REG - TBC Bank Group PLC - 1st Quarter Results
RNS Number : 3584OTBC Bank Group PLC17 May 2018
TBC BANK GROUP PLC ("TBC Bank")
1Q 2018 UNAUDITED consolIdated FinanciAl Results
Forward-Looking Statements
This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant, you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
First Quarter 2018 Unaudited Consolidated Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") will release its unaudited consolidated financial results for the first quarter 2018 on Thursday, 17 May 2018 at 7.00 am BST (10.00 am GET).
On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Date & time: Thursday, 17 May 2018 at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT)
Please dial-in approximately five minutes before the start of the call quoting the password TBC:
Password:
TBC
UK Toll Free:
0808 109 0700
Standard International Access:
+44 (0) 20 3003 2666
USA Toll Free:
1 866 966 5335
New York New York:
+1 212 999 6659
Russia Toll Free:
8 10 8002 4902044
Moscow:
+7 (8) 495 249 9843
Replay Numbers
Replay Passcode:
7398612
UK Toll Free:
0800 633 8453
Standard International Access:
+44 (0) 20 8196 1998
USA Toll Free:
1 866 583 1035
Russia Toll Free:
8 10 8002 4832044
Moscow:
+7 (8) 495 249 9840
Contacts
Anna Romelashvili
Head of Investor Relations
E-mail: ARomelashvili@Tbcbank.com.ge
Web: www.tbcbankgroup.com
Tel: +(995 32) 227 27 27
Address: 7 Marjanishvili St. Tbilisi, Georgia 0102
Investor Relations Department
E-mail: ir@tbcbank.com.ge
Web: www.tbcbankgroup.com
Tel: +(995 32) 227 27 27
Address: 7 Marjanishvili St. Tbilisi, Georgia 0102
Table of Contents
1Q 2018 Results Announcement
Letter from the Chief Executive Officer
Unaudited Consolidated Financial Results Overview for 1Q 2018
Results by Segments and Subsidiaries
TBC BANK Group PLC ("TBC Bank")
1Q 2018 Consolidated Financial Results
Net Profit for 1Q 2018 amounted to GEL 97.5 million
The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation
TBC Bank - Background
TBC Bank is the largest banking group in Georgia, where 99.7% of its business is concentrated, and it accounts for 35.3% market share by total assets. TBC Bank offers retail, corporate, and MSME banking nationwide.
These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS") as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing segment on 10 August 2016.
In 4Q 2016, TBC Bank acquired Bank Republic which has been consolidated into the Group's results.
Results reported below prior to 30 September 2016 relate to the group previously headed by JSC TBC Bank Georgia.
Financial Highlights
1Q 2018 P&L Highlights
§ Net profit amounted to GEL 97.5 million (1Q 2017: GEL 96.6 million; 4Q 2017: GEL 96.8 million)
§ Pre-provision profit amounted to GEL 147.8 million (1Q 2017: GEL 120.6 million; 4Q 2017: GEL 143.7 million)
§ Return on equity (ROE) amounted to 21.0% (1Q 2017: 24.2%; 4Q 2017: 21.0%)
§ Pre-provision return on equity stood at 29.6% (1Q 2017: 28.7%; 4Q 2017: 29.0%)
§ Return on asset (ROA) amounted to 3.2% (1Q 2017: 3.7%; 4Q 2017: 3.0%)
§ Total operating income amounted to 238.7 million up by 17.3% YoY and down by 1.9% relative to 4Q 2017
§ Cost to income was 38.1% (1Q 2017: 40.8%; 4Q 2017: 41.0%)
§ Cost of risk stood at 1.3% (1Q 2017: 0.9%; 4Q 2017: 1.4%)
§ Net interest Margin (NIM) stood at 6.9% (1Q 2017: 6.6%; 4Q 2017: 6.4%)
§ Risk adjusted net interest margin (NIM) stood at 5.2% (1Q 2017: 5.1%; 4Q 2017: 5.2%)
Balance Sheet Highlights as of 31 March 2018
§ Total assets amounted to GEL 12,401.0 million as of 31 March 2018, up by 19.7% YoY and down by 4.4% QoQ
§ Gross loans and advances to customers stood at GEL 8,432.9 million as of 31 March 2018, up by 18.4% YoY and down by 1.4% QoQ
§ Net loans to deposits + IFI funding stood at 93.2% and Net Stable Funding Ratio (NSFR) stood at 123.5%
§ NPLs stood at 3.1%, down by 0.3 pp YoY and down by 0.2 QoQ
§ NPL coverage ratios stood at 114.6% or 225.8% with collateral on 31 March 2018 compared to 104.7% or 209.4% with collateral as of 31 December 2017
§ Total customer deposits stood at GEL 7,610.8 million as of 31 March 2018, up by 25.4% YoY and down by 2.6% QoQ
§ As of 31 March 2018, the Bank's Tier 1 and Total Capital Adequacy Ratios (CAR) per new NBG methodology stood at 13.8% and 17.7% respectively, while minimum requirements amounted to 10.2% and 15.0%
Market Shares[1]
§ Market share in total assets stood at 35.3% as of 31 March 2018 up by 0.9 pp YoY and down by 1.1 pp QoQ
§ Market share in total loans was 37.8% as of 31 March 2018, unchanged YoY and down by 0.4pp QoQ
§ In terms of individual loans, the Bank had a market share of 39.6% as of 31 March 2018, down by 2.2 pp YoY and down by 0.5 pp QoQ. The market share for legal entity loans was 35.6% up by 2.2 pp YoY and down by 0.4 pp QoQ
§ Market share of total deposits stood at 38.9% as of 31 March 2018, up by 1.3 pp YoY and down by 0.9 pp QoQ
§ Market share of individual deposits stood at 40.6% up by 0.5 pp YoY and down by 0.7 pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 37.0%, up by 2.5 pp YoY and down by 1.0 pp QoQ.
Additional Information Disclosure
Additional historical information for certain P&L, balance sheet and capital items, and on asset quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Financial Highlights section.
Letter from the Chief Executive Officer
I am delighted to present a strong set of financial and operating results for the first quarter 2018, as well as to provide a brief overview of recent macroeconomic developments in the Georgian economy.
Our consolidated net profit for the first quarter 2018 reached GEL 97.5 million, while our return on equity was 21.0% and return on assets stood at 3.2%. Our robust profitability was supported by an improved net interest margin, which increased by 0.3 percentage point year-on-year to 6.9% and a strong increase in net fee and commission income, which grew by 31.9% year-on-year. The improvement in net interest margin is mainly related to an increase in loan yields. We were successful in increasing higher yield, higher risk loan share of our portfolio, which will continue to support our NIM in the future, however will have a negative impact on cost of risk. In this context, our expectation for NIM in the medium to short term is be around 6.6% with 0.4 percentage point acceptable deviation and cost of risk to be in the range of 1.4-2.0%.
The growth in net fee and commission income was achieved across the board with the most significant contribution coming from card operations. Over the same period, we also achieved good results on the cost side and reduced our cost to income ratio to 38.1%, down by 2.7 percentage point year-on-year.
In the first quarter 2018, our loan book expanded by 18.4% year-on-year, while deposits increased by 25.4% year-on-year. As a result, we maintained our leadership in terms of total loan and deposit market shares which stood at 37.8% and 38.9% respectively.
In terms of asset quality, we continue to maintain prudent risk management and, as a result, our non-performing loans stood low at 3.1% at the end of the first quarter 2018, down by 0.3 percentage point year-on-year. Our non-performing loans coverage ratio stood high at 114.6%, or 225.8% with collateral.
Our capital and liquidity levels remain strong. As of 31 March 2018, our total capital adequacy ratio (CAR) per Basel III guidelines stood at 17.7%, higher than the minimum requirement of 15.0%, while the tier I capital ratio was 13.8%, above the minimum requirement of 10.2%. At the same quarter end, the regulatory liquidity coverage ratio stood at 114.4% compared to the minimum requirement of 100%, while net loans to deposits + IFI funding stood at 93.2% and the net stable funding ratio (NSFR) was 123.5%.
On macro side, I am pleased to report that the strong economic growth experienced in 2017 continued in the first quarter of 2018. GDP growth stood at 5.2% for the first quarter 2018, mainly driven by the continued growth of exports, tourism revenues and remittances - up by 28.4%, a 29.2% and a 22.4% year-on-year respectively - as well as an increase in domestic and foreign investments. Continued growth of external inflows also had a positive effect on the current account deficit, which declined by 4.2 percentage point year-on-year to 8.7% of GDP in 2017 despite an acceleration in domestic demand, which could have led to increasing account deficit.
The above-mentioned positive trends are expected to continue through the year and the NBG has just upgraded its growth forecast to 4.8%. I would also like to mention that Fitch Ratings revised its outlook on Georgia's long-term foreign- and local-currency issuer default ratings to positive from stable and it affirmed the rating at BB- on the back of the favorable growth prospects.
Turning to our operating performance, I would like to highlight that we continue to improve the performance of our digital channels and, as a result, our off-loading ratio[2] in the retail segment reached 89.0% in the first quarter 2018, up by 0.7 percentage point quarter-on-quarter. The main drivers of this increase are transactions conducted in mobile banking and self-service terminals which have become the most widely used channels among our customers after the ATMs.
I am delighted to see the first results of our voice biometrics recognition system, which was launched in our call centre at the end of 2017. We have taken around 50,000 voiceprints since launch and conducted 36,000 authentications in March 2018, which represents 18% of total calls received.
