Sberbank of Russia (SBER) Earnings Call Transcript & Summary

Good morning and good afternoon, investors and shareholders. We welcome you to our conference call where we're going to discuss the results of Sber Group for 2024. It is an important day for us. We disclosed the IFRS results, and we went back to our traditional format. We have provided you with the presentation. And the CEO and the Chairman of the Executive Board of Sberbank, Mr. Herman Gref; and Taras Skvortsov, the Head of our Finance Department, are with you today. We're going to have a Q&A session after the presentation. You have a QR code in the presentation to send a question to our platform. We have gathered these questions, and the questions that were upvoted most are going to be asked by me. This conference call is video recorded today on the 27th of February, 2025. There might be some forecasts and expectations that we're going to share with you that might not be -- materialize in the future. Please look at our presentation for information. And it is my pleasure to give the floor to Mr. Gref.

Investors, analysts, a very warm welcome. Today, we're summing up the performance of Sber Group in 2024. This is the first year of our new strategic cycle, our 3 year strategy. And as we said in December, it's our investor event. It was a challenging year for the entire market. We passed yet another test for our ability to dynamically change. Last year, the inflation was rising and the unemployment was at historical low, and this have led to fierce competition for talent and, obviously, rising wages. The key rate has risen to a 20 year high. To combat high inflation, the regulator tightened lending conditions and increased requirements to the banks' capital. Yet even in such conditions, we managed to achieve all the stated financial goals. The net profit for the full year reached RUB 1.580 trillion. Earnings per ordinary share increased to RUB 72. Return on equity stood at 24%. Our equity increased to 9% to reach RUB 7.2 trillion, while making the record dividend payout of over RUB 750 billion for 2023. A half of that amount went to the federal budget. A very important thing to say is that we restored the Group's total capital adequacy ratio under N20.0 ratio to 13.3%. This indicator is the main criterion for determining the level of dividends payouts. I'd like to say that that was the parameter that was the hardest to control and manage, but we were able to achieve all our goals for the previous year during the last year. So we would like to say that, basically, there were no parameters that were put for the top management team to achieve and that were not achieved. We have achieved all of them. Now, the comparison of the forecast with our actual financial results are displayed on the slide. We continue to increase the number of retail customers. Today, it's 109.9 million people, and we acquired, almost 1.5 million new customers over the year. The number of monthly users of our Sberbank Online and SberKids app grew by 2.2 million people. Today, there are over 85.5 million of them. The, DAU/MAU indicator also increased to 54.1% (sic) [ 54.8% ]. That's a record high level. 46.3 million people already use our app every day. Our transactional services and primarily the basis for high activity and frequency of use. We have various payment solutions, SberPay, QR, card payments, give our customers flexibility in choosing the most convenient and most beneficial payment method. The MAU of SberPay at the end of the year approached 34 million users. We are actively developing the service for accepting payments through multi QR, 1.8 million POS terminals are available for this service. We are transferring this technology to other acquiring banks as well. We have 19 partner banks who can make purchases through our terminals and leveraging our technologies. We have made a very important leap in the penetration of biometrics on the market. 1 million terminals already accept payments with a smile. We have cut the payment processing speed by half. I'd like to remind you, by the way, that only one company in the world has a similar technology. Not in Russia nor in the world, no one was able to address the problem of using biometrics for payments, using a simple camera and a simple terminal with a 2D camera. The cost of the terminal went down to $60 -- lower than $60, actually, and that helped us to install 1 million terminals and that was the results by the end of the year. More than 2.5 million customers used biometrics in 2024, and the number of transactions over the year exceeded 25 million. The number of monthly users in December approached 1 million. This year, we plan to significantly increase the number of terminals so that these user-friendly and beneficial payments method becomes available to even more customers. Last year -- I mean, obviously, we'd like to thank Apple who introduced sanctions and disabled NFCs. That helped us to develop this service, and that helps us -- this service helps us to enter the metro stations with biometrics. It's a very reliable service. As with any technology, this service needs some time to speed up, to take off. But running ahead in my expectations, I would like to say that we see the pretty good dynamics. We're off to a strong story. In February, the growth -- we had a twofold growth of a number of customers on a monthly basis. That happens as it usually happens with the technologies. People are starting to flock to it. Last year, the total volume of acquiring, payments and transfer increased by 17% to almost RUB 110 trillion. The scale of Sber's transactional business requires impeccable reliability. The efficiency of the fraud monitoring system, reached 99.8%, which is the world's best. 100%, absolutely the best one. There's no other company in the world that can reach this level, especially if you think about the constant cyber-attacks from a number of other countries. We show reliability, and we show that we protect our customers from the criminals. Last year, we managed to prevent fraud against our customers in the amount of more than RUB 300 billion. Last year, we rebooted our SberSpasibo loyalty program. Now everyone can choose categories that match their personal preferences. As a result, the number of Spasibo program participants increased by 14.7 million people since the start of the year and reached 91.9 million users. During the year, our customers used over 193 billion bonus points, which basically means RUB 193 billion. So we saved RUB 300 billion, that's a -- these forecasts are pretty good. Last