Sberbank of Russia (SBER) Earnings Call Transcript & Summary

Good afternoon, dear viewers, investors, shareholders, our guests. Today is our pleasure to spend these 2 hours with you to deep dive in the Sber mortgage business. We have fantastic speakers today. Deputy Chairman of the Executive Board, Head of Retail Business of Sber, Kirill Tsarev; Senior Vice President, CRO, Dzhangir Dzhangirov; and CEO of DomClick that is our digital housing platform, Nikolay Vasev. They are going to talk about the mortgage business in Russia and the -- our business, Sber, and our vision of mortgage and how the technologies help us to drive these services. Before we start, let me talk about some housekeeping details. First of all, the time line. We are going to have a 40-minute presentation, give or take. After that, it will be followed by the online session of Q&A. Thank you for registering beforehand. We will be happy to answer your questions. After that, we will have some small presentations of our digital application and our -- additional services that you can purchase with our platform. I have to say that there is a disclaimer. You know that our presentation may have some expectations and focus of some business results that are influenced by a number of risks that we know of or do not know of. So these forecasts can differ from the actual results that you will see in the future. If you want to read more about the disclaimer, please read that on our presentation on our website. This event is being recorded, and event is going to be available on our website, the recording as well. So thank you for joining us and for looking at that presentation afterwards. Now it is my pleasure to welcome to Kirill Tsarev, Deputy Chairman of the Executive Board, Head of Retail. Thank you.

Thank you. Let me welcome you once again on behalf of Sberbank. Maybe I will kick-start this meeting, and my colleagues will support me in this endeavor. Now let's start without any further ado. Now the first thing I wanted to focus on is the market itself. The market is growing, starting from -- it is growing in 2021. From June, the state support program has been changed. I'm going to talk about that a bit later. But the most important thing is -- and this is something you should see on the slide, is that the demand is mostly driven by the structural decrease of the interest rate. And this helps the mortgages to be more accessible and available. We see some change, some upward change of the rate but not only the subsidy and support programs were driving the behaviors of the customers who wanted to buy new real estate properties. Another factor that I would like to mention is that the mortgage portfolio today is going to be higher than RUB 11 trillion. That will be around 10% of the GDP. So on the one hand, that is a great result. On the other hand, we can boldly say that the potential of the development of the mortgage market in Russia is still untapped because we can see it in the prospective of other countries. That can say that Russia has a great potential to unlock in terms of the development of the housing market and the mortgage market. So we are expecting some strong stories here. Now a few words about the mortgage business. I would like to say that on the one hand, the average ticket is growing, and it is related to the prices going upwards. On the one hand -- on the other hand, people are trying to increase the -- and enlarge their real estate properties. Some just buy new -- the first property. Others buy better properties. That obviously that leads to increase of the average ticket. Another important factor is that the mortgage payment on average is around RUB 23,000. It's not that big. If you look at the income of the population, you can say that many people can afford mortgage. Now the real duration maturity of the mortgage is around 5 years. That tells you that the -- that Russians can repay mortgages earlier, or they trade in this way or another. They improve their housing conditions. They buy new properties or larger properties. And the -- when we talk about the overhead of the market, when we talk about the NPLs, we can see that it is better than the market on average. It's still pretty low. Another important factor we have to talk about is the dynamics of the construction industry. On the one hand, we understand that the potential for the development is huge. We think that the mortgage housing has to increase. We see that there is a potential -- and there is a potential that is unlocked in Russia. It can grow even higher. On the other hand, if you look at the number of transactions with escrow accounts, it's growing. The reform has been adopted in a large sense of the world, and we see it as a positive trend for the future because that means that the market is becoming more transparent. And some of the potential risks that we had previously are being eliminated. And we think that in longer term, it will have a positive effect. And the growth of the market that we have seen in the recent months is expected by us to be present in the future as well, and that would drive the mortgage market and the construction market. Another important thing that -- to consider for many is to see what will happen after the change of the state program, how this market is going to develop. And I think that here, we need to look at 2 things really. On the one hand, we're talking about the main program, the state program 2020. From the 1st of July, it was amended. There is a limit for RUB 3 million for all regions, but there are 2 major factors. And they're very important. The family mortgage has -- program has been large. It is available for all families with even 1 child. So the potential -- that part of the potential of the state program was transferred to another program, another important factor. I have to mention what we see in the bank is that the -- or one, the majority of the portfolio, the secondhand properties that usually were not covered by the state program are now covered by them. And now you can say that for us, the change of the state support program is driving us in that way or another, but it's not that dramatic. If you look at our slide here, you will see that the state-supported mortgages was quite significant. In June, July, we saw the growth of the state-supported mortgage. It wasn't related to the fact that in July, it was -- the program was going to its end and the mortgage portfolio was forming more actively at the same time, July and August. We see that on the one hand, the volume of transactions and deals without state support increase. Obviously, the number of deals supported by the state decreased, but it did not go to 0. So we think that it is a totally normal trend in terms of the market movement. On the one hand, the state is more effective in supporting targeted individuals and households. We're talking about the regions with lower prices for real estate or young families. On the other hand, from our business perspective, we can see that the secondhand property market is increasing. So we are going to see some kind of a combination. The state support is going to dwindle. On the other hand, the secondhand market is going to increase as well as the firsthand market, primarily market, new properties, market without state support. Another factor to consider is that we recently have been talking about the fact that there was a major increase in the price of the average square meter. We have seen that, although there are 2 major factors. If you look at longer perspective, we can see that it's not such a dramatic price growth especially given the inflation that we have seen happening during that period. And actually, during 2019, 2020, it was actually a decline in a way, a rebound, sorry, in a way. And the state-support program helped to, say, relaunch the demand for the real estate properties, and we think that this is a major factor. We do not think that the real estate has gone too far from the inflation, at least if we talk about the longer term. So in 5, 7 years, if we look at these 2 curves, we will not see any major changes. That's very important in 2017, 2018. We saw that these prices were not going up. It was actually going down. It was going down when the inflation was going up. So in the longer term, we see that these 2 curves started to correlate in a way. Another important thing to consider is what is going to happen now? We see that the key rate is being revised upwards. And on one of the slides, you remember I've shown you that as the rates go down, the behavior of customers changes the longer -- demand for longer-term products is changing. It is becoming more and more beneficial to buy something with a loan. So the -- these rates stimulate the growth. At the same time, we see that there is a correction of the key rate, and that might lead to the change of the mortgage rates as well. But we see it as a midterm trend because in longer-term perspective, we think that the rate will be predictable within the predictable range, and there will be no major growth. And the mortgage levels will be on the -- more or less the same level. It's a very important element for us. If we look at the number of applications for the mortgages, we do not really see such a decrease in demand. That's a very important indicator. We think it is. And that is the indicator that influences the current situation. Another important element for us and for the market is that there is a number of products delivered together with the developers because obviously, developers want to offer the best deals to their customers. So we see a higher range right now. And apart from the mortgage for the secondary -- for the secondhand market, we see the programs, special programs supported by the largest developers that help to select the best deals and the best products for the customers. At the same time, it will be important to say that the growth that we have seen on the market and the desire of the banks to drive this business even further, we see the emergence of new products. The mortgage deal is the classical thing. The important thing is what additional services do you provide. Apart from that deal, about mortgage transactions, apart from this granularity of the -- this wide range of these -- the mortgage share programs, there are state-supported programs, but there are also developer-supported programs and there are other programs with the best offers for the renovation loans. Obviously, you don't need just a flat with walls. You want it to be nice and cozy. So what you want to do is to deliver the full range of services. That also includes the electronic registration services. It includes the additional services that the mortgage customer receives. We are talking about some additional loans that are needed for renovations. We're talking about service things like simplification of registration of the maternity capital that the state allows to use for -- to repay the mortgage. So this more customized offer for the customers will help to make the mortgage experience more personalized. Another important element is that the development of this product should inevitably lead to the development of our business. And currently, we see that Sberbank is increasing the mortgage portfolio step by step. We see our share -- in 8 months 2021, it is more than 52%. It has been growing steadily. We think that's a wide range of services, including the registration experience that my colleague is going to talk about later, helps us to say confidently that we will even grow -- that we will grow our mortgage business even further. There will be some changes in the state support programs, but nevertheless, the -- our portfolio is going to be stable. Our assumptions are that, well, of course, the number of mortgage transactions and deals will be adjusted to the changes in the state support programs. But our portfolio -- good portfolio in the secondary market and our good positions tell us that we will even further increase the mortgage portfolio. To wrap up, I would like to say just a few words about our customers and then to pass the floor to Dzhangir Dzhangirov, my colleague. Anyway, our customers with a mortgage, that's 4 million people. I'm not going to walk you through the entire slide. It is a diversity of customers. In terms of the income levels, we have people with different income levels. And Dzhangir is going to talk about the quality of the portfolio. Another important element is that there are a bit more men with mortgages than women. And if you look at the age, we see that there is an emerging group of customers who are younger than 25 years. And it's encouraging for us to see that young people are building their lives, building the homes for their families. We hope that, that trend will continue and that these young people will improve their housing conditions, and we are going to support them all along the way. That's it for me. It is my great pleasure to give the floor to Dzhangir Dzhangirov. Please, you have the floor.