Our insurance subsidiary continues to grow rapidly, increasing total market share by 5.7 percentage point to around 19.0%[3] quarter-on-quarter. Over the same period, the number of customers has increased by 6.8% to around 296,000.
Outlook
I am pleased with our first quarter 2018 financial results and feel confident our customer-centric approach and digitalisation strategy will enable us to further strengthen our leading position in the Georgian banking sector and deliver strong returns to our shareholders. Therefore, I would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 40%, dividend pay-out ratio of 25-35% and loan book growth at around 15%.
Economic Overview
Economic growth
Georgia's strong economic performance continued in 2018. In 1Q 2018 economic growth amounted to 5.2% as per initial estimates of the statistics office, Geostat, up from the 5.0% in 2017. The sustained recovery in external inflows, coupled with the strengthened consumer and business confidence remained the core drivers of growth.
Sector-wise trade and repairs (+6.6% YoY), construction (+11.2% YoY), transport and communication (+6.2% YoY), real estate (+6.3% YoY), and manufacturing (3.6% YoY) were major drivers of growth in 2017. Generally, favorable economic conditions were reflected in almost all sectors of the economy.
Household consumption continues to recover amid increasing incomes and improved consumer sentiments. In 2017 household consumption went up by 8.9% YoY in nominal terms compared to the 3.4% growth the year before. Investments also increased by 9.0% YoY, reflecting the growth of inventories (+8.3% YoY) and higher capital formation (+9.0% YoY). Higher investment growth was supported by public as well as private investments. Public infrastructure spending went up by 29.6% YoY. Public capital spending grew by a solid 2.5 times YoY (albeit from a lower base) and it supported the economic growth in the first two months of 2018.
Bank lending to the economy also accelerated. As of 1Q 2018 the total loan portfolio expanded by 18.6% YoY[4] compared to 13.0%[5] growth a year ago. Over the same period lending accelerated to both the business (+14.9% YoY) and retail segment (+22.8% YoY).
Exports of goods increased by 28.4%[6] YoY in 1Q 2018, continuing the robust growth trend of 2017. Exports to the EU increased by 31.4% YoY while exports to the Commonwealth of Independent States (CIS) went up by 48.0% YoY. Exports to other countries increased by a more modest 7.3% YoY over the same period. Growth of imports also accelerated reflecting the recovery in domestic investment and consumption demand. In 1Q 2018 imports of goods increased by 21.6% YoY. Capital and intermediate goods (+29.7% YoY) accounted for 11.4pp, of the total imports' growth, consumer goods for 3.4pp (+11.2% YoY), petroleum and transportation imports added another 3.3pp (+10.6% YoY), while 3.5pp was due to one-off items.
Tourism inflows continue to deliver stellar performance. In 1Q 2018 tourism inflows grew by 29.2% YoY and the number of visitors from the EU countries hiked by 28.7% YoY. Upward trend also for visitors from the CIS (+8.5% YoY) and other countries (+31.8% YoY).
Amid improved economic performance in the major remitting countries, remittances grew by 22.4% YoY. The growth of inflows was fastest from the EU (+35.4% YoY), followed by other countries (+26.1% YoY), and the CIS (+8.8% YoY). The share of the EU in remittance inflows exceeded that of CIS countries for the first time in 1Q 2018, marking an important milestone and further underlining the continued diversification of the geographic base of remittances and other external inflows.
The Current Account deficit declined to 8.7% of GDP in 2017, compared to 12.8% of GDP in 2016. The drop mainly resulted from the improved balance of trade in goods and services (+4.0pp). Current transfers (+0.6pp) also had a positive influence on the CA deficit, while the income account (-0.4pp) had a slightly negative impact.
The USD/GEL exchange rate appreciated by 6.9% YTD as of the end of 1Q 2018 and by 1.3% YoY. The EUR/GEL exchange rate also appreciated by 4.1% YTD and weakened by 13.3% YoY as of the end of March, 2018.
Inflation and monetary policy
The consumer price inflation decelerated markedly in 1Q 2018 and the impact of excise taxes growth on prices dissipated. As of March 2018, CPI inflation stood at 2.8% YoY, close to the NBG's target of 3%. In the reporting period, prices growth on alcoholic beverages and tobacco and transportation moderated to single digits, bringing down the headline inflation closer to the NBGs target. Despite the continued recovery in domestic demand, it still has not passed through the point when growth becomes inflation and, according to the NBG, the output gap still remains negative and is expected to close down gradually by the end of 2019.
The NBG kept policy rate unchanged at 7.25% during the latest meeting of the monetary policy committee on 1 May 2018. The central bank, however, expects the economic growth to remain strong, and the still negative output gap is not expected to put upward pressure on prices. The current stance of the monetary policy can be considered relatively tight. However, considering that the external pressure on inflation could be further increased, the central bank waits for a more conclusive evidence regarding the future inflation developments before acting accordingly. Over the medium term, the policy rate is expected to decline closer to its neutral level of around 6%.
Fiscal policy
The favorable economic growth supports budget tax revenues which, in the first 2 months of 2018 increased by 14.0% while total revenues went up by 20.5% YoY. Over the same period, current spending increased by a modest 3.0% YoY.
Along with the strong economic performance fiscal sustainability indicators continue to improve. As of the end of 2017, the external public debt stood at 34.7% of GDP, down by 0.4pp YoY and total public debt also declined by 0.4pp to 44.0% of GDP.
Budget deficit remains anchored with the IMF's EFF program, which envisages bringing down the deficit below 3% of GDP from 2018 and accelerate the public investment at the expense of more moderate growth current spending.
Since the beginning of 2018 series the Ministry of Finance (MoF) has proposed a series of tax reforms. The MoF plans to introduce one unified form for tax payments to further reduce the administrative burden for tax payers. The Ministry has also initiated the decrease of taxes rate for micro businesses and, at the same time, it broadened the definition of micro business to cover a wider range of activities. These initiatives should contribute to a higher business activity.
Going forward
The Georgian economy continues its solid growth performance forward supported by the favorable external conditions. In addition, continued reforms help to accelerate growth and outperform most of Georgia's peer countries in Eastern Europe and CIS. As per IMF projections, growth is expected to average 5% over the next five years, well above the average growth in the broader region.
Unaudited Consolidated Financial Results Overview for 1Q 2018
This statement provides a summary of the unaudited business and financial trends for 1Q 2018 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited.
Income Statement Highlights
in thousands of GEL
1Q'18
1Q'17
4Q'17
Net Interest Income
175,403
142,333
165,395
23.2%
6.1%
Net Fee and Commission Income
34,919
26,477
38,954
31.9%
-10.4%
Other Operating Non-Interest Income
28,377
34,672
38,969
-18.2%
-27.2%
Provisioning Charges
(39,463)
(17,659)
(36,436)
123.5%
8.3%
Operating Income after Provisions for Impairment
199,236
185,823
206,882
7.2%
-3.7%
Operating Expenses
(90,932)
(82,920)
(99,641)
9.7%
-8.7%
Profit Before Tax
108,304
102,903
107,241
5.2%
1.0%
Income Tax Expense
(10,778)
(6,345)
(10,487)
69.9%
2.8%
Profit for the Period
97,526
96,558
96,754
1.0%
0.8%
Balance Sheet and Capital Highlights
Mar-18
Dec-17
Mar-17
In Millions
GEL
USD
GEL
USD
GEL
USD
Total Assets
12,401
5,136
12,966
5,002
-4.4%
10,362
4,238
19.7%
Gross Loans
8,433
3,493
8,553
3,300
-1.4%
7,121.0
2,912
18.4%
Customer Deposits
7,611
3,152
7,817
3,016
-2.6%
6,071
2,483
25.4%
Total Equity
1,931
800
1,890
729
2.2%
1,680
687
14.9%
Regulatory Tier I Capital (Basel III)*
1,517
628
1,437
554
5.6%
NA
NA
NA
Regulatory Total Capital (Basel III)*
1,943
805
1,885
727
3.1%
NA
NA
NA
Regulatory Risk Weighted Assets (Basel III)*
11,000
4,556
10,753
4,148
2.3%
NA
NA
NA
*Per new NBG methodology in line with Basel III guidelines, which came into force in December 2017
NA-Not Available
Key Ratios[7]
1Q'18
1Q'17
4Q'17
ROE
21.0%
24.2%
21.0%
-3.2%
0.0%
ROA
3.2%
3.7%
3.0%
-0.5%
0.2%
Cost to Income
38.1%
40.8%
41.0%
-2.7%
-2.9%
Cost of Risk
1.3%
0.9%
1.4%
0.4%
-0.1%
NPL to Gross Loans
3.1%
3.4%
3.3%
-0.3%
-0.2%
Regulatory Tier 1 CAR (Basel III)
13.8%
NA
13.4%
N/A
0.4%
Regulatory Total CAR (Basel III)
17.7%
NA
17.5%
N/A
0.2%
Leverage (Times)
6.4x
6.2x
6.9x
0.2x
-0.5x
*Per new NBG methodology in line with Basel III guidelines, which came into force in December 2017
NA-Not Available
Income Statement Discussion
Net Interest Income
In thousands of GEL
1Q'18
1Q'17
4Q'17
Loans and Advances to Customers
256,053
215,089
255,576
19.0%
0.2%
Investment Securities Available for Sale
13,168
8,801
11,991
49.6%
9.8%
Due from Other Banks
4,919
1,752
5,374
180.8%
-8.5%
Bonds Carried at Amortized Cost
8,037
7,441
7,292
8.0%
10.2%
Investment in Leases
7,672
4,686
7,787
63.7%
-1.5%
Interest Income
289,849
237,769
288,020
21.9%
0.6%
Customer Accounts
62,922
53,852
66,144
16.8%
-4.9%
Due to Credit Institutions
41,477
32,363
45,762
28.2%
-9.4%
Subordinated Debt
9,640
8,685
10,293
11.0%
-6.3%
Debt Securities in Issue
407
536
426
-24.1%
-4.5%
Interest Expense
114,446
95,436
122,625
19.9%
-6.7%
Net Interest Income
175,403
142,333
165,395
23.2%
6.1%
Net Interest Margin
6.9%
6.6%
6.4%
0.3%
0.5%
1Q 2018 to 1Q 2017 Comparison
Net interest income increased by 23.2% to GEL 175.4 million, compared to 1Q 2017, driven by 21.9% higher interest income and 19.9% higher interest expense.
