Jan Art: Ilya, how do you assess the development of the banking industry in Russia in 2018? What, in your opinion, determines its current state and prospects?

Ilya Chizhevsky: First, we see that intensive lending rates remain in Russia. Secondly, the share of secured lending has grown significantly. It now accounts for 44% of the total volume of loans issued against 38% in 2015. Thirdly, the indicators of the quality of the retail loan portfolio have reached their peak values, and we do not see any improvement in the market in terms of the cost of risk in the short term. At the same time, as we expected, in the second half of this year, the cost of borrowed money began to grow. There are two reasons why this is happening: the growing pace of lending and the change in the key rate. This means that in 2019 banks will need to monitor margins even more carefully, and the cost of lending for the population will continue to rise.

Jan Art: For the public or for business?

Ilya Chizhevsky: And for business too. If banks do not translate the cost of funding into the final cost of lending, then we will see a significant reduction in profitability or a decrease in the level of approval, which, in the event of a reduction in volumes, will also lead to a loss of profitability. In this situation, I'm more of a supporter of raising rates in the market. Players who unjustifiably resort to dumping will, as a result, incur losses themselves and, in general, will distort the market, which, unfortunately, we observe from time to time.

Jan Art: Despite the fact that the situation on the market is very ambiguous, your bank ended 2017 with strong performance. In this regard, 2018, according to preliminary sensations, will somehow differ from the previous one?

Ilya Chizhevsky: Our parent bank is a public company, so I will only operate on the results that have already been officially published. 2017 was a record year in the history of OTP Bank in Russia, the best in 23 years of operation at that time. Nine months of 2018 is the next best result in terms of earnings for our banking group in Russia. The profit of the Russian business of the OTP Group for the first nine months of 2018, excluding the Touch Bank project, reached 5.1 billion rubles. Taking into account the results of Touch Bank, the net profit of OTP Bank (Russia) for the first nine months of 2018 amounted to 4.4 billion rubles, which is 27% better than the same indicator in 2017.

Jan Art: The history of OTP Bank spans a quarter of a century. You have been working in this bank for three years. What tasks have you set for yourself and are you setting now?

Ilya Chizhevsky: I have been working at OTP Bank for more than five years, and have been heading it for the last three years. The main task that we discussed with shareholders three years ago is the stabilization of financial results. Due to the market situation, we, like other players, experienced certain difficulties in 2013-2015, but we managed to overcome them. In 2016, we had a significant breakthrough. In 2017, as I said, we showed our historically best financial result. In 2018, we continue to develop at a high pace, despite market difficulties, and at the same time we are updating our infrastructure. In this regard, the task was exceeded, but I am personally glad not so much that we have achieved the best historical financial result, but that through our work we were able to convince shareholders of the prospects for further investments in the Russian business of the Group, including the acquisition of new assets.

Jan Art: Does the acquisition of banks or portfolios still make sense from a business point of view?

Ilya Chizhevsky: In our situation, taking into account our assets and potential, it is definitely “yes”. We are not the largest bank in Russia in terms of assets. It is easy to explain - we have a relatively small corporate business. At the same time, according to the results of the first half of 2018, OTP Group in Russia is 15th in terms of net profit, 5th in terms of return on capital with a result of 23% and 2nd in terms of return on assets. In other words, it is one of the most efficient financial groups in the country. Our main challenge is scale. We need to grow our assets faster than the market, so we are looking for complementary acquisitions.

Jan Art: Let's talk about the nature of your results. It is clear that this is always a multifaceted work, nevertheless - what are the highlights of your success? Is it new technologies, new business models, elementary "cutting the bones" or all together?

Ilya Chizhevsky: All together, of course. But I would like to make a few points. The first thing today is that we are very demanding in terms of financial results when making decisions. We evaluate them with the help of financial models and only on the basis of the calculations we make or do not make this or that decision. If adopted, we monitor its effectiveness and, if necessary, adjust it. Second, we are critical of our spending. Russia remains a country with a short crisis cycle, and there are many reasons for this. I think it is short-sighted to inflate expenses in order to soon engage in their reduction. Third - we are not chasing "market share". I am of the opinion that it would be a mistake to conquer the market without restraint, because margins are usually sacrificed for this, and this does not lead to anything good.

Jan Art: Is being a "daughter" of a foreign bank today a plus or a minus?

Ilya Chizhevsky: I do not think that the ratio is determined solely by the origin of the share capital. I have no reason to say that at least in some way we have noticed a special attitude towards ourselves due to the fact that we are a bank with foreign capital. Moreover, Hungary has a special relationship with Russia, Budapest is actively interacting with Moscow. The President of Russia regularly meets with the Prime Minister of Hungary, and, in my opinion, this is the most regular communication with the head of one of the EU states. Rather, I see it as an additional opportunity.

Jan Art: One French banker once told me: “Russian banks are cool and professional, they are no worse than our European ones, but still in France the planning horizon is 50 years, and here it is two or three years ...”. How many years ahead are you looking at?

Ilya Chizhevsky: Curious how often this 50-year plan is rewritten due to its irrelevance?! We try to focus on a calculated three-year horizon with a number of tolerances, that is, our planning is a “digitized” vision for three years, and beyond that - at the level of extrapolations. I do not think that the current conditions allow us to calculate more than three years ahead with the required accuracy.

Jan Art: You have made a certain evolution from a retail bank to a universal bank, and as part of this evolution, you have begun to work more actively with small and medium-sized businesses. What are the prospects for this direction?

Ilya Chizhevsky: Over the past three years, we have made a decent step towards diversifying the bank. We do not have a goal to become one of the largest corporate banks, but we are confidently developing in our niche, effectively diversifying the bank's business model, offering corporate clients a high level of service with a comfortable dialogue format, which is especially appreciated by them. We have increased our corporate assets from 20% to 25% and we can grow further.

