Sberbank of Russia (SBER) Earnings Call Transcript & Summary

[Audio Gap] We must change the business model itself. It must revolve around the individual and their long-term interest. We want to help our clients to secure their financial well-being, lead a healthy lifestyle, and build a career. People should be able to harness AI or the key technology of the 21st century for their benefit. The focus on human centricity and fundamental progress in AI will require us to reinvent IT across the board. Sber is about efficiency. This is one of our top priorities. We are on the brink of a massive transformation. The first year of our new strategy is coming to an end, a year that was full of landmark events impacting our development in almost all areas of business. Today, we enjoy the trust of 110 million clients, a huge figure that continues to grow. Over the year, we've had more than 1.3 million people join us, and the number of companies that we help in building that business has exceeded 3.2 million. Throughout the year, we have been developing products and services for people and businesses tailored to their needs and challenges. All this is reflected in our strong financial results that shareholders expect us to deliver. Over the 9 months of 2024, we earned RUB 1,227 billion in net profit, which is almost 7% higher than in the same period last year. Return on equity exceeded 25%. There is no doubt that we are about to reach this year's target margins of 23%. This year, we've paid our shareholders a record dividend, RUB 752 billion, half of it or RUB 376 billion was paid to the state. But of course, we've had our share of surprises. The external landscape continues to test our adaptability. And we are more than ready. We expected inflation to slow down. But in a series of circumstances reversed the trend. Unemployment reached a historic low and the market is in a tough competition for talent. Wages are growing. The sanctions pressure persists. Import restrictions, cross-border settlements remain complicated. What's more, it is clear that we have a rather long period of monetary tightening ahead of us. The key rates gained 5 percentage points over the year. And that might not be the limit. Today's situation is unique in that the rate is very high in real times as well. What are some of the other challenges we faced? One of them was the government's decision to increase the corporate income tax to 25% and its fight against inflation, the regulator took unprecedented steps to tighten lending and raise capital adequacy requirements. This affected the entire financial industry. At the same time, competition in financial services remains high and will only grow. Banking market players have been consolidating through mergers. Marketplaces are increasing their focus on financial services. The competition to retain clients is intensifying. This leaves us only one choice: lead the change, create innovative products and 0 in on the main thing. The client, the individual. A year ago, we set ourselves the bold goal of transforming our business model in an unprecedented way, to become a human-centered company. This means empowering people to unlock their potential and expand their landscape of opportunities. It was a super ambitious goal. The only way to achieve it is through state-of-the-art technology and above all, generative artificial intelligence. Generative AI will enable us to make scientific, medical and industrial breakthroughs in everyone's interest. We want to give people a tool that they can use to improve their quality of life. This path requires meticulous preparation, infrastructure expertise and engagement of each member of our team. Let's have a look at what we've accomplished over the year. We immediately sprang into action with our human-centric strategy. Building on people's needs and wants, we've been providing meaningful support and helping them grow their business. We saw the turnover of companies grow rapidly up until the middle of the year. The upward trend was replaced by a slowdown as rates went up. We were helping our clients develop that business. And as a result, the corporate portfolio grew by almost 18% over the 10 months of this year. The main industries that our clients were developing were metallurgy, transport, logistics and house building. Together with our partners, we launched the largest infrastructure project in Russia, building the first high-speed railroad from Moscow to St. Petersburg. The project is based on a concession agreement with the government, and the total amount of extra budgeted funding will exceed RUB 1.5 trillion. The new railroad will take you from Moscow to St. Petersburg in just 2 hours and 15 minutes. In property development, we simplified the customer journey as much as possible to speed up all the processes, the obligation for financing is submitted online, and you can receive a credit proposal in 1 day. This approach reduced the time to process a project lending deal by 20%. We have accumulated in-depth expertise in residential real estate. Here, our share is over 50%, which helped us build a high-quality portfolio with a high share of escrow accounts. To take care of people, we have increased our loan portfolio for housing developers. And today, it is more than RUB 5.4 trillion. We are involved in funding over 65 million square meters of housing built throughout the country, this means that more than 1 million families in Russia will soon move into their new homes. The real estate sector is undergoing a major transformation. It has to do with the completion of some of the preferential mortgage programs. Today, we have a high-quality portfolio with substantial coverage with escrow accounts. Many projects are at the end of their investment cycle. We believe that one of the key factors supporting our corporate clients is the speed of loan disbursement. To increase it, we have launched services with automated decision-making based on AI models, they automatically approve loan products catering to individual customer needs within a minimal time frame. 90% of decisions on working capital lending for large and medium-sized businesses are already made using such models. A few years from now, we plan to increase it to 97%. 82% of decisions on loans to small and micro businesses are made online. It is the most actively and rapidly developing business. The portfolio of loans disbursed online using AI has already exceeded RUB 2 trillion. What else do we do to help clients develop their business? We offer solutions that go beyond the conventional financial perimeter. Our industry-specific solutions help clients automate and improve their operational processes. This increases performance and reduces risk and the GigaChat offers user tips. We are developing services for digital transformation of business. Today, more than 1,700 companies from various industries are undergoing digital transformation with the help of Sber and our IT partners with the partner network spanning over 250 companies. We appreciate that people who decide to become entrepreneurs and start their own business need to be constantly learning, growing and acquiring new knowledge. To help them, we have joined [ Sberg ] University in launching new training programs. We help people develop their soft skills, promote personal growth and cultivate their successes. On a separate note, we must focus particular efforts on helping the people of Donbas at this difficult time. We have 12 offices in Donbas for our corporate clients there in the Luhansk and Donetsk People's Republic. And we have opened new Sber branches in 7 cities in Crimea to help entrepreneurs develop their business. I would like to thank the team and especially those working in the border areas and the new territories. With your dedication, engagement and perseverance, you set an example for all of us. This year, we've markedly expanded our presence in the new territories. We have also been helping restore social infrastructure, sports facilities and child care facilities. We want to build a comfortable environment for people from all regions. It should have all the services necessary for normal life. Today, our main digital service, Sberbank Online is used by more than 83 million people. Since the beginning of this year, 1.2 million new users have joined it. Most recently, we have launched a new service called Space for Living. It will help you seamlessly switch between products to buy consumer goods and medications, watch movies and listen to music, fill up a car, buy tickets and book hotels for travel. You can also use it to make online doctors' appointments for yourself, your children and even pets. We strive to provide the most user-friendly services tailored to the lifestyle of our clients. To this end, we carefully study their preferences. To illustrate the point, this year, we have launched the My Real Estate Service in DomClick. Now we can not only choose your perfect home there, but also solve all kinds of household problems without hassle. Next year, we will launch new services for motorists. With that in mind, we are creating an ecosystem of solutions for buying, selling and owning a car. Importantly, this new functionality for both your home and car will be available in our main Sberbank online platform and in separate applications. All of these services are now even more convenient and rewarding as we have relaunched our SberSpasibo loyalty program. We have removed all restrictions and levels, so now people can customize categories as they do important or necessary depending on their personal preferences. And in 2025, we plan to personalize the program even more. In addition to our usual loyalty program, we focused on developing the subscription model. We transformed the SberPrime subscription by creating 3 levels in different themes and filling them up with new services. It has received positive feedback from our clients. Over the year, the number of SberPrime subscribers has increased 1.5x and reached 18 million people. In 2025, we will add a multi-subscription for the whole family. We have created a separate loyalty program for small and micro businesses. It's called SberBusiness Spasibo. This program provides entrepreneurs with cash back, which can then be used as bonus points or converted into rubles. As of today, it has 620,000 members. A year ago, we talked about emphasizing our segment-based approach. And so in 2024, we considerably revised our offerings for premium segments, such as Premier, Sberbank First and private banking. We are already getting good results. The number of Sberbank First clients has grown 38% over the year, and the number of private banking clients has doubled. This November, we opened a business lounge at Sheremetyevo Airport for the clients of Sberbank First and Private Banking. Now they have this new comfortable space for work and relaxation while they're waiting for their flight. Clients have recognized the benefits of our credit card. Today, our market share is 51.5%, having increased by 2 percentage points. To make our offers even more targeted, we have created a new card for the younger audience. Its terms and cash back are perfect for this demanding and dynamic client demographic, and they will definitely appreciate the modern design. Over the 10 months of this year, our retail portfolio increased by 11.9%. The main growth occurred in the first half year and affected all retail lending segments. We see a clear slowdown towards the end of the year. Consumer loans are under pressure from high rates and tightening regulations. A significant driver of mortgage growth in the first half year was state-sponsored preferential programs. Their reduction, as expected, led to a slowdown. That said, we have never limited our focus to the traditional interest-bearing business, but also actively developed additional services for our clients. DomClick continues to grow, and I'm very happy to see that people are choosing us for their mortgage deals and as a holistic ecosystem for all things real estate. Last year, we decided to create convenient and useful real estate services for every day. This is how we launched the My Real Estate section on DomClick used by more than 4 million people every month. The most popular services are real estate valuation and rental income calculator. You can create a listing with just one click and GigaChat will help you write the text for it. And by the way, such listings yield twice as many responses. They are available in the Sber mobile app in the home section. And even if sale is not part of your plans, you can still add your feed to the DomClick app. It will enable you to see your home as a valuable asset, estimate its market value and monitor its changes. Real estate can become an important part of your financial planning. But that's not all this year, we have given people 13 million additional reasons to smile, 13 million plus one to be specific. We have made a breakthrough in biometrics. Pay with a smile has turned into a slogan. Payment with a smile takes mere seconds, it speeds up queuing and cheers clients up. To make it all happen, we have developed a new family of biometric channels and significantly reduce their cost. By the way, these channels accept payments not only using biometrics, but also QR codes, bank cards, payment stickers and NFC. Our continued commitment to technological leadership in payments is also supported by international rankings. In 2024, we had a crucial milestone in that we transitioned to our own bank card processing solutions. Today, our own processing system handles more than 200 million cards. Thanks to this transition to the new pricing, we were able to reduce the time to market of new functionality threefold due to more flexible configurations and our in-house development team. Today, the entire technological landscape of Sber operates on our own platform. This means that we have no limits in terms of flexibility, scalability, benefiting our customers. When it comes to the performance of the platform, today, the total cost of ownership of some of its components is several times lower than similar solutions. We've already told you about the largest card processing migration in the history of our bank. And here, I would like to mention 2 important factors. The transition was so seamless that our customers didn't even notice the changes. It's like swapping an engine in a flying plane without interrupting a flight. Secondly, the infrastructure for our own solution is 1.5-fold cheaper than better solutions from foreign vendors while the functionality is the same. We are witnessing AI disrupting our everyday life. The largest tech companies are fighting hard for leadership. They integrate AI into all their business processes and products and create AI-driven assistance. Model training is where a real race has begun. We believe that the main winner of this race will be human. The next stage is the development and implementation of AI agents, autonomous smart systems that are able to perform tasks without human intervention. It is already clear that not every company will be able to afford the development of such solutions. Actually, they don't have to. It would be ideal when we have ready-made high-quality large language models on the market. The advantages of generative AI applications is on top of the agenda for investors and businesses. Global consulting companies predict that the adoption of generative AI by companies will increase the revenue and reduce costs by about 15% over the next 1.5 years. This could also increase productivity by 22%. Our strategy priorities were absolutely correct. Business model sustainability and technology leadership are inseparable. 