Thank you very much and good afternoon from the whole Sberbank team as well. As we normally do, we will have some prepared remarks in the beginning and then we will go to Q&A.

So prepared remarks for the second Q 2017 Sberbank Group IFR results, I would like to turn over the floor to Mr. Alexander Morozov, Deputy Chairman and Chief Financial Officer of Sberbank Group.

Alexander? And on the Q&A session, we will also have a possibility, if need be, Alexander Vedyakhin, our Group Chief Risk Officer; and Yulia Chupina, our Chief Macroeconomist.

But now, Alexander Morozov. Alexander, please.

Thank you very much, Jyrki, and say good afternoon everybody from myself as well. I have to say that have to say that the operating environments in Russia has continued to show some improvements.

For example, investments are growing by 7.3% and consumer demand by 2.7% year-on-year in second quarter. We have upgraded some of our market forecasts, and our GDP growth forecast is now 1.5%, 1.7% from the previous 1.2% and inflation for the full year to be 3.8% instead of 4.0%.

The ruble door for an exchange rate has been updated to 59 while the Central Bank key rate is expected to be 8.5% at the year end. In the second quarter of 2017, we achieved the net profit of RUB185.6 billion, a good return on equity of 24.8%, earnings from assets of 2.9%.

Therefore, we are changing our full year rate on equity guidance from high teens – for very high teens as we promised to deliver to around 20% to be précised for the full year around 2017. During the second quarter, our net interest income grew by over 5% year-on-year to RUB357.6.

This was a result of the accelerated loan growth as well as expanding net interest margin. After first quarter decline, I have to say that our loan book growth in the second quarter was very healthy at the level of 4.7% year-on-year and retail grew up by 3.5%, core price 5.4.

The current loan pipeline looks very strong and we believe the second half of the year will be very supportive and we will see further loan growth helped by decreasing interest rates, especially in the mortgage segment. And while we believe potential is still huge in front of us and that’s one of our strategic priorities for years to come.

Right now, our rates in mortgages fell to historical lows, and we see quite substantial additional demand for mortgages in terms of market. That's very promising and that’s just the beginning.

Net interest margin continues its expansion in the second quarter. And assets use remains stable, while liability side continued to slightly reprice down.

Taking currency accounts by now EBITDA guidance of stable margin for year 2017 has some risk, upside risk, and it looks like the net interest margin will show a bit more resilience in the next year to come than we initially thought. I hope you can see it as positive news.

Our loan-to-deposit ratio commonality was stable at 90.8% and while we saw positive change in our demand deposits, growing at a share of total deposits from 26.4% to 27.5%. And our fees and commission income showed some improvement in second quarter, with growth of about 10% year-over-year.

But due to the first quarter, the cumulative growth for six months, year-over-year, resulted in 7.5%. It's worth noting that results foreign exchange rate differences from international subsidiaries, the growth will have been 11% year-on-year and the main difference in the considerably weaker Turkish lira.

Our fully previous promise, we added on Page 12 of our presentation, more comprehensive breakdown of our fees and commission income, which I hope you find helpful that it is based on our management accounts. Next year, we are going to disclose much more information about this and deliver much more substantial segment reports.

This should be part of our IFRS 10 reporting. As you can see, the services selected to cash proceedings on this Page 12 are slowing down at the same time main growth originates from the calculated businesses, as the market is transforming in somewhat cashless society, which is very positively has had chance to continue for years to come.

On our previous quarter, I promised an update for our guidance for fees and commission full year 2017. We now see it clearly turnaround in fees and commission, and we expect improvement in terms of going forward by the same time, as our results, first half of the year, were weaker, much weaker than we expected initially, we had to lower our net fees and commission forecast for the full year from high teens to low double digit.

Let’s go through mathematical. As we can emphasize from our previous calls, cost control is one of our key priorities for this year.

And in the second quarter, I'm happy to report continued progress in this front, as OpEx decreased 4.5%, year-on-year, and 1.3% for six months year-to-year. Cost income ratio came in at 33.5%, which is well below 38.5% achieved in first half a year ago.

Despite the seasonally softer, last quarter on cost side, we are upgrading, nevertheless, our cost income ratio guidance to mid-30s from previous guidance, mid-to high-30s. So let's start with this monthly priority.

