just a second we will let everyoneconnect and start the conference callall rightgood afternoon ladies and gentlemenwelcome to creative bank of moscow firsthalf uh 2021 financial and businessresults conference callwe must advise you that this conferencecall is being recorded at this time wewould like to pass the floor to ericdebosham head of invest relations at mkbgood afternoon ladies and gentlemenwe are pleased to welcome you today atthe call dedicated to the financialand business results of mkbfor the first half of 2021.in the course of our presentation todayour ceo believer troubarand our cfo mikhail pavlov will give anupdateon the businessdevelopmentand will present the financialperformance of the bank on the reportingperiodour presentation as usual will befollowed by a q a stationnow i will turn the floor over to thefirst speaker vladimir so please goaheadthank you ericgood afternoon ladies and gentlemen ihope that all of you and your familiesare well and safeand i'm of course i glad to start ourdiscussion on financial results of thefirst half of the yearbefore we get into the details of ourperformance in the first half of thisyear i would like to focus on microoutlook for 2021 and briefly covercurrent environment in russiain july the international mine monetaryfund imf has revised up the projectionfor russian gdp increase in 2021 from3.8 percent to 4.4 percentbased on stronger gdp numbers and fasterrecoveries in the first half of 2021and of course it was higher than it wasexpectedcurrentlyrussia's effort to deal with theeconomic consequences of the pandemicbring positive resultamid strong rebound to foil prices andprogress in vaccination the recovery ishappening earlier and faster thananticipatedimf notes signs of the strength not justin the manufacturing sector but also thereopening of the economy and thestrength of the service sector as wellin june 2021 russian gdp is estimated tohave reached pre-pandemic levels plus4.6as for monetary policy during the secondquarter central bank of russia increasedthe key rate twice from four point fivepercent to five point five percent injulyuh russia's cbr height base rate byhundred basis points to six point fivepercentin an attempt to tackle persistinginflationthe move matched consensus expectationsbesides policy makers signaled furthernear-term tightening with an averagerate forecast of 7.5 7.1 per percent inthe second half of the yearwe expect that current rate increasewill support net interest margin andprovide positive tailwind to ourbusiness performancefinally strong resilience of russianeconomy going forward is supported bythe low public debt and current accountsurplus and of course more than 600billion international reserveson the next slide number four i willhighlight key recent corporatedevelopments of our bank of mkbuh generally rapid increase of economicactivity in the second quarter supportedour corporate and business developmentin the second quarter our bankdemonstrated strong business performanceand in particularin may we raised share capital in theamount of 22.7 billion rubles from thecapital markets through an spoin the second quarter we continue todevelop strategic partnerships withlarge corporate customersthird mkb together with other banksissued a syndicated loan to ugmkwe launched our product line for retailclients or at the bank calzorala in thein the branches of this bank after theacquisition in the first quarter of thisyear which will widen and diversify thegeography and the range of industries inthe portfoliowe launched mortgage lending in theregional network and exclusive partnerprograms with the construction marketleaders in grad and fskin the reporting period mkb investmentsaccelerated the results boosting theamount of fund raised to 5.5 billionrubles which is more than 60 percenthigherin comparison to second half of lastyear and the trade turnover uh increasedtoto269 billion rubles which is uh21plus year to dateuh mkb is recognized among top fourleading russian bondarrangers our bank has arranged 43issues with a total nominal value ofabout 600 billion rubles during thefirst seven months of this yearon 24th of june future ratings enhancedoutlook from negative to stable andaffirmed mkb's long-termcredit rating at double b levelbesidesi want to mention that in july 21st ofjuly of this year snp global ratingsupgradedits issue credit rating on our bank todouble b with a stable outlookthe positive rate in action reflects ahigher evaluation of asset qualitythe retina agency commented the bank'sperformance during the last yeareconomic slowdownthe banks the bank successfully tackledthe new challenges andadopted uh to the new operatingenvironmentas can be seen in his high operationalefficiency profitability and assetqualityanalysts specifically noted mkb'sconservative approach to risks takenin terms of sustainable development mkbpersistently extends the initiatives andprojects in line with our strategywe disclosed extended sustainabilitystrategy for the next three years 2123that includes medium term goals and keyperformance indicators for the nextthree yearswe updated procedure for managingenvironmental and social impact ofproposed financingmkb actively continues co-ranging ofgreen and social bonds on russian debtcapital marketsour sustainable projects portfolioreached about58.3 billion rubles we are focused onenhancing green and