Transcript of the beginning of the talk:
Vladimir Putin: Let us begin at the beginning, and summarise last year. We have frequently discussed the problems of your bank and the entire banking system, with an emphasis on the necessity of increasing corporate and private loans.
There is another problem, closely related to it. I mean bad debts, which remain to this day among financiers' worst dangers.
Let us also take stock of profits obtained in 2009.
Andrei Kostin: You are quite right, it was a harsh year for bankers and other financiers. We drew up the year's preliminary financial results on national accounting standards for a first time yesterday.
They were better than what we expected a month or two ago. The net profit of VTB, the main bank, was 28 billion roubles.
Vladimir Putin: So much for last year. And how much did you make the year before?
Andrei Kostin: Approximately the same. We were certainly doing b etter in 2007. Anyway, we preserved the previous profit rate though 2009 was tougher on us than 2008.
Vladimir Putin: But you have surely stocked up more?
Andrei Kostin: Yes. We managed to get bad debts in check in the second half-year, so our loss reserves were below the planned target.
Our loan loss provision makes 6.4% for today, thrice more than a year ago. Not that it threatens steady development of VTB. More than that, we do not expect any unpleasant surprises from bad debts because, as I have said, we are keeping them in check. Though they might grow, we know the problem, and it is unlikely to get out of control.
VTB remained Russia's largest taxpayer throughout the year-more than ten billion roubles to the budgets of all levels. Our arms made another 15 billion roubles net profit. The bank has several affiliates based in Russia-VTB 24 deals with private deposits, VTB Capital with investments, and VTB Northwest is the former St Petersburg Promstroibank [industrial construction bank-Tr.].
So the year's financial results are tolerable, and we are optimistic about this year. We think the bank will make profits no smaller than in 2007, the fattest of recent years. More than that, we regard 2009 as a year of post-crisis development and progress.
We are reconsidering our strategies to shift emphasis to mid-sized business, mainly of the regional scope. It is underfunded the worst now, while big biz can make do with other financial sources. That is why we intend to double or even treble the volume of our deals with mid-sized companies this year.
Vladimir Putin: Has your portfolio increased?
Andrei Kostin: Yes, by total 11% last year, though it is less than we expected. We are setting more ambitious targets for this year-a 25% increase for private deposits.
Vladimir Putin: What are your interest rates now?
Andrei Kostin: We are steadily reducing them, just as the Central Bank is. This concerns not only new loans-we are reconsidering loans made at the peak of the crisis, when the rates were exorbitant. We are bringing them into balance with the foreign market. If the government is success with its anti-inflation measures, as it has been for today, the rates will eventually slide down to the pre-crisis level, I think.
Vladimir Putin: What's your present-day average rate?
Andrei Kostin: From 10-10.5% to 11% for large companies, and 14% for smaller ones.
Vladimir Putin: Your clients have heard the rate will be 9-10%, so they will ask whether they can borrow on this interest at once.
Andrei Kostin: Believe me, we are lending! I have merely said we divide borrowers into categories. We will certainly lend not only to corporate giants.
Vladimir Putin: We should certainly reckon with the economic situation. We should by no means undermine the banking pillars but you should check your policy against economic needs, and the stance of the Central Bank and the federal government.
Andrei Kostin: We see it all, especially due to sizeable government aid to banks, including VTB, during the crisis. This aid was the principal reason why the bank retained stability, so we surely reckon with clients' interests and national economic needs-not only with our bank's interests. I think we will go on the same way this year.
Vladimir Putin: How much have you received?
Andrei Kostin: 180. Now, our portfolio has increased by 50%, and amounts to 270 billion roubles.
Vladimir Putin: Were you also success in the stock market?
Andrei Kostin: Yes, we established an investment bank by way of an experiment at the end of 2008, when the crisis had reached its height in the West. We did it because Russia had no big dealers in the investment servicing market, which American and European bankers had monopolised.
We were success, I think-the bank made six billion net profit last year. We have investment arms now not only in Russia but also in London, Dubai and Singapore.
We will start New York and Hong Kong offices this year, so as to involve all basic financial centres in the work of our investment bank, which is effective enough-we are leading the CIS and Central Europe on certain positions even now.
I think we will go on with the job, and will compete with the leading Western banks. I hope Russian corporations will do business not only with big US banks but also with VTB.
Vladimir Putin: The Russian stock market set a national growth record in 2009, and was doing among the world's best. In fact, Brazil and Russia led the world in this respect. Did your bank make money on this success?
Andrei Kostin: We were very particular about the job. After all, it is usually private investors who gamble in the securities market, while we are servicing such investors. A bank should make a greater part of its profits by crediting and commissioning.
Vladimir Putin: I see, but still... We regarded it as support at the beginning of the crisis.
Andrei Kostin: We surely have our securities portfolio, and we have made money on it. Many of our clients have mortgaged their securities, and also gained much-which has made our loans more reliable.
Bankers have profited by the rapid growth of the Russian market within last months. Our block is going up, too. We expect the trend to persist this year. The Russian stock market has beneficial prospects.
Vladimir Putin: What about VTB capitalisation?
Andrei Kostin: It has grown by half since September, when the government invested in the bank.
Vladimir Putin: Is it a recent growth?
Andrei Kostin: Last month's. It has gone on since New Year-our shares went 7% up yesterday. The market is hopeful about Russian banks and shares.
Vladimir Putin: I rely on further dynamic partnership with all involved in the economy, and I expect VTB to support the federal government in all its principal anti-crisis measures and provisions for progress after the crisis.
Andrei Kostin: I see what you mean, Mr Putin, and we will do what you want.
Vladimir Putin: Okay.