Kirill, thank you. Hi, everyone. I'm going to walk you through the most important metrics in terms of the risk level for the mortgage portfolio. Well, it is a great pleasure for a risk manager to talk about mortgage portfolio because the level of risk is the lowest if you look at the major products of the bank. 2 years ago, the level of NPL for this product was less than -- around 1%. Now it's 0.48%. So it's 2x lower than we had last year. And that's the same trend for the entire market. And for the banking system, the mortgage is a very promising product and a product that is in high demand. Another important metric that we monitor closely is the level of the -- and the number of loans of our customers. It is quite stable. It is around 45%. I'm talking about the PTI. And we do not see any major trends to growth here. The state support program for the mortgage that we had helped to increase the payment with the same level of loans. At the same time, we did not pressure our customers in terms of any additional payments. So the payments will not increase. And this is a very important metric. The PTI is a very important metric because we do not want the customers to get many loans that they will have hard time repaying. The level of risk of the inbound flow graph to the right is rather stable. You can see that in the last 1.5 years, the level of risk has fluctuated, but we can see that on the applications with state support, the level of risk is much better than without state support. This is actually -- can be explained very well because the state support attracted the attention of those who haven't before thought of a mortgage as a serial product. So when the rates fell, we received a very big flow of people who started to look at the mortgage as a product with a very good rate with these reduced rates as a method to improve their living conditions. For every ruble that's repaid under the mortgage plans, we have about RUB 5 that's repaid preliminarily. So there is full repayment. There's partial prepayment, and this means that on the one hand, our customers have the opportunity to pay faster, to service the debt much, much faster. But this also means that the mortgage market has a very big potential. If the rates fall, it is evident that the people will start to repay prematurely less and less. So the blue and green charts will reduce. In COVID times, especially last year, we saw some growth in NPL90+ at the 12th payment, but we can see that even in the period of the most accurate COVID phase, the number of NPL cases wasn't very dramatic. Moreover, in April, we launched the restructuring program, which allowed us to restructure the loans. And it also helped us ensure keeping the customers outside of the NPL zone. We had about RUB 117 billion of loans that were restructured last year. In the portfolio, we have RUB 92 billion. That's less than 2% of the total amount of the portfolio. More than 80% of the loans that were restructured went back to the scheduled repayment. So we helped our customers through our own restructuring program, and there was also the state restructuring program. So every 4 out of 5 customers use it to their advance. And 9% are in nonperforming zone and about 7% returned for another restructuring. As far as the average monthly payment is concerned, we can see that in the period when the state support was launched, this level fell. Our customers planned to buy some property with a specific price, and the state support actually ensured the decrease of this monthly payment for these customers. But together with that, the state support allowed many customers to take loans for a bigger amount. And we can see that the average monthly payment restored very quickly and it even started to grow. We must realize that this already happened with apartments with better locations or size. We must forget that we also had inflation this period. And if we make a correction for inflation, we will see that the level of the real payment corrected by inflation is also stable. As far as the Stage 3 loans are concerned and coverage with provisions, these are disclosed as part of our quarterly report. We can see here that the level of loans in Stage 3 has decreased together with the NPL about by 2x since the start of 2019, and the level of coverage grew. So in this extent, we think that our portfolio is very nicely provisioned. We don't see any trends for further growth of provisioning. There's a question that interests many. What happens to loans that go into the NPL zone? On this chart, you can see that the lion's share, 99.6%, a very, very big share of this portfolio is restructured. It goes back into the planned payments it is structured. And in this way, the customer gets back to normal life, so to speak, just 0.4% get to the court stage. Even on the court stage, a very big part is also harmonized. To get to an agreement with the customer, the level of the loans that turn into real estate on the balance sheet of the bank is minimal. Another metric that we are tracking very attentively is the RWA density, risk-weighted assets density. This metric fell at the start of 2020 because we adopted new models, internal models. It's called the IRB approach, internal ratings base. So we've made these models and we decreased the number of RWA by 1.5x this year. This year, we saw that the Central Bank increased their risk weights on mortgage. It did that since the 1st of August, but these macro buffers were made just for the loans with high LTV, where the customer takes a very big part of the loan compared to the cost of the apartment. Central Bank tracks this loan loads of the population, but mainly the focus is unsecured loans. Mortgages is the focus, but there's no sizable increase of the macro buffers. We do not expect them. And the last thing I wanted to say before passing the word to Nikolay Vasev is how the process is working. So today, absolutely all loans are issued using the zero field technology. So the customer doesn't need to input any kind of data into any kind of questionnaire. So we identify the customer. And based on this identified information, based on that, we take the decision. 96% of decisions are made automatically. Average time for decision for such applications is only 2 minutes and 2 seconds. This corresponds to the time in which you'll get a cup of coffee made in a good coffee shop. With that, I pass the floor to Nikolay.

