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Edited Transcript of CBOM.MZ earnings conference call or presentation 27-Aug-19 2:00pm GMT

Half Year 2019 Moskovskiy Kreditnyi Bank PAO Earnings Call

MOSCOW Sep 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Moskovskiy Kreditnyi Bank PAO earnings conference call or presentation Tuesday, August 27, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eric de Beauchamp

Credit Bank of Moscow (public joint-stock company) - SVP of IR

* Vladimir Alexandrovich Chubar

Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board

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Conference Call Participants

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* Alan Ramsey Webborn

Societe Generale Cross Asset Research - Equity Analyst

* Ekaterina Sidorova

Sberbank CIB Investment Research - Senior Credit Analyst

* Nikolai Krassimirov Dimitrov

Morgan Stanley, Research Division - Research Analyst

* Ruslan Gadeev

Raiffeisen Bank International AG, Research Division - Financial Analyst

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Presentation

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Operator [1]

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Good day, everyone, and welcome to the CREDIT BANK OF MOSCOW 1H 2019 Financial and Business Results Conference. Today's call is being recorded, and now I would like to turn the conference over to Eric de Beauchamp.

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Eric de Beauchamp, Credit Bank of Moscow (public joint-stock company) - SVP of IR [2]

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Thank you very much. Good afternoon, ladies and gentlemen. We are pleased to welcome you today at the call dedicated to the 6 months of 2019 financial and business results of CREDIT BANK OF MOSCOW. In the course of our presentation today, our CEO, Vladimir Chubar, will give an update on the key financial and business highlights of reporting period, and I, Eric de Beauchamp, will present the financial performance of the bank more in detail. Our presentation will be followed by a Q&A session, and you are very welcome to ask your questions to our speakers. Now I turn the floor over to our first speaker. Vladimir, please go ahead.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [3]

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Thank you, Eric. Good afternoon, ladies and gentlemen. Welcome to our first half 2019 results call today. Commenting on our second quarter results, I can summarize that our performance has been stronger than in the first quarter, both on the income-generating front and on the quality of business though we are still a bit negatively exposed to certain factors, on which we will comment in detail during today's presentation.

I will start with Slide #2, and I will comment on the key business trends for the reporting period and our key achievements. In terms of the domestic market, our core business is dynamic, and in general, reflects the market trend with the retail business expanding following wider access to high-quality customers in the lowering interest rate environment, while on the corporate side, high-quality demand from our target niche of clients is quite limited leading to portfolio contraction. At the same time, our ruble-denominated portfolio is growing as our clients show more interest to local currency now, which is also a reflection of the general trend in the economy.

As for other businesses, our IB franchise is gradually growing and, as highlighted on this slide, we proudly achieved top 4 bond arranger position with 40 completed transactions from the year start. Our further outlook for business development is quite positive. We expect that our new corporate business development model will stimulate quality business growth, reinforced by IB products offering, while retail business will also expand in line with larger demand from our high-quality target segment.

First half of the year was also important for us as it was marked by first dividend payment ever for the bank with 25% of RAS income for 2018 distributed to our shareholders. International markets have remained quite positive in the second quarter in terms of interest to Russian risk, which is evident both from the volume of new issuances and secondary market trend levels.

Having tapped the market with the 2 consecutive senior Eurobond transactions in the first quarter, we secured our position of the most active player in the syndicated loan market from the CIS in the second quarter as we signed $0.5 billion syndicated loan facility with a wide range of banks from the U.S., Europe, Asia and Middle East. This transaction is unique for the Russian banking sector and is directed to finance international trade businesses of our clients.

I'm also happy to report that in the first half of 2019, CBM was twice upgraded by the rating agencies, both international and local ones. Evidencing success of our strategy, consistent and focus on the quality of business, Fitch Ratings upgraded the bank's rating in June to BB on the back of a better risk profile evaluation.

Apart from that, Russian rating agency, Expert, upgraded us to A level in April, also highlighting asset quality improvement, decreased pressure on the capital and strong business profile.

Now I will summarize key financial results for the period concerned. Please take a look at Slide #3. I will not dwell on all the trends and dynamics of all the ratios listed here, as Eric will provide detailed comments in the second part of our presentation, but I will mention a few important ones.