Interest income grew by 21.9% YoY to GEL 289.8 million, mainly due to the increase in interest income from loans and advances to customers, which are primarily related to an increase in gross loan portfolio by 18.4% YoY. This effect was further magnified by 0.4pp increase in loan yields (partially due to product composition change), which stemmed from a 0.9pp increase in GEL denominated loans effective rates. This was partially offset by 0.7pp drop in FC denominated loan effective rates. The growth of the interest income also resulted from higher interest income from investment securities available for sale and due from other banks, primarily due to an increase in the size of the respective portfolios. Yields on interest earning assets expanded by 0.4pp to 11.5%, compared to 1Q 2017.
The 19.9% YoY growth in interest expense to GEL 114.4 million in 1Q 2018 was mainly due to 16.8% increase in interest expense on customer accounts and due to 28.2% increase in interest expense on due to credit institutions. The increase in interest expense on customer accounts was attributable to a 25.4% growth in respective portfolio. This effect was slightly offset by a 0.1pp drop in cost of deposits, which resulted from 0.1pp decrease in cost of deposits of GEL denominated deposits and 0.4pp decrease in cost of deposits of FC denominated deposits. The expansion in interest expense on amounts due to credit institutions was attributable to a 7.5% increase in respective portfolio and 0.9pp increase in effective rates due to credit institutions. Cost of funding remained unchanged at 4.4%.
Consequently, NIM was 6.9% in 1Q 2018, compared to 6.6% in 1Q 2017. While Risk adjusted NIM stood at 5.2%, compared to 5.1%.
1Q 2018 to 4Q 2017 Comparison
On a QoQ basis, net interest income grew by 6.1% as a result of 0.6% higher interest income and 6.7% lower interest expense.
The GEL 1.8 million, or 0.6%, QoQ increase in interest income mainly resulted from the growth in interest income on investment securities available for sale. This in turn was due to 1.5pp higher yield on available for sale securities, as well as due to accounting adjustment effect between 3Q 2017 and 4Q 2017, which effectively decreased the amount reported in the last quarter of the year. It is worth mentioning that compared to the previous quarter, the average local currency appreciated by about 3% which had a negative influence on interest income from loans, due to which it was flat. Yield on interest earning assets increased by 0.3pp, compared to 11.2% in 4Q 2017.
The GEL 8.2 million, or 6.7%, QoQ decline in interest expense was primarily due to the 9.4% decrease in interest expense on amounts due to credit institutions. This decline resulted by the 13.4% fall in the balance of respective portfolio, primarily related to the NBG loan repayment. Another contributor to the decrease was the 4.9% contraction in interest expense on customer accounts. This, in turn, resulted from the 2.6% drop in respective portfolio and to 0.2pp decrease in deposit effective rates due to our initiatives as well as broadly in line with the overall market trend. Again, the appreciation of the local currency had a technical effect, decreasing the interest expense on foreign exchange currency liabilities. Cost of funding contracted by 0.2%, from 4.6% in 4Q 2017.
Consequently, on QoQ basis, NIM increased by 0.5pp in 1Q 2018, compared to 6.4% in 4Q 2017. Meanwhile risk adjusted NIM stood remained stable at 5.2% on QoQ basis.
Fee and Commission Income
In thousands of GEL
1Q'18
1Q'17
4Q'17
Card Operations
21,736
20,829
21,618
4.4%
0.5%
Settlement Transactions
16,239
14,095
16,410
15.2%
-1.0%
Guarantees Issued
4,220
2,744
4,754
53.8%
-11.2%
Issuance of Letters of Credit
1,072
1,409
1,286
-23.9%
-16.6%
Cash Transactions
4,445
3,428
5,378
29.7%
-17.3%
Foreign Exchange Operations
490
220
337
NMF
NMF
Other
2,632
1,775
5,890
48.3%
-55.3%
Fee and Commission Income
50,834
44,500
55,673
14.2%
-8.7%
Card Operations
10,467
12,777
10,946
-18.1%
-4.4%
Settlement Transactions
2,142
1,520
2,139
40.9%
0.1%
Guarantees Issued
306
267
483
14.6%
-36.6%
Letters of Credit
260
213
368
22.1%
-29.3%
Cash Transactions
1,117
1,007
1,111
10.9%
0.5%
Foreign Exchange Operations
2
88
2
-97.7%
0.0%
Other
1,621
2,151
1,670
-24.6%
-2.9%
Fee and Commission Expense
15,915
18,023
16,719
-11.7%
-4.8%
Card Operations
11,269
8,052
10,672
40.0%
5.6%
Settlement Transactions
14,097
12,575
14,271
12.1%
-1.2%
Guarantees
3,914
2,477
4,271
58.0%
-8.4%
Letters of Credit
812
1,196
918
-32.1%
-11.5%
Cash Transactions
3,328
2,421
4,267
37.5%
-22.0%
Foreign Exchange Operations
488
132
335
NMF
NMF
Other
1,011
(376)
4,220
NMF
-76.0%
Net Fee And Commission Income
34,919
26,477
38,954
31.9%
-10.4%
NMF - Non Material Figures
1Q 2018 to 1Q 2017 Comparison
In 1Q 2018, net fee and commission income totalled GEL 34.9 million, up by GEL 8.4 million, or 31.9% compared to 1Q 2017. This mainly resulted from an increase in net fee and commission income from net card operations by GEL 3.2 million, net fee and commission income from net settlement transactions by GEL 1.5 million, and from net fee and commission income from net guarantees received by GEL 1.4 million.
The rise in net fee and commission income from net card operations is related to the increased number of active cards and POS terminals by 33% and 11% respectively.
1Q 2018 to 4Q 2017 Comparison
On a QoQ basis, net fee and commission income fell by GEL 4.0 million, or 10.4%, compared to 4Q 2017. This was primarily driven by a decrease in net fee and commission income from net card transactions by GEL 0.6 million, net guarantees issued by GEL 0.4 million and other net fee and commission income by GEL 3.2 million. The drop is explained by seasonally high number of transactions, volumes and related fee and commission income in the fourth quarter.
Other Operating Non-Interest Income
In thousands of GEL
1Q'18
1Q'17
4Q'17
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations
19,553
22,192
25,714
-11.9%
-24.0%
Share of Profit of Associates
307
92
249
NMF
23.3%
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments
17
(3)
3
NMF
NMF
Gains less Losses from Disposal of Investment Securities Available for Sale
-
-
93
NMF
-100.0%
Revenues from Cash-In Terminal Services
1,026
262
255
NMF
NMF
Revenues from Operational Leasing
1,575
1,784
1,411
-11.7%
11.6%
Gain from Sale of Investment Properties
1,041
192
2,775
NMF
-62.5%
Gain from Sale of Inventories of Repossessed Collateral
105
354
682
-70.3%
-84.6%
Administrative Fee Income from International Financial Institutions
-
151
-
-100.0%
NMF
Revenues from Non-Credit Related Fines
142
50
1,284
184.0%
-88.9%
Gain on Disposal of Premises and Equipment
45
27
760
66.7%
-94.1%
Other
2,520
8,346
3,824
-69.8%
-34.1%
Other Operating Income
6,454
11,166
10,991
-42.2%
-41.3%
Gross insurance Profit[8]
2,046
1,225
1,919
67.0%
6.6%
Other Operating Non-Interest Income
28,377
34,672
38,969
-18.2%
-27.2%
NMF - Non Material Figures
1Q 2018 to 1Q 2017 Comparison
Total other operating non-interest income and gross insurance profit fell by GEL 6.3 million to GEL 28.4 million in 1Q 2018. This decrease primarily resulted from the fall in gains less losses from trading in foreign currencies and foreign exchange translations by GEL 2.6 million, which was caused by lower volatility and tighter margins in 1Q 2018, as well as to the one-off FX income in 1Q 2017. Another contributor was the GEL 5.9 million contraction in other subcategory of other operating non-interest income, which was attributable to the fair value adjustment of the previously acquired loan portfolio in 1Q 2017. This effect was partially offset by a GEL 0.8 million increase in gross insurance profit and by a GEL 0.8 million increase in gain from sale of investment properties.
The increase in gross insurance profit was related to the sharp increase in number of customers by c.179,000, which in turn led to high increase in gross written premium by 190.2% YoY on standalone basis. As a result, according to internal estimates market share[9] reached 19.0%. More information about TBC insurance can be found in annex 20 on page 34.
1Q 2018 to 4Q 2018 Comparison
On a QoQ basis, total other operating non-interest income and gross insurance profit fell by GEL 10.6 million, or by 27.2%, primarily driven by decreased gains less losses from trading in foreign currencies and foreign exchange transactions by GEL 6.2 million, or 24.0%. This in turn was caused by seasonality factors, higher turnover and volatility in 4Q 2017. The decrease was also caused by a GEL 1.7 million drop in gains from the sale of investment properties and a GEL 1.3 million decline in other subcategory of other operating non-interest income.
