Promsvyazbank: Russia's Largest Public Bank

Putin meets with Promsvyazbank CEO Pyotr Fradkov.

Chairman of Promsvyazbank PJSC Pyotr Fradkov.

Today, Putin had a chat with Chairman of Promsvyazbank PJSC Pyotr Fradkov. The bank’s history is jaded as it was nationalized 2018 with the arrest and prosecution of its founders about which Wikipedia refuses to elaborate. I tried connecting to the bank’s homepage, but it’s blocked because it’s illegally sanctioned. The treatment it’s received by Wikipedia is odd since other Russian state-owned/Public corporations aren’t treated the same way and have an honest rendering of their history. It’s likely due to the role Promsvyazbank plays in Russia’s economy that it’s treated as it is. And just what is that role? The Kremlin’s preamble gives us a hint:

Petr Fradkov informed the President about the bank's activities in support of the state defense order, as well as working with civilian corporate clients and individuals. Special attention is paid to providing financial services to military personnel, military retirees and defense industry employees.

Now, let’s read the chat and find out:

Vladimir Putin: Pyotr Mikhailovich, good afternoon!

PSB is one of our largest banks. It operates in all regions of the Russian Federation, including new territories. I would like to hear today how you assess the work of our largest financial institution, especially since the bank is probably the leading provider of state defense procurement and is very active in the defense industry. As a matter of fact, that's what we created it for. You are welcome.

Pavel : Mr President, thank you very much.

Promsvyazbank has been increasing its potential in recent years. Now it is one of the largest financial institutions in our country. The bank's assets amount to 7.5 trillion rubles, and just since its creation in such a new capacity – as a universal and state-owned bank-the growth has been almost six times, in principle, quite an unprecedented situation. And, as we can see, the potential is still far from exhausted.

But it is important for us to develop in a balanced way, as you quite correctly pointed out, both in the defense industry, I will say a little more about this, and in the civilian segment. And we do not forget about this: our portfolio of civil corporate clients amounts to more than a trillion rubles, small and medium-sized businesses – more than 600 billion rubles. We work profitably and efficiently.

Thus, we can say that the bank has proved its stability over the past five or six years of operation [since its nationalization] and, I think, can perform all the tasks assigned to it.

As for the military-industrial complex, it was quite correctly noted that this is our focus. We are looking at two aspects here. The first is the support of the state defense order itself. Because almost 85 percent of all payments for the state defense order now go through Promsvyazbank. These are large volumes, up to 80 thousand operations per day. Keeping in mind the importance and specifics in terms of continuity and uninterrupted payments, we place special emphasis on this. The necessary infrastructure has been created throughout the country. Here, too, we feel quite confident, there should be no failures.

And, of course, lending, so-called advanced lending, accounts for more than 2.5 trillion rubles of loans issued specifically in the military-industrial complex in the broadest sense. Of these, 70 percent is the so-called preferential portfolio, which, of course, is now a very important and significant factor for defense companies, taking into account the overall macroeconomic situation. This, of course, allows enterprises to plan their financial and economic activities more comfortably, work with the State Budget and modernize their production.

We began to develop the third direction. As a bank, we have also become involved in the development and investment of dual-use technologies, which are now very much in demand, and we already have experience in various types of equipment, which is also used in SVO.

I can't help but mention working with individuals, which is also a big aspect for us. Retail client portfolio…

Vladimir Putin: On military pensioners.

Pavel Fradkov: That's exactly what I would like to say, too. In general, the total portfolio is more than 600 billion rubles, but, of course, the key categories that are important to us are the military personnel themselves. Here we separately create a special network just for military personnel. We are the leaders, absolute leaders in the country on military mortgages.

And quite rightly, Mr Putin, you have noticed that this is working with military pensioners, including veterans of the special military operation. Here we are working together with the Defenders of the Fatherland Foundation and the Ministry of Defense in terms of, let's say, providing the most comfortable modern banking services, so that veterans of military operations can use modern technologies to monetize their benefits, their preferences that they have at the federal and regional levels. In this sense, we have signed agreements with absolutely all regions, and they work to make it just as convenient.

And the third direction is working with employees of the defense industry . This is also an important factor, because now the defense industry is developing, and we need personnel. This is one of the problems that we have, and we are trying to find together with the defense industry enterprises, again with the regions, some effective support mechanisms, in a good sense, to retain young personnel, including personnel at enterprises.

One of the programs that we are implementing is the provision of housing at a lower-than-market price. We are able to do this when we combine the efforts of all parties. From 15 to 50 percent there is a discount to the market value of housing. And in the near future, we can already say that almost four thousand families of employees of the defense industry enterprises will receive new apartments at more favorable conditions. And this is an additional extra-budgetary source of support for this category of our clients.

Of course, the big topic is new subjects. We are actively continuing to work in this direction. We have several areas of work. The first is the development of the branch network itself, which now has 460 branches in all four regions. I think that the satisfaction of the population [with the quality of the bank's services] is high, and appropriate measurements are being made. In some regions, such as the Donetsk People's Republic or Zaporizhia region, satisfaction is even higher than in the whole of Russia. In the Kherson region, in Luhansk – all-Russian. In principle, we can say that, probably, the task that you set is being carried out in the way we see it, so that it is in demand by people.

We not only focus on lending and settlement services, but also promote services such as legal services. Because citizens are not always able to correctly interpret the legislation of the Russian Federation. There is a great demand for this type of service – insurance services and much more. In other words, we are trying to make life more comfortable in different directions, and we feel this responsibility. So here, too, work continues.

Vladimir Putin: Good. Let's look at the documents. [My Emphasis]

What a way to lower overhead costs. In fact, four of Russia’s ten largest banks based on their assets are public banks, including the two largest, Sberbank and VTB Bank (assets well over 50 Trillion Rubles more than all the other eight combined), whose CEO chats with Putin have been reported at the Gym. This hybrid banking organization gives Russian governments at all levels enormous development potential as loans to poorly performing regions can and have been written off to provide additional economic stimulus. The Public banks are also capable of providing the lower mortgage and other preferential loan rates since they’re tied to the Ministry of Finance and legislative actions in ways the private banks aren’t. And yes, it’s entirely possible that over time the public banks will drive the private banks out of business or limit them to specific niches like financial speculation. We’ll need to wait and see if Russia develops a similar FIRE (Financial, Insurance, Real Estate) sector like other Neoliberal nations as its economy matures. Currently, that doesn’t seem to be the case as Russia’s development scheme is mostly driven by state/public based investment, although the private fraction is increasing.

The next article is somewhat related as it looks at the BRICS SWIFT-like platform.

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