year, RUB 290 billion was stolen from the Russians by fraudsters, and this scale is just unthinkable. And we saved RUB 300 billion for our customers. At the same time, we paid RUB 193 billion to our customers as bonus points. Just gave this money away. Our SberPrime subscription has also changed to have added new services to it, and we see a very positive response among the users. The number of SberPrime subscription users increased by 12.4 million people over the year and exceeded 22 million users. Our subscription is recognized as the most balanced and the most beneficial subscription on the market in terms of benefit service and cost. As for the lending to retail customers, the portfolio increased by 12.7% over the year to RUB 18.1 trillion. The share of Sber in the retail lending market is a record high 47%. We have never achieved these huge market shares. The effect of mass-scale preferential mortgage programs in the first half of the year was the main driver of portfolio growth. And the completion and tightening of regulation significantly slowed the growth of the mortgages by the end of the year. The mortgage loan portfolio expanded by 9.6% and reached RUB 11.2 trillion. Our share in the mortgage market is 57%. The fastest growth was in the credit card segment with Sber's portfolio growing since the start of the year by 43.4% to RUB 2.3 trillion. Today, our credit Sber card is used by 25 million people. In 2024, the car loan portfolio grew actively. And this trend was observed throughout the market due to limited new vehicle supply in 2023 and an increase in recycling fee in 2024. So this year's dynamics is expected to be quite different from what we had before. The Sber car loan portfolio grew by 83.2% over the year, exceeding RUB 600 billion. Sber's share in the car lending market grew 3 percentage points to 19.1% over the year. In terms of savings, high market rates stimulated the high savings activity among the population. Our line-up of deposits and savings accounts has been significantly transformed. We have new tools now that allowed to customize your deposit pricing based on the customer engagement. As a result, the funds due to retail individuals increased by 21.5% to reach RUB 27.8 trillion and our market share stood at 42.3%. As for our corporate clients, we managed to increase their number by over 150,000 clients to 3.3 million. Our online bank for businesses serves 2.9 million monthly active users. Of those, 51% use only our mobile app, Sberbank Business Online, that's its name. The share increased 2% over the year. Engagement is also growing. The mobile app DAU/MAU ratio grew 3 percentage points to 46% over the year, which is a very good indicator. Last year, we completed the migration of digital bank functionality for businesses to our target platform. We have launched a loyalty program for our corporate customers. It is used by over 650,000 companies. For most of the year, we saw a growing demand for financing with a clear slowdown closer to the end. The most active borrowers were companies from the following industries: metallurgy, oil and gas and petrochemicals, transport, logistics and housing construction. The loan portfolio increased by 19% and reached RUB 27.7 trillion. A significant part is represented by the residential real estate financing portfolio. Over 64 million square meters of housing is being built throughout the country with the participation of Sber. I would like to mention the quality of this portfolio. The share of overdue debt is only 0.32% and actually even went down in Q4. We are restructuring our internal lending processes. And we bring new products to the market. For example, in 2024, we significantly increased the portfolio of gold loans for gold mining companies. This product showed a pretty good uptake among customers. And the portfolio grew several-fold to RUB 200 billion, more than 90% of working capital lending decisions -- solutions for -- so sorry, decisions for large and medium sized businesses have been transitioned to the digital lending process. That has enabled customized decisions and shorter decision-making time. More than 90% of decisions, I would like to emphasize that, the loan portfolio of small and medium businesses increased by 9% over the year to RUB 6.7 trillion. The funds due to entities increased 21.8% since the start of the year or by 20% if we factor in the foreign currency revaluation and they reached RUB 16.8 trillion. Sber's share in the corporate deposit market over this period increased by 1.3 percentage points and amounted to 19.8%. So this is not a target market for us. This is a kind of a balancing market. Among entrepreneurs, we see a demand for continuous self-growth and new knowledge and skills to help them. We've joined SberUniversity in launching new training programs. These programs are aimed at developing digital and soft skills, promoting personal growth and successor training. Our AI-based digital technologies are widely used for social and economic development of Russia. Sber operates with 81 Russian regions in terms of AI development. Our AI solutions have already been implemented in health care utilities as well as operations of various government agencies. We have a very wide range of solutions that we delivered to the regions. I'd like to say that the governments are more and more happy with our AI-driven solutions. And they have a more detailed and targeted demand for these solutions. In terms of the loan portfolio quality, trends in the corporate and retail portfolios went in different directions during the year. The level of non-performing loans in the corporate portfolio decreased by 10 bps to 3.2% over the year. The cost of risk amounted to 0.45% over the year. As for the retail portfolio, the level of non-performing loans increased and that was expected during the year due to the unsecured lending segments, which can be explained by high interest rates, first of all and tighter regulation. The share of retail non-performing loans went up by 1 percentage points to 4.3%, while the cost of risk for the year amounted to 1.75%. Overall, the total cost of risk for Sber's loan portfolio amounted to 1% over the year, which is slightly better than our forecast. So we thought it would be around 110, 120 basis points. Efficiency, that's the issue that we prioritized last year and we will prioritize this year as well. Our CIR indicator, cost-to-income ratio was at the lower end of the forecast range and it totaled 30.3%. I don't even know what other bank can show such an indicator, given our scale and the