Provision for Impairment
In thousands of GEL
1Q'18
1Q'17
4Q'17
Provision for Loan Impairment
(27,999)
(16,922)
(28,421)
65.5%
-1.5%
Provision for Impairment of Investments in Finance Lease
(240)
(31)
(79)
NMF
NMF
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments
(3,875)
92
(1,019)
NMF
NMF
Provision for Impairment of Other Financial Assets
(7,420)
(798)
(6,917)
NMF
7.3%
Impairment of Investment Securities Available for Sale
71
-
-
NMF
NMF
Total Provision Charges for Impairment
(39,463)
(17,659)
(36,436)
123.5%
8.3%
Operating Income after Provisions for Impairment
199,236
185,823
206,882
7.2%
-3.7%
Cost of Risk
1.3%
0.9%
1.4%
0.4%
-0.1%
NMF - Non Material Figures
1Q 2018 to 1Q 2017 Comparison
In 1Q 2018, total provision charges expanded by GEL 21.8 million to GEL 39.5 million compared to 1Q 2017. This increase was primarily attributable to loan portfolio, driven by higher recovery of provisions in corporate segment in 1Q 2017. The growth in total provision charges was also driven by a GEL 6.6 million rise in provision for impairment of other financial assets and by a GEL 4.0 million rise in charges on provision for performance guarantees and credit related commitments.
In 1Q 2018, the cost of risk on loans stood at 1.3% (1.7% without FX effect) compared to 0.9% (1.5% without FX effect) in 1Q 2017.
1Q 2018 to 4Q 2017 Comparison
On a QoQ basis, total provision charges grew by a GEL 3.0 million, or 8.3%, amounting to GEL 39.5 million. The rise mainly resulted from a GEL 2.9 million increase in provisions for performance guarantees and credit related commitments, and a GEL 0.5 million rise in provision for impairment of other financial. Increase in guarantees was related to one corporate borrower. Provision charges on loans fell by GEL 0.4 million due to GEL appreciation.
QoQ cost of risk without FX effect increased by 0.5pp from 1.2% in 4Q 2017 mainly due to seasonally low provision expense in retail segment in 4Q 2017, as well as increased share of higher yield, higher risk loans in our total loan in 1Q 2018.
Further details on asset quality are available in the Balance Sheet Discussion section.
Operating Expenses
In thousands of GEL
1Q'18
1Q'17
4Q'17
Staff Costs
52,116
47,538
54,105
9.6%
-3.7%
Provisions for Liabilities and Charges
-
(95)
-
-100.0%
NMF
Depreciation and Amortization
10,470
8,604
10,425
21.7%
0.4%
Professional services
2,962
3,415
4,672
-13.3%
-36.6%
Advertising and marketing services
4,527
3,060
8,141
47.9%
-44.4%
Rent
5,864
5,836
5,908
0.5%
-0.7%
Utility services
1,735
1,717
1,515
1.0%
14.5%
Intangible asset enhancement
2,494
2,214
3,346
12.6%
-25.5%
Taxes other than on income
1,656
1,511
1,095
9.6%
51.2%
Communications and supply
1,034
786
1,195
31.6%
-13.5%
Stationary and other office expenses
1,184
1,100
1,539
7.6%
-23.1%
Insurance
485
530
756
-8.5%
-35.8%
Security services
496
517
488
-4.1%
1.6%
Premises and equipment maintenance
1,035
1,644
1,574
-37.0%
-34.2%
Business trip expenses
320
365
645
-12.3%
-50.4%
Transportation and vehicles maintenance
378
416
453
-9.1%
-16.6%
Charity
280
271
282
3.3%
-0.7%
Personnel training and recruitment
176
404
526
-56.5%
-66.5%
Write-down of current assets to fair value less costs to sell
(3)
(57)
(165)
-94.7%
-98.2%
Loss on disposal of Inventory
20
955
51
-97.9%
-60.8%
Loss on disposal of investment properties
31
-
57
NMF
-45.6%
Loss on disposal of premises and equipment
278
123
186
126.0%
49.5%
Acquisition costs
-
307
560
-100.0%
-100.0%
Gross Change in IBNR
-
221
-
-100.0%
NMF
Other
3,394
1,538
2,287
NMF
48.4%
Administrative and Other Operating Expenses
28,346
26,873
35,111
5.5%
-19.3%
Operating Expenses
90,932
82,920
99,641
9.7%
-8.7%
Profit before Tax
108,304
102,903
107,241
5.2%
1.0%
Income Tax Expense
(10,778)
(6,345)
(10,487)
69.9%
2.8%
Profit for the Period
97,526
96,558
96,754
1.0%
0.8%
Cost to Income
38.1%
40.8%
41.0%
-2.7%
-2.9%
ROAE
21.0%
24.2%
21.0%
-3.2%
0.0%
ROAA
3.2%
3.7%
3.0%
-0.5%
0.2%
1Q 2018 to 1Q 2017 Comparison
In 1Q 2018 the total operating expenses increased to GEL 90.9 million, up by GEL 8.0 million, or by 9.7% YoY, primarily due to the rise in staff costs by GEL 4.6 million, or 9.6% YoY. This was mainly due to the general increase in salaries, bonuses and various HR management-related costs at the TBC Group level and related to the overall increase in the scale and performance of the business. Other contributors were the increase in administrative expenses by GEL 1.5 million, related to the overall growth of the scale of the business, and the increase in the depreciation and amortization expenses by GEL 1.9 million, related to the growth of the book value of both fixed and intangible assets.
As a result, the cost to income ratio was 38.1% in 1Q 2018, compared to 40.8% in 1Q 2017.
1Q 2018 to 4Q 2017 Comparison
On a QoQ basis, the total operating expenses fell by a GEL 8.7 million, or 8.7%. The decrease was primarily attributable to a GEL 3.6 million contraction in expenses related to advertising and marketing, by a GEL 1.7 million decrease in professional services and a GEL 2.0 million fall in staff costs. The overall decline in operating expenses is related to the seasonally high costs in the last quarter of the year.
As a result, the cost to income ratio decreased by 2.9pp from 41.0%, compared to 4Q 2017.
Balance Sheet Discussion
In millions of GEL
Mar-18
Dec-17
Mar-17
Cash, Due from Banks and Mandatory Cash Balances with NBG
2,247
2,505
1,753
-10.3%
28.2%
Loans and Advances to Customers (Net)
8,137
8,325
6,918
-2.3%
17.6%
Financial Securities
1,011
1,107
813
-8.7%
24.4%
Fixed and Intangible Assets & Investment Property
531
530
481
0.2%
10.4%
Other Assets
475
499
397
-4.8%
19.6%
Total Assets
12,401
12,966
10,362
-4.4%
19.7%
Due to Credit Institutions
2,270
2,621
2,112
-13.4%
7.5%
Customer Accounts
7,611
7,817
6,071
-2.6%
25.4%
Debt Securities in Issue
19
21
24
-9.5%
-20.8%
Subordinated Debt
402
427
345
-5.9%
16.5%
Other Liabilities
168
190
130
-11.6%
29.2%
Total Liabilities
10,470
11,076
8,682
-5.5%
20.6%
Total Equity
1,931
1,890
1,680
2.2%
14.9%
As of 31 March 2018, the Group's total assets amounted to GEL 12,401 million, up by GEL 2,039 million, or by 19.7% YoY. The increase was mainly due to the rise in net loans to customers by GEL 1,219 million, or by 17.6% YoY. The YoY increase in total assets also resulted from a GEL 494 million, or 28.2%, rise in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) and a GEL 198 million, or 24.4%, increase in financial securities, compared to 31 March 2017.
On a QoQ basis, total assets declined by GEL 565 million, or 4.4%, primarily due to a GEL 258 million, or 10.3% decrease in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG), due to a GEL 188 million or 2.3% drop in net loans to customers and due to GEL 96 million, or 8.7% decrease in financial securities. The decline across the balance sheet items were also related to the appreciation of the local currency, which had a negative effect on assets denominated in foreign currency.
As of 31 March 2018, the gross loan portfolio reached GEL 8,433 million, up by 18.4% YoY and down by 1.4% QoQ. At the same time, gross loans denominated in foreign currency accounted for 58.2% of total loans, compared to 61.4% as of 31 March 2017 and 59.7% as of 31 December 2017.
Asset Quality
Foreign Currency Income Linked Borrowers
31-Mar-18
31-Dec-17
Segments
FC share
FC linked income borrowers share
FC share
FC linked income borrowers share
Retail
49.4%
25.4%
49.3%
24.9%
Consumer
18.0%
24.5%
18.5%
22.7%
Mortgage
80.1%
25.6%
81.4%
25.4%
Corporate
75.6%
53.1%*
74.6%
56.3%**
MSME***
53.3%
14.9%
63.8%
16.6%
Total Loan Portfolio
58.2%
34.0%
59.7%
34.3%
* Pure exports account for 7.0% of total Corporate FX denominated loans
** Pure exports account for 8.0% of total Corporate FX denominated loans
*** MSME dollarization level decreased due to re-segmentation in Q1 2018
PAR 301 by Segments and Currencies
Par 30
Mar-18
Dec-17
Mar-17
GEL
FC
Total
GEL
FC
Total
GEL
FC
Total
Corporate
0.0%
1.1%
0.9%
0.0%
2.0%
1.5%
0.3%
1.6%
1.2%
Retail
2.9%
1.7%
2.3%
2.9%
2.0%
2.4%
2.7%
2.4%
2.6%
MSME
1.9%
3.5%
2.7%
1.5%
3.1%
2.5%
1.9%
4.0%
3.3%
Total
2.2%
1.9%
2.0%
2.1%
2.2%
2.2%
2.1%
2.5%
2.4%
1 loans overdue by more than 30 days to gross loans
Total
The total PAR 30 decreased by 0.2pp QoQ. The decline in PAR 30 ratio in 1Q 2018 is mainly related to repayment of one large corporate borrower. The total PAR 30 contracted by 0.4pp YoY. The YoY decrease is related to improved performance across all segments.
