Good afternoon, ladies and gentlemen. Thank you very much for being with us for this call.

We will talk about our results for the third quarter of 2018 and 9 months of the current year. Let me introduce our speakers today.

We have our CFO with us, Mr. Alexander Morozov; and our Chief Risk Officer, Dzhangir Dzhangirov.

They will give you a short presentation on our results, and then we will continue with our traditional Q&A session. I hope that you all had a chance to look at the press release and the numbers, and we hope that this call will help you to understand further trends in our development.

With this, I'm turning the call to our CFO, Mr. Alexander Morozov.

Alexander?

Good evening, Singapore. Good morning, America.

Good day, everybody. So I'd like to highlight key achievements of the third quarter of year 2018 as well as to share with you some insights with regard to our business for the rest of the year.

And let me start with results - financial results of our business. Sberbank Group earned net profit in the third quarter of RUB228.1 billion.

It corresponds to a return on equity of 25.5% for the group. And you know that starting from the 1st of for July, we report Denizbank as discontinued operations from second quarter.

Net interest income is one of the main driver behind our performance. It increased by 3.2% year-on-year to RUB359.5 billion.

And behind it, so many components. But retail lending, which remained very robust in the third quarter and grew by 6.8% on a quarterly basis to RUB6.4 trillion.

I have to say that increasing convenience of online applications for Sberbank's loans encouraged substantial additional customer demand. The [indiscernible] of retail loans reached another record.

It costs now to RUB870 million. The unsecured part accounted for approximately half of provisions.

29% of all consumer loans were issued online. But this time, it was very important and so we may see positive dynamic quarter-to-quarter with regard to this online, which is a confirmation of the right decisions taken earlier and success of Sberbank online as a product.

So consumer loans grew by 8.8% in the third quarter. Mortgage portfolio increased by 6.2% in the quarter, and I have to say, with the additional services of housing ecosystem, which we call DomClick, are becoming more and more popular.

Another I'd like to mention, first of all, we're enjoying site registration and secure settlements. So 50% and 60% respectively penetration of all DomClick loan mortgage.

With regard to corporate loans, we increased by 2% quarter-to-quarter to RUB13.7 trillion. And we saw Russian ruble lending outpacing foreign exchange loan growth in the third quarter in real terms.

It's very important trends so - and so these numbers are given in real terms. These trends will continue as visible, very clear and to be continued.

With regards to other drivers which seriously affected net interest income, I'd like to mention that mandatory reserves is allocated to the Bank of Russia. Due to changes, regulatory changes increase of - our expected reserve requirements increased by 17.4% for 9 months.

So RUB186 million. And that's quite a substantial increase of a portion of assets which are not working anymore.

So we do not share any interest on that mandatory reserve. Nevertheless, despite all these things, you may see our corporate and retail yields, net of these margin dynamics, in our presentation.

And we see the impact from multiple factors on net interest marking which are offsetting each other. On the one hand, ruble appreciation, a little bit product mix shift, somewhat higher rates on the front book were a positive.

On the other hand, gearing dynamics and repricing of focus [indiscernible] have negative effects. All these taken together, I suggest that net interest margin for the full year will be definitely above 5.5% as stated by our guidance, without substantial changes on a quarterly basis.

So seasonally, fourth quarter is slightly better than the third quarter. But this year, we believe that this seasonal effect will be less visible.

Nevertheless, again, on a full year basis, we will be - no change to the 5% and 5.5%, as indicated in our guidance. Fees and commission income.

It grew by a healthy 17.7% to RUB114.6 billion. And main contributors to the growth were fee income subsegments.

So first of all, that's net fees from acquiring [indiscernible] operations, minus transactional business and fees from foreign exchange customer operations. I'll address gradually, so one by one.

Fees from acquiring [indiscernible] operations grew by 27.3% on an annual basis and four important topics here. Total payment volumes in acquiring increased by 46%, 46.

Internet acquiring growth, plus nearly 200% in 9 months; growth numbers. P2P transfers, 9 months increased by 36%.

And transport acquiring, in September, we had already more than 10 million transport tights which were paid as bank cards. And it has also doubled the number of June this year.

