REG - TBC Bank Group PLC - 2Q and 1H 2022 Financial Results Report
12/08/2022 07:00
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RNS Number : 7835V TBC Bank Group PLC 12 August 2022
TBC BANK GROUP PLC ("TBC Bank")
2Q AND 1H 2022 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 the 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 the necessary regulatory approvals and licenses; the impact of
developments in the Georgian economy; the impact of COVID-19; the 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 regulations, 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
accounts and financial statements. The areas in which the management 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, the numerical figures shown as
totals in certain tables might not be an arithmetic aggregation of the figures
that preceded them.
Second Quarter 2022 Consolidated Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") published its unaudited consolidated financial
results for the second quarter and first half of 2022 on Friday, 12 Aug 2022
at 7 am BST. The management team will host a conference call on the day at 2
pm BST to discuss the results.
Please click the link below to join the webinar:
https://tbc.zoom.us/j/94805472323?pwd=U2dLYW1IZHZKdW9qcmJ6YVVwZmlCZz09
(https://tbc.zoom.us/j/94805472323?pwd=U2dLYW1IZHZKdW9qcmJ6YVVwZmlCZz09)
Webinar ID: 948 0547 2323
Passcode: 935364
Or use the following dial-ins:
· Georgia: +995 7067 77954 or +995 3224 73988 or 800 100 293 (Toll
Free)
· US: 833 548 0282 (Toll Free) or 877 853 5257 (Toll Free) or 888
475 4499 (Toll Free) or 833 548 0276 (Toll Free)
· United Kingdom: 0 800 260 5801 (Toll Free) or 0 800 358 2817
(Toll Free) or 0 800 456 1369 (Toll Free) or 0 800 031 5717 (Toll Free)
Webinar ID 948 0547 2323#
Other international numbers are available at: https://tbc.zoom.us/u/acVuboaB0
(https://tbc.zoom.us/u/acVuboaB0)
The call will be held in two parts: the first part will comprise
presentations, while participants will have the opportunity to ask questions
during the second part. All participants will be muted throughout the webinar.
Webinar Instructions:
In order to ask questions, participants joining the webinar should use the
"hand icon" visible at the bottom of the screen. The host will unmute those
participants who have raised hands one after the other. Once the question is
asked, the participant will be muted again.
Call Instructions:
Participants who use the dial-in number to join the webinar should dial *9 to
raise their hand.
In addition, the management team will provide a live presentation at 4.30 pm
BST on the same day via the Investor Meet Company platform. The presentation
is open to all existing and potential shareholders. Questions can be submitted
pre-event via your Investor Meet Company dashboard up until 9.00 am BST the
day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet TBC
Bank Group PLC via:
https://www.investormeetcompany.com/tbc-bank-group-plc/register-investor
(https://www.investormeetcompany.com/tbc-bank-group-plc/register-investor)
Investors who already follow TBC Bank Group PLC on the Investor Meet Company
platform will automatically be invited.
Contacts
Zoltan Szalai Anna Investor Relations Department
Romelashvili
Director of International Media and Investor Relations
Head of Investor Relations
E-mail: ZSzalai@Tbcbank.com.ge
Tel: +44 (0) 7908 242128
E-mail: IR@tbcbank.com.ge
E-mail: IR@tbcbank.com.ge
Web: www.tbcbankgroup.com (https://www.tbcbankgroup.com/)
Tel: +(995 32) 227 27 27
Tel: +(995 32) 227 27 27
Web: www.tbcbankgroup.com (https://www.tbcbankgroup.com/)
Web: www.tbcbankgroup.com (https://www.tbcbankgroup.com/)
Table of Contents
2Q and 1H 2022 Results Announcement
Interim Management Report
Key Highlights (#_Toc111049478) (#_Toc111049478)
Letter from the Chief Executive Officer (#_Toc111049479) (#_Toc111049479)
Economic Overview (#_Toc111049480) (#_Toc111049480)
Unaudited Consolidated Financial Results Overview for 2Q 2022 (#_Toc111049481)
(#_Toc111049481)
Unaudited Consolidated Financial Results Overview for 1H 2022 (#_Toc111049549)
(#_Toc111049549)
Additional Disclosures (#_Toc111049627) (#_Toc111049627)
1) (#_Toc111049628) (#_Toc111049628) (#_Toc111049628) TBC
Bank - Background (#_Toc111049628) (#_Toc111049628)
2) (#_Toc111049629) (#_Toc111049629) (#_Toc111049629)
Subsidiaries of TBC Bank Group PLC (#_Toc111049629) (#_Toc111049629)
3) (#_Toc111049630) (#_Toc111049630) (#_Toc111049630) TBC
Insurance (#_Toc111049630) (#_Toc111049630)
4) (#_Toc111049631) (#_Toc111049631) (#_Toc111049631) Fast
Growing Digital Bank in Uzbekistan (#_Toc111049631) (#_Toc111049631)
5) (#_Toc111049632) (#_Toc111049632) (#_Toc111049632) Loan
Book Breakdown by Stages According IFRS 9 (#_Toc111049632) (#_Toc111049632)
6) (#_Toc111049633) (#_Toc111049633) (#_Toc111049633)
Re-segmentation of Certain Balance Sheet Items (#_Toc111049633)
(#_Toc111049633)
7) (#_Toc111049634) (#_Toc111049634) (#_Toc111049634)
Glossary (#_Toc111049634) (#_Toc111049634)
Material Existing and Emerging Risks (#_Toc111049635) (#_Toc111049635)
Statement of Directors' Responsibilities (#_Toc111049636) (#_Toc111049636)
Condensed Consolidated Interim Financial Statements (Unaudited)
Independent Review Report
Condensed Consolidated Interim Statement of Financial Position
Condensed Consolidated Interim Statement of Profit or Loss and Other
Comprehensive Income
Condensed Consolidated Interim Statement of Changes in Equity
Condensed Consolidated Interim Statement of Cash Flows
Notes to the Condensed Consolidated Interim Financial Statements
TBC Bank announces unaudited 2Q and 1H 2022 Consolidated Financial Results
The market leader in Georgia with robust profitability and steady growth,
supported by solid capital
Continued strong progress in exploiting our international growth potential
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.
The information in this announcement, which was approved by the Board of
Directors on 11 August 2022, does not comprise statutory accounts within the
meaning of Section 434 of the Companies Act 2006. Statutory accounts for the
year ended 31 December 2021, which contained an unmodified audit report under
Section 495 of the Companies Act 2006 and which did not make any statements
under Section 498 of the Companies Act 2006, have been delivered to the
Registrar of Companies in accordance with Section 441 of the Companies Act
2006.
The interim management report is on pages 5 to 48 and the Condensed
Consolidated Interim Financial Statements (Unaudited) are on pages 49 to 101.
Key Highlights 1 (#_ftn1)
Maintaining strong growth in Georgia despite the adverse impact of the war in
Ukraine
Although the challenging geopolitical environment continues to be a matter of
concern, the Georgian economy has once again demonstrated its resilience.