With a profit of RUB 2.2 billion in the first half of this year is still under pressure of the same factors as during the first quarter. First of all, we are technically negatively exposed to stronger ruble on the U.S. dollar-denominated perpetuals which is, nevertheless, neutral for the capital.

Secondly, higher provisions were charged in the first quarter for one of the large borrowers mentioned during our previous call.

Net interest margin has remained at the level of the first quarter at 1.9%, having lowered from the last year as a result of a larger liquidity buffer on the balance sheet of the bank and higher deposit interest rate.

Total assets have remained relatively stable at RUB 2.1 trillion, while loans to customers decreased by 4.7% to RUB 705 billion, largely affected by limited demand for loans from largest corporates.

Retail loans remained on an uptrend showing a healthy growth of 4.7% to RUB 101 billion. Loan portfolio quality is stable with the cost of risk improving to 1.7% comparing to 3.2% in the first quarter and NPL ratio hitting 3.9%, reflecting now total overdue debt of the same large client from petroleum sector. This loan is well provisioned, and we do not expect it to have any further negative impact on the P&L of the bank.

Now let's move to Slide #4, summarizing our business results for the reporting period. As mentioned before, downward trend in corporate loan book, namely 6% decrease, was partially offset by growth of retail loans by almost 5%, which resulted in retail loan book now making 14.3% of total loans.

Breakdown of the loan book by industries is presented on the right-hand side, evidencing well-diversified portfolio with the top sectors being petroleum refining making 24% of the loans; crude oil production and trading 20%; property rental standing at 11%; and residential construction at 9%.

Retail loan book breakdown evidences higher portion of mortgages of 22 -- 23%, while cash loans still dominate making 73% in total retail loans. Strategically, we're still focused on high-quality business growth and have positive outlook on further market opportunities to implement our growth strategy.

Now I pass the floor to Eric who will further comment on financial performance of the bank. Eric, please go ahead.

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Eric de Beauchamp, Credit Bank of Moscow (public joint-stock company) - SVP of IR [4]

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Thank you, Vladimir. I would like to draw your attention to Slide #5 with a detailed overview of the bank's income and expenses. On the bottom left diagram, we see that interest income increased by 5% in the first half of 2019 in the context of unchanged asset structure.

The net interest margin decreased year-on-year from 2.9% (sic) [2.7%] to 1.9%. This ratio remains under pressure due to on one hand large proportion of low risky highly liquid assets; and on the other hand, increased competition on the market.

Diagram on the left reflects negative dynamics of operating income in the first half of 2019. Total operating income was down by 46% at RUB 15.7 billion caused by a decline of net interest income from RUB 23.8 billion to RUB 19 billion and the net loss of RUB 8.9 billion of the other net income item. The main part of the net interest income decline was due to interest expense growth in the first half of 2019.

Also net loss primarily resulted from foreign exchange losses in the first half of the year. Accounting specifics of foreign currency evaluation on a perpetual Eurobond brought a RUB 4.3 billion negative effect to the bank's operating income due to ruble appreciation in the first half of the year. At the same time, an accounting posting of the same amount positively impacted the retail earnings.

Net fee and commission income remained at the similar level year-on-year. On the upper right diagram, we can see that operating expenses grew by 18%. The main driver was salaries and employment benefits which increased by 27% to RUB 7.8 billion. Administrative expenses decreased by 20% to RUB 2 billion, which was mainly the result of efficient cost cutting.

Now let's move to Slide #6 with a breakdown of the bank's total assets. Total assets stayed almost flat year-on-year at the level of RUB 2.1 trillion. 67% of total assets are represented by highly liquid assets. 74% of the securities portfolio are represented by top tier, highly liquid, investment-grade debt securities and serve as a part of the bank's liquidity buffer. The total amount of additional unused liquidity sources comprise a very significant buffer of roughly RUB 700 billion, which components are detailed on the right-hand pie chart. These namely are unpledged securities, which the bank received under reverse REPO transactions and owned securities belonging to the CBR Lombard List.

Now I suggest turning to Slide #7 on the loan portfolio quality. The portfolio risk metrics generally remained stronger in the first half of the year. As described on the upper left diagram, gross loan portfolio decreased slightly, while coverage by income and allowance increased to 5.5%, being at sufficient level given loan portfolio quality.