scale of our -- chain of our brick-and-mortar branches. So we thought that that would be unattainable. But now it's a pretty banal figure for us, although, I mean, it is backed by our major efforts and total automation. The group's operating expenses grew by 15% over the year in the context of rising inflation and labor costs outpacing growth. Overall, wages growth in Russia amounted to 18.1%, while wages growth in the IT sector totaled 31.4%, plus payroll costs increased by 16.9%. I have to say that, now it's much more prestigious to work in Sber, the image improved. And that helps us not only to compete wages-wise, because the level of culture, the level of competencies and skill growth that our engineers get is becoming more and more important. And we train them. And we give them all the knowledge that we have accumulated, regardless of whether they are going to stay with us or go to the market. In this sense, we are not afraid of that, because usually strong employees prefer to stay in Sber. Competition for the same employment offer is not that strong. The second major focus of our operating expenses is our investment in technologies and innovations, our IT. And this area is of strategic importance for us. Of the tech breakthroughs last year, it is important to highlight the following. We migrated, our bank card services to our proprietary processing system. It bears reminding that we've got over 200 million active bank cards, plastic cards. Its critically important, not a single processing solution out there in the market can support us. Traditionally, all of the Russian market used to sit on 2 proprietary solutions and neither could really support us. Last year, we came second in the world after JPMorgan in the scale of the transactional business. We overtook all the other international systems. And on growth rates, we have good reason to suspect that we might actually come first in some point in the future. There's a very small gap between us and the #1. And creating our own processing solution, easily scalable, gave us a dramatically lower cost per transaction. And the speed and scalability is pretty much any that we want to. The peak workloads around the New Year season, we no longer fear those peak seasons, whether we clear it, whether we don't clear it, those fears are past behind us. We accomplished a monumental project that we call LTP, legacy to platform, the transition to our own platform for all our big tech services. And that's not just independence from external vendors and not just high productivity. It's a lot of efficiencies. Our platform costs us 50% less than internationally available vendor-provided solutions. We straddled 2 platforms for a while. Those are additional costs. You asked us a lot of questions about those. Starting from this year, it's another life. LTP is over. We doffed all the legacy. We freed up over 5,000 engineers and they will be switched to other programs, other development. Another critically important program for us, AI native, that's the creation of a new technological landscape. Without this, we would have had to hire thousands and thousands of very expensive engineers. And here, we are employing our well-trained engineers. Thank you, engineering team that delivered on this transformational program. They are now switching to new, more ambitious tasks. And this is a major feast that we have celebrated. It is my great happiness that we actually delivered on time. It actually happened to come at the same time as a need to catch up with the AI transformation plans. On the old landscape, it was impossible to do the things that we aim to do on AI. Right now, we are one of the most, if not the most, prepared companies in Russia to make another major leap on AI. Last year, we accomplished a major progress on GigaChat model family. Our model family is one of the strongest in the Russian markets, 7 million people use it. The total number of prompts exceeds 150 million. Sber is making a sizable contribution to scientific development, R&D. We established an R&D center for AI last year. That's a small team, very tightly knit team of engineers that is developing a platform to assist the Russian R&D in the search of new breakthroughs. These years, 80% of new discoveries in size are made using AI. And we are looking to develop a dependable, good quality instrument for our scientists. This year, we will deliver on it. As AI is going to transition from an assistance role to the autonomous roles, new horizons for -- new efficiencies will be opened up. The good news for investors is that the recent success of DeepSeek made a revolution in efficiencies of models. Training models has become quicker and more efficient. I have to say that some of our solutions were used inside the DeepSeek landscape. And it gives us a reason to rejoice that we were able to study DeepSeek architecture. And we have to say that we are moving in very, very close landscapes with DeepSeek and with other major vendors. Of course, AI is creating new risks. The threshold for market entry is dramatically lower. That's new disruption, new competition. The failures will be for those who have not built up their processes and not made their processes flexible, but we have been doing that. So we were not very much upset by the arrival of DeepSeek, because we made GigaChat available to the market at large. It is as available to the market as it is available to us. It is available to our competitors, our partners alike. So in this sense, we are not closing up. It is a means to use our own initiatives, our own innovative solutions, to use competition and drive ourselves. We think we stand to win in this competition because we are the best prepared, not because we are able to lock those innovations inside Sber. We have been actively implementing AI agents, multi-agent systems. Obviously, this is not the format to talk with investors about AI agents. But multi-agent systems are definitely something that will radically change the business. This is something that you have not been able to imagine even a couple of years ago. As you work with customers, with clients, an employee will be able to fill a very complicated question that a call center operator will take about 12 minutes on average to handle. And this is actual performance of our salespeople. In working with entities, an AI agent can look for tenders and proactively inform a relationship manager about those potential opportunities for financing. This is a solution that were developed by a tightly knit team of our engineers that were actually working in