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Vladimir Putin: Mr Gref, did you finish the first half of the year with a profit?

German Gref: Yes, Mr President, but unfortunately, the profit was considerably less than what we had last year. We finished the first half of 2014 with a profit of 186 billion rubles, but this year’s figure only comes to 81.5 billion rubles. Overall though, just having a profit at all is already good for a difficult year like this one.

The first quarter was very tough for us. Last December and the first quarter [of 2015] were tough, but the situation gradually began to improve over the second quarter. We see that demand for loans is starting to recover. Overall, over these six months, our lending to legal entities fell by around 6.5 percent, and lending to physical individuals fell by 0.5 percent. We have succeeded in maintaining lending to individuals at a stable level, mostly through mortgage lending, because this has been a good year so far for mortgage loans.

Vladimir Putin: You brought down interest rates on mortgage loans, didn’t you? What is the average interest rate now?

German Gref: The rate is currently at 12 percent under the state subsidy programme, taking compensation from the state authorities into account. Without compensation, it is 13 percent. As the Central Bank gradually brings its rates down, we are doing the same.

Overall, we have lent more than 250 billion rubles in mortgage loans since the start of the year, with state-subsidised loans accounting for 64 billion of this total. I must say that this decision [on state subsidised mortgage loans] has been a great help, especially over the first six months. If you had not taken this decision, we would have seen a very sharp drop of course, especially in the first quarter. This decision has helped the construction sector a lot.

Vladimir Putin: It is very good that such a steep drop did not happen.

German Gref: Yes, we succeeded in keeping the situation under control. As we see it, the situation will start to even out more or less over the second half of the year. In June, we saw slow but steady growth in lending to legal entities.

We saw a big increase in demand in the big business segment in June. We think this is deferred demand: the interest rates were very high, and so companies tried to avoid borrowing. Now, the interest rates are coming down, and demand for loans is starting to recover.

There is slower but nonetheless gradual growth from large, medium and small enterprises. Demand has not yet returned to last year’s level, but it is slowly growing.

Overall, we forecast that the second half of the year will be difficult, but without the sharp dips we saw in the first quarter and even in the second quarter. Things will not be easy, but we think that the situation will more or less gradually return to normal, so long as no sudden shocks come along, of course.

Vladimir Putin: Are deposits growing?

German Gref: Yes. The last quarter of 2014 and the first quarter of 2015 were a shock period for deposits, of course.

Vladimir Putin: Yes, you spoke to me about this.

German Gref: Overall, looking at households’ deposits, the increase was 7 percent as at July 1. This is a very good result, and thanks to this, we were able to return in large part the expensive money that we had borrowed from the Central Bank and were able to halve what we have been receiving from the Central Bank.

Vladimir Putin: You returned to the Central Bank the money that you had received from them as support?

German Gref: These were Central Bank funds that we received as temporary liquidity. We put them into state securities, which they bought.

Vladimir Putin: And you have returned part of these funds to the Central Bank?

German Gref: More than half. This money was expensive. This is our most expensive borrowing to date.

Vladimir Putin: Why is it so expensive? The Central Bank is your shareholder, why did they give you such expensive resources?

German Gref: They regulate lending and monetary policy, and of course they were forced to raise the rates, and this cost us our profits. We had three trillion rubles from the Central Bank, but now this is down to less than 1.5 trillion.

Vladimir Putin: This is a good evolution.

German Gref: Overall, yes.

As for the Central Bank’s policy, we see that they took a very firm line towards us, of course, but overall, they did help a lot to soften the circumstances and save the situation in general.

Vladimir Putin: Good.

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