Retail Segment
The retail segment PAR 30 amounted to 2.3%, down by 0.1% QoQ and down by 0.3% YoY basis. Without re-segmentation effect PAR 30 would have been stable QoQ.
Corporate
The corporate segment PAR 30 amounted to 0.9%, down by 0.6pp QoQ and down by 0.3pp YoY. QoQ decrease is mainly driven by repayment of one large corporate client. The YoY decline is related to overall improved performance of the corporate book.
MSME
The MSME segment PAR 30 amounted to 2.7%, up by 0.2pp QoQ. The increase was driven by re-segmentation effect. Without re-segmentation effect Par 30 would have been flat
The MSME segment PAR 30 decreased by 0.6pp YoY. The decrease was mainly driven by SME sub-segment.
NPLs
NPLs
Mar-18
Dec-17
Mar-17
GEL
FC
Total
GEL
FC
Total
GEL
FC
Total
Corporate
0.9%
3.0%
2.5%
0.0%
4.2%
3.2%
0.7%
5.2%
4.1%
Retail
2.4%
3.0%
2.7%
2.6%
2.8%
2.7%
2.1%
2.9%
2.5%
MSME
2.6%
6.2%
4.5%
2.2%
6.0%
4.6%
2.5%
5.4%
4.5%
Total
2.2%
3.7%
3.1%
2.1%
4.1%
3.3%
1.9%
4.3%
3.4%
Total
Total NPLs stood at 3.1%, down by 0.2pp on a QoQ basis and down by 0.3pp on YoY basis. Both YoY and QoQ decrease is attributable to improved performance of the corporate loan book.
Retail Segment
Retail NPLs stood at 2.7%, stable on QoQ basis and up by 0.2pp YoY.
Corporate
Corporate NPLs stood at 2.5%, down by 0.7pp on a QoQ basis. QoQ decrease is mainly driven by repayment of one large corporate client.
Corporate NPLs decreased by 1.6pp on a YoY basis driven by improved performance of the corporate loan book.
MSME
MSME NPLs declined by 0.1pp on a QoQ basis, to 4.5% and remained stable on YoY basis.
NPLs Coverage
NPLs Coverage
Mar-18
Dec-17
Mar-17*
Exc. Collateral
Incl. Collateral
Exc. Collateral
Incl. Collateral
Exc. Collateral
Incl. Collateral
Corporate
103.8%
275.5%
86.6%
211.0%
69.2%
271.0%
Retail
157.6%
235.6%
154.0%
237.3%
121.4%
207.6%
MSME
70.2%
179.2%
54.6%
170.6%
54.4%
170.9%
Total
114.6%
225.8%
104.7%
209.4%
84.6%
217.4%
*per IAS 39
Total
NPL coverage ratios per IFRS 9 stood at 114.6% and 225.8%, including collateral, compared to 104.7% and 209.4% as of December 2017.
Retail Segment
NPL coverage ratios per IFRS 9 stood at 157.6% and 235.6%, including collateral, compared to 154.0% and 237.3% as of December 2017.
Corporate
NPL coverage ratios per IFRS 9 stood at 103.8% and 275.5%, including collateral, compared to 86.6% and 211.0% as of December 2017.
MSME
NPL coverage ratios per IFRS 9 stood at 70.2% and 179.2%, including collateral, compared to 54.6% and 170.6% as of December 2017.
Liabilities
As of 31 March 2018, TBC Bank's total liabilities amounted to GEL 10,470.6 million, down by GEL 604,8 million, or 5.5% QoQ. The contraction was primarily due to a GEL 350.6 million, or 13.4%, decrease in amounts due to credit institutions and a drop in customer accounts by a GEL 206.0 million. The declines across the balance sheet items were also related to the appreciation of the local currency, which effected liabilities denominated in foreign currency.
As for year-on-year comparison, total liabilities increased by a GEL 1,788.6 million, or 20.6%. This increase was primarily attributable to a GEL 1,540.0 million, or 25.4% increase in customer accounts, as well as a GEL 157.8 million, or 7.5% rise in amounts due to credit institutions.
Liquidity
As of 31 March 2018 the Bank's liquidity ratio, as defined by the NBG, stood at 30.8%, compared to 29.4% as of 31 March 2017 and compared to 32.5% as of 31 December 2017. As of 31 March 2018, the total liquidity coverage ratio (LCR), as defined by NBG, was 104.6%, above the 100.0% limit, while the LCR in GEL and FC stood at 90.4% and 114.4% respectively, above the respective limits of 75% and 100%.
Total Equity
As of 31 March 2018, TBC's total equity amounted to GEL 1,930.4 million, up by GEL 39.9 million from GEL 1,890.5 million as of 31 December 2017. The QoQ change in equity was mainly due to a GEL 33.4 million increase in retained earnings.
As for YoY comparison, total equity increased by a GEL 250.0 million, or 14.9%. This increase was primarily attributable to a GEL 211.3 million increase in retained earnings and a GEL 76.1 million increase in share premium.
Regulatory Capital
According to the newly introduced methodology, as of 31 March 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.8% and 17.7%, respectively, compared to the minimum required levels of 10.2% and 15.0%. In comparison, as of 31 December 2017, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.4% and 17.5%, respectively, compared to the minimum required levels of 10.3% and 12.9%.
In March 2018, The Bank's Basel III Tier 1 Capital amounted to GEL 1,517.2 million up by GEL 80.0 million, or 5.6% compared to December 2017. The Bank's Basel III Total Capital amounted to GEL 1,943.4 million up by GEL 58.1 million, or 3.1% on QoQ basis. Risk Weighted Assets amounted to GEL 10,999.6 million as of 31 March 2018, compared to GEL 10,753.2 million as of 31 December 2017.
Results by Segments and Subsidiaries
The segment definitions are as per below (updated in 2018):
· Corporate - legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or who have been granted facilities with more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;
· MSME (Micro, Small and Medium) - business customers who are not included in either corporate and retail segments; or legal entities who have been granted a Pawn shop loan;
· Retail - non-business individual customers and individual business customers, who have been granted mortgage loans; all individual customers are included in retail deposits;
· Corp. Centre - comprise the Treasury, other support and back office functions, and non-banking subsidiaries of the Group;
Businesses customers are all legal entities or individuals who have been granted a loan for business purpose.
Summary of key changes:
· The limits for corporate customers have been increased from GEL 8.0 million to GEL 12.0 million for annual revenue and from USD 1.5 million to GEL 5.0 million for granted facilities; As a result, GEL 66 mln was added to corporate loan portfolio and GEL 78 mln was added to corporate deposit portfolio.
· Certain sub-categories for the individual business customers that are granted non mortgage loans have been moved from retail to MSME segment. As a result, GEL 236 mln was transferred from retail to MSME loan portfolio.
Income Statement by Segments
1Q'18
Retail
MSME
Corporate
Corp.Centre
Total
Interest Income
149,300
50,999
57,217
32,333
289,849
Interest Expense
(29,436)
(2,593)
(30,893)
(51,524)
(114,446)
Net Transfer Pricing
(22,996)
(17,984)
4,292
36,688
-
Net Interest Income
96,868
30,422
30,616
17,497
175,403
Fee and Commission Income
37,449
5,152
6,837
1,396
50,834
Fee and Commission Expense
(13,031)
(1,540)
(1,275)
(69)
(15,915)
Net fee and Commission Income
24,418
3,612
5,562
1,327
34,919
Gross Insurance Profit
-
-
-
2,046
2,046
Gains Less Losses from Trading in Foreign Currencies
5,661
4,862
8,770
(2,213)
17,080
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)
-
-
-
2,473
2,473
Net Losses from Derivative Financial Instruments
-
-
-
17
17
Other Operating Income
3,148
209
2,292
805
6,454
Share of profit of associates
-
-
-
307
307
Other Operating Non-Interest Income
8,809
5,071
11,062
3,435
28,377
Provision for Loan Impairment
(27,884)
(4,683)
4,568
-
(27,999)
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments
149
284
(4,070)
(238)
(3,875)
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease
-
-
-
(240)
(240)
(Provision)/Recovery of Provision for Impairment of other Financial Assets
-
(2)
(7,026)
(392)
(7,420)
Recovery of Impairment/(Impairment) of Investment Securities Available for Sale
-
-
(9)
80
71
Profit before G&A Expenses and Income Taxes
102,360
34,704
40,703
21,469
199,236
Staff Costs
(32,690)
(9,070)
(7,045)
(3,311)
(52,116)
Depreciation and Amortization
(8,519)
(1,134)
(506)
(311)
(10,470)
Administrative and Other Operating Expenses
(20,337)
(3,440)
(2,016)
(2,553)
(28,346)
Operating Expenses
(61,546)
(13,644)
(9,567)
(6,175)
(90,932)
Profit before Tax
40,814
21,060
31,136
15,294
108,304
Income Tax Expense
(5,399)
(3,214)
(4,867)
2,702
(10,778)
Profit for the Year
35,415
17,846
26,269
17,996
97,526
Portfolios by Segments
In thousands of GEL
Mar-18
Dec-17
Mar-17
Loans and Advances to Customers
Consumer
1,926,828
2,128,658
1,859,865
Mortgage
2,007,914
2,069,728
1,736,302
Pawn
34,583
34,767
33,985
Retail
3,969,325
4,233,153
3,630,152
Corporate
2,489,516
2,475,392
1,922,615
MSME
1,974,075
1,844,672
1,568,270
Total Loans and Advances to Customers (Gross)
8,432,916
8,553,217
7,121,037
Less: Provision for Loan Impairment
(296,096)
(227,864)
(202,791)
Total Loans and Advances to Customers (Net)
8,136,820
8,325,353
6,918,246
Customer Accounts
Retail
4,197,277
4,378,266
3,543,911
Corporate
2,474,560
2,410,862
1,733,114
MSME
938,967
1,027,689
793,808
Total Customer Accounts
7,610,804
7,816,817
6,070,833
Retail Banking
As of 31 March 2018, retail loans stood at GEL 3,969.3 million up by GEL 339.2 million, or 9.3% YoY. Without the re-segmentation and the currency effect the retail loan portfolio would have increased by 2.8% QoQ. As of 31 March 2018, TBC Bank's retail loans accounted for 39.6% market share of total individual loans. As of 31 March 2018, foreign currency loans represented 49.4% of the total retail loan portfolio.