While the tourism recovery has slowed following the Russian invasion in
Ukraine, the negative impact was balance by higher migration to the country.
Moreover, despite a surge in oil prices, Georgia's terms of trade remain
stable and remittance inflows are high. As net inflows are strong, the GEL has
rebounded close to pre-pandemic levels. After a post-pandemic recovery of real
GDP growth to 10.4% in 2021, we also expect over 10% growth this year.
Importantly, Uzbekistan, other country of operations, has also demonstrated
resilience in this challenging environment as well with projected growth of
around 5% in 2022.
Continued strong performance… - In the second quarter of 2022, our net
profit amounted to GEL 235 million with 5% of quarterly growth, driven by
strong income generation. The 6% year-on-year decrease was related to a high
base a year ago due to provision recoveries (GEL 50.1 million) and gains from
the disposal of one of our investment properties GEL (26.3 million). As a
result, our ROE for the second quarter of 2022 stood at 24.1%, while our ROA
amounted to 3.7%. In the first half of 2022, our net profit amounted to GEL
459 million, up by 14% year-on-year, with ROE of 24.2% and ROA of 3.7%.
…backed by solid capital and liquidity levels - As of 30 June 2022, CET1,
Tier 1, and Total Capital ratios stood at 15.0%, 17.8% and 21.2%,
respectively, and remained comfortably above the minimum regulatory
requirements by 2.9%, 3.3% and 2.9%, accordingly. As of 30 June 2022, our net
stable funding (NSFR) and liquidity coverage (LCR) ratios stood at 127% and
121%, respectively, comfortably above the regulatory minimum of 100%.
Our Georgian banking franchise maintained its leadership position… - We
continue to be market leaders in total loans and deposits. As of 30 June 2022,
our loan book increased by 23% year-on-year in constant currency terms, in
line with the overall growth of the banking sector, which translated into a
39.1% market share, up by 1.0 pp over the year. Over the same period, our
deposit base increased by 30% in constant currency terms and our market share
in total deposits amounted to 40.7% as of 30 June 2022, up by 2.9 pp
year-on-year.
…while our Uzbek business continued its growth - Our Uzbek business
continues its rapid growth. By the end of June 2022, the number of registered
users and downloads of our digital banking app reached 1.8 million and 2.4
million, respectively. At the same time, our retail loan and deposit books
amounted to GEL 181 million and GEL 236 million, up by 26% and 40% during the
last quarter, respectively.
In parallel, we continued to expand our Uzbek payments business, Payme. The
number of active monthly users doubled year-on-year to reach two million in
June 2022, while the volume of transactions increased by 56% year-on-year in
the second quarter of 2022. Over the same quarter, revenues increased by 82%
year-on-year and amounted to GEL 12 million, while net profit was GEL 7
million, up by 73% year-on-year.
Increasing our digital footprint across the Group - In June 2022, our monthly
active retail digital users (MAU) stood at 3.0 million, up by 71%
year-on-year, while daily active retail digital users (DAU) reached more than
1.0 million, up by 67% over the same period.
Strong progress in our payment business - Our payment business recorded strong
results on both the issuing and acquiring side in the second quarter of 2022.
The volume of transactions conducted by TBC cards and the volume of
transactions at TBC Bank terminals both increased by 30% year-on-year.
Letter from the Chief Executive Officer 2 (#_ftn2)
After our remarkable financial results in the first quarter of 2022, we
continued to deliver a strong performance in the second quarter as well. Our
net income amounted to GEL 235 million, up by 5% quarter-on-quarter, and our
return on equity stood at 24.1%. For the first half of 2022, our net income
stood at GEL 459 million, up by 14% year-on-year, with return on equity
reaching 24.2%. Despite the war in Ukraine and concerns about a global
recession, the Georgian economy continued to be very strong, leading to an
increase in our real GDP growth forecast to above 10.0% for the full year 2022
compared to the previous forecast of 5.5%. A strong GEL since the beginning of
the year has also contributed to the stability of the economic environment.
The number of our users is also growing steadily at the Group level, with the
number of monthly active digital users reaching 3.0 million in June 2022, up
by 71% year-on-year, while daily active digital users amounted to over 1
million, up by 67% over the same period.
Strong financial performance
In the second quarter of 2022, our operating income amounted to GEL 464
million, up by 22% year-on-year and 12% quarter-on-quarter. The year-on-year
increase was mainly related to higher interest income on the back of the
improved net interest margin, which reached 5.8% in the second quarter of
2022, up by 0.8 pp, as well as loan book growth of 15%. The quarter-on-quarter
increase was spread across several income streams, with a particularly strong
contribution from non-interest income. In the second quarter of 2022, our cost
of risk amounted to an annualized 0.9%, while our cost to income ratio
remained broadly stable year-on-year at 35.3%, improving by 1.3 pp
quarter-on-quarter. Our loan growth was strong, increasing by 23% year-on-year
and 6% quarter-on-quarter in constant currency terms. As a result, we
maintained our leadership position with a market share of 39.1% at the end of
June 2022.
Our strong capital generation allows us to keep our capital at prudent levels.
After accounting for the distribution of the final dividend in the second
quarter of 2022, our CET1, Tier 1 and Total Capital remained comfortably above
the minimum regulatory requirements by 2.9%, 3.3% and 2.9%, accordingly. At
the same time, we continued to maintain high liquidity, with our net stable
funding (NSFR) and liquidity coverage (LCR) ratios standing at 127% and 121%,
respectively, as of 30 June 2022.
Strong growth in our Uzbek businesses
We continue to expand our Uzbek banking business by growing our loan and
deposit books, as well as introducing new products and services. By the end of
June 2022, the number of registered digital users of our digital banking app
reached 1.8 million, while our retail loan and deposit books amounted to GEL
181 million and GEL 236 million, respectively. During the second quarter of
2022, we introduced digital onboarding, enabling customer registration without
any physical interaction, and launched a virtual visa card in USD allowing our
clients to make international online purchases.
As the business is growing successfully, we invested additional capital into
TBC UZ in the amount USD 21 million, while our partners, IFC and EBRD injected
USD 7 million each to support our expansion plans in line with the joint
venture arrangement entered into in September 2021. As a result, the total
investment into TBC UZ to date amounts to USD 79 million.
Our Uzbek payment business, Payme, continues to grow rapidly. The number of
active monthly users doubled in June 2022 year-on-year and reached two
million, while the volume of transactions increased year-on-year by 56% in the
second quarter of 2022. Over the same quarter, revenues increased by 82%
year-on-year and amounted to GEL 12.0 million, while net profit was GEL 7.1
million, up by 73% year-on-year.
Outlook
Our strong financial and operating results for the first half of 2022 fill me
with confidence that we are on the right track to achieve our growth and
profitability targets. Therefore, I would like to re-iterate our medium-term
targets for the key financial measures: ROE of above 20%, a cost to income
ratio below 35%, a dividend pay-out ratio of 25-35% and annual loan growth of
10-15%.