sustainable lendingmkb targets to develop reducing gagmeasures emissionand initialization of law and portfoliocarbon footprint calculation andrespective mitigation actionsour bank is top rated among banks inreich's europe esg ranking of russiancompaniesnow i suggest that we move to discussionof the key financial results of the bankfor the reporting period presented onslide number sixbusiness environment revival in thefirst half of the year empowered mkbdevelopment and brought to solidfinancial performancewe issued around 116 billion loans in116 billion russian rubles and loans tocorporate clients and over 18 billionrubles to retail customers during thefirst half of the yearmortgage portfolio boosted by 22 percentin line with our strategic targetsoutperforming the marketwe earned almost 14 billion rubles whichis almost 50 year-on-year plusand for the first half of the yearcorresponding to roe level of 13.5in the list of key achievements i wouldlike to includedynamic net interest income growth uh 28law uhgrowth amid lowest key interest ratelevelstotal loan portfolio expanded by 13that outperforms strategicmortgage portfolio boosted by 200percent emits from market trendbasel capital grew by 5.1 percent andcame at a level of 350 billion rulesrussian accounting capital adequacyratio n11 reached 9.8 percentwhich is outperforming our strategictargetupdated macro adjustment implementationin line with the rapid recovery of therussian economy brought significantpositive effecton improvementin the asset quality of our loanportfolioand finally in recognition of ourachievements global banking and financeand forbes granted several reputableawards to our bankthat's all from my site now i would liketo pass the floor to mikhail for thefurtherdetails on our financial performancemikhail please go ahead floor is yoursah thank you vladimir good afternooneveryone as already mentioned mkb hasdelivered a solid financial performancein the first half of the yearwe see some positive dynamic of netincome for the period total apparentincome after provisions increased by40and amounted to 31 billion rublesdriven by dynamic rise of net interestincome to35 billion rubles uhit is 28and 35 growth of net fee and commissionincomeamid significant decrease of provisionsprovision chargeand noticeable improvement in theasset quality asset quality of our loanportfolio in line with economyrecovery decreased loan loans provisionscharged by seven times lower than thecharge of a year agoand when the bank made significantprovisions on the back of worsen inmacra environment and the pandemicconstraintsthe ratio of net interest income toequated assets reached 4.5 percentnet interest margin improved by almost20 basic points to 2.4 percentthe growth of net interest margin isassociated with the outstrippingincrease of the interest rate on theasset side compared to the liabilitiesinterest expensethis is largely a consequence of the keyrates growthin comparison with the first half 2020interest expense decreased by 7or 3.5 billion rubles mainly due todecrease of interest paid on due tocustomers amid the reduction ofawaited average interest rates indeposit sitesthe bank's operating expenses expandedby 30 in comparison this comparison tofirst half2020 due to growing charges for salariesand employment benefits as well asbusiness development expenses amidconsolidation with acquired banks andcompaniescost income ratio is currently slightlyhigher on the long term levelin the reporting periods net income ofthe bank reacheduh 13.5 billion rubleswhich is actually 49 percent year onyear delivering return on equityor of 13.5umas demonstrated on slidenumber eight the bank's balance sheethas grown steadily driven by an increasein both corporate businessincluding loan portfolio and deposits incredit and financial organizationsand securities portfoliomkb total assets increased by8.6 in the first half of the yearthe share of the loan portfolio came upto 36in the reporting periodthe essential part of the balance sheetgross repo operationsreduced to 43of total assetsmkb's main source of funding remainsdeposits from corporate and retailcustomerswith the share of 59of the liabilitiesuh decreasing customer deposits ismainly caused by the decrease incorporate term and and demand deposit by31.5 billion rublesat the same timeindividual current accounts increased byeight billion rubles or around twopercent here to date in the first halfof the yearthe growthof the assets was supported by financingfrom director corporations by 207billion rublesas well as successful placement of eurodenominated bonds in the first quarteruh generally solid liabilities expansionreflects the bank's strong reputationand the ability to attract funding fromdifferent customer groups in itsvariousvarious market environmentnow let's move to slide number nine withthe breakdown of the bank's total assets34 of total assets is loan portfolio wasfocused on corporate lendingconsisting of 87of the portfolioduring first halfuh 2021 the retail portfolio increasedby 15namely 18 billion rubles and thecorporate portfolio increased by 14uh 116 billion rublesat the 30th of june the most significantindustriesuhin lone portfolio are crude oilproduction and trading24 of total loan portfolio growth andcommerce and trading15of total loan portfolio growthall companies from crude crude oilproduction and trading industry have