President of Russia Vladimir Putin: Mr Kostin, our construction complex and the entire building industry are shifting to a new system of work. Its operation and results will largely depend on the banking system’s reaction to these changes.
I know that your bank has also been using escrow accounts with your clients. How is this work going? Let’s begin with this.
President and Chairman of VTB Bank Management Board Andrei Kostin: It is true. As you have said, the work has just begun: the new law and the new rules came into effect on July 1. But for now we can see only positive results.
Speaking about escrow accounts, so far, about 1,500 accounts worth over six billion have been opened at our bank. We believe that 25,000 accounts will be opened by the end of the year.
We are actively working with builders using the project financing system. We have 1,800 builders’ accounts and 50 projects worth 220 billion rubles. We are also working on other projects worth 200 billion rubles. This is the money that will be allocated to build accommodation for those who will later open escrow accounts. So the work is in full swing, and I find it positive that this does not result in higher construction costs. This is why I think that we will accomplish this task. To tell the truth, I do not see any problems in this area.
Vladimir Putin: And what do you think about mortgages in general?
Andrei Kostin: Mortgages are doing well. We can see no “bubbles” there. As of today, the bank has a mortgage portfolio of 1.5 trillion rubles. In the first six months it saw an increase of 300 billion, or 120,000–130,000 new loans, or about a quarter increase on last year. Quite a quick growth. However, the demand remains stable. We can see that our clients are actively using it.
By the way, we are introducing new digital methods to simplify this work. Today people living in the Moscow Region can apply on the bank’s website and undergo the entire procedure online: they only need to come to the office once to apply for a loan. We plan to extend this service to other regions by the end of the year. In fact, we have the aim of creating a platform where clients can use digital means to choose, buy, sell, or repair residences, by the end of the year. Everything will be available online.
You always ask about the cost of mortgages: as of June, the average interest rate was 9.9 percent. But we see that the Central Bank has started reducing it. Given this tendency and the forecasts, I believe that the rates will go down by the end of the year.
Vladimir Putin: I expect this too, and I am speaking of a decline in inflation as well.
Andrei Kostin: You have set us this target as regards mortgage loans, and we will work on it.
Vladimir Putin: As you have noticed, together with our colleagues from the Government's economic departments and with the participation of the Central Bank governor we have discussed mid-term economic development. One of the issues was the increase in consumer loans. What do you think about this? Are there any problem points? Do you see them? What is the overall situation with consumer loans?
Andrei Kostin: The situation with consumer loans is fine; this is actually one of the most dynamically developing sectors. We, of course, listen to different opinions but our assessment is a bit more optimistic. We believe that the boiling point has not yet been reached as regards this issue. But we take into account the opinion of the Central Bank’s top official and the Government.
We have already enhanced control over this and stopped providing loans to potentially troubled borrowers. Of course, we are responding to the situation because we remember the misfire that occurred in 2014 and nobody wants that to happen again. So I think that banks are responding to this. I believe these efforts should be continued, with a better understanding of the risks and limitations that exist as regards the most risky loans.
Vladimir Putin: And efforts should be made to prevent people from getting into difficult or troubled situations.
Andrei Kostin: Of course. We are making efforts. We, including me personally, are considering people's requests for mortgage loans, and we are not strict about some things and allow payment by instalments, especially for families with many children. The law on mortgage payment holidays was absolutely the right thing to do. Banks should have a proper attitude and think about people in such difficult situations – unless there is fraud or some other unlawful activity.
Vladimir Putin: Good.