Our main challenge is scale. We need to grow our assets faster than the market, so we are looking for complementary acquisitions

If we talk specifically about SMEs, then in addition to attracting cash and settlement services, we are gradually developing lending to the segment. In 2017, we managed to attract the largest number of new SME clients in the history of the bank. Having learned how to do this effectively, at this stage we focus on the quality of attracted customers, we put a lot of effort in this direction.

Jan Art: Will it also require the development of an office network? In your opinion, is the role of the network, office decreasing or increasing?

Ilya Chizhevsky: As technology penetrates our daily lives, as technology and services allow customers to conduct more and more transactions through various devices and remote channels, the importance of today's offices will decline. This process is inevitable, but it takes time; the new format of interaction with the bank will not be comfortable for all client segments at once. In ten years, those financial institutions that will remain on the market will certainly work differently as sophis. The level of active use of technology and regulatory restrictions are the main factors affecting the relevance of offices. Another factor is the level of financial literacy and experience in using financial products. The more comfort customers have, including due to transparency and experience, the easier it will be for them to switch to remote service and refuse to visit offices. Also, for many clients, the presence of an office remains a very important indicator of the bank's stability. For these clients, the safety of savings is a priority, and this gives the bank an advantage in the cost of funds raised. By the way, we have it the lowest in comparison with our direct competitors.

Jan Art: About six years ago I went to Stockholm to see how everything is arranged in the banks. Bankers then said: "We now perceive the office no longer as a place of operational activity, but as a consulting point." Do you have the same view? Do you also assume the transformation of bank offices? Bookshelves have appeared in restaurants - a very attractive trend, now you can read there over a cup of coffee. Or, for example, a great experience with the organization of children's corners in bank branches.

Ilya Chizhevsky: I don't think that the transformation of the bank office is the appearance of a bookcase or a children's corner. At the same time, I do not dispute the pleasantness of such things in the department. Transformation is first and foremost the purpose of the office. What the client comes there for, and what we want to offer him there. Do we want to offer some kind of basic transaction in offices in 10 years? I do not think. Rather, we want to help the client get an idea of ​​certain financial services that will help him achieve his goals. This will be the role of the branches - helping clients achieve their goals when without outside advice they find it difficult to manage on their own. An interesting observation is that many of our clients are with us because they enjoy interacting with our employees, this follows from the feedback results. Just to take and deprive them of this opportunity means to lose their loyalty and eventually lose them. In this situation, the right balance and sequence of steps are required to meet the needs of customers while maintaining the operational efficiency of the bank, in particular its branches.

Jan Art: Do you think that in the future banks will be able to offer adequate, intelligible and diverse tools to a wide range of customers? Those who need more than just a loan or a deposit.

Ilya Chizhevsky: Definitely yes. For two reasons. First, banks are learning. The second reason is that clients are learning. Both parties gain experience and begin to understand each other better. Yes, it takes some time, we do not have a culture and a hundred-year history of savings and investing in various instruments. There is no family practice when parents would pass on to us some kind of sacramental knowledge regarding the management of their own finances and the family budget. That's why it's not a fast process.

We talk a lot about financial literacy in the field of lending, but, in my opinion, we do not pay enough attention to financial literacy in the field of budget and savings management. Not to mention that some have a long planning horizon, while others have a short one. Everyone's goals are different. Someone is passionate, ready to take on more risk, someone is conservative, and this requires a different approach and different tools. There is no doubt that banks will learn to better formulate offers, and customers will perceive them better. The quality of products and services will be better, and the mutual understanding of customers and banks will be higher. But this will take time and, importantly, the stability of the banking sector, the faith of customers in it.

Jan Art: How do the changes we are talking about affect management, the requirements for the competence of employees, top management and line personnel?

Ilya Chizhevsky: We are all learning and we must start with ourselves. I would single out three requirements that I once accepted for myself and for a long time consider to be key for top managers and no less important for all employees.

Engagement - the willingness to join new initiatives, take on new things, do more and do it well

The first is clarity of thinking, which means logic and thoughtfulness, combined with the ability to argue one's position and convey this argument so that it is understandable to others. The second is flexibility. We live in a rapidly changing space, and the ability to readjust, work with new inputs, and be open to new things is critical. The third is involvement, willingness to join new initiatives, take on new things, do more and do it well. This is usually followed by recognition with all the ensuing benefits for the employee.

Jan Art: How do the Hungarian roots of the bank affect the work?

Ilya Chizhevsky: Many top managers of the Group know and understand Russia well. Many Hungarian colleagues speak Russian and know our history, which simplifies mutual understanding. In my opinion, it is much easier for us in this regard than for other Western banks, because we have similar thinking and we look at many things in the same way.

Jan Art: The last question, futuristic: 25 years of the Russian OTP Bank, and if you imagine another 25 years, how do you see it?

Ilya Chizhevsky: First of all, after 25 years, according to the latest decisions, I will have to retire… (laughs). I would be cunning if I said that I see this future very clearly. But I would really like OTP Bank to be the organization that will provide its clients with effective and affordable solutions to achieve their goals. Including, but not exclusively, in the financial sector, since in the future the bank's activities will have to go far beyond the perimeter of financial services.

BRIEFLY ABOUT HUNGARY

- What is your personal perception of Hungary?

Very beautiful country. The Parliament building in Budapest is one of the most beautiful in the world and, of course, an architectural masterpiece. Separate quarters of Budapest are very reminiscent of the Petrograd side of St. Petersburg, which additionally helps me feel comfortable in the Hungarian capital, like at home, in my hometown. Hungary is a very diverse and culturally rich country, with its own traditions, in general, very neat and friendly, which probably determines the large flow of Russian tourists.

- Do you like dishes with pepper?