Thank you, Dzhangir. Dear investors, hello. It is true that the average time for decision-making on mortgage loans is just about 2 minutes. I wanted to go a little back into the past to compare it with the future to understand what the DomClick platform is, how it was born and what was before it. If we look into the past, just 10 years ago, the mortgage already was present at Sber, but it was using another technology. You could only make it at a branch, get a consultation only by physically going to a branch or partners, agencies as well where you could get a consultation. But ultimately, you needed to visit our branch. So compare this to 2 minutes. Then 10 years ago, a bit more 11 years ago, Sberbank had a whole program called the 3 8s, 888, triple 8. The first 8 meant 8% of the interest rate for mortgage loan; second 8 digit meant 8 years; and third 8, they thought -- some people thought 8% was the initial payment. But for that, the initial payment was 50%. And the third 8 meant 8 days. 11 years ago, 8 -- it took 8 days to review the application. Now it takes 2 minutes. So you can see this drastic technological path. It is a very, very big improvement. Sberbank started taking digital applications in just a couple of years ago, where our colleagues created the special platform which allowed taking applications. We found it, estimated this opportunity. And at that point, it was 2012, 2013. The mortgage market wasn't so popular and technologies weren't as developed, but we saw the future behind it. And in 2013, in autumn, more than 13% of all of our mortgage applications, all the customers came through this platform. It wasn't called DomClick. At that time, it was an online partner. It was mainly aimed at our partners, the real estate agencies, which was and it still remains. It will be our key strategic area. In 2014, in spring, the share of mortgage customers who came to us through this channel was already 25%. And at that time, by the end of the year, we realized that we needed to go further, that our goal wasn't just to solve matters just to take applications and to make a decision. We needed to look at it more broadly at the whole path of the customer to solve some kind of problem they may have with live situation or real estate. Sometimes, they need legal expertise. Sometimes, they need to help to choose. Sometimes, they need to choose an apartment or a location. And at that point, they were very segregated, classified, which helped customers in this or that way to find the buyers or a location. And at that moment, in 2015, we, as a company, made a strategic decision to allot a separate business, to create a separate company. On 20th of July 2015, we created the real estate center of Sberbank. And then in 2016, it was called DomClick. The first service that appeared on this platform, in addition to the services that I mentioned, was the registration of real estate. We were able to integrate with the state authorities with the Rosreestr, the state register. So the open interfaces and APIs, we were able to do this. So when we make a mortgage transaction, we send applications to registration. We issued electronic keys and we -- the customer didn't have to go to any state authority or to state registry offices. So the customer journey was shorter. The number of financial transactions was reduced. In 2017, we launched the service of free -- of safe settlements, where we register the settlements in a -- help them do it in a very safe way. If the transaction is done, the seller has the money and the buyer has the property. In 2017, we realized that we need to go even further. We launched the real estate showcase, where we started to compete with the existing players from the market like Cian or Avito. I will show you the results a bit later. But the year 2018 was the year of stabilization. And in 2019, when the share of services already reached a very, very serious level of 70% -- or about 70% of saturation, we launched the search process. So due to these advances in the realty search engines, we took third place among classifieds, which are based on these searches, horizontal and vertical. Among vertical classifiers, we're player #2. And just thanks to this constant movement forward, we were able to make all of the services covering the way of the client completely possible, legal expertise and making a link between our clients and our partners. So let's look at the figures. This is how the MAU development looks like. Since the start of 2020, number of DomClick users grew from 2.5 million to almost 16 million. And we have ambitious goals for the next 3 years to have this figure -- this number improve the level of more than 20 million. And if we take a look at the key achievements, the brand recognition for now is 29%. It's a fourfold growth in the last 3 years. Number of classifieds improved 2x. And here, we are in the big league. The number of contacts that our partners get, who promote the locations, who sell it, it increased almost tenfold. And this trend continues. The DomClick platform services a single platform in Russia where you can solve any of the matters you could have with real estate, searching, choosing, getting your mortgage, completing the transaction, servicing the previous loan, closing the transaction, removing pledge and similar transactions and reselling. We close the cycle with just one app. The search, in just 3 years, we made an application that competes and sometimes even is better than the existing players in this area which specialize only on real estate. A very convenient calculator. You can calculate any options of the mortgage and/or the payment and just in 2 taps get a decision. If you're getting especially your salary from Sberbank card, you can identify using Sber ID, choose the amount that is suitable to you, make an application and in 2 minutes, you get the decision. Servicing the mortgage. This is a very, very popular part. Customers solve any matters they may have with the real estate here. You find more than 50 different services in terms of servicing the previously issued loan and for other needs that any customer may face, the customer that has an apartment, including those with mortgage. We can see that generally, the mortgage market, we look at it in -- as a whole. Our share is 50% share of Sber on the mortgage market, and the portfolio is 52%. But the interest is about 50%, 52%, and we have the ultimate target to have at least 50% of the share. We will fight for every customer and the best service that we can give to the market. In addition to the 50%, there are about 50% of the market with property transactions. It's also interesting for us because we can reuse any of the services used in the mortgage transactions. This gives us the opportunity to earn about RUB 12 billion to RUB 13 billion of revenue per year on various services, advertising, promoting objects, locations and solving any other related matters. This is our dynamics for the revenue. As you can see, we are growing. And when we make some pauses for some technology, redevelopment and reassembly, yes, we have that, but we are not stopping. We never stop, and the volume of the real estate market in Russia has not tapped its full potential. We're not only talking about the average ticket, but we're talking about the sales, the search, the improvement of the housing conditions. There were other features that we are not announcing yet, not to scare away all our competition. But next year, I would like to say that we are going to deliver the service that would totally redesign the housing buying experience. Now our goals. The market share for the new deals for the mortgages, at least 50%; the growth of the portfolio, 15%; at least the growth of the share of our non-mortgage deal, growth of -- twofold growth. We have now transactions without the mortgage, and we want to grow at least twofold for the number of deals and transactions without the actual mortgage. And another goal, as I have said, our MAU is expected to grow to 22 million by 2023, currently 15 million people. So that is more than 30% growth. And this is our goal for the nearest future. Colleagues, investors, thank you very much for your attention. And we now are ready to go to the Q&A session as far as I understand. Thank you very much.

[Audio Gap] our event. We would like to thank our speakers for these very instructive presentations. And now let's go to our online Q&A session. Thank you very much for those who registered and for your attention. We're going to start with the first question. Sam Goodacre from JPMorgan, please. You have the floor.

Thank you very much for such an informative session. My first question centers on the profitability of the mortgage product. You spoke about the lower RWA density, which obviously would help from an ROE perspective. And you did allude to the cost of risk levels of a typical mortgage. But when we think about the other constituent drivers of profitability, could you perhaps help us understand the other parts of the P&L of the mortgage product? And also, perhaps give us a bit of an outlook of where you think that might trend in terms of the fees you earn in addition to the interest income, the cost-to-income ratio, et cetera?

Thank you very much. Kirill and Dzhangir, I think, will be able to answer that question.

I'm going to start with the cost of risk. Thank you very much for your question. As for the trends that we saw in the last 2 years, the cost of risk for the mortgage was negative. It happened because at the start of 2020, we transitioned to new models. That ensured the major decrease of RWA by 1.5 fold. And we freed up a lot of reserves provisions. So given the long-term trends that we saw in the mortgage, we saw that the risk was lower, and hence, the metrics improved. The negative cost of risk continued this year as well. So our cost of risk is actually negative, which is a unique situation, and we do not expect that to continue further. So we expect the cost of risk, of course, to be positive. And we are going to have some losses before provisions. We are now within the budget cycle, and we are putting up some plans for 2022. I cannot really share with you the forecast for 2022, but we think that the -- next year, the cost of risk will be very, very low.

Yes. As for the profitability, I would like to say that, well, obviously, if a customer with a mortgage has higher profitability than other customers, at the same time, I have to say that in different -- if you talk about different streams, we have, what, around 100 million customers, and 4 million customers are the mortgage customers. They are better there now thanks to the mortgage. On the other hand, we understand that this deal is quite profitable for us because we conclude the contract once and then we have a very long-term relations with the customer. And at the same time, they're using other services of the bank. So with a low margin of the mortgage is compensated by the depth and the long-term character nature of our customer relations.

