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Qiwi (NASDAQ:QIWI)
Q2 2018 Earnings Conference Call
Aug. 16, 2018 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone. Welcome to the Qiwi second-quarter 2018 earnings conference call. This conference is being recorded. At this time, I would like to turn the call over to Mrs. Varvara Kiseleva, head of investor relations. Please go ahead.

Varvara Kiseleva -- Head of Investor Relations

Thank you, operator, and good morning, everyone. Welcome to the Qiwi second-quarter earnings call. I'm Varvara Kiseleva, head of investor relations, and with me today are Sergey Solonin, our chief executive officer, and Alexander Karavaev, our chief financial officer. A replay of this call will be available until Thursday, August 23, 2018.

Access information for the replay is listed in today's earnings press release, which is available on our Investor Relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on August 16, 2018. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. This forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties.

Qiwi cautions that these statements are not guarantees the future performance. All forward-looking statements made today reflect our current expectation only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's most recent annual report on Form 20-F filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements. During today's call, management will provide certain information that will constitute as a non-IFRS financial measures, such as adjusted net revenue, adjusted EBITDA, adjusted net profit and adjusted net profit per share.

Reconciliations to IFRS measures and certain additional information are also included in today's earnings press release. With that, we'll begin by turning the call over to Sergey Solonin, our chief executive officer.

Sergey Solonin -- Chief Executive Officer

Thank you, Varvara, and good morning, everyone. Thanks for joining us today. I'm excited to share our second-quarter results and robust performance in the first half 2018 with you. Our core payment-services business demonstrated solid performance, with 28% segment [Inaudible] net revenue and 22% segment net profit growth.

Our growth this quarter was mainly driven by the development of our payment ecosystem and implementation of our B2B2C strategy, as well as certain external drivers that I will mention later. On top of that, we continue to develop our key products and use cases in order to offer our clients convenient solutions in our focus market vertical. We are preceded to invest in scale up our consumer financial services segment, which is represented by Sovest projects, as well as building up our [Inaudible] segments with Tochka and multibanking platform. Given all of the above, we believe that our performance serves as solid foundation for our future growth.

We achieved strong financial results in our payment service business in the first half of 2018, building up a firm foundation for investing in the development and scaling of a new business lines and projects. We believe we are well-positioned to grow our payment service segment and our business [Inaudible]. In order to achieve this goal and generate substantial operating cash flows to support our investments in the new projects, we will focus on executing our strategy through building a wider digital infrastructure, creating new and enriching existing client use cases, and expanding the ecosystem of our business through offering our consumers the widest use of services and expanding the consumer life cycle. Now on some operating highlights.

Payment service segment volume increased by 21%, to reach RUB 263 billion, driven by significant growth in e-commerce and money remittance verticals, which grew 48% and 42%, respectively, over the second quarter of 2017. We are pleased with the dynamics in both verticals and believe that such growth was largely driven by the development of our peer-to-peer ecosystem, secular growth in our core market, as well as the roll-out of the products we deployed together with our partners, such as [Inaudible] taxi company that's part of our B2B2C and self-employed focus. The increase in e-commerce market vertical was also driven by the sports-betting volumes, elevated by the football World Cup 2018. As of 30th of June, we had RUB 20.5 million Qiwi Wallet accounts, an increase of RUB 2 million as compared to the prior year, resulting from our continuous efforts to grow and [Inaudible] leverage our ecosystem, and implementation of our B2B2C strategy.

Our total consumer financial service segment payment volume reached RUB 3.2 billion for the second quarter of 2018. We also see positive dynamics across key operating metrics of the project. Moreover, the second quarter, we have significantly enlarged the capabilities of the product, introducing several new options for our consumers which make the product even more attractive and useful, while improving user monetization. We continue to develop our products and enhance in our business model, with the aim to start testing the multibanking model for Sovest by the end of the year.

And we see substantial interest over the [Inaudible] installment cards project from other players in the banking sector. We believe that we have entered an interesting niche with a significant potential and have built a robust infrastructure, including best-in-class distribution and partner network. Our SME segment, which we developed through Tochka, continue to demonstrate robust operating performance in the second quarter of 2018. We currently upgrade Tochka as a multibank service that provides its customers with the opportunity to open accounts with either Qiwi Bank or Otkritie Bank.