2023 marks yet another technology breakthrough for us. We have launched the Russian language neural network called GigaChat. Since then, its user base grew from several thousand Sber employees to 7 million unique users, and the total number of requests to the service has already exceeded 150 million. In 2024, we updated GigaChat's entire range of models to fit our diverse needs. GigaChat Light is an easy model for simple tasks that require maximum speed. GigaChat Pro is an advanced model for complex tasks that require creativity and better instructions following. The result that I'm really proud of is our new big GigaChat Max model with improved capabilities. The model has become even faster, more convenient and useful for all users, which gives all Russians new opportunities for unlocking their potential. Thousands of hours of our team's work have been invested in it. Today, it is the most powerful model in Russia and one of the 3 strongest models in the world. We outperformed GPT4 turbine in a number of tasks. Most importantly, GigaChat Max is already available to all users on all surfaces, GigaChat also learned how to recognize images. For example, students can take a photo of a learning material, election notes, upload an image and get a brief content of the text. Its key topic and generate a learning plan in a few clicks. All these achievements have real market applications. Today, more than 9,000 external customers, including large corporate businesses use GigaChat via API for their business tasks. We are proud of our Kandinsky neural network that can generate images and now videos in different styles based on text descriptions and understands prompts in more than 100 languages. Since its release, it has been used by more than 15 million people, and the number of generations exceeded 500 million. I would like to thank all our users who leverage our services every day for all kinds of tasks. We have offered such GigaChat-based assistance to our relationship managers. It shows the most important information about the customers' business and offers recommendations. Thanks to the technologies and commitment to our customers, performance indicators took off, and we now offer 10% more solutions that help our customers' businesses grow. Thanks to Anton Siluanov, the Minister of Finance of the Russian Federation, we, together with the Ministry of Finance, created a special AI-driven agent that correlates expenditures and budget classification codes. The ministry prepared the database, and we trained the system on it. Now the bulk of routine work can be assigned to AI so that people can focus on the exciting stuff. AI permeates all aspects of Sber's activities. It's like a blood system in a human body. It changes the experience, not only for our customers but also for our developers. During 2024, our AI developer assistant called GigaCode has become much smarter. Already now, it generates around 40% of code. Better to see something once then to hear about it 1000 times. Let's see how GigaCode helps our developers in real life. Sber leasing, we started to use GigaCode in August 2024 to automate business processes. One of our tasks was to create a new system to automate the different processes and its code really saves the time. It will give you the tips on how to improve the code that goes for front end or back-end development. It can generate code. It can compile documentation or API descriptions, explain the logic of database queries, optimize codes and so on and much more. GigaCode is a part of the ecosystem of the entire environment for the development. It also has -- this tool has -- tool set has various tools for administration. We also have GitVerse and more than 70,000 developers have already leveraged this tool to create and test their projects. We understand that it's very hard to raise investments in start-ups. So we organized our fifth international accelerator for tech start-ups. The participants demonstrated their ingenuity. They managed to raise a record amount of more than RUB 1 million of investments this year. We offered a unique opportunity to integrate GigaChat solutions in their start-ups. The scale of AI applications is huge, but will the investment pay off? This is a concern for investors around the world. Sber will clearly understand where, how and in which processes AI truly delivers. Today, Sber uses more than 2,000 AI models. In 2024, the real effect from using AI in our products and processes will reach RUB 450 billion, which is 1.5x higher than in the previous year. 29% is the growth in income generated by personalization and recommendations of products and services to business customers, 27%. That's the income from increasing the sales funnel and personalizing offers for individual customers. That is thanks to our recommendation systems. We are increasingly better in understanding our customers' needs and personalizing our offers to their preferences. 27% of the effect was achieved by reducing credit risks. AI is embedded in the scoring models, early risk identification and quick response models that are triggered if a customer's financial situation has deteriorated. We apply models for fraud reduction, fraudulent transaction recognition, cybersecurity and other tasks. 9% of the RUB 450 billion comes from cost optimization. We also use Sber Process Mining for in-depth process analysis and optimization. With this platform, we have already saved over RUB 20 billion. And today, we offer the solution to the market. 8% is delivered by other effects, including flexible pricing offers and loyalty program customization. All these effects are incremental. In other words, we compare processes after AI integration and with an alternative scenario without AI launch pilots and A/B tests while monitoring the efficiency of models on the go. The effect lasts for up to 3 years, and then we need new ideas. And to ensure the financial effect, it is required to transition to the GigaChat, a new generation AI. Thanks to this, we, among other things, achieved productivity growth. It grew by 11% per Sber employee this year. We keep our cost-to-income ratio below 30%. What is our outlook for 2025? Of course, we expect tight monetary policy, and it will pose a huge challenge for businesses and the banking sector. However, we know that in recent years, the Russian economy has repeatedly proved to be unique in adapting to the new environment. In 2025, we expect the GDP to grow at 1.3%. The inflation will continue to decrease, but it will remain at the level of 6%, 7%. We believe that the key rate reduction cycle will start earlier than the second half of 2025. We see that the current challenges combined with a long period of high rates will put pressure on business dynamics. This will lead to some reduction in demand for financing. And therefore, we estimate the corporate sector growth rate to be slightly above the inflation. Higher rates will be with us longer than we originally planned for and regulatory restrictions affecting retail lending will lead to market cooling. We estimate that the retail lending growth across the banking industry will not exceed 5%. At the same time, higher rates will encourage people to save. Overall, we expect for the high growth in the market on the level of 17%, 19%. As for our plans for generative AI, I think that next year, we will go from experiments and sporadical success stories to the widest possible implementation of generative AI and a multiple fold growth of our user base. Our ambition is to reach 20 million GigaChat users, hundreds of cases in dozens of Russia's largest companies that will deliver real economic effects. I also personally believe that in 2025, our R&D team will deliver a research or even make a discovery, [ Havenburg AI ] as one of their teammates. Despite the tight monetary policy and challenges, we aim to contain the pressure on our margin and target it to reach at least 5.6% in 2025. This is a very serious ambition and above the level we set in our strategy. What will be the drivers for that? First, slowdown in lending and the steady growth in retail deposits will cool off the competition for customer deposits. This means that the cost of deposits will not exceed the key rate to the extent it does now. The recent measures of the Bank of Russia are also aimed at eliminating this imbalance. Secondly, the share of floating business loans in our portfolio is 68%, and that will help us maintain the margin. The start of the interest rate reduction cycle will ease the pressure on funding costs. In terms of risk management, Sber has always performed excellently. One of our strengths is a diversified corporate portfolio in terms of borrowers and industries and 2/3 of our retail loans are secured, which is very high. In 2025, we expect the cost of risk in the corporate segment to gradually normalize and take off from the current near 0 values. In mortgage, the level will be close to the one we've seen this year, but the risks in consumer lending and credit cards will be elevated throughout 2025. Therefore, we forecast the total cost of risk at around 1.5%. Next year, our fee and commission income will be under pressure as business activity will slow down and transaction fees for our loyal customers will drop. In addition, we have planned a number of methodology changes in the revenue from our documentary transactions. The forecast for the next year is between 7% and 10%. In a comparable methodology, the fee growth will exceed 10%. Operating expenses will grow under the influence of 6% to 7% inflation and the competition for the best talent. A little under half of the growth is due to the increase in payroll. The second half is driven by our investments in technologies, support and depreciation of equipment and intangibles. However, we will keep the cost-to-income ratio in the range of 30% to 32% and productivity per employee will grow by at least 15%. Capital adequacy is a common challenge for the entire sector, but our situation is different. First, Sber is the only systemically important bank that distributes 50% of its profits to shareholders. So it's harder for us. Second, we have deliberately raised our requirements by setting the target capital adequacy ratio for the [ N20.0 ] group at 13.3%. This provides a significant buffer to the regulator's precrisis requirements, and this is an indicator of Sber's highest reliability. We are fully prepared to introduce to the countercyclical buffer announced by the Central Bank. Even after this decision, we will have a considerable buffer, which will allow us to leave the target for [ N20.0 ] unchanged. However, the decision-making and risk management system is focused on ensuring a proper return on equity in every transaction. External environment will remain challenging for the entire market, and this is obvious, but we have paved the way for a successful year. Our business has grown significantly over the year. We have advanced in our technology agenda. We have just completed the planning and goal setting process, and these are major milestones for us. We see that our team is laser-focused and result-driven. This is an important result for our country and for everyone. We remain committed to our goals. We intend to maintain return on equity at 22% minimum. In terms of capital adequacy, we expect the [ N20.0 ] ratio to go back to the target value of 13.3% during 2025, taking into account the 50% dividend payout for 2024. Everything we have achieved was possible, thanks to the trust of our customers, the efforts of our team and of course, our shareholders. We are building a people-centric company, and that is where our strength lies. Dear viewers, we are continuing our live session. This is our Annual Shareholder and Investor session for the current ones and potential ones as well. We are now in for an exciting discussion about the results of 2024 and the expectations of 2025. The entire top management team is here with us, and Alexander Vedyakhin is connected online. We have journalists and investment analysts, and we are going to answer your questions live today. If you connected through our chat, you can also put forward a question on our website. During the discussion, there will be forecasts of future events and results that are subject to known and unknown risks. So the factual actual results might differ. The more detailed information about the risks and restrictions is going to be in our presentation that is going to be published after this event.