Finally, I am delighted to report that the Board has declared an interim
dividend of GEL 2.5 per share, payable in October 2022, which will be
supplemented by the buy-back programme of up to GEL 75 million. For more
information, please refer to our press release on 12 August 2022 available at
https://tbcbankgroup.com/news-and-media/regulatory-news/
(https://tbcbankgroup.com/news-and-media/regulatory-news/) .
Economic Overview
Economic growth
The Georgian economy rebounded sharply in 2021, achieving an annual growth
rate of 10.4% after a 6.8% decline in 2020. Despite the adverse impact of the
war in Ukraine, the growth momentum continued in 2022, reaching 10.5%
year-on-year in the first half, with a solid increase of 7.2% in 2Q 2022, amid
the record high base effect a year ago.
External sector
Notwithstanding the negative impact of Russia's invasion of Ukraine, the
external sector continued to perform strongly after the first quarter of 2022,
with goods trade data looking promising in 2Q as export and imports grew by
29.8% and 32.8% year-on year, respectively. While the major driver of the
growth in exports in 2Q 2022 was surged prices internationally, some increase
was also observed on the back of real growth. As anticipated earlier, exports
of destination sensitive products were difficult to redirect in the short
term, while non destination sensitive products such as commodities stayed
resilient or even strengthened. Although increased prices also influenced
imports, overall, Georgia's terms of trade remained resilient, further
supporting growth and the GEL. At the same time, investment goods continue to
have a high share in imports, especially after adjusting for the impact of the
higher oil prices, indicating positive sentiments.
The recovery in tourism further strengthened and is almost back on track,
supported by the migration effect, reaching 85.3% of 2019 levels in the second
quarter of 2022, up from 68.1% the previous quarter.
Remittance inflows remained resilient increasing by 27.1%(( 3 (#_ftn3) ))
year-on-year in the second quarter of 2022 (even after adjusting for double
counting with tourism inflows from Russia), up from 9.2% growth in the
previous quarter.
Fiscal stimulus
The fiscal stimulus, although still sizable, negatively affected growth in
2021 as the deficit amounted to around 6.3% of GDP, after an expansionary 9.3%
of GDP in 2020. Importantly, the major source of deficit financing in
2020-2021 was external, largely compensating for the pandemic-related drop in
net inflows. According to the Ministry of Finance, fiscal consolidation is
expected to take place in the coming years with deficit-to-GDP ratios of 3.6%,
2.8% and 2.3% in 2022, 2023 and 2024, respectively. At the same time,
government debt, which reached its mandated ceiling of 60% of GDP in 2020,
normalised at an estimated 49.4% of GDP by the end of 2021. Going forward, the
debt-to-GDP ratio is expected to decline gradually to 43.7% by the end of
2024.
Credit growth
By the end of 2Q 2022, bank credit increased by 18.7% year-on-year, compared
to 18.1% by the end of 1Q 2022. In terms of segments, retail lending increased
from 19.7% at the end of 1Q 2022 to 20.3% at the end of 2Q 2022. MSME lending
somewhat decelerated from 22.5% at the end of 1Q 2022 to 20.3% in 2Q 2022,
while in the same period corporate lending strengthened the most by 2.7 pp,
reaching a 15.5% YoY growth rate.
Inflation, monetary policy and the exchange rate
After a sharp deterioration of expectations amid the war by the end of 1Q
2022, the USD/GEL regained its value and appreciated to the pre-war level,
reaching 2.93 by the end of June.
In June, the annual CPI inflation came in at 12.8%, which was 0.5 pp lower
than the one in May, though mainly on the back of the base effect as June's
monthly seasonally adjusted annualized inflation was still elevated.
Nevertheless, the moderation of international commodity prices and the PPI in
Georgia, the higher probability of a global slowdown and the stronger GEL
suggest that the CPI inflation will normalise in the near future. Therefore,
the NBG kept the monetary policy rate unchanged at 11.0% in its meeting in
June, 2022.
Going forward
Despite the downside factors arising from the Ukraine-Russia conflict, TBC
Capital's projections indicate over 10% growth in 2022. The main drivers are
the recovery in tourism, including the migration impact, strong exports and
remittances, and gradually recovering FDI inflows.
More information on the Georgian economy and financial sector can be found at
www.tbccapital.ge (http://www.tbccapital.ge/) .
Unaudited Consolidated Financial Results Overview for 2Q 2022
This statement provides a summary of the unaudited business and financial
trends for 2Q 2022 for TBC Bank Group plc and its subsidiaries. The quarterly
financial information and trends are unaudited.
TBC Bank Group PLC's financial results has been prepared in accordance with
UK-adopted International Accounting Standard (IAS) 34 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the Financial Conduct Authority (FCA).
Please note that there might be slight differences in previous periods'
figures due to rounding.
Financial Highlights
Income Statement Highlights
in thousands of GEL 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Net interest income 303,572 288,619 242,767 25.0% 5.2%
Net fee and commission income 75,572 65,890 63,008 19.9% 14.7%
Other operating non-interest income 84,965 58,283 74,512 14.0% 45.8%
(file:///C%3A/Users/local_ppapidze/INetCache/Content.MSO/6CBAB128.xlsx#RANGE!A15)
Operating profit 464,109 412,792 380,287 22.0% 12.4%
Total credit loss allowance (37,854) (13,736) 45,291 NMF NMF
Losses from modifications of financial instruments - - (104) NMF NMF
Operating expenses (163,635) (150,950) (134,688) 21.5% 8.4%
Profit before tax 262,620 248,106 290,786 -9.7% 5.8%
Income tax expense (28,056) (24,125) (40,394) -30.5% 16.3%
Profit for the period 234,564 223,981 250,392 -6.3% 4.7%
Balance Sheet and Capital Highlights
in thousands of GEL Jun-22 Mar-22 Jun-21 Change YoY Change QoQ
Total Assets 26,027,081 25,056,340 22,091,541 17.8% 3.9%
Gross Loans 17,534,515 17,320,213 15,274,926 14.8% 1.2%
Customer Deposits 15,772,905 15,081,429 12,870,418 22.6% 4.6%
Total Equity 4,010,695 3,896,760 3,336,825 20.2% 2.9%
CET 1 Capital (Basel III) 3,069,501 2,964,648 2,382,595 28.8% 3.5%
Tier 1 Capital (Basel III) 3,655,281 3,584,908 2,837,805 28.8% 2.0%
Total Capital (Basel III) 4,357,184 4,279,803 3,573,282 21.9% 1.8%
Risk Weighted Assets (Basel III) 20,519,966 20,358,187 18,275,845 12.3% 0.8%
Key Ratios 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
ROE 24.1% 24.3% 31.0% -6.9 pp -0.2 pp
Bank's standalone ROE 25.1% 25.6% 34.7% -9.6 pp -0.5 pp
(file:///C%3A/Users/PPapidze/Desktop/Results%20Q1%202022/1Q%202022%20Support%20file%20for%20the%20report.xlsx#RANGE!A15)
4 (#_ftn4)
ROA 3.7% 3.7% 4.4% -0.7 pp 0.0 pp
Bank's standalone ROA(4) 3.9% 3.9% 4.7% -0.8 pp 0.0 pp
NIM 5.8% 5.6% 5.0% 0.8 pp 0.2 pp
Cost to income 35.3% 36.6% 35.4% -0.1 pp -1.3 pp
Bank's standalone cost to income(4) 27.8% 28.7% 28.6% -0.8 pp -0.9 pp
Cost of risk 0.9% 0.3% -1.3% 2.2 pp 0.6 pp
NPL to gross loans 2.3% 2.4% 3.4% -1.1 pp -0.1 pp
NPL provision coverage ratio 99.8% 96.0% 91.3% 8.5 pp 3.8 pp
Total NPL coverage ratio 167.5% 167.9% 169.6% -2.1 pp -0.4 pp
CET 1 CAR (Basel III) 15.0% 14.6% 13.0% 2.0 pp 0.4 pp
Tier 1 CAR (Basel III) 17.8% 17.6% 15.5% 2.3 pp 0.2 pp
Total CAR (Basel III) 21.2% 21.0% 19.6% 1.6 pp 0.2 pp
Leverage (Times) 6.5x 6.4x 6.6x -0.1x 0.1x
Net Interest Income
In 2Q 2022, net interest income amounted to GEL 303.6 million, up by 25.0% YoY
and by 5.2% on a QoQ basis.