their free time. And this kind of innovation is something that attracts new clients big time. We have been implementing AI agents for relationship managers in the copilot mode. GigaNet is another development, quite on a par with international opposite numbers. Actually, I was riding in my car to this meeting and our engineers sent this thing up to me. Our agents were talking to each other -- AI agents. After every single action, they were very polite. They were asking for forgiveness. They were making all kinds of polite statements. And I complimented the engineers. You were good parents. You gave a very good up bringing to our AI agents. But this is an amazing transformation, AI transformation we are going through. Perhaps this is the most interesting period in the entire period that I've been working at Sber and perhaps in my entire life. Everything is changing radically. And we're actually happy that despite the adversity, despite the criticisms, we have been investing heavily into these technologies in all the previous years. And we are gaining all kinds of recoupments. We are seeing the happiness in the faces of our employees. We understand that we hit 100% bull's eye on transitioning to the human-centric philosophy. And technologies are actually becoming really, really mature at the speed that we had never envisaged. I think we actually guessed right on the right side of our endeavors. We entered 2025 in very good shape. The economy gained an additional impetus from fiscal spending. We improved our projection for the GDP growth in 2022 to 1.5%, maybe 2%. At the same time, inflation will remain elevated. Yet, we have revised our forecast upwards to a range of 7.5% maybe 8.5%. But we believe the key rate reduction cycle will start in the second half of 2025. We broadly agree with the Central Bank on that. In the second half, inflation was a bit too elevated. You can't really project the full year figures based on that. If the portfolios grow as they were, the portfolios have been a bit shrinking for 2 months. But for the full year, we expect a dramatic decrease of inflation if all things hold. We believe that the key rate reduction cycle will start in the second half of 2025. All the projections we maintain at the same time. 2025 is a very important year for the transformation of our business model, making our business and assistance for every single client of ours, expand the space of choice. We want to help every single person expand on his or her potential. The generative AI is the thing to use. That's the thing that creates these opportunities. Even in our case, this is not largely the technological transformation. It is the internal transformation for every single person inside our big team. And this year is what we're going to be focusing on. When we approved our strategy, dear investors, at the end of 2023, we thought that 3 years we will just spend preparing our technology. We see our technology developing at a much quicker pace than we had envisaged. And I have no doubt that by the end of 2024 we will be prepared to make this new leap. But the main problem is our internal human unpreparedness for this most powerful transformation that we had envisaged. So this year will be a year of personal transformation for the bank, for the entire team, because there will be a lot of rethinking to be done. Pretty much every single molecule of everything that we have been doing in the previous years will have to be transformed, the thinking modes, the algorithms of thinking, all of that will have to be revised. And if -- in the previous transformations we were set in motion by our engineers, our specialists and we were really decelerators with our classical ideas of the business models. This year, the engineers are an impediment as well, because as they introduce the modern AI systems, you need to depart from the algorithms of thinking. And this is something that is achieved with great difficulty. There's not a single person in the company, starting with me, that has no need to accomplish this transformation. Most of the most heavy kind of a mental kind, the rethinking, the reappraisal of everything that we have been doing. This is a big path, a very complicated path, but we are initiators of the change. We must stay open to the new things. We must be able to learn critically important skills these days. And I would like to thank every single employee of Sber for their performance last year, for the engagement, for the general willingness to pursue this change. We have no shame for our performance. They are very natural figures that we are citing. They are stable. They are long term. They are sustainable. The company is in great shape, mentally and financially. Last year, we accomplished an increasingly monumental transformation. We thought it's going to be a little effort. We created 2 business blocks, IT and technological development. Tech development is only wrapping its head around AI with the creation of the super modern AI native landscape. AI-based organization, autonomous AI-based organization is something that we are aiming for. There's no benchmarks for that. But this is again dramatically -- this is hugely interesting. We think -- but we are embarking on an un-shortened path. And we understand very well the answer to the question of Google CEO. He was asked the question, what will be your major investments in AI? What is your projection for next year? The projection for next year was his response, will be significantly more investment in AI. How about the recoupment? Not this year, not next year. We will not recoup this investment, neither next year or the year after that. But we have this feeling that unless we invest we will lose much more than just the money that we spend. And I can sign my name under every single word of this statement. Our statement -- our investment into Gen AI is non-recoupable so far, but the investment into the classical AI is well recouped. And this is what gives us the room for maneuver. This is what gives us the room for investing in multimodal systems, into Gen AI. The classical business objectives are resolved with classical AI. Unless we transition to big tech, to AI platform, we would not have been able to embark on the transformation that we are embarking upon today. And the second word of thanks I would like to address to all the clients of Sber for sticking with us, for trusting us. And thirdly, I would like to thank in a big way our shareholders and investors for their faith in us. Thank you very much. And with this, I would like to take the questions.