There's paprika, it's not the same thing (smiles). Yes, I really like it. In general, Hungarian cuisine is very diverse. For example, I especially fell in love with the Hungarian fish soup, which is not so common, since Hungarians practically do not eat fish. But there is a tradition of cooking fish for Christmas.

- No feeling of depression and stagnation?

Not at all. Rather, a sense of development - progressive, balanced, long-term. Hungary has very good macroeconomic indicators.

“The only one who can spoil the market is the banks themselves”

Ilya Chizhevsky, who headed OTP Bank less than a year ago, will have to turn it from retail to universal

Ilya Chizhevsky believes that there is no need to regret investments in human resources /M. Stulov / Vedomosti

Retail OTP Bank, which is part of the international OTP Group, has been losing positions in terms of assets in the banking system over the past few years: if at the end of 2011 it ranked 38th, then in the second quarter of this year it was already 57th. According to the president of OTP Bank, Ilya Chizhevsky, now the group is determined to grow in the Russian market. Suffering losses during the crisis and reducing its portfolio, OTP Bank decided to enter the corporate business segment and become a universal bank. One of Chizhevsky's predecessors, Zoltan Illes, who headed the bank in 2012-2013, tried to promote this idea, but only now the group has made a final decision. Chizhevsky, who has become the third president over the past four years, in an interview with Vedomosti, tells what the bank has learned during the crisis and why it does not conduct business in the “daredevil” style.

OTP Bank Plc.

banking group
Major owners (company data as of March 31, 2016): 76.97% are unnamed investors; Megdet, Timur and Ruslan Rakhimkulov (8.9%), Hungarian Oil and Gas Company (8.7%), Groupama (8.3%).
Capitalization - $ 7.24 billion.
Financial indicators (Q2 2016):
assets - 10.7 trillion HUF ($37.6 billion),
capital - 1.3 trillion Hungarian forints ($4.57 billion),
net profit - 129.1 billion HUF ($460.4 million).

- I propose to go from the general to the specific: how will you develop the bank? You've been working for almost a year...

– You have added a lot to me (laughs). I was appointed in the second half of October. Officially took office at the end of November 2015. We finally agreed with shareholders in the fourth quarter of last year that we will develop in Russia as a universal bank.

- That is, it was only in the fourth quarter? Before that, too, there were such ideas, as I understand it?

– Ideas were different. We have a European shareholder, and for obvious reasons, the events of the past two years have raised many questions. Accordingly, different scenarios were considered. But we agreed that we will develop not only the retail business, but also work with legal entities and the treasury. And we are following this strategy.

- Tell me, what other options were there?

- Well, in such a situation, the owner evaluates different scenarios. From monoliner to extreme options.

JSC OTP Bank

universal bank
Main owners (company data as of August 4, 2016): OTP Bank Plc. (66.2%), Alliance Reserve LLC (31.7%).
Financial indicators (IFRS, II quarter 2016):
assets - 115.7 billion rubles,
capital - 25.7 billion rubles,
net profit - 1.55 billion rubles.

- And what was the most extreme?

- Singling out one direction as the only one for development. The risk of this situation is that you become completely dependent on this one direction and in case of any changes - market or regulatory - there is a huge risk to your business model. In our market conditions, it would be a mistake to go this way.

– And that is why you chose the model of a universal bank... Tell me, does the concept of “universal” include large businesses or is it mainly small and medium-sized businesses?

- Everyone has their own standards of what is considered big business. Now we have companies with turnover in the billions of rubles a year, and we plan to increase the portfolio. Basically, if you look at our balances, in particular corporate current account balances, you will see that we are showing one of the highest dynamics in the market in terms of growth.

– And what dynamics?

– At the end of the second quarter, we increased the balances on the accounts of corporate clients by more than 60% compared to the end of 2015 (at the end of 2015 - 2.8 billion rubles - Vedomosti). This is about a universal model: we get many advantages, including in terms of diversifying funding and reducing its cost. Due to this, we have a competitive advantage in the form of an additional margin. Funding exclusively from fixed-term retail deposits is not a cost-optimal story.

Ilya Chizhevsky

Born in Leningrad (St. Petersburg) in 1978. Graduated from the St. Petersburg Institute of Fine Mechanics and Optics (Technical University)

Manager at Citibank, responsible for the development of alternative sales channels and credit development

In GE Capital, until 2011, he went from the head of the Moscow region to the sales director of GE Money Bank in Russia

Commercial Director of Rusfinance Bank (Societe Generale)

Deputy Chairman of the Board of OTP Bank, responsible for the development of classic retail and corporate business

Since November, President, Chairman of the Board of OTP Bank

– Can you name the cost of funding now and the one you are striving for?

- Now - about 7%. If you look at the comparison, you will see that our cost of funding is lower than most banks that focus on issuing POS loans.

- Due to what?

- Just due to the diversification of sources. If you look at the balance of our liabilities, we have a decent share of legal entities, in particular, current account balances. This is the cheapest source of funding.

What about the parent bank?

– The parent bank is always ready to insure us – if we need additional liquidity, in case of emergency market volatility. But we fund locally.

– What is the profile of the companies that hold accounts with you? Perhaps you work with a certain category of corporate clients?

– No, there is a wide range. We work with small and medium-sized businesses, and these are all areas that you can imagine in terms of industries, from pharmaceutical manufacturers to retail distributors. Hungarian companies certainly prefer our bank, as do many companies from Eastern Europe. But when we talk about large legal entities, we often take the position of a second-tier bank, and this position suits us quite well. Given our scale, this allows us to manage the concentration of risk on the borrower, despite the fact that we work only with very reliable companies.

Face to companies

What are your corporate portfolio goals?

- Now we are negotiating with our headquarters on revising the local limit and, in general, we find an understanding of this position. From the point of view of corporate lending, the bank's task is to stabilize and diversify the portfolio. In addition, we focus on factoring and guarantees. This business is developing very actively. I do not see any obstacles for us to be able to double or triple our corporate loan portfolio over time: on the horizon of 2–3 years, reach a figure of 20–25 billion rubles. for us it is quite a realistic story. We are very comfortable working, for example, with pharmaceuticals, but this is not the only direction. I can say where we will definitely not go (and here we are not alone): in the development business.