As we have disclosed earlier this June, we signed a partnership agreement with Otkritie and management team of the Tochka, launching our joint development of this business. Under our agreements, we have established a joint venture, Tochka, which will serve as technology co-partner and service provider for banks, members of the multibank platform. We're very excited about Tochka business and our partnership with our Otkritie in the SME segment. We believe that Tochka is one of the best solutions for SME business in Russia, that is offering entrepreneurs broad range of financial services distinguished by a unique quality of client experience.

Moreover, in August, we have had a first meeting of Tochka supervisory board, where we adopted the strategy and business plan of Tochka. As we discussed earlier, we will be financing the development of the project in equal parts -- 50% each with Otkritie, with aim to reach breakeven in the first half of 2019 and reach the target of RUB 1 billion net profit in 2021. Positive volume dynamics in our key market verticals converted into strong payment service segment net revenue growth and together with our SME segment contributed to our overall robust performance in our business. Alexander will walk you through the second-quarter numbers in more detail, just -- in a just a moment, while I would like to walk you through some recent developments.

We have also recently finalized our negotiations with Otkritie in respect of the Rocketbank project. In accordance with these agreements, we aim to transfer Rocketbank customers' personal and business processes to Qiwi by the end of 2018. We believe that apart from unique proprietary product offering that Rocketbank possesses, there is a profound potential of synergies between our core products and use cases in Rocketbank offering. We're currently working on our strategy in respect of this line of business and we'll provide an update once we finalize the transition of the business.

And now I would like to add a personal point. Starting from tomorrow, I will embark on around-the-world trip with my family that will last next nine months. At the same time, I remain fully committed to Qiwi and will continue to serve as a CEO and be actively involved in the executive management of Qiwi while I'm on the journey. During the last decade, we have created a unique, modern best-in-class and self-sustainable management team and structure that has been and will continue to lead Qiwi.

So my trip will not affect the day-to-day operations and management of Qiwi. With this, I will turn the call over to Alexander, who will take you through our financial results in more detail. Alexander?

Alexander Karavaev -- Chief Financial Officer

Thank you, Sergey, and good morning, everyone. Second quarter of 2018 total adjusted net revenue increased by 54% to reach RUB 4.5 billion, up from RUB 2.9 billion in the second quarter of 2017. The increase was mainly driven by payment services and small, medium enterprises segment net revenue growth. Payment services segment net revenue increased 28%, to reach RUB 3.8 billion, compared to RUB 3 billion in the second quarter of 2017.

Payment services payment adjusted net revenue increased 36% to RUB 3.4 billion, up from RUB 2.5 billion in the prior year as a result of the net revenue growth in our e-commerce and money remittances verticals, which grew 62% and 22% respectively, offset by a decline in a trend of financial services verticals by 11%. Our financial results in this segments are driven both by increase in volume, as Sergey just described, and the improvement of the payment average net revenue yield by 14 basis points year over year, as a result of changing category and product mix. Payment services other adjusted net revenue decreased 10% to RUB 470 million, as compared to RUB 522 million in the prior year, mainly because of the decrease in revenue from advertising, as well as revenue from overdrafts provided to agents. Payment services segment net revenue, excluding revenue from fees for inactive accounts and unclaimed payments, increased 32% compared to the same period in the prior year, primarily as a result of growth in payment services payment adjusted net revenue, as discussed earlier.

Consumer financial services segment net revenue was RUB 58 million for the second quarter of '18, as compared with the net revenue loss of RUB 68 million in the second quarter of the prior year, showing the development of our Sovest project as well as the introduction of new consumer-focused option. Net revenue of the small, medium enterprises segment was RUB 597 million for the second quarter of '18 compared with nil in the prior year. Small and medium enterprise segment [Inaudible] include mostly Tochka revenues recognized from information and technology service agreements with Otkritie Bank, for providing services to Tochka clients that have their accounts with Otkritie Bank. Net revenue of the corporate and other category was RUB 23 million for the second quarter of 2018, compared with RUB 7 million in the prior year.