Now the first question, Elena Tsareva, BCS.

Mr. Gref, colleagues, Hi, everyone. I'd like to congratulate you with the successful implementation of this 2026 strategy in 2024 despite all the challenges. My question is related to the building of think people and customer-centric model based on AI and its prioritization. What were the main achievements in 2024 in terms of digitization with LTV, with -- if you talk about the loyalty of the customers. And what are your expectations for 2025 in terms of the disruptions and the achievements given that the customer behavior might change given the challenging environment?

Elena, thank you for your question. First of all, overall, we think that in terms of strategy rollout, we are on track. In terms of technologies, we were able to make a big step towards success. First of all, in terms of understanding what we need to do in these 3 years and how do we need to change our landscape. This resulted in creating 2 key blocks, technology block. We had one before. This is a technology block now that we have and the technology development block. Andrey Belevtsev is responsible for technology development block. And this is the block, the team that is responsible for our AI transformation. It is obvious that this is a nontrivial task that requires major efforts. And by the end of the current year, we -- some programs were shifted to the start of January because this year, our peak loads will be much higher than planned. But [ LTV ] legacy to platform program is going to be completed this year. Basically, we are going to fully rely on our own developments and solutions in our landscape. We have just a few third-party solutions. Basically, we have just built a totally new landscape that is in no way a restriction for us in terms of leveraging digital technologies and scale in our business. A couple of traditional banking products wouldn't be able to deliver this -- deliver the processing for the peak loads that we had this year. And the -- we're overall happy with the program implementation. Up until the 10th of January. We extended the deadline for the migration for a couple of key products. Otherwise, we have either completed everything by the end of December, we will have some new deployments, but I hope that they will not affect our customers' experience in any way. And that's the first thing. So we have fully prepared ourselves for the next step. It is called AI native transformation. And here, we need to transform yet again, the same transformation that we did with digital transformation. The situation is a bit more challenging because for now, no other company has made such a leap forward in such a transformation. So we have to develop some things on the fly and implement them on the go. Secondly, we have improved our products -- product range. GigaChat Max is in line with all of our parameters that we expected. I, to be honest, became a very active user of GigaChat Max. And all in all, every day, we use search engines. I myself have been lately using this new search engine or AI service called Perplexity. And so now I'm using both GigaChat and Perplexity, and I see that GigaChat is way better in terms of fact checking, in terms of how structured the response is and particularly when it comes to the Russian language and some peculiar traits that the Russian business has or some context or facts unique to the Russian environment, the Russian culture. We have been observing this growth over the past months and the stickiness, growth of the project. So we are largely optimistic as to the parameters that we planned for 2025 and our strategy. We have a lot to do. We continue to grow across the board with all of our objectives and goals, specifically with this universal one-stop solution of an AI assistant for our clients. We have already begun this journey, and we see very, very positive results. So yes, this year, starting with the financial results, the financial performance, we expect to close this year in accordance with our plans. Some of the figures, the capital adequacy, for example, may differ because of the tighter regulation that was tighter than we had expected initially and also because of the very, very major volatility of the market. We hold a huge portfolio of securities and its revaluation, of course, did affect capital adequacy. But as we all know, spreads always go back, revert to narrowing down eventually. So we are nearing this year's end with this feeling that we are on the right path. The strategy was quite disruptive for us, and we did have doubts about whether we would be able to find the answers we're looking for in the philosophy of a commercial company, strictly commercial company from the human centricity perspective. And now we firmly believe that, that was the right thing to do. And we've also made great progress in terms of technology, add to that the delivery of financial results. When it comes to next year, we will continue with the strategy. And this is our main goal. This is our main job next year. Regardless of the circumstances, next year, we will be assisting with the strategy implementation. The strategy requires a lot of investment because generative AI is the most expensive technology out of everything we have done before. So next year is going to be complicated. We've had difficulties with financing. But just this week, we have approved the budget, the plan for the next year. It requires a lot of efforts, but we did it. And we also added one more goal for next year, increase efficiency, efficiency with the help of generative AI, which is going to be a separate program, a separate stream. We weren't able to include all the effects in this business plan. So we have plans for the first quarter, and I hope we will be able to optimize our costs even further and improve our productivity even further. So this is going to be a separate stream, a very big one using generative AI to boost productivity. What's more, we have really did our best -- we have really done our best to cut costs as much as possible where it was possible to focus on our technological development. So yes, this is probably it for next year, the 2 main things. So in addition to strategy, we have efficiency. 2025 must be a year of efficiency for us because without improving efficiency, we won't be able to deliver the financial results that we should, given the macroeconomic challenges and the regulation, the regulatory landscape. With all the products where we have the GenAI component, we see raising client loyalty. We see an uptick in usage, both MAU and DAU. Client retention is a big thing there or stickiness, the stickiness factor. It's very important. Thank you very much for your questions. Thank you, Elena.

