One of the prospects for the Russian digital ruble is to help resolve the problems of cross-border settlements, says VTB First Deputy Chairman Dmitry Pyanov. According to him, Russia will no longer allow a monopoly of one channel of international payments; in the future there will be a variety of platforms. In an interview, the top manager explained why digital will not replace plastic, how much VTB is investing in the development of artificial intelligence as part of the development of a digital assistant project, who is the main supplier of the yuan to the Russian market, and what determines the possibility of paying dividends for 2024. Interviewed by Yana Churochkina.
— Your strategy provides for the first payment opportunity in 2026, for 2025. But VTB head Andrei Kostin did not rule out the possibility of paying dividends based on the results of 2024. What will this decision depend on?
— We call this a “dividend surprise”; this phenomenon already has an established name. In what cases is a “dividend surprise” possible? The first lever: if we are ahead of profit in the first year of the strategy. Let me remind you that the strategy includes a profit forecast for 2024 of 435 billion rubles; by the end of the year it will be more than 500 billion rubles.
Second: our entire growth in the loan portfolio — very large, we believe, a record in the market in the corporate cycle — is mainly associated with high-quality borrowers. This means that it puts less strain on capital. Lower risk-weight of the loan is our second lever.
Dividends utilize capital, so to pay them we need a larger capital reserve than provided in the strategy, through two levers: higher profit and lower credit weight. There will be sufficiency significantly higher than that recorded in the strategy for the end of 2024, on the medium-term horizon there will be no unforeseen negative trends, elements, dangers — a “dividend surprise” will become possible. It should be noted that we fully understand the need to respect the rights of shareholders who are interested in dividends, as well as customers and the entire economy.
— VTB is the only bank that has a network of banks abroad: China, India, Vietnam, Kazakhstan, Armenia. Do you still plan to open additional branches or offices in the near future?
— We have no plans for any new countries.
— What is the share of loans in unfriendly currencies in VTB's portfolio? Are there any problems with payments on such loans?
— First, it should be noted that this share is constantly decreasing — for one reason or another. If before the introduction of sanctions in 2022 it was about 31%, now it is 8%. This share tends to decrease in different ways: for some, we convert loans into friendly currencies or rubles, for others, we are preparing to repay debt. And some clients continue to pay in the loan currency.
— Do you think there is enough yuan liquidity in Russia? When will RMB loans be available to every borrower at your bank?
— The main donors of yuan liquidity are Russian exporters. They sell oil, gas, coal for yuan, and, accordingly, through an obligation to sell proceeds, they sell yuan to the Russian market.
Corporate lending in Chinese currency may intensify even more when the volume of yuan liquidity changes on the passive side: if individuals and legal entities save more on deposits in yuan. This is pressured by the current monetary policy, due to which banks offer ruble loans at very high rates.
As for individuals, the vast majority of our fellow citizens receive salaries in rubles, take out loans in rubles and are thereby protected from currency fluctuations. You can, of course, be tempted at the moment by a lower rate, but it is obvious that with the volatility of exchange rates there is a threat of receiving larger payments in the future.
— Is the bank planning massively introduce artificial intelligence technologies into work? What share now comes from AI solutions? Do you think that all decisions can be trusted to artificial intelligence?
— According to our estimates, in the short time horizon in the banking sector, every bank client will have a digital assistant.
Banking products are complex, the external environment is changing faster and faster. Even for me, as a banker, it is very difficult to keep track of which investment is more profitable today. Deposit? Bond? If it is a bond, with a fixed coupon or a floating one? Due to the lack of time and personal preferences to achieve this or that financial goal, I really want someone to analyze the entire array of external and internal information for me. Moreover, it is preferable for me to “download” internal information, my wishes, verbally and in free form into the “smart” speaker. Whether it’s “I’m focused on high returns that beat inflation”, or “I don’t invest in stocks because their fluctuations can lead to loss of money”, or “I only invest in Russian because I’m afraid that my investments will be blocked by unfriendly infrastructure «. Having received the verbal conditions, the artificial intelligence should help create an initial portfolio and manage it daily during the life of this portfolio with minimal involvement from me. At some point, he may see a unique situation with the yuan exchange rate and recommend, say, 5% of the portfolio to convert yuan from the ruble.
This is our vision for a digital assistant that integrates both investment and banking products. This combination is explained by the fact that during periods of high rates, banking products may be more profitable; they have priority; as soon as rates decrease, and they will inevitably begin to decrease, investment products will gain importance. I do not rule out that such services will become in demand not only among people, but also among businesses.
— How expensive are such assistants?
— We spend several billion rubles a year on the development of the digital assistant project, and this is where we see our future.
There is a separate area of artificial intelligence in which solutions are difficult to find, even for a few billion rubles, tens of billions of rubles, and maybe even hundreds of billions of rubles — these are large language models (LLM). They appeared relatively recently; ChatGPT was released at the end of 2022.
Language models cost hundreds of billions of rubles from the point of view of the fact that they need to be trained and there is very expensive hardware, which is produced by one company. At the same time, foreign language models, most likely, will also not be able to be used, because they are trained on other values, literary objects, and other language elements.
We will develop the LLM direction towards improving Open Source (open source software code) and partnerships in order to be in the market or even ahead of it.
— What is the current percentage of digital cards in the hands of bank clients, and to what level can it grow by the end of the year? Are you ready to completely abandon plastic cards?
— VTB’s portfolio includes 2.7 million digital cards, and by the end of the year their number will grow to about 3 million. If we talk about the future, according to our estimates, there will still be two worlds.
The first world is people who do not carry plastic cards, who have digital cards and pay services. And the second group is often older, for whom a material object is important. For example, there is a category of people who are willing to pay a lot of money to issue a card in a minimalist style with a minimum of information and made of metal. That is, some portion of material cards will never die, just as paper books did not die when digital analogues appeared.
— The Central Bank has launched piloting of the digital ruble since August 2023, and you are participating in it. Are the costs commensurate with the potential benefits that market participants could receive? Will the market be able to completely switch to digital ruble payments?
— The phenomenon is new, so now no one can give you accurate forecasts regarding payback. While all investments are in a very foreseeable size, they are less than investments in artificial intelligence. For example, I believe that one of the prospects of the Russian digital ruble is to help resolve the problems of cross-border settlements.
If there is an interface for cross-border settlements between two, three or more countries in the digital ruble, digital yuan, other currencies, if settlements will be protected, invisible to other counterparties, conversion at a favorable rate, then almost any investment will pay off handsomely.
You, as a potential client for purchasing something on any marketplace with one click at a favorable rate, would refuse to transfer in a cross-border digital ruble ? Of course, we would welcome it.
— In the foreseeable future, is it possible that the market will completely switch to digital ruble payments?
— I think not.
— When can the digital ruble take a significant share in international payments? How do you see the infrastructure of international payments in the near future?
—This will clearly be more than one instrument. Our country will no longer allow the monopoly of any channel or instrument for international payments, so we cannot say that the digital ruble will be the only means. There will be a variety of channels and platforms. What is also important here is the different movements of different countries towards such calculations: according to our estimates, over the next five years, about ten countries will have digital currencies.