thehighest rating and the major players inthe market with long-standing experiencecompanies from commerce and tradingindustry are international traders withlong long standing experienceand diversified marketandthe main purpose of loans are attractedto advanced contractsthe share of retail law on portfolioat the end ofthe second quarter was 12.7the portfolio grew from the beginning ofthe year by 15.1due to solid growth of the mortgage loanportfolio by 22and cash loan portfolio by 10on the backof consolidation ofculturalbankdollar shell of reverse repo operationsinin total assetsas of the end of second quarter reducedto 43 percentin line in the line with the bank amidstmid-term strategyover 94 of securities that surfacecollateral and the repo agreements haveinvestment grades14 of total assets are represented bysecurities the securities portfolio nowconsists of 75of top tier highly liquid investmentgrade debt securities eligible forpledge in the cbrthat serve as a part of the bank'sliquidity bufferduring the reporting period securitiesportfolio increased by 13the increase in in the balance of thiscaption was primarily due to thepurchase and revaluation of russiangovernment bondssecurities of the republic of kazakhstanand russian railwaystotal amount of additionalunused liquidity sources compressed avery significant buffer of roughly 735billion rubleswhich components are detailedon the right hand by chartthis namely uh unpledged securitieswhich the bank received under reversereport transactionsand securities from own portfoliobelonging to the cbr loan at leastuh now i will take a few more minutes todiscuss law and portfolio qualityon slide number10.in the first half for 2021 provisioncharge for credit losses on loanportfoliowas 1.8 billion rublescomprising the amount of or 1.3 billionrubles for the second quarterduring second quartercorporate portfolioecl rateat amortized cost was decreasing despiteportfolio increasethe main reason was issuance of loanswith high rating and repayment of loanswith low ratinguh during first halfof the year acl charge for corporateloan loans including those at fair valuewas 1.7 billion rublessale charge for retail loan portfolio inthe first half of the year amounted to616 million rublesoverdue ratio for mortgage loans is lowand stable less than two percentwhile the quality of the cash loans hasimprovedthus combining updated macro economicadjustment the ecl rate for cash loanportfolio decreased from14.1 to 12.9 percentcost of risk in the reporting period isuh0.6uh low levels of core uh cost of riskwere empowered by the growth of highquality loan portfolio amid macroadjustmentmodels updateon the back of the rapid recovery of therussian economysufficient improvementin the asset quality of the loanportfoliois observed through npl and stages ratiototal loan portfolio and pl ratioreduced to 2.5 percentthe npl level for corporate portfoliodemonstrated the continuing downwardtrend here on yeardecreased to two percentretail portfolio and pl ratio amounts6.2 percentas shown on the as shown on the bottomleft diagramthe share of stage three and possibleloans decreased from five percent to 4.4percent of total portfolioand the impairment allowance providesits efficient coverage of 102 percentstage 2 ratio came to 2.1 to meet therepayment of some loanson the stageand the growth of the portfolio due tothe issuance of high quality new loansuh during first half ecl recovery forcash and cash equivalentsand for due from credit and otherfinancial institutions were333 million rublesand854 million rubles respectivelyecl recoveries for securitieswas675 million rublesnow i suggestturning to slide 11 where corporate loanportfolioclassificationin accordance with ifrs 9 is providedon the diagram there is an evolution ofcorporate loans created quality analysistotal amount of stage 1 loan loansincreased from779to916 billion rublesplus 18during the first half of the year due tothe issuance of new loansthe share of stage oneloans increased since second quarteruh at the level of 94.1 percentuh during second quarteruh stage one loans amountincreased due to the issuanceof of loans in amount of154 billion rublesthere is and decrease in stage twoan amount of three billion ruble rublesmostly due to their payment of someloansuh the share of stage three loansbeing the most risky segment reducedfrom 4.1 infourth quarterlast year to 3.3 percent in thereporting periodand the impairment allowance provides asufficient coverageof 79 percentlet's now move to slides number 12which illustrates the funding structureof the banktotal liabilities reflects growth of 8.5during six months of 2021 with gooddiversified source of fundinguh 54 of total liabilities arerepresented by customer depositsvolume of corporate deposits comprisedcomprises to 70 percent and individualto about 30 percentuh deposits by creating institutionswhich accounted to for about uh29 percent of total liabilities weremainly represented byuh report transactionsaround93 percentthe share of debt securities issued isseven percent with major part ofin foreign currency including the issueof 600 million euro dominated bonds madein the first quarterthat repayment schedule is comfortablefor the bank with the bulk of wholesalefunding due from 2025and slide number 13ifrs capital developments are depictedon the upper diagramsi phrased total capital grew in thereported