Hello everyone. Welcome to Sberbank Full-Year 2020 IFRS Results.

We are very happy that you decided to spend the next couple of hours with us. We will try to explain and address all your questions and show you the very impressive results of our group which we achieved during the last very challenging year.

Our call is hosted by our management team. We have with us, our CEO, Chairman of the Executive Board, Mr.

Herman Gref; we have our First Deputy Chairman of the Executive Board, Alexander Vedyakhin; we have our CFO, member of the Executive Board, Alexandra Buriko; and our Chief Risk Officer, Dzhangir Dzhangirov. We will have as usual a brief introduction of our results followed by Q&A session for our analysts and investors and then we will continue with journalists.

Please not that this conference is being recorded today on 4th of March 2021. Before we begin, let me do some housekeeping.

So, I have to draw your [attention] to the fact that some information on the call may contain forward-looking statements regarding future events and performance. Actual results may differ materially from those expressed or implied in the statements made during the call due to known, unknown risks and uncertainties.

For more information, please refer to the disclaimer statement in our presentation. English and Russian lines are today available.

So, please click the interpretation button on your devices. I turn it now over to our CEO, Mr.

Herman Gref. Please go ahead.

Thank you [indiscernible]. Good afternoon ladies and gentlemen.

Thank you for joining us today and let us to present to you our 2020 results. First of all, we met our guidance in full despite the unprecedented and challenging year for all of us.

People and businesses across the world have struggled with the pandemic and the related restrictions, and on top of that had to explore new behavioral patterns. The rational economy demonstrated strong resilience, thanks to timely state programs and monetary stimulus, and it's reasonably good shape before the crisis.

Russian GDP shrank less than feared by 3.1%. The government rescue package costs 4.5% of GDP.

And our Central Bank did a very good job cutting key rates overall by 200 bps to historical low of 4.25%. Sber played an active role in helping clients businesses and the community to deal with the crisis.

Redistributed social payments launched our own support programs and participated in the state funding and [resurrection] programs. Overall, last Sber originated RUB17.7 trillion loans including those under state programs.

Sber has been their leading agent of state subsidized mortgages supporting demand. At the same time, we increased landing to developers or residential construction and the portfolio doubled to RUB850 billion.

[Indiscernible] exposure for both corporate and retail clients. Most payment holidays are now over.

And we are happy to say that the majority of our borrowers both retail and corporate demonstrating solid payments discipline. Some of the industries in the corporate segment were more affected by the crisis and they evolved the third of corporate restructuring required additional considerations in the second half of 2020.

Overall our assets quality looks pretty strong, and we will slightly update our outlook on cost of risk for this year. I think it would be a good news for all of us.

Consumer activity and our [opinion business] turnover was down a bit during the lockdown in the first half of 2020. But once restrictions were lifted, activity recovered fast.

At the same time, the share of non-cash transactions grew as a result of changes in client behavior. These factors supported growth of our fees and commissions revenues.

As a result, we maintained a healthy level of capital adequacy and resumed dividend payments in October at the originally planned level. Sber was among the first banks to resume dividends last year.

And we distributed a record amount of among Russian public companies over RUB420 billion. We improved the market share across all key financial segments with the most noticeable pickup in retail deposits of 45.4% from 43.8%.

And historically, these numbers are very important for our business. Now, a few words about the quick overview of financial results.

Net profit was RUB760.3 billion. EPS came in at RUB34.36 per share, down by 11% year-on-year.

Return on equity reached 16.1%. Return on assets was 2.3%.

2020 was marked for us several significant events. First of all, we transformed into a tech company and completed our previous strategic plan.

We rebranded to into this bear, capturing our universe of both financial and non-financial services for life and businesses under one brand with a very strong recognition. And third, we presented our new strategy 2023 with a focus on an integrated ecosystem and easy agenda.

What differentiates an ecosystem from a holding it's a good question. Now, we discuss this question with many of our regulators and our colleagues.

I can describe it in one sentence. Its focus is clearly around the client, while holding was built around the owner.

And our priority is to ensure the best user experience and engagement for our customers. Today, we're proud to report that our audience approached 99 million individuals, and 2.7 million businesses.

Out of them 65 million retail [and/or] 2.3 million corporate clients are using our digital apps every month, and more than half of them use online services every day. It's obvious that the pandemic boosted digital habits.

Even traditionally, offline audience, both twice as many products, online compared with last year. Additionally, our digital non-financial services monthly client base of e-grocery grew or 10-fold and that of video streaming doubled.

Over 55% of all retail products were sold online. We launched a family of voice assistance, Salute.

They simplify user experience and make the use of our apps real fun. We started production of smart devices, SberBox and SberPortal, which are compatible with voice assistant.

We launched SberPay, upgraded our P2P tariff model around after transfer [indiscernible] to over [140 cities]. All that contributed to the fact that more and more retail payments in Russia become cashless.

Our numbers show the share of non-cash turnover is 71%. In our wealth management business, we have maintenance leading positions across key segments, such as life insurance, investments insurance, and mutual funds.

We increased assets under management by 70% to RUB1.75 trillion and made all products available on our online channels. To recap on our non-financial businesses, we added a few lines through acquisitions, including digital geo locations, audio streaming, enhanced presence in [foodtech].

The entire investment in non-financial ecosystem assets at the end of 2020 was around RUB150 billion. In our non-financial businesses we looked RUB 71.4 billion in revenues, demonstrated 2.8 times growth year-on-year.

The integration of our ecosystem is now facilitated by 36 common services, including SberID number of its active users reached 16 million users. In 2020, we launched SberPrime, which is subscription based bundles of products.

It will be expanded and diversified this year. And finally, I would like to share with your recent developments on ESG agenda.