Moving on to expenses. Strong operating performance of our payment services business has continued to generate substantial cash flows, supported our investments in the development of our new projects, most notably Sovest and Tochka. These being said, adjusted EBITDA increased 1% to RUB 1.3 billion -- RUB 1.39 billion, from RUB 1.38 billion in the prior year. Adjusted EBITDA margin was 31% compared to 47% in the prior year.

Adjusted EBITDA margin contraction primarily results from the increase in compensation for employees and related taxes excluding effects of share-based payment, higher SG&A, seasonal expenses both incurred in connection with servicing Tochka project as well as client acquisition and advertising expense incurred due to investments in the scaling up of Sovest project and Tochka projects. Adjusted EBITDA was also affected by the increase in other administrative expense. Group adjusted net profit decreased 19% to RUB 872 million, down from RUB 1.1 billion in second quarter of the prior year. Adjusted net profit was largely affected by the same factors of adjusted EBITDA, as well as increase in net [Inaudible] loss as compared to the same period in the prior year.

Payment services segment net profit increased 22% to RUB 2.3 billion, compared with RUB 1.8 billion in the prior year, primarily driven by payment services segment net revenue growth. Consumer financial services segment net loss was RUB 702 million in the second quarter of '18, as compared to a net loss of RUB 576 million in the prior -- in the same period of the prior year, resulting from the expansion of operations of Sovest project and these costs mostly related to the consumer acquisition. Small and medium enterprises segment net loss was RUB 263 million, resulting mostly from client-acquisition and marketing costs. Corporate and other category net loss was RUB 413 million, an increase of 123%, compared with a net loss of RUB 185 million from the prior year.

The net loss was primarily driven by expenses incurred in connection with Rocketbank project, as well as several other individual [Inaudible] projects. Finally, as you saw in our earnings release, our board of directors decided from refrain from distributing the dividend, while they're incurring significant investments in connection with the launch of a lot of new projects. We expect that throughout the 12 months starting from the first quarter of 2017, we'll concentrate on investing into our future growth, while long term we remain committed to distributing all excess cash to our shareholders. Now on to our guidance.

We increase our payment services segment net revenue guidance and expect payment services segment net revenue to increase by 18% to 22%, driven by the strong performance of our payment services business in the first half of 2018. We increase our total adjusted net-revenue guidance to incorporate the increase of our payment services segment net revenue guidance, as well as over-performance of net revenue recognized in connection with the Tochka project in the first half of 2018 and our expectations regarding SME net revenue for the second half of the year. Thus, we expect our total adjusted net revenue to increase by 26% to 32% over 2017. We increase our payment services segment and profit guidance to incorporate the increase of our payment services segment net revenue guidance and expect payment services segment net profit to increase by 12% to 17% for 2017.

At the same time, we revise group-adjusted net profit and expect it to decrease by 15% to 25% over 2017. The revision of our guidance is driven by the incorporation of Tochka project and Rocketbank costs for the second half of 2018. We expect that the additional net loss for the second half of 2018, [Inaudible] with Tochka project, will amount for around RUB 0.5 billion. The cost of the shares with the transfer and roll-out of Rocketbank operation in Qiwi, I expect that the amount roughly RUB 600 million for the second half of the year.

Although we see our first-half 2018 results as a solid foundation of future growth, certain other factors remain beyond our control, and hence we reserve the right to revise guidance in the course of the year. With that, operator, please open up the call for questions.

Questions and Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Bob Napoli with William Blair. Please proceed with your question.

Bob Napoli -- William Blair & Company -- Analyst

Thank you. Sounds like a great trip, Sergey. Stop in Chicago if you get a chance. Couple questions.

The -- first on the e-commerce growth, the World Cup, you pointed out the World Cup, and the addition to sports gambling on -- now what -- can you give -- what would the growth of e-commerce have been without the World Cup? And can you give us some feel for the segment mix under e-commerce? What verticals are, make up the majority of that business today?

Sergey Solonin -- Chief Executive Officer

Hi, Bob.

Bob Napoli -- William Blair & Company -- Analyst

Hello.