– But judging by your retail portfolio, the retail business will still prevail for a long time, am I right?

Retail remains in effect

– At the same time, your retail portfolio is significantly reduced. Are you going to cut it further? How much do you currently give out per month?

– The portfolio is shrinking not because we don't give out much now. The portfolio is shrinking because we issued little in 2015. In August, the group will issue over 7 billion retail loans, which is about 30% more than what we issued a year ago. Already, the consumer and cash loan portfolios are growing, so for us the question of the growth of the total portfolio is only a matter of a short time, taking into account the preservation of the yield rule.

- What kind of profitability are we talking about?

– Our minimum requirement for NPV is 0.25% in the least risky products, where we are absolutely sure that the level of risk volatility will be minimal. We issue a number of products with a certain additional buffer, which is laid down for possible volatility in the market. (NPV, Net Present Value - net present value. A calculated value that is used to compare various options for investing capital. - Vedomosti.)

- Now many argue that in the POS business, which is the main one for you, margins are falling. How will you survive?

– You know, the only one who can spoil the market is the banks themselves. Therefore, as long as there is no madness in terms of the growth of obviously unprofitable transactions, in principle, the marginality of the market will be in a healthy state. You need to be able - first of all to yourself - to say “no” when you see beautiful figures for the volume of loans on paper, but you understand with your mind that there will be no plus in terms of profitability for the bank. And this is a very difficult decision, and it is not easy for everyone. We have developed a certain algorithm: when we see that cooperation cannot be profitable in any way, we do not enter into this partnership. We had to give up so many major partners, despite the fact that we treat them with great respect. We simply do not see how this business can be made profitable for ourselves.

If you ask why the management of many banks decide to go into such partnerships, then my opinion is that this is the pressure of incorrect KPIs and some hopes for a subsequent cross-sale, which, in the current market volatility, in my opinion, is a whole series of illusions. It can be shown by numbers that from the point of view of ultimate efficiency, this story does not work. If we now fast-forward 10 years to a time when the market was growing in triple digits and many primary listing errors were forgiven by insane growth that outweighed the cost of those errors, then such a strategy could be justified. But not in the current situation. Now we are very much dependent on what is happening with the economy, on what is happening in the political environment, and the market has a completely different dynamic. If you are not sure that each loan is economically justified, do not issue it.

We do not set ourselves targets for market share. We certainly have certain volume targets, but with the obligatory condition that every first issue of a product must be profitable. Moreover, profitable taking into account the cost of capital. And this is our fundamental difference from what, as far as we know, competitors are doing. When making certain decisions, we do not support an opportunistic approach with the hope that the situation on the market will magically be better: let's issue something now with a small minus or zero, and then this story will somehow form by itself, but the volume or market share will be beautiful. In principle, at some distance this may look like a step back for us, because you see that you are giving out less competitors. But in the medium and long term, this will give us a strategic advantage, since in the event of market volatility we will be in a significantly more favorable situation than our competitors. Our principled position is that we will never go to retail chains, the issuance of which in one way or another brings a minus. As the saying goes, less is more.

- Can you give examples when competitors give out in the red?

- We know certain trading networks in which it is impossible for banks to issue loans on the plus terms on the conditions on which they agreed to work there. After all, tenders are held, according to their results, it is possible to see on what conditions transactions are concluded as a result.

Quest for the debt collector

According to our calculations, some banks agree to a partnership at minus 3-4% in terms of NPV. There are two options here: either they poorly calculated what is found on the market, or they are counting on a subsequent cross-sale, but, I repeat, there is no confirmation that it will eventually lead to a plus.

This is something that has already happened to many players and cost a lot of money, but to my surprise, they continue to do it. There is a risk that the pursuit of volumes and a kind of war of compromises will begin, and for this story, in my opinion, the responsibility lies solely with the management of banks. As far as we are concerned, we do not run a daredevil business.

– POS is your main retail business. How do you feel about cards?

– We significantly, but absolutely consciously, reduced our credit card portfolio in 2015 from RUB 42 billion to RUB 32 billion. At the same time, they earned almost 1 billion rubles on cards last year. net income against a loss of 156 million in 2014. Now is not the time to chase volumes, and in terms of priorities, we focused on profitability. They cut off something that definitely generated a loss for us, and this required, among other things, a certain reduction in the portfolio. Until the end of this year, we plan to issue about 2 million cards with a fundamentally different yield.

How do you attract new retail clients?

– In general, of course, it has become more difficult to attract new customers. We have not yet reached the situation on the market when good borrowers regained their confidence in the future and began to actively use loans again.

For us now one of the most [important] channels for attracting customers is the Internet. It is the most adequately evaluated and effective.

What the bank has learned

- Now, according to RAS, you have a loss for the first two quarters. When do you plan to become profitable?

– As a rule, what we see under IFRS, in a little less than a year, is reflected in RAS. In general, for us, as for an international group, our result under IFRS is the main one.

Looking at IFRS results, in Q1 2015 it was a loss of RUB 2.4 billion, while in Q1 2016 we already earned a profit of RUB 686 million. In the second quarter of this year, our profit more than doubled compared to the first quarter and amounted to 1.55 billion rubles. Frankly, we are very pleased with such dynamics. (Profit figures are given without Touch Bank losses. - Vedomosti.)

What will you do with the overdue debt? According to RAS, you have a delay of 21.9%.