period and comprised to349 billion rublesgood financial result and successful spomade in the second quarter allowed thebank to grow cortier onecapital to 226 billion rublestotal capital adequacy ratioofof themkb group calculated in in accordancewith the base of three requirements hasslightly decreased in the reportingperioddue to thedecrease of the additional capital whileuhtaiwancapital ratio exceeded fully at 2020level even on the solid growth of therisk-weighted assets by227 billion rublesthe dynamic ofcapital ratio ratios under russianaccounting standardsis shown on the bottom graphson the left side you may see regulatoryminimums including buffers applicablefor systematically important bankson the right diagram actual mkb'scapital adequacy ratio are representedthe bank demonstrated strong capitalposition with all ratiosas of1st of july well above minimumregulatory requirementsn11 ratio improved and achieved ninepointeight percent in july amid share capitalrisingthe improvement of asset quality andtriple strengthening in the reportingperiodthese were the main highlights of thebank's financialsand business results for the first halfof the yearthank you very much for your attentionand now let's move to the q a sessionuh dear attendees we are now opening theq a sessionif you would like to ask a question youcan do it in the following waysfor those using zoom app on your phoneor your desktop please use the raiseyour hand function and wait for yourline to be unmutedalternatively you can type your questionusing the q a icon at your control barand it will be read out and answered bythe company if you are calling in fromthe phone line you will need to pressstar 9 on your phone and wait for yourline to be unmuted we also kindly askyou to introduce yourselves now thefloor is open to your questionshello everyone it's mikhail dmitry frombcs i have three questions if i may umfirst off could you please elaborateeffects losses in the second quarterruble was not particularly volatile overthe period so what's behind the lossum second uh could you please disclosethe growth ofif i may start one by one becauseotherwise i will forget as usual suresorryyeah fixed losses look uh it's a swapsas we described it a number of times uhmainly it's a swap expenses actuallythe big part about eighty percent of allof this uh it's a swap expenses and uhdue to the uhifrsrequirements uhthey are in the fx lossesokay um could you please disclose thegrowth of the portfolio loan portfolioand fees excluding recent acquisitionssay please again the question excludingwhatexcludes the recent acquisitions of alsookay we can do this colleagues if youmay do it now please do it i'm not sureit's material because uh calzora is nota materialasset especially if you're talking aboutthe corporate side if you're talkingabout retail maybe yes maybe for theretail it's uhuh some amount which can be like twothreepercent maybeokay uh while my colleagues uh try uhtrying to figure out now the numberswithout this uh please ask your thirdquestion as you said you have threequestionsthank you um any guidance for this yearwould be much appreciated if you maythank youonce againum any guidance for this year would bemuch appreciated if you may providethank youany guidance for this year you meanlikewhich guidance in particular or justwide range of themany number you can provide so it wouldbe very helpful i'm not sure i'm notsure that uh any guidance changed incomparison to what we disclosed in marchso that's why i can just uh address yourquestion to the answers which we did onthe last call and uh it's quite the sameso we didn't change anythingin comparison to the last callyou can use them easilyokay i think thank youthank youso ii assume that it will take some time toanswer your second question maybe wejust can come back to youoffline and uh colleagues will give youthe numbers but once again for otherlisteners i can say thatit's not material asset and it didn'tchange numbersuh if you just will exclude thelong long portfolio of cultural inparticularokay we can i can i can provide numbersif we speak about cultural at the end ofthesecond quartervolume of total assets of the bank wasaround 35 just 35 billion rubles andspeaking about law and portfolios thetotal loan portfolio was less than 10billion rubles andaroundhalf of this isfor corporates and half for a tailso it's quite yeah it's minor minornumbersokay please uh nextquestionsmikhail gandalin please go aheadum good day gentlemen thank you forpresentation i have a few questionsthe first oneyour interest rateor interest incomegrows rapidly and net interest marginis improvingon raising key rate somy question ishow long will you benefit from a raisinghear ratehow long your margins will improve goingforwardso could you provide guidance for thisyear and maybe for a longer term periodhow do you see yournet interest margin will performuh when do you think that what we seethatwell you see the repricing of actual uhoh well active part of your balance butwhen we will see that passive part ofyour balance will start also repricinguh and your net interest margin willstabilize thank you this is my firstquestion yes uh thank you mikhail forthe good question look uh to understandbetter theforecast it's just better to look at thesecond quarter in particular and thesecond quarter net interest margin wasuh 2.5 2.6uh in comparison