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President of Russia Vladimir Putin: Mr Kostin, how are things going? What’s your view of the general situation and how is your bank doing at the moment? Of course, I would like to hear above all about your total loan portfolio and the relations you are building with clients, the Government, and the Central Bank. 

VTB Bank Chairman and CEO Andrei Kostin: Mr President, first of all, the big priority as we see it is to provide credit to the country’s economy and people, and in this respect, I can tell you that VTB Group’s loan portfolio is growing faster this year than it was last year. 

Our loan portfolio has increased by 18 percent since the start of the year and comes to a total of 7.8 trillion rubles [more than $202 billion], which is approximately double the estimated figure and roughly twice higher than average development on the Russian market as a whole. To compare, our portfolio grew by 21 percent over the entire year last year, and so we are clearly seeing a positive dynamic at work here.

We have already gone some way towards replacing lending sources that Russian companies for various reasons have not been able to obtain abroad, and we see that Russian banks, including VTB Group, are able to meet the demand for loans in the Russian economy’s real sector.

As for work with households, our main focus here is on housing mortgage loans, and our mortgage portfolio has grown by 23 percent since the start of the year. This is also a dynamically developing segment. We will continue our work in this area.

But the international situation and the situation with our bank in Ukraine are having an impact on us and are causing us some losses. This will affect to some extent our bank’s profits. Overall though, the bank is operating in steady and stable fashion and we are providing full service to our customers.

The Central Bank and the Government are taking sufficient measures to ensure the banking sector, including VTB Group, has the liquidity, capital and everything else it needs. 

Vladimir Putin: You mentioned your activities in Ukraine, are you having problems there?

Andrei Kostin: Mr President, there are problems of course linked first to the sharp downturn in the economic situation in Ukraine, the negative growth and rapid devaluation of the national currency, the hryvnia. The general political situation and the war in Ukraine have led to a sharp drop in payments discipline. 

We are currently receiving only half of what we are owed in payments on loans. Our losses since the start of the year already come to around 26 billion, and I think this will double by the end of the year.

Vladimir Putin: 26 billion what?

Andrei Kostin: Rubles.

We need to add to this the acts of vandalism against our offices and the direct threats made against our employees. Of course all of this shows how difficult a working environment it is there and how complicated a climate. 

But we think that it is too early to talk of halting our bank’s activities there. We plan to continue our work there, despite the quite serious difficulties we have been facing.

Vladimir Putin: Yes, you should certainly continue this work, all the more so as Russian banks hold more than 30 percent of the market in Ukraine’s banking sector, and if we pull out of this market this would indeed be an added and quite serious blow to Ukraine’s economy. We have no interest in letting this happen.

It is in our interests to have a reliable and stable partner, therefore, regardless of the difficulties you face, you should continue your work, all the more so as, as far as I understand, you have a good partnership relation with Ukraine’s Central Bank.

Andrei Kostin: Yes of course, we will certainly continue our work, Mr President.

Vladimir Putin: You mentioned work with customers here and your ability to act as a replacement for the loans that our economic actors need. They were previously turning to markets abroad for this money. We are aware of the problems that can arise if economic actors do not comply with financial discipline and fail to monitor their level of debt. You are working with clients too. 

Of course they all need to be aware that when it comes to problems that arise not as a result of political events but are caused by their own economic and financial activities, in accordance with market laws, they must take responsibility for this burden themselves and need to keep this in mind at all times and never forget that this is the case.

Andrei Kostin: Yes, this is very important, Mr President. This is a perfectly fair approach. We do indeed have cases when not all of our customers fully take into account the situation on the market, all the more so on the international market. Of course there are a number of clients who have taken on too high a level of debt and then try to either get support from the state or get a special deal from the banking sector.

But it is very important to respect banking and payments discipline. Overall discipline is essential and everyone needs to be responsible for themselves. I think this is the right approach to take at this time, and this is the approach we will follow.

Vladimir Putin: What you just said now is a key point – all economic actors must follow this approach.

Andrei Kostin: Yes.

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