So it's a faster-developing segment. So all together, as I mentioned, plus 27.3%.

And we look very positively at the sales development of that sort of business. Second component for the transactional business, plus 16% year-on-year basis in the third quarter.

And fees from foreign exchange customer operations. The third component, plus 31.4% in the third quarter in the face of currency volatility and supported by improved pricing offerings and advantages of our Sberbank market platform.

It's worth to mention that 53% of all transactions in foreign exchange are now executed internally. So we take both - margin from both sides.

At the end of 2017, our respective portion was just 40%, now it's already 53%. Another important number is that 85% of all foreign exchange conversions are now settled for remote channels.

At the end of year 2017, respective number used to be just 3%. So you see that gradually, we increase our presence in foreign exchange market and customer business.

And definitely we see here very substantial room for sales improvement and further increase of revenues and in portion commissions. It's a very prospective business, we see.

And we feel also very strong here. Strong because the key platform has developed organization-wise, they're prepared much better.

So it's a good start. Cost of risk, a very important component when we analyze our total profit/loss accounts.

For loan portfolio, at amortized cost, we allocated nearly RUB59 billion in that provision charge for the third quarter which translated into cost of risk of roughly 123 basis points. As you know from our previous reporting, IFRS 9 standards requires us that all loans at fair value are revalued for the profit and loss statement.

Negative revaluation of loans at fair value for the third quarter totaled to RUB18.6 billion. And as a result, cost of risk on a combined base came in at 157 basis points for the quarter.

And revaluation accounted for 55 basis points and additional 21 basis points was deferred to foreign exchange volatility. In the meantime, quality of the loan portfolio remains merely unchanged.

And share of Stage 3 loans, of total gross loans at amortized cost cap's at 8.4%. Office growth.

Office grew by 6.4% on annual basis, and it was mainly driven by changes in accounting policy with regard to capitalization of expenses related to the development of intellectual property created for in-house IT projects. So in fact, we've simply shifted costs related to compensation and benefits of our employees from subsidiary, Sberbank Technology, to Sberbank bank - Sberbank legal entity to integrate IT skills and experience into product management teams, and which would result in reduced time-to-market projects.

And the fact, in the past, we recognized respective net cost for [indiscernible] which has a negative effect on our amortization cost years after. And starting from 1st of July, 9,000 approximately IT engineers, costs related to work reflected through compensation and benefits through payrolls for OpEx and - which will reduce our amortization costs starting from year 2019 and later.

If we exclude this one-off effect, office growth would be just plus 2.5%, which is well below inflation. So we did it intentionally, and the aim behind this methodological change in our accounting to assure sustainability in our efficiency now.

OpEx growth and reduce our amortization cost starting from year 2019, as I have already mentioned. Cost-to-income ratio on continuing operations improved.

So 30.6 percentage points from 31.2% a year ago in the third quarter 2017. As you know, seasonally, fourth quarter, we have slightly higher OpEx expense that relates primarily to our - to the annual bonuses which we pay in the fourth quarter and which are partly created in source terms of provisions during the year and partly that expense will be additionally charged in December, depending on our full year results.

And as a result, full year round our cost-to-income ratio will be a little bit low number. So higher number about 13.6%, but nevertheless it will definitely beat our guidance.

And from that perspective, we feel also quite strong. Capital.

Core equity Tier 1 capital adequacy ratio improved by 60 basis points over the quarter to 11.9%. And it was mainly driven by retail earnings.

And as you remember, we expected to see further impacts from IRB implementation by the end of the year. And in the third quarter in this regard, we delivered another 10 basis points in capital savings due to previous implementation of IRB, which is clearly seen from our reporting.

Also improved the group's leverage ratio by 50 basis points to very healthy level, 11.4% for the quarter. Now it's time for guidance.

We spent some time discussing whether we should amend it or keep unchanged. And finally, I'd like to say that as of now, we do not see any need to change our market forecast and growth expectations for the sector and ourselves, as major trends have become visible already and it's already beginning of November.

So too late to change marker. Let's base our judgment on facts.

And we will be very on guard to materialize some substantial changes. And we keep unchanged our targets regarding key financial performance metrics for the full year.