What else to say? On the cost of risk side, we have not fully provisioned our exposure to other account, but it was the main driver for the increase in our cost of risk in the second quarter.

At the same time, we have seen our existing guidance for cost of risk for the full year, so which means, mathematically, but next quarters, third and fourth quarter, on quarterly basis, which be – will show lower cost of risk when we posted in second quarter and the first half of the year. Our capital equity ratio remains relatively stable and resulted, in the second quarter, in Core Equity Tier 1 of 12.7%, and total capital ratio of 16%.

Our strong profitability was countered by loan book growth, dividend payments, and risk factor assets increased as a result of the varying crash in ruble. We have decided, finally, to switch from Basel I to Basel III on the IFRS reporting, starting from third quarter this year.

This means that our next results issue presented on November 15 for the third quarter will already be reported on the Basel III. This will have an impact of about 200 basis points to 230 basis points on our Core Equity Tier 1 ratios.

If you take into account, we update our guidance for full year for capital at year end and on the Basel III now to over 10.5% Core Equity Tier 1 Basel III. Last but not least, IFRS 9.

As you are all aware, we are implementing IFRS 9 from the beginning of the next year. And we promised you to give some guidance, what it might cost us.

We currently assess this, up to be up to 50 basis points in our capital ratios, starting from January 01, 2018. And with that, I finally like to briefly comment on the Transneft case, which was in the second level court in Moscow.

I have to say that we are fully satisfied with today's appeal, court decision. From a professional point of view, we have no doubt in rightness of our case and today's court resolution to issue our debt.

I'd like to separately highlight that Transneft has been and remains one of our largest customers, and we currently have no other similar case pending. Since, and so I'd say, thanks for that.

I'd like to welcome you to open Q&A session.

Thank you very much Alexander, so we are ready for Q&A.

Thank you and congratulations with a good set of results. I have several questions.

My first question is about your resilient effort yield, and I welcome that the average yield on corporate loans was almost flat, quarter-over-quarter. Could you please confirm to us, if this was due to the changes in the loan mix?

But also my question is, what helped you to deliver a very moderate reduction on average yield on corporate loans? And in other words, were there deductions in both mortgages and the retail consumer segment?

So what really helped you to post almost flat, very small reduction of average yields? So this is my first question.

My second question is about your number of employees, we very much welcome the progress in the reduction of number of full-time employees at the bank, but that said, I think the pace of quarterly reduction is somewhat slower than what you have guided in December of last year. So do you think that the previous target of reduction by 8% of total number of employees during this year is still intact?

So these are my two questions. Thank you.

Assets yields on corporate side. We clearly see trends of growing demands for ruble-dominated loans.

And in terms of yields, ruble-dominated loans are more high yields versus dollars and currencies was short. Secondly, we've definitely emphasized our efforts on small, medium-sized businesses.

And see if you look at the breakdown of our corporate portfolio, so growth was achieved. So noticeable expense due to extension of our great lines to small and medium-sized customers, where, again, yield is higher.

So altogether, I believe that we have now, more or less, stable asset-side yields. And I believe we’ve fully addressed that in our updated guidance for full year.

So it reflects our first, best understanding as of now situation of the – when we go to the development of the margin. As for your second question, number of employees we never guided, and we never specifically targeted any specific number of headcount reduction.

But we guided, say, increase of our efficiency ratio, in terms of cost income ratio, in terms of productivity. And so we see new potentials opening in new businesses, and the number we report, it concerns not only banking employees, but it concerns the whole group of Sberbank, including other jurisdictions, including non-banking businesses and including new promising carriers.

So from that perspective, we fully comply on these promises to deliver high efficiency, high productivity, and we are fully recover our initial plan.

Okay, coming back to the first question. Can I, just double check with you, your guidance of stable margin, year-over-year, and my numbers, suggest that there should be some margin erosion in the second half of this year.

Is this the same in your forecast?

I mentioned in my short speech that I clearly see some upside risk on the net interest margin guidance. We initially guided stable margin for the full year.

Now we believe that, yes, some upside risk exists. We do not change the guidance, but this market is quite important, I believe.