Let's try to answer the next question from Evgeniy Kipnis, Alfa-Bank.

Mr. Gref. Dear colleagues, thank you very much for this event. And congratulations on the first year of your strategy implementation, and I wish you a very happy new year. I had a question about the acquiring market. Your share in this market is still very high, around 70% or so and we are always positively surprised by your achievement in the payment infrastructure in our market. That said, we see competition intensifying, and we see that the e-commerce market is already taking up 20% of retail trade. There are big players that have been creating their own fintech projects becoming more and more important as a distribution channel for merchants. And so they do try to create these contained ecosystems for their partners, for their clients. What is your take on it? And what do you think the e market is going to look like in the near future, say, 5 to 10 years? And what is your share going to be in that market?

Kirill, I think this is a question for you.

Yes. Thank you very much for the question. Let me answer it in parts. As to the acquiring market, I think technology development is the biggest thing there. It's important not to stop with the progress to continue creating the best and most convenient payment methods. So we have introduced this several solutions lately, the QR code payment and then biometrics payment. So it's very crucial for us to be continuously offering new even better payment services to the market. So yes, this is a technological race indeed. And the one who wins it is going to have the biggest advantage, and that is the main focus on us -- for us in this area. So this is where we're going to put our efforts. As for the e-commerce, we've had this focus area before as part of the previous strategy and this one as well, we have been reiterating on many occasions that we want to build an open ecosystem, but also a more closed ecosystem for our partners. We have a lot of partners in our network. So yes, this is going to be a competition for the best client experience, the best client journey, the one who is able to create this ecosystem of services around the client is going to win. The accuracy of recommendations in this regard is very important for us. The ability to know what the customer wants. I think that is the success factor. We have been keeping a close eye on our competitors, and we see that, yes, competitors indeed are using and creating their own payment solutions for e-commerce. That said, they rarely go beyond the perimeter of those ecosystems. So yes, it is important for us to have our own open ecosystem, but we have been collaborating and cooperating with these companies as well in creating better payment solutions because better payment solutions that can satisfy the needs of retail customers and corporate customers, I think, will be the main factor that will be driving good results in the future. I don't think we should talk about this in terms of threats because this is not a threat for us, this is an opportunity for us. The threat comes from the regulator, I would say. And there's just nothing you can do about it. I think the regulator has really overdone itself. And I think it's a bit too much for now. As for competitors, they're not a threat, they are a driving force. It's very easy when you are a monopolist in the market, you have the monopoly and the support from the regulator, then it's easy. But what we see today in terms of infrastructure, the payment infrastructure of e-commerce comes from this clumsy and awkward game in this field in the market coming from government agencies. So they have created this regulatory landscape where the e-com players are using the infrastructure to simply extort money basically. The e-commerce players are acting rationally, using our infrastructure to gain a noncompetitive advantage. It's there that we would appreciate a swifter response from the regulators since they have created this behemoth of -- this monopoly behemoth. So they should have put the e-commerce players in the same conditions as the rest of the market. And then we would see who the most efficient is. So I would say that we, firstly, do not see any threat in this regard. And secondly, the most important thing is with the expansion, we are fighting against NATO nearing our borders actually. And so the regulator similarly is nearing the red buoys in terms of business regulation. They are now talking about the QR monopoly. We are saying no, no monopoly, let's create an alliance with banks with more than 80% in acquiring, and we transferred all of our acquiring rights -- acquiring technology rights. We have been collaborating for ages with our partners, other banks, TBank, Alpha Bank, Gazprombank, all the majors. They have long been connected to the system. We now have payment stickers and there is a law about the payment sticker monopoly and combating it. That really stifles the enthusiasm for innovation. That's a big hurdle, I think. We also have this plan this year, 1 million terminals with Pay By Smile biometric payment by the end of the year, and we have delivered on that plan. Seemingly a simple technology and just 2 years ago, there were businesses promising to deliver this technology, and they failed, but we succeeded. And next year, we want to have 2 million terminals with this technology. Once again, we are collaborating with banks, with our partners. We're the only country in the world with this solution. And I know it because we have analyzed the market. We have done our research. So no other country in the world has this universal payment service. Apparently, it's too difficult for a mathematical solution for the 2D camera. But we did it, EUR 2,000 that would have been the cost of our terminals, but we were able to reduce it to $60 basically. So commercially, that paints a completely different picture. Now we do not need any NFC ports from the monopolist because we see people getting used to paying with a smile, with their biometrics. We are launching the service for the metro. The technology is up and running, and it works perfectly with the administration of [indiscernible]. We are going to roll out this technology as well. And next is [ Yekaterinburg. ] So all of the places, all of the infrastructures where you need this technology to work as fast as possible momentarily. We have created all kinds of alternatives for the NFC by Apple. We don't want to see back in the market because that's an obsolete technology by now. And now we want to avoid the monopolization of Pay by Smile because then it will stifle innovation. We will know how the government goes with innovation. So that's the threat. Otherwise, we are able to answer all kinds of market-related challenges. Just to add my comments, we have 18 more banks joined the QR payment technology. We have already had an agreement with the consortium of banks. This is a good example of market collaboration. We're always open to it. We're always open to innovate and pass this innovation over to other marketplaces.

Let's take one more question by video, and then we will move on to questions from the chat. Dmitry Trembovolsky, [ Solid Broker. ]

I have a sort of a follow-up question about the challenges in 2025. You have quite big ambitions as to the returns on equity. How are you going to -- how are you planning to deliver the results? If something goes wrong, [ Transnet, ] for example, are afraid of the 25% corporate income tax, this raising tax. What do you think about that scenario? Does it scare you?

Well, all kinds of things can go wrong. That's the spirit of the times. We are not yet at the singularity point, but we are close to it. So the productivity horizon for all models is very, very short. We would be happy to see our business plan to supply for 6 months. That would be a long time. In the first quarter, I think we will have to summarize the first results. So the short answer is anything can go wrong. The good news is that we are mobile, we are flexible. I can't say that we are always ready to any scenario, but we are as prepared as one can be. So we are, of course, going to be adjusting our strategy if the context changes. The plans are indeed ambitious, and we are used to achieving our ambitious goals. So we will do our best to do this again. But as I said, this is an unprecedented context. We are getting questions about why are you not lending to legal entities? Well, have a look into the regulations. You have done everything to make us stop lending. The regulation is so tight, and it comes from all angles. We spent 2 years to learn to work in a space with no oxygen. And now we have barely enough oxygen to survive this strategy period. Of course, we are not expecting any higher returns than planned, any higher yields than planned. But in any case, I hope we can deliver on our ambitious plans.