Thank you very much. I hope that answers your question. Andrzej Nowaczek from HSBC, please, you have the floor, sir.

I'd like to follow up on Sam's question actually. What would you say the ROE is on your mortgage portfolio at the moment? It has to be higher than the average ROE. Am I right?

Yes. Kirill?

Well, it's -- I cannot say it's higher because if you take this particular category of customers, the profits are higher. If you look overall, the mortgage has lower margins than, for instance, consumer loan. So it's all relative.

I would like to build on that maybe. We look at the return on RWA indicator. And since we had some decrease in RWA density, the RORWA for the portfolio increased dramatically, increased 1.5 fold. At the same time, the margins remained at the same level. But we did not publish the indicator of RORWA for separate products. But obviously, mortgage is a good, profitable product if you talk about it as a stand-alone product.

Andrzej, I hope that, that answered your question. If you have a follow-up, we will be able to answer that later. Let's go to Andrey Mikhailov, Sova Capital. Please, Andrey.

Two questions here. The first one is basically what we have started to discuss, the return on RWA. As far as I understand that you cannot disclose all the information but compared to the consumer loans or to the corporate loans, large corporate grants, where is the mortgage? In this perspective, I understand the margin out -- margin, but the risk weights might be low. Maybe that offsets the low margin. And after that, maybe I'll ask a second question.

Well, the RORWA for the mortgage portfolio is higher than the average. It is not significantly higher but it is higher, but the competition on this market is fierce and 10, 20 basis points of the rate is reflected in the response of the customers. So we balance with this low margin. But as I've said before, the mortgage as a stand-alone product is a profitable product and has a better RORWA on average if you compare it to all the other credit products of the bank.

My second question about DomClick. Have you ever thought about scaling that to other products and regions, geographies?

Thank you very much for that question. Now the first part of your question is yes. And as I have said before, complementary services are already available on DomClick platform. And moreover, for some of our partners, you can even apply for a consumer loan at DomClick. If you think about scaling it to other countries, well, we are cautious about now when it's a balanced approach because if you look at the world and if you look at the platforms that work in several countries, well, basically, there are none because every country has a specific nature and you have to build relations with the local real estate partners. So we do not have any big plans there although some local initiatives with the neighboring countries are something that we are considering.

Thank you so much for the question. The next question, Autonomous Research, Gabor Kemeny. Please, you have the floor.

On the pricing trend is my first question. Just broadly speaking, it seems that mortgage interest rates have been coming down while the inflation has been picking up a little bit. And actually, the 2 are not far from each other, the mortgage rates and inflation. I guess first question would be, where do you see mortgage rates heading? And yes, if you could comment on the competitive situation in relation to that. And yes, the other question is just following up on the profitability of the mortgages. Can you comment on the cost of underwriting mortgages? I guess you mentioned that 90% -- or 99% of the underwriting is automated. But I guess there are some costs attached to it, like IT spending, risk analysis, database management, et cetera. So a few -- some color on that would be useful.

I think I will start with the rates. Well, obviously, yes, the rates are correlating with the inflation and with the cost of money on the market on the one hand. On the other hand, mortgage is a long-term loan at least if you talk about retail loans, and it is more or less stable. So we understand that if the trend for the longer term for the key rate is going to be upwards, it will be reflected on the rate. As for the competition, we think the competition is quite harsh and all the banks offer more or less the same price range. But since the interest rate is -- since all the customers are very sensitive to the interest rates on the longer term, so changing the rate by 0.2%, 0.3% in the mortgage business has traditionally been seen as a big thing by customers. So the stability of the rate is a big topic. So decrease in -- or increase in the rate is a major step. So the market responds to the change of the key rate. On the other hand, the changes of the rates are happening regularly. And we're talking about the key rate, too. And we're talking about the cost of money in the market and I'm talking about that first question. I was answering the first question and that's for the underwriting. Dzhangir maybe?

Yes. Increasing the level of automated underwriting operations to 96% led to the major decrease of the head count. And currently, the underwriters who analyze the credit application are nonexistent. We have fraud analysts, several hundred people, and they are analyzing only a small portion of the overall flow. Less than 5% of the flow is being monitored by them. Having a better knowledge about customers and having better neural network-based models and models the -- monitors the transactions, we have the decrease of the analyzed -- of the analysis of all the retail loans, including the mortgages. The model in the validation costs and IT costs increased on the other hand. So I would say that overall, the costs are going down slightly, but they are not going down dramatically because the IT modeling offsets the decrease of the income related to underwriting.

I would also add because it's a very long-term loan and the check amount is much higher, the cost of these, administrative costs, are not as high if you -- comparatively.

I have another question. The colleagues have asked -- analysts about the income of the mortgage portfolio. If you measure it relative to the risk-weighted assets, the mortgage portfolio is showing a bigger yield. How much it is bigger so that we cover this question? 1.5x, I think.

Yes, about 1.5x.

Thank you very much. Let's take the next question, and then I'd like to make an announcement for those asking the question. If you need to ask a follow-up question, please raise hands, and we'll come back to you and give you the opportunity of asking additional questions. If you need to specify something or maybe if we didn't cover something as you wanted to, just we would -- so Gabor, if there are no follow-up questions from you, we'll move on. There's questions from Andrew Keeley from Sber CIB. Andrew, the floor is yours.

I have a couple of questions. One is it's very interesting, your -- the presentation on the DomClick platform. I'm wondering if you can just tell us a little bit more about how the platform is differentiated from the likes of Cian and Avito. Why would someone searching for property choose DomClick over those sites or maybe other players. How do you compare in terms of the number of listings you offer and the additional services that you offer. Do they offer similar things? Or are they kind of lacking? Are you ahead on those? And then my second question is given it seems like there's still not really floating rate mortgages so much in Russia, I'm wondering kind of how easy and costly it is to refinance mortgage loan within Sberbank.

Andrew, thanks a lot for your question. I will try to cover it in short and then to describe it fully. Even in our ad campaign, we had a very easy thought. You can find and buy on any platform, on any classified platform. You can find -- not just find, but find and buy. So if you enter the app, you can find or choose whatever you want, choose a loan, approve it, make a transaction, and sign the loan agreement and the sales and purchase agreement without leaving the app. This is how we differentiate from our current competitors. If we take a look at the global trends, almost all players that do business in advertising and classifieds understand that the market, sooner or later, will end and they're not going to the transaction. We went another way. We initially created the platform for transactions. And now we're moving on to advertising. Of course, for those who are making the transactions, there's a big income. So we realize that we have many more opportunities to make it a full-cycle transaction than our competitors, especially considering the fact that in our secondhand, we have our physical network, about 400 specialized branches where you can make a real estate transaction with room for discussion with employees who specialize in that and 3,000 branches where you can get an initial consultation, get a digital key, and then digitally remotely finalize the transaction. In terms of indicators, right now, the number of listings on our platform is about 1,800,000. Our main competitors -- with our main competitors, there's -- again, there's 2,200,000 in average. But as we -- as the appetite of our competitors to the income from advertising increases, the number of listings will decrease. But with us, it will increase. If we take the living properties such as apartments, we serve as the player #1. So there are 2 segments which we haven't fully covered. First is the rental segment and the commercial real estate, and rural estate is 70% covered. So in terms of the living properties such as apartments, it's 70 -- it's the best coverage. So why customers choose us? There are a couple of reasons here. There's no silver bullet here. No single solution that would allow to solve it all and to -- each lion's share. Here, it's a complex question that our solution is about finding and about buying. Our partners work with them, click for mortgage service. And with us, it is easier to promote the listings with us. Just like the customers that take a mortgage, it is easier to look for it with us. We identify those who are searching and we consider 30% of -- about 40%, sorry, of customers who are looking for real estate do not take a mortgage with us or they don't take a mortgage at all or they take a mortgage in other banks. It's a good signal for us because we are becoming a service, not just a mortgage service, but the ones solving matters -- other matters with the real estate. The second question was on the floating interest rate. Yes, about the floating rate, I can say this because in the Russian legislation, since November 2011, there's no possibility of taking commission for preliminary payment. Floating rates make no sense because, of course, if the rate falls, the customer will feel comfortable. If it increases, the customer always can refinance. So the floating interest rate -- they make no sense. They only have sense when there are commissions that limit the customers in early repayments.

