Sberbank of Russia (SBER) Earnings Call Transcript & Summary

Good afternoon to investors and shareholders and analysts. Welcome to our conference call dedicated to Sber's consolidated IFRS financial results for the first quarter of 2025. Today, we have with us Deputy Chairman of the Management Board, Taras Skvortsov, who will start with the presentation of our quarterly the results and then take your questions. [Operator Instructions] I would like to emphasize that the conference call is being recorded today on the 28th of April 2025. The call may include the forecasts and expectations of the leadership, which may differ from actual indicators going forward. For more information on the risks, please see the disclaimer on the risk on the second slide of our presentation. Thank you very much. And with that, I will now give floor to Taras.

Thank you, Anastasia. Good afternoon, dear analysts, journalists, investors of Sber, everyone who is on the call today. Today, we are summing up the performance of Sber Group in the first quarter of 2025. Net profit in the period increased almost by 9% year-on-year to a record of RUB 436 billion. The return on equity increased to 24.4%. Since the start of the year, we have acquired over 200,000 new clients, exceeding 110 million retail and 3.3 million corporate clients. By the end of the first quarter, almost 99 million people benefited from the hassle-free access through our single authentication system SberID. Over the period, the number of users increased by 4.3 million, while the number of digital services supporting SberID exceeded 40,000. Every month, Sberbank Online app is used by over 84 million people. With this figure having grown 900,000 since the start of the year, the services accessed for almost 45 million active users every day, and the DAU/MAU ratio is 53%. In the first quarter, we expanded SberPrime subscription options by adding electric scooter rental. Now our users can join the service free of charge and enjoy a discount on their ride. The number of Prime subscribers grew to 22.7 million. For corporate clients, Sber has introduced a new SberBusiness Prime subscription. It enables business clients to use banking and nonfinancial services, receive discounts and bonuses. You can configure the subscription in line with your business needs by selecting the required services. In the first quarter of 2025, the Russian economy showed a steady positive trend, but the growth rate slowed down, including due to the consumer and industrial segments, where the rate decreased year-on-year to 8.3% and 7.7%, respectively. After a sharp rise in December, the income growth rate virtually stabilized. Household incomes, they fell by 1.4 percentage points to 16.5% per annum in the first quarter. The total payroll increased by 18%. The most significant wage increases were in the manufacturing industry, IT and construction. The high cost of credit resources has limited consumption, with its growth slowing to 13.4% year-on-year, mainly due to nonfood segment where the growth rate declined from 20% in 2024 to 13% at the start of 2025. And this trend has been continuing. Now about inflation. Despite high inflation at the start of the year, a number of key indicators point to a mitigation of long-term inflationary pressures. With that in mind, we maintain our GDP growth and inflation forecast for 2025. And now let's take a closer look at our financial performance. In the first quarter, net interest income exceeded RUB 832 billion, an almost 19% growth, mostly supported by the growth in the volume and yield of working assets shown in 2024. The net interest margin increased to 6.11%, which was due, among other things, to the change in the methodology for accruing subsidies under state mortgage programs in the first quarter. The demand for loans from corporate clients is mostly driven by large and major clients. In the other segments, the demand is significantly lower. In the first quarter of 2025, the corporate portfolio increased 1.3%. If you look at real terms, net of exchange rate fluctuations, it reached RUB 27.5 trillion. We increased our market share to 32.6%. The main drivers of lending growth were housing, construction and the oil and gas sector. The cost of risk for the corporate portfolio remained close to 0. For the total loan portfolio, we recovered provisions in the amount of almost RUB 7 billion, which was explained by bad debt repayment and a few methodological changes related to our revision of risk assessment models. Please see details in reporting. In the retail lending, the first quarter saw diverging dynamics. The mortgage portfolio increased by 0.4% taking into account securitization transactions and reached RUB 11.1 trillion. The bank started to gradually decrease mortgage loan rates, while the majority of the loans were used for apartments and newly built properties. Consumer loans continued to decline, pressured by tight regulation, which led to a decrease in the total portfolio volume by 5.8% since the start of the year. However, Sberbank has maintained its domination in the market. In response to the inaccessibility of