OREANDA-NEWS. April 16, 2010. Transcript of the beginning of the meeting:

Vladimir Putin: The Central Bank is cutting its refinancing rate. What is our leading financial institution, Sberbank, doing about its rates? How does your loan portfolio look?

German Gref: We are updating our loan policy because inflation has recently slowed down. Data for the past month show that inflation fell 50% in April 2010 compared to last year. The inflation rate will continue to fall this year and interest rates will go down accordingly.

In the first quarter, our efforts to expand our loan portfolio were still being held back by the effects of last year's crisis. April was the first month since November when we registered a minor increase in our individual loans portfolio. We see this as the beginning of a positive trend.

The increase in lending to corporate clients has so far been very small. We think that the individual loans portfolio will grow faster than the corporate loans portfolio, as business activity is expected to pick up somewhere around July. Companies have been hit harder by the crisis than individuals. The economic crisis in Russia is different from, say, the industrialised countries of Europe and America in that our people's incomes did not decline but even grew slightly last year, which makes us unique.

Vladimir Putin: Incomes grew on average, but not for all groups.

German Gref: Yes, they grew on average. Wages slumped a little during the crisis but incomes grew, primarily due to increased pensions.

Vladimir Putin: We increased pensions, wages of public sector employees and some other payments.

German Gref: I can tell you now, because all the decisions have already been taken, that on Monday, April 19, we will lower interest rates on all types of loans for individuals. We have decided to cancel all fees for the first time in Russia and for the first time in our bank's history. The loan interest has also been made equal to the effective rate, the final rate for borrowers.

Vladimir Putin: Which means there will be no other fees for the borrowers?

German Gref: Starting April 19, we will not charge any fees or payments apart from the loan interest; it will be lowered by 0.5-1 percentage point on average even though we have incorporated all the fees that were previously levied on individuals into the interest. I hope that our decision, which will take effect on Monday, will encourage lending.

As for the effective interest rate, we will cut it by 2.5% and even 3% for some products.

Vladimir Putin: Good. So what will be the final rate?

German Gref: That depends on the loan product, as the interest rates for consumer loans are slightly higher. The interest on mortgage loans for clients with Sberbank payroll cards will be the lowest. The rates will vary between 10.5% and approximately 13%, depending on the plan the client chooses, the stability of his or her income, the size of the down payment, and the type of loan - a mortgage loan or a home loan issued with a view toward reregistering it as a mortgage loan.

Vladimir Putin: What about consumer loans?

German Gref: The interest rate on consumer loans is higher, upwards of 17%. But our consumer loan interest rates are several times smaller than the rates offered by commercial banks, in particular in stores where the rate is 30%, 40%, and even as high as 60%.

Vladimir Putin: All right, let's talk some more about mortgage loans. What progress have you made in your talks with the government regarding the support system for mortgage lending? Do you receive the funds we decided to allocate in order to lower the interest rate?

German Gref: First, in 2009, Sberbank issued approximately 78% of all mortgage loans in Russia. We did not raise the mortgage interest rate last year and continued to issue mortgages despite the crisis. This year we have entered the active stage of the programme we coordinated with the government. In particular, I would like to discuss with you an idea for modifying the system we had been offered.

Today is a very opportune moment to help people buy relatively inexpensive housing on the market and encourage housing construction. This could accelerate the recovery in many sectors. The interest rate I mentioned, 10.5%, is even lower than the one we had discussed, which was 11%. We have launched the programme, and we also see several other opportunities, which I'd like to tell you about. We will be able to move forward if we get the support we need.

And one more thing: For the first time in Russia and in the history of Sberbank, we have decided to approve a loan for the construction of the Moscow-St Petersburg highway. We will work jointly with Vnesheconombank. We will issue 29 billion roubles [for the project] and another 4.5 billion to reimburse VAT costs. The construction of that road will cost 33.5 billion roubles. This is the first commercial loan issued for 20 years to build a highway; it involved a lot of work. In the past six months, we have been working jointly with a consortium, Vinci, which will build the road.

Vladimir Putin: Is it a French group?

German Gref: Yes, this French company is a leader in infrastructure construction projects. Our project is very complex, and it was very difficult to calculate the necessary spending. Besides, 10 billion roubles will be invested in bonds with sovereign guarantees. We have agreed that Sberbank will be a minor shareholder in the company [set up to build the road] in order to gain experience in infrastructure construction projects.

We see this as a symbolic project. We plan to sign an agreement with the consortium on April 27. The overwhelming majority of roads under construction in China are built in exactly this way, with commercial financing and fees to use the roads.

Vladimir Putin: This is what we have talked about. Infrastructure projects, including road construction, should continue even during economically difficult periods, and perhaps especially during such periods. So, this is a good signal for the infrastructure sector and the economy as a whole.