I would also like to add, as one element, it has to do with the fact that with the state programs because there's partially subsidized interest rate linked to the key rate of the Central Bank. And so this is additional hedge here. It's about $1 trillion of such transactions. In terms of interest rates, Mr. Dzhangir, can you cover that?

This state support program actually helped the banks manage interest risk, us and others in the banking system. Right now, the share of loans -- let's say, for the customers, it's always a fixed rate. You must realize that. Considering the compensation, which Kirill mentioned, the bank is getting an additional payment that will change together with the key rate. And now with the growth of the key rate, the effective rate for the banks, with the [ lows ], with the state program has also grown. This, together with that, the growth of the share of the floating rates in the corporate segment allowed us to decrease our sensitivity to interest rate risk to almost 0. Why I mentioned the corporate portfolio because the interest rate risk is managed across the book, not in the individual segments, but through the balance sheet.

Do you cover that? Do you have a follow-up question on that, Andrew?

No. I'm good.

We have a follow-up question from Andrzej from HSBC. Let's go back to your question.

I have another question related to the one I asked before. It's on affordability. You had this slide with PTI ratios there, but perhaps not showing the full picture. Interest rates are obviously going up, so are house prices. So is there enough disposable income growth to keep mortgage borrowing affordable? And what level of mortgage debt, in relation to GDP, would you in the next few years? So it's 10% now, how many years will it take for it to get to 20%, for example?

I'll start. I'll start answering and then and Kirill and Nikolay will add. Level of PTI payment to income, as I showed, is rather stable. Our customers have the opportunity to service the mortgage loans. It is rather stable. It's not growing, it's not falling. With that, any serious or dramatic growth of the volume of mortgage lending comparable to GDP is possible only with the growth of the number of borrowers, not the additional loads of the existing customers because the existing customers buying an apartment is -- it happens 1, 2, just several times per life. It doesn't happen often for many people. So answer to your first question is that our customers feel rather well in terms of servicing their mortgage debt. They are not overloaded. In our policy of retail lending, we have a principle of responsibility. So we don't want to overload the customers with the debt that in the 1 year or 2 or 3 will be very difficult to cover. And also, I showed that for every ruble that the customer must repay with the plan, they repay RUB 5 outside of the plan, they prepay it. It means that we feel rather well. But the increase to 20%, I think it can only be with the -- with broadening the number of people participating in the lending market in general.

I will add 2 figures to you. We said today that there are 4 million mortgage lenders. Population of the country is 140 million. So the level of penetration of mortgage right now is objectively low. So we lived for dozens of years in very high interest rates. It is very recently that we have lived with interest rates less than 10%. And while we stay with these low interest rates, the more we stay there, the model of behavior will change. People in principle are very careful about mortgage. We see that our indicator of average 5 years is average mortgage loan, although some people have 20 or 10 years. People want to repay it as fast as possible. They want to get rid of mortgage because they don't want to live it for very long. We think that with the interest rates falling or decreasing, I think the model will change. The model of structuring the portfolio, planning personal life, we see very big potential here. The speed with which we can reach 20% of GDP, I think it depends on the number of drivers. The first driver is the interest rates which we mentioned already. So if they're a bit higher, the speed will be a bit lower. If the rates return to 6% to 5%, the speed will increase. The second important aspect is, I think, the number of real estate objects. So the construction speed. Here, it is important to have a balance in terms of the cost of the properties and the level of inflation. So if we continue to look at the market as a stable one, then I expect -- it's hard to make these forecasts, but I think 5, 10 years, it can double, I think. But again, that's -- disclaimer, that's exclusively my -- like a very, very range, we cannot give very specific forecast.

Another 2 things I wanted to say. On the mortgage market, there are structure changes today. I showed this chart. We witnessed the appearance of the market of a new category of clients. The clients who didn't turn to loans before at all. So for them, the rates were too high and they thought that they didn't have to pay for double-digit rates on their risk. They found some other ways to buy an apartment, not getting a mortgage. Now we can see that the lower rates attract good customers. And second thing is the change that happened on the construction market. This escrow accounts campaign very much made the purchase of apartments safer. There are also many risks. Previously, when the person participated in the construction process as an investor, these risks are now put on the bank's shoulders and banks are professional participants. They can assess risks, right? They can take the risks, right? And individuals, they had to bear increased risks because they can't professionally assess the risks like we can. So now the market is safer and better for individuals. So with these structural changes, I think, of course, I agree with Kirill, there will be a speeding up of the volumes in the mortgage market. Thank you.

Now I will go to the next question from a retail shareholder who is watching our session right now. In the presentation, you mentioned a very low level of NPL with the mortgage portfolio. So this means that there's lack of overload, but the regulator, many times, bringing our attention to the fact that there is a rather big concern about quality deteriorating. So Sber's position known -- there is a big player, is it known to the regulator and how is this discussion going on?

The Central Bank, of course, tracks the level of risk on the mortgage. This is one of the biggest products in the banking here. But there are a couple of factors here, which Central Bank is tracking. The first one is debt load of the customers. Here, I showed our situation. And in general, we don't have any concerns here. We're tracking the long-term credit capacity of our customers on our own. I think the Central Bank is more interested in the dynamics of the prices on the real estate market. I think we saw this growth in Moscow and other big cities and throughout Russia in 2.5 years. It's about 50% growth of price. Of course, this draws attention. With that, in our models, lending models for new projects, we have about 0 growth of price. We understand, of course, this growth cannot be sustained forever. And so with inflation, we think that for the purposes of lending, there will be even a decrease in real terms. I think the prices will stabilize. They cannot grow with such speeds and such a long time, they will stabilize. And I think that the position of the regulator in this extent will correspond to that situation.

Do you want to add anything?

I think that's it. I think that's it.

All right then. Let us look at the next question, Alan Webborn from Societe Generale.

Can you hear me?

Yes.

Could I ask you about the mix in the portfolio. You said, I think that currently 30% is primary and 70% is secondary. Is that consistent throughout the portfolio? Or is it different in different regions? Just to get an idea of that. And then in terms of the growth outlook. And after the big rise in property prices in the big cities, obviously, Moscow and the state support subsidies, which clearly were favorable for the big cities given the price rises, do you think the dynamics of the growth in your portfolio will change over the next 3 to 5 years in terms of where the growth is coming from? And does that represent any new challenges compared to how you've been managing the market and the market growth up until now? That's what I'd be interested in.