Thank you, Mr. Gref. We are passing over to the Q&A. [Operator Instructions] Let's take the question from [ Dmitriy ] [indiscernible].

Congratulations on the accomplishing of this challenging year, you and your team. As a shareholder, I find it very important that you delivered not just on the forecast. You actually exceeded the forecast. So the question is, we have seen a certain thaw in the relations with the United States. There's some talk about lifting of certain sanctions. Do you think sanctions will be lifted from Sber? What is your expectation? And what potentially may be the growth points once that happens?

Well, thank you very much for the warmth of your statement. It's very important for us. I'm not being formal here. We feel the great responsibility towards our shareholders and our clients. We went through this dramatic shock. And this really sharpened our sense of responsibility. In 2022, we were able to pay out RUB 750 billion of dividends in 2022, and that's obviously the result of this -- of our trepidation really and the sense of responsibility that we have for our customers. We have been going through transformation continuously for many years. But in these challenging times and challenging years, companies like us have to become the backbone of the economies, if not us, who will make that leap forward? What might happen? Will that happen? Everything might happen. Our scenario is no sanctions will be lifted. And our scenario basically says that the sanctions will be even harsher. So if sanctions will not be harsher -- I mean, it's impossible to make them stricter really, because I think we are living under all sanctions possible. I talked with the ambassador of one of the countries, and he told me, yes, come to visit our country. And I said, well, then, lift the sanctions and then we will talk. And he says, you are not under sanctions in our country. Now I'm like, wow! I thought that I was sanctioned in every country. Like not from a couple of countries, but entire world implemented sanctions against us and against me. Because I said, guys, I just stop to count the sanctions really because before we were like counting every sanction and thinking about that. But now we see all these lunatics that are implementing some weird sanctions, Xbox imports sanctions, like what the hell is that really? I mean we will make our own Xbox. I mean we can do anything. Microelectronics is the only thing where we struggle a little bit. But as for everything else, it only gives us the push, the boost to grow. So we are preparing for the worst. And like the financial market, we see a lot of foreign capital in the market and it's increasing. Obviously, the costs will go down, if we're talking about this removal of the sanctions. We have created a special unit that works with the settlements when we understood what will be the end result of all of that. We were -- basically we were able to close all the demands for our customers. And the international payments last year, we basically went back to our previous figures. We went back to the international cross-border payment market. There will be major changes, might be major positive few changes, but our paradigm is to prepare for the worst. Thank you very much for your question.

Next question is Mikhail Ganelin from Aton.

Thank you very much for what you do and your team does, it's absolutely fantastic. I have this strategic question. In the comments of the Central Bank, we see that the Central Bank want to strengthen their capital adequacy ratio. They wait and the norms will grow. The capital adequacy ratios will grow. The add-ons will grow as well. Do you expect major investments in the next several years? And third, dividends, the shareholders are accustomed to the fact that the bank pays good dividends. In the next 2, 3 years, will it be possible to combine all these 3 factors. Will you be able to maintain the dividend payout at the same level? Or maybe you will have to shift some of the money to some of the funds to strengthen the capital adequacy.