Mr. Gref, one of your favorite questions about skiing, mountain skiing. Apparently, we have skis among our investors. What about the infrastructure development in Manzherok and the Republic of Altai? Are you going to focus just on the Manzherok resort or you're going to have other infrastructure projects?

Now we are going to develop only Manzherok and the infrastructure that is connected to it, like the airport, we are now about to sign a concession agreement with the government. We're going to build an airport on a concession base, a concession agreement. We have agreed with the government, and I'd like to thank them for that, that they will give us all the rights to build the airport in line with our requirements. We will extend the landing plot to 500 meters. We'll build new lanes. We own the -- we have been owning the airport for a little bit more than 6 months. And we -- in the 6 months, we were able to maximize the convenience of the airport. I think now people who come to this airport will be pleasantly surprised. We are now making the temporary in-flight area, and we are building an administrative complex and that we're going to deliver in March. And in the next 2 years, the passengers will have a pretty convenience experience in terms of the airport. It's still limited in terms of the number of income in passengers, but we have decided that in 2 years, we will have new airport and infrastructure and the state is building a direct road from the airport to Manzherok. Then it will take around 15, 17 minute drive from the airport to Manzherok. I would ask us to build the best steel resort in the world, and we are going to deliver. Those who haven't been there for about a year, I do recommend you to come back. We added more ski tracks. We have 50 kilometers of tracks right now. A couple of more lifters. So we are completing this infrastructure building stage, and we are going to monetization right now. At the start of the year, we hope that the government will sign the first federal zone of the complex development of this region where we are going to be the main -- the core investor, and we're going to control everything around it. So we are going to build all -- to control to make sure that there are no sheds and there are no multicolored buildings with weird architecture. In Manzherok, everything is going to be developed according to our construction design plan. We're going to demolish all of these sheds, and we will give these territory to the investors of different level. But these will be the investors that are going to be committed to building a tourist cluster there of the highest possible level and category. And the hotels going to range from 2 to 5 stars. And from this next year, we are will transition to the monetization stage. We see that the price for the land plots increased dramatically. There's a huge demand for chalets and the detached houses and the apartments. The rental apartments, which we expected, we are going to build the new complex of the apartment blocks. And we hope that we will earn some good money next year. If the model is successful, thanks to building the apartment blocks, we will be able to have an ROI on the infrastructure and the roads and the hotels will give us a long-term revenue, long-term profits. The country does lack such critical infrastructure. And we hope that as Europe is closed, the [indiscernible] will be nicely replaced by Manzherok and people will go there and it will be very, very comfortable and convenient that the user experience will be fantastic of that asset that we were not able to sell in 6 years. We decided to transform it to a great business, and we are going to do that.

Thank you very much. The next question, Andrei Melaschenko from Renaissance Capital.

Hi, everyone. I do congratulate you with the successful 2024 despite all the challenges and restrictions. A couple of questions. How do you -- what do you think about the initiative of Bank of Russia on risk management for the large corporate borrowers. Is it in line with the Sber strategy and plan for 2025? Does it correlate? And last year, as we discussed the strategy, the dividend policy change was discussed, for this strategy, do you plan to correct the dividend payout scheme and for example, pay out dividends every year 6 months, not 12 months. So in terms of frequency, will you change that?

We will not change the frequency of payouts. It is does thing you can possibly do in the current situation, you see that we are committed to our dividend payout promises. And if we increase the frequency, we will have problems that will reflect on the businesses. So it will affect our capital adequacy ratio. Our investors should be happy. I think that despite anything, we never find any excuses to not deliver to our shareholders, and we deliver on all of our commitments. And I hope that next year, we will be able to meet all of your expectations and meets all of the obligations. As for the approaches of the Central Bank, we think they are not good. They will generate a lot of problems among large corporations. So we are now trying to develop an alternative approaches that will address the challenges. We understand what Central Bank is trying to address. But we try to make some alternatives, so as not to create a such tension, first of all, among our largest corporate borrowers. So we have a constructive dialogue right now. And we do hope that we will be able to find these mutually agreed approaches.

Yes. If I may, I would like to add that despite these initiatives, we have not changed our corporate portfolio growth forecast in the 6%, 9% range lower than inflation. So we have this initiative, we are discussing actively with the Central Bank. I'm confident we will find the proper cost between the market and the regulator that will be good the market and the regulator.

Another question on the website. In terms of technology development, what amount of -- what volume of investments do you put on the technology investments. How do you substitute vendors? And how expensive are investments in AI? Andrei, a question for you.

Well, technology development is our top priorities as Mr. Gref said. We are completing the largest program to the target platform that will obviously substitute third-party vendors. We see that our technologies is 1.5 twofold cheaper then if -- then the foreign vendor solutions. So we are moving towards higher flexibility for the businesses and higher economic efficiency. If you talk about our 2024, 2026 forecast, we see that the investments in technologies will increase by 30%, but more than 3/4 of this amount are the investments in AI. AI is the core technology, not only for our strategy implementation, but it's the key for the global economy and this transformation. So we think that we -- our top priority is to find all the possibilities and investments and efforts and invest all of that in this technology. Apart from that, we always think about the fact that our technologies must be available to the larger market, to the public. Now we have many partners among the state sector, authority organizations and large and small and medium businesses. We are proud that this year, we started to develop a large tech community, more than 70,000 developers and engineers are using our products. We have GitVerse, one of our tools for the developer solutions. It is an alternative to GitHub that blocks our developers, developers from Russia. Now you can migrate everything from GitHub to GitVerse, our solution, it will -- even if everything works with GitHub, you can make a redundant copy. IDE is the environment for the developers that is used by more than 25,000 developers, more than 40,000 people downloaded and installed our development environment and is related to the fact that a number of companies stopped providing their solutions to our Russian developers. So we need a proper substitution, and that's the personal efficiency boost. And we see that developers that work on the AI -- that use AI as assistance are 25% and up to 40% more effective and productive than the developers that do not use that. And developers are very active and dynamic community, the innovation. And so next year, I think it will be hard to find a developer that are not using AI assistance. And within Sber, we were able to go through that phase. More than 90% of our engineers are not working without -- are not developing without a Copilot. And can we monetize these developments? Maybe it's time to monetize them. It depends on the level of maturity and readiness. We are looking at our technology solutions as an important part of the businesses. Next year, we expect the market revenue to grow by 70%. That's for our tech subsidiaries. That's a huge ambition, but it is based on the fact that the products that we offer to the market are super innovative and the investments and they give a huge boost for our customers in terms of AI. AI helps to do that for our customers. Yes, I do not think that we need to commit to this target. The investments in AI are huge. It's like all other tech companies that are developing fundamental models they're comparable. We are different, though, because we have an opportunity to monetize them. We do not monetize them as we could have because we invest right now and that's the investment for the future, but there is a capacity for that. And I'm talking about improving the efficiency for the next year and using GigaChat not only for the -- for boosting efficiency of our internal processes, but using it for the radical improvement of the quality of the products and the user experience are the things that we should achieve and our calculations say that next year, we will be close to have our next year investments to not deliver ROI-wise, but I think maybe in 2026, 2027, we will be able to monetize all these investments, start monetizing them. And I think not many companies in the world can monetize the developments that they do in Gen AI, depending on the scale of their business. And apply them to their business. And I think it's hard to say when this breakeven will happen. This year, around $350 billion of investments are made in generative AI and $60 billion of the turnover. So obviously, these figures are not comparable. However, the latest forecast have been corrected upwards in a major way. And we are confident today that in 2, 3 years, the investments in Gen AI will start to have some returns on investments. The next big leap, that's the big question. These are the trillion-plus models and huge capacities that will maintain the work of the AGI. But that's the second -- the next stage for us. We can guesstimate some -- the investment amount. You've heard about this $5 trillion. It's hard to say how to break even for that and how to return the investments on that. And obviously, we don't have the plans to invest that much. But I think there will be some alternative solution because the energy consumption that is required for model training, which is like more than -- for these models, [ 1 trillion-plus models ] and inference is that's very costly. So we will see how the situation unfolds. And obviously, GigaChat at the start of next year, I mean, now it's much better in terms of working in the context. At the start of next year, we will increase the amount of the context window twice. Yes, [ MAX 2 ] will be deployed next year. The context window will be increased 4x. And based on the results that we see in the lab, it will be much better than we see right now. So it will be a major step forward. So I do recommend you, I do encourage you to use GigaChat. I use GigaChat for a variety of topics. Sometimes I check the results and sometimes I consult with it and use it as an assistant and the quality is much better. Yes, giga.chat, a very simple address, giga.chat. The investments in technologies and technology development helped us business-wise to have independence. On the other hand, it opens up many more opportunities because now the processing is on our own technology stack. We have talked about acquiring the acquiring system and the software is ours. It helps us to launch products much quicker, and it helps us to adapt the regulations and the restrictions that happened due to external factors to roll everything out and to deliver a high-quality service for our customers. And therefore, we are -- as a huge company for us, a technology independence is one of the key factors for the success.