the consumer loans, in credit cards, we saw the opposite trend. The portfolio volume over the reporting period increased almost 5%, reaching RUB 2.5 trillion. The market share of Sber in credit cards over the quarter increased 1.1 percentage points and reached 54.1%. The car loan portfolio decreased 3.2% over the quarter to RUB 583 billion. The cost of risk in the retail loan portfolio increased in higher rates in the economy overall, tighter regulation and a slowdown in the portfolio growth rate reaching 3.3%. That's mostly explained by the growth in own unsecured lending. Overall, the quality of portfolio is showing a negative trend enhanced by the seasonal sector. The share of Stage 3 loans increased by 40 basis points to 4.1% in the first quarter. Trends in retail unsecured lending contributed to that, as I have said, and there was a slight deterioration in the quality of small business segment. The total cost of risk for the whole portfolio increased to 1.24%. Having said that, even this indicator is slightly better than our indication -- expectations. We predicted 1.5% for the full 2025. And provision coverage of impaired assets amounted to almost 121%. The dynamics of funds due to individuals remain rather high. During the first quarter, their volume increased 3% in real terms to RUB 28.4 trillion. The market share of our bank in this segment increased by 0.4 percentage points, reaching 42.7%. With the positive factors improving the liquidity of the banking sectors, Sber and other banks were able to normalize the deposit rates versus the secure rate of the Bank of Russia. However, at the same time, the average cost of individual funds increased 1.7 percentage points in the first quarter. The amount of -- given this decrease in the second quarter, we are not to expect a significant growth of cost of individual funds and corporate funds as well. The amount of corporate customers' funds in real terms increased by 2.3% over the quarter, reaching RUB 16.9 trillion. The market share of Sber in here was 19.5%. And average cost of raising funds increased by 0.4 percentage points to 14.4%. Net fees and commissions income increased in the first quarter to about 10.4% year-on-year to RUB 203 billion, which is generally in line with our expectations. Our technology -- our payment technologies have continued to develop rapidly. SberPay NFC contactless payment service is already successfully used by over 14 million customers making over 7 million transactions daily. Payments by QR code became available, not only domestically, but also abroad. Belarus and Turkey joined the countries accepting such payments. In the first quarter of 2025 alone, clients made over 35 million payments using biometrics, which is more than the figure for the entire last year. Sberbank has been consistently implementing an operational efficiency strategy by integrating official -- artificial intelligence into its key business and internal processes. Operating expenses increased 15.2% year-on-year in first quarter and the ratio of operating expenses to income improved to 26.9%. In the first quarter, we presented an improved version of our LLM, GigaChat 2.0. This update, among other things, led to a growth in the popularity of the service. Number of users increased 43% over the quarter, reaching 17 million people and the total number of processes -- processed requests exceeded 0.5 billion. We're also paying considerable attention to creating tools that make it easier for programmers to work. Our GitVerse resource, which has already attracted over 90,000 professional users, helps developers quickly create and publish mobile applications using a GigaCode agent for automatic analysis and improvement of Giga source code, allowed to reduce testing time and improve the quality of projects. Due to profit earned during the quarter, equity increased to RUB 7.36 trillion. Common equity Tier 1 grew by 6.5% over the quarter. And the total equity grew by 5.2% to RUB 7.2 trillion. Risk-weighted assets decreased 1.5% over the quarter to RUB 52.2 trillion against the backdrop of ruble strengthening despite the loan portfolio growth and an increase in regulatory macro buffers in the retail portfolio. And the density of RWA slightly decreased by 0.2 percentage points to 86.8%. Capital adequacy on the N20.0 increased in the first quarter to 14% from 14.3%. Last week, the superiority -- last week, the Supervisory Board recommended that shareholders allocate a record amount of RUB 786.9 billion, or RUB 34.84 per ordinary and preferred share of full dividend payment. And the Annual General Meeting of Shareholders is scheduled for the 30th of June. It will be held for the first time in remote format with an option for absentee voting. In conclusion, we have passed the first quarter with considerable success. And at this stage, we are maintaining all the earlier forecasts for 2025. We don't see any need to [ alter ] forecasts as of this time. Thank you very much for now. And I'm ready to take your questions right now.

Thank you very much. We are proceeding at a brisk pace. Evgeniy Kipnis, Alfa-Bank, you have the floor now.