Sergey Solonin -- Chief Executive Officer

So -- so in terms of World Cup growth, World Cup effect on the sports betting growth. So the -- it's something that we're still testing. So we believe that the part -- at least the part of the gamers and participants that used to make sports betting during the World Cup will probably stay within the ecosystem. But generally, the good way to look at it as follows: so if you take the Q1 growth in that category, Q1 to Q1 of last year, then that -- that would be approximately the same in Q2.

So everything was...

Bob Napoli -- William Blair & Company -- Analyst

OK.

Sergey Solonin -- Chief Executive Officer

That would be kind of related to World Cup.

Bob Napoli -- William Blair & Company -- Analyst

And vertical mix, can you give some feel what percentage fiscal goods versus sports gambling -- versus sports versus other...

Sergey Solonin -- Chief Executive Officer

Yes, look, it's not [Inaudible] change, by -- still sort of vast majority in e-commerce would be virtual, of which, like the -- the half approximately would be like all types of gambling, I mean, not gambling but sports betting and gaming, social and I don't know [Inaudible] kind of things and then the rest would be like other virtual goods for like social networks and [Inaudible] anything. So given that World Cup effect, I think the share of classical online e-commerce probably dropped slightly in Q2, but again, we see that it's a temporary effect generally.

Bob Napoli -- William Blair & Company -- Analyst

And then, Sovest, the -- how successful you've been in adding banks, trying to develop that multibanking model? And do you still target breakeven next year? And at what point would you pull back investment if you're not able to get the multibanking model to work for you?

Alexander Karavaev -- Chief Financial Officer

Yes. Well. Hi, Bob. For Sovest, we're working now with only one bank, although we have few banks in a row, so -- because the integration is not that quick as we would like to see.

So one bank would be launched this year and we will test on it the distribution system and multibank model in general. So right now, we do have understanding that our model works. So, we have a feasible model and economics on the project. So independently on multibank model, if it works or not, because we don't know, we think that it will work, but we still don't have a case.

So we will think about pushing this project forward and the pressing gas in the next year. So this will be decided, I think on the budget on the next board meeting, that will be more about the budget for the next year. So depending on that, we either -- we either go as we planned, and then we will break even as we planned or we will want to scale the business, and in the case we want to scale the business, it will mean that next year we will push for more clients. And then it will mean that we will spend some money next year, which will, I think, in the most aggressive scenario, which will be the same as this year.

Bob Napoli -- William Blair & Company -- Analyst

And last question for me is, I think It's nice to see get a -- the credit rating from S&P, they do -- one thing they point out a few times is an increase in there, a competition. Where are you seeing an increase in competition? Is it from Yandex Money, Sberbank, or are there new -- where are you seeing your most difficult competition?

Sergey Solonin -- Chief Executive Officer

No, the competition now is coming from Sovcombank, which is one of just banks in the banking system, which made a very similar model and all the other -- all the other products are not competing with us, as I think.

Bob Napoli -- William Blair & Company -- Analyst

Thank you. Appreciate it.

Operator

Thank you. Our next question comes from the line of Vladimir Bespalov with VTB Capital. Please proceed with your question.

Vladimir Bespalov -- VTB Capital -- Analyst

Hello. And thank you for taking my question. First, I would like some clarification on your guidance and how you're going to consolidate, de-consolidate Tochka, Rocketbank, so maybe you could provide some color? Is that correct to assume that you de-consolidate Tochka from the 1st of July and reflect from this time only your share in net losses of Tochka? And then for Rocketbank, this is the full-year consolidation, but would you expect like Rocketbank to move to certain stage and to breakeven and to what will be, let's say, the effect of this Rocketbank? And next year, and in your revenue guidance outside of the core business, and there's a pretty good increase in that guidance as well. Is that just the effect of net, as you mentioned, of the outperformance of Tochka in the second quarter? Or there might be something beyond just Tochka, maybe Sovest is going to perform better, and so what is behind this?

Sergey Solonin -- Chief Executive Officer

OK. OK. Thank you. So now, first of all, on the accounting treatment.