The YoY rise in interest income of GEL 94.1 million, or 20.5%, was mostly
attributable to an increase in interest income from loans related to the GEL
2,259.6 million, or 14.8%, increase in the respective portfolio, and a 1.0 pp
rise in the respective yield on the back of growing interest rates and a loan
composition change.
The increase in interest income on a QoQ basis of GEL 25.0 million, or 4.7%,
was also mainly driven by an increase in interest income from loans to
customers, related both to an increase in the loan portfolio by GEL 214.3
million, or 1.2%, and to a 0.4 pp rise in the respective loan yield.
Interest expense increased by GEL 33.3 million, or 15.5%, on a YoY basis,
mainly related to an increase in the deposit portfolio of GEL 2,902.5 million,
or 22.6%, and a 0.3 pp growth in deposit cost driven by GEL deposits. Over the
same period, the share of the deposits portfolio in total liabilities went up
to 72%, compared to 69% a year ago.
On a QoQ basis, interest expense increased by GEL 10.0 million, or 4.2%,
driven by an increase in the NBG loan and other borrowed funds.
In 2Q 2022, our NIM stood at 5.8%, up by 0.8 pp on YoY and 0.2 pp on a QoQ
basis.
In thousands of GEL 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Interest income 552,719 527,743 458,572 20.5% 4.7%
Interest expense* (249,147) (239,124) (215,805) 15.5% 4.2%
Net interest income 303,572 288,619 242,767 25.0% 5.2%
NIM 5.8% 5.6% 5.0% 0.8 pp 0.2 pp
* Interest expense includes net interest gains from currency swaps
Non-Interest Income
Total non-interest income amounted to GEL 160.5 million in 2Q 2022, increasing
by 16.7% YoY and 29.3% on a QoQ basis.
Net fee and commission income increased by 19.9% YoY and 14.7% on a QoQ basis.
The increase was mainly related to increased payments transactions both in
Georgia and Uzbekistan.
Net gains from FX operations demonstrated exceptional results in 2Q 2022,
mainly related to increased margins and volume due to the high volatility of
the exchange rate.
Other operating income decreased on a YoY basis, related to the non-recurring
gain from the disposal of our investment property in 2Q 2021 in the amount of
GEL 26.3 million. On a QoQ basis, the increase was driven by the gain from the
repurchase of senior unsecured bonds in April 2022 in the amount of GEL 6.1
million.
In thousands of GEL 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Non-interest income
Net fee and commission income 75,572 65,890 63,008 19.9% 14.7%
Net gains from currency derivatives, foreign currency operations and 66,520 47,857 31,688 NMF 39.0%
translation
Net insurance premium earned after claims and acquisition costs 5 (#_ftn5) 6,698 4,267 5,470 22.4% 57.0%
Other operating income 11,747 6,159 37,354 -68.6% 90.7%
Total other non-interest income 160,537 124,173 137,520 16.7% 29.3%
Credit Loss Allowance
Credit loss allowance for loans in 2Q 2022 amounted to GEL 39.0 million, which
translated into a cost of risk of 0.9% on an annualised basis.
In thousands of GEL 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Credit loss allowance for loans to customers (39,025) (11,497) 50,112 NMF NMF
Credit loss recovery/(allowance) for other transactions 1,171 (2,239) (4,821) NMF NMF
Total credit loss allowance (37,854) (13,736) 45,291 NMF NMF
Operating profit after expected credit losses and non-financial asset 426,255 399,056 425,578 0.2% 6.8%
impairment losses
Cost of risk 0.9% 0.3% -1.3% 2.2 pp 0.6 pp
Operating Expenses
In 2Q 2022, our operating expenses expanded by 21.5% YoY and 8.4% on a QoQ
basis.
The YoY increase in staff costs was driven by the expansion of our business,
both locally and internationally, while approximately 40% of the increase in
administrative and other operating expenses was attributable to the growth of
our Uzbek business. On a QoQ basis, the increase in operating expenses was
mainly related to administrative and other expenses, driven by increased
marketing activities.
Our cost to income ratio amounted to 35.3%, while the Bank's standalone cost
to income stood at 27.8%.
In thousands of GEL 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Operating expenses
Staff costs (90,332) (86,159) (77,757) 16.2% 4.8%
Recovery/(allowance) of provision for liabilities and charges 4 (64) (54) NMF NMF
Depreciation and amortization (24,321) (23,011) (19,337) 25.8% 5.7%
Administrative and other operating expenses (48,986) (41,716) (37,540) 30.5% 17.4%
Total operating expenses (163,635) (150,950) (134,688) 21.5% 8.4%
Cost to income 35.3% 36.6% 35.4% -0.1 pp -1.3 pp
Bank's standalone cost to income 6 (#_ftn6) 27.8% 28.7% 28.6% -0.8 pp -0.9 pp
Net Income
In 2Q 2022, we generated GEL 234.6 million in net profit, up by 4.7% on a QoQ
basis, supported by both interest and non-interest incomes. The YoY decrease
was related to a high base in 2Q 2021 as a result of provision recoveries, as
well as a non-recurring gain from the disposal of our investment property.
As a result, our ROE and ROA for 2Q 2022 reached 24.1% and 3.7%, accordingly.
In thousands of GEL 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Losses from modifications of financial instruments - - (104) NMF NMF
Profit before tax 262,620 248,106 290,786 -9.7% 5.8%
Income tax expense (28,056) (24,125) (40,394) -30.5% 16.3%
Profit for the period 234,564 223,981 250,392 -6.3% 4.7%
ROE 24.1% 24.3% 31.0% -6.9 pp -0.2 pp
Bank's standalone ROE(6) 25.1% 25.6% 34.7% -9.6 pp -0.5 pp
ROA 3.7% 3.7% 4.4% -0.7 pp 0.0 pp
Bank's standalone ROA(6) 3.9% 3.9% 4.7% -0.8 pp 0.0 pp
Funding and Liquidity
As of 30 June 2022, the total liquidity coverage ratio (LCR), as defined by
the NBG, was 121.2%, above the 100% limit, while the LCR in GEL and FC stood
at 113.3% and 124.5%, accordingly, above the respective limits of 75% and
100%.