You know, this is one of my favorite questions. It all depends very much on what you do with the delay. There are banks that sell it and due to this they have a low level of overdue loans, although in fact the exits there are very high. Someone in no case sells and keeps to the last. And if your portfolio is also declining, then in percentage terms, this whole story is growing, although new issues can be absolutely excellent in terms of risk indicators and profitability. Therefore, let's agree that, in principle, this indicator in isolation does not mean anything at all.

Now in terms of what we have. If you look at our 2Q financials, you will see that the cost of risk in ruble terms has decreased by 60%. We feel very confident. Our cost of risk is now at a record low of 7%.

But I repeat: we continue to believe that the situation on the market is volatile. We are seeing positive signals in retail lending, but we do not yet see such stable signals in macroeconomics, and therefore we continue to pursue a very careful and cautious risk policy.

- If we talk about the vintage analysis of loans, what is the delay in issuing loans this year?

– This may vary depending on the type of products we distribute.

- By type, if possible.

- For cash loans - a little more than 4%. Consumer lending - 3.4%, cards - 6.6%.

And in 2015 and 2014 what was the level?

- At the peak it reached 14-15%. Of course, this was not built into the business model. I don't think the market is to blame. Here we must present certain claims to ourselves, since not always and not all decisions on our part were made optimally. But, as one Chinese proverb says, if you stumble and fall, it does not mean that you are going the wrong way. This helped us to correct our actions, and now we have the result that we have.

There is such an indicator - FICO Health Index. The indicator shows the number of retail loan agreements with overdue debts of 60 days or more in units of the total number of loan agreements. So, the situation with overdue debts at the level of the peak of the 2009 crisis was reached on the market already at the beginning of 2014. Then it only worsened. This is exactly what we all experienced in one way or another. But here's what's important: for the first time at the beginning of this year, and the data here comes with a delay, there was a certain stabilization. And the very fact of stabilization is an extremely important signal for the market. In my opinion, the situation in terms of the bottom in terms of the cost of risk in the market has been passed. By the way, I know credit institutions where the situation with the debt burden on the client over 100% in relation to his monthly income was considered normal. I've never been able to understand this kind of logic and I hope the last couple of years have taught everyone enough to prevent situations like this from happening again.

– Are these large well-known banks?

- Including. There was an expectation that customers would be able to refinance indefinitely in other banks. You know, there is such a game: when there are fewer chairs than the participants in the game, everyone runs around them to the music, at some point the music stops and you need to have time to take a free chair. So, at a certain moment, the overwhelming majority of banks did not have enough "chairs", and each took on the losses that they accepted. But the ones who suffered the most were those who were dismissive of risk management.

- One of the essential topics is foreign exchange mortgage. How did you solve this problem? And did you decide?

- In general, we have a small portfolio - about 3.5 billion rubles, which is about 4% of our total portfolio. As of July 1, a little more than 600 foreign currency mortgage agreements remained, which is 34% of the total number of loans that were originally in foreign currency. Now the bank has seven own restructuring programs, in addition, we are cooperating with AHML in this direction.

- That is, not all borrowers have restructured their loans yet?

- Not yet, although such an opportunity exists and many of those who were offered these programs took advantage of them.

- Including. We have always approached each case individually. At the same time, we did not always hear, in our opinion, fair demands from borrowers, but, I think, we were able to find a common position with all constructive clients and solve their problems.

– What was your loss from the restructuring? Is he material to the bank?

– It is not as large as that of other market participants, since in general the foreign currency mortgage portfolio has a small share in our total portfolio. We are not a mortgage bank and do not plan to develop our own mortgage, but we are only engaged in servicing the existing portfolio.

A bit of politics

- Have you been affected by political risks in any way?

- I do not see that they have had any significant impact on us, although we have introduced certain restrictions on the operations of our treasury. Because, having Western shareholders, we are obliged to follow certain restrictions that were imposed by the European Union. But this did not have a significant impact on us.

- Restrictions - is it work with sanctioned banks?

– These are long-term securities of issuers subject to sanctions.

Is it just this or are there other restrictions?

– Only in this. There are no more restrictions.

– During the crisis, in a difficult political situation, did the parent bank somehow change its attitude towards the Russian “daughter”?

– You know, in this regard, we actually have a very big advantage. I have worked in American companies for a long time and I can imagine how American shareholders can now think about Russian business and operations in this market in general. We have Eastern European shareholders, and in this regard, we do not experience any serious concerns, restrictions, or difficulties.

If we talk about the trend in general, then it has now changed a lot. A year ago, the level of anxiety was much higher. Now in all internal discussions we discuss how we will grow, whereas a year ago we paid a lot of attention to how to optimize. These are two fundamentally different ways of thinking. Therefore, I am glad that now the bank is working according to the scenario that I voiced. But in order for this to continue, we must not forget about those things that once led to losses. And I keep repeating like a mantra: no opportunistic sentiments and no false hopes for the future.

OTP Bank, which is one of the 50 largest banks in Russia, and in a number of areas - among the market leaders, this year turned 25 years old. Inc. talked to the President of OTP Bank Ilya Chizhevsky and found out how the bank manages to achieve high profitability, what areas it specializes in, as well as how he spends his leisure time and what the president of one of the largest credit organizations teaches his children.

Your Hungarian shareholder is 70. Name some of the most important moments in the history of the bank. What do you remember the most?

For us, the starting point of a new life was 2006, when the OTP Group acquired Investsberbank. Here I will make a small transition to the history of the Group, because 2008 did not pass us by. There was a difficult situation in Hungary, connected, first of all, with foreign currency mortgage lending. I must say that the Group coped with it very worthily and in a short time. This made it possible to continue the development of business both in Hungary and abroad, in subsidiary banks. For us, this meant the allocation of investments for product development and the increase in distribution, which took place in 2012-2013. But, unfortunately, then the financial crisis began. The hardest time was in 2014 and the first half of 2015. As for all banks in our country, it was a time when we made difficult decisions. They concerned costs, the revision of our business approaches, and to my regret, they also concerned personnel. But I am very glad that this time is behind us, since 2016 we have been developing our business very actively. It is pleasant to note that over the 25-year history of the bank in Russia, the last 2 years have been the best in terms of financial results.