On Tochka, yes, you're exactly right. So as soon as that new joint venture will go live, we will de-consolidate the Tochka business and the majority of the profits will be picked up for the equity pickup. On the exact date, we're still discussing that with [Inaudible], so it's more, shall be decided on the [Inaudible] of consensus. It's likely will not be July Fourth, but probably slightly later, but this is something that you're going to be discussing with [Inaudible] for the next kind of reporting period.

But it will not concern the revenue, because the part of the revenues that we actually, we still will book the part of revenue that would relate to the client, Tochka clients that are served through the balance sheet of Qiwi Bank. And then we're going to be having approximately same amount of costs, some [Inaudible] revenue we're going to be paying to Tochka for servicing those clients. So from that point of view, the accounting treatment will probably be slightly more complicated. So we plan for the next quarter, as soon as we issue next quarter results to spend some time to explain how that's going to be working from the accounting point of view.

And, obviously, the -- the guidance reflects our current understanding of accounting effects of Tochka as I just described, so we're still going to be having quite [Inaudible] revenue in that segment. So on Rocketbank, we -- Rocketbank will be fully consolidated, so we own all the assets and we're now in the process of migrating all the technology [Inaudible] onto the Qiwi Bank, which we believe will probably take around couple of months [Inaudible]. So we have already a few thousand clients of Rocketbank migrated successfully from Otkritie Bank to Qiwi Bank. I think for the next year losses, we -- unfortunately, I'm not really able to say as of now.

So we basically first of all need to complete the migration and we, as Sergey said, we plan the budgeting session, the budgeting board that will approve the key indicators in November then probably the formal budget going to be approved in December. I mean, generally, we believe Rocketbank would require some investments within the next couple of years, but that would really depend on our joint project pipeline, which with we are trying to achieve is to basically look to the synergies that we may create by using Rocketbank for our users, and based on those kind of conclusions, we will provide the budget for the -- for its development.

Vladimir Bespalov -- VTB Capital -- Analyst

Thank you. And on the revenue side, the upgrade of your guidance apart from the core business, was there something else beyond just Tochka's contribution in the second quarter? And have you revised any -- any numbers for Sovest, for example, or anything else?

Sergey Solonin -- Chief Executive Officer

We -- No, we have not revised, so Sovest, Sovest numbers dropped for that year [Inaudible] exactly same as we basically used for the guidance that have been provided previously. So the upward revision [Inaudible] primarily core business and Tochka.

Vladimir Bespalov -- VTB Capital -- Analyst

OK. Thank you very much. And another question, a little bit broader one, we -- we hear a lot of discussion right now in the government about taxing self-employed people, individuals, and so on and so forth. What is your view on this? Do you see this as an opportunity for Qiwi? Or you believe that the people might just move to cash settlements and things like this and this might adversely impact your business?

Sergey Solonin -- Chief Executive Officer

No. Hi, Vladimir. We definitely believe that it is an opportunity. So we are participating in all these discussions in tax department.

And we think that for Qiwi the platform, this is an opportunity to give an ability for both the government and people who self-employed to cooperate and work through a platform so that it will be easy for both sides and -- as far as I know at least for now, the current tax regime that they think about for the future for self-employed is not difficult, or is not very high, or is it not any high, anyhow high for self-employed. And the only thing that should be in place is automation of the process, which we hope we'll be able to provide for our customers.

Vladimir Bespalov -- VTB Capital -- Analyst

OK. Thank you very much. And maybe the last question, you mentioned that Tochka will request some investments from Qiwi and from Otkritie. How much Qiwi is going to invest, let's say, over the next one, two years?

Sergey Solonin -- Chief Executive Officer

Now, look, we believe for all, I think we have provided -- we have [Inaudible] it's around RUB 700 million to RUB 800 million additional investment from our side this year and approximately same amount coming from Otkritie. And next year, Tochka is going to break even, so we're pretty sure that that will happen something that has been already proven. That -- that would [Inaudible]. Again, we have some interesting new strategic ideas inside Tochka and how we might deploy the assets in a broader sense that they have in terms of brain force and brand.

But this is something that we're going to be discussing next year. So far their core business going to be profitable next year already and hence will not require an additional investment.

Vladimir Bespalov -- VTB Capital -- Analyst

OK. And out of this amount which you mentioned for this year, how much is invested already?

