Russia 24 TV channel interviewed Dmitry Patrushev, Chairman of the Board and CEO of Russian Agricultural Bank on the Bank’s activity in 2013, its plans and strategic prospects.
— Dmitry Nikolaevich, would you please tell us about 2013 financial results? What has been the revenue dynamics year-on-year?
— In general, 2013 was a challenging year for agrarians, for our borrowers. Nevertheless, the tasks, that were set by the Bank itself and the government as our shareholder, have been accomplished. The Bank’s performance is demonstrated by the following figures. Our loan portfolio increased by 15% and amounted to RUB 1.274 trillion, corporate loans increased 13% and exceeded RUB 1 trillion (a very significant result for us, in my view). Retail lending has actively grown as well – by 25% in 2013. As of today, our retail loan portfolio amounted to RUB 247 billion. Total assets currently stand at RUB 2 trillion. Total equity, including the capital contribution in December 2013, is RUB 218 billion. This year we have been quite efficient. RusAg has doubled its last-year profit, bringing it to RUB 1 billion.
— How important is retail business for the Bank? How do you plan to develop the card segment?
— The Bank’s development strategy through 2020 states an ambitious target in retail segment. We have made significant progress in 2013 – a 25% increase, and we plan to maintain the same growth rates in 2014. It should be pointed out that we increased both retail loan portfolio and client deposits. Deposits and customer accounts have grown 33% as compared to 2013, that is, our liabilities in general. I’d like to stress that the Bank is present in a lot of cities, through its 78 branches, we have a wide-spread network and, in fact, we offer our products and services throughout the country. The satisfaction of our borrowers depends on the quality of services we deliver. That’s why we work towards this target – improving the quality of our services. In terms of payment cards, it is a very interesting instrument that allows to provide remote services to our clients. Payment cards will be the driver of further lending growth, provision of utilities payment, money transfer services and other advantages related to cards use. We will develop this segment.
— What are your borrowing plans for 2014? Will the Bank place debt issues in the domestic or Eurobond market?
— We will remain a player in financial markets and will closely watch market conditions. However, the focus will be placed on attracting client deposits and funds into accounts. But in case of need and depending on the market environment we will be ready at the appropriate time to borrow in international and domestic debt markets.
— What is your approach to managing overdue loans?
— In general, we had to create additional loan loss provisions. In 2012, total loan loss provisions amounted to RUB 25 billion, this figure remained flat in 2013. So, in terms of CBR ratios we are absolutely fine. But I’d like to stress at this point – and, in my view, this fact is quite positive – last year we managed to decrease the share of overdue loans in the loan portfolio. In 2012, this indicator stood at 9%, while in 2013 it amounted to 7.7%. Special mention should be made about the new risk and problem assets management systems. It is important, that the standard tools in the Head office and the branches are designed so as to give us the possibility to restructure the debts, improve the financial position of our borrowers, and in any case take efforts to prevent their bankruptcy in order not to create problems for the whole industry. I can say that this approach is welcome and our clients are satisfied with the Bank’s policy. We should keep in mind that most RusAg’s clients live in rural areas – Russia’s rural population amounts to 30%. I believe, we have achieved certain progress in managing problem and overdue loans; at the same time we implement these processes so as to avoid such cases in the future. For example, last year we declined around 60 thousand loan applications that were not appropriately executed. We estimate that such actions prevented losses of about RUB 90 billion.
— What are the Bank’s plans for 2014? What are the key business segments and will there be any changes in priorities?
— The Bank works pursuant to the strategy adopted in November 2012. It is directly synchronized with the State Program on Agribusiness Development. By aligning these documents, we understand that agricultural sector and agribusiness as a whole needs the Bank’s investments – around RUB 400 billion. Seasonal field works financing is a product of utmost importance for the Bank’s borrowers. According to our estimates, the Bank can extend about RUB 170 billion for these purposes this year, but we should keep in mind that these amounts and their availability for Russian agribusiness will strongly depend on support provided by the state to agricultural borrowers. I’d like to stress that nonetheless we are a universal commercial bank and in 2014 we will work towards increasing efficiency and, in its turn, profitability. At the same time, since we are an industry-specific bank, lending to agribusiness will remain our priority.
— Is SME segment attractive for RusAg?
— SME segment, in my opinion, is vital for the economy in general and for agribusiness, in particular. Today, we are one of the key lenders to agribusiness SMEs. SMEs comprise 55% of our corporate portfolio, which is RUB 570 billion in absolute terms. I believe that both small and medium business have high growth potential. And while today we finance production in this segment, in the near future we will focus on the development of such banking products that will allow our borrowers to process and sell these products.
— Dmitry Nikolaevich, what is your overall view of the situation and prospects of Russian agribusiness?
— Agribusiness has made progress in recent years. As per Russian Statistics service, gross agricultural production rose 6.2% in 2013. I must say that RusAg plays a very important role in this respect. Last year the Bank’s lending to agribusiness rose 46% year-on-year, moreover, it is reported at the Government meetings that by means of the Bank’s lending we achieved an increase in the industry growth rates as a whole. Currently, our share in lending to agribusiness approaches 50%. This is a significant figure, I guess, a tangible contribution to the industry development. Thanks to the coordinated actions of the Ministry of Agriculture, with whom we maintain contacts and align our actions, we will be able to continue our successful track record in agribusiness development.
— What has been the effect of capital increases, in particular the contribution made last year, on the Bank’s operations?
— We think that the state support is very important. By using the state support, namely the performed capital contributions, we can successfully accomplish the set tasks. The fact that we can direct budget resources to our borrowers with a 8-9x multiplier is fundamental. It means that each rouble contributed to the Bank’s capital allows us to provide around 9 roubles for agribusiness development. These figures are quite graphic, I think, and the capitalization has a very serious effect on the industry development. Besides, the financial condition of our borrowers in many cases leaves much to be desired and capital contributions allow us to manage the downside risks that arise when we finance this industry, while also - which is important - complying with the CBR ratios.
— Last question. What is the status of the project to transform RusAg into a development institution? When can the respective decisions be taken and which form of reorganization do you support?
— RusAg is a universal commercial bank, we work with a real sector of the economy. Agribusiness accounts for about 80% of our loan portfolio, and any disruptions whatsoever in lending process could lead to certain problems. To ensure successful business operation the decisions that influence market environment should be stable and predictable. In my view, reorganization under volatile economic environment could result in increased stagnation risks both for agribusiness producers and industry as a whole. That’s why such a decision, no doubt, will be taken upon evaluation of consequences for the industry and the federal budget. As a universal commercial bank, we will work towards increasing our efficiency and, in its turn, the financial result.
— Thank you.
Source: Russia 24 TV channel