Congratulations on great performance. Several questions from me. Perhaps I'll go one by one for your convenience. Question one, the net interest margin. We are seeing that in the first quarter, it's been performing much better than the full year expectations and probably better than the previous year. In light of this, do you maintain the positive sensitivity to the growth of interest rates that we discussed during the previous calls? And are you taking any action at the moment to reposition your balance structure for the future cycle of the rate?

Yes, Evgeniy, thank you very much for the question on the margin. We should accept this recognition. Yes, we are performing a bit better than the forecast. But going forward, the potential for not being that pessimistic is there and so the sensitivity to the rates. At this time, we have a positive sensitivity, about RUB 18 billion. Having said that, we are looking to bring this value to 0 and the payment of dividends will contribute to the lowering of sensitivity in light of the expected decrease in the rates. We don't need to keep a big sensitivity on the whole action plan. It is about management obviously indicated towards lowering it. Right now, it seems to be a successful strategy to pursue.

Yes. The next question, on the credit quality in retail, especially unsecured retail, we see that this is probably the highest rate over the past couple of years. What trends are you seeing? How complicated is the servicing of the loans? Or should we read the performance in the first quarter perhaps like this, they are reflecting your negative scenario and starting from the second quarter, should we be seeing a lowering of the cost of risk?

Yes, indeed. Our forecast for 2024 and the performance of the first quarter show that the credit portfolio quality, especially in the retail has been negatively affecting our performance. But this is a dubious situation. On the one hand, we are seeing rather good performance on the mortgages, and we don't have much deviation there as for the previous year and what we could have expected. On the other hand, in unsecured, the quality has been deteriorating. It has been deteriorating. It was deteriorating in fall of last year, especially in the second half, and in the first quarter, the trend stayed. It is appreciably so. We understand why it is happening. That is explained by the higher rates. It is a natural selection of the clients. The good paying clients are not particularly keen to borrow more. And those that are not 100% willing to pay, their percent in terms of the overall volume has been growing. And in the first quarter, what we saw was some exits, some fallout into NPL, not just on new loans, but over -- but loans and some -- with some maturity. And we are obviously taking action in response to such trends, and we are trying to mitigate this incoming flow -- we're trying to mitigate this negative trend for the incoming flow of loans. But all of these actions take effect over the midterm. In a month or in a quarter, you can't really see much effect. So for 2025, we are not seeing much improvement in terms of portfolio quality. In all likelihood, the projection that we gave, we'll stick to it, but as our action is taking effect and as the rates are going down, we expect stabilization of the portfolio quality to the levels seen pre rates increase. So the situation is like I have said, but with a great -- good marginality and with a good management. In some situations with restructurings, with smart recoveries, we are trying to invent all kinds of new efficiencies to benefit both the bank and the customer. We are trying to lift the pressure from this factor on our financial performance.

There was another question. Yes, there was another question, the last one for today. About your track with the blocked assets, we see that the Bank of Russia has tightened its approach and at the same time, the U.S. -- the new U.S. administration with all the processes that accompany this new administration. Given all that, you work with the blocked assets, has it changed in a way? And can we expect the positive effect on your P&L from that story?

Well, as for the blocked assets, at the end of last year, that's what the changes and clarifications of the Central Bank of Russia in line with the lower [ 222 ], this instrument has become negligible and nonaccessible for us. So as for the blocked assets, we're working as part of the standard processes for the reconciliation. We have been working on that in 2022 and 2023 and the previous year. Every quarter, as part of these initiatives and activities, we decrease the share of our blocked assets in our portfolio, and we are going to continue to do that regardless of whether we are going to factor that in our portfolio contribution. So no major radical changes or some unexpected trends that we are expecting. So we are committed to that effort. And the Central Bank, in terms of the assets, is also making the exchange, and we are participating in that. So -- but looking at our large portfolio and provisions that we create for that, it is a small -- it is but a small share. So it cannot really radically change our results. Our cost of risk factors in all these potential measures. But we have been working with the Central Bank to that end and we are going to work in all -- for all assets that are blocked. And we are committed to making sure that we'll return the blocked assets to the bank.

And Olga Naydenova from Sinara will have the next question. Olga, please make sure that you press the unmute button, and we are waiting for a question. Okay. Maybe next question then, Svetlana Aslanova from [indiscernible].