In 2020, we reshaped our ESG activities. We set up Executive ESG Committee created a dedicated team and appointed ESG supervisors to both of our boards, and defined ESG goal in Sber’s new strategy.

At the beginning of this year, Sber became a member of two global ESG initiatives, Principles for Responsible Banking and Global Compact. These step flags that ESG transformation is best recognized choice and crucial for our corporate sustainability.

All-in-all, 2020 ended on a positive note for our corporation. Based on our strong results and significant buffer of our set one capital adequacy ratio, we feel comfortable with proposing to our Supervisory Board the same amount of dividends per share, as we paid last year, I mean 2019, which will mean a 56.2% payout of net profit.

And I would like to thank all of you for your attention.

Thank you, Herman Gref and I pass the floor to our CFO, Alexandra Buriko for the short introduction of segment reporting and some quick update on our outlook.

Thank you, Anastasia and good day everyone. Thanks for staying with us.

I promise to be very quick. A few words about segment reporting, which we present for the first time in our 2020 financials.

During the Strategy Day, we defined our key growth drivers and structured the segmental breakdown accordingly. We talked about our banking business, payments, wealth management and brokerage, risk insurance, and non-financial businesses.

So, now it's a new format. The segments are by business lines and not regions as was previously done.

As mentioned by Mr. Gref, revenues from Sber’s non-financial businesses for 2020 reached 71.4 billion in line with our guidance.

We’re going to disclose the operating metrics relevant for each business line to give you traction of its performance. E-commerce is our strategic priority as we discussed during Strategy Day, its performer GMV reached over 26 billion represented by our e-grocery business, which includes SberMarket and [indiscernible], as well as SberLogistics.

And shortly we will add a non-food marketplace [Goods.ru]. We have signed the agreement in January and are going to close the deal pretty soon.

Also, we will complement the e-com space within e-pharmacy business. We recently invested in a 45% stake of a JV for [SberTroika].

Our B2B non-financial businesses with main drivers in cybersecurity and SberCloud turn EBITDA positive on individual basis in 2020. I hope that this disclosure will help you understand, track, and value our business on a going forward basis.

Now, let's look at our 2021 guidance. On the macro front, we slightly adjusted our forecast for 2021 with regards to inflation and the key rate versus our expectations that we shared with you on the Investor Day in late November.

We revised inflation up to 3.8% from 3.5% as pricing pressure increased distorting the dovish rhetoric of CBR. We now expect the key rate to stay flat this year.

On the sector side, we upgraded our guidance for corporate deposits to 10%, 12% range from 9, 11. As far as their numbers, we basically made three adjustments.

First of all, on net interest margin, we ended 2020 higher than expected and now we forecast a 50% basis point contraction from the higher base. On cost of risk, as mentioned by Mr.

Gref, we slashed our expected range by 20 basis points to 120, 140 basis points to flat our more upbeat view on the asset quality. And finally, on the back of these changes, we have improved our guidance on ROE by 1 percentage point to over 18%.

So, thank you very much and back to Anastasia.

Thank you, Alexandra. And I open up the Q&A session.

And we take our first question from Andrey Rusinov, Goldman Sachs. Please go ahead.

Good afternoon colleagues, thanks a lot for the presentation and congratulations, it was very strong results, and especially with your desire to maintain the dividend flow that would be obviously very much appreciated by investors. So, I've got a couple of questions and from the more over a medium-term and longer-term nature, so I would like to address them to [indiscernible], essentially, kind of talking about your ecosystem, and also the competition you're facing from various areas, could you please maybe elaborate your thoughts about recent actions of the internet companies and ecommerce companies that are looking to develop their payment and more broadly, lending capabilities?

So, do you see this as a risk to potentially your core business, or the risk to your new developments in broader ecosystem space? And probably the second question that, also a bit connected to that theme is about the regulations with regard to the ecosystem, you mentioned, that you're in close contact with the regulator.

So, if you could maybe share some light on what your initial impressions about potential implications of this regulation, one on the development of your ecosystem that would be very much appreciated. Thank you.

Thank you very much for your question. What could I say about these activities?

All our internet competitors with payments, it was totally expected from our side. What we described in our previous strategy that we need to be a tech company, because now all tech companies try to be banks.

And we would like to fight with them on their territories. Now, they try to come on our territory, but I think they're a little bit too late with that.

If you look at the benchmark for us, like a Chinese market, if you look at transactional activities in China, and transactional business, 95% of all transactions for, first of all, I mean, the internet transactions, but offline also now doing to companies reach out and enter financial. And it means that transaction with business like very important business, for the banks not from the profitability side, also from the really important data says, site, because the transactional data generated very important data for risk management.

Now then, I think they're not able to bring the situation back. In our market we are the dominant player, because we didn't sleep last 10 years, and we built outstanding transactional services for our customers.

And I think that now we are ready for this kind of competition. I think it's all what I can say.

Yeah. We'll see how the situation will be developed in the future, but I think that we have a huge opportunity to be a biggest player in this market and to save our dominant positions.

The second question is also very important because, now in the whole world, everywhere we see this conversation, this deep discussions about ecosystems and how the state can regulate the competition and these huge companies based on the platforms. Same situation we see in Russia now, we are in a very active stage in a very constructive discussion with our Central Bank and with our government.

And we would like to organize special discussion to the end of March, together with the government. How the regulation will look in a few years?

I think that we have very constructive discussions. We organize the special presentation for regulator, I think one week ago.

We received a lot of experience, a lot of projects from the whole world. We now understand this trends in U.S.

and China and Europe, and now we understand what the regulators in the whole world do in this area. And my opinion that our regulators, including our Central Bank, understand very clear that ecosystem, this is the fact, and this is the – our future this is the trend.

