Dmitry Leus: The Development of the Russian

Regions is Our Means of Survival

The Russian banking system is showing signs of a liquidity crisis,
with growing fears of a financial crisis, and Alexei Kudrin is speaking
about a full-fledged economic crisis. At the same time, the Chairman
of Bank Zapadny, Dmitry Leus, speaks about hyper-liquidity and
contemplates conducting an IPO.
- Dmitry Isaakovich, there is a general belief that small banks must
specialize in order to be successful. On the other hand, you offer a
relatively broad product line and behave like a universal bank. Why
did you choose such a strategy?
- Dmitry Leus: The truth is that we are not a universal bank in the full
sense of the term, as our main focus is still in retail banking. But our retail
offering is universal indeed mortgage loans, car loans, overdraft loans,
and other consumer lending products. When it comes to loans for small
and medium-sized enterprises (SME), we currently adopt a more cautious approach. I am not saying that
we are not working at all in that sector, but corporate lending requires a more complex analysis of our
customers. In addition, the last two years have seen defaults mostly in the sector of SME lending.
On the other hand, an analysis of default statistics shows that mortgage lending is a relatively safe
product. Unfortunately, it is impossible to survive from mortgages only, due to lower profit margins in this
segment.
- Can you tell us more about the mortgage lending market? Are you working with the Agency for
Housing Mortgage Lending (AHML), an institution studying the international experience of
mortgage lending in order to introduce best practices into Russia?
- Dmitry Leus: AHML requires its partners to fulfil certain criteria. However, in my opinion, a large part of
our country does not meet these criteria. Unfortunately, unofficial revenues still constitute an important
part of the Russian economy.
In general, the belief that credit should only be awarded based on documented income is misguided. Take
a 15-year mortgage who in our country can look back to a 15-years track record within one single
company? The focus should therefore be on the collateral. If a loan can be justified in light of the
collateral, then less attention should be given to the income history of the creditor.
- Does that mean that you raise capital based on your liabilities?
- Dmitry Leus: Correct. We basically use deposits when lending, in addition to the Banks capital, of
course.
- Is this not too risky? A banks liabilities are of a short-term nature, as deposits may be withdrawn
at any moment. A banks assets, however, often take years to mature.
- Dmitry Leus: I do not deny that there is a certain risk involved. Nevertheless, on average, a mortgage
loans maturity amounts to 5 years. In addition, any loan, even if it hasnt been awarded according to
AHML standards, may be ultimately sold. Sberbank, for instance, offers such programmes, as well as the
other banks. There are also partner programmes that allow raising liquidity when necessary. But for us
this is the last resort, because it is not our goal to work as an agent. We intend to preserve our client base
and to offer them the products and services they ask for.