As shown on the upper right diagram, the impairment allowance provides a comfortable coverage of NPL of 142%. This ratio decreased quarter-on-quarter, mostly due to reclassification to NPL of one large corporate loan from the oil sector. As it is shown on the diagram, NPLs to corporate customers increased from RUB 15 billion to RUB 24 billion in the first -- in the second quarter of this year.

Cost of risk and NPL ratio dynamics are presented on the bottom left diagram. The increase of NPL up to 3.9% is mainly due to worsened credit quality of this corporate. The cost of risk decreased from 3.2% to 1.7%, which is closer to the normalized level we anticipate for the bank. The bottom right diagram depicts the level of related party lending, which is stable at the low level.

Now I suggest turning to Slide 8, where loan portfolio classification in accordance with IFRS 9 is provided. In the diagram, you can see the breakdown of corporate loan portfolio at amortized costs into 3 stages plus the category of purchased or originated credit impaired. The dynamics evidenced see the improvement of corporate loan portfolio quality year-on-year. The share of Stage 1 loans increased from 83.6% as of June 2018 to 90.5% as of June 2019.

At the same time, the share of Stage 3 loans, being the most risky segment, decreased from 11.5% to 4.4%, due to the effective impaired loans management.

The next slide, #9, provides the breakdown of loan portfolio risk metrics on corporates and retail loan portfolios. On the upper left-hand diagram, gross corporate loan portfolio decreased by 6.1% in the first half of this year, which is basically due to foreign currency revaluation.

Corporate loan portfolio denominated in rubles showed a growth in line with the market trend. Coverage by impairment allowance reduced to 141% as the NPL increased to 3.9%, mainly due to a large corporate oil refinery loan. The transfer of that loan to NPL category during the second quarter of 2019 was not coupled with creating additional provisioning as sufficient provision level has been already accrued in March this year.

On the bottom left diagram, corporate cost of risk increased to 1.4%, mainly due to additional provisioning of 2 big car dealers.

In the right part of the slide, you can see retail loans portfolio risk metrics. NPL ratio demonstrated a continuing downward trend year-on-year and decreased to 3.7%, which mainly resulted from the improvement of mortgage loan NPL as that decreased down to 2.5% of gross mortgages loan.

NPL coverage increased to 148%. Cost of risk went up to 4% due to write-off of nonperforming loans, in line with the bank's accounting policies.

Now let's move to Slide #10, which illustrates the funding structure of the bank. Total liabilities remain flat. In the reporting period, the bank achieved good results in diversification of its funding base by attracting retail deposits that reflects strong bank's reputation in the market.

The deposit base, which accounts for more than 60% of total liabilities, increased by 5%. The bond issued line increased up to RUB 155 billion, reflecting the 2 Eurobond issuance of the first quarter. Debt repayment schedule is comfortable for the bank with the bulk of wholesale funding due from 2023.

Deposits by credit institutions were mainly represented by REPO transactions, which accounted for 84% of overall interbank balances. The balances are utilized for REPO business purposes, so the dynamic is totally in line with interbank business demand.

Now I suggest turning to the final slide, #11, on the bank's capital position. IFRS capital developments are depicted on the upper diagrams. IFRS total capital slightly decreased to RUB 290 billion due to the revaluation of subordinated debt denominated in USD, Tier II [in 81] and a slight increase of risk-weighted assets during the first half of this year.

On the bottom right graph, the dynamic of Russian Accounting Standard capital ratios is shown. Regulatory minimums, including buffers applicable for systemically important banks, were by far overtopped with N 1.1 reaching 8.8%; N 1.2, 12.1%; and N 1.0, 20% as of the 1st of July 2019.

These were the main highlights of the bank's financial and business results for 6 months of 2019. Thank you very much for your attention, and now let's proceed to the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll go first to Alan Webborn of Societe Generale.