Thank you. Kirill?

Nikolay?

Yes. Thank you very much for the question. Yes, 70-30, that's the ratio between primary and secondary market. It varies across regions, depending on the construction sector in this or that region and this level of development. If you look at Moscow, the indicator -- this indicator here is like 50%, 60%. That's for the new developments and the rest was for the secondary market. If you look at the smaller regions with the less developed construction companies, we sometimes have 20-80 or 10-90 ratio. If you can talk about the pricing and the prices, the growth rate of the prices changed. There are no surges, no rallies because the demand stabilized. You cannot satisfy that quickly, the twofold growth of the demand in terms of the balance of the prices. But we see that the developers decided against surge in the prices. So the demand has stabilized. As for the growth of the portfolio, we see that the portfolio is going to grow. And that will be driven not only by the volume of the -- expected volume of the mortgage transactions, but the growth of the duration. When the rates go down, many people try to refinance the loan. If they don't need to refinance the loan, they will try to leave with the loan that they already have. Now if you talk about the behavior of the customers, people in Russia understand how mortgage works. And the more friends you have who have already had mortgage loans, the better your understanding of the loan. This loan will not be considered as a threat, as a bogus story really. People will live with it longer. And it will be okay. And there will be less early repayments and the portfolio will grow in line with the -- our expectations.

Yes. I would like to maybe add that if you look at that, the growth of the portfolio was driven by the active growth of the market. But as we have said before, some state support programs remained and the other part of the demand will be transferred to either new developments or to the secondary market, secondhand properties. The secondary market was developing as the markets of state-supported mortgages, that means that the mortgages did not generate any new demand. But this demand was driven, not only by the fact that they wanted to buy new properties, but the state support programs helped people who needed new housing to be new properties, and we'll have to thank the government for that. And there is dynamics on this market. And as banks want to maintain that dynamics, another party interested in that are the developers. Developers are thinking about better structuring the deals, the offerings. They provide additional programs, and they work with us. We deliver mutual programs where we offer best deals for the customers, and that is driven by these programs of the developers. So I think that this -- the part of this market that is supported by the state is going to transform, so to speak. So if you look at year-on-year dynamics, we'll see some slowing down of the state-supported mortgages. At the same time, since we are on quite high levels and the depreciation level of the portfolio will be, on average, 5 years, not 2, 3 years, we will still have the stable growth of the portfolio.

Thank you very much. Alan, any more questions? Thank you very much. We have another question, as a follow-up question, about the process of given out the mortgage. Currently, the mechanics of the mortgages is fully digital or customers have to come to the office at least once? That's the question for maybe Dzhangir and Nikolay. Could you comment on that?

Well, a very small share of borrowers actually come to the brick-and-mortar branches. It's less than 1%. And it is basically done to protect the customers because we do not want to have social engineering cases or fraud. We still have them sometimes. So we are talking about large amounts of money, and this is a potential major risk for our customers. So to protect them, in some situations, we ask them to come to the office, to come to the branch.

I'd like to build on that. There is a notion of the electronic signature and so that the customer can sign contracts with this electronic signature. They have to come to the branch at least once to be identified, that's an important element. And after that, the customer can sign all the other agreements and contracts and the entire process is fully digital, that's talking about our process. But there is another important factor that is related to the secondhand property market. The majority of the deals are now concluded with the real estate agents. They represent either the buyers or the sellers. And the bank is used as a venue for these people to meet and discuss and negotiate. So we think that the -- going fully digital will be the transactions on the primary market where this transaction can be fully digital and the developer support that. And actually, some people actually -- they select flats online. So they can also select the flats and get the mortgage and sign on the documents online. But I think that our branches are going to be used still for quite a long while. But it's not related to our process of approving the deal. But the deal, apart from the mortgage, is a secondary thing. The negotiations are very important as well. The majority of the deals happen on DomClick, but many people just want to see each other physically. So yes, we see an upward trend in terms of the digital format. But we think that these deals are going to be concluded offline for quite a while now. Nikolay, any comments?

Yes. As for the banks and digital formats, let's say that the mortgage consists of 2 parts. First, we need to meet and consult the customers and provide solutions for them. And then we need to register the deal. There are 2 deals basically, 2 transactions. First, we give out the money for the mortgage. And second part of the deal is when a buyer buys something from the seller. There are 2 retailers -- retail customers or 1 retail customer and 1 corporate customer. And they buy a ready-made flat or a shared equity. So as for the first part, when customers just want to talk and to get these solutions, and this is virtual money we're talking about, from the part of the bank, we make it online. We -- like 75%, 80% of the customers will make a decision online. This 75%, 80% consists of 50% -- 50 percentage points are the customers who use DomClick or our website to file an application and get their decision. And then 20%, 25% of customers come through a partner. They either go to their offices, physical offices or online. But for us, that's 80%, which is online format. As for the others, it's harder to estimate that because we do not know how many of our customers receive the online consultation because maybe they have filed -- filled out the application on the partner side, and then it went to us. We think that at least 30% of these cases are fully digital, but we don't know because it just comes to us digitally. Then we're talking about the deal, the transaction. We're not talking about buying cell phones, talking about buying an apartment and sometimes customers pay out for 20 years. And usually, it's a household. It's a family thing you know. And it actually strengthens the ties between the spouses because, obviously, that is very important. That's a big deal. So the people want to meet each other just to look into the eyes and just make sure everything is all right because that's a big thing. We have some very advanced customers. They do not want to go to the branch, and they are ready to make the transaction. There is a synchronous deal, so to speak, when a buyer is in the 1 branch and the seller is on the other branch. They are located in different regions. For instance, a client from [ Khabarovsk ] [indiscernible], city of Russia, buys an apartment in St Petersburg, or someone from Tyumen is buying a flat in Sochi, they can come to the branch in their town, sign all the documents, get all the support needed. And then they sign the documents, then everything is fine. But if you look into the future, I think that this is going to be more popular because in 2016, the share of customers who use the app and the website to file an application for the mortgage, that was like 2%, 3%, maybe 5%. I'm not talking about the partners, that's -- well, for us, is a digital channel, but from the part of the customer, it is a physical channel, right? But we thought that there's no future for that. But now half of the customers and, in Moscow, it's up to [ 3%, 17% ] of the customers can get a decision on the mortgage application without visiting the office of their partner or the branch of our bank.

Thank you very much. Very interesting, especially your idea on strengthening the family ties. So yes, use Sber mortgage products to do that. Okay. Next question, [ John Gimir ], please you have the floor.

So I actually have 2 questions. The first one is how does the mortgage product or the mortgage ecosystem, so to speak, drive the related product sales such as property insurance or unsecured loans for perhaps renovations? That's the first question. And the second question is also about home equity, which I think is a related product from -- at least from a risk perspective. So I wanted to understand how you view that product and whether or not if you -- whether or not you have any expansion plans?