You hear me all right? Okay. A couple of clarification questions really. You have said that the share of loans for the floating rate is in line with the indicators on the presentation. Given the NIM, what is the share of the state supported mortgages in your portfolio? And the other small question if I may. If we remove that change in the methodology and algos in the other way, how the change in the methodology change the curve of the NIM in Q1?

So Svetlana, in terms of the loans, the mortgage loans, the share of the state supported mortgage loans is increasing gradually. And for example, for new properties, it's 99% that is state supported. So basically, all the mortgages for the new properties is state supported. As for the secondhand properties, the government has included a number of regions in the program, included some options for the secondhand properties. The share of state supported mortgage programs is around 70%. So overall, the share of these state supported mortgages in our portfolio is growing. As for its pressure on the margin, I'm talking about the methodological factor that we factor in the share of the state supported mortgage, it's easy to calculate. I would like to say that the level of the margin is in line with the level of the margin in Q4. So that's a one-off event. And in the next months and quarters, we will not see that.

I have another question. Now you have answered the question about the blocked assets. What about the immobilized assets? It is possible that this part of assets will face harsher restrictions? Will the group have to sell some of the assets in some time? How can it affect the financial results?

It's an important topic. That is true. We can see that the banking sector is pretty nervous about these regulation. Now there's a couple of things to consider here because, first of all, we're talking about the methodology. How do you calculate that? There are some things that are not very clear. We're talking about, for example, the hardware that is needed by the banks. How do you factor that in the data centers and the software? No, bank can not invest in these assets including the intangible assets. So that's the first thing. Secondly, how does it affect that? If we take the current situation, the calculation is done based on the volume of the capital and the more capital the bank has. You can look at that based on the capital adequacy ratio. The lower CAR the bank has, the more challenging it is to meet these requirements. In terms of systemically important banks, Sber holds a special place because we are committed to prioritizing the capital adequacy ratio. So we're not going to be those who will suffer from this new regulation. At the same time, we are actively working with our regulator to improve the methodology to make sure that it meets the goals that it was intended for, to decrease the investments of the financial sector and some kinds of assets and to -- but at the same time, the banks have to invest in IT and other things that are vitally important for the banking -- the entire banking sector to work. And -- so that we can pave the way for the future developments of the banks, not for the 1, 2 years, but for decades ahead. So investments of the banks in the software and other things are very important. We are going to work -- continue working with the regulator as the methodology is improved and revised.

Olga Naydenova, please.

Can you hear me now?

Yes.

I congratulate you with the great result. A couple of questions. One, about the margin. You said that it is related to the change of the methodologies and the accrual of the subsidies. Is it a one-off factor or is it more of a continuous trend that we're going to see? And the second question is about the credit quality -- the loan quality. What do you see in the corporate loan portfolio? And how have your expectations change in terms of the quality of the portfolio in the corporate segment? And another question about the insurance business. The result of the insurance business in Q1 is a bit worse than we have accustomed to. What is happening in this business line? Are there some one-off factors? And what can we expect in insurance?