If we talk about the Group, then in 2018-2019. it continued to actively develop and expand its presence in Central and Eastern Europe. During this time, 6 banks were acquired, and further negotiations are underway. Currently, the OTP Group is present in 10 countries and is the largest and one of the most profitable financial groups in Central and Eastern Europe.

- How does the bank achieve high profitability?

First of all, the interaction between internal divisions was completely rebuilt. If at the time of my arrival at the bank in 2013, my colleagues within the board often interacted in the language of memos, but now it is simply impossible to imagine. I believe that we have built an exemplary collaboration between business, finance and risks, where everyone is responsible for their part of the work with one goal - the development and growth of the bank's performance. It is this structure and culture that I consider the key to our overall success. The return on capital of the Russian business of OTP Group amounted to 23% in 2018, which is one of the best results in Russia.

It will also be important to note that when making decisions, we adhere to two very important principles.

First, we never prioritize short-term benefits over long-term organizational development priorities. We want to work on the market for a long time and successfully and do not make such compromises.

The second - when making a business decision, we always evaluate it through the prism of numbers and financial analysis. We look at the present value, lifetime value, which allow you to very clearly see the drivers and predict the financial effect of a particular decision. The combination of these factors, in addition to the business model itself, allows us to show such results.

- How do you calculate these long-term steps?

As I said, we do not allow populist decisions to be made for the sake of some place in the ranking, to the detriment of profitability. We have many examples on the market, you don't have to go far. When times get tough, we see banks making business decisions that weren't well thought out. For some, this resulted in the collapse of either the direction, or the entire business as a whole. It is not difficult for us to become a leader in consumer lending. This can be done in 3 months, if we talk about the volume of loans, but the long-term financial consequences of such a decision will be extremely painful for the organization. We decided once and for all not to go that way. In a short-term market in terms of economic cycles, decisions cannot be made “at random”.

- What areas does the bank focus on? Or an emphasis on versatility?

Historically, 77% of the organization's revenues are related to As part of the strategy that we have defined for ourselves for the next 3 years, we want to diversify our business model both in terms of sources of income and sources of attracting new customers. There are many prerequisites for such a decision, including the volatility of the economy in the country. Lending is becoming a rather sensitive area, and it is quite risky to base the attraction of new customers solely on it.

- What other directions do you plan to develop?

We have 3 million active clients. We have not previously offered most of them related to everyday spending of their own funds.

Another example is working with high-yield segments, such as which we have not actively developed before. We want to take a closer look at the opportunities we have in these areas. Our bank has been operating in the Russian market for 25 years and is one of the few Western banks that remain active in our market and are considering opportunities to expand and develop their business. For many clients, this is attractive.

Entering new segments, we understand that the processes and products that we have need to be improved. If you make a quality product that is convenient for the client, honest with him, and builds optimal processes, then there is no reason for you not to develop this direction. There is no mystery or secret here.

It is probably difficult to come up with something new in banking - all banks have approximately the same products. What is your advantage over competitors?

Here you need to understand what segments and what products we are talking about. If we talk about our advantages in consumer lending, I will, of course, speak about the quality of decisions made and expertise. If we talk about or small business, it is, first of all, reliability for our clients and work in an individual "boutique" format, with a lively dialogue, which is very convenient for our clients.

- We are a publication about small and medium-sized businesses: does the bank work with SMEs? What services does it offer to clients?

Historically, it has occupied an important place in the development of the bank, another issue is that at some point the profitability of consumer lending prevailed so much that this direction faded into the background in terms of development priorities. But in 2014 we returned to this issue, since 2015 we began expanding our activities in SMEs, formulating a new proposal for supplementing it with new services, and in 2018 we launched lending, which historically has not been done before.

I have seen interesting statistics in terms of opening accounts for legal entities. In our country, the number of legal entities is falling. At the same time, I am familiar with the plans of many banks that set a goal within 3 years, if not to double, then significantly increase the number of legal entities that they serve. Here is one of two. Either legal entities will diversify more than now and open accounts in many banks, or many banks are deceived in their expectations. Understanding this trend, we are looking for our niche and those who may be interested. Those for whom the reliability of a Western bank, the service we can provide, and above all our flexibility will be an advantage. These are the clients we attract.

The bank does not make compromises related to the quality of attracted customers, we have a rather demanding control. We bear obligations both to existing clients of the bank and to shareholders.

- How many legal entities does the bank serve today?

About 17 thousand active clients of small and medium businesses. This figure is growing. We attract quite a lot of clients every month. At the same time, we focus on small and medium-sized businesses, not on micro.

- What is the reason for this?

Firstly, a large number of banks have focused precisely in the micro-segment, where competition is high, it is difficult to offer something special.

Secondly, customers who are looking for their service in micro are mainly focused on digital solutions, and there are banks that do it objectively well - again, it is difficult to compete. Thirdly, there is a rather low salary.

- What are the advantages of your bank in the field of SMEs over other credit institutions?

They lie in an individual approach. For example, in lending, we do not work on the principle of a factory, we have a lively dialogue with SME clients. In most cases, this helps in terms of decision making.

- What goals and objectives do you set for yourself and for the bank's team for the next few years?

We have an understanding of what we want to do over the next 3 years, and there are 3 key priority areas within which we will develop.

The first is diversification. We are interested in receiving additional sources of income.

We will also launch a new direction or start thinking completely differently about those where we are already present.

We never set ourselves the task of being pioneers in the field of digitalization. There are a lot of prerequisites for this, related, among other things, to the segment in which we work. But for ourselves, we understand very well that digitalization is an opportunity to significantly optimize our internal processes and make customer interaction with us more convenient. So this is our second priority. By the end of this year, we are completely changing our digital platform inside the bank, this is a large-scale and important project for us.