And we need to monitor this situation and many markets in which these big companies try to build this ecosystem, and to save the competition between the ecosystem. In Russia, I think the situation is not so difficult because we have national competitors and three of them the big players in this area.

I mean, [Mail.ru], Yandex and Sberbank. And I think that it would be right if we don't be aggressive with this regulation, because regulation can kill the business activities very easily.

And I think that now we are all together on the same page and we would like to monitor the situation and maybe support competition in many markets. Few of the markets are now mature enough.

For example, if you look at [Taxi], it's a dominant player there. And we are the growing competitor for them.

But I think that for the state is very important to save this competition and to support this game between two big players. But in many cases, the market is not so developed.

For example, in the e-com and we see that we have big players in this market, leaders but the market is on the beginning of the maturity way. I think that we will see this competition during the next 10 years, not less.

And I'm optimistic, I think that now we are very constructive way with the regulators and level of understanding what is the right way on the ecosystem. Economy is very high.

I mean, Russian government and the Russian Central Bank and I think that we will find the good solutions for the business and for the government also.

Thank you very much.

Thank you very much.

That's very helpful. Thank you.

Thank you. And meanwhile, we take our next question from Gabor Kemeny, Autonomous.

Hello. Hello, can you hear me please?

Yes, yes. Yes, Gabor, please go ahead.

First question is on the on the segments. Thank you for providing the segments about disclosures.

Looking at it seems that your payments business has been growing a little more quickly than you anticipated than what is implied in the three year strategy. And on the other hand, the insurance and the wealth management businesses seem to be trending a bit below the growth you indicated there, what was the outlook for these segments in – for the income growth in these segments in 2021?

Second question is, on your assumptions on oil prices, it seems that you are assuming a $55 oil price for 2021. And we are quite significantly above these levels.

Right now, it’s around $65, how would this impact your business outlook if the oil prices stayed at these higher levels? And just finally, if you could comment on how you expect the – [goes through] cooperation to facilitate your e-commerce ambition in 2021?

Thank you.

Thank you very much for your questions, Gabor. I will start with the first one.

Indeed, the growth in our payments business was quite healthy in 2020, despite some downfall during the first half that was related to the lockdown period, and we anticipate that this healthy growth will continue in 2021 and throughout our strategy period. However, as we discussed during our Investors Day, we do have certain risks related to regulation and potential decline in fees and commissions rates.

However, for now, it is still a very fast growing business. We have a large share in acquiring that helps and changes in client's behavior that was mentioned by [indiscernible] which also was very helpful in this regard.

In terms of your second question on the oil price, I can only say that our sensitivity to the oil price is such is quite small. We are rather sensitive to ruble dollar exchange rate.

And as you can see, at the moment, the ruble dollar exchange rate is not fully compliant with the level of oil prices. But with that, I will pass to Oleg to maybe comment a little bit more on the levels that we forecast what we currently see.

Oleg Zamulin, Chief Economist.

Yes. Good afternoon.

I'm Oleg Zamulin. And our subject about oil price comes from the fact that we think that the pandemic will still weigh heavily on their Russian economy this year and not on the Russian economy, but the world economy and therefore the demand for oil will remain subdued.

So, we are not confident that the higher the prices that we observed today will stay throughout the year, especially since there is much capacity to increase oil output in the world, given the current restrictions on oil output both from the OPEC countries and from the United States where these restrictions [can mature]. That's the basis for our forecast.

Now, to the third question.

The third question about our e-com and goods through – frankly speaking, I don't want to speak a lot about the deal [with goods] because the deal is not closed now. Maybe one month ago, we signed the MOU and now under way to finish this and close this deal.

And after that maybe we can announce a little bit more detail on our plans also together with our partners. But what we announced before that GMV this year in our e-com business must be doubled and we save the same forecast for this year and e-com is a very high priority for our team.

And each board member has the same KPI for this year for e-com development, and believe me, we will do everything and what we can to start and to launch this business as a highest priority in our company.

Thank you. Just a quick, quick add, not on the e-com, but overall revenues for non-financial services will double as we discussed or not less than double.

And of course, e-com will be the largest part of [indiscernible].

RUB125 billion to the end of this year. [Indiscernible].

Thank you very much. And we go ahead and take our next question from Mikhail Shlemov, VTB.

Mikhail, please go ahead.

Yes. Hello, do you hear me?

Yes, Mikhail.

Yes. Good afternoon.

Thank you very much for an opportunity to ask the question. I actually have three questions.

Two of them are, kind of bundled together, but just like the way how I want to ask them, and that's mostly questions we get them an [indiscernible]. So, if we would look or actually as examples of the other markets, how basically the FinTech disruption to the incumbent banks has been coming from?

It has mainly come from the payments, as you have rightfully pointed out, and something which is very well visible in the segment reporting, you made a very strong move, and pretty much ensured that you remain a dominant player in the payments in the digital age as well – in the digital age as well, in comparison to the previous branch based banking. So, the interesting point is that for regulators, doesn't seem to be happy about it.

So, they're intervening more and more, and actually leading the disruption in the payment space. And probably, if you would follow this logic, they would be willing to take a more proactive role in terms of regulating or even try the competing review.

So perhaps, I want to hear your thoughts how you think about this unlikely competitor, which is effectively the regulator, and how it's going to impact the broader strategy. The second question also relates to the segment reporting, which is, again, super helpful, and thanks a lot for providing this to us.

And that actually comes to wealth management. And the interesting point is that, which I have picked up from one [McKinsey Report] about FinTech is that the wealth management in reality is the second largest revenue pool attractive for the FinTech’s right after payments.