Thank you.

Good evening gentlemen and thank you very much for the presentation. And again congratulations on the great results.

The question is actually is on the cost of risk. Given after the first half, we have left for Agrokor hopefully just behind us in terms of provisioning, I am some what surprised that you haven't changed your cost of risk guidance for the remainder of the year, given that, I would assume, that the underlying cost of risk in the first half would be significantly less versus the reported number.

Could you, perhaps, a little bit elaborate surrounding this one? And the second part of the same question is actually regarding the IFRS 9 impact on the recurring cost of risk based from 2018.

So whatever are any, let's say, running effect from the cost of risk in eight and apart from 15 BP on a standalone capital, which you mentioned in the presentation. That's my first question.

I would like to ask a second one afterwards. Thank you.

So thank you Mikhail for your questions, actually as Alexander has already mentioned, in the second half of the year, we are expecting less provisions. But because we have already made some additional provisions about Agrokor the average will be, the average cost of risk in the year will be in accordance to our guidance, previous guidance, and because of this, we are not changing it.

But in the second half of the year, mathematically, this should make less provisions to be able to achieve our guidance in terms of cost of risk for the whole year. Okay.

And about second question. [Audio Gap] Actually, yes, we haven't a short discussion, actually, about results of IFRS 9.

As Alexander has already mentioned, it will be 50 basis points on the capital and equity of the heat, what we will see. That's, by the way, I think, a bit lower than in other financial institutions.

But nevertheless, we don't think that the additional impact will be significant on one hand side. On the other hand side, we will describe this impact, and you will see in our guidance to the 2018.

And see, if I may add, I'd like to adjust one remark. Up to 50 basis points.

So that's up a little. Potentially, that might be slightly lower.

Yes

That is very helpful gentlemen. Thank you.

And the second question is actually surrounding the capital adequacy ratios under the Basel III. So first of all, a little bit clarification question.

Taking into account the IFRS 9 impact, technically, on the 1 of January, 2018, your Basel III Tier 1 ratio should be 10%. This is correct, right.

Not lower than 10%. Because we indicated the guidance, the minimal level we should promise.

And actual number will depend on foreign exchange rate at the time, as our – depends on our dynamic of risk-weighted assets growth in the second half of the year and a number of our other parameters. But we are certain that we will be able to deliver not less than 10.5% by the end of this year.

And technically, because of implementation of IFRS 9, not less than 10% first quarter next year.

Okay, that's helpful. Thank you.

And now taking a little bit bigger picture view. Where do you think that Basel III Tier 1 ratio should be for you to become comfortable with further increasing dividend payout from the current 25%.

Thank you.

I would say – answer in the following way. We will definitely address what topic when we present our strategy for the next three years.

So our dividend policy will be integral part of our new strategy. At the same time, as Jyrki mentioned on our previous conference calls, I believe that the comfort level for us in terms of core equity Tier 1 and the Basel III is something like 12.5%, which is more or less, average level for good spending, European big bank of our size.

So we believe that we can gradually achieve good level. Having said that, I do not – please, don't interpret me wrong, it doesn't mean that we will not touch our dividend policy, and our recent stance before we deliver 12.5%.

So we – I'd like to keep call up all options open. And I believe it will be process of achieving 12.5% and the same time, always, our dividend policy will be defined, we take in into account economic where we add it, we can deliver it to our shareholders.

I mentioned that number of times, but for us what is important is our ability to deliver economic value added on capital employed. And we do not need an excess of capital.

And we are ready return capital to our shareholders as soon as we see. But we have no capacity to deliver to peer – to other peers, economic value added.

As of now, I hope that around 25%, quite less than that return on equity is more or less comfortable level for our shareholders.

That’s very helpful Alexander. Thank you so much.

Thank you, it’s Alex Kantarovich from JP Morgan. Alexander, my question is on, again, Basel III capital adequacy.

And am I missing something? But your risk-weighted asset density ratio remains very high, and this is due to your approach in calculation of risk-weighted assets.

Will you have permission from the Central Bank of Russia to switch to a more granular model-based approach, which should help your Tier 1?

So Alex thank you for your question. Good question.