We're on track. We believe that all our promises will be delivered and targets will be met.

Probably the only one thing to mention is another potential key rate hike. We do not exclude from Russian Central Bank before the year-end, but we do not think about this step if and when it occurs somehow affects our full year result of year 2018, taking into account that remaining time until the year-end is just less than two months.

And before we move to Q&A session, I'd like to finally announce that, as usual, we are going to hold our annual traditional event, Analyst Day, somewhere mid of December. Exact date will be sent to you and analysts will be invited.

It will be held in Moscow. And we're going to present on this Analyst Day our guidance for the next year with regards to market - to market development and the guidance for our own financials for the next year.

So somewhere mid of December, around 12th of December, but exact date will further confirmed in the next week or 2. And we will be ready to discuss more details, forward-looking trends and our key assumptions during this event.

So we welcome you. And shortly, we'll distribute our official invitation for this event.

So with that, I'd like to thank you for your attention and I'm ready to answer your questions.

I've got three questions about the nonbanking financial business, given that you have delivered very solid growth in the insurance business in particular this year, but also you're showing promising signs for all of the nonbanking business. Look, I'll ask the questions one by one.

So firstly, would you be able to update us on the penetration levels for nonbanking financial products and services within the existing client base? And then perhaps give some color about if this is all about cross-sell to existing clients or rather, new client acquisition.

That was my first question.

It depends on the product. As I mentioned, some products' penetration level is about 50% [indiscernible] less than that.

I'll say it's mostly existing customers. And we are going to present in our Analyst Day in December a little bit broader picture with regards to the evolution of our ecosystem and say, give more details on the development on a couple of our most interesting initiatives, like Yandex.Market or [indiscernible], our JV with Yandex and potentially maybe some other topics as well.

And with regard to Yandex.Market, it's probably worth to mention that revenues of Yandex.Market increased by 71% in the third quarter. And almost 4,000 orders are received daily now.

And we plan to integrate e-commerce services, Sberbank Online, our main remote channel. And we started installation of custom made [indiscernible] stores and pickup points in our branch in Moscow [indiscernible].

But more details about penetration development of our nonbanking traditional services will be given on our Analyst Day.

Okay. Well, look, my second question was about the competitive environment for these nonbanking businesses.

You may want to reserve that for the Analyst Day, too. But if there is anything you can tell us about the competitive environment, your market position.

And ultimately, when you think about insurance, asset management, brokerage, what is the risk of smaller, more fintech-y type operators? And ultimately, is there anyone in the space who is a real competitor to you?

We welcome competition. I'll say it stimulates us to think faster and do more.

As of now, we are number one in practically all the structured markets. So we are going to preserve that position to do as much as necessary and to run as fast as necessary, maybe twice as fast as now to continue to be the leader in all these respective markets.

There is no exception.

Okay. And then my third question on the nonbanking financial business is more technical.

And actually, it's related to how we can gauge the total operating income of these ancillary businesses. I'm aware, for example, that under IFRS, you report income in slightly different line items.

For example, with your wealth and asset management business, some of the income is reported within NII, i.e. the interest you earn on the securities that you have within the AUM.

But this is actually different to your reporting under RAS. So there's a bit of an NII difference, for example, between RAS and IFRS driven by this.

Could you perhaps highlight some of these differences? And ultimately, how can we - or where can we gauge the picture of the total operating income you're getting from these businesses?

Next year, I plan to start to disclose our segment reports, which will give more details with regard to the development of specific businesses within the group, including mentioned by you. As of now, we do not disclose these details.

So wait a little bit.

You can find it in the annual report, if you want, because from time to time we show these numbers in our annual report regularly.

Hello? Do you hear me guys?

Yes. Go on, please.

Yes. A couple of questions from my side.

The first thing which I wanted to understand a little bit is the net interest margin trend in the Q3. As you were showing in your presentation, the yields in the corporate book, which is still a majority part of where you make money, had been down 40 basis points, driven by the repricing of the back book.

How much further do you think the trend has actually room to go down? And whatever effect it's going to have on the Q4 NIM.