However, if we would compare the performance of the segment to the payments, it has been basically stagnating last year in terms of the bottom line, even despite the fact that we had a huge inflow of retail investors in the Moscow exchange, and some of your competitors have been demonstrating explosive growth in space. I was wondering on whatever, you could share a little bit more ambition, or perhaps even just like make a wealth management [foodservice] into the high growth club of basically the doubling of revenues, given the high priority and extra room for disruption coming from this space.

These are the two ecosystem, let's say basic questions. And the third one is actually coming from a dividend.

That's very highly appreciated the fact that you decided to maintain the dividend, especially in this turbulent times, and especially in the context that you haven't stopped paying for dividend during COVID-19 crisis. However, a more philosophic question is that how should we be thinking about your dividend payout going forward as clearly the 56% is likely to set the expectation that 50% dividend payout is a flaw.

So, how we should be thinking about the dividend distribution going forward? Especially if I remember, we were talking today about the fact that you were thinking that the excess capital, which you'd have in the bank could be returned to the shareholders?

Thank you very much.

Mikhail, thank you very much for your questions. The first question is, I think is the same question relating to the first question.

What do you think about the competition regulator? Now, we don't have some of the problems with our regulator, because we are joined the common system, the SBP [fast braking system].

And now we are on the right position with regulator. And I think that now we have a huge market share of the payments, and it would be very difficult to save same market share.

And I think that we could see, maybe in few years, we could normalize our market share. But now, we are very, very powerful in this area.

And it would be not so easy and not so fast. But I understand that we can – I don't want to make some of the forecast in numbers, but I think that maybe it's only one country with this kind of situation when one big player has such a big market share, and I think it's normal.

Banks, ecosystems, internet players, regulators all together they will try to compete with us and then we'll receive part of our business today, but it's not such a big problem for us. How big will be this share?

I don't know. I don't want to predict it.

Frankly speaking, when we started with this business 12 years ago, I can't expect that we will reach this, kind of unbelievable market share. But what I said, I think it's – I look at this situation, maybe like a special case in the world.

But I think in 10 years, maybe we will have 50% of market share, but not less, because we are very powerful. We are technologically very powerful and we develop our technologies and new opportunities for our customers in payments and our platform is number one in our market by technological abilities.

And I think it would be very difficult to fight with us. If you look at the wealth management, you're right, it would be number two size of the market for all of us for, I mean, financial organizations and we grew last year 3.6% year-on-year, but if we look at the situation last year was not such an easy environment for wealth management.

And pandemic situation, the second reason, this is the new regulation of me selling the [cat] our growth during this period of time. And I can say that, again, add maybe third reason on that were invest a lot of efforts on a technological basis in this business.

Because frankly speaking, we invest before we invest much money and much of our efforts in retail and corporate, but it wasn't so strong in wealth management. And last few years we invest a lot of money on that and I think that you will see during the next three years, the growth will be, I hope that the growth in this area will be double digits, but I don't want to say that we will double this result like in non-financial businesses, but I think that we will see good growth in wealth management.

And the third question?

[Indiscernible] dividend going forward?

Now, look at – it's very difficult to predict now how the solution would be in the future, but what we say, what we said many times before, if we would like to have enough capital adequacy ratio, we would like distribute our capital to our shareholders, and, but I’m not ready to predict the numbers on that. And it's a principle.

I could say, and I could tell you our principles and you can feel that we are very strong in declaration, and then deliver for all our promises and all our principles. And this year, what they have done during this difficult period of time, during the pandemic that we distributed more than the promise that it means that we are on the track to fulfill our promises which we have done before.

Thank you very much for your questions.

Thank you. And I'm afraid we have to let [indiscernible] go in eight minutes and have room for one question to him.

We have in queue [indiscernible] Elena over to you. But don’t worry for the rest of analysts we will continue with the team and we'll address all your questions.

So, Elena, please go ahead.

Good evening and thank you very much for the presentation and for the opportunity to ask the questions, and to really good results for very challenging year. So, my first question is about like, last year, we also stated in the press release that there was a good support of mortgage from the state program.

So, how would you evaluate the impact of these state programs, support program for mortgage when it comes to ends on our potential demand for mortgage and potential growth of mortgage business that’s there? And my second question you curate forecast and expectation on –as you know there’s no change this year, but if we just see here some discussions here some signals that there is a possible hike of key rate within the year, will be its risk for your new guidance?

Those will be my questions. Thank you very much.

Thank you very much for your questions. Mortgage is now a very significant business for us.

And if you look at the state supported programs, now it's 25% of the new loans. And what we see that, if the situation would be stable, I mean, the inflation rate will be in the same level and we don't expect that and if the program will be canceled in the middle of the year, then we don't expect that it would have such a huge influence on the growth.

I think that we will see maybe less than previous year and less than first half of the year digital growth, but I think we have a good potential to growth till the end of this year. And I don't think that it would have a huge impact on our portfolio and our [indiscernible] financial result of this year.

And what I see that the government now try to intensify and implement different mechanisms to provide more loans, because they have very aggressive plans to double the amount of building constructions. And it's very, very aggressive goal for the government.

And we have a very good team. In this part of the government, Mr.

[indiscernible] the Vice Prime Minister. He’s very experienced and very energetic guy.

And now we are participating in different meetings with him to try to find new mechanisms, how we can identify and provide money to the population, to the citizens to buy more and more apartments. And I think that we will see a huge opportunity in this area during the next 5 year, 10 years, not less.

And I'm very optimistic in our B2B construction business and in our retail mortgage business. And we have a very good situation in – after the new regulation in for the construction companies.

Last year was not so easy for all of them, but now they are recovered and we see a lot of new projects and the government increased the amount of money in infrastructure investment. And I think that we will stay in very good position from the banking side and in this business.

