Sberbank has been growing strongly. How are you going to maintain your recent growth? We are a universal bank, and we achieved this in 2000. In 1996 corporate clients represented 5% to 6% of all our liabilities. Now it is about 30%. It is a hard job to increase it further, but we want to try. The competition in the corporate banking sector is the most fierce. We published our new concept, accepted by shareholders in June. The first concept was quantitatively to become a universal bank, now it is qualitatively to become a universal bank. The main guideline of the new concept is the qualitative improvement of our products and services and the whole financial strategy of the bank is linked to this end.
You are increasing lending in the real economy. The government wants this. To what extent is the bank a government agent?
We do it not only because it is government policy. At present I must say that we have no special interests, no special advantages to [lend to the real economy].
Our share in the real sector is about one-third of all credits provided. So we have no real advantages, in taxation or anything else, regardless of what kind of credit you give – 15 days to some retail shop, or over several years to some huge plant with big risks – it doesn’t matter.
Are you satisfied with the quality of your loan portfolio? It’s often argued that state banks are relatively poor performers when it comes to assessing loan risk because they are subject to political pressure.
This is the sheer prejudice of the international financial institutions, which don’t like public sector banking on principle. The short history of the Russian banking system shows quite the opposite. The banks that were consistently dynamic, creditworthy and reliable during the hard financial crisis of 1998 had shares owned by the Central Bank of Russia (CBR).
It is another myth that it was because the CBR supported them so strongly that they were able to overcome the crisis. There was support, but if we compare this support with what the commercial banks received from the CBR the comparison would show that the banks with state involvement proved to be creditable and solid financial institutions, because of their management, their risk control and so on.
This was not the case in the commercial banking sphere. For example, the IMF selected 18 banks [as examples of some of the best and strongest banks in Russia before the crisis] and I think that only two of them survived.
We enlarged our credit portfolio in recent years. During 1999 we increased it 3.4-fold.
At the same time the absolute increase of the problem loans and bad loans decreased and its share is now 2.5% [of assets] which is quite acceptable on an international basis. [The reference is to figures audited by PricewaterhouseCoopers.]
The argument that creating a real-sector economy is the prerogative of commercial banks is false. The biggest banks by capital are Sberbank and Vneshtorgbank (VNT). If someone were to deprive us of this function, of creating a real-sector economy, what other bank could replace us, taking into account that their capital is much less than ours?
How does your dominant market position affect your business?
We have 85% of the rouble deposits. It is an important distinction – if you take both rouble and hard currency together [our market share] decreases to 75% as in hard currency we have less than half [the market]. If you take the rest of the market segments then they are not higher, so we are not monopolists in any sense.
Let’s be fair is what I say to competitors that raise this problem. The habit of 85% of private deposits banking being with Sberbank is a natural monopoly of habit. The bank is 159 years old and has the biggest affiliation network of 23,000 branches. Other banks don’t have this affiliation network, which decreases their costs. At the same time there are a lot of regions where no-one wants to compete with us, where there are no other banks.
Doesn’t the government guarantee of state bank deposits give you an unfair advantage?
There was a declared guarantee to all banks with a state share of 50% plus one share. So the same guarantee is enjoyed by VNT and some other banks that have government stakes but that are not active in the retail business.
This guarantee imposes on the bank certain rules of conduct. The commercial banks don’t have these restrictions. The commercial banks do not have a special guarantee fund that we have. It is not enforced as some sort of state privilege, but is funded every year out of our profits.
We support two possible approaches. First, the elimination of any kind of state guarantee – which is an approach more or less supported by the CBR. Nowadays the central banks of other countries effect this guarantee through increased transparency for commercial banks and through tighter supervision and control. Alternatively, there must be a unified system of guarantee for all commercial banks that meet the requirements of the CBR. It must be an earned guarantee.
Isn’t a more commercialized bank the best way to ensure that the banking sector is efficient?
I agree with this. If at present the banks with state share are becoming stronger it is not a problem to be afraid of. They are raising their capitalization, they are becoming more interesting for strategic investors. After a period of time, as the whole banking system gains strength, the government and CBR will sit down and decide if it needs to have a control or blocking share.
I think it will take 10 years to develop the new Russian banking system. It is an excessive approach to have a developed banking system at once. I think evolution is better than revolution. We have had a lot of revolution in our history. And in banking as well. Revolutions did no good. There must be a gradual growth of all banks – both those that have a state share and those that don’t. And in five years it will be quiet a different picture. After five or 10 years it will be time to decide.