And the second question is actually on the cost of risk. Given that we are seeing the second quarter of the continuous adjustment to the fair value in our operating income line under IFRS 9, as far as I remember, it's related to the specific oil refineries loan situation.

How do you feel in terms of provision income versus this type of exposures right now? Do we - should we expect this to be largely done?

Or there is something more which you would like to book into the year-end?

So we do not guide specifically cost of our liabilities or yields in our assets. We guide just net interest margin.

And with regard to the net interest margin, I mentioned in my short introductory speech, that now we have to go with some - consider fully this development of the alternative margin affecting trends. Some multiple opposite factors.

Some of them support the expansion of the margin and some others are a little bit limiting. But nevertheless, we believe that full year round, the - so fourth quarter margin will not be drastically different from what we saw in the third quarter despite some growing cost of our liabilities in the third quarter and little bit because of the high interest rates.

And with regards to yield on corporate loans specifically, we do not expect substantial or noticeable reduction of the yields on the corporate side. And all together, on balance, I believe that the last - seasonality of the last quarter.

I think that it will be, I mentioned already, well above our guidance on the same figure side. And so - but I would refrain from stating that our margin will be substantially better when it - even it was in the third quarter to be more or less the same, plus or minus.

No dramatic changes.

Alexander, that's really helpful. And if we could also talk about the provisions for the adjustment to the fair value, which we have been taking for the second quarter in a row, we have the underlying loans behind those; do you think are adequately provisioned or adjusted fair value right now?

At any point of time, we are always ready to provision to a situation. So don't be worried, we will be in line with our full year guidance with regard to cost of risk, around 130 basis points.

Every single regime.

I have a couple of questions. First, there was a small benefit from the IRB implementation in Q3, but your RWA density remains very high.

What else can be done to optimize RWA? And what impact can this have on capital ratios?

With regards to risk-weighted assets density, you may see gradual reduction quarter-to-quarter. So it's not something which might be resolved in one day.

It's a journey. It's the result of nonstop discussion with Russian Central Bank.

And it's ongoing process, that's reduction of our - greater restructuring of our assets and - for example, in the third quarter, we reduced our risk related to market risk. That was done intentionally within the bank, taking into account and addressing high volatility on the market.

So all together, we expect that this will still be continued. But it's - and it will have quite extended the fact.

So let's say, story is not at all and process is not yet finished.

Okay. And would you have an update on retail deposit flows in October?

Retail deposit flows relatively stable in October. So wait a little bit, as next week we will release our October results under Russian standards.

So I cannot disclose it now. Wait just a few days.

Next week, I hope that results will not disappoint you as usual. So again, guys, look, I'm very positive looking at what's going on now.

Despite all the troubles in terms of market, despite all this volatility and a lot of things which hardly may be predicted or could not be predicted at all, we continue to deliver on a consistent basis good quality revenues at a sustainable quality. And from that perspective, again, I believe that, that trends will be continued.

So expect us to bring more fees and commissions, expect us to be focused on cost, expect us to be just in line with our promises on cost of risk and, on balance, all - I'd like certainly all of our promises formulated for this year and our strategy will be delivered. I have no doubt about it no matter what happens in this crazy world.

I actually have a follow-up question on your margin outlook and basically the loan and deposit yields. I appreciate you do not guide directly for those items, but still, if you could give us any color on your thinking of - at what point, basically, the changes to the rates you've done both on the asset side and on the consumer loans, mortgage loans and on the deposit side and the retail deposits, would start to result in margin accretion?

I appreciate it might not, as you commented, it might not happen in the fourth quarter already. But should we expect this trend to materialize and the margin widening in the first quarter?

Or maybe it will be a more protracted direction, basically?

I would answer your question maybe a different way. Our initial assumptions with regard to the margin development for year 2018 and now for 2019 are revised already upward versus the initial assumptions which we formulated when we structured our 2020 Strategy and presented it in London.

So what's happening now supports margin both this year and next year as well. So I hope it's helpful for your model.

Unfortunately - but it's nice that I can disclose now more details with regard to the development of the margin and maybe some components of which, we'll discuss on our Analyst Day. Now we're in process of planning, detailed planning just item by item, product by product.