with the first quarterwhich was 2.2 so average 2.4 for thefirst half of the yearbut uh i just will address to thisnumber that uhwe are expecting that uh 2.6 percent uhwill be the level 2.5 2.6 in this rangewill be the leveluh on which net interest margin willland by the end of the yearand uh saying about benefiting from theuhkey rate increase etc etc souh it's not the main factor actuallymain factor of course is that moreefficient work onasset liability management etc etc and ithink thatthis is also theimportant thing to sayso uh once again answering in a short ina short version so 2.5 2.6 for netinterest margin uhfor this year for the full year this isthe numbers we should uh we arebelievingthank you and uhis it possible to maintain these marginslonger termthank you so there is actually in ourplan which we described in some detailsand seems to me march it was marchuh yeah we actually said that uh 2.7this is the target uh in terms of netinterest margin on some period of timethank you very much and my secondquestion is about youropinions or your costs they inflate itquite substantially and of course theincome ratio jumped to over 40 percentso could you provide more details whywhywhy this costs increase so dramaticallyand so what should we expect in thesecond half of the year and in longertermthank youyes uh in terms of thecost income ratio as ratio just nottalking about absolute numbers but interms of ratiothere is a couple of reasons of coursefirst there's increased costs and we arenot expecting that the costs will beincreased uh in comparison with thesecond with the second quarter in thethird and fourth quarter if you'retalking about thesequarters andin terms of the profituhagain we shouldnot to forget that uh some influence onour financial resultin p l we have from the revolution ofour perpetual bones and in the secondquarter it was negative result aboutseven or eight hundred billion eighthundred million rubles so if we willexcludethis negative result of course thethe cost to income will be below 40closer to 35 percentokay thank you and where do you see along-term cost income ratiouh in a range of in the range of 30 35closer to 35 percentthank you very muchokay so the next question is going to beuh from the user uh calling from phoneuh could you kindly introduce yourselfbefore asking the question uh your lineis unmutedoh hi i'm italian everyone from top10thanks for the thanks before thisafternoon um a couple of questions if imay umi remember in um at q2 sorry the q1reporting um you you talked about nofees having been a slightly weak pointum partly seasonally in the in the firstquarterand that you were expecting to seean improvement in future quarters thatyou were working on a number oftransactions and and so on i think iremember that commentand yet actually the fee um performancein the second quarterit's a bit better but not that muchbetter um and clearly you've given usthis longer term guidance of moving fromsort of 20to 30 percent of total income and i justwondered how you feel you know progressis in in terms of fee income and are wegoing to have to wait a little bitlonger um before you start seeing thatpercentage um improving so i'd just beinterested to see firstly where youwhere you think you are on on feesyes actually we are still uh uh thankyou for the question good afternoonfirst of all uh in terms offees and our projection we didn't changeit so we're still uh going to thisnumber you're right there was some uhexpectations uh about the second quarterand third quarter as well unfortunatelydue to some you know someissues working etc etc so a number oftransactions were moved to the thirdquarter so we expect that uh it will beuheven better result in a third quarterand a fourth quarter as well so uh thereis a just you know general answer thatuh we are still uh on on track there wasminor inimprovement as you said right on the inthe in the second quarter but at thesame timewe are expecting that it will be evenbetter in the second half of the yearyeah that's that's great umnext question on um on the on the margini mean you've been relatively clear umbut i mean clearly when when you gavethe um the 2.7target um interest rates were at fourand a quarter i i think they probablystill were and they're now at six and ahalf and as you say they'll probably endup above seven by year end um does doesthat make it easier um over the periodto get thereyeah because clearly i guess what we'reexpecting yeah it's easier so i justdon'tuntil we didn't change internally ourtargets i don't want to say that wechanged them and we have new ones so ifyou ask me like mycurrent private view and if i if i cansay this way uh yeah it will be easierit will be easier and for sure uh it canbe rel and get it can be revisedon some period of timeand of course uh we somehow expectedthat it can be in an increase in therates etc but at the same time we shouldnot forget about competition and at thesame time with the increase of absolutenumbers of absolute rates and of courseas a consequence increase of potentialnets of potential increase of net netinterest margin at the same timewe shouldn't forget about competitionand uh it can besome higher competition next year that'swhy you know to be on the safe side weare still uh keeping this 2.7 percentbut at the same time it can be revisedthis isfor sure okay that sounds that's greatand