I believe there was a second question [Elena] on the change in CBR rhetoric on the interest rate. And I think it's important to understand that, since the end of last year, we are now positively exposed to increase in [CBR rate] due to change in our asset structure, and large share of floating rate loans in our portfolio.

So, we don't see any, any downside risk to our new guidance, if the situation does not go as planned in terms of our forecasts of the flat rate until the end of the year. Thank you.

Thank you very much. And closing remarks from our CEO, Mr.

Herman Gref.

I would like to say that it was not so easy year for our business and for our organization. But if you look at the end at our results, we delivered in very in this not such a friendly environment, I think very good results.

And we're sure that this year would be much more successful for banks and for us specifically, and we will deliver also good results. And we're sure that we will – now we’re in very good position because we finished our main part of technological transformation.

We have very strong team with a very good, more than enough technological resources, and we're very strong in our relations with our customers. We provide many different services to our clients, including digital services, including digital transformation.

And what we see that now is a huge demand on digital transformation in the market is a key for many of our corporate customers, and we could provide them through [indiscernible] used and the best technologies which we can see in the world. And it makes us happy.

It gives us a lot of fun in our very traditional banking business. And what I see that the eyes on my colleagues that completely different than five years ago, during the beginning of this way, it was a lot of hesitations.

And nobody else can predict that we can finish this transformation. But now this part of the game is over.

Now, we have a new way and an innovative way. And it's very interesting for the whole team, and it gives us new energy.

And I would like to thank all of our investors, for your trust, for your support. And we will do everything, what we can do in this situation to provide to you the best results.

And hope that we can see also a little bit different impressions from your side, as a bank, to the technological organization, technological company with completely different multiples. And this is the way which we can – which we try to implement and bring the new value to our share shareholders.

And we believe that it's possible, and we will show to the – all our investors that it's possible, because many criticism during the last years was that, please guys, tell us, could you show us the second financial organization who has this type of radical goals to convert their business to the technological and high tech organizations? Now, what they can see that a lot of banks in the world announced the same goals to build the ecosystem, and now we're not alone.

A lot of our colleagues doing the same, not only in different countries, also in Russia, and we have a huge respect to our competitors, including the banks. We have a big respect to our competitors, Tinkoff, VTB, Gazprombank, and many, many others.

And we don't want to be self confident or so proud that that we will – we don't want to be part of this environment and not to be a right competitor for them. We have huge respect to each of our competitor.

I mean the high tech organizations like Yandex and the financial organizations and banks. And I think that all together we will develop economy in our country and I'm optimistic on that, because the Russian government with the new program, which now very – they're very intensively discussing, will bring the country to the new level of economic growth.

And it will give us a good upside for developing our ecosystem and new businesses in not financial and financial area also. And thank you.

Thanks to you. We will stay in touch.

We will open more and more information about our ecosystem, and we are ready to be criticized for it from your side. And we are expecting your constructive criticism.

And we would like to stay in touch with you every day and our IR team is ready for that.

Of course. Thank you very much Herman Gref and we continue with the question and we'll take the next question from [indiscernible].

Hi, can you hear me?

Yes, sure. Please go ahead.

Okay. Good.

Thanks for the call today, and a couple of questions, if I may? Firstly, is a question actually on ESG, without becoming too broad, I'd be interested to know what your priorities are for the next year?

I mean, you've clearly set yourself some big goals to be a leader in Russia, and to pull the rest of Russia along with you, but I'd been interested to know what your priorities are for the next year. In particular, I wonder whether net ESG will become part of management incentives.

And it's something that you're probably a little bit behind other countries in doing that, and I wondered whether there was something that was being planned there? And also whether you feel opening up to independent audit, from an ESG perspective, is something that you might consider?

So those were the questions on ESG. And I think also, are you actually in putting Russia forward, be willing to go beyond Russian regulation, because clearly no ESG criteria at the moment are being led elsewhere.

And I wondered whether you now feel you can go further. So that would be very interesting.

And two perhaps rather more dull questions, I did notice that the retail side deposits in Q4 were extremely strong. And in essence, that the cost of retail deposits was very low in Q4.

And I wondered whether you felt you could actually keep retail deposits down at that 3.1% that you achieved in Q4, because that did appear to be an extremely good figure. And then perhaps, if we could get a little bit more granularity on what was going on in the cost of risk in Q4?

I mean, you've been clear, we've seen from the [indiscernible] numbers that you've done better than your target. But clearly, the cost of risk in retail was exceptionally low in Q4, and you clearly did a few things on the corporate side.

So, I wondered, what were the moving parts in Q4? And what behind that is the reason for your change in guidance, more than just generally feeling better about things?

Thank you.

So thank you, [Alan]. So, actually, three of us can answer.

Here's Alexander Vedyakhin. So, about the ESG.

So, as Mr. Gref said, this is a strategic priority for us.

And this is what will – this is what we'll do. So, we would like be a leader in the ESG agenda in Russian and so maybe one of the leaders in the banking in the world.

So, this is our goal by and how actually, so the – we actually are improving so to say, developing ESG agenda in three areas. First of all, ESG for our employees, this is really important and we have, for example, more than one thousand initiatives – internal initiatives that we are supporting.

So that's really good and that really help us to encourage our employees, especially in the young generations. So, second, ESG for government, and we are in talks with the Central Bank.

We are in talks with the governments. We are in talks about all possible green agenda we hear from Russia.

And this is really important for us and we have also made a center for competence in Sberbank is their actually is to, to provide green and ESG services for our counterparties in the Central Bank and other regulators and the government. So, and ESG for our clients, so for retail clients the making special green products, green cards, and etcetera, some green initiatives and social initiatives.