So all activity is next year. This process to be finalized in the model and our decisions by the beginning of December.

And so when we present some important numbers to you for your models to be carried out satisfactorily. But we are on track with our initial model with regard to the final numbers and margin develop specifically, we are better than we expected.

I have several questions. First of all, on your fee outlook, we've seen that you actually delivered 22% increase year-over-year in 9 months.

So just want to hear your comments, given that your guidance for the full year is in high-teens. If you - is there any reasons why you are expecting a slowdown in the fourth quarter?

Or that's just a cautious stance on forecasting? Second question is, I've seen that deposit growth in the third quarter was mostly driven by fund from state and public sector deposits.

Just wanted to double check if your expectations for corporate deposit growth for this year actually include this type of fund. Thirdly question is on capitalization...

Sorry, Maria, I think you - let me answer your question one by one. It will be a little bit easier for you and for me as well; and not to forget something important.

So with regards to the projection of our fees and commission income growth full year, we should take into account the base effect. Fourth quarter last year was quite successful for us.

So from that perspective, again, first half of the year last year was less successful. So from that perspective, when we analyze the development and dynamic year to year, we should keep it in mind.

Due to this base effect, we formulated our guidance as high-teens and not as above 20. But you might be right, at the end of the day, we are on the safe side, definitely.

It's better to be on the safe side in that situation. So - and second question...

It was about state funding...

State funding, yes. So we work with municipalities all around the country in Russia, and these funds are included into these items.

It's quite substantial, plus number of different regional funds which are also reflected under this balance sheet item.

So just to confirm, when you expected that your corporate deposit growth this year will be above the sector projection of between 10% and 13%, that includes these deposits from municipalities, correct?

Our growth of deposits from corporate will be above the sector anyway, including - and results to these funds both.

Okay, it's clear. Next question, on your change in accounting for capitalization of IT products.

Do I understand correctly that this optimization, the transfer employees from Sberbank Tech is expected to be completed in the fourth quarter? If that's the case, what's actually the full effect once the optimization is finalized on the cost?

It's not optimization. It's better to say change from CapEx to OpEx.

So we intentionally increased our OpEx this year, which will definitely affect next year and years after, in order to reduce amortization costs from CapEx. So from that perspective, immediate effect is negative, negative for OpEx, for our cost income ratio.

And we compensated through our efficiency increase and cost savings through different other items. But medium-term, longer-term effect is positive, as we reduce our amortization costs for years after.

We believe it's appropriate. So it assumes what we think not only about basis out, not only about optimization of our - this year bottom line communication of cost of income but you think about sustainability in our results, sustainability of reduction of cost creation and we have extended and sustainable positive effect.

So in full cost increase of compensation benefits already reflected or will be reflected in the fourth quarter. So this change from CapEx to OpEx, OpEx line, which is concerned with compensation benefits.

I understand. I just wanted to check if there is visible addition in the fourth quarter from further transfer of employees from Sberbank back to the bank?

Or is there [indiscernible]

Mostly already reflected.

Okay. I see.

And just finally, maybe you would be able to provide some comments on the press reports about the bank's plans to acquire working stake in Yandex. Maybe overall comments.

Do you see any strategic benefits from further integration? Or how would you - if you're able to comment, how would you look at that?

I simply do not want to comment. You see a lot of rumors around just on the market volatility.

We do not comment rumors. All respective comments were already made by respective people.

I am not in a position to comment on non-events.

I got several questions, and I will ask them one by one. The first question is, how happy are you with your 92% coverage ratio of stage III loans?

And what is your - probably the target levels for this ratio?

Hold on.

[Technical Difficulty] we created RUB58 billion of additional provisions for the third quarter. And our stage III coverage remains at the level over 70%.

So we think that our - that the grade recovered for the group is properly addressed in provisions.

Okay. So everything that is higher than 70% is appropriate, right?

Actually, we think that the current risk is addressed in the provision, that's what I said.

Okay. The second question is about the consumer loans segment.

So very strong growth that we saw in Q3. Was it the reason the product of your particular boost - your particular push amidst the upcoming risk weights for the loans in this category?