Thank you very much, Mikhail, for the question. As when we changed the membership of the Supervisory Board, we had some tensions with the new members of the Supervisory Board. We were suspected -- it was suspected that we are trying to do something to not pay high dividends. And I just said, ladies and gentlemen, just live in the company, work in the company for like 6 months and then make all these conclusions. Because for us this really is offensive. This is an insult because our philosophy of life is different. Our concept is different. Paying all the taxes is not just a requirement. It's an honor. And for us, paying our dividends is a part of our mission. This is basically the reason why we're here. So we will do everything to make sure that we meet all our obligations, all our requirements. So that no one can say that we saved something here and there. Like, Mikhail, I cannot guarantee you that in the next 2, 3 years we will pay out all the dividends, because the world is just so volatile. So under promise and over delivery, this is my motto. So it would be irresponsible for me to give you all these promises. It will be irresponsible for me to do that in front of my team, too. We'll try to make sure -- we will make sure we will commit to deliver on all of these goals. We are going to pay all the taxes on Russia. Starting from Moscow and going down to all other regions of Russia, we are the major -- the largest taxpayer. And we understand how difficult life might -- is in other regions of Russia. We will do everything we can to top up the federal budgets as well as regional ones. We understand that people were buying our shares, hoping that we will show the stable results. And that we will be really maniacs in delivering on our commitments. And we will do our utmost to deliver. I'm not saying that -- I'm not presuming that if we pay out the dividends, all the dividends, we might have challenges with our investments. We remove -- cut the costs, and unnecessary cuts and we filter the unnecessary things. But there is always an efficiency margin. We have a lot of things to remove still. Like in Toyota production system, there is this word -- kind of a waste. They have this notion that you can remove the waste. And we are going to remove some inefficient costs and we're going to pay for everything from our budgets. And the last one to be heard will be our shareholders. When we will say, sorry, guys, we are not able to pay the dividends. But I do hope that you will not hear these words from us. Thank you. Dividends, is one of the most uploaded questions we received from our platform. And there was a question. One largest bank said that in 2024 they will not pay out dividends. And what is -- are we to expect -- the largest bank is us, another largest bank, one of the largest banks. So I thought that everyone -- I thought that someone said such a silly thing about us. I will reiterate. I cannot guarantee you what will happen in the next 3 years, because I really don't know what will happen. But we are going to pay all the dividends for 2024 and 2025. 13.3% capital adequacy ratio is going to be met or was met. So we're going to pay out all the dividends. We have no excuses.

Next question, Olga Naydenova from Sinara.

Now, you have mentioned that the sanctions might be eased and it might have some positive effects. What are the risks related to that? Because you have mentioned some huge investments in technologies, do you see any risks if we have new players that have access to international technologies? Are these risks significant for you in this point in time? And the next question is about your management strategy for the assets -- the non-financial assets that you have. Given the fantastic banking business result, the non-banking business assets are not delivering as expected. Can you expand on that, please?

Well, first of all, Olga, thank you very much for your question. Well, first of all, this is the result of not only the banking business and the result of the group and the result of our investments in different businesses. And we have very surprising synergies that are delivered by our diverse investment streams. Who would have thought that we are going to address engineering challenges by building huge data centers? And this experience would serve us well in building driverless cars. I'm not going to expand into that, but the experience was reused and that was absolutely fantastic. That's one example. The second thing I want to say here is that, obviously, today, when we make decisions, we are moving and fully transitioning to using generative AI in risks. The models are just delivering much better indicators. We are implementing GigaChat everywhere. And we are experiencing a great leap forward. Just one example, I don't think it's a secret really. I think I can share this information. So you can see that Waymo company is now in this work in the driverless taxi market in 3 cities in the U.S.A. That problem was thought to be unresolvable. And we are moving to GigaChat right now and we're moving to generative models. And in generative models in 3 months made such a progress that we were not able to achieve in the last 5 years. And obviously, I'd like to underline that, obviously, not all of our investments hit the target. Obviously, we made mistakes. But we have a major advantage in terms of the scale and diversification of our investments. Are we concerned by competitors with international technologies? We are concerned. Maybe only if Elon Musk comes with all these companies from Mars. I do not see any competitor, any company on planet Earth that would be able to challenge us, really. Among the banking structures, I don't see any competitors that would be on the par with us, especially on the Russian market. So welcome. We will be very happy if we have an even harsher competition. And I would like to say that our banks are pretty good competitors, not all of them, obviously. But there are some very strong competitors or also partners. We respect them very much. And we actually borrow some of their ideas. We've learned looking at them. We don't think it's a problem really. A very small bank might be the smartest one. And they can deliver great results. So you have to look at the competitors and to get their experience and to leverage that. So we are not afraid of anyone. Like if European banks wake up finally, and come to our bank -- come to our markets, I mean, come on. No bank is ready for such a level of technology implementation that we are going through right now. We are already doing that technology transformation. And I was quite modest saying that, by the way. But I'm pretty confident what I'm talking about. The competition from the technology companies, yes, these are much more dangerous competitors for us in all areas, except for banking. And here, I'm talking about Russian technology companies, good, powerful, great companies. And that goes for the international tech companies as well. If they all come to the Russian market, and especially the most advanced ones will come to the Russian market, that will drive the competition and drive up the risks. But we have not used all of our reserves. We'll have to go to the top gear and really drive our bank forward. The harsher the competition, the more exciting it is.