Sergey Solonin -- Chief Executive Officer

It's -- I mean, it's on top of what we've already invested, so that...

Vladimir Bespalov -- VTB Capital -- Analyst

OK. This is in for the second half of the year, right?

Sergey Solonin -- Chief Executive Officer

Yes. Exactly.

Vladimir Bespalov -- VTB Capital -- Analyst

And this will be cash that you're going to invest or it's going to be some kind of settlement with Otkritie for the past revenues?

Sergey Solonin -- Chief Executive Officer

All of this, this is something that we're discussing, I'm sure, we will have a really good kind of sign as soon as we've agreed with Otkritie all the specific matters in respect of that joint venture. They eventually settled the accounts receivable in respect of Tochka for last year for RUB 644 million. As for the -- as for this year, we don't know yet, so it might be part cash, part type of settlement, but within relation to the accounts receivable created [Inaudible] so this -- again, it's more or less doesn't matter, because what we agreed with Otkritie in principle is that, starting from January 1 of '18, we basically finance Tochka in equal part, 50-50 each, and obviously have same rights to the economic benefit that Tochka provide and then we have a number of different types of instruments and how we achieve that, it's contributing the accounts receivable or cash injection or something else, so this is something that we are discussing like tactically to say.

Vladimir Bespalov -- VTB Capital -- Analyst

And maybe just a few words on developing multibanking model around Tochka, when we can see progress on that?

Sergey Solonin -- Chief Executive Officer

Well, certainly, so It's like in the next year, so we have couple banks that are fairly interested to join that ecosystem. Actually, three banks.

Alexander Karavaev -- Chief Financial Officer

[Inaudible] multibanks.

Sergey Solonin -- Chief Executive Officer

Yes, today, it's already the multibank, with at first Qiwi, then Otkritie, but if you talk about [Inaudible]

Vladimir Bespalov -- VTB Capital -- Analyst

Yes, yes, definitely.

Sergey Solonin -- Chief Executive Officer

Yes, so we have three banks in the pipeline, so one bank is fairly advanced phase, so to say, two others more kind of in the strategic [Inaudible]. Once again, as I said, the preparation cycle and technology kind of part of the project is fairly complicated, so we believe, we may be in a position to announce something early next year, not earlier than that, I think.

Vladimir Bespalov -- VTB Capital -- Analyst

OK. Thank you very much.

Sergey Solonin -- Chief Executive Officer

Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Andrea Mikhailov with Sova Capital. Please proceed with your question.

Andrey Mikhailov -- Sova Capital -- Analyst

Good afternoon. Thank you so much for the call. I have a question on the Rocketbank and in particular conversion onto Qiwi. You mentioned that you have booked already 3,000 clients of Rocketbank to your balance sheet.

And my first question is, what is your target for estimated conversion rate for the total universe of Rocketbank clients, so to speak?

Sergey Solonin -- Chief Executive Officer

Well, our estimation is around 80% that also due to the increase of the client base that they still experiencing, so it will be more or less the same base that they have in the quarter.

Andrey Mikhailov -- Sova Capital -- Analyst

OK. Thanks very much. I have a few more questions on this. Out of the few thousand clients that have already migrated, would you be able to share how many of those who have already opened term accounts, term deposits for the year?

Sergey Solonin -- Chief Executive Officer

I think not much, but usually the term account deposits, they at least not something that can be easily migrated, so from a technical and legal point of view, they still keep them in Rocketbank, I mean in Otkritie and they open the current accounts in Qiwi. But again, based on the consumer service that we basically feel for -- we do -- this is -- the term account deposits will probably need time, they need to mature. So our estimation is that 80% of the term current accounts will migrate.

Andrey Mikhailov -- Sova Capital -- Analyst

All right, thank you very much. And final question on this, my assumption currently is that, at least for the time being, you invest most of the cash after the conversion into securities -- [Inaudible] securities, bonds [Inaudible] and corporate bonds of that kind. Is this a fair assumption to make and do you think your strategy will change in terms of that? For instance, would you be able to finance Sovest cards with local bank balances?