I can answer about Russian standards for, actually, IRB and international standards for IRB. For Russian standards, IRB, I can say that as of today, the on-site assessment of Sberbank application for internal rating base, that we actually approached by the Bank of Russia is completed.

And the final assessment report is prepared and provided to their bank. And based on our estimation, there are no findings in the report we stand in the way of IRB implementation.

Additionally, the Bank of Russia is currently preparing to drop resolution, based on the bank's assessment results, which will be submitted to the Banking Supervision Committee of the Bank of Russia by 2017 year-end. And in case the Banking Supervision Committee of the Bank of Russia authorizes the application for the bank and for the Reserve Bank, we plan to apply acquire IRB for capital requirement calculation according to Russian standards, starting from the first quarter of 2018.

And about IRB approach for capital requirement calculation for international standards, I can say that we will do it, I think, 2019, because first of all, we have to understand finally, how the procedure is really working and afterwards, we will proceed to international standards IRB. Thank you.

Right, I understand. But correct me if I am wrong that this could mean an upside to the chart on the Page 29 of your presentation, showing over 10.5% Tier 3 and under Basel III, right, if it was implemented either way?

So that's correct chart, and it's correct my answer, actually. Because my answer is really about beginning 2018, and the chart is about as of today.

So this is the main difference.

So the chart is relevant for this year, for year 2017. And as for the next year, we will come back to our forecast and our guidance, when we present full guidance for the next year.

As you do it normally, close to the year-end this year.

Right.

Yes and sorry, on my topic [ph]. I saw on Bloomberg, Sberbank’s cost to income estimate to 30% [ph] this year.

So guys, if I mispronounced, please correct, I didn't promise 30% this year. Definitely, I believe that cost income ratio of 20%, that's long-term target, which should be achieved.

But at the same time, we never promised 30% this year. We little bit upgraded, so mid-30s, sorry.

So 36%, 35%, something, like that. So about work level cost inflation we're going to achieve by the end of this year, but not lower than that.

It says too much. I think it's already a quite big achievement and quite big improvement versus our previous guidance.

Please check.

Yes, clear on that Alexander. Thank you.

I also recall Mr. Gref saying that the bank headcount may half within ten years time frame.

Obviously, ten years is a long time, but I'm just curious, if you have any specific target for 2018?

No. I can just repeat but we do not have any specific targets as for headcount reduction.

But we have very specific, very detailed targets as per productivity increase and efficiency increase. And we look at it from that point of view.

Okay.

And on the one hand, we reduced some headcounts, we increased our efficiency on backoffice sites on some utility [indiscernible] sites. But we seriously radically increased our capacity on data science, on IT, on risk management, where it is necessary.

Right. And my last question is – back to the capital adequacy question.

What level of risk-weighted asset density ratio do you see as normalized ones, once you adopt the new standards, Basel III and once you undergo all the changes, even if within several years?

Alex, we do not feel it’s very comfortable now to answer this – let’s say question. Taking into account that we are in the final stage of discussions with Russian Central Bank and we do not want to influence their decision.

So please allow us to come back to that question when we present our third quarter results on 15th of November.

Yes. Actually, we have an agreement, so to say, with Central Bank that we will not disclose of those results before the decision of banking supervision committee will be taking so that's also very understanding, nobody knows what will be the decision.

Okay, I appreciate that. Thank you very much.

Hi, good afternoon. A couple of questions for me, if I may.

I think I remember in Q1, you talked about the strength of the ruble, actually, hitting your fee income, one of the reasons why it was a bit weak in Q1. And have you benefited from the opposite effect in Q2?

Or do you think the sort of level of fees that you gained in Q2, is something that you can sustain. I think you’ve given a full year guidance but I just wondered, whether at Q2 performance was helped by that or not.

The second question was I think you’ve adjusted your cost of risk guidance in Q2. You didn't do that in Q1.

So why did you do it in Q2? Is it because the revenue progress has been better, the margin progress has been better or something else happened on the cost front that would be interesting to understand a bit better.

