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Andrey Kostin: “I think Russian banking sector is doing very well”


HOST: This week Russia announced it is growing at the slowest pace that it’s seen in three years. Here are the numbers: Q3 GDP growing at just 2.9%, and economists say it’s going to get worse. Joining me now on a FOX Business exclusive is a man that this really matters to. He is  Andrey Kostin, Chairman and President of  VTB Bank, Russia’s second largest bank. I am glad to know that we are not the only ones with all these problems, but still, we’d take 2.7% growth. At a time, I am wondering, when US banks are having so much trouble taking risk and making money, because we know, risk has better rewards, is Russia and Russian banks finding the same problem?

ANDREY KOSTIN: No, I mean, in spite of the slowdown of the economic growth, I think Russian banking sector is doing very well. I think the growth of Russian corporate loans this year is expected to be in mid-teens, and the growth of retail loans will probably be above 40%.

HOST: You’re kidding, so when you say retail…

ANDREY KOSTIN: No, it’s quite a sound… Yes, the growth of retail business is very good in Russia.

HOST: When you say retail, you mean home loans, in Russia, what are retail loans consisting of?

ANDREY KOSTIN: Well, consumer loans to buy TV or mortgage, or other loans for whatever use, I mean.

HOST: And the citizens are paying those loans back?

ANDREY KOSTIN: Yes, it’s short loans, normally starting from a couple of months, and of course, on mortgage it’s longer, and they are paying quite good.

HOST: Well, then why did your Q2 earnings drop 63%, what was the problem there?

«I don’t think there is too much problem with the Russian economy. Probably, it is a little bit dull — there are no fiscal cliffs, there are no sovereign debt defaults, but I think the Russian economy needs new drivers. As you know, Russian economy is still not balanced properly, it’s still driven mainly by oil and gas industry, and I think, to provide more substantial growth we just need new industry.»
Andrey Kostin,
President and Chairman of the Management Board

ANDREY KOSTIN: I don’t think there is too much problem with the Russian economy. Probably, it is a little bit dull — there are no fiscal cliffs, there are no sovereign debt defaults, but I think the Russian economy needs new drivers. As you know, Russian economy is still not balanced properly, it’s still driven mainly by oil and gas industry, and I think, to provide more substantial growth we just need new industry, as particularly, Russia joined WTO now. So, we have to particularly focus on restructuring our economy, which is probably here, but not much has been done yet.

HOST: OK. So, joining the World Trade Organisation, the word is that would add 11% to Russia’s GDP. So we are waiting to see that, what are the new opportunities? What are the new industries that you feel Russia could come up with, other than the minerals and the energy position, in which a lot of it is run by… Are you considered an oligarkh? No! All the oligarkhs run those.

ANDREY KOSTIN: No, no. Of course, Russia traditionally had quite a high level of education of people, and quite advanced in hi-tech. If you look at the military side or space, you know, Russia definitely can provide more for the world economy, for the world markets in this area. So there is a particular focus now on this industry, and the government is investing money, as well as private investors. So we very much hope that things will change in due course.

HOST: I know Cosmos, the space business very well. You know, our fiscal cliff, of course, half of Russia’s income comes from, you know, what happens in Eurozone, which is already weak, but we are facing this fiscal cliff. Is there a word for "fiscal cliff" in Russian?

ANDREY KOSTIN: Well, there is, of course, but not necessarily they provide a very accurate connotation of this.

HOST: What is it?

ANDREY KOSTIN: Фискальный обрыв.

HOST: Fiskalny obryv. There, we put it in Cyrillic for you. You see the US falling off a cliff. I don’t mean to laugh, because I don’t believe it’s going to happen, but will the US’ instability affect VTB’s business?


HOST: Now that you have an office in New York, you’re trying to extend here, to the US.

ANDREY KOSTIN: It definitely affects the price of our stocks, because the trend in our stock price is just very much the same as the global trend. So, you know, as the stock market in America is now performing, underperforming, I mean, that’s the lowest since July, it definitely affected the Russian stock market, including our stock. So, that’s one thing, another, of course, is global instability in general. Of course, it affects Russia and potentially the view of our companies for the future development, so yes, we are a part of the global economy. What’s happening in New York will have an effect in Moscow.

HOST: All the more reason the Russians, I am sure, are saying "Can you fix the fiscal cliff, please?"

ANDREY KOSTIN: Absolutely.

HOST: You’re not the only ones, everybody else is. Great to see you, Andrey.

ANDREY KOSTIN: Thank you very much.

HOST: Andrey Kostin is the Chairman and President of VTB Bank. It’s 75.5% owned by the Russian government, eventually, maybe, they’ll take it more private. We’ll see you in Davos, I hope.


HOST: Thank you very much.

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