thirdly sorry to come back again onon on the trading side but i remember inthe in the first quarter you sort of uhgave us a sort of uhyour own view that about two billion aquarter in swap costs was about right umi hear what you say in terms of the ithink it was 800 million of the uhof the perpetual markdown in in thesecond quarter well was there anythingelse uma little bit uh specific aboutabout 2q um because clearly yes we'veseen figures higher than 5.1 billion onthat line in the past but in a slightlymore stable environment it just it justlooked a little bit high um and just anyany further comments on that would bewould be interesting yeah look uh interms of the swap costs actually when isaid two billion you know i'm i was likemy wife who said uh there is somethingyou just see the first number and don'tsee the second number and the secondnumber was very close to you know twohigh numbers like uhnine or eight so uh actuallyuh it swaps mainly and uh if you justlook at the current uh current numbersuh of the second quarter and inparticular and all the first half of theyear of courseuh as i said mainly swap costs and allother uh all other sources of this kindof expense or losses are not materialand also we should not forget that thereis some uh revolution of theof the perpetual bond which is also herein this numberwe we are thinking internally that weshould also providemore uh clear information about thisvolatility of theuh perpetual bond and i mean notperpetual bond but revolution of theperpetual bond and uhstart to disclose kind ofnormalized profit or something like thiswhich will beuh without this uh volatility anda bit more clear picture toinvestorsokay thanks and then so finally i meanyou you had a a pretty good what lookslike a pretty good performance again inin mortgages in the second quarter imean clearly the you know the statesubsidies have havenot quite vanished but they're muchreducedfrom july and and i think sort ofvolumes of of state-supported mortgageshave have come down a lot um and and ijust wondered isis that was that important to you i mayhave asked you this last time but um wasit important and do you think mortgagegrowth will will flow in the second halfor you still think that there's athere's a good uh a good opportunity tokeep growing fast there we expect somekind of slow down so 20will be not just doubled and will notcome to 44 by the end of the year itwill be slowed down but at the same timewe prepared ourselves for this and wei'm not sure if i was talking about thison the calls but it's my public positionthat i don't uh i do not believe thatthe support of the mortgage uh of themortgages the port of constructioncompanies which was in last year uhshould be forever and i think it'simportant that uh yes it can be somemedicine can be some pillar some pillswhicheconomy andsome sectors can use but it just cannotbe foreverthat's whyonce again answering your question weare not expecting that will be the samegrowth as it was in the first half ofthe year but at the same time we expectus to outperform the market in terms ofthe growth of loan portfolio in themortgages and we pay much more attentionnot just to the mortgages to the supportor some kind of you know subsidies etcbut we pay much more attention to ourspecial programs with the constructioncompanies which we are implementing moreand more and uhof course it can support the sales ofthe mortgages and etc etcthanks a lot that was pizza thank youthank you so muchuh thank you then the next question isfrom yukatirina siddharvaplease go aheadhi uh thank you very much uh for adetailed presentation actually the bulkof my questions have already beenanswered but i have one more questionuh concerning your cost of risk so itseems that cost of risk and provisionsstill remain pretty lowuh in second quarter and i remember thatyour full year guidance wasone percent in terms of cost of risk uhdoes this mean that your cost of riskwill go up in second half this yearand uh what are our thoughts umabout asset quality at this point oftimeyesgood afternoon nice to hear youuh look in terms of the cost of risk anduh in general the quality of the loanbook so it's just remain uh let's saygood sowe're not expecting any uhany new issues any new concerns concernsor troubles from uhthis part of our business i mean fromthe lending sideuh so cost of risk uh projection was onepercent i still uh want to keep itbecause look ii'm you know older and older and uh allthe time want to be a bit moreconservative than before and uhif i will say thatit can be slight increaseuh in a cost of risk uhso wewe don't know what will happen you knowuntil the end of this year and i'm stilluh trying to figure out if it can be anynew like black swans you know from uhany of our borrowers or from uh russianeconomy or from world economy we justdidn't know that's whyuh to keep ourselves more you knowuhmore ready for any circumstances we arekeeping ourselves in these numbersbut uh you know just moving back from uhlike expectations or some fear comingback to the you know uhsome discussion i can say that of courseit will be it should be below one i meanuh uh cost of riskbecause uh if nothing will happenit will it will be much more below oneon the levels we see in the first halfof the yearthat's clear okay thank you very muchthank youthe next question is from kalim kalimplease go aheadthank you