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Alan Ramsey Webborn, Societe Generale Cross Asset Research - Equity Analyst [2]

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I think clearly we were a little bit disappointed to see what was happening on the corporate side in terms of lending growth. Your margin was quite a bit sort of lower than you were sort of suggesting it, it could move to after a fairly weak Q1. And again, you've had the sort of, I guess, the noncapital impact issue on the sort of trading -- on the trading side, again. I guess what would be interested to know is that still, however fast you grow your retail, it's not going to compensate for a lack of opportunities that you want to take on the corporate side. So I think in Q1, you suggested that you could see still positive growth in the loan book for this year, sort of 7%, 8% is what you said and that would now look not practical. I know you did say that there was quite a good pipeline in Q1 -- after Q1 and that again doesn't seem to be sort of evident particularly, although I appreciate what you said about the growth in the ruble book. So could you just sort of describe how you see the business environment, what you think the pluses and the minuses are and is frankly 1.9% margin? And I appreciate the difference in the way you look at things, but is that the reality for the moment? That would be helpful.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [3]

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Alan, thank you for the question. Answering your question, I can say that I just can confirm the forecast, which we gave in -- on the last call. Of course, the second quarter was not, let's say, the mirror of this -- of the forecast I gave to everyone on the call last time. But seeing what we have now and what we're doing now, I just can confirm the forecast we gave last time in terms of the loan growth, in terms of other metrics. So they are still actual.

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Alan Ramsey Webborn, Societe Generale Cross Asset Research - Equity Analyst [4]

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Okay. And what gives you confidence, that -- is it relates to the fact that interest rate is coming down? Do you think that's going to have a positive view on your margin? Are there deals that weren't executed in the second quarter that you think will come through? Just give us a feeling as to what gives you that confidence when clearly the bar is now a bit higher?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [5]

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Just as I said on the previous call, we see some demand. And actually, the problem was that this demand just moved a bit further. So now it's end of August, and when I'm saying my word that I can confirm the previous forecast, I'm just taking a look at what we have now and using this. So that's why I am still a bit confident that the figures I gave last time and in the beginning of the year, they're still figures which we can use and which we can think about.

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Alan Ramsey Webborn, Societe Generale Cross Asset Research - Equity Analyst [6]

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Okay. And just also on the sort of retail side of the business, do you think that there's going to be any impact from the regulatory changes that will come into force in October? Or is that not really the business that you're focusing?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [7]

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For us, that's quite minor because we are not in a pool of the banks, which are, let's say, aggressive with the rates or with some other products. So for us, we count that this is quite minor change, so it's not material even for our business model in retail. Of course, there is impact, but it's not material for us to make any changes in business model or to make any changes in our forecast.

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Alan Ramsey Webborn, Societe Generale Cross Asset Research - Equity Analyst [8]

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Okay. And I guess sort of final question. Maybe a little bit of an update on the cash management business and how you feel that is going? How the fee income is behaving in an area? That would also be interesting.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [9]

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Look, I just cannot remember if I mentioned last time that we're on track to move all the cash-handling business from the bank to our subsidiary, Inkahran. If I didn't mention, I can say this now. The process was finished in mid-May. Currently, we do not have any cash-handling business in the bank. It's almost to Inkahran, our subsidiary. And actually, this really gives me a lot of comfort in terms of the, first of all, control of the expenses and have all the expenses in one place. This is number one. Number two, in terms of the clients, of course, we lost some customers. We calculated it was about 10% loss of our customer base during the move from the bank to Inkahran, which, of course, was not good honestly. But it's better than we expected because the expectations, they were a bit higher.

So in terms of the forecast of the fees, we think that if we gave any figures in the beginning of the year, we can confirm them. If not, I just don't remember if we discussed this on the previous calls. So we think that it will be decreased in comparison to the previous year because, as I said, we lost some of the customers. But at the same time -- I am saying more about corporate customers, but at the same time, we see now good trend in terms of attracting more banks, more financial institutions to be our customers in this business. So this trend started some years ago, and it's more and more actual even this year because more banks making decisions to have -- do not have their own cash-handling business and using some outsourcing companies like we are.