And should we expect a somewhat deceleration in subsequent periods after the risk weights are lifted?

For seasonally, it's very supportive for the development of retail loans. So from that perspective, I think that this seasonal effect will beat the negative effect from risk weights methodology change from Central Bank side.

So I do not expect substantial deceleration of retail portfolio growth in the fourth quarter.

Okay. And the final question is about the connection between your dividend decision and the target level for the Tier 1 ratio.

So you're just 0.6 percentage point below your target as of the end of the 9 months of this year. So let's say if you reach your target by the year-end, what is the sort of guarantee that your board will recommend a 50% payout next year?

Or there will be still an entry up until the decision? I mean, the Q1 and the backdrop will affect your decision also?

If you want a guarantee by insurance, if you ask my opinion, whether we will comply with our dividend policy, yes, we will be compliant. So our dividend policy is strictly and it's very clearly stipulated.

But our aim is to gradually achieve the level of core equity tier level 1 level at 12.5%., simultaneously gradually improving increasing our payout ratio. So we are on the way on both of these targets.

So it's not just the time to discuss dividends in absolute amount in terms of payout. It will be discussed by the Board of Directors when we close our annual accounts.

So some of that goes to the end of the first quarter next year. But again, we will be - stick to our promises formulated on dividend policy.

Just maybe a follow-up question just on dividend. Given that now the bank these closures is postponed due to headlines, postponed to the beginning of the next year, and given that decision on dividends is going to be done at the end of first quarter next year, is the logic right that you will account for this sale closure?

Or this is not the case? I mean this positive 100 bps additional Tier 1 support?

Will you account for this if deal closes in the beginning of the year?

Everything is interconnected to this world. So from that perspective, you're absolutely right.

But from other points of view, we believe increase of our capital adequacy ratio, no matter what happens in markets. So I do not want to speculate on that very little bit and say, I think that anyway, we have much more information and much more insights about that by the end of the first quarter, not now.

Now it's too early to speak about it. We are on the way, you see we gradually improve and even without DenizBank, our capital - DenizBank, the consolidation and we saw respective release of capital.

We substantially increased our capital adequacy ratio. So I think that is very supportive for our dividend policy.

But so it's as much as I can say now. And again, whether it will be the end of the first quarter or just the very beginning of the second quarter, but decision with regards to the dividend policy and recommendation for our annual shareholders may be taken and will be taken only by the Board of Directors.

When we have closed accounts and when we have absolutely clear situation with the DenizBank, and that definitely will be part of the decision.

Appreciate it. And also maybe, could you please provide any like insights if there is any like seasonality for fourth quarter equity built up?

Or this is mostly could be like just affected slightly by seasonally low net profit in the fourth quarter? There is some seasonality also?

The biggest uncertainty comes from foreign exchange. As you may remember, RUB10 per dollar foreign exchange volatility means for us roughly 50 basis points in terms of capital adequacy ratio.

So from that perspective, it all depends on foreign exchange rate in the fourth quarter. I would not expect us to post in the fourth quarter same increase of capital adequacy ratio, so 60 basis points as we show posted in the third quarter.

That might be too optimistic, being on the safe side. But nevertheless, some increase of capital adequacy ratio provided we have more or less stable situation on markets might be expected and should be expected.

Understood. And just a final question.

Do you see more pressure on deposit rates in October? And do you feel that there are more to come?

We see growing competitions on the rates on the local market. We do not exclude, as I already mentioned, one more increase of the key rate by Russian Central Bank.

We are not certain about that, but we cannot exclude it completely. So that will also be very, very important factor for the market.

But nevertheless, I believe that anyway mostly it's already done, mostly it's already reflected in the prices where we are. And I would not expect substantial further negative effect on the rates and on cost of funds in the fourth quarter.

Could you talk us through what's behind the third quarter increase in your credit loss allowances against loans to amortized cost? I mean, it's not huge.

But I mean, clearly, you've gone up from 80 bps to 110 on retail and again from 1.1 to 1.3 on corporate. And am I right, the sort of energy issue that's been on the books has been more related to those loans at fair value?