Olga, thank you very much. As for the margin, it was a one-off factor. We do not think that these measures are necessary in the future. Our margin is pretty easy to forecast, especially if you look at our quarterly reports starting from March and April and May. You'll be able to use the Russian accounting standards and indicators as the benchmark and there will be no one-off factor. As for the quality of the corporate loan portfolio, Q1 is kind of a deviation because we're not going to continue to replenish our provisions, and we expect the quality of the corporate portfolio to stabilize in the next quarters, and given the methodological factors, our cost of risk is going to be within the range. And that's we accept. The small and micro businesses segment flourishing right now. It started last year. The rates are high. And the -- usually, not everyone have the resources for repaying the debt. So the number of defaults is growing. If you talk about the medium and large and major businesses, there are some one-off stories there. So you can't really say that there are some industries that are of particular concern. Yet there are some industries where customers -- where our clients are not in the best situation. We use stress tests to forecast that and to provision accordingly. So it's like the situation that we faced in Q1. The situation in the economy deteriorated to rate -- there was a rate hike, at the same time the quality of the portfolio in terms of the cost of risk was better than forecasted. Why? Because we beforehand have created the provisions -- used the models to create proper provisions based on the new methodology. But in the second half of the year, in the remaining quarters, we are going to stabilize this indicator. And we expect something -- some problems, but we do not expect a major deterioration of the portfolio in terms of the corporate portfolio. Overall, it is true for now. We can see that according to data, we were a bit more pessimistic in terms of the corporate loan portfolio forecast compared to the results -- to the actual result that we have seen in the last 3, 4 months. As for the insurance, it wasn't ideal in terms of the reports and how it reflects the real situation with the insurance business. There are some nuances. The major part of the insurance businesses is reflected in the trade and interest related yields income. But if you summarize the situation with the insurance business, there are no negative things there. No negative trends. In terms of the profits, in terms of other indicators, the Q1 results are in line with the Q1 results of 2024. So you can compare that. And in terms of the contribution of our subsidiary companies, the insurance -- our insurance company is the one that drives the additional profits and contribute to the overall group profit. So the business is growing in line with our plans. We're really happy about it, and we are quite sure that in Q2, in the second half of the year, we're going to focus on it more to make sure that it delivers better results. So if you look at the report, you have to understand that some part of its profits are reflected in other parts of the book.

Couple of questions from our listeners. The question about the forecast of the corporate loan portfolio growth, yield forecast is 11% and at the same time, in Q1 was minus 1%. What are your expectations? From what point and in what industries do you think we'll be able to drive that -- your previous more optimistic forecast?

When we gave the forecast, we looked at real dynamics of the portfolio. If the ruble strengthened from RUB 102 per USD to RUB 80 per USD or RUB 82 per USD, obviously, that differentiates the indicators in nominal and real terms. We had a growth of 1.3% for Q1, when it was a pretty good time for the borrowers, was a lot of balancing of the federal branches. There were huge accruals to the physical persons who made the purchases. So in Q1, that really was driving the corporate segment. So the -- in Q1, not many clients wanted to take a loan. That was okay. In Q1, we grew by 1.3%. And we think that overall, in the second half of the year, we have a higher demand for loans. The key rates, obviously exacerbates -- strengthens this desire of customers to wait and see before taking out a loan from the bank, but everyone is expecting the key rate to go down. And we expect that as the key rates go down, the demand will be revived because that's a possibility. So that's 1 factor. On the other hand, there're expectations that the rate will go down. We think that 9%, 10% is a pretty realistic figure that we might see by the end of the year.

Another question is about the stage supported mortgages that the bank is actually working on. Removing the commission for the developers, how will it affect the results of the second half [indiscernible]?

Yes. We introduced the fee in response to several factors that made this a loss-making business. The main factor perhaps was the significant increase in the rate on deposits and the overall cost of funding for the deposits. It's just easier to track the deposits. It's always in the ads. It's in the media. On the corporate customers, it was also the same trend. And then secondly, it was a tightening regulation, which, especially in the low down payment segments, consumed a lot of equity on part of the banks. In the first quarter overall, specifically due to the liquidity sector stabilization, we saw the corporate rates go down. The key rate apparently stayed at the same level, but this differential between the funding cost and the key rate, it went down. And this first factor was largely negated. So we brought the fee amounts down. And we see it equated to nil at some point in the future. But the second factor, the pressure on equity of the banks is staying and the Central Bank has not been taking any action with respect to that so far as we can tell. So in all likelihood, and I'm talking about the market in general, all of the banks are working with the fees because the economy effects everyone. All the banks are likely to limit the disbursements of loans in some fashion. The loans with small down payment where they see too much equity pressure, this is probably a trend towards a general decrease in mortgages -- new mortgages. You could have done something and banks would have kept 0 fees, but as things go, either it's the fee or it's a rejection of some borrowers. But the situation has been changing. The government went to accommodate the borrowers. The term of the subsidies for the state mortgage program was increased. We are maintaining a dialogue with the government, with the Central Bank. Everyone understands the importance of the mortgages for the economy, for the construction sector, for just helping the people to improve their residential situation. I think some decisions will be made here and, in some fashion, it will be a positive trend. In some fashion, everyone is trying to see. We projected mortgages -- new mortgages to decline year-on-year, but it can't continue this way. Everyone sees some kind of an improvement down the road. So there, the mortgages are one of the key markets. We have a big market share. We have a big share of the projects on the corporate side. So it is very important for us to see, and we've been trying to work with all the stakeholders to improve the situation.