Over the same period, NSFR stood at 126.7%, compared to the regulatory limit
of 100%.
In April 2022, we repurchased US$ 55 million of our senior unsecured bonds at
96% of face value to provide liquidity to the market.
Jun-22 Mar-22 Change QoQ
Minimum net stable funding ratio, as defined by the NBG 100.0% 100.0% 0.0 pp
Net stable funding ratio as defined by the NBG 126.7% 126.9% -0.2 pp
Net loans to deposits + IFI funding 97.7% 101.4% -3.7 pp
Leverage (Times) 6.5x 6.4x 0.1x
Minimum total liquidity coverage ratio, as defined by the NBG 100.0% 100.0% 0.0 pp
Minimum LCR in GEL, as defined by the NBG 75% 75.0% 0.0 pp
Minimum LCR in FC, as defined by the NBG 100.0% 100.0% 0.0 pp
Total liquidity coverage ratio, as defined by the NBG 121.2% 116.1% 5.1 pp
LCR in GEL, as defined by the NBG 113.3% 110.0% 3.3 pp
LCR in FC, as defined by the NBG 124.5% 119.2% 5.3 pp
Regulatory Capital
As of 30 June 2022, our CET1, Tier 1 and Total Capital ratios stood at 15.0%,
17.8% and 21.2%, respectively, and remained comfortably above the minimum
regulatory requirements by 2.9%, 3.3% and 2.9%, accordingly.
The QoQ increases in all CET1, Tier 1 and Total capital adequacy ratios were
mainly driven by net income generation and GEL appreciation, partially offset
by the issued 2021 final dividends and the growth of the loan book.
In thousands of GEL Jun-22 Mar-22 Change QoQ
CET 1 Capital 3,069,501 2,964,648 3.5%
Tier 1 Capital 3,655,281 3,584,908 2.0%
Total Capital 4,357,184 4,279,803 1.8%
Total Risk-weighted Exposures 20,519,966 20,358,187 0.8%
Minimum CET 1 ratio 12.1% 12.2% -0.1 pp
CET 1 Capital adequacy ratio 15.0% 14.6% 0.4 pp
Minimum Tier 1 ratio 14.5% 14.6% -0.1 pp
Tier 1 Capital adequacy ratio 17.8% 17.6% 0.2 pp
Minimum total capital adequacy ratio 18.3% 18.3% 0.0 pp
Total Capital adequacy ratio 21.2% 21.0% 0.2 pp
Loan Portfolio
As of 30 June 2022, the gross loan portfolio reached GEL 17,534.5 million, up
by 1.2% QoQ or 5.6% on a constant currency basis.
The proportion of gross loans denominated in foreign currency decreased by 1.9
pp on a QoQ basis and accounted for 51.9% of total loans. On a constant
currency basis, the proportion of gross loans denominated in foreign currency
increased by 0.1 pp QoQ and stood at 53.9%.
As of 30 June 2022, our market share in total loans stood at 39.1%, up by 0.2
pp on a QoQ basis. Our loan market share in legal entities was 39.7%, up by
0.4 pp on a QoQ basis. Our loan market share in individuals stood at 38.5%,
down by 0.1 pp on a QoQ basis.
In thousands of GEL Jun-22 Mar-22 Change QoQ
Loans and advances to customers
Retail 6,666,569 6,582,652 1.3%
Retail loans GEL 3,994,645 3,763,609 6.1%
Retail loans FC 2,671,924 2,819,043 -5.2%
CIB 6,462,635 6,461,554 0.0%
CIB loans GEL 2,083,255 2,040,940 2.1%
CIB loans FC 4,379,380 4,420,614 -0.9%
MSME 4,405,311 4,276,007 3.0%
MSME loans GEL 2,357,651 2,191,308 7.6%
MSME loans FC 2,047,660 2,084,699 -1.8%
Total loans and advances to customers 17,534,515 17,320,213 1.2%
2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Loan yields 11.2% 10.8% 10.2% 1.0 pp 0.4 pp
Loan yields GEL 15.7% 15.5% 15.1% 0.6 pp 0.2 pp
Loan yields FC 7.2% 6.9% 6.7% 0.5 pp 0.3 pp
Retail Loan Yields 13.2% 12.6% 11.4% 1.8 pp 0.6 pp
Retail loan yields GEL 16.6% 16.5% 15.9% 0.7 pp 0.1 pp
Retail loan yields FC 8.4% 7.6% 6.4% 2.0 pp 0.8 pp
CIB Loan Yields 9.3% 9.2% 9.0% 0.3 pp 0.1 pp
CIB loan yields GEL 14.3% 14.1% 13.8% 0.5 pp 0.2 pp
CIB loan yields FC 7.0% 6.9% 7.1% -0.1 pp 0.1 pp
MSME Loan Yields 10.9% 10.6% 10.2% 0.7 pp 0.3 pp
MSME loan yields GEL 15.3% 15.1% 15.0% 0.3 pp 0.2 pp
MSME loan yields FC 6.0% 6.0% 6.1% -0.1 pp 0.0 pp
The comparative rates for 2Q'21 do not correspond with the rates disclosed in
2Q and 1H 2021 financial report, since they include re-segmentation effect as
described in appendix 6.
Loan Portfolio Quality
Par 30 slightly improved on a QoQ basis, mainly driven by the improvement in
the CIB segment, attributable to one group of borrowers. Over the same period,
Par 30 for the MSME segment improved slightly, while in retail, the Par 30
ratio increased by 0.2pp, attributable to an unsecured consumer portfolio.
Total NPL also slightly improved on a QoQ basis. In the CIB portfolio, the
improvement was mainly attributable to the recovery of one stage III borrower,
while in the MSME portfolio, it was driven by the micro sub-segment. Over the
same period, the retail NPL ratio remained stable.
Par 30 Jun-22 Mar-22 Change QoQ
Retail 2.5% 2.3% 0.2 pp
CIB 0.7% 1.1% -0.4 pp
MSME 3.8% 3.9% -0.1 pp
Total Loans 2.2% 2.3% -0.1 pp
Non-performing Loans Jun-22 Mar-22 Change QoQ
Retail 2.2% 2.2% 0.0 pp
CIB 1.3% 1.6% -0.3 pp
MSME 3.9% 4.1% -0.2 pp
Total Loans 2.3% 2.4% -0.1 pp
NPL Coverage Jun-22 Mar-22
Provision Coverage Total Coverage Provision Coverage Total Coverage
Retail 171.8% 223.1% 169.3% 230.1%
CIB 55.4% 118.7% 47.5% 115.0%
MSME 59.0% 143.1% 64.3% 147.7%
Total 99.8% 167.5% 96.0% 167.9%
Cost of risk
In 2Q 2022, the total cost of risk amounted to 0.9%.