If you could just talk us through what's been happening across that period, that would be helpful.

Yes, we [indiscernible] our...

This is Dzhangir, our Chief Risk officer.

Yes, hello, everyone. So the growth of loan portfolio on the retail side was - in the third quarter was a real dip so we had to create provisions given that.

So as we already discussed, there was increase in fair value adjustment for the oil refineries. We keep our conservative view on that.

And all the aspects are actually - is just our normal business, so there were deteriorations of - for some names in the corporate portfolio and we addressed that through provisions. So nothing really unusual to mention.

So in retail, is it more related to the maturing of the portfolio as you have now been growing quite strongly? Is that fair?

Actually, we have to create provisions when we issue loans. So given that the loan portfolio growth was really huge in the third quarter, we had to create new provisions, and that's reflected in our cost of risk.

Okay so that would be if we look at the higher ratio?

If you look at, say, our cost of risk breakdown, which are reflected for amortized cost, that's roughly retail accounted for 34.3 basis points and corporates for 89 basis points. So what's - it looks like that.

And I think it's helpful.

Okay. So the message is, this is just about growth rather than any deterioration in quality?

No, no, no. Probably it might be also helpful for you always incorporate 89 basis points, we have 22 basis points which result of foreign exchange [indiscernible].

So what's 89 minus 22, so the pure change of quality is 67 basis points result foreign exchange [indiscernible].

Okay, super. And could I just ask - I'm sorry to ask you this, I mean, clearly there has been a headline this morning from your report that you're not probably going to close DenizBank before the beginning of next year.

I mean, are you renegotiating the price? Or is this a regulatory issue that's taking longer to sort out?

We have not been approached by our partner with regards to any sort of renegotiation of any of principal terms and conditions of the agreement signed. So delay relates only and exclusively to the delay related to European bureaucracy with regard to clearance on the transaction.

Firstly, on Turkey. Can you give us some color on why did your Turkish results improve in the third quarter which is shown on the discontinued operations?

It's a bit counterintuitive, because most of the Turkish banks' profits actually declined in the third quarter. Did you have some foreign exchange gains here or anything?

And the second question is on your capital targets. I believe the 12.5% capital - CET1 target includes a 50 basis points buffer for FX volatility.

Obviously, you determined this before the recent quite significant increase in FX volatility. What's the chance that you would revise this capital buffer and eventually the CET1 target towards the year-end?

So let me answer one by one. Net profit of Turkish banks, they're up, for 9 months, to the level of 7 point - practically $7 billion, so that's a plus 13.4% versus the previous year.

And net profits of DenizBank is RUB4.7 billion, if you speak about that. And the difference between the number indicated now statements and net earnings, let's just say the company eliminations related to income from intergroup lending, when we debit interest income and create discontinued operations, plus quite important component, foreign exchange differences [indiscernible], which is also part of the number.

So but DenizBank is developing quite well and DenizBank demonstrates about 15% return on equity. So from that perspective, we believe it represents - it now is the best bank in the Turkish market.

So we are proud of the development of Denizbank and proud of the results. We are doing clearly good job.

Despite the turbulence, despite the volatility, new increased our presence and we continue to do a good job with regard to the risk managements. Hence, I'd like to remind you that DenizBank is probably the best bank in the Turkish market with regard to self-sustainability in terms of liquidity.

And loan-to-deposit ratio of DenizBank is around 100%, which is a big difference towards the prevailing respective rate of the Turkish market. And as a results, it's much less exposed to prospective interest rates [indiscernible] particularly eliminated.

So from that perspective, again, DenizBank is in a good track.

Yes. On capital.

In the policy, we indicated 12.5% results in your reference to foreign exchange in relation to foreign exchange cushion. So we simply want to have 12.5% and foreign - if just the foreign exchange devaluation, 10 rubles is 50 basis points what I mentioned.

That should be - what's not related to that. So I don't see any relation between these two numbers.

Okay. So you would not revise this target towards the year end.

Is that what you ...

We will not revise our targets. Our targets is part - I mean target 12.5% is a target mentioned in our dividend policy.

And dividend policy is a part of our strategy, which was approved a year ago. So we are not going to change it.