Next question from the chat. What projects in digital assets and blockchain technologies are being implemented by Sber? Question to Alexander.

Yes. Thank you very much for your question. We have our own CPA platform. We have organized more than -- we have launched more than 127 releases, 27 were in 2024. And as we speak, the CPA of [ RUSAL ] being released on platform. So at Investor Day, I do encourage you to test drive this platform and to invest in the assets that will be related to this -- those are the CPAs that will be related to these assets. We have not only digital CPAs, but other CPAs that can hedge the risks and diverse risks. We launched the Sber insurance CPA that were related to the space launches insurance. So yes, I would please check this out. This is the tool that we -- an instrument that we're going to use even more next year.

Thank you very much. The next question. Mr. Gref, I go back to AI. For the bank, these are huge investments pretty large investments, but this is a critical technology for the company. On the one hand, we are competing with other countries. On the other hand we have our own markets, but the impacts of the AI on the economy will influence the positiveness of the Russian economy compared to the other economies. And the question, therefore, is the following the Yandex that is producing the AI products, given the lack of resources, maybe it will be better to join the forces with the Yandex at least in terms of infrastructure to develop AI technologies. .

Well, first of all, we don't have plans like that. Moreover, I think that these are non-efficient plants. We should not combine forces -- join efforts with Yandex. It's great that we have to model. It's great that we have competition. We do respect Yandex and our partners and competitors. We are very thankful to them for their great work. It's fantastic that they do that. They have a fantastic, very talented team. We know them all. We respect them all. And now on the contrary, Yandex experienced difficult times, and we did everything to help them because having Yandex in the country is of critical importance. And I think to -- it is important to maintain this very competitive environment, especially in the tech industry. And we do need a competitor. If we join forces in this act, it will not deliver the results. And this is what we fight for when we talk with the regulators. When we talk about the competition, we're not just making the lift service. Sber has never made anything to disrupt the competition. We have never bought any bank. Even though we could have diverted our efforts, our profits there as some other companies do in other sectors, but we didn't. We favor the fair playing field for other companies fighting for the competitive advantage and monopoly. I think every company should have the right to be a monopoly at some point with some solution with AI, for example, the monopoly who that is briefing the rewards and accumulating a huge base of customers and everybody is lagging behind. We did a great job with disrupting the market. The absolute leader Google could have done the same, but they failed. They were too late. And so leadership went to another player. And the other market is now trailing behind, catching up and NVIDIA, the absolute monopolist in this market, what are other players doing? They are buying the latest innovations, the super efficient, the super productive processor by NVIDIA and they are joining together into sort to create an alternative to NVIDIA. That is the right approach, I think, as part of a major company, I think we are competitive. We are able to compete. How do you check that? If you're not operating in a competitive environment, you can't. So you need to support your competition. And I don't think we or Yandex should become a monopolist. The market is sufficient, and we have enough innovations and technologies for the Russian market and for the global markets as well. We see the massive positive effect that our partners are getting from using generative AI. I guess, [indiscernible], for example, making huge money on using Gen AI and AI in general. There are other examples I can provide. I think the Russian market will also be sufficient to withstand 2 models and to monetize 2 models. Thus, Yandex is very actively venturing abroad, selling their solutions abroad. So yes, we work together with Yandex. We have collaborations with Yandex. So we are on good terms, and we'll continue with it, but it's very important to maintain the competition. Sorry, Alexander, you wanted to say something.

Yes. Sorry to interrupt, Andrey. I just wanted to add about Yandex, but you go first and then I will add my piece.

Yes, I just wanted to say that this is really a very important thing for us, this area where, together with Yandex, we can learn from each other. I'm talking about research, research and science and also education, the top priorities. With all metrics, I would say, our models are way better than Yandex. And of course, we we're happy about it. Yes, Alexander, you wanted to say something.

Yes, 5 years ago, we organized this AI Alliance. We initially had 5 companies. Today, it's 12. We warmly welcome you to AI journey. We will be sharing our developments with AI. So this is the alliance, this is a platform where we can join our efforts in regulation, in research and education. And that's a great opportunity to support and to expand the competitive landscape that Mr. Gref was talking about. And also, we had a number of discussions with the Bank of Russia and the Governor of the Bank of Russia asked us about it, and we said that we are going to make all of our technologies public, all of our products, public, this is our principle. We have had 2 or 3 [ FI ] days. Yes, this is a regular conference. And also GigaConf is yet another technological conference that we're going to make regular. Yes, exactly. And we are also working tightly with a number of banks and Alpha Bank, particularly because Alpha Bank are completely without fear. And this is very effective trade, I think. We've had banks come to us with their concerns. Well, what if we buy your product and something goes wrong, Alpha Bank is completely different. They just jump straight in. And we see that there are things that Alpha Bank is doing with Gen AI better than us, and we are learning from them. That's great. They are taking our fundamental models and they're applying them to certain areas with even better effect than us. That's what we want. That's why we want the competition. If we see that our competitors are ahead of us in certain areas, well, we need to run faster. I think the context today means that there is no monopoly. There is no abuse of power. We are -- it is a major play, and we have a mission as we see it, provide access to these products, make them available. And if someone does with them something better with us, then this is a driving force for us. This is an impulse for us and emphasis for us be better and faster.

[indiscernible].

Colleagues, Mr. Gref, good morning. Thank you very much for this event. I'm [indiscernible] from PF Advisors. Congratulations with the support track strategy-wise. I have several questions, if I may. The first block of questions about the macro environment and your relations with the regulator. How are you going to deliver on the ambitious skill with the margins, given the tightening regulation the macro prudential regulation, what is going to happen with the new rates with the growth of the key rates that is making additional profit. So what are your expectations in that regard? That's the first block.