very much um hi um good set ofresults i have umquestions regarding thefunctional currency mixrelated to the to the business i i wantto understand what proportion of yourloan bookis dollarized and the amount ofthe absolute amount of swapping that youneed to doto to fund this loan book that's thefirst questionthe second uh when you say uh okay i'msorry i just uh well we will answer oneby one so when you say dollarized youmean all the hard currencies or onlydollars no hard currenciesfor me it's the same okayfor us nofor us i know i mean there is a smallmovement makes a lot of difference butjust just to get a rough approximationof what is yourknowledgeable issueto help me and say which part of ourloan book is in uh hard currencies eurosdollarsuh you mean um total assets are just uhnolonger let me check it because i cangive you a number forthe uh total assets currently if you areinterested in attending what's the totalnumberspeaking about total assets yeah yeahspeaking about total assets on theliabilities sidesuh we total assets can't be on theliability side i'm asking about thetotal electricity exposureso uhuh on the asset side we have uhruble denominated assets of uhum68roughly okayum just just a secuh and uh umon the uhliability sites umtheuhshare of forjustin let me check it and maybe i'ma bit wrong uhon the liability side we have68uhohsorryagainon the asset side we have 68 percent uhruble denominated assets and uh on theliability side just uhuhfifty fifty around fifty two percentdrupal liabilities okay so the on a netbasis you have toborrow16of your asset base has to be swappedfrom ruble into dollar is that correctyes you're you're correct sothis is the reason for swap costs yeahso so what i want to understand betteris if i was to estimate yournet interest marginincluding the soap cost how much of theswap cost would eat out of your netinterest margin how many basis pointsyou reckonso it is around two uh20 basic pointsadditional costswapsokayso the swap cost about 20 20 basispoints on an overall liability side buton the dollar liability side it would bemuch higher i guessso i mean that's cost for swaps for ifwe calculate our net interest margin soincluding cost of swaps would be around20 basic points lower than uhwithoutuh cost of swapare these swaps rolled over on aquarterly basis or are they annualizedumproductslook it's uh it depends on the positionof uhswaps yeah i guesslook it just doesn't matter that we ohit's it's just not uhlike you know wemake them for three for three months orsome other months it just depends on theposition of ib and they're making themfor different uh sites and of coursemainly site we need andof course different tenorsthank you very much that was the mostimportant part of the question that ihad thank you very much for yourpresentation really appreciate thatokay so the next question is from nickdimitrovgood afternoon gentlemen quick questionfrom me and they're kind of minorquestions umi was looking at your asset quality andon the retail side and the standardretail is relatively small for you butit seems likethere was a migration from stage twointo stage three loans and when i lookat stage three loansthey increased roughly by about 20percent from year end 2020so i was wondering whether there wasanything going on there in particularno hi nick i think good morning for yougood morning good morning uh look umthere is a couple of loans which movethere so not like capitalwhen it's a couple it doesn't mean twobut there is a number of loans which uhjust went into uh troubles some time agoand uh it was a number of loans touh private bank customersandapparently worked on them there was acollateral etc but it's another story soit's not like uh you know some uhnumber of uh big number of small loansit's uhnotmanyof them theregot it got it umand then the other question isum regarding funding so your loans didincrease by about 13 years todayyour deposits actually declined roughlyby about a percentage point so you diddeployliquidity into loans which ultimatelyimpacts your net interest marginumlooking at your loan to deposit ratioyou're still at the very comfortable 66but i was like wondering kind of goingforwardand you did say that you expect your netinterest margin to continue to benefitwhether it's you know high interestrates or deploying extra liquidity howshould we think about funding in generalshould we expect to seethe loan-to-deposit ratio to continuetrending upwardsas you deploy the liquidity or youbelieve that it's going to stabilize atthe current leveluh look it's a question of uhmuch more macro situation with thedeposits in the systembecause uh it's just not about ourdecision or our strategy you know it'smuch more about the customers andespecially the retail customers becausethe main outflow in terms of percentagewas thereyou know the we discussed it number oftimes i'm i'm sure not only our bank butmany other the sameyou know on the retail side there is anoutlaw because people were not happywith low rates and the deposit side theywere much more happier to seeadvertising from the brokers russianbrokers which you know i was tellingthem the guys come to the market thereis arally you can earn much more money thandeposit forget about the banks etc eventhe banks did the same so currently uhwe see that the trade started to changebecause of higher rate on the depositside so two percent