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Operator [10]

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(Operator Instructions) And we'll move next to Nik Dimitrov at Morgan Stanley.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [11]

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I have a quick question regarding asset quality. So NPLs continued to tick up and reached 3.9% from 2.5% in Q1 2019. And if I remember, kind of the big driver for the increase in NPLs in Q1 was the Antipinsky refinery, which you said was like 80% provisioned and there was collateral. So what is driving the increase from 2.5% in Q1 to 3.9% in Q2? Is it still that credit or there is something more going on?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [12]

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Nik, thank you for the question. Yes, it's the same loan. It just moved from being not overdue to being overdue because the contractual tenor was in the second quarter to pay back. So that's why technically they're overdue, just happened in the second quarter. So it's the same trouble, the same loan, which it just moved from being not overdue to being overdue.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [13]

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Got it. Got it. And I was looking at your Stage 2 loans for the corporate part of the book. And I noted that a bunch of loans migrated, and I'm talking about within the Stage 2 part of the book, from moderate risk to high credit risk, which to me implies that there is a very high probability they're going to go into Stage 3 or NPLs next quarter. Is that a fair assumption? And what is your outlook for credit quality in Q3?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [14]

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Look, I think it can be fair because, as you know, we have one of the car dealers, which are feeling not so well, not so well as we want this customer to feel. And now they are in Stage 2. And I think we're saying about them that the risk is higher and actually, as Eric said in his part of the presentation, that one of the drivers in making more provisions in the second quarter was the car dealer and -- because we feel ourselves not so comfortable. At the same time, the sector is doing not so bad. So I mean the overall car sales in Russia, and -- but at the same time, with this customer, we think that we should be more conservative.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [15]

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Understood.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [16]

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I must say, let's say, 100%, it will just go through Stage 3. But of course, it can happen, and you're absolutely correct to say that if the risk is higher, of course, the risk -- I mean if the risk profile of the customer is higher, the risk of moving this customer to another stage is higher. But at the same time, as I said, we are not expecting some extra or some, let's say, material provisions for this customer. And it can be even other, look, because Stage 2 and Stage 3 provision model is a bit different, and it can even be better provisions in the Stage 3 because it's another model, which is using for the Stage 3 customers.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [17]

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Got it. Got it. That's very helpful. Just going back to the net interest margin. So it remained stable at 1.9% in Q2. I think you kind of guided -- and I know you tried to address this question previously. But I think you guided for a NIM of 2.3% to 2.5%. Is that guidance reachable at this point, considering the fact that we're well into 2019?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [18]

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I -- currently I think, yes, the lower end of my previous forecast. And actually, yes, because now it's really already the end of August and what I see now from the current situation in the portfolio and the loan book with the margin with some other transactions. So yes, I think it's reachable. Of course, we'll see this by the full year results. And yes.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [19]

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Got it. And one last question on operating expenses. And I kind of tried to break down your numbers on a quarterly basis, and it did seem like OpEx continued to increase at a fairly kind of high rate year-over-year. And we know that the revenue side is kind of being challenged, so obviously, that is impacting efficiency. But it does seem like OpEx increased by almost 35% quarter-over-quarter. Is that like a one-off thing? Or what's driving? This is a pretty high rate of increase.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [20]

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Yes. You're absolutely right asking this. More relevant to the first quarter to compare and -- I mean to make the forecast for the third and fourth quarter. It's much more the one-off thing. Of course, you know the second quarter usually it's time to pay some bonuses to people in the bank and, of course, it was mostly because of this.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [21]

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Okay. And I apologize, one last thing on capital. So you did say that you paid out dividends to the shareholders. So your previous target in terms of how you want to manage the N 1.1 ratio versus the statutory minimum considering the fact that it's going up as of January next year.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [22]

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Say again the question, please.

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Nikolai Krassimirov Dimitrov, Morgan Stanley, Research Division - Research Analyst [23]

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Just on capital, the N 1.1 ratio. If you can kind of remind us how you want to manage it versus the statutory minimum?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [24]

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Yes. The minimum which we are currently seeing from the CBR is 8%. Our guidance was to be around 9%. And currently, I just can confirm that we are still on track with this guidance.

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Operator [25]

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(Operator Instructions) And we'll move next to Ruslan Gadeev at RBI.