And then, I guess, sort of thirdly, you made a very strong segment about stable yields in the corporate sector and I assume that that is in line with your views of what you think will happen to interest rate between now and year-end. And I did wonder whether you felt that there was room to push deposit costs and down further in the second half of the year because clearly, you've done an awful lot in the second quarter and to optimize your funding costs and for example, if rates were flat and didn't move, could you do anymore or you are now dependent on rates falling further?

Thanks very much.

Okay. Thank you very much for your questions.

I'll try to answer just one by one. If I get to foreign exchange incidents on fees and commissions, yes, we continued to see it but just before the main difference was due to much weaker Turkish lira and what we should care taking into account but I heard a question in a way – to what extent we are certain let’s say our fees and commissions team will be stable and resilience next three quarters.

And I choose it end of this year. Yes, we are certain about that was in focus of our attention and we are little bit reduced our full year guidance, adjusted because of quite low achievements in the first quarter.

So magically high double-digit is unachievable now. And at the same time, low double-digit that’s what we keep in mind and we believe that foreign exchange rate expectation won't seriously affect what's guidance.

So cost of income ratio, I worry a bit now, because we have much more facts and say, much more data. And some of those sides on revenue sides as well as cost side.

We have an internal program inside Sberbank. We call that market expenses now, we call that, say, our adjusted efficiency program.

But day after day, week after week, month after month, we look for an opportunity, how we might spend less and what might be done better, what should done in different way. So from that perspective, efficiency, let's say, key priority for us for a long time.

And you may be absolutely certain that you’ll be one of cornerstone of our new strategy, which will deliver, present to shareholders later on. And from that perspective, I would answer that those sides, cost side dynamic and improvements and efficiency were we achieved and planned to be achieved, practically on all lines of our costs.

And income revenue side more resilience initially we saw in the first quarter. So both components gave us enough certainty to upgrade our initial guidance to mid-30s.

And now we have the fact, in terms of our MSC [ph] accounts, almost eight months, full months, and that's why I'm certain that we can deliver our promises. And your last question, with regards to – the fact that I interpreted in a way wholesale sensitivity and my answer will be the following one.

We are positively exposed to further interest rate reduction and 100 basis points per hour shift down in terms of Russian ruble, will give us additional staffing rate RUB22 billion on l2 month horizon. And we are also positively exposed to much less extent, but nevertheless, the potential height of American dollars.

So from that perspective, we are well positioned, and net interest margin once again, that's a result of combination of asset-side yield and liability side yield. And what really should be in focus of your attention and which in focus of our attention, let’s say sensitivity and interest rate gap.

So RUB22 billion, that's our 100 basis points sensitivity per hour shift, 12 month horizon.

Okay. Thank you.

And in terms of where rates are now, did you make big efforts in the second quarter to bring funding costs down to an appropriate level for the current environment i.e. need to get funding costs down further, do you need rate caps?

So sensitivity analysis and interest rate gap shows that our liabilities will reprise now faster than our assets and in Russian rubles. And in new liabilities, new deposits we will be taking at low rates because of adjusted – major reduction of interest rates over the last 12 months.

So anyway, even results any specific rates cuts from our side, we should do not blend now. Cost of our liabilities will continue to go down.

Just as a result of initial maturities of all side deposits, taken previously a year or two years ago at higher rates and replacements of those liabilities by new deposits taken at substantial lower rates, we should quote now.

That’s very helpful. Thank you.

Hi, my first question is on fees, it looks like there was a big jump in your foreign exchange-related fees. What you call operations with foreign currencies.

When you guide for a low double-digit fee growth this year, what do you assume here? And secondly, coming back to your growth guidance, I understand you substantially benefit from the headcount reduction, from the bench reduction, from the cost saving measures you implemented, how should we actually think about the cost evolution in the second half?

So if we assume that the first half rate of cost reduction, do you think that's the reasonable proxy?

As it gets to foreign exchange fees and commission. We’ve always mentioned that, say, our market share from small business foreign exchange is prior individuals and this core rates, is [indiscernible] to be noticeably higher and better than it used to be in the past.

And as you will know, we undertook some efforts to start to radically increase our market share in foreign exchange small businesses and customers. So I believe that it's sustainable chance, and we will see continuation there.

Taking into account that ruble will achieve actually was not very high, we seriously reduced spreads with quarter of our customers and by doing so, we radically increased the flow and volumes. Customer transactions, we operate risk.