I guess most of my questions have been answered, but I've got a couple of small ones. First of all, on the net interest margin, the third quarter, we saw a big drop in the gap between the IFRS margin and the Russian accounting margin.

It basically halved. Now I understand that was due to a few different factors, one of which was, for example, the kind of accounting differences and the ruble weakening during the quarter and that being captured by RAS but not by IFRS.

I'm just wondering if you can give us any color as to whether you think this is kind of going to become a kind of new normal in terms of the kind of gap between the IFRS and the RAS margin? Or I suppose, put another way, the extent to which this decline in the gap between margin was driven by unsustainable factors as opposed to kind of the accounting differences because of the moves in the ruble?

Mostly accounting difference, that's of temporary nature, so that's temporary differences. And so next year, we will do our best to eliminate it or to substantially reduce it.

Full year, the difference won't be so substantial.

Okay. And just a second question on your liquidity management.

You mentioned, Alexander, earlier in the call that you're coming under pressure from higher reserve requirements. And once - one of the targets in the strategy that you released was to boost the - in terms of your asset liability management was to boost the loan deposit ratio to 99%.

That's basically been pretty flat for the last few quarters. I mean, I'm just wondering kind of how you think about this.

I mean are you basically now kind of feeling that you should be more cautious on this front given external situation, et cetera? And if external risks diminish, I guess, kind of next year - heading into next year, do you think that you will start to see the loan deposit ratio going up towards that 99% target?

We separately manage loan-to-deposit ratio in different currencies. It makes a difference.

In Russian ruble, it's floating around 100. It's our core markets and we have plenty of the chances to raise additional liquidity from different sources.

First of all, from our core deposits. So it's already 100%.

And when it's about hard currency loan to deposit ratio is around 70%. And from that perspective, we feel ourself also want to safety aside.

And I do not expect us to substantially change that ratio next year taking into currency very high level of uncertainties in [indiscernible] world. So I think that this difference will continue to prevail.

I hope I answered your question. So when you look at average and [indiscernible], it doesn't indicate the use indication.

And so you have to absorb the loan to deposit ratio in different currencies.

Just a couple of brief questions regarding the tax and liquidity management slide, Page 25 of your presentation. Can you please reaffirm my understanding that the execution of the corruption for the new style Sberbank in February is not included in one 6 months bucket at the liquidity risk chart?

And the second question is whether this chart somehow includes the possible proceedings from the Denizbank deal next year?

Okay. When you look at our Page 25, we do not include on to this page any proceeds from DenizBank.

So it's not yet included. That transaction is not yet settled.

Hence, when we settle that deal, we will definitely include it, so it's not yet here. With regards to our subordinate debt, everything is here.

And definitely all our obligations will be met in time. And CBC is relevant for our subordinate debt, so it should maturity in due time.

I'd like to thank everybody who attended this call. Thank you for being with us in this turbulent time.

And I'd like to assure you, we, as management, we do whatever is necessary to continue to deliver our promises to deliver good results. I hope for today we didn't disappoint you.

And we look forward to seeing some of you in our Analyst Day. Invitations will be sent by our IR service just in days, in the mid-of December, when we will discuss with you our assumptions for the next year.

But again, putting numbers into your model, expect us to deliver at least our financial targets stipulated in to our strategy.

Thank you very much. To our Russian-speaking clients.

Good afternoon. I would like to ask about the probability of the sanctions in November.

Do you expect them to be high? The probability is high?

Or do you expect this will somehow impact the bank? And do you have an action plan to counter the sanctions?

Yes. I've got this song rotating in my head, this tune from the Russian - popular Russian comedy, A Brilliant Head.

I'm not going to remind you the words, but you will certainly remember it. Whether they are going to happen or they will not happen, it's all about reading the coffee beans or tea leaves, same kind of projecting.

We are ready to face all the new trials and tribulations the pipe has thrown at us. As of this moment, we feel quite confident and quite at peace.

We are confident in our ability to rely on our own powers. And of the introduction of sanctions?

[Foreign language] There is no translation because there is no incoming audio signal from the conference. [Foreign language].

There are no more questions.