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Ruslan Gadeev, Raiffeisen Bank International AG, Research Division - Financial Analyst [26]

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I have a question concerning your transaction to take over almost 20% of this pharmacy chain company, 36.6. Could you please provide a little detail on that one because if I heard correctly, the financial statement -- you account for that one as investment at fair value of roughly RUB 11 billion. And in this regards, what are your expectations for the company's performance going forward?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [27]

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So I'll respond. Thank you for the question. So look, of course, we are not in a position to comment the performance of the company now. I'll try to answer your question in a bit different way. So we're -- yes, absolutely right saying that we are now the owner of 19.65% of the company. We are not in a position to sell this stake within next, I can say, a year maybe or maybe even more because, of course, we are more -- see the future of the company more positive than now. And, of course, we are not in a position to manage the company. It's very important for us we're only financial investor, but we are not in a position to, let's say, manage the company or influence somehow the management. For us, the most important thing, of course, is to monitor the company to see how they perform and our last discussion with the management, which happened just not far from now, make -- made us quite positive in terms of the future of the company. And all the steps which current management and majority shareholders are making are quite good, what we see now. And I think that the company being a huge player in the Russian market, is still in a good shape to increase even now the market share, and, of course, is number one. And number two, of course, is to work with the expenses, work with the efficiency is also one of the main targets of the company.

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Operator [28]

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And we'll go next to Ekaterina Sidorova at Sberbank.

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Ekaterina Sidorova, Sberbank CIB Investment Research - Senior Credit Analyst [29]

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My first question is about this quarter, I appreciate that the growth in NPLs was due to crystallization of NPLs by Antipinsky oil refinery. Still if you look at loan loss provisions of NPLs, its historical is a bit low, it stands at 140 and in terms of coverage of one day plus overdue, it's still again low versus historical numbers. So how do you assess best quality at this level since don't you think that some potential future programs could require some additional provisioning going forward?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [30]

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Thank you for the question. First of all, answering, I will start from this. We see that -- you're absolutely right saying that there is a historical lower level. It really shows the current quality of the portfolio in general and the quality of, I mean particularly, the corporate loan book. The loan which we discussed quite deeply on the last call, Antipinsky oil refinery, of course, is the major problem now in the portfolio. And as we said before, it's almost fully provisioned, which I personally think a bit more conservative than it should be, but at the same time, we decided not to argue with auditors with this level of provisions, let's say, to be on the safe side, to be more conservative.

And in terms of the future provisions, in terms of the future troubles, we -- as I said, we see that the current level is absolutely fair in terms of coverage of provisions to overdue loans. And currently, I don't see any new troubles. As I said answering the previous call about the car dealers, we potentially might have more provisions on this sector, in general, but currently, I don't see that it should be something like this because might be that's currently provisioned well. Of course, in the beginning of the fourth quarter, when we'll start to work with the third quarter review, of course we will look at these borrowers quite deeply, and we'll decide if the current level of provisions is fair or not. That's all.

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Ekaterina Sidorova, Sberbank CIB Investment Research - Senior Credit Analyst [31]

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Okay. And my second question is regarding your -- the growth of corporate loans. So you're saying that there is a pipeline of corporate loans. At this moment, are these new borrowers or existing borrowers, could you share some...

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [32]

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It's a mix. It's really the mix and it's new borrowers, it's old borrowers. And of course, when we're saying about old borrowers, it's mostly the companies from, I mean top Russian names. And when we're saying about new borrowers, of course, it's mostly the mid companies because, of course, we know and we can say about all big Russian names that they are our existing borrowers or our previous borrowers in the past. So of course, we know them quite well. And the new companies, they are making more, let's say, mid-volume loans and mid-volume limits.

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Ekaterina Sidorova, Sberbank CIB Investment Research - Senior Credit Analyst [33]

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And my final question is about retail lending growth. Could you please, once again, share your forecast of your target share of retail loans in the total portfolio? Are you looking at the new [POCI] regulation and to what extent it will limit your appetite in the sector?

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [34]

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Yes. I answered it already on this -- I mean on your second question about if it's a little -- if new, let's say, outlook of the regulator to this loan can create any changes in our will to grow, I can just say, once again, no, we don't see that it can limit us now. In terms of the forecast until the year-end, as I said before, it's up to 20%, it's the area we can grow our retail loan book this year and mostly the same areas, the consumer lending -- general consumer lending and mortgages, even more for the loans.

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Operator [35]

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And there are no additional questions at this time. I will turn the call back over to our speakers for any concluding remarks.

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Vladimir Alexandrovich Chubar, Credit Bank of Moscow (public joint-stock company) - Chairman of the Management Board & Member of the Supervisory Board [36]

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We just want to say thank you to everybody who participated on this call as usual. And have a good day to everyone.

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Operator [37]

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And once again, that does conclude today's conference, and again, I would like to thank everyone for joining us today.