plus or even threepercent plus in comparison to what we'veseenone year agoof course uh making uhretail customers much more happy and uhthey want to move back to the banks ofcourse maybe some of them lost money youknow lost money on the capital marketson the i meanexchanges etcbut at the same time uh in general wemuch more uh umi forgot the worddepend on we much more depend on thecustomers on the on the corporate sideof course uh it's also the story whenyou know customers uh they want muchmoreuhuse more efficiently their money and ofcourse uh don't just leave them with thebanks but at the same timeyour question was how you can evaluatethe currentlevels if they are stable or can bechanges i should say stablei should say stable because uh there isuhno expectations that we will go deeplyin you know ininborrowing fromthe local markets i mean uh interbankrepo market etc and just using theliquidity which we have in the form oflet's say bonds oron our proposition or after the reverserepo et cetera et ceterasoi like this level which we have nowright right makes sense makes senseunderstood and one last question verybrieflyso your n11 ratio 9.8 percentpreviously you said that you like torun your capital in the kind of the ninepercent area i guess the assumption hereis that we're going to see the9.8 percent kind of gradually grind downto the nine percent area probably byyear enduh i do not expect it will be by theyear end uh look it it just first of allit it it it also depends on the uhrubleitwill be weaker of course you know wehave ruble capital ruble determinatecapital uh we have as we just discussedwith kalim we have a number of uhdollar and euro dominated assets whichcan be of course which will be reprisedand finally it will have more pressureon the capital of the ruble cap or theon the ruble capitalso uh ifuh the situation with the ruble and uhruble you knowwith other currencies will be the sameas now i will do it i do expect thatwill land somewhere you know nine pointtwenty five or nine point five percentso this is what i see now because ofcourse we should uh expect some uhrussian uh accounting profit will whichwe which can be audited et cetera etcetera so some other extra sourcescapital can be added to the base capitalat the same timeas we started to groweven better than we expected in terms ofthe loan portfolio etcmaybeit also can be the case it will uh comequicker than i expected uh it's you knowit's like uhtwo parts of metal of course on one sideit's better to grow and to use thecapital which we have and come quickerto the levels we like to be but at thesame time of course it's just better tokeep somesome surplus and maybe there will besome even bettertransactions bettercustomers in the futureunderstood excellent thank youappreciate itthank you very muchuh thank you uh the next is mikhailghanaian mikhailuhhi it's me again uhi would like to ask one more question ifi if i may more strategic questionuh so you acquired culturally so do youum consider another another many dealsto require another regional bankswhat's your strategy in this areathank you uh thank you mikhail goodquestion i answered it uh in march so wedon't have anyuh you know targets in terms of ourstrategy uhto growin not inin organic wayto grow not in inorganic wayi should say this way so uh only organicand this is part of our strategy uh ofcourse uh as i said never saideverywhere at the same time we are quiteopportunisticandit will be some uh good offers we canlook at them as it was with consora sowe didn't look for like you knowregional banks to expand in euro regionbut there was an offer we looked wedecided okayso at the moment we don't work on anytransactions and don't have any offersfrom the marketokay thank you and your strategysuggestsexpansion to other regions quiteaggressively as far as i rememberyour presentationsaid that you tend to cover around 30regionsso do you plan to set up branchesyourselfwhat's yourhumans in this area yes yes so as we didactually as we did many times in the inthe past and last year and two years agoso uh we opened branches by ourself andit's a much more preferred strategy butonce again if there is a good bank goodregional bank which is uhwhich can offer somefirst of all of course good client baseuhand uhtransparent business model transparentassets etc we can look at itokay thank you very muchthank youdear ladies and gentlemen thank you verymuch for your questions if there are nomore questions we would like to pass thefloor to vladimir tuber for closingremarksuh thank you very much uh it was a goodcall uh and i really appreciate that uhwe have so many participants uhdespite the fact that uh there is a just23 of august and stilla vacation period is in progress and uhfor those of you who are uh connectingand working from uh some good places onthe seaside i hope that you will enjoythe last weeks the last week even ithink of the summer and for those of youwho are working already in the officesor at home uh the same just enjoy thesunuh and uh be health of course and allthe best to you and your uhbeloved ones your families and yourfriendswith this i think we can say goodbyethank you very muchuh dear attendees we thank you again forthe participation we encourage you toget in touch with ir team of mkb for anyfurther inquiries stay safe and have agreat day ahead goodbye everyonethank you bye thank you goodbye