Thank you. Indeed, in terms of sensitivity to the changes in the key rate. We do have positive sensitivity. As the key road grows, we do get some additional profit. But that said, the increasing key rate does negatively impact portfolios, lending portfolios and -- in the long term, it does affect the interest income. Overall, margin-wise, we see intensifying pressure. Many banks see lowering margins. Over the 10 months, the net interest income is -- and the net margins are the biggest metric, the major metrics that we are focusing on and monitoring and we try to balance what we do in order to maintain them in a state that is the most favorable for us. Our AI models are used to manage our margins, our decision-making in that regard, and this affects the speed of decision-making given the growth of risk, which we expect to continue next year. It is especially relevant to maintain the high margins. Next year is 5.6 is the target at least, the minimal target. Despite all the circumstances in the market and the raising fee rates, we have been delivering on the margin target, and I think the market can best show that we will deliver it next year as well. Well, we should always have some room for some doubt. We do have certain doubts, we shouldn't be overly optimistic, but with the business planning, it took a lot of effort and our results will depend on the number of innovations that we need to accomplish a 5.6% margin. Some say that loans minus deposits that it was 5.6%. Of course, that's nonsense. There is a big innovation factor to it. The net fee and commission income, the transactional business, lots and lots of factors. So that's where the answer lies with the reducing margins of lending. We need to make lending so efficient, so productive that it wouldn't have any extra costs, balance sheet management, balance management. We see that we are way better than the market in managing our balance sheet. Once again, thanks to AI. We have built unique predictive models. It can predict what's going to happen in the market months ahead of it. And the accuracy is down to 0.15. This is a great success for us because what it used to be in the early 2010s, we would get the reports and statements way too late. We should have turned way earlier on this road. And then we got the reports, but it was too late. Now we have good predictive models. So we know what we have to do months in advance. All of this taken together, our super advanced treasury products, the dynamic balance sheet products based on AI. This year, we have changed a lot. We have implemented generative AI across the board, and we see that it is giving good results. It's not like we're sitting there and trying to calculate whether we would fit somewhere or not. Throughout the year, it's going to be a huge number of investments that we will need to deploy and create. We will do everything in our power to achieve it. We have a pretty advanced execution culture. It may sound a bit complacent, but it's true that we do not even consider the possibility to fail. We do our best to achieve the goal. Of course, there is always room for doubt, but we're moving on. And if you're becoming more doubtful, that means you need to move on even faster. I wanted to say something, but I forgot. The margins probably. [indiscernible] said that he had 2 blocks of questions. So maybe let's give him the opportunity to ask the second block.

Yes. Thank you, Gref for a comment. Since you started talking about the predictive models, I can't help but ask what are some of the trends and risks in the housing sector, let me see. Do you consider -- do you expect some defaults and what are your predictions as to the mortgages for retail customers? Thank you very much, and good luck with your strategy.

Mr. Vedyakhin will start properly and then Mr. Gref.

Yes, let's start with the corporate borrowers. We are a bank with the highest level of the market share, more than 50% of the market, and we have a good understanding of the market. We have been going into these projects that have a good reserve, a good buffer in terms of resilience. We have more than 80% of the portfolio covered with escrow accounts, which is enough to service cash flows, and we believe that risks in that regard are under control. We are also looking at the margins of our developers in the portfolio. It is around 20%. It was around 20% in the third quarter of 2024, which once again gives the opportunity to developers to continue implementing the projects that are already ongoing. The demand for new projects is indeed decreasing, and we expect the pipeline of new projects to significantly curtail in the near future. We do not expect any defaults. We do not have any defaults in the portfolio, and we do not expect any significant deterioration of the development portfolio in 2025.

You asked about the predictive models. Last week, we completed full check of scenario-based analysis for the current interest rate and what we are presenting today as our plans for next year does factor in the results of that -- well, not exactly a stress test, but a test that takes into consideration the [ sales growth ]. As I said, the predictive power of our models is rather robust, and we can rely on them. The situation is indeed complicated. There is a number of areas, industries and borrowers will find themselves in a difficult situation and same for banks. It all depends on how long this gap will persist between the real inflation, the rates, the Bank of Russia rates, the market rates. This is an unprecedented spread and the economy cannot withstand it for a long time. We see today is signs of a slowdown -- significant slowdown of the economy, especially in investment in housing. Moscow, Krasnodar, St. Petersburg, other markets are overheated. Moscow region to a lesser extent for now, a drop in investment in housing is playing its part. But otherwise, we see this significant pressure on the market. And the market responds adequately. The President said this yesterday, the government and the Bank of Russia should be responsible for avoiding this overheating going too far because reverting it and going back to what we had before would be too difficult. The spectrum of stagflation is also moving ahead. With the Bank of Russia, we are in a dialogue, and they have been following the quality of our portfolio very closely. And when it comes to our predictive models, we immediately report all of the significant changes to the Bank of Russia. So I hope that the colleagues there will also be responding to any changes in the situation adequately and in time.

Thank you. We see that in terms of mortgage, our clients remain very disciplined, high quality. So we do not see any risks there. We have always been very careful when we analyze our borrowers and the initial deposits. So I do hope that 2025 will be stable. The [ RUB 24 trillion ] limit by the Ministry of Finance, that is also a factor. So I think we can't speak of a buffer to an extent. And also, we have been living with this amended program for 6 months. So we are in the middle of transitioning to this new model as we speak, the adaptation period.

We have questions from our journalists. The first one is [indiscernible].

Hi, everyone. The situation is challenging. We appreciate that. My question is related to the credit portfolio and the lending in general. In the retail, we see that the lending is going down. So mathematically speaking, the debt problems will grow. In the corporate lending, we are not seeing that situation unfolding. But based on your comments, I understood that in corporate lending, you are pretty selective or like you look at the -- you do not give out loans to some borrowers or even some industries. The question is, whether Sberbank is regarding stopping some types of lending, corporate lending and retail lending. What will be the conditions for that? And the provisioning policy, will it change given the extreme situation in the lending that we're seeing right now? Maybe it has already changed because Sber has traditionally been more conservative than its main competitors provision-wise.

I think I will start here. In terms of the retail loans, we are adapting our models constantly based on the changes that are happening. And we can see now that we have significantly slowed down the retail lending because we obviously see the cost of resources that we give to our customers, and we look at their capabilities. So our figures show that we have revised our lending capabilities downwards significantly in terms of the mortgage lending. We also see the slowdown, not only the slowdown of the lending, but the programs as well. secured retail lending, there's a risk there, but we have a larger margin to cover the risk. And we are pretty comfortable there. For next year, the total cost of risk is 1.5%. We have modeled it based on the macro forecast that we have right now. As for the corporate lending, I think Alexander will comment on that.

Yes, we see the cost of risk in third quarter 2024 that is near 0%. Unfortunately, this situation will change in 2025, but we still think that our risks are under control. We have a mortgage lending for the housing. We have other areas, but our LTV is pretty good, portfolio-wide, and we made stress tests that Mr. Gref talked about. It's spanned across many industries, not only housing. And we have seen that some customers that experienced lower risk metrics, and we know what to do with that. It depends on the cycle of these higher rates. How long will it be present in the economy? The quicker it goes away, the better. But again, we don't see potential problems in the portfolio. We have additional costs planned for the provisions, as we calculated our budget, we've talked about that, we provisioned even more for the risks. And we will be able to deliver the financial results that we have talked about at the start of this session. We do not change the provisioning policy at all. It remains the same. It has always been -- we have never planned -- we never gave out loans with [ ICR ] lower than 1.2% for the housing because the [ ICR ] dropped and it really saved us our conservative policy, but we don't have it lower than 1%, 1.1%, 1.05% to 1.1%. And in the current situation, we do not see any potential defaults. And there is a number of industries where the debt-to-EBITDA indicator will go up. And the same goes for the borrowers. We have borrowers like that, and we already suggest in a preventive measure, we already suggesting preventive measures for them, and this is why we make these predictive models and we analyze the stress tests. We try to make sure that this situation is unfolding in a planned way. So we now try to predict what will happen in Q2, Q3 and the situation is manageable. In the banking sector, there are 2 problems. Too much liquidity or the lack thereof. A low rate and too much demand and super high rate and lower demand. These are the macro risks that we have to manage. That's our job. We shouldn't be too emotional about that. It's our job, and we have to consider it as a business as usual.

Thank you very much. We have discussed AI a lot and a new question about AI. And does Sber plan to replace the employees in the brick-and-mortar branches with GigaChat?