Yes. And one more question from the same channel. Has there been planning for an optimistic scenario, perhaps with the sanctions getting lifted, and where the most important effect might come from?

Well, we have been looking at all kinds of scenarios. And when we talk about the lifting of all the limitations, we've got so much restriction -- we've got so many restrictions on the banking sector, on the economy, imports, exports, and importantly, all those restrictions were implemented by various countries and various packages. We've got some assets blocked and we made some reciprocal bouquet. It's a bouquet and unraveling the whole thing is too optimistic to see everything getting lifted. Only in fairytales you see scenarios like this. We can only see a gradual improvement of the situation. Until the restrictions of the Central Bank assets are lifted, there will be no other restrictions lifted on equity flows, et cetera. What we would like to see is the lifting of settlements at least, which has been materially affecting the actions of our clients and the bank overall. If that happens, that will be probably the first important step for us to see a certain effect, both in the economy overall and in the banking sector's performance. But again, there's so many sanctions that even this scenario, seemingly a little -- seemingly a small scenario would be difficult that really beg us belief to date. Let's see how things unravel. If the sanctions are lifted, the positive effects on our bank and the sector will be there.

And now I'm passing you over to the journalists' questions. Ms. [indiscernible], you have the question.

Yes, two questions. This year will be obviously less than simple for the banks. Do you think Sber might breach its own record? And the second question, when will the mortgage commissions will be lifted for the subsidized mortgages?

Yes. For the first months, we have seen a less than simple situation. You can't grow the profits as optimistically as last year in the sector overall. Yes, the performance in the first quarter was better than in 2024. And for the equity margins that we wanted, we are looking to do what we promised. Our policy states that we intend to pay out 50% if we achieve capital adequacy at, at least 12.4%. And for the first quarter, we saw a considerable improvement. Before we make the payment, we would like to -- we have to improve the adequacy a little bit more. So we recompense. But there's a lot of externalities, the ruble exchange rate, the dynamics in the securities markets, especially the bond market, how the loan portfolio grows, how they curate the mergers going forward, we can't promise in advance, but we will certainly be trying. We have a 3-year strategy, 2 years out of the 3, we stuck with the dividends. We gave the recommendation. Hopefully, the AGM supports our recommendation. We will try to do the same thing in 2025 on the dividends. As for the fees, I think it's somewhere in the offing. There is some decision on this account. We are doing the discussion with the government, with the other banks, how and when this can be done. And when the actual decision is made, we will implement the lifting of the fees.

[ Anastasia Savelyeva ], Interfax, the next question, please?

Can you hear me?

Yes, yes.

Right. You're certainly not revealing it, the performance of your nonfinancial business, but could you give us close -- a flavor of whether it is still loss-making or perhaps in some future time frame, you see the nonfinancial business generating some profit? That is the first question.

Yes. Well, we are working in a slightly different format with the nonfinancial companies. We are working with them as partners. And we see their performance improving generally. They did improve last year. They improved rather well in the first quarter. And I think every business is trying to break into a profit. And those companies are no exception. This is certainly a goal, and we will certainly be helping them in every way we can. We have certain investments in the business related to client loyalty. A lot of clients find it important to get at the same -- get nonfinancial as well as financial services from the same source. Those services are part of the Prime subscription. And those nonfinancial services are also mandatory for us in light of the current trends. We are incorporating those nonfinancials in our overall reporting one way or another. And as we go forward, we see the situation improving both for the companies themselves and for our investments. I can't really give you specific figures, but the overall trend is a good one. And generally all those companies will gradually break into profit.

Yes, yes. I've got another question. You responded to it in part. Yes, what is the expectation regarding the loan portfolio quality? You said that you will broadly hit the targets of 2025. On quarterly basis, you don't expect deterioration of the loan portfolio quality. But the second question is, you said it many times that the prospects for the liquidity situation are not there in terms of improvement. Is it the same situation? Could you tell us how much has the FX share of your portfolio shrank?