Thank you very much. I think I will start. Obviously, mortgage, as many other products, is connected to other products. Insurance is the product that is natural for a mortgage. I'm not even talking about the products that Nikolay mentioned in the support and services. Another question is the retail consumer lending because, well, we can see that the -- in consumer lending, many customers specify that they take the money for the renovations. These loans are different in times because if you buy a loan in new development, that is being developed still, then you'll need the renovation loan a bit later. So on the secondary market, people get these loans one after another. For us, in other cases, it doesn't happen like that. On the other hand, I have to say that we have a set of these products, not only related to the mortgage. I mentioned already that we have 4 million mortgage customers, and we have more than 100 million customers. And we have a range of anchor products like the mortgage, the transfers, our daily -- entire daily banking with Sberbank Online and other things that help us to cross-sell the relevant products, the neighboring products, so to speak. Now moving back to the -- your question. For the mortgage, you have insurance, consumer lending, other classical banking products because it is related to the settlements to the banking services, all that. And now we add a whole range of additional products related to the ecosystem. We have SberMegaMarket, this is an e-com website. So if you bought a flat, if you made renovations, then, well, maybe you would like to have a larger screen TV. And you can do it there. Yes, there was a second part of the question.

Yes, about home equity. As for the home equity, yes, we have this product. We have been offering for quite a while. A special niche of customers are using that. Usually, they have the property already, and then they buy another one. Sometimes people just sell their own flat and buy a new flat, so they have nothing in between. So -- if you compare the customer experience, the home equity loans, I would like to underline in Russia, if we talk about our competition, the customer experience in other countries for home equity loans are very developed, you should say that the consumer loans can be -- consumer loan can be done in 2 -- with a push of 2 buttons. With home equity, you need to push the same 2 buttons, but then you need to register the pledge, the security. And for that, you need to go to your spouse. She has to say, yes. Yes, and you need to tell her about all that. Yes, I try to make this home equity thing. And then I was informed that you have to tell your wife about that. And I said, okay, never mind then. Yes, because then you need to put it all for the pledge and that's the shared property, and that's a tricky one. When the bank does not have other standard mortgage products, then it becomes a solution.

Yes. I would like to add that sometimes, we think that it is the means for entrepreneurs to get funding for their business. We're talking about the small and micro business support programs in the banks, whether they're developed or not. And there are products where you can pledge your property, real estate property for a loan. Yes, for the sole traders called individual entrepreneurs in Russia. Yes, it's not very popular, but we still have this product because -- well, some people want it. But there are more user-friendly ways to take out loan. Yes, but anyway, our goal is to deliver all products that might be interested for the customers. Everything related to real estate should be on our shelf. We have a classical mortgage transaction. We have money home equity for the retail customer, for the sole traders, individual entrepreneurs. So we have the full range. But obviously, I think that the classical offering -- the mortgage is -- the mortgage for buying a flat for living is the most popular product. Yes, another thing I wanted to say is that some customers, when they take out a loan, a mortgage loan, and they repay it early because they have another flat. So they have to buy that flat. They want to renovate and then they can move out and sell the other flat. So we have a lot of properties owned by customers, and that is a potential. On the other hand, we're talking about like not really dilapidated housing, but some old house. And so we see the potential for the construction market. The development and the renovation program in Moscow that we are seeing unfolding right now before our right is a good indication that Russia has a huge potential for the construction industry.

Yes, it's true. Despite the share of ownership, the quality of property and the wish to improve it.

Yes, quality and space. I think these are the 2 aspects. And of course, we have the potential because many citizens want to improve their living conditions. It's a very good indicator. If we go back to one of the previous questions, the potential driver and future of mortgage growth. So people want to live better. And this is very good. If we can help in doing that, we'll be very glad to do so. It's hard to argue with that.

[ John ], I think we are done with your questions, right? We can pass to our next one. Mikhail Shlemov from VTB.

Can you hear me?

Yes.

As usual, it was very informative. If possible, I'll ask 3 questions. I'll start with a simple specification questions, and then will go to the difficult ones. I think in your presentation, you mentioned that the average duration of a mortgage loan is 5 years. Can you specify, how does the refinancing impact this figure, especially refinancing in other banks? And if it does impact the indicators, what is the average duration considering the refinancing effect?

Thank you for your question. The numbers are open in -- per month. This year, we issued about RUB 250 billion of mortgage loans. The refinancing amount that we detect that's going to another bank is about RUB 15 billion. So of course, there is impact, but it's not very serious to make some kind of a sizable decrease.

This is about impact of your -- of repayment -- of refinancing on duration. I think also what impacts the duration is that some people take a mortgage for a specific time. They have an initial amount of money, have another partner, buy a new apartment. When you transfer to the new one, they sell the old one. This a very important element. I can name the percentage, but it impacts the situation to the third one. We mentioned that if the customer has some free money, they want to repay the mortgage as fast as possible. We see that the customers -- some customers try to -- maybe if they don't repay it completely, they just want to decrease this debt and then [indiscernible]. This is a psychological trend.

Just many people know that, in Russia, people want to buy an apartment for their kids. In 5 years, let us just be there. When he becomes of age, he will have it or she will have it. It's -- and not allow anyone to live there. It's counterintuitive in terms of economic notion because this money could be invested in some other instruments. But people, right now, they don't believe in something else. So I think that this is a place of power or protection from inflation. People say usually, at least we have this apartment, no one will take it from you. This is a very important element at least for now.

Mikhail, you had other questions?

The second group of questions is going back to the unit economy from the Russian lending. Considering the fact the average duration of a mortgage loan is about 5 years, this we learned, but how do we rightly calculate the funding for your mortgage portfolio? On the one hand, when we look at the blended funding, it is less than 3%. But this is a rather short financing. On the other hand, we can look, for example, at the 5-year bonds which you placed in rubles. I think it's a 7.4 for them. I think this leads to a very thin margin on the mortgage market. What's the best way to think about it? And another question about unit economics. So can you tell us how your costs for issues and servicing mortgage loan, say, in traditional branch from the ones issued through DomClick, percentage maybe or in any other form that you can do this, say RUB 2 million or RUB 10 million, I think it's almost the same to you?

I can start answering the first part. The decisions on the loans are made on the individual loan, not on the portfolio level. We model the funding rate, the level of risk, the level of cost. This is -- and the level of probable income from the customer, we model all this. So when you compare this rate for the mortgage and on our bonds, we don't specify additional income and other drivers that impact the yield on a specific transaction. Plus, you must model the part that we have with the state support because there we have compensation on behalf of the state. The key rate plus/minus the cost, plus the interest rate and minus the mortgage rate. In this extent, for modeling, that's a very good question, which rates should be used? I don't think we can make just one rate because for the sales support, it must be 1 model. For the rest of the loans, there should be some other model. Mikhail, I think we can talk separately to you because it's not a simple methodological question.

Yes. Yes, I'm all for it.

Yes. We can answer it using various methods.

Relative to the cost, second part of your question. If we take all of our costs for attracting customers, processing, consultation, even take the team of the central head office who create this toolkit in recalculation to 1 issued mortgage loan, the self cost is about RUB 12,000, RUB 13,000. This breaks down into the cost of attracting the customer and the cost of servicing the customer, preparing for the transaction, processing. So very, very low compared to the income.

Super. So during the lifetime of the loan, I can logically say that the cost for support of this mortgage loan operating expense is minimal.

They are much lower. So the cost, which I mentioned is considering the cost of supporting and closing, removing encumbrance.

The whole cycle.

I just broke it down for the RUB 1 million of issued loans per year. If we take it per issue, it's even less. But out of those expenses that we had, it will be, I think, about 10% because it's maximum automation. And only for some difficult things like replacing a pledge or when people get divorce, we need these things to be solved. Only for that, we are making additional expense, but it doesn't happen very often. Our customers don't get divorced very often.