As a result, you have much more sustainable growth in our foreign exchange fees and commission business. That's first half.

Second, as we get to cost, again, for me, what's important, that's cost income ratio. If we see a customer demand, we definitely should satisfy that demand.

And if it requires additional sales forces or something like that, we are ready to add sales force, provided fully covered by revenues. And it's accretive of our cost income ratio.

So I wouldn't focus separately on cost side. But I would focus, primarily, on cost to income and cost to assets.

Our cost to asset sold is improving, than say, our targeted improvement. It shows our overall effectiveness of the bank and the same time, I'd like to mention that fourth quarter, we have seasonally a little bit higher expenses, seasonally.

And fourth quarter, I think we'll be quite similar to the second quarter in terms of cost line.

That’s very helpful. Thank you.

And finally, on the deposit insurance charges. I understand that there are advanced discussion about increasing the deposit insurance contributions for banks.

Can you share with us what are your base case expectations here? What sort of an increase would you expect?

I do not want to speak a little too much on that subject. Let's just wait for the decision to be taken later on this year.

We calculated different scenarios. These are contribution to be increased to different levels.

But I do not want to anticipate the formal announcements. Anyway, it won't affect our this year guidance.

And as for the next year, it's now too early to speak about that. So this year, guidance takes into account all possible scenarios of the development of the [indiscernible] growth of contributions and the deposit insurance came from our side.

Don't worry about that. It is already in.

Okay. So with the – even includes that possible 20 basis point deposit insurance charge or provides for that?

It seems like I've already answered your question.

Okay, thank you.

Hi, good afternoon. So couple further questions on your margin development.

In particular, could you give us an indication, given some of the turmoil that we have seen in the third quarter, as to whether you think that might affect your corporate deposit yields positively or negatively? Positively in the sense that, there could be a quite to quality or negative in a sense that rates could be having some upward pressure due to stress.

And also a second question that may relate to the interest income, tangentially, at least, is the big gain that you had in the FX area, although there were some losses on the derivative line, if you give an indication of whether you think that is more on the one-off nature, or if is this something that we should be characterizing as kind of effectively a part of your margin, as you have indicated in the past, sometimes? Thanks.

[Audio Gap]

As for your second question, I have just answered, on foreign exchange, that we can see that it is stable, as not one-off result, but as a stable. And yes, I expect that's our revenue contribution from foreign exchange, from floor business foreign exchange customers, we will be more – we will be sustainable, and quarter-to-quarter.

That's my short answer to the second question. And as for the first question, for us, just picking volatility is not like that for the banking business as a whole.

And especially when you can calculate and manage your interest rate is quite fast, and we have all necessary ammunition pockets to do that properly. But at the same time, I do not expect substantial volatility on corporate deposit sides until the year-end.

I think the market still will be relatively stable, and I do not expect any, sort of, turmoil. I source, as I have mentioned beginning of our conversation, we upgraded our economic forecast, which reflects our best and existing cost stabilization situation.

We do not expect anything from the market to reflect negatively our full year net interest margin now.

Thanks very much.

Thank you. I have two follow-up questions.

One is, do you think that an ability to sell your Ukrainian business shall give you enough grant to fully provision your Ukrainian exposure, that’s number one. And my second question is about your joint venture with the [indiscernible] market.

When do you think you can start monetization of your investments into this joint venture, and can you share with us your expectations on how you will monetize this investment? Thank you.

[Indiscernible] is insignificant for us that we are in constant dialogue with our partners, and we look for all opportunities. So story is not yet over and is not yet closed.

But taking into account, that’s, again, it’s less than 0.1% of our total net assets. It’s just medium plus.

It’s just a formality. As for your second question, as for Yandex money, you know that we’ve signed a non-binding term sheet in a form of joint venture based on the Yandex market flat from Yandex and practically, everything includes fee.

At the moment, we disclosed in our press release related to this event. As of now, I have nothing to add, but the Yandex market strategy development will be included in our overall as Sberbank Group strategy at it will be presented simultaneously at the same time.

