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President of Russia Vladimir Putin: Mr Kostin, I would like you to start with the bank’s performance last year. And then we will talk about the issues I consider very important, which I raised in my annual Address to the Federal Assembly.

Let us begin with your performance results.

President and Chairman of VTB Bank Management Board Andrei Kostin: Mr President,

The year 2018 was quite successful for the VTB Group. Our net profits calculated under Russian Accounting Standards increased by 130 percent to 231 billion rubles. According to International Financial Reporting Standards, they grew by 50 percent to 180 billion rubles.

Both figures are record high for the bank; they show that the financial market is quite stable and there are good conditions for banking.

Our corporate loans portfolio increased by 15 percent over the year and reached 8.4 trillion rubles. SME loans were growing especially rapidly; the growth was 20 percent.

Overall, our performance last year was satisfactory. We hope to keep up this positive trend this year.

Vladimir Putin: One of the issues I focused on in the Address, which I would like to discuss with you, is mortgage lending.

Andrei Kostin: Mr President, we are highlighting mortgage lending, as per your May 2018 Executive Order and your Address to the Federal Assembly.

I told you a year ago, in February 2018, that our mortgage portfolio equalled 1 trillion rubles. Since then it has reached 1.4 trillion rubles.

We issued 300,000 mortgage loans last year and plan to issue 425,000 loans worth a total of 1 trillion rubles this year.

We realise that the task you have set is to lend mortgages at the lowest possible interest rates. We currently keep the rate at around 10 percent, and we think that the economic situation in the second half of the year will allow us to lower the mortgage rate.

We are working on achieving the goal you have set for the medium term, a 9 and 8 percent interest rate.

Vladimir Putin: The reduced interest rate should be 6 percent for families with two and more children, with the government subsidising the rest.

The task for your bank and the other financial institutions is to issue loans at a net interest rate of 6 percent, without advancing any conditions or forcing any additional services on the borrowers. This is essential.

After all, it does not matter to the people who offers them the incentives. If they have to pay more, they do not care about who made the decision.

Andrei Kostin: Mr President, I see what you mean. I will personally supervise this aspect. You are absolutely right. Of course, we must focus our attention on families with many children and low incomes.

Vladimir Putin: Please do. I will also discuss this matter with the Central Bank so that they also monitor the financial institutions’ activity in this sphere.

And lastly, one more question, the financing of housing construction. We are holding discussions on this issue in the context of transitioning to a new system of operation in this sphere. What can you say about this?

Andrei Kostin: Mr President, it is a very important question. We must preclude the negative effects on housing equity holders, which is why we are closely monitoring this aspect.

We believe that our construction loans portfolio, which now equals 300 billion rubles, will increase by at least 150 percent within three years.

We plan to open some 25,000 escrow accounts this year. We are aware of the banks’ responsibility in this connection, which is why we are doing all we can and also offer financing towards this end.

In particular, we have invested around 1 billion rubles in infrastructure. We are hiring additional personnel to ensure proper control of this system.

I believe that we will fulfil this task and that we will be able to provide the necessary financing for developers starting July 1, when the law comes into effect, so as to keep up the construction process.

Vladimir Putin: How many such accounts should your bank open in the next few years?

Andrei Kostin: The target this year is 25,000 escrow accounts. I believe the figure will grow several-fold in the next few years.

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