In the reporting period, retail deposits stood at GEL 4,197.3 million up by GEL 653.4 million, or 18.4% YoY. Without the re-segmentation and the currency effect retail deposits would have increased by 1.3% QoQ. Retail deposits accounted for 40.6% market share of total individual deposits. As of 31 March 2018 term deposits accounted for 54.7% of the total retail deposit portfolio, while foreign currency deposits represented 83.1% of the total retail deposit portfolio.
In 1Q 2018, retail loan yields and deposit rates stood at 14.6% and 2.8% respectively. The segment's cost of risk on loans was 2.7% (without re-segmentation effect 2.9%). The retail segment contributed 36.3%, or GEL 35.4 million, to the TBC's total net income in 1Q 2018.
Corporate Banking
As of 31 March 2018, corporate loans amounted to GEL 2,489.5 million up by GEL 566.9 million, or 29.5% YoY. Without the re-segmentation and the currency effect the portfolio would have increased by 3.2% QoQ. Foreign currency loans accounted for 76.1% of the total corporate loan portfolio. Market share of total legal entities loans stood at 35.6%.
As of the same date, corporate deposits totalled GEL 2,474.6 million up by GEL 741.4 million, or 42.8% YoY. Without the re-segmentation and the currency effect corporate deposits would have increased by 2.4% QoQ. Foreign currency corporate deposits represented 44.0% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 37.0%.
In 1Q 2018, corporate loan yields and deposit rates stood at 9.2% and 5.2%, respectively. In the same period, the cost of risk on loans was -0.8% (without re-segmentation effect also -0.8%) In terms of profitability, the corporate segment's net profit reached GEL 26.3 million, or 26.9% of the Group's total net income.
MSME Banking
As of 31 March 2018, MSME loans amounted to GEL 1,974.1 up by GEL 405.8 million, or 25.9% YoY. Without the re-segmentation and the currency effect the portfolio would have increased by 1.9% QoQ. Foreign currency loans accounted for 53.2% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 939.0 million up by GEL 145.2 million, or 18.3% YoY. Without the re-segmentation and the currency effect the deposit portfolio would have increased by 2.3% QoQ. Foreign currency MSME deposits represented 51.9% of the total MSME deposit portfolio.
In 1Q 2018, MSME loan yields and deposit rates stood at 11.3% and 1.1% respectively, while the cost of risk on loans was 1.0% (without the re-segmentation effect 0.6%). In terms of profitability, net profit for the MSME segment amounted to GEL 17.8 million, or 18.3%, of TBC's total net income.
Consolidated Balance Sheet
In thousands of GEL
Mar-18
Dec-17
Mar-17
Cash and cash equivalents
1,245,562
1,431,477
697,118
Due from other banks
23,311
39,643
151,780
Mandatory cash balances with National Bank of Georgia
978,116
1,033,818
904,487
Loans and advances to customers (Net)
8,136,820
8,325,353
6,918,246
Investment securities available for sale
580,784
657,938
428,138
Investment in subsidiaries
1,585
1,277
537
Investment securities held to maturity
429,875
449,538
384,756
Investments in finance leases
145,546
143,837
88,627
Investment properties
76,690
79,232
96,064
Goodwill
28,657
28,657
28,658
Intangible assets
84,997
83,492
63,906
Premises and equipment
369,610
366,913
320,659
Other financial assets
107,726
130,402
82,254
Deferred tax asset
2,527
2,855
3,406
Current income tax prepayment
8,454
19,084
10,058
Insurance and Reinsurance Receivables
20,125
15,742
3,414
Other assets
160,662
156,652
180,479
TOTAL ASSETS
12,401,047
12,965,910
10,362,587
LIABILITIES
Due to Credit Institutions
2,270,119
2,620,714
2,112,360
Customer accounts
7,610,804
7,816,817
6,070,833
Current income tax liability
44
447
2,902
Debt Securities in issue
19,371
20,695
24,376
Deferred income tax liability
663
602
3,727
Provisions for liabilities and charges
12,467
13,200
15,528
Other financial liabilities
76,438
80,762
54,780
Subordinated debt
402,058
426,788
344,841
Insurance Contracts Liabilities
14,061
10,992
342
Other liabilities
64,618
84,440
52,354
TOTAL LIABILITIES
10,470,643
11,075,457
8,682,043
EQUITY
Share capital
1,626
1,605
1,581
Share premium
753,298
714,651
677,211
Retained earnings
1,266,299
1,232,865
1,055,011
Group reorganisation reserve
(162,167)
(162,167)
(162,167)
Share based payment reserve
(24,608)
9,828
21,303
Revaluation reserve for premises
70,039
70,045
70,460
Revaluation reserve for available-for-sale securities
4,146
1,731
(5,088)
Cumulative currency translation reserve
(7,425)
(7,360)
(7,636)
TOTAL EQUITY
1,901,208
1,861,198
1,650,675
Non-controlling interest
29,196
29,255
29,869
TOTAL EQUITY
1,930,404
1,890,453
1,680,544
TOTAL LIABILITIES AND EQUITY
12,401,047
12,965,910
10,362,587
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL
1Q'18
1Q'17
4Q'17
Interest income
289,849
237,769
288,020
Interest expense
(114,446)
(95,436)
(122,625)
Net interest income
175,403
142,333
165,395
Fee and commission income
50,834
44,500
55,673
Fee and commission expense
(15,915)
(18,023)
(16,719)
Net Fee and Commission Income
34,919
26,477
38,954
Gross insurance profit
2,046
1,225
1,919
Gains less losses from trading in foreign currencies
17,080
21,146
25,622
Foreign exchange translation gains less losses
2,473
1,046
92
Gains less losses/(losses less gains) from derivative financial instruments
17
(3)
3
(Losses less gains) / gains less losses from disposal of investment securities available for sale
-
-
93
Share of profit of associates
307
92
249
Other operating income
6,454
11,166
10,991
Other operating non-interest income
26,331
33,447
37,050
Provision for loan impairment
(27,999)
(16,922)
(28,421)
Provision for impairment of investments in finance lease
(240)
(31)
(79)
Provision for/ (recovery of provision) performance guarantees and credit related commitments
(3,875)
92
(1,019)
Provision for impairment of other financial assets
(7,420)
(798)
(6,917)
Impairment of investment securities available for sale
71
-
-
Operating income after provisions for impairment
199,236
185,823
206,882
Staff costs
(52,116)
(47,538)
(54,105)
Depreciation and amortisation
(10,470)
(8,604)
(10,425)
Provision for liabilities and charges
-
95
-
Administrative and other operating expenses
(28,346)
(26,873)
(35,111)
Operating expenses
(90,932)
(82,920)
(99,641)
Profit before tax
108,304
102,903
107,241
Income tax expense
(10,778)
(6,345)
(10,487)
Profit for the period
97,526
96,558
96,754
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation
2,374
(1,407)
946
Exchange differences on translation to presentation currency
(67)
(96)
(60)
Items that will not be reclassified to profit or loss:
Other comprehensive income for the year
2,307
(1,503)
886
Total comprehensive income for the year
99,833
95,055
97,640
Profit attributable to:
- Owners of the Bank
95,758
94,975
95,367
- Non-controlling interest
1,768
1,583
1,387
Profit for the period
97,526
96,558
96,754
Total comprehensive income is attributable to:
- Owners of the Bank
98,031
93,473
96,179
- Non-controlling interest
1,802
1,582
1,461
Total comprehensive income for the year
99,833
95,055
97,640
Consolidated Statements of Cash Flows
In thousands of GEL
31-Mar-18
31-Mar-17
Cash flows from operating activities
Interest received
286,870
236,723
Interest paid
-114,810
-93,869
Fees and commissions received
50,177
43,697
Fees and commissions paid
-15,988
-18,193
Insurance premium received
10,632
2,472
Insurance claims paid
-4,547
-1,407
Income received from trading in foreign currencies
17,080
21,303
Other operating income received
-6,747
7,493
Staff costs paid
-81,180
-51,305
Administrative and other operating expenses paid
-34,351
-32,771
Income tax (paid) / refunded
-113
-10,379
Cash flows from operating activities before changes in operating assets and liabilities
107,023
103,764
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia
24,793
-214,398
Loans and advances to customers
-254,413
-190,209
Investment in finance lease
-10,397
363
Other financial assets
27,467
24,090
Other assets
2,262
-17,175
Due to other banks
27,601
-49,578
Customer accounts
142,411
-53,309
Other financial liabilities
-10,447
6,351
Other liabilities and provision for liabilities and charges
406
-1,669
Net cash from operating activities
56,706
-391,770
Cash flows from investing activities
Acquisition of investment securities available for sale
-80,411
-37,753
Proceeds from disposal of investment securities available for sale
-
-2250
Proceeds from redemption at maturity of investment securities available for sale
158,849
41,583
Acquisition of subsidiaries
-
-350
Acquisition of bonds carried at amortised cost
-56,429
-129,956
Proceeds from redemption of bonds carried at amortised cost
71,405
119,285
Acquisition of premises, equipment and intangible assets
-15,394
-19,573
Disposal of premises, equipment and intangible assets
910
1,458
Proceeds from disposal of investment property
4,192
872
Net cash used in investing activities
83,122
-26,684
Cash flows from financing activities
Proceeds from other borrowed funds
645,260
497,714
Redemption of other borrowed funds
-935,698
-473,649
Proceeds from debt securities in issue
75
2,805
Issue of ordinary shares
17,397
29
Net cash from / (used in) financing activities
-272,966
26,899
Effect of exchange rate changes on cash and cash equivalents
-52,777
-25,003
Net increase / (decrease) in cash and cash equivalents
-185,915
-416,558
Cash and cash equivalents at the beginning of the year
1,431,477
1,113,676
Cash and cash equivalents at the end of the year
1,245,562
697,118
Key Ratios
Average Balances
Average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the Management for monitoring and control purposes.