And also I’d like to – you think as opportunity, really just headlines Bloomberg I’d like to focus your attention the fact that our dividend policy will be integral part of our strategy when it will be presented. And all the questions related to potential changes of our dividend policy and our potential payouts will be addressed at that time.

And as of now, we do not comment it, and we don’t promise anything, just the way that it will be, that’s underway.

Thank you.

Good afternoon. It’s Sam here.

Alexander, I have a quick question on, what I believe the new regulations out of the CBR regarding provisioning. And specifically, it’s related to your calculation of provision and the use of local rating agencies.

So what I understand is that you’re actually one of the few banks which started to follow this new provisioning board, which came into effect in mid-July. I wonder what the essence of that is and indeed, what impact if any it would have on a recurring basis?

So thank you very much for the question Sam. Actually about – this regulation about agencies, Russian agencies, when you mentioned this, so we checked it, and we don’t see any significant impact on our provisions, I can say.

Nothing special for us.

Okay, fine. Thank you very much.

Hi, guys hello. Thank you for the presentation.

Just couple of questions. First, you mentioned that mortgages are one of the priorities for you.

I just want to hear thoughts on the rate cuts that you made, and how that compares to effective yield on your existing portfolio. And also, if you can talk about the initial reaction you’ve seen from your customers, and what growth rate you think you can achieve, given the rate reductions?

And the other question is a minor one, just, if you can provide details, what was the goodwill impairment of RUB7 billion that you booked in the second quarter? Thank you.

Potential customer reaction on our interest rate cuts, that’s fully reflected in our guidance, which is updated now. So first quarter, we were below the expectations a little bit, below our own expectation to get to the growth of portfolios.

Second quarter, we were in line, and I believe that it gives a very good growth for our full year forecast and guidance as we get to full year growth. I think that’s – I think that this is an answer.

So it’s a little bit early to estimate what might be additional growth from recent substantial capital mortgage rates because cut season on mortgage markets just to start, 1 of September. And we see full results adjust in the fourth quarter so little bit wait, we will definitely come back to the topic when we present our results on third quarter, which we will have on the 15 of November.

But definitely, taking into account very low penetration of GDP – of mortgages versus GDP, irrational, we can see the – I mentioned that a number of times, we can see the mortgage result, key priority, strategy product and our market share in this product is quite sustainable. We are more than happy to quality of this portfolio, and we’ll definitely support it by interest rate cuts, if necessary.

So that’s what we need. And to get to your second topic, so goodwills impairment, that’s relates mainly to Sberbank Europe to acquisition.

And as of now, we have minimal goodwill, I think on our balance sheet. And we have no goodwill related to Sberbank Europe at all.

It’s fully write-off – written off.

Thank you. And just, maybe to follow up, can you disclose the average yield on your existing mortgage book as of the second quarter?

Just a moment, I’m trying to find the appropriate number. Okay.

As for average, for portfolio, that includes only Russian part of the business. That’s not group level, but just Sberbank Russian and average mortgage rate of, I think, it’s 12.2% now.

Thank you.

That’s on outstanding portfolio. On new loans originated, rates applicable are in line with our policy, and new rates imply plenty [ph] applications.

Does that conclude all of the questions, operator?

So for the international participants, thank you very much for participating. As always, if you have further questions, please don’t hesitate to contact our IR service.

And now we’ll then turn to the Russian part of the call.

Thank you for the opportunity to ask a question. Can you hear me?

Yes.

Good. I have the question about the reporting.

The risks for Sberbank had the same risk for Ukrainian assets 0.1%. Why hasn’t it increased – it has now have decided – so that it will be increased.

Is this a typical moment because technical problem, because of the Ukrainian National Bank. I’m sorry.

What do you mean by assessing the risk? What do you mean by that?

Well, in the reporting, it is written that the assessment of risk is 0.1% from the consolidated assets of the growth. Because you decreased and increased that needs to be higher.

Yes, correct. But we're talking here about the volume of the Ukrainian assets.

So while this is just a small volume of assets and there is – I think, we have been decreasing in strength, we are still continuing to do that. It is not increased, it is decreasing.

So also does that mean this is a share of Ukranian assets?

Yes, of course. When this is just a share of Ukranian assets in the group, so it's 0.1%.