The cost of risk for CIB amounted to -0.1%, attributable to the strong overall
performance of the portfolio and the positive macro-outlook. In MSME, the cost
of risk amounted to 0.0%, on the back of the improved macro-outlook compared
to the previous quarter. Cost of risk in retail segment amounted to 2.5%, due
to accelerated growth in unsecured consumer loans within recent quarters.
Cost of risk 2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Retail 2.5% 0.6% -0.2% 2.7 pp 1.9 pp
CIB -0.1% -0.1% -2.0% 1.9 pp 0.0 pp
MSME 0.0% 0.3% -1.8% 1.8 pp -0.3 pp
Total 0.9% 0.3% -1.3% 2.2 pp 0.6 pp
The comparative ratios for 2Q'21 do not correspond with the ratios disclosed
in 2Q and 1H 2021 financial report, since they include re-segmentation effect
as described in appendix 6.
Deposit Portfolio
The total deposits portfolio amounted to GEL 15,772.9 million, increasing by
4.6% QoQ or 8.9% on a constant currency basis.
The proportion of deposits denominated in a foreign currency decreased by 3.6
pp on a QoQ basis and stood at 60.8% of total deposits. On a constant currency
basis, the proportion of deposits denominated in a foreign currency decreased
by 2.0 pp QoQ and accounted for 62.4% of total deposits.
As of 30 June 2022, our market share in deposits amounted to 40.7%, up by 0.4
pp on a QoQ basis, while our market share in deposits to legal entities stood
at 42.4%, up by 1.4 pp QoQ. Our market share in deposits to individuals stood
at 39.2%, down by 0.4 pp QoQ.
In thousands of GEL Jun-22 Mar-22 Change QoQ
Customer Accounts
Retail 5,906,886 5,618,872 5.1%
Retail deposits GEL 1,571,548 1,461,142 7.6%
Retail deposits FC 4,335,338 4,157,730 4.3%
CIB 7,589,188 7,567,725 0.3%
CIB deposits GEL 3,170,605 2,844,528 11.5%
CIB deposits FC 4,418,583 4,723,197 -6.4%
MSME 1,562,211 1,487,665 5.0%
MSME deposits GEL 718,622 657,057 9.4%
MSME deposits FC 843,589 830,608 1.6%
Total Customer Accounts* 15,772,905 15,081,429 4.6%
* Total deposit portfolio includes Ministry of Finance deposits in the amount
of GEL 715 million and GEL 407 million as of 30 Jun 2022 and 31 Mar 2022,
respectively.
2Q'22 1Q'22 2Q'21 Change YoY Change QoQ
Deposit rates 3.7% 3.7% 3.4% 0.3 pp 0.0 pp
Deposit rates GEL 7.7% 7.5% 6.6% 1.1 pp 0.2 pp
Deposit rates FC 1.4% 1.5% 1.7% -0.3 pp -0.1 pp
Retail Deposit Yields 2.8% 2.7% 2.2% 0.6 pp 0.1 pp
Retail deposit rates GEL 5.6% 5.3% 4.7% 0.9 pp 0.3 pp
Retail deposit rates FC 1.8% 1.8% 1.5% 0.3 pp 0.0 pp
CIB Deposit Yields 4.5% 4.5% 4.0% 0.5 pp 0.0 pp
CIB deposit rates GEL 9.5% 9.4% 8.3% 1.2 pp 0.1 pp
CIB deposit rates FC 1.2% 1.4% 2.1% -0.9 pp -0.2 pp
MSME Deposit Yields 0.7% 0.7% 0.8% -0.1 pp 0.0 pp
MSME deposit rates GEL 1.3% 1.1% 1.4% -0.1 pp 0.2 pp
MSME deposit rates FC 0.2% 0.2% 0.3% -0.1 pp 0.0 pp
The comparative rates for 2Q'21 do not correspond with the rates disclosed in
2Q and 1H 2021 financial report, since they include re-segmentation effect as
described in appendix 6.
Segment definitions and PL
Business Segments
Upon the annual review of business segmentation, the limits for corporate
segment have been changed as follows:
· annual revenue limit increased from GEL 12.0 million to GEL 20.0
million;
· granted facilities limit raised from GEL 5.0 million to GEL 7.0
million.
The definition has been updated starting from 1st of January 2022. The updated
changes are reflected in segments' definitions below:
· Corporate - a legal entity/group of affiliated entities with an
annual revenue exceeding GEL 20.0 million or which has been granted facilities
of more than GEL 7.0 million. Some other business customers may also be
assigned to the CIB segment or transferred to the MSME segment on a
discretionary basis. In addition, CIB includes Wealth Management private
banking services to high-net-worth individuals with a threshold of US$ 250,000
on assets under management (AUM), as well as on discretionary basis;
· Retail - Non-business individual customers including the
fully-digital bank, Space. The business is broadly divided into two segments:
o Mass retail
o Affluent retail (customers eligible for affluent retail have >3,000 GEL
in monthly income)
Since 2021, WM & VIP individual customers are managed in the CIB
directory;
· MSME - Business customers (Legal entities and private individual
customers that generate income from business activities), who are not included
in the CIB segment;
· Corporate centre and other operations - comprises the Treasury,
other support and back-office functions, and non-banking subsidiaries of the
Group.
Business customers are all legal entities or individuals who have been granted
a loan for business purposes.
Income Statement by Segments
2Q'22 Retail MSME CIB Corp. Centre Total
Interest income 218,454 117,557 153,662 63,046 552,719
Interest expense (40,237) (2,833) (83,543) (122,534) (249,147)
Net transfer pricing (62,409) (54,967) 27,256 90,120 -
Net interest income 115,808 59,757 97,375 30,632 303,572
Fee and commission income 84,739 8,080 20,109 14,562 127,490
Fee and commission expense (43,133) (3,085) (2,121) (3,579) (51,918)
Net fee and commission income 41,606 4,995 17,988 10,983 75,572
Insurance profit - - - 6,698 6,698
Net gains from currency derivatives, foreign currency operations and 18,442 12,380 31,087 4,611 66,520
translation
Net gains from disposal of investment securities measured at fair value - - - 108 108
through other comprehensive income
Other operating income 1,478 277 407 9,299 11,461
Share of profit of associates - - - 178 178
Other operating non-interest income and insurance profit 19,920 12,657 31,494 20,894 84,965
Credit loss (allowance)/recovery for loans to customers (40,682) (133) 1,790 - (39,025)
Credit loss recovery for finance leases receivables - - - 883 883
Credit loss recovery/(allowance) for performance guarantees and credit related 36 47 (1,742) - (1,659)
commitments
Credit loss (allowance)/recovery for other financial assets (22) - 1,624 (610) 992
Credit loss (allowance)/recovery for financial assets measured at fair value - - (128) 1,311 1,183
through other comprehensive income
Net (impairment)/ recovery of non-financial assets (95) 28 (9) (152) (228)
Operating profit after expected credit and non-financial asset impairment 136,571 77,351 148,392 63,941 426,255
losses
Staff costs (41,795) (16,361) (14,552) (17,624) (90,332)
Depreciation and amortization (15,135) (3,516) (1,663) (4,007) (24,321)
Provision for liabilities and charges - - - 4 4
Administrative and other operating expenses (24,856) (6,201) (5,394) (12,535) (48,986)
Operating expenses (81,786) (26,078) (21,609) (34,162) (163,635)
Profit before tax 54,785 51,273 126,783 29,779 262,620
Income tax expense (5,527) (5,266) (13,798) (3,465) (28,056)
Profit for the period 49,258 46,007 112,985 26,314 234,564
In 1Q 2022, the management reclassified net fee and commission income from
acquiring and issuing business, utility payments income as well as fee expense
on self-service and POS terminal transactions to retail segment from other
segments.