Key Ratios
Ratios (based on monthly averages, where applicable)
1Q'18
1Q'17
4Q'17
ROE1
21.0%
24.2%
21.0%
ROA2
3.2%
3.7%
3.0%
Pre-Provision ROE3
29.6%
28.7%
29.0%
Cost to Income4
38.1%
40.8%
41.0%
Cost of Risk5
1.3%
0.9%
1.4%
NIM6
6.9%
6.6%
6.4%
Risk Adjusted NIM7
5.2%
5.1%
5.2%
Loan Yields8
12.3%
11.9%
12.3%
Risk Adjusted Loan Yields9
10.6%
10.5%
11.1%
Deposit rates10
3.3%
3.4%
3.5%
Yields on interest Earning Assets11
11.5%
11.1%
11.2%
Cost of Funding12
4.4%
4.4%
4.6%
Spread13
7.1%
6.7%
6.6%
PAR 90 to Gross Loans14
1.2%
1.5%
1.4%
NPLs to Gross Loans15
3.1%
3.4%
3.3%
NPLs coverage16
114.6%
84.6%*
104.7%
NPLs coverage with collateral17
225.8%
217.4%*
209.4%
Provision Level to Gross Loans18
3.5%
2.8%
2.7%
Related Party Loans to Gross Loans19
0.1%
0.1%
0.1%
Top 10 Borrowers to Total Portfolio20
9.4%
8.3%
8.2%
Top 20 Borrowers to Total Portfolio21
13.4%
12.2%
12.4%
Net Loans to Deposits plus IFI Funding22
93.2%
97.2%
92.5%
Net Stable Funding Ratio23
123.5%
106.8%
124.4%**
Liquidity Coverage Ratio24
114.4%
NA
112.7%
Leverage25
6.4x
6.2x
6.9x
Regulatory Tier 1 CAR (Basel III)26
13.8%
NA
13.4%
Regulatory Total CAR (Basel III)27
17.7%
NA
17.5%
* Figures per IAS39
** Per updated internal methodology in line with Basel 2014 guidelines
Ratio definitions
1.Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period; Annualized where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Annualised where applicable.
3.Pre-Provision Return on average total equity (ROE) equals net income attributable to owners excluding all provision charges divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period
4. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
5. Cost of risk equals provision for loan impairment divided by monthly average gross loans and advances to customers. Annualized where applicable.
6. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, amount due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks.
7. Risk Adjusted Net interest margin is NIM minus cost of risk without one -offs and currency effect
8. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers. Annualised where applicable.
9. Risk Adjusted Loan yield is loan yield minus cost of risk without one-offs and currency effect
10. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits. Annualised where applicable.
11. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets. Annualized where applicable.
12. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities. Annualised where applicable.
13. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).
14. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.
15. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.
16. NPLs coverage ratio equals total loan loss provision calculated per IFRS 9 divided by the NPL loans.
17. NPLs coverage with collateral ratio equals loan loss provision calculated per IFRS 9 plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
18. Provision level to gross loans equals loan loss provision divided by the gross loan portfolio for the same period.
19. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
20. Top 10 borrowers to total portfolio equals total loan amount of top 10 borrowers divided by the gross loan portfolio.
21. Top 20 borrowers to total portfolio equals total loan amount of top 20 borrowers divided by the gross loan portfolio.
22. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
23. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III. NSFR ratio for before 2Q 2017 is calculated per updated internal methodology in line with Basel 2014 guidelines.
24. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined by NBG.
25. Leverage equals total assets to total equity.
26. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
27. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.5922 as of 31 December 2017. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4452 as of 31 March 2017. As of 31 March 2018 the USD/GEL exchange rate equalled 2.4144. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2018 of 2.4854, 4Q 2017 of 2.5933, 1Q 2017 of 2.6029.
Additional Disclosures
Subsidiaries of TBC Bank Group PLC[10]
Ownership / voting
% as of 31 March 2018Country
Year of incorporation
Industry
Total Assets
(after elimination)Subsidiary
Amount
GEL'000
% in TBC Group
TBC Insurance
100.0%
Georgia
2014
Insurance
38,496
0.31%
JSC TBC Bank
98.7%
Georgia
1992
Banking sector
12,082,192
97.43%
United Financial Corporation JSC
98.7%
Georgia
1997
Card processing
7,907
0.06%
TBC Capital LLC
100.0%
Georgia
1999
Brokerage
14,745
0.12%
TBC Leasing JSC
99.6%
Georgia
2003
Leasing
190,746
1.54%
TBC Kredit LLC
75.0%
Azerbaijan
2008
Non-banking credit institution
31,639
0.26%
Banking System Service Company LLC
100.0%
Georgia
2009
Information services
565
0.00%
TBC Pay LLC
100.0%
Georgia
2009
Processing
31,867
0.26%
Mali LLC
100.0%
Georgia
2011
Real estate management
181
0.00%
Real Estate Management Fund JSC
100.0%
Georgia
2010
Real estate management
21
0.00%
TBC Invest LLC
100.0%
Israel
2011
PR and marketing
393
0.00%
1) Earnings per Share
In GEL
31-Mar-2018
31-Mar-2017
Earnings per share for profit attributable to the owners of the Group:
- Basic earnings per share
1.80
1.80
- Diluted earnings per share
1.79
1.75
Source: IFRS Consolidated
2) Sensitivity Scenario
Sensitivity Scenario
31-Mar-18
10% Currency Devaluation Effect
NIM*
-0.1%
Technical Cost of Risk
+0.2%
Regulatory Total Capital per new NBG regulation
1,943
1,978
Regulatory Capital adequacy ratios tier 1 and total capital per new NBG regulation decrease by
0.59% - 0.71%
The table above shows the effect of a 10% currency devaluation on TBC Bank's balance sheet as of 31 March or Q1 2018 income statement, as applicable.
(*) Linear depreciation is assumed for NIM sensitivity analysis
Source: IFRS statements and Management accounts
3) FC details for Selected P/L Items
Selected P&L Items 1Q 2018
FC % of Respective Totals
Interest Income
39%
Interest Expense
49%
Fee and Commission Income
31%
Fee and Commission Expense
68%
Administrative Expenses
23%
Source: IFRS statements
4) GEL Refinance Rate and Libor Linked B/S Items 31 March 2018
GEL Refinance Rate Gap
GEL -242 m
Libor Gap
GEL 1,079 m
GEL m
% share in totals
GEL m
% share in totals
Assets
1,709
14%
Assets
2,393
19%
Securities with fixed yield(≤1y)*
409
41%
Nostro**
180
41%
Securities with floating yield
49
5%
NBG Reserves**
978
72%
Loans with Floating yield
1,119
13%
NBG Deposits
167
12%
Reserves in NBG
116
9%
Libor Loans
1,405
12%
Interbank loans& Deposits & Repo
15
4%
Interest Rate Options
21
Liabilities
1,951
19%
Current accounts***
405
5%
Liabilities
1,314
13%
Saving accounts***
494
6%
Senior Loans
1,011
46%
Refinancing Loan of NBG
732
34%
Subordinated Loans
303
76%
Interbank Loans &Deposits & Repo
98
87%
IFI Borrowings
222
10%
(*) 48% of the less than 1 year securities are maturing in 6 months
(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. From March, 2016 according to NBG regulation is it possible to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.