So, for example, we help a lot for workers from the east coming to Russia to work, that's by the way, there are more than 4 million such kind of workers. And we are talking in the Tajik language, for example, and Kyrgyz language with them and so on, so, - and this in social agenda.

And for green agenda, for our clients, we will raise all our credit portfolio, I mean, in terms of legal persons, sell rates, every company for the CO2 footprint and ESG rating, and based on this ESG rating, we will decrease interest ratio for the credit portfolio. And we hope that Central Bank will decrease RWA, risk weighted assets for such kind of stable companies.

So, we are in talks with the regulator about this. About external audits, we have made S&P audit for ESG.

And I can say that we have quite a good rating. It's not in the disclosure, but so we …

We will release it closer to year-end.

Yes, yes, yes. Well release it in the year end and I think you will see it in our Annual Report.

Yes?

Yes.

Yes. Okay.

When IR answered yes, it means yes. So, you will see our external audit results for ESG agenda.

So, I think that's all for the first question. And for the second question, I will pass the – and for ESG, we are really happy that the risk management is really in.

So, having this in the loop is the agenda. So, Dzhangir.

Yes, thank you, Alexander. Let me add a couple of words here.

Actually last year, we incorporated the ESG factors in our credit policy. So, we discourage projects were at very far high, and we encourage those where the risks are low end where Alexander said, this will be in our interest rate.

We're going to develop our own ESG score for our corporate clients. And we're already started to collect data for that.

And by the end of the year, we're going to have already some results. And the ultimate goal here is to incorporate ESG factors in the [PD models].

And once we do that, as Alexander said, we were going to encourage Central Bank to incorporate ESG factors in our valuation. That is what I wanted to add.

Thank you. Dzhangir.

[Alan], I think you clearly can see that ESG is at the top of our mind and is included in all top team KPIs for this year. And now we’ll go into your question on the cost of retail deposits.

You're absolutely right. And following the reduction in curate, we managed to reduce the cost of funds and in particular the cost of retail deposits quite significantly.

And this trends, albeit at a slightly slower pace, but continues still as the previous deposits expire, and people renew deposits or put them into special current accounts that we launched recently that are interest bearing. So overall, the cost of retail funds continues to slowly decline.

Now, however, the upside here is obviously limited, considering that the curate is now forecasted flat or may even increase towards the end of this year. We don't see here a huge upside potential, but of course, we will manage the cost of funds.

And we'll do our best to maintain net interest margin in accordance with our guidance.

And so to add a little bit on words of Alexandra, I would like to mention that in December, they have always regular payments from the government. And that's our costs for free, so to say, and you can see that some decreases in December's and every December actually, you can decrease cost of funds based on this fact.

But I agree with Alexander for sure that they have such kind of forecast.

Excellent. Now to Dzhangir about the cost of risk in Q4.

Thank you. So, in Q4, our portfolio performed better than we expected and actually it continued to perform better within the first month of this year.

So, our more conservative assumptions were based on the assumption that it will be difficult for some of our clients, especially from the industries that suffered from the pandemic that it will be difficult to return to the schedules. However, what we see is that most of our clients actually return to their schedules.

And in our models actually also show that, you know in previous crisis, we’ve seen more strong correlation between macroeconomic factors and performance of the portfolio this year. Last year and this year, we see that that correlation was like broke, which broken in the good way.

So, portfolios performed much better than just based on the macro development. And this, especially in the retail.

So, retail performs much better than one may expect based just on the macroeconomic assumptions. And therefore, we changed our guidance, as Alexandra mentioned already to the range between 120 to 140 and there is no room for further improvement until the end of the year.

Thank you, Dzhangir. Perfect.

Thank you, [Alan], for your question. So we go ahead.

The next question we take from [indiscernible].

Good afternoon, ladies and gentlemen. Thanks for this opportunity.

Most of my questions have been answered already. I just wanted to get your official confirmation about your segment analysis, your ecosystem segment analysis on the pre-tax level.

You booked the net profit of RUB8.6 billion. Is that correct that the youngest market stake disposal has been included into that?

And if yes, if I remember correctly, the financial effect from this deal has been estimated amount of RUB20 billion, so without this deal, it was actually slightly more than 10 billion loss. And, broadly speaking, what the ecosystem, what businesses of ecosystem are positively contributing now on the pre-tax level, if any, if possible to disclose that?

And could you please reiterate your sort of timeline of other businesses going profitable on the operating level in this year particular? Thanks a lot.

[Andre] thank you very much for your questions. So, first on the non-financial business and the results of disposal of Yandex market, indeed, the segment result includes the positive result of disposal of Yandex market in the amount of RUB20 billion, it’s a pre-tax amount.

The amount of gain on disposal was previously disclosed. And yes, it is included in this segment.

In terms of what we – like what is positive and what is EBITDA, our segment result positive and what is negative in 2020, you can see the breakdown in addendum to the presentation, as well as in the financial statements. But basically, the majority of our B2B ecosystem are EBITDA positive – businesses are EBITDA positive and in particular, we highlighted the two fast growing stories, cybersecurity and the cloud.

Both of them are in the green zone already in 2020. And we expect that they will remain this way, despite the, kind of the expected growth in double digits or even [indiscernible] cloud in particular, we expect growth several times in terms of top line.

And on B2C side, the majority of these businesses are still in the fast growing market share gaining stage. And as we previously stated, the focus right now is on the top line, as well as the unit economy.

So, what we consider important is, of course, gaining the market share as fast as we can, especially in e-commerce space where competition is fierce, as we already discussed, and at the same time, we're very watchful to make sure that the unit economy is positive. And the business models are viable.