And now a long-term strategic question. When you spoke about the potential growth of the mortgage market to 20% from the general Board -- the thing that's absent in Russia is lending of individual house construction. It seems like there are changes in terms of state subsidies in this area. And the program, I think, are prepared by some of our construction companies. I'd like to ask, do you have any estimations on how sizable this driver is going to be? How important it will be for the development of the mortgage market in midterm?

Thank you for your question. We're thinking about that, and we're looking at it, we even have minor programs here. Some of the regions we are making, specific transactions, I think Nikolay will cover them to talk about the general line, we think it's a very, very big future in that. In our understanding, this market must become more standard. Let's say, almost standardized, more professional. So if -- it's clear that the house 30, 40 kilometers away from Moscow has specific costs and specific liquidity. It's simpler with Moscow even. If we take another city, we take 20 or 30 or 40 kilometers from that city, from that point, there will be a very, very big differentiation. If there is some central heating, what's with the road, what's with the infrastructure, and there are 2 areas here. First, development of individual construction and financing, similar to big multistory buildings, specifically about individual villages or towns where we can forecast how this property will behave. So we'll be [indiscernible] characteristics or even typical characteristics. Secondly, the participation of the state, it must be very clear, very transparent. Maybe it should be similar to the one with escrow accounts where there's some guarantee. Then there is a very big potential block having to do with when people are building houses on their own when they're not hiring someone. Here, we can finance such projects where there are typical houses being constructed. We see such projects right now, whether a typical houses from specific types of wood, where we can standardize the transactions in a certain way. So there are more of this standardization. We see the higher -- the potential of this market. Nikolay, can you add?

Thanks for your question one more time. It's a good one. I think we must tell you about this in more detail. So the mortgage program with individual construction is existent. It has been here for a couple of years. And our share, by our estimation, in individual lending is about 75%. In addition to us, a couple of banks are doing this but not on a big scale. And the process itself of getting a mortgage for divisional construction, because of the structure of this individual construction, is very complex. Why? And so the person buys land and wants to build the house, but mortgage is a pledge, it's not a loan, right? It's making a pledge, collateral, and they need money. So the land costs RUB 1 million and they want to build a house, invest RUB 2 million. In total, it will cost, for example, RUB 4 million because there will be work and support and all this. So as a collateral, you need to have something. I think maybe there will be pledge or some other objects as we say, when we discussed the previous one. People don't want to pledge something else or to attract some people, their relatives or their -- some other people to make the pledge for them. So -- and we -- so there's nothing to collateralize. But -- we can do it in tranches, for example, because they build it for 1, 2, 3 years. We make the first tranche and issue the second tranche. And when we see that the money was spent for their purpose and after the house has been constructed, the citizen and our customer registers this property. We take the pledge and then remove the pledges. It's like preparing sushi rolls in your house. It's easier to order them from a restaurant than making this yourself. When it is all industrial, it's typical, it's easier. It's a product. Like in the apartments, you buy a share, and that's it, the turnkey solutions. But what this person will build? What will serve as a collateral? What if they don't connect the gas heating right, it may explode. It's -- I don't think the future is behind that. I think the future is behind the industrial, construction cereal houses and typical solutions. Then the financing will be provided in -- as easy way as it is for the multistory buildings. Second part, the cost value of the land, which the constructions get must be lower. Otherwise, you'll have a dilemma. Either you're building 1-story building or a 20-story building. The cost value of land in the overall construction cost is very big. So there's little motivation of building low-story buildings. We need to construct multistory buildings. It has opportunity to make a lower price for the constructor for individual housing to be a completely different picture. And third, a statistical thing. If we take a look at the statistics out of RUB 80 million of registered square meters of living space have -- is multistory, have -- is individual houses. But here, you must specify the factor of the dacha amnesty that's being postponed for several more years. I think it's not the way to go. It must be developed industrially. So a social rule should be made where they are done well. So there is a future in that, but only relative to how fast the standardization is going, how well the infrastructure is developed.

Mikhail, thank you for your question. There is another analyst who is concerned about the modeling. It's a question not about the cost of funding, but the normalized level of risk, which the mortgage portfolio bears.

Thank you very much for a very well presentation. I have a question. How DomClick cooperates with Sber's ecosystem? Evidently, there is integration with ecosystem services with the lending in Sber. Is there any potential of cooperation with DomClick with other services of Sber? For example, to increase sales in commercial segment or to increase sales in the rental segment.

Yes. So let's answer Mikhail's question, Mikhail Butkov from Goldman Sachs.

Yes. There is a correlation of course. We think there are several correlations but the most obvious one, apart from the banking and insurance services, we're talking about e-com because, again, relocation means some additional [indiscernible] , some additional stuff related to the housing. At the same time, you can have some additional services offered by us. For instance, we actively offer our Prime subscription where customers have some discounts for e-com services. So there's going to be a Sber market discounts so they can buy groceries and products, enjoy videos. So every element builds on the previous one. We see that effect. We can't really show you that in numbers, but this is obvious and these are the trends that we can talk about today.

Thank you very much, Mikhail. Any more questions? I would think that -- no. Okay.

So the question about the cost of risk. Now as for the normalized cost of risk, if you take the CoR for the last like last quarter -- the last several years, we have 20 basis points. But we need to understand that there are many effects that drive this figure that were one-off. First, transitioning to new models. Secondly, the COVID effect. The third is the growth of the portfolio and the maturity will still be going on for some time. The structural changes of the entire market is also another thing. So this is why we cannot take this 20 basis points as a proxy for the future. We are currently modeling cost of risk for the next 2 years. It's not going to be more than 20 basis points. That's all I can say, so less than that. And in the long term, I do not expect it to be very much higher, maybe there will be some crisis here or some one-off event, but I don't think it will be higher than 20 basis points.

Thank you. Thank you very much. And as far as I understand, we have the last question from Nida, Morgan Stanley.

I just have a question on competition. So given mortgages are so attractive and there has been a key driver of loan growth, how do you see competition impact on pricing looking into 2022?

The question was about the price and competition. I think we have talked about that for a while. I think that the market is quite stable right now, is related mostly to the fact that the margins with the transactions is quite low on the one hand. On the other hand, there is a kind of a parity in the market, if you can call it that. So the competition is based on the speed, quality and the user friendliness for the customers registering the transaction and working out all the details for all the parties of the transaction because the property transaction is not something that 1 participant want. When we talk about the consumer loan, the client wants that, presses several button, gets the money on the settlement account. That's it or like on the card. But here, we have the other party who sells that real estate property. It might be a developer or another retail customer. So it is a more complex deal with multiple stages where you have to deliver the best customer experience and the great user friendliness for all the participants. The pricing factor is quite stable, as I said. Everyone is more or less on the same level, if you can call it that. And no one can make this kind of a major preference or major discounts. No one can deliver a really competitive price, the other drivers are used.

Thank you very much. Thank you all for the questions. Thank you, Board, the speakers, for the very detailed presentations and for the Q&A session. We hope it was a great experience, very instructive. We are going to organize more deep dives that would talk about more business streams of Sber. Our next event is planned on November -- for November. Please make sure you monitor our website where we'll publish the news about these events. Thank you very much.

Thank you all, and thank you all for the questions. [Statements in English on this transcript were spoken by an interpreter present on the live call.]