1. Banking in Transitional World
Sberbank
IFC
7 June 2018

2. European banks have still not fully recovered from the previous crisis
Returns do not even cover costs of capital
Price-to-Book ratio of major banks is below 1
Source: IMF, ECB

3. Banking under threat: what will it be in 5 years?
Macroeconomics
Weak growth
Technologies
Low rates and QE
Fintech
Financial markets
Banks
Digital economy
Cybercrime
Government
Competition
Regulation

4. Interest Rate hiking cycle creates risks for financial stability
Economic growth in the next couple of years will slow down
No one has yet finished the normalization of policy after QE
Assets, US$tn
IMF forecast
The role of central banks has significantly increased after the crisis
SOURCE: Bloomberg, ECB, IMF

5. Regulation of banks is getting more complicated and more stringent
Number of pages in Basel Committee publications
Capital requirements are constantly increasing
SOURCE: NRU HSE, IMF

6. Sources of funding in financial markets are increasingly numerous
Debt market
Stock market
New sources
Russia in 2017
IPOs of Russian companies, US$ bn
Corporate portfolio of banks +0.2%
Corporate bonds market +21%
ICO in 2017, US$mn
Government is actively developing non-banking sector
Individual investment accounts
Good for economy, but harder for banks
Account at the Moscow Exchange can be opened via Public Services portal
Bank of Russia has adopted a financial market development program
А активных счетов – на 40%
Открытие счета на Московской Бирже стало возможным через портал гос. услуг
SOURCE: CBR, CBONDS, EY, Moscow Exchange, NAUFOR

7. Competition from regulators?
The Bank of Russia has announced the intent to create a marketplace for financial services
Marketplace
Deposits
Insurance
Loans
IIA
Bonds
Pensions
Banks, insurance companies, non-state pension funds, etc.
Population
The Ministry of Finance is issuing OFZ for the people
CBR is creating new state-owned banks
Dom.RF is aiming to take 5% of the mortgage market
Treasury is going to be transformed into a payments system

8. Fintechs are entering into new areas
Explosive growth of fintech is a challenge both for banks and regulators
Fintechs are entering into new areas
New challenges
Regulatory arbitrage
Financial literacy
New business models
Credit scoring AI
Payments
Cryptocurrency
Blockchain
Acquiring
New answers
Trading
Regulatory sandbox
Flexible RegTech
Development of people and digital competencies
Risk management
Insurance
P2P lending

9. Cyberthreats are evolving into the most important threat to financial stability
Annual cybersecurity budget
Banks are already particularly vulnerable...
Digitization of financial sector is exceedingly quick
70% of banks in 2016 lost money to cyberattacks
Companies in the real sector
Banks
...transformation of banks into ecosystems – additional risk
Greater attractiveness as a cyberattack target
Monitoring for vulnerabilities becomes more complicated
Scale of losses is increasing
$19 mn
$58 mn
что в 3 раза больше чем у нефинансовых организаций
SOURCE: Kaspersky

10. Regulation in the age of digital economy
Who will banks give loans to: traditional or technology companies?
Share of tangible assets
81%
18%
Who will the market give financing to?
Price to Earnings 19
155
Banks are forced to lend to traditional industries with low growth potential

11. What do banks have to invest in to survive in the transitional world?
Resilience
Customer experience
Renewal
Automation
Change user experience
Transition to Agile
Robotization
Digital marketing and sales
Update of IT architecture
Cyber security
Advanced data analytics
Digital ecosystem
SOURCE: McKinsey