Yes, as for the loan portfolio is hard to add really anything to what I've already said. On the retail track, we can't really exclude some more deterioration versus the first quarter because the NPL trends exhibit a considerable lag. What we see today is still the optimal of 2022. As for the corporate versus the first quarter, there will definitely be a deterioration because you can't maintain a good cost of risk for the entire year. As for yuan, the situation generally stabilized, normalized back in the end of last year. And in the first quarter on some market indicators, we did not see a day when the situation came close to the problems that we saw in September or October 2024. The rates are sticking to very low levels and the actions of the Central Bank really made it clear to the banks that it does not intend to fund the banks and the active operations, active transactions really saw the banks cut the lending in yuan. And that really stemmed the deterioration driver. You can't really borrow in yuan these days. It's pretty difficult to borrow something significant. And this choice is pretty stable. Yuan is generally used for settlements as for the balance of rubles, dollars and other currencies. We have been continuously driving down the share of foreign exchange balance sheet. But right now, this is one of the information elements at the Central Bank precludes us from disclosing in our reporting, but we have not really seen much interest on the part of corporate clients or retail ones in replacing the status quo in currency. All the growth in labilities has been accounted for by rubles. And the decline has been just stemming because some clients have been keeping their funds traditionally in dollars or yuan and regardless of the rates regardless of any movement in the rates or exchange rates, they just stick with those deposits and do nothing with them. These clients are staying there, and we have not seen changes as radical as we saw in 2022 or '24.

Julia Koshkin RBK-- RBC, next question.

Hello, can you hear me?

Yes. Yes, we can hear you all right.

You gave some assessment of the quality of loans in retail. Could you give us more detail about what vintages have been performing better or worse? And how can this be explained? Those are -- others the ones that are boarded highlights or not. And how could you comment on the growth of share and volumes of NPLs and mortgages?

You can see that the report has been showing some growth on this track, although that was not a dramatic growth. But we have to say that when we talk about the shares or quality of the portfolio, Stage 3 loans in various segments, as you have said it on the mortgages, that affects, among other things, that is affected by the overall growth of the portfolio. In the first quarter, the gain was under 0.5 percentage point. And we traditionally -- so more NPLs falling out in the first quarter. In the first quarter, the overall mood is perhaps not favoring loan repayments. Some people just physically forget to repay, we see the same clients catching up in subsequent quarters. If we talk about trends, we can't really see money. If people borrowed at high rates in -- at the end of last year, early this year, they generally get exhibit higher NPLs versus the clients that have borrowed earlier. But even those, we see some clients, they service and service and then they just fall out and stop performing. And this is unexpected for us because we grew accustomed to those clients, repaying half a loan. It did repay half loan, why not perform half way. Situations vary. Sometimes some people leave to serve in the army during the special military operation. We freeze interest payments for those. We do other things for those. And well, the retail portfolio has been continuing to impact, getting impact. On mortgages, it was more about private residences, but flats, apartments, especially bought with government subsidy those are more stable. But unsecured borrowing in credit cards too, there is considerable growth of NPLs. We had envisioned that it was generally in line with our expectation. And we see -- we see that -- we think that there might be some more NPLs here. And that might happen over several quarters where upon it will stabilize and stabilize it, certainly will. Because our credit policy, our lending policy, really responded to the situation. We are modeling client behavior investor, we assess risk better, et cetera.

Thank you very much. Next question from [indiscernible].

Just a question about the risk, the comfortable level of risk for the NPL?

Our guidance was 1.5%. We said that the cost of risk will not be higher than 1%. Now for the retail some clients, it will be around 1.5%. Might be more than 2% but we think that we are in line with our guidance.

Next question as Tatiana Voronova, from media.

A question and a request for clarification. First of all, I would like to ask about the number of restructuring cases for us that the Sber Bank is committed to supporting the customers who require the restructuring of debt. How often does it happen? What is the amount like on average? And do you have the same practice -- practices in the -- for the retail and what is the amount of the loan? And what amount by the end of the year as a result? I'm talking about the restructured loans. Another question is that in your presentation, you see that the yield for some assets is -- was growing slower than the funding yields. Are you going to reconcile that gap? Here it's more about the margin. Another question of Anastasia about immobilized assets. So starting from 2022, we have seen that the bank to avoid -- some banks including Sberbank to avoid the sanctions were changing shareholders. And that includes subsidiaries of Sberbank. How are you going to form the portfolio of nonbanking assets because formally, some of the companies are not owned by you now. How are we going to do about that?