So yes, loan assessment in the first, performs Sberbank, no additional calculations. I have just 0.1% of Ukranian assets.

Yes, sir. A question about Ukraine.

What do you plan to do with Ukraine? When do you plan to provision the debt for Ukrainian assets?

For Ukrainian borrowers?

Because now it is provisions are not 100%. As I have been told, well, to provision to 100%, you need to make sure, you need to be absolutely confident that the investment will be lost.

So now you think, that this might be – it might happen. You know, a very correct sentence.

You said that we're continuing the work and negotiations with departments and regulator, Ukrainian regulator, to find new opportunities to proper exit in the Ukrainian market. So basically, given that the provisioning level of – the current provisioning level of Ukranian assets is quite adequate, as we think.

As for Sberbank, what is the chance that this will be sold? We don't make these assessments, because the situation is quite sensitive.

And we have told you everything we could during this conference call. Thank you for understanding.

Thank you. I appreciate.

Hello. I'd like to first ask about the forecast of the bank.

Some forecasts have not been changed by the bank, including the retail deposits. You haven't changed your forecast for retail deposits, why exactly?

Don't you think that due to the relocation of license from many banks and due to the some option-related things, there might be some increase of the flow in retail deposits, I mean, it was quite a good increase in retail deposits. Perhaps, the data might be even higher.

I mean, it might be quite optimistic. And the implementation of Basel III standards for Tier 1 capital, how it will affect the bank?

Well, we have Julia Tseplyaeva, the main macroeconomist of the bank, she will answer your first question. And the second question will be answered by me.

So Julia, you have the floor.

Good day to you. Yes, we see some trend that says that when the central bank makes the resolution of a bank, some of its deposits are selects reliable, financial execution.

However, given the overall macroeconomic choice and the recent increase in consumer demand, there is decrease of the savings and people expect that this economic situation will be better. And the retail deposit rates are going down.

So we have one effect that overlays another effect and in terms of the total results, this will the result is as is for Sberbank.

Okay, thank you. And the second question, please.

Could you please remind you that was related to dividends? No, at Basel III, IFRS 9.

How it will effect of this situation would improve and dividends for Sberbank – will obviously, when we make decisions for dividends and these decisions are going to be made by the AGM based on the recommendations and discussions of the supplies of our board meetings. But all the factors that influence the CAR and resilience of the bank are being taken into account.

Okay, thank you.

Alexander, just another question, if I may, about the report. What kind of the report of the profit before tax for the first half year 2017 of the international business was RUB15.6 billion compared with RUB12.7 billion a year before.

So that was kind of a big growth, 23% growth. Perhaps, you might say who it was – who contributed to that growth, apart from the [indiscernible]?

Thank you.

Well, I can say that, even though Ukrainian Bank is in the green – it has the yields, but obviously the bank contributes the most in our international business. They show quite good results.

That was around 18% of the yield in the first half of the year, so they are significantly improving their cost of risk and their cost to income ratio. Obviously, here we'll have – we see some very positive in dynamics.

Have I answered your question? Are you satisfied with my answer?

Yes. And what about Sberbank Europe, what is that with the profits?

Well, Sberbank Europe. Given the fact that it has suffered as Sberbank of Russia, due to Agrokor court case, I mean the provisions that have been created there were – made difficult to achieve a positive result.

But marginally, there are around zero. The first half year, they have a very small minus for the first half year.

When are they going to be in the black, fully in the black? Well, they used to be in the fully in the positive, and the result was Sberbank Europe for the first half year was the result of that was – the result that we achieved unfortunately due to Agrokor, because we have to create additional provisions for Agrokor court case for all assets – in the balance of the group, whatever the jurisdiction.

Okay. Thank you.

Well, then I would like to thank all the participants of this call. And from the English and Russian site.

And I'd like to thank everyone, all the participants. Thank you for being with us.

I do hope that you’d liked our results. You are satisfied.

You if you have any additional questions, our Investor Relations and Public Relations services are be happy to accommodate your requests and questions. We can comment offline.

If you have any additional questions that you were not able to ask during this conference call, or perhaps, for additional information, you could call the services as well. So thank you so much.

Good evening to all. Thank you.