The timeline, some of the businesses we expect to turn positive in 2021, but the majority are turning in terms of B2C are turning positive towards 2022 and 2023. Of course, it will depend on many factors that are currently unknown, but the goal, of course, is to gain market share, and ensure that all of those businesses are earning good margins.

Thank you.

Thanks a lot.

Thank you. And we take our next question from [Sam Wadekar], JPMorgan.

Hello, can you hear me?

Yes. And we like your [T-shirts], yes.

Yes. Great T-Shirts.

Thank you.

Thank you very much. It's something that I've treasured since your previous [indiscernible].

I have a question on your insurance business. We obviously saw a decline in the growth rate in premiums last year, but obviously, it's a very under penetrated market.

So, when we think about the outlook, which segments of insurance are you most optimistic about? And could you also give us a bit of color on the competitive dynamic in that business?

You know, if perhaps we break it down between life and non-life, for example? The other question I had was related to your risk weighted asset density release.

And if you could remind us of the, sort of the decline you would expect over the course of this year from the implementation of centralized approached in the OP risk part of that calculation? And then the other thing was just a clarification really on what Mikhail was asking earlier on your dividend policy.

You've obviously – you're recommending a dividend payout of 56% for this coming year. And I wonder if that therefore means that you're rather targeting dividend per share, rather than a, sort of a payout level as you have done previously?

Thank you.

Thank you for your question. So, the first one on insurance business will be addressed by Alexandra and then we'll share.

So, we see the insurance business a big potential. So you're absolutely right.

So, 2020 was not so good year for insurance business also, because of this COVID pandemia. So, despite of this, we see some increase in the segment assets, and you see it in, in our segment analyzers.

Actually, we are not satisfied with the dynamic we have for insurance business and we are sure that in this year and in the next years we will see much better results in insurance. So, you asked what are the main sectors we will increase our revenues and our shares.

I can say that actually, we will do. , corporate insurance will increase.

And this is really understandable for us. Car property insurance, health insurance, and actually, our main target is online insurance.

So, as you know, our Sberbank online has more than 60 million of online users monthly. And that means that we have really huge client base and providing this client base with the insurance products we will definitely improve our market share and definitely improve our profits.

So, by [indiscernible] so we are providing also insurance for pets, for example, and I have insured my cat for example, in our insurance company. So when you have some pets, please welcome.

Thank you. So the question on our RWA goes to Dzhangir.

So, as you know, last year, we significantly improved our RWA due to mainly three reasons: Basel 3.5 implementation, also we implemented the new models for IRB, and we released some of them macro add-ons, as well as other banks in the banking system, since Central Bank allow that. And fourth quarter there was another effect, which is increase of the share of the government bonds in total assets, and therefore our RWA density also slightly decreased.

And this year, we are going to continue to implement the new IRB models, but the main effect will come from standardized approach for operational risk. We’re fully ready for SA and we're going to send the application to Central Bank over the course just a few days.

And that will give us approximately 1 trillion or probably more of decrease in RWA.

Thank you very much. And the last question was on dividend policy?

Yes, thank you. And as Mr.

Gref already stated, it is very important to us to keep our promises and we stated during our Investor Day presentation, that if we do accumulate excessive capital, and have sufficient room above the comfortable level of capital adequacy, we will distribute that accumulated capital to our shareholders in the form of dividends. And I think this is how we want to look at it.

Obviously, the 50% threshold remains an important mark, and it will remain in our dividend policy. However, we will follow this rule and will continue to hopefully positively surprise our shareholders even when we do accumulate sufficient cushion above the capital adequacy level.

And just to clarify that the dividend payout that we will propose to our supervisory board will be RUB18.7 per share this year. That is similar amount as was paid out in 2020 for 2019.

Thank you very much.

Thank you. Could I have a quick follow-up.

Yes, please.

So it's again related to insurance. So, last year, your claims ratio increased by 25%.

And that seems somewhat counterintuitive to me, given that as an impact of the result of the pandemic, mobility would have been lower, there would have been, you know, fewer folk driving cars and fewer accidents. And it'll be, you know, the death toll, potentially because of COVID was higher.

There would have been less folk out and about, you know dying in normal circumstances. So, what drove the 25% increase in the claims ratio over the course of last year?

Thank you. Thank you for your question.

We're just looking at the numbers. And the reality is that it is driven by the recognition rules of the standards were in the first year, basically, we recognize a larger part of the potential claims.

So, it is not driven by the situation in the economy, per se, but more the actuarial models that basically, we use in order to reflect the results in our IFRS accounts. And just to clarify that, in 2020, we're still not in the market for such things as car insurance, for example, it is the new part of our strategy that we are just launching this year.

So, it is something that you will see as key drivers on the go forward basis. Thank you.

Okay. Thanks Alexandra.

Thank you.

Yeah.

Thank you, Alex. Thank you, [Sam].

And we move on to next question, we take from [indiscernible], Morgan Stanley. Please go ahead.

Yes. Hi.

Thank you very much for the presentation, very, very useful Q&A. I have two questions.

My first one is on the net interest margin. Your [main decline] expectations of around 50 basis points for this year, refers this cost in late November, early December.

And were based if I remember correctly, you know, among other things on you're expecting another key rate cut from the Central Bank. Now that the regulate has moved to, you know, much more hawkish tone, and, you know, presumably, you have also changed the view on the potential for the rate cuts, how much, you know, in your views does that change pressure on asset yields for this year and your overall view on the potential net interest margin trajectory?

And isn't your current, you know 50 basis points decline guidance, looking a little bit too conservative? That's my first question.

The second one is, on the cost of risk to Dzhangir, so it appears you have reversed the part of macro factor for retail loans in the fourth quarter, but remain pretty conservative on the corporate side. And you have improved your cost of risk guidance for this year, but it still seems to be, you know, quite significantly above average about [free cycle].