(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification)
Source: IFRS Consolidated
5) Yields and Rates
Yields and Rates
1Q'18
4Q'17
3Q'17
2Q'17
1Q'17
Loan yields
12.3%
12.3%
11.9%
12.4%
11.9%
Retail loan yields GEL
20.5%
19.7%
19.2%
19.7%
20.0%
Retail loan yields FX
8.4%
8.8%
8.5%
9.0%
9.1%
Retail Loan Yields
14.6%
14.2%
13.8%
14.2%
13.9%
Corporate loan yields GEL
11.2%
12.2%
11.0%
10.6%
10.0%
Corporate loan yields FX
8.6%
9.2%
8.6%
9.5%
8.8%
Corporate Loan Yields
9.2%
10.0%
9.2%
9.8%
9.1%
MSME loan yields GEL
15.0%
13.6%
13.1%
13.4%
13.3%
MSME loan yields FX
8.9%
9.4%
9.4%
10.4%
10.1%
MSME Loan Yields
11.3%
10.9%
10.7%
11.4%
11.0%
Deposit rates
3.3%
3.5%
3.4%
3.5%
3.4%
Retail deposit rates GEL
4.4%
4.4%
4.0%
3.9%
3.9%
Retail deposit rates FX
2.5%
2.7%
2.8%
3.0%
3.2%
Retail Deposit Yields
2.8%
2.9%
3.0%
3.1%
3.3%
Corporate deposit rates GEL
8.0%
8.5%
8.3%
8.5%
8.7%
Corporate deposit rates FX
2.0%
2.1%
2.2%
2.1%
1.7%
Corporate Deposit Yields
5.2%
5.3%
5.2%
5.2%
4.9%
MSME deposit rates GEL
1.8%
2.1%
2.2%
2.2%
2.0%
MSME deposit rates FX
0.5%
0.8%
0.7%
0.6%
0.5%
MSME Deposit Yields
1.1%
1.4%
1.4%
1.3%
1.1%
Yields on Securities
8.1%
6.9%
8.4%
7.8%
8.1%
Source: IFRS Consolidated
6) Risk Adjusted Yields & Cost of Risk
Risk-adjusted Yields
1Q'18
4Q'17
3Q'17
2Q'17
1Q'17
Loan yields
10.6%
11.1%
10.7%
10.9%
10.5%
Retail Loan Yields
11.6%
12.2%
10.8%
10.9%
10.6%
Corporate Loan Yields
9.3%
9.6%
11.1%
11.3%
11.1%
MSME Loan Yields
9.8%
10.4%
9.9%
10.5%
9.4%
Source: IFRS Consolidated
Cost of Risk
1Q'18
4Q'17
3Q'17
2Q'17
1Q'17
Retail
2.7%
2.0%
3.2%
3.1%
2.9%
Corporate
-0.8%
0.7%
-1.7%
-1.6%
-2.9%
MSME
1.0%
0.7%
0.9%
0.7%
1.1%
Total
1.3%
1.4%
1.3%
1.3%
0.9%
Source: IFRS Consolidated
7) Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
SDL Loans as % of Gross Loans
3.1%
3.2%
3.4%
3.3%
4.1%
Source: NBG, TBC standalone
8) Cross Sell Ratio[11] and Number Active Products
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
Cross Sell Ratio
3.88
3.94
3.79
3.67
3.57
Number of Active Products (in millions)
4.56
4.50
4.06
3.78
3.16
Source: Management accounts
9) Diversified Deposit Base
Status: monthly income >=GEL 3,000 or loans/deposits >=GEL 30,000
VIP: deposit >=USD 100,000 as well as on discretionary basis;
Wealth Management for non-resident customers >=USD 100,000 as well as on discretionary basis
31 March 2018
Volume of Deposits
Number of Deposits
MASS
39%
93.0%
STATUS
29%
6.5%
VIP
23%
0.4%
Wealth Management for non-resident clients
9%
0.1%
Source: Management accounts
10) Loan Concentration
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
Top 20 Borrowers as % of total portfolio
13.4%
12.4%
12.5%
13.0%
12.2%
Top 10 Borrowers as % of total portfolio
9.4%
8.2%
8.3%
9.1%
8.3%
Related Party Loans as % of total portfolio
0.1%
0.1%
0.1%
0.1%
0.1%
Source: IFRS consolidated
11) Number of Active Clients (in thousands)
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
Internet or Mobile Banking
447
461
375
340
298
Mobile Banking
365
359
289
254
219
Source: Management accounts
12) Number of Transactions in Digital Channels
1Q 18
4Q 17
3Q 17
2Q 17
1Q 17
Internet banking number of transactions (in thousands)
2,449
2,743
2,175
2,166
2,098
Mobile banking number of transactions (in thousands)
5,315
5,207
3,953
3,163
2,622
POS number of transactions (in thousands)
17,887
16,416
13,326
11,328
9,636
POS volume of transactions (in mln GEL)
661
631
543
447
394
* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches
Source: Management accounts
13) Penetration Ratios of Digital Channels
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
IB&MB Penetration Ratio
38%
40%
35%
33%
34%
Mobile Banking Penetration Ratio
31%
31%
27%
25%
25%
Source: Management accounts
14) Net outflow of borrowed funds
Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million)
331
303
402
312
170
154
41
66
146
Source: Management accounts, revolving non IFI loans from NBG are excluded
15) NPL Build Up (in GEL millions)
NPLs
NPLs as of Dec-17
Real Growth
FX Effect
Write-Offs
Repossessed
NPLs as of Mar-18
Retail
115
26
-4
-27
-2
107
Corporate
78
-12
-4
0
0
62
MSME
85
15
-5
-5
-2
89
Total
278
29
-13
-32
-4
258
16) Net Write-Offs, 1Q 2018
In GEL millions
Write-Offs
Recoveries
Net Write-Offs
Retail
-27
6
-21
Corporate
0
1
1
MSME
-5
2
-3
Total
-32
9
-23
Source: IFRS Consolidated
17) Portfolio Breakdown by Collateral Types as of 31-Mar-18
Cash Cover
2%
Gold
3%
Inventory
7%
Real Estate
63%
Third Party Guarantees
6%
Other
3%
Unsecured
17%
Source: IFRS Consolidated
18) Loan to Value by Segments as of 31-Mar-18
Retail
Corporate
MSME
Total
45%
44%
45%
45%
LTV is defined as loan amount divided by the value of collateral
19) Regulatory Capital
Total Capital and Tier 1 Capital Limits
2017 Actual
2018 F
2019 F
2020 F
2021 F
Tier 1
Total
Tier 1
Total
Tier 1
Total
Tier 1
Total
Tier 1
Total
Minimum Requirement
6.0%
8.0%
6.0%
8.0%
6.0%
8.0%
6.0%
8.0%
6.0%
8.0%
Conservation Buffer
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
Counter-Cyclical Buffer
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Systemic Buffer
0.0%
0.0%
1.0%
1.0%
1.5%
1.5%
2.0%
2.0%
2.5%
2.5%
Pillar 1 buffers
8.5%
10.5%
9.5%
11.5%
10.0%
12.0%
10.5%
12.5%
11.0%
13.0%
In addition, the pillar 2 buffers in tier 1 will be in the range of 1.5%-2.5% in 2018 and gradually increase to the range of 2.5%-4.0% by 2021. The pillar 2 buffers in total capital will be in the range of 3.0%-5.0% from 2018 to 2021
20) TBC Insurance
TBC Insurance is a wholly owned subsidiary of the Company and the Bank's main bancassurance partner. It was acquired by the Group in October 2016 and it has been growing rapidly since then. TBC Insurance's product offering comprises motor, travel, personal accident, credit life and property, business property, liability, and cargo insurance products. The company uses a broad range of channels to sell its products, including insurance agents, auto dealerships, web platforms, as well as TBC Bank's market-leading multichannel network.
In line with the Group's digitalisation strategy, TBC Insurance actively uses digital channels to market and sell its products. In 2017, TBC Insurance launched on the local market the first insurance chat bot, B Bot, which sells different types of insurance products. B Bot is fun to use and is quickly gaining popularity among our clients, especially the younger generation. Another popular sales channel is the wide network of TBC Bank's self-service terminals, where customers can buy travel and motor third-party liability (MTPL) insurance in a very short time. In addition, travel insurance can be purchased through TBC Bank's internet and mobile banking services, and more products are planned to be added to this channel in 2018, including payment protection insurance (PPI), CASCO and MTPL.
The insurance business delivered outstanding financial results in a short period of time. In March 2018, its market share[12] grew from 7.9% to 19.0% YoY. Over the same period, the number of clients increased from 116,456 to 295,607 and TBC insurance posted GEL 12,494 thousand in gross written premium, up by 190.2% YoY and its net earned premium reached GEL 6,458 thousand, up by 160.9%. As a result, net profit amounted to GEL 1,260 thousand in 1Q 2018.
In thousands of GEL
1Q'18
4Q'17
3Q'17
2Q'17
1Q'17
Gross written premium
12,494
12,153
8,584
6,275
4,306
Net earned premium
6,458
5,881
4,622
3,873
2,475
Net profit
1,260
601
885
(94)
(458)
1Q'18
4Q'17
3Q'17
2Q'17
1Q'17
Net combined ratio
76%
93%
92%
107%
114%
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
Market share12
19.0%
13.3%
10.9%
9.0%
7.9%
Number of clients
295,607
276,848
239,472
174,385
116,456
[1] Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.
[2] Number of transactions conducted in remote channels divided by total number of transactions.
[3] Excluding health insurance, based on internal estimates
[4] Excluding exchange rate effect
[5] Excluding exchange rate effect and Credo bank effect
[6] Growth in USD terms
[7] Please refer to page 28 for key ratio definitions
[8] Gross insurance profit can be reconciled to the standalone net insurance profit (as shown in annex 20 on page 34) as follows: gross insurance profit less provisions, administrative expenses and taxes, plus fee and commission income and net interest income
[9] Excluding health insurance, based on internal estimates
[10] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016
[11] Cross-sell ratio is defined as the number of active products divided by the number of active customers.
[12] Market share excluding health insurance; Source: Insurance State Supervision Service of Georgia. Market share for 1Q'2018 is based on internal estimates
This information is provided by RNSThe company news service from the London Stock ExchangeENDQRFGMGMKKNKGRZG
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