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance sheet
In thousands of GEL Jun-22 Mar-22
Cash and cash equivalents 2,739,226 1,962,460
Due from other banks 42,552 58,348
Mandatory cash balances with National Bank of Georgia and Central Bank of 2,108,455 2,243,280
Uzbekistan
Loans and advances to customers 17,131,009 16,917,292
Investment securities measured at fair value through other comprehensive 1,915,987 1,898,005
income
Bonds carried at amortized cost 27,962 48,565
Finance lease receivables 253,057 254,087
Investment properties 20,506 20,396
Current income tax prepayment 1,565 817
Deferred income tax asset 13,876 14,368
Other financial assets 402,621 330,750
Other assets 454,779 429,996
Premises and equipment 429,726 406,855
Right of use assets 77,039 76,251
Intangible assets 345,291 331,618
Goodwill 59,964 59,964
Investments in associates 3,466 3,288
TOTAL ASSETS 26,027,081 25,056,340
LIABILITIES
Due to credit institutions 3,575,808 3,353,903
Customer accounts 15,772,905 15,081,429
Lease liabilities 70,491 71,891
Other financial liabilities 283,154 136,479
Current income tax liability 13,870 4,563
Debt Securities in issue 1,514,106 1,737,192
Deferred income tax liability 4,349 9,424
Provisions for liabilities and charges 31,000 26,019
Other liabilities 116,384 106,836
Subordinated debt 634,319 631,844
TOTAL LIABILITIES 22,016,386 21,159,580
EQUITY
Share capital 1,682 1,682
Shares held by trust (7,900) (7,900)
Share premium 283,430 283,430
Retained earnings 3,344,623 3,230,348
Merger reserve 402,862 402,862
Share based payment reserve (12,488) (18,362)
Fair value reserve for investment securities measured at fair value (25,609) (24,006)
through other comprehensive income
Cumulative currency translation reserve (18,023) (15,276)
Net assets attributable to owners 3,968,577 3,852,778
Non-controlling interest 42,118 43,982
TOTAL EQUITY 4,010,695 3,896,760
TOTAL LIABILITIES AND EQUITY 26,027,081 25,056,340
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL 2Q'22 1Q'22 2Q'21
Interest income 552,719 527,743 458,572
Interest expense* (249,147) (239,124) (215,805)
Net interest income 303,572 288,619 242,767
Fee and commission income 127,490 112,893 96,485
Fee and commission expense (51,918) (47,003) (33,477)
Net fee and commission income 75,572 65,890 63,008
Net insurance premiums earned 23,053 20,215 16,146
Net insurance claims incurred and agents' commissions (16,355) (15,948) (10,676)
Net insurance premium earned after claims and acquisition costs 6,698 4,267 5,470
Net gains from currency derivatives, foreign currency operations and 66,520 47,857 31,688
translation
Net gains from disposal of investment securities measured at fair value 108 2,117 4,653
through other comprehensive income
Other operating income 11,461 4,097 32,491
Share of profit/(losses) of associates 178 (55) 210
Other operating non-interest income 78,267 54,016 69,042
Credit loss allowance for loans to customers (39,025) (11,497) 50,112
Credit loss recovery/(allowance) for finance lease receivable 883 (1,445) (1,204)
Credit loss (allowance)/recovery for performance guarantees and credit related (1,659) 589 1,284
commitments
Credit loss recovery/(allowance) for other financial assets 992 (1,690) (5,689)
Credit loss recovery for financial assets measured at fair value through other 1,183 85 1,248
comprehensive income
Net (impairment)/recovery of non-financial assets (228) 222 (460)
Operating income after expected credit and non-financial asset impairment 426,255 399,056 425,578
losses
Losses from modifications of financial instruments - - (104)
Staff costs (90,332) (86,159) (77,757)
Depreciation and amortization (24,321) (23,011) (19,337)
Recovery/(allowance) of provision for liabilities and charges 4 (64) (54)
Administrative and other operating expenses (48,986) (41,716) (37,540)
Operating expenses (163,635) (150,950) (134,688)
Profit before tax 262,620 248,106 290,786
Income tax expense (28,056) (24,125) (40,394)
Profit for the period 234,564 223,981 250,392
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve (1,597) (13,150) (36,758)
Exchange differences on translation to presentation currency (8,703) 130 (5,976)
Other comprehensive income for the period (10,300) (13,020) (42,734)
Total comprehensive income for the period 224,264 210,961 207,658
Profit attributable to:
- Shareholders of TBCG 233,799 224,666 247,945
- Non-controlling interest 765 (685) 2,447
Profit for the period 234,564 223,981 250,392
Total comprehensive income is attributable to:
- Shareholders of TBCG 223,499 211,646 205,195
- Non-controlling interest 765 (685) 2,463
Total comprehensive income for the period 224,264 210,961 207,658
* Interest expense includes net interest gains from currency swaps
Key Ratios
Average Balances
The 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, which
were prepared from TBC's accounting records. These were used by the management
for monitoring and control purposes.
Ratios (based on monthly averages, where applicable) 2Q'22 1Q'22 2Q'21
Profitability ratios:
ROE(1) 24.1% 24.3% 31.0%
ROA(2) 3.7% 3.7% 4.4%
Cost to income(3) 35.3% 36.6% 35.4%
NIM(4) 5.8% 5.6% 5.0%
Loan yields(5) 11.2% 10.8% 10.2%
Deposit rates(6) 3.7% 3.7% 3.4%
Cost of funding(7) 4.8% 4.8% 4.5%*
Asset quality & portfolio concentration:
Cost of risk(9) 0.9% 0.3% -1.3%
PAR 90 to Gross Loans(9) 1.4% 1.3% 1.2%
NPLs to Gross Loans(10) 2.3% 2.4% 3.4%
NPL provision coverage(11) 99.8% 96.0% 91.3%
Total NPL coverage(12) 167.5% 167.9% 169.6%
Credit loss level to Gross Loans(13) 2.3% 2.3% 3.1%
Related Party Loans to Gross Loans(14) 0.1% 0.1% 0.1%
Top 10 Borrowers to Total Portfolio(15) 6.6% 6.7% 7.8%
Top 20 Borrowers to Total Portfolio(16) 8.8% 10.2% 11.9%
Capital & liquidity positions:
Net Loans to Deposits plus IFI** Funding(17) 97.7% 101.4% 102.8%
Net Stable Funding Ratio(18) 126.7% 126.9% 130.6%
Liquidity Coverage Ratio(19) 121.2% 116.1% 127.1%
Leverage(20) 6.5x 6.4x 6.6x
CET 1 CAR (Basel III)(21) 15.0% 14.6% 13.0%
Tier 1 CAR (Basel III)(22) 17.8% 17.6% 15.5%
Total 1 CAR (Basel III)(23) 21.2% 21.0% 19.6%
*The Group enters into swap agreements denominated in foreign currencies with
a view to decrease cost of funding. Respective interest effect is presented
within net interest income, but has not been previously included in the cost
of funding ratio calculation. As the contracts reached significant volume, the
Group revisited the presentation of effects in the cost of funding ratio and
decided to include interest effect from swap agreements in the calculation of
cost of funding. The change was made retrospectively and ratios of previous
periods have also been restated.
