President of Russia Vladimir Putin: You wanted to show me something, Mr Gref.
Sberbank CEO and Chairman of the Management Board German Gref: Yes, Mr President, I would like to show you two of our products. One is SberBox, which is now commercially available. It is a small box that can be hooked up to almost any television set outfitted with HDMI input (all TVs made in the early and mid-1990s and later have it), making it a smart TV that can be controlled via the internet by voice commands.
It has 180 TV channels, an online cinema, our music app, a voice assistant that can provide weather reports, exchange rate information and financial services, and answer questions using online information. There is a streaming news feed as well. Small – and not only small businesses can place their apps here and access owners of this console.
Our educational platform, SberClass, is also part of it. Children from low-income families do not always have access to a tablet or a computer. This contraption, which is modestly priced at 2,999 rubles, turns any television set into a high power computer with an educational platform for children and access to our cloud storage. Games are also available, and a cell phone can be used as a joystick to control games.
It includes an educational platform and a wide choice of apps.
We put it on sale just a few months ago, and sold about 100,000 devices. We plan to sell at least 10 million devices by 2023, which is important. The demand is high because they are inexpensive. Now, during the coronavirus pandemic, people are buying so many of them that we can barely keep up.
Vladimir Putin: Good value for money.
German Gref: Yes. In fact, we focused on keeping the price low so that more people could afford it.
The second device that we are bringing to the market in December is called SberPortal. You are holding the first one. It is not sold in stores yet. It will be available for purchase after December 20.
It is the first device in the world with a hand gesture-controlled wide-angle camera. If you take a picture of yourself and several family members, the camera will recognise a family member and adjust the content on the screen to the family member currently in the shutter. You can close it, if you want to. There is a magnetic lid there.
The features are the same here with three voice assistants and phone call capability. You can make financial transactions, buy stocks, watch movies, send any picture from here to the television set, or listen to music, and so on.
This is 100-percent our in-house design, and the sound quality is good. The entire device, including the chip design, camera and screen was made by our division called SberDevices.
This will be our third device on the market. It will be priced more expensively at about 28,000–29,000 rubles. This will be the most sophisticated device on the market. The others will be much less expensive. Next year, we will bring out five more different devices for vehicles and smart homes. Just like this one, they will be used to control lighting, air conditioning, and so on.
In fact, this is an all-purpose device connected to our cloud, which makes upgrading an ongoing process, and users will have access to all services, not just ours. Any company that will want to have access to its customers will have an option to deploy their apps there for everyone to use.
Vladimir Putin: The customers might wonder where to the camera transmits the image.
German Gref: The camera does not transmit the image anywhere, because the chip stays here, and we are not getting any images. However, if you do not want the camera to take pictures of you, you can simply close the lid. There is a physical magnetic lid if you want to be absolutely certain. Here is a button to turn off the microphone and a lid to close the camera lens. The information is stored only on the chip inside the camera, and all information related to the delivery of content and queries will, of course, be stored in our cloud here in Moscow.
Vladimir Putin: I see, thank you. Good luck.
German Gref: Thank you.
We are new to this market. This is our first run, but, in fact, we are the first bank to make and market electronic devices. We are quite ambitious. We plan to grow our production numbers and provide most of our services using these devices by 2023.
Vladimir Putin: Let us talk about Sberbank's performance over the past nine months. As far as I understand, net revenue is slightly down, and capital efficiency is slightly down as well, but overall the results are quite strong for nine months. The credit portfolio is up, and, as I understand and you probably sense it, individual economic activity is increasing.
German Gref: Mr President, indeed, this year was quite challenging for the economy, in particular, the eleven industries that were the hardest hit and, of course, the banking sector.
Earlier in the year, our forecasts were quite pessimistic, and we projected that GDP might drop by 12 percentage points. Starting in late March, when we began to build up reserves, as well as in April and May, we tried to create provisions to take care of future problems.
We saw a number of markets, such as tourism, transport, restaurants, cafes, and so on collapse. Indeed, eleven industries were hit extremely hard. However, the measures that were taken by the Government, in particular, two of them, worked very well.
The first was payments to families with children. This supported people quite well, and we immediately saw an increase in economic activity. The second was about salary-secured loans with 2-percent interest provided jobs were preserved. No other country did that, and it worked really well. If jobs get preserved, then in March the companies will write these loans off, including interest. This was very helpful. We saw a fairly rapid recovery in May, June, July and August. As a result, we estimate that GDP will fall by no more that 3.8 percent to 4.5 percent.
Vladimir Putin: The Government and the Central Bank showed about the same numbers.
German Gref: Yes, this is significantly better than we originally expected.
In September, consumer spending began to stagnate. In November and December, we have been witnessing a drop in demand due to the pandemic again. However, the drop is not as big as it was in the spring, and we are no longer pessimistic about the future. We think this year our revenue will drop by about 12–13 percent compared to last year, and this year we will make, I believe, over 700 billion rubles net.
Recently, we adopted a new three-year strategy and our supervisory board approved it in November. This week we presented it to our investors.
Vladimir Putin: Your net revenue fell sharply in the first and second quarters. Things are gradually recovering now, as far as I understand.
German Gref: Correct, the third and fourth quarters are all about recovery. We are past the crisis. However, during the first and second quarter, we had to form reserves just as our clients did, and net revenue was down.
Vladimir Putin: I think the return on equity looks even better.
German Gref: We will have the return on equity at around 16 percent, which is quite good for a crisis year. Most importantly, we see that we will most likely be able to pay 50 percent of the dividends. We have paid 423 billion in dividends this year, which is the largest amount in history paid out by a Russian company. Notwithstanding the crisis, we have preserved the entire volume. And we are very hopeful that we will be able to pay 50 percent of dividends in the coming three years. Respectively, next year – and we are aware of the problems the budget is having due to large expenditures this year to support businesses and people – we will do everything we can to stay within the forecast numbers and pay the entire volume of dividends.
This year we have spent much money due to the coronavirus – overall we have spent about 17 billion rubles on additional expenses. Among them, we have greatly increased charity contributions: we bought a large amount of PPE for hospitals in different regions. Just last week we sent another batch of PPE to the northwestern regions. We helped the police; we helped hospitals and children’s homes. Of course, we also purchased PPE for our staff since we have been working all this time and certainly had to buy both masks and protective gear for all clients because customers are only allowed to enter the office if they are wearing a mask. If a customer does not have one, we offer them a mask, which is available at each office.
So far, generally, we adapted to the very difficult situation we had earlier in the year, and we basically look forward to 2021 with optimism. Even though we understand that vaccination launched in December will proceed slowly, we nevertheless expect that most probably we will have economic growth of 2 to 3.5 percent and a recovery of most industries. Therefore, we are optimistic in this respect.
As a result of many years of work to digitise all our services, we have been able to weather this period quite well. We assessed how much we gain from the technologies designed in those years, and last year we earned approximately 400 billion rubles year-on-year thanks to the use of the technologies and cutting waste. We have completely recouped our investments. Each year we invest a large amount of money in technology but we see a return on these investments.
In addition, we have created a number of services. One of them is mortgage: in spring, we were the only bank on the market providing complete mortgage services, including the state registration of the mortgage loan, without any visits to the office. People could buy a flat without ever coming to our office. And overall we have seen that our task in this hard period of time is to support our clients, both companies and individuals. This is a big challenge for the entire team, as well as a great honour to help our businesses, people and the country to get through such a hard period.
Vladimir Putin: Good.