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Dmitry Leus: “The Development of the

Russian Regions is Our Means of Survival”

part3

- Dmitry Leus: You must be a very reliable client then... [laughs]. o! of course! there are

such people! but they are not in the ma"ority. #e have a lot of clients $ho %no$ that &an%

'apa(ny has been $or%ing on the cre(it mar%et for over five years ) an( has survive( the

crisis. *f course! $e $ill have to increase our rates at some point! to be in line $ith the

mar%et! but $e $ill never be able to offer the highest interest rates. +n fact! our e,perience has

sho$n that even (uring times of strong (iscrepancy in (eposit interest rates! capital outflo$s

(o not e,cee( 20-0.

- You are or!ing on a "oint pro"e#t ith the

pharma#y #hain “Rigla”$ % small &an!

#olla&orating ith a &ig netor! of

pharma#ies$$$' (hat is the nature of your

#olla&oration'

- Dmitry Leus: #e are currently launching a pilot

pro"ect (uring $hich &an% 'apa(ny $ill be

present $ith a small ban% counter in ten igla

branches. or igla this generates an inflo$ of

ne$ customers mainly intereste( in our servicesbut also having a loo% at the pharmacy3s offering

 ) an( vice versa. 4t the same time! such an

approach brings the ban% closer to its clients.

5ra(itionally! a visit at the ban% has to be planne(

long beforehan( an( involves long $aiting hours.

+n contrast! here the client fin(s himself in a 6uite

natural $ay right in front of the ban%3s counter

an( can easily profit from the full spectrum of our services ranging from account opening!

(eposits! loans! an( cre(it car(s. + repeat that the pro"ect "ust starte(! but if everything goes

$ell its prospects are e,cellent. igla (isposes of a large net$or% across the country $ith

points of sale in top locations.

+n a((ition! also in collaboration $ith igla! $e have starte( to implement a "oint loyalty

programme. +f the interest payments from &an% 'apa(ny3s (eposits are spent in a igla

pharmacy! the client receives a 20 (iscount on the pharmacy3s pro(ucts. +n reality! to get

such a (iscount is impossible! as me(icine prices are regulate( by the state! but here the

costs are borne by us. #e offer a similar pro(uct for cre(it car(s.

 - (hy )i) you #hoose a pharma#y #hain as your strategi# partner' *s it to enhan#e

your visi&ility'

- Dmitry Leus: 5his is not a coinci(ence. 4 person visiting a pharmacy is psychologically

spea%ing in the i(eal state of min( for us. +t is a perfect place to combine physical an(financial health! implying a certain concern about one3s con(ition an( a strong resolution to

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enhance or at least to conserve it. #e $ere offere( a partnership $ith the chain of coffee

houses 7ho%ola(nitsa! but refuse( in light of the coffee-house3s connotation of rela,ation

an( socializing. *ur ban%ing pro(ucts nee( focuse( customers.

+n general! + feel that the pharmacy3s customers $ill appreciate to have an open $in(o$ into

the ban%ing $orl(! an( that people may gro$ use( to it.

- *n a))ition to these un#onventional plans+ you are systemati#ally opening ne

#onventional &ran#hes$ More than , &ran#hes ere opene) sin#e ./,,$ 0an you tell

us more a&out this rather aggressive groth strategy'

- Dmitry Leus: + (on3t thin% our strategy is aggressive. ather! it is a survival strategy. #e

have simply un(erstoo( that our (evelopment in the ussian regions is a top priority.

*ur e,perience has sho$n that the (efault rate on loans in the regions is by far lo$er than in

the capital. +n a small to$n everybo(y %no$s everybo(y. 4n( the local security officer is most

li%ely an e,-chief of police $ho %no$s his $ay aroun(. +n such an environment it becomes

very (ifficult for cre(itors not to service their (ebt! or not to return their loans! because of the

negative publicity it imme(iately creates in the neighborhoo(.

8osco$ is (ifferent. #hen $e launch a ne$ len(ing pro(uct in the capital $e imme(iately get

hun(re(s of suspicious applications coming from frau(sters $ho are testing $hether there is

a $ea% spot in our scoring or un(er$riting processes. 5o(ay such frau(sters (ispose of very

sophisticate( mechanisms. ormal clients only materialize in a secon( phase. +n the

periphery! ho$ever! this pattern is significantly shorter ) if not fully absent.

- You have in#rease) your #apital$ (ith hat'

- Dmitry Leus: #ith revenues! in a((ition to the issue of ne$ shares.

- Di) the #urrent sharehol)ers repur#hase these shares'

- Dmitry Leus: Yes.

- You have also issue) &on)s$ (ho are their &uyers an) hat is their yiel)'

- Dmitry Leus: #e have a goo( i(ea of $ho the potential bon( buyers may be! as $e have a

$ell-%no$n un(er$riter. 9ven if the mar%et is not purchasing our bon(s! our un(er$riter an(

partners have committe( to purchase them. 5he fun(s raise( $ill flo$ into our pipeline

pro(ucts! but it is still too early to spea% about yiel(s.

- *n Septem&er you surprise) o&servers ith having 1an! 2apa)ny au)ite) &y 4M5$

(hen * re#ently #he#!e) ho au)ite) 1an! Mos#o 6 a pu&li#ly liste) #ompany 6 itturne) out it as no one from the 1ig 7our$ This &egs the 8uestion hy you hire) su#h

an e9pensive au)itor$ *s this only lin!e) to the &on) issue or are there )eeper reasons'

- Dmitry Leus: You are right in noticing that this $as an e,pensive au(it! in particular for a

ban% of our size. 5he reason is simply that $e alrea(y to(ay strive to comply $ith tomorro$3s

stan(ar(s. 4t the en( of the process! au(itors usually recommen( $hat nee(s to be change(

or improve(. #e listen carefully to this a(vice. +f $e $ant to go public ) an( going public is

the epiphany of every business ) the right asset structure is of %ey importance. +f a globally

recognize( au(itor ac%no$le(ges our structure! this alrea(y means an 0 rate of success.

#e recently visite( the ;on(on 7toc% 9,change an( $ere tol( that a public listing is possible

$ithout a cre(it rating! but it is not possible $ithout an international au(it. +nvestors thin% the

same $ay. 5his is $hy $e believe that having a goo( au(itor $ill provi(e us useful gui(ance

an( help us avoi( mista%es going for$ar(. +n short! a <=8> au(it is an investment into the

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future.

 - %n *4O is a long-term goal$ (hat a&out the short term' %re you planning to attra#t

investors'

- Dmitry Leus: ?ertainly! but let us first as%: $ith $hat ob"ective (o $e $ish to attract

investors@ #e $ant to become a mo(el ban% $ith an absolutely transparent business an( aclear focus on improving processes in line $ith international stan(ar(s. 5his must be the

ob"ective ) an( not the (issolution of our shares through a financial investor. 5his is $hy $e

are only intereste( in attracting an investor such as! for e,ample! the 9uropean &an% for

econstruction an( Aevelopment. =ut (ifferently! $e are loo%ing for a partner rea(y to share

his %no$-ho$! e,pertise! an( e,perience! an( gui(e us by best practices an( mo(el behavior

 ) not unli%e an ol(er brother. 5his must be the ob"ective. #ith such an investor on our si(e $e

$ill $al% gently into the future.