** International Financial Institutions
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to
owners divided by the monthly average of total shareholders' equity
attributable to the PLC's equity holders for the same period; annualised 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. 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).
4. 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 CIB shares), net investment in
finance lease, net loans, and amounts due from credit institutions.
5. Loan yields equal interest income on loans and advances to customers
divided by monthly average gross loans and advances to customers; annualised
where applicable.
6. Deposit rates equal interest expense on customer accounts divided by
monthly average total customer deposits; annualised where applicable.
7. Cost of funding equals sum of the total interest expense and net interest
gains on currency swaps (entered for funding management purposes), divided by
monthly average interest bearing liabilities; annualised where applicable.
8. Cost of risk equals credit loss allowance for loans to customers divided by
monthly average gross loans and advances to customers; annualised where
applicable.
9. 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.
10. NPLs to gross loans equals loans with 90 days past due on principal or
interest payments, and loans with a 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.
11. NPL provision coverage equals total credit loss allowance for loans to
customers divided by the NPL loans.
12. Total NPL coverage equals total credit loss allowance plus the minimum of
collateral amount of the respective NPL loan (after applying haircuts in the
range of 0%-50% for cash, gold, real estate and PPE) and its gross loan
exposure divided by the gross exposure of total NPL loans.
13. Credit loss level to gross loans equals credit loss allowance for loans to
customers divided by the gross loan portfolio for the same period.
14. Related party loans to total loans equals related party loans divided by
the gross loan portfolio.
15. Top 10 borrowers to total portfolio equals the total loan amount of the
top 10 borrowers divided by the gross loan portfolio.
16. Top 20 borrowers to total portfolio equals the total loan amount of the
top 20 borrowers divided by the gross loan portfolio.
17. Net loans to deposits plus IFI funding ratio equals net loans divided by
total deposits plus borrowings received from international financial
institutions.
18. Net stable funding ratio equals the available amount of stable funding
divided by the required amount of stable funding as defined by NBG in line
with Basel III guidelines. Calculations are made for TBC Bank standalone,
based on local standards.
19. Liquidity coverage ratio equals high-quality liquid assets divided by the
total net cash outflow amount as defined by the NBG. Calculations are made for
TBC Bank standalone, based on local standards.
20. Leverage equals total assets to total equity.
21. CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both
calculated in accordance with requirements of the NBG Basel III standards.
Calculations are made for TBC Bank standalone, based on local standards.
22. Tier 1 CAR equals tier I capital divided by total risk weighted assets,
both calculated in accordance with the requirements of the NBG Basel III
standards. Calculations are made for TBC Bank standalone, based on local
standards.
23. Total CAR equals total capital divided by total risk weighted assets, both
calculated in accordance with the requirements of the NBG Basel III standards.
Calculations are made for TBC Bank standalone, 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 US$/GEL exchange rate of 3.1013 as of 31
March 2022. As of 30 June 2022, the US$/GEL exchange rate equalled 2.9289. For
P&L items growth calculations without currency effect, we used the average
US$/GEL exchange rate for the following periods: 2Q 2022 of 2.9962, 1Q 2022 of
3.1091, 2Q 2021 of 3.3271.
Unaudited Consolidated Financial Results Overview for 1H 2022
This statement provides a summary of the unaudited business and financial
trends for 1H 2022 for TBC Bank Group plc and its subsidiaries. The half year
financial information and trends are unaudited.
TBC Bank Group PLC's financial results has been prepared in accordance with
UK-adopted International Accounting Standard (IAS) 34 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the Financial Conduct Authority (FCA).
Please note that there might be slight differences in previous periods'
figures due to rounding.
Financial Highlights
Income Statement Highlights
in thousands of GEL 1H'22 1H'21 Change YoY
Net interest income 592,191 467,898 26.6%
Net fee and commission income 141,462 108,301 30.6%
Other operating non-interest income 143,248 115,177 24.4%
(file:///C%3A/Users/local_ppapidze/INetCache/Content.MSO/6CBAB128.xlsx#RANGE!A15)
Operating profit 876,901 691,376 26.8%
Total credit loss (allowance)/recovery (51,590) 28,047 NMF
Losses from modifications of financial instruments - (1,591) NMF
Operating expenses (314,585) (256,928) 22.4%
Profit before tax 510,726 460,904 10.8%
Income tax expense (52,181) (57,525) -9.3%
Profit for the period 458,545 403,379 13.7%
Balance Sheet and Capital Highlights
in thousands of GEL Jun-22 Jun-21 Change YoY
Total Assets 26,027,081 22,091,541 17.8%
Gross Loans 17,534,515 15,274,926 14.8%
Customer Deposits 15,772,905 12,870,418 22.6%
Total Equity 4,010,695 3,336,825 20.2%
CET 1 Capital (Basel III) 3,069,501 2,382,595 28.8%
Tier 1 Capital (Basel III) 3,655,281 2,837,805 28.8%
Total Capital (Basel III) 4,357,184 3,573,282 21.9%
Risk Weighted Assets (Basel III) 20,519,966 18,275,845 12.3%
Key Ratios 1H'22 1H'21 Change YoY
ROE 24.2% 25.9% -1.7 pp
Bank's standalone ROE 25.4% 28.4% -3.0 pp
(file:///C%3A/Users/PPapidze/Desktop/Results%20Q1%202022/1Q%202022%20Support%20file%20for%20the%20report.xlsx#RANGE!A15)
7 (#_ftn7)
ROA 3.7% 3.6% 0.1 pp
Bank's standalone ROA(7) 3.9% 3.7% 0.2 pp
NIM 5.7% 4.8% 0.9 pp
Cost to income 35.9% 37.2% -1.3 pp
Bank's standalone cost to income(7) 28.2% 30.6% -2.4 pp
Cost of risk 0.6% -0.4% 1.0 pp
NPL to gross loans 2.3% 3.4% -1.1 pp
NPL provision coverage ratio 99.8% 