So, what is driving it? If you could maybe provide a little bit more color, do you see potential for further write-backs on your macro factor, and, you know how is your outlook for the corporate side of the cost of risk look, does it look in particular?

Thank you.

Thank you very much for your questions. I will take the first one on net interest margin.

When we presented our guidance at the end of November, we actually forecasted the same CBR rate as we are forecasting now, flat at [4.25]. So, here we do not have any significant changes.

And in reality, we do kind of upgrade the overall level of net interest margin for 2021 considering that we finished 2020 at the higher level. However, you are absolutely right to say that, at this moment in time, we do have more upside potential than at the end of last year when the CBR rhetoric was not as dovish as it is now.

And as I said, we are positively exposed to changes in order to increase in the interest rate. So, we do have some upside potential here and if the situation changes, we will definitely upgrade the guidance.

However, it is not yet that we are ready to do that. Thank you.

And now over to Dzhangir on cost of risk.

Yeah, thank you for your question. On the retail side, we actually indeed released the macroeconomic add-on because actually our macroeconomic outlook now is much better than it was in the first quarter last year.

So, we'll use that. However, at the same time we did calibration of our [IRB models] based on the history, which included the year 2020, and therefore, on the calibration part we actually increased back our reserves.

So, and the total effect was neutral. Just to give you an idea what happened on the retail provisions.

On the corporate side, actually the maturation of the portfolio is slower than on the retail side. And therefore, we think that we don't – we haven't yet seen all the results of the – across industries.

So, we continue to be conservative here, but again, as I said before, we – once we see the maturation and the effect of the restructuring, we may further improve our guidance. But let's wait the results of the first quarter at least.

Thank you.

Thank you very much. And we have one more question that we have received from [indiscernible], HSBC?

The question is on the 500 billion GMV target that we have for 2023, whether it relies on acquisitions or ecommerce – of other ecommerce businesses, or we talk about organic growth, and what GMV run rate are you seeing for 2021 after the first two months of this year? Thank you.

The question was to Alexandra.

Yes, thank you Anastasia. I think we discussed during our strategy day that we will consider both organic growth, as well as acquisitions.

When we are building our integrated e-commerce player, what is I think very important is that this year already, we closed one deal on e-pharmacy, and we are in the process of finalizing a very important deal on the platform goods.ru that is definitely going to form the basis or the central piece of our e-commerce platform. On the go forward basis, potentially, we will look to acquire some missing pieces if you feel that the price is right.

And kind of it is a good combination a synergy with what we already have. However, I think it would be fair to say that what we already have in our portfolio, including acquisitions of e-pharmacy and goods.ru is sufficient we feel to achieve the target of 500 billion GMV in 2023.

In terms of the run rate, I would propose that we wait until the Q1 disclosures where we will present as we promised our full segment break down similarly to the full-year accounts. And of course, because some of the acquisitions are not yet complete, we will not have the full picture yet, but the businesses that we already have in our portfolio such as the market, [some market] and logistics are going according to the plan.

And the plan for this year is 125 billion GMV that was already announced by Mr. Gref.

Thank you.

Thank you very much. And we take the last question from analysts.

We have one follow-up question as I see from Mikhail Shlemov, VTB. And then we move on to journalists.

Yes, hi again. Thank you very much for an opportunity for a couple of follow-up.

So, I want to follow up the question which [indiscernible] was asking about net interest margin. I have quickly looked up at sensitivity disclosure in the financials and just like something which has surprised me, actually, is the fact that the sensitivity to a change in the ruble interest rates, it seems like has significantly dropped actually in 2020, and actually it looks like fairly marginal, so according to financials, 1 percentage change drives only 2 billion change in the net interest income.

I just like wanted to check whatever it is right or whatever we're missing something in this calculation which was seemed in the financials and the broader picture should be more complex, I would like to get if [indiscernible]? That’s first question.

And the second question is and actually [indiscernible] the recently completed acquisition, and there are two questions surrounding this. First of all, in what segment it would actually fall, whatever it would be ecommerce where we do have a GMV target, or whatever it would be a health segment, which you have been disclosing separately, just helping us to model this properly?

And whatever you can disclose, since you've completed the deal with GMV of the uptick of – in 2020? Thank you.

Mikhail, thank you very much for your questions. On interest rate sensitivity, I believe I already mentioned that, but maybe I was not sufficiently clear.

Indeed, basically our sensitivity turned at the end of last year, and we are now positively exposed to increase in interest rates, marginally positively exposed. This is a result of changes in our asset structure.

We have a very large share of floating rate loans now in, first of all, on the corporate side, of course, but also when we look at our mortgages, all the new mortgages issued under the state subsidy program are indeed floating rates as well. So that drives the change in our sensitivity to interest rate changes that you also see disclose in the financials.

So, it changes from minus 20 to around zero, marginally positive in the beginning of 2020. And …

Alexandra, I'm sorry, just like, very quickly, to follow-up, perhaps, could you quantify the share of the floating rate loans both on the corporate side and in mortgages? I just like to make it easier for us to model?

Yeah. It’s around 40% Mikhail.

Yeah, overall, on our floating rate.

Perfect. Thank you.

Yes. And, and on [indiscernible] well, since the deal was just closed, it is, you know, it is not yet obviously, included in our numbers.

We will include it in e-commerce segment, as it will operate as an e-commerce platform. For last year the GMV based on the information that we have was around RUB6 billion in 2020.

That's perfect. Thank you so much.

Thank you.

Thank you Mikhail, and I would like to thank all the investors and analysts for staying with us for this call. Hope it was useful, and we continue with journalists and we switch to Russian.

Alexander will act as a moderator. Thank you.