And the third, most important area, we identified the improvement of customer experience. Due to the results of work in this direction, we want to gain additional benefits and trust from our existing and potential customers. We have already launched a program that is reviewing both processes and products for interacting with customers. This becomes a key task for the management and all employees of the bank.

- What are these processes, products?

First of all, those for which we have regular feedback from our customers. We also plan to work with focus groups, which will help to get more information about what customers like and what needs to be changed on our part. Due to this dialogue, we will seek a balance between convenience for customers and the business tasks that we set for ourselves.

What kind of feedback do you get from clients now?

If you look at the feedback from customers to banks, for example on the Internet, you will see very few positive examples. This property of a person is more willing to speak out about the negative than about the positive experience, because we perceive positive experience as the norm, which is natural and fair.

It is impossible to make all 3 million customers absolutely happy throughout the entire interaction, so, of course, there are requests. We rebuilt our customer service business 3 years ago, and now it's nice to say that 80% of customer requests through any channel are resolved faster than 5 days.

Working at such a pace, how do you manage to stay in good shape? Are there any ways - how to recover after work?

One thing that I recently discovered for myself, and I regret that I did not discover it earlier, is to be able to switch. You need to give your head a break from work. If this is not done, the efficiency is reduced. For me, these are 3 main things - music, theater and sports.

Do you organize some kind of leisure for employees during the working day, so that they also have the opportunity to switch for a while?

Certainly. Now we are finishing the reorganization of our infrastructure. We are in a new head office, we moved into it on April 15th. There are enough areas where employees could relax during the day. The task was to create a space where employees would be comfortable, regardless of the time when they come here. We have both showers and bike parking.

In the neighborhood with us there is one more of our operational office, which we have re-equipped for greater convenience and efficiency of the team, built a comfortable infrastructure for work and leisure there.

Also at the end of 2018, an operating office was built in Tver with an area of ​​5.5 thousand square meters. m. This 3-storey building is by far the best office in Tver, in which the space is organized in such a way that it is convenient and comfortable for colleagues to spend time at work. Until the end of 2019, 600 employees will work there.

All our new offices are equipped with spacious kitchen-dining rooms, comfortable meeting rooms, and collaboration zones. We have installed special telephone booths in the central office so that employees can communicate on personal issues without distracting colleagues, and without experiencing discomfort themselves.

Have you ever had to make difficult choices in your life?

I had to, of course. At one time, I moved from my hometown to Moscow. For me it was a very difficult decision. Friends helped make this happen, and thanks to them I never felt lonely or uncomfortable in Moscow.

- How often do you travel and what places do you usually choose for trips?

I calculated that over the past year I have more than 110 border crossing marks in my passport, I travel often.

To relax and feel good, I need to go to nature. I'm not a big fan of cities. I go to the taiga with a tent for 3 years in a row and spend a week in the wild. These are actually mini-expeditions, and that's where I really relax.

The topic of financial literacy of the population does not lose its relevance. How do you teach your children the right attitude towards money?

Of course, finance is of great interest to children. My middle daughter last year, she was then 9 years old, asked me to tell her in detail how the bank works. I drew several diagrams, explained what cash flows are. My daughter folded the papers and took them with her. I think she has some kind of plan.

The main thing I instill in them about money is that money is the result of work. This forms a correct and responsible attitude towards money. My children have their own savings, I see how carefully they treat them, and I respect this.

What is your attitude towards loans, and how would you feel if one of your children wants to take out a loan in the future?

I will ask my child exactly the same question that we ask our clients. Do they know what they want to spend money on, do they understand how they will cope with the repayment of their obligations.

- Have you ever had your own business? Have you thought about starting your own business in the future?

Of course there was. At the age of 13, at the Moskovskaya metro station, I was very successful in selling ice cream during school holidays. Earned more than my parents' combined income.

At the moment I am a hired manager, but if I ever thought about business, it would be related to education. Raising three children, you understand the imperfection and limitations of the current system, and at the same time you see the opportunities that modern technologies and alternative approaches to education open up.

The president

Ilya Petrovich Chizhevsky was born in Leningrad (St. Petersburg) in 1978.

In 2000 he received a diploma from the St. Petersburg Institute of Fine Mechanics and Optics (Technical University). While studying at the University, he was an active member of the International Association of Students of Economics and Management (AIESEC). He started his career in St. Petersburg in the FMCG sector - Kraft Foods.

In 2003, he moved to the retail division of ZAO Citibank in Moscow, where he developed alternative sales channels and loan products. In 2006, he moved to GE Capital - working in Russia and abroad, he rose from the head of the Moscow region to the Director of Sales and Distribution in Russia, was responsible for the development of distribution and sales channels, alternative funding and customer acquisition via the Internet. In October 2012, he moved to LLC Rusfinance Bank (Societe Generale) to the position of Deputy President of the bank, where he was responsible for sales, products and marketing at the bank.

In June 2013, he joined the OTP Bank team, where from August 2013 he held the position of Director of the Network Division. On June 9, 2014, he was appointed Deputy Chairman of the Management Board of OTP Bank. Ilya Chizhevsky was responsible for the classic branch network business and alternative sales channels. In addition, he was responsible for working with the VIP segment, micro and small businesses, the development of the Bank's corporate business, channels for remote attraction and servicing of the Bank's clients.

Kapustin Sergey Nikolaevich

Sergei Nikolaevich Kapustin

Deputy Chairman of the Board, Member of the Board

Sergei Nikolaevich Kapustin was born in Moscow in 1979.

In 2001 he graduated from the Faculty of Mechanics and Mathematics of Moscow State University with a degree in Applied Mathematics. He has a PhD in Economics.

