Herman Gref enjoys unique standing in todays
Russia. An outspoken advocate of economic reform in an
increasingly authoritarian political environment, hes the
market-friendly chair and CEO of the nations largest
financial institution, Sberbank, which remains profitable in
the midst of a two-year economic crisis.
Gref rose to prominence in government and business by
impressing future president Vladimir Putin during the 1990s,
when both were ambitious junior officials in St.
Petersburgs municipal administration. In 2000, Putin, who
had just succeeded Boris Yeltsin as president, appointed Gref
minister of Economic Development and Trade. After presiding
over an eight-year burst of economic growth, Gref took over as
chief executive of Sberbank, then a stodgy Soviet-style savings
bank, and turned it into a modern powerhouse offering the full
range of retail and wholesale services.
Thanks in large part to its 40 percent market share,
Sberbank continues to thrive despite the impact of global
sanctions following Russias intervention in Ukraine and
the price collapse of oil and gas, the countrys main
source of revenue. During a recent visit to meet investors in
New York, Gref, a youthful, gym-fit 52, sat down on a cold
Saturday morning for a breakfast interview with
Can Russias economy grow if oil prices remain
below $35 a barrel?
Last year the economy shrank by 3.7 percent, and this year
our forecast is for another decline of 1.5 to 2 percent, which
is more pessimistic than the consensus of 0.9 percent.
Next year, if oil prices increase to $45, we may grow 0.5 to 1
percent. But we need reforms that lead to a diversification of
the economy away from its dependence on
oil and gas. We have to create a radical change in the
investment climate. The first and most important measure is to
protect property rights and to reform the judicial system
involved with that issue. We also need tax reforms that
encourage more investment. We must eliminate bureaucratic red
tape, beginning at the top federal level. And these reforms
must get under way within the next three years.
Do you convey these views to President
I speak out publicly about these ideas. I do not have
frequent meetings with the president. But whenever I can, I
convey my views to government officials, including the
president. I see this as a first step in gaining acceptance for
In the wake of international sanctions linked to
Ukraine, the low oil prices and the falling ruble, how has
Sberbanks strategy changed over the past two
In a first stage, we focused on further cost cutting. We had
already accomplished a lot before 2014, but we found
significant other areas to cut back. Over the past two years,
we closed 1,500 of our 18,000 branches. Our online and mobile
banking transactions are increasing 20 to 30 percent annually.
But the number of customers at our branches grew by 14 percent
in 2014 and by 8 percent last year because a lot of other banks
are in trouble and people are moving their accounts to
Sberbank. Thats why we cannot reduce our branch network
By 2018 we intend to reduce our operational costs by an
additional $1 billion annually. We are also reviewing our risk
management with the aim of increasing the quality of our
assets. And we can already see results. The nonperforming loan
rate for the Russian banking sector as a whole is 2.5 times
higher than ours.
Last year we finished the installation of a single
centralized IT platform to replace the 17 previously existing
ones. This was a huge step forward, but it isnt nearly
enough. If we want to survive in the long term against the
financial services that will be offered by Google, Amazon and
Apple, we need an IT platform that is cloud-based and
open-sourced. And we intend to create one by 2018. By that year
we also expect to increase our return on equity, which is now
11.8 percent, to 18 percent.
Abroad we will retreat from smaller markets and focus on the
bigger, more profitable countries like
Turkey. In Europe we will shrink the traditional branch
network and move forward with digital banking.
Sberbank is still majority-owned by the Central Bank
of Russia. What possibility is there that it will become a
private sector bank as you have long advocated?
It wont happen anytime soon. President Putin said that
Sberbank will be excluded from the list of state companies that
will be privatized in the next two years. There are many
politicians in the parliament who say Sberbank would receive a
very low price at this point in the economic crisis. Also, the
banking sector needs stability. Many banks have been forced to
close down. So maybe it would be more realistic to restart the
discussion of privatizing Sberbank in two or three years. I
still think privatization would be a good idea.
You have run Sberbank for more than eight years and
were minister of Economics and Trade for eight years before
that. Would you consider returning to government?
I was probably subjected to more criticism than any other
official when I was in government, and I wouldnt want to
go through that experience again. I have promised investors
that I wont leave Sberbank until we are satisfied with
its modernization and efficiency and have a good succession
plan in place. Afterward I want to go into business. But
thats in Gods hands.