Sergey Solonin -- Chief Executive Officer

Yes, that's for sure, that's for sure. So from that point of view, probably we'd love to look like a more normal bank, I mean, a part at least, a substantial part of the current accounts will be -- So, yes, so [Inaudible] as you know, there's a lot of kind of special kind of norms and ratios for the banks that needs to be [Inaudible] that needs to be [Inaudible] and we [Inaudible] run through our modes for the next year and couple of years from now to see how well they are balanced, and we are, generally, but again, our ultimate goal is to move service to multibanks, from that point of view, we will not be needing a lot of cash deposit, from that point of view.

Andrey Mikhailov -- Sova Capital -- Analyst

And just -- just to make sure, so if taking [Inaudible] this multibank model for Sovest, the Rocketbank client [Inaudible] been invested mostly in securities in the future, is this correct?

Sergey Solonin -- Chief Executive Officer

In different low-risk instruments in general. So that's, that historically has been the message [Inaudible] not to assume any risk in investment, cash investment.

Andrey Mikhailov -- Sova Capital -- Analyst

All right. Thank...

Sergey Solonin -- Chief Executive Officer

This we're going to continue that way.

Andrey Mikhailov -- Sova Capital -- Analyst

Thank you very much for this and [Inaudible]. Thank you.

Sergey Solonin -- Chief Executive Officer

Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Sveta Sukhanova with Sberbank. Please proceed with your question.

Svetlana Sukhanova -- Sberbank -- Analyst

Good afternoon, everyone. Can you please explain the -- why FX loss in Q2 has expanded? And why loss for the corporate segment has expanded? What is included in that loss for the corporate segment?

Sergey Solonin -- Chief Executive Officer

Yes, OK, so -- yes, thank you. So on forex, it's very simple. So we, one of the legal entities that we have [Inaudible] so to say, it's mostly technical. So one of the legal entities that we have in the group has a functional currency US dollars.

This is the company that serves as our gateway to the merchants that use English law primarily [Inaudible]. And that's-- that's technically the devaluation of rubles that has produced that forex loss. If we would be having all the companies within the group using rubles and functional currencies, so that, we would not be having a loss. On the corporate segment, so it primarily comes from Rocket, so though we have not on-boarded, so to say, that business for the [Inaudible] half of the year, but we were taking some of the costs that actually Otkritie refused to have and it's been so important for us not to damage the brand and the [Inaudible] the client experience that we basically financed.

The total amount of that cost was around RUB 150 million, so that's probably the major part of increase of corporate and other category and then a few other smaller projects.

Svetlana Sukhanova -- Sberbank -- Analyst

Understand, thank you very much. So when you was talking about additional loss of RUB 600 million, attributed to Rocket in the second half of this year, do I understand the [Inaudible] -- we'll see through the -- going through the corporate segment or where Rocket would be recorded?

Sergey Solonin -- Chief Executive Officer

That's a good question. it's -- it's --there are actually two options, so it might be still the books for corporate and other or it may be presented as a separate segment. This is again subject to analysis of IFRS standard and [Inaudible] circumstance. Standards basically require certain threshold to be kind of met for the kind of segment to be presented separately for the financial statement.

We don't yet know whether Rocket will surpass those threshold. But anyway, even if not, we will try to make it transparent and present a separate number in the reporting [Inaudible].

Svetlana Sukhanova -- Sberbank -- Analyst

Understand, but this RUB 600 million which you mentioned, it's like net loss which you expect for the second half from the Rocket, do I got it right?

Sergey Solonin -- Chief Executive Officer

Yes. That's right. That's right.

Svetlana Sukhanova -- Sberbank -- Analyst

Thank you.

Sergey Solonin -- Chief Executive Officer

Thank you.

Operator

Thank you. [Operator signoff]

Duration: 41 minutes

Call Participants:

Varvara Kiseleva -- Head of Investor Relations

Sergey Solonin -- Chief Executive Officer

Alexander Karavaev -- Chief Financial Officer

Bob Napoli -- William Blair & Company -- Analyst

Vladimir Bespalov -- VTB Capital -- Analyst

Andrey Mikhailov -- Sova Capital -- Analyst

Svetlana Sukhanova -- Sberbank -- Analyst

More QIWI analysis

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