Yes. Look, people who come to our brick-and-mortar branches, they come to talk with the people. You can do everything in Sberbank online. If they decide to go brick-and-mortar, then they have to go there in the physical branch and to talk and connect with our employees. And we shouldn't remove this option. And people cannot know all of our products. We have hundreds of them. Based on GigaChat and GigaChat Max, we have developed an app that is called GigaHelp. It's based on GigaChat. And there in online mode, it gives recommendations to our employee in terms of what products to offer to the customer, to a particular customer and help make a proper consultation. There's like this emotional component there as well. If you need to support a customer or if a customer is experiencing some emotional problems, GigaChat will give you some recommendations in terms of how to respond to this or that action of a customer emotion-wise. So AI strengthens our employees. It's not about replacement. Tomorrow, are you GigaChat? because this is quite a provocative question because if GigaChat is asking that question, then GigaChat you should not expect to replace our employees. You will have to work with them side by side. Yes. I would actually answer that, GigaChat will make our employees in the branches stronger and better, and that goes for the entire team as well because we have more and more products. The environment is very complex. So GigaChat can be a copilot for employees working in the branches as well as those working in support centers and in other teams. We have many products. Some of them are pretty unique and not very popular. And so you have to know the information about all the products and GigaChat helps there. And we plan to implement this copilot based on GigaChat in all of our products, and it will improve the efficiency of our employees. And at the same time, we improve the user experience and the quality of our services. And at the same time, we see that the volume of transactions and the number of customers is growing constantly, and it is backed by the improved productivity and performance. So we need to make sure that based on the increased load, the quality of the services remains the same. And on the high level, I would like to also add that multimodality is the next big challenge for the next year because to be as human as possible, you should not only write intelligent tax, but the emotions and the style should be -- so that customers will not distinguish between being a GigaChat and your friend. All of these things are going to be discussed on our AI journey conference.

Sorry for interrupting, but all of these issues are going to be discussed on 11 to 12 to 13 December at AI journey, and we are going to discuss GigaChat and many other AI-related topics.

Mr. Gref, Yes, it's great that we have looked at our projects and the projects of our partners. These are the projects related to Gen AI. And all of these projects are going to be discussed on the AI journey in terms of Gen AI presentations are going to be very exciting. The conference is going to be great. It is going to be streamed live from 11th to 13th December. There was a question why we look so sad. I do ask you for your forgiveness. Only Nastya is smiling. Look, we do look a bit tired because the end of the year is usually -- that's usually a major -- there's a major workload, and we have a goal set in business plan and AI journey in December and the end of the year, obviously. So we are working on our goals. And yesterday, we finished the work like very late. And so all of these things are happening at the same moment. And obviously, it is reflected on our tired faces. So we do ask for your forgiveness dear investors. We will try to look a little bit more upbeat. But we're in good shape.

Thank you very much, Mr. Gref, the last question maybe, [ Daria Maslova ] from Financial Times.

Daria from Financial Times. Could you please expand on the changes that you might see in the behavior of the consumers as the mortgage rates increased. What are the most popular loans for the retail customers and for the business customers?

Thank you. As for the retail loans, the retail customers, they save more. They want to say more because the rates are high, and some of them do not use any investment products because when you have such a high deposit rate that works. So this is in terms of the savings, one of the trends in terms of the consumption area, we have seen many car loans and the reason is simple because the population expected that car prices to go up due to the additional duties. For us, it's around 4% of the overall portfolio volume macro prudential weight and syndicators are going to be increased so that's not a problem. We see stable demand for educational loans. We have a great product supported by the state by the government for the young people to get a proper education, good education and have an affordable loan. As for the model, it was -- it is pretty much the same. There was some activity in the Black Friday period, the classical December activity, were planned for that. People will buy presents. So -- but everything is in line with the expectations. And as for the retail customers, I will also add that the behavior is changing radically. We have seen historically low level of the money of the cash that people hide under the cushions and people put the money on the deposits, and this is a great thing because it will help the economy to use the resources. These resources properly and people will earn money on top of that. So this is a rationality really. I wouldn't call it greed. I mean people are rational and the inflation is 9%. So whether you put the cash under the cushion and you earn nothing, and you put it on the deposits, and it's 20%. So keeping your money in cash or putting on the deposits, the difference is 20%, 1/3 almost. And we expect next year the number of -- the amount of savings in cash to decrease by 20% and people have also made some green pack reserves at some point. But now with the inflation in the U.S., this year it went down a little bit. I think it's like 3%, 3.5% range. But the inflation went up to 10% almost. In 3 years, the accumulated inflation was around 20%. So if you put $100 in 2022 under your cushion or in a safe place, now you have $80. That's the best case scenario, by the way. Have you put this money on deposits and convert it into ruble. Well, yes, the ruble has weakened. You have to factor that in. But we now do not expect the ruble to give any surprises. It will fluctuate depending on the situation. And we do not think that the ruble will weaken significantly. We have calculated the balanced rate that should be today based on factoring in the inflation, and I have said that it should be RUB 90, RUB 95. But currently, it should be around RUB 100, RUB 105 per dollar. This is the range that we should have in terms of the exchange rate. This year, by the end, it might reach RUB 112, RUB 115. No, I'm talking about next year. Yes, next year. Exchange rate. So the yields in rubles is huge and it's the deposits. This is guaranteed yields and people are starting to convert foreign currency and put them into deposits. They invest in deposits first and foremost. And they use our other instruments too. So this is what is happening right now. And I know -- some people ask me, what do I do with dollars? And it really breaks my heart because people say, I had dollars for 3 years that was just kept in the safe place in cash and I say, well, just convert them and put them on deposits. If you have lost 20% in the last 3 years, then maybe the outlook will be even weaker. And then I mean, the yield will be 0% because if you have a dollar deposits, it's like 0%. So if you do not plan to travel and if you do not have any expenses related the potential education of your kids in foreign countries then what's the point of having -- keeping your cash in foreign currency. Just put them on the deposit. And this is what people are doing right now. They are moving to deposits. And this is a very rational behavior. I have never seen that in such a behavior in Russia.

Yes. As for the corporate customers, the deposits are now dominating in terms of -- compared to the investments and the corporate customers are using deposits, having additional yield or a margin. There's still demand for the investments that has to be completed or required investments, investments that are needed acutely by business, the turnover [ lending ] is now more demand because the -- now the logistical -- logistics are more complex and expensive, and the turnover lending, therefore, is more in demand, and we have this market. So I'll just say that this is what is the situation for the B2B segment?.

Thank you very much, Alexander. We have answered all the questions through the video connection and the majority of the questions that we had in the chat. Thank you very much for being with us for these 2 hours. Keep in touch, our Investor Relations team is always happy to connect and to hand out with you. We have launched a special telegram channel for investors in telegram growing rapidly. And the summary of our Investor Day will be published there. A summary was done by GigaChat. And please use this tool. It's a fantastic tool. We also have a feedback form. So please make sure to fill out the feedback. Mr. Gref, some closing remarks, please?

Yes. First of all, I would like to thank all of the investors. Thank you very much for being with us. Thank you for believing in us and putting your trust in us. We cherish that trust, and we'll try to do our utmost to deliver. It's a great time to invest in our shares. They are at a low point in terms of the prices. And it is obvious that they will rebound. So you have to continue -- we do encourage you to continue to invest in Sber. This year was a very important year for us. The next year will be as important and as critical in terms of being capable of addressing the macroeconomic challenges. It will be as challenging and as important as the previous year. And we do not give any excuses to ourselves related to these challenges. So invest. If you have any questions, make sure that you put them forth because we will answer all of your questions. We are very open and transparent, and I would like to take this opportunity and to congratulate you all with the upcoming new year. I do wish this year to be much more successful for our country. We do want that to happen. The volatility is pretty high, but there are prerequisites for a success story. And if we join our efforts, God willing, we will be able to achieve that success. So stay healthy, stay in harmony and be confident in yourself and have a lot of relationships in your families. And I would like to have some -- to thank the journalists who work with us and discuss finance and economics with us. We're going to meet with our journalist pool. Thank you very much for your work because without your work, we won't be able to communicate with our investors and the entire community. Thank you very much, and a happy New Year. Thank you. Bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]