Thank you very much. As for the restructuring, if you talk about corporate portfolio, the shelf restructured loans is more or less stable. There are some customers who come for the second and third times but that's business as usual. Even if after restructuring a client cannot service the loan fully, we in advance create the required provisions. As for the retail customers, the share of restructuring is growing. But if you compare it to the end of 2023, the growth is like 0.5%, 0.6% maybe. So saying that restructuring is a large-scale problem that will eventually lead to worse quality, no, that is not the case. We have some regulations. During the Coronavirus, for example, that required the banks to restructure. I mean 80% of restructuring is done in line with this typical standard situation. 20% are some of the individual things. And I mean, we are personalizing the customer experience for that. But I mean, it's pretty stable. Pretty stable looking at previous quarters and this quarter as well. If you talk about the liabilities, costs and asset yields Here, the -- it's very important to understand how they correlate with each other, the assets and liabilities because the margin is formed not only from the yields and the costs, but also is driven by the reconciliation of the credit portfolio, the loan portfolio and the liabilities of the bank as well as the overall portfolio, but the margin reflects that. But given the trend to decrease the deposit rates that we have seen during the first quarter, we believe that the peak of higher liability costs has been passed. Even if there is some increase in the future, it is not going to be as significant as we've seen in the first quarter. And obviously, it is going to help us to feel more confident margin-wise. We do not -- I mean we started to decrease the rates for the mortgages, and we decreased the rates for other retail products, the corporate client rate and rates lower than those of 2024. So there is a reconciliation. The rates are going to go down gradually. This is how banks work. They have to ensure that they can work in whatever environment. The rates are low, the rates high, super high, maintained at the same level. Well, that's the market that fluctuates and we have to be in line with the market. And we know how to do our business, and we're making our work performance more efficient. As for the immobilized action assets, that's not really the work of the bank because in terms of the capital adequacy ratio and in terms of the other indicators that our regulators are monitors, regularly it's calculated properly. No problems at all here. We are talking more about the methodological factors like what should be included, how the immobilized assets should be calculated? And what share of the capital they account for? So these are the questions that are more important than some subsidiary companies because usually the major investments are made by the banks in the core financial business that help them to earn profit. So let's wait for the announcement of the updated methodology and the implementation period and deadline. I mean, we are going to calculate all of the ramifications and tell you whether it is a problem.

Thank you very much. It's been the second hour that we have been working. So the last question, Maria from RBC Investments.

Two questions. First about the key rate by the end of the year. When do you expect the key rate to go down? The second question is about the USD rates. Do you think that the previous second month -- previous several months formed the trend, more long term trend?

As for the key rate, we have not changed our forecast. We expected the key rate to go down in 2025. We think that it will happen in the second half of the year, and there will be -- there will be 1 or 2 decreases to the level of 19%, 19.5%. As for the USD rate, in our basic forecost, we expected it to be around RUB 100 in 2025. So the current depreciation of the ruble is in many ways driven by the external political factors and it's very hard to predict what will happen next. Currently, we are in line with our expectations. Recently, we have seen a forecast from the government and they also forecast that USD rate to be around RUB 100 for USD 1. So I think we're on the same page here, and our expectations are in line. But what will happen actually and what will be with the sanctions regime, what will happen with the trade after the possible easing or potentially tightening of the sanctions. It's very hard to predict because the current FX market has become very defragmented and this is the structure that makes it hard to predict the rate. Because even one deal, one small action, by small, I mean, you know, if you compare to the things that we had in 2020 to '21 might lead to a major decrease or increase of the ruble, like in one day, USD rate might go up and down by RUB 1, RUB 2, RUB 5, RUB 10. This is a situation that we are facing right now. We are committed to ensure our FX risks. So that if ruble is depreciated. We do not face major negative consequences. But our benchmark is RUB 100 per USD.

Thank you very much. We are closing our session. Thank you very much all the participants. Thank you for your exciting questions, and I would like to thank all the Sber team who made this call possible We'll see you in a quarter. Thank you. Bye.