More than 15 years in the banking sector. He started his banking career in 2001 at Bank Vozrozhdenie, where he rose from a leading specialist to Deputy Head of the Retail Operations Department, being responsible for the Bank's retail business and risk management.

In 2008, he moved to OTP Bank, where he took the position of Director of the Risk Assessment and Methodology Directorate. Supervised issues related to credit risks for the Bank's retail portfolio, lending methodology, operational and market risks.

From 2011 to 2013 he worked in the field of microfinance.

Since 2013, he has been Deputy Chairman of the Board, Director of the Risk Management Division at OTP Bank.

Oreshkina Yulia Sergeevna

Yulia Sergeevna Oreshkina

Director of the Legal Support Directorate, Member of the Management Board

Yulia Sergeevna Oreshkina was born in Moscow in 1973.

In 1997 she graduated from the Moscow State Law Academy with a degree in jurisprudence.

She began her career in the prosecutor's office, then moved to the Legal Department of the Moscow Main Territorial Department of the Central Bank of the Russian Federation. Yulia Sergeevna Oreshkina also worked in various years in the legal departments of a number of large Russian banks, in particular, such as CB Petrocommerce, OJSC Impexbank and others.

Yulia Sergeevna Oreshkina has been working at OTP Bank (until 2008 - Investsberbank) since 2007, where she heads the legal support department.

Vasiliev Alexander Vasilievich

Deputy Chairman of the Board, Member of the Board

Alexander Vasilievich Vasiliev

Deputy Chairman of the Board, Member of the Board

Alexander Vasilyevich Vasiliev was born in Akhtubinsk in 1978.

Graduated from Moscow State University. M.V. Lomonosov.

Has been working in the banking sector for over 10 years.

From 2004 to 2010, he served as Deputy Head of Retail Operations at OJSC Bank Vozrozhdenie, where he worked on projects to develop lending products for individuals (consumer loans, car loans, mortgage lending), as well as to introduce automation systems for retail lending processes , such as Microsoft Dynamics CRM, Experian Strategy Manager.

In 2010, Mr. Vasilyev headed the credit risk department of FG BCS, where he participated in the launch of retail lending and in the creation of unified processes for assessing and managing credit risks. Since June 2011, he joined the OTP Bank team as Director of the Directorate for Product and Technology Development. Since December 2013, he has been Acting Director of the Consumer Lending Division.

Dremach Kirill Andreevich

Deputy Chairman of the Board, Member of the Board

Kirill Andreevich Dremach

Deputy Chairman of the Board, Member of the Board

Kirill Andreevich Dremach was born in Moscow in 1974.

In 1996 he graduated from the Moscow Institute of Economics and Statistics with a degree in Applied Mathematics.

More than 20 years in the banking sector. He began his banking career in 1996 at ZAO Citibank, having gone from a specialist to the Head of the Information Technology Department, where he was responsible for the development of the information and technical base, automation of business processes and financial management in the field of IT.

In 2009, he moved to Barclays Bank LLC as Director of the Information Technology Department, in 2010 he was included in the Bank's Management Board.

From 2012 to 2016, he worked at AO Citibank as Head of Operational Banking Technologies in Central and Eastern Europe, responsible for the creation, maintenance and development of the bank's high-tech information environment, supervised the development and application of information systems and new banking products.

In November 2016, he joined the team of OTP Bank JSC as Director of the Operational Management Division. Since November 3, 2017, he has been the Deputy Chairman of the Management Board, a member of the Management Board of OTP Bank JSC.

Belomytsev Igor Yurievich

Deputy Chairman of the Board, Member of the Board

Igor Yurievich Belomyttsev

Deputy Chairman of the Board, Member of the Board

Igor Yuryevich Belomyttsev was born in Gorky (Nizhny Novgorod) in 1966.

In 1989, he received a diploma in Economics with a degree in Foreign Economic Relations from the Karl Marx University of Economic Sciences in Budapest. In 1993, Igor Yuryevich graduated from the magistracy at the Stockholm University of Economics.

More than 25 years in the banking sector. He began his banking career in 1990 at the Hungarian Mezobank, which was later merged into a major financial group in Central Europe, the Erste Bank Group. Igor Yuryevich was appointed Director of the Treasury Operations Division and was responsible for the development of ALM and the management of Erste Bank's treasury activities in Hungary, the development and implementation of business strategies in the field of treasury operations, initiating the development of new investment products and strategies.

In 2001, he moved to PJSC Volksbank (Budapest) and headed the Treasury Division and the investment direction at the Bank.

In 2007 he joined the team of OTP Bank (Ukraine) as Deputy Chairman of the Board responsible for Treasury operations and asset and liability management, development of subsidiaries. Under the leadership of Igor Yurievich, OTP Factoring, OTP Pension Fund, OTP Management Company and OTP Leasing were created and successfully developed.

In 2016, Igor Yuryevich moved to OTP Bank (Russia), where he took the position of Advisor to the President and was responsible for the development of the Corporate Business and Treasury Operations. In February 2017, Igor was appointed Director of the Corporate Business and Treasury Division, Igor successfully manages the development of strategies and new products in the business areas of these divisions.

On November 3, 2017, he was appointed Deputy Chairman of the Management Board, member of the Management Board of OTP Bank JSC.

On January 27, 2015, Gabor Burian-Kozma joined the team of the Finance Division of OTP Bank JSC as a Project Manager. He was involved in the development of plans for the preparation and implementation of financial projects of the Bank, took part in the improvement of business planning and the development of an effective strategic model for the development of the OTP Group in Russia.

On December 1, 2015, Gabor was appointed Director of the Finance Division and took over the supervision of the financial unit of OTP Bank (Russia) and the management of the divisions responsible for the formation and strategic planning of the Bank's financial policy, financial and accounting services, divisions responsible for audits.

On June 6, 2018, he was appointed to the position of Deputy Chairman of the Management Board, member of the Management Board of OTP Bank JSC.