[ Anatoly Byarinov from SmartUp ].

I have the question about non-banking business. There are some major losses there. Maybe there are some -- there's some time line where it will break even at least. There was some information about cut in the -- some of the employees that would help to mitigate the losses from the non-banking businesses.

Well, here, we are talking about investing in the loyalty of our customers. On the whole, you are right. This year, we are much more -- we have a much higher requirements for our subsidiary companies and for all of the companies that work with us, even the companies that where we do not control the full stake. But we put very harsh requirements and goals and ambitious goals for ourselves. And all of these goals and requirements are going to be translated to all of the subsidiary companies. We are reviewing our management strategies for subsidiary companies. We have replaced many top managers. And in many companies, we're going to continue that replacement this year as well. We have very high ambitions here. And we are looking for returns opportunities in these companies, because the harsher the conditions and environment is, the more competitive they should be. So I mean, this year, they will not go -- they will not break even. They'll not deliver returns. I mean, each of these companies will not deliver the profits. But we are making great leaps forward to improve the situation.

Alex [indiscernible] from [ Broker & Company ].

I congratulate you on achieving all the goals. I have a question about the capital. According to the dividend policy, the major condition on paying out dividends is to ensure the 13.3% of the capital ratio. And that also includes an anti-cyclical add-on, which from 1st February will be 0.25% and from the 1st of June it will be 0.5%, the additional add-on. Will the bank increase the capital adequacy ratio due to these changes? And what do you expect in midterm?

Well, 13.3% is the level that we had. It implied an increase of several macro add-ons, including the anti-cyclical add-on on the part of the Central Bank. We had huge discussions at the Supervisory Board meetings. There was a decision. There was a major division of opinion. The decision was taken. And everyone thought that the anti-cyclical add-ons are overkill. Look at the things in the banking system, Central Bank is giving leniency. But again, it panned out that strategically, we were right. We set it up at 13.3% as the internal challenge for ourselves. And we have not seen any grounds so far for any increase over the midterm to lead to any breach in our part. Any breach for our commitment on dividends. I'm not sure that the Central Bank is going to maintain the rate that they are aiming for. I do apologize. But if they do, a lot of the banks on the market might go under. And sending too many banks onwards, taking them off the field, that's not too realistic. If that happens, if it does happen, then, in 2028 our adequacy will be 12% and it will be quite acceptable. If that happens, if the rate is maintained, we might raise the adequacy bar by 2028, but that's not very topical at this point. It is certainly not any reason for us to fail with those dividend commitments.

We're passing over to the next block of questions. Our journalists are on the call as well. They also want to ask their questions. The first question we will take from [indiscernible].

If I may, I've got 2 questions. One, the profit of the banking sector according to CBR forecast might be a couple of trillion rubles. Do you think it is possible given the current dynamics on lending?

Well, it is a projection that is lower than the previous year. Unless something follows a very bright scenario, the profit will be lower. 2025 is going to be very challenging for the banking sector. And for us, drafting the business plan was pretty uphill, let's put it bluntly. You're not to expect any super performance by the banking sector this year. If things happen steady as they go, it will be pretty negative for the lending. I think starting from the second half, there might be a lowering for the key rate by the CBR unless something happens out of line, but this is our expectation. Moreover, we are looking at bringing the mortgage rates down. We made a first incremental step to bring down the commercial price on the mortgage loans. That's a meaningful story, a very, very small step to bring down the deposit rates and to bring down the loan rates. We are really groping for this threshold. We are probably one of the first banks that made this step. We are expecting a downward cycle.

We have another question from Anastasia Shtyleva, Interfax.

My question is, why did you provision that much in the fourth quarter on the corporate portfolio? Is that a stand-alone company? Or is that several industries? Perhaps there was a coal mining as well? And are you expecting any worsening on this sector? What is your take on the corporate sector in general? Would you expect an increase on the risk for that portfolio, perhaps due to the increasing rates, steadily higher rates for the entire market?

Well, obviously, yes. The answer to your question is, obviously, yes. The proactive provisioning for our core portfolio for the core entity, yes, that's what we have been expecting, yes. And we were always conservative with respect to potential macro risks. And the fact that we provisioned more in December, that does not mean that we encountered worsening of the portfolio. But we have proactively started to increase the provisions with the expectation of worsening situation. If the situation proves to be better, we will unwind the provisions. But if the situation pans out to be worse than we had expected, we will be ready for that. All these circumstances are such and such. This is not something that we quote when we bring down the dividends, because we don't bring down the dividends. And we expect our strategy to prove right another time. We have been working for pretty much 1 hour and 15 minutes. We've got time left for one closing question.

My question to Mr. Gref and Taras Skvortsov. What is your take on the current situation with the mandatory liquidity? As we speak, there's a meeting of the Head of the Central Bank with major bank representatives or perhaps not major banks, you're not present there. And Ms. Nabiullina has said that there will be no leniency on short-term liquidity on the part of CDR. We have heard. We have seen the competition for liquidity, turned into a competition for deposits of natural individuals, natural persons. That's an interesting situation, isn't it? Would you be looking to increase your share of the deposit market that has been shrinking for you? That's the first question. And the second question, we have seen some placements of discount bonds by Sberbank. The banks don't use that instrument very often. It's interesting to find out why you have been using it. And Anastasia Shtyleva asked about the cost of risk on the corporate segment. Your colleagues from VTB in the third quarter provisioned pretty heavily, if I'm not mistaken, because there were mass fraudulent loans. Did you have similar situations? Perhaps you might give us an insight into the scale of this problem.

As for the liquidity, the situation has stabilized significantly. At this time in the banking sector, we don't have any problems with the mandatory liquidity. You have seen the spreads on the key market flattening. We don't see anything -- any problem in hand. There was some. There was a crazy competition for the deposits that we were not really involved. And as we conducted ourselves responsibly midterm, we had no problem with making a dash for the market share and increase that market share. But I think we took a step back in good time because the problem was not who went where. In banking, it was about who stopped in good time. And it takes time to see who was right. We think that the maneuver with the stoppage for us was at an opportune point in time. We don't see any problem with the liquidity. I think you're looking at the wrong indicator when you're trying to gauge the temperature with the liquidity. Right now, we do not see any situation. We don't see the situation to be the same as it was in the third quarter. There was a question on the discount obligation or discount bonds. Well, for one thing, we have to support the market. The second point is, we use all the instruments to raise funds. And if we see a good opportunity, we go into the market and place -- make a placement. And there are some clients that ask questions, that show demand for such instruments. And our placements were, in some part, a response to the demands made by our clients. The situation has been evolving, okay? There was a shrinkage of the portfolio in December. It was an unusual situation, very unstandard. In January, we'd see a shrinkage. In February, we have seen a decline of the portfolio. To an extent, this is because the situation with liquidity has been stabilizing. If the market does not need that expensive money, the banks don't need that expensive money. The fraud schemes, yes. I don't know about competition, but AI has been helping us to cut off, that fraud. You know, 4 billion events are analyzed an hour by our AI engines. Fraudsters are not comfortable, stealing from us. We have never been provisioning for fraud. This is the comfort that we gain from our AI leadership, our tech leadership. The macro things are worrying for us more. Higher rate will, obviously, trigger lower solvability -- lower solvency, and more defaults, more non-paying customers. But a departure from the ability to use our risk assessment models, that's a problem. Last year, we showed the Central Bank that a transition to their last century regulation models, tightening those risk management screws are going to produce an inverse effect. And we departed our models -- we departed from our models and started using, the mandatory ratios, it might seem that, yes, we successfully used those things last century. But right now, the cost of risk has been growing. We showed, the data to the analysts. In terms of regulation, the monetary thing that the Central Bank has been pursuing, that's the right thing to use. But in terms of managing the cost of risk and shrinking the risk sector wide, that has an inverse effect for the market. I have been showing our figures to the Central Bank, including the governor. They have been studying those figures. Motivations can be different. But going back to the fraud question, we have never had a problem with that kind of fraud. I can't really imagine anyone playing models that big to create the need to provision for that risk, not really. And we have been looking forward to a meeting with the girls from the journalist pool. Well, thank you very much, our journalist community. Thank you very much for your very stable and clear coverage of our news. And investors, thank you kindly. And thank you, team, we have been cherishing your confidence, your faith in us. And we will continue to do so. And we will keep doing all the good things to maintain that faith.

You have the QR codes. We are wrapping up now. Please note our Telegram channel. For the investors, you can learn the most topical news from that channel. Do share the link with your colleagues and friends. And you'll hear from us again, at the end of the first quarter. Interpretation discontinued. [Statements in English on this transcript were spoken by an interpreter present on the live call.]