannot disclose this information. The name of the client I see.

[Interpreted] As of now, there are no further questions.

[Interpreted] Thank you very much for the questions. So regarding the question about the amount of investments, we will get back to you offline about the exact number. Thank you. Thank you so much.

[Interpreted] And this is where we close our call. Thank you very much and see you next time. Goodbye.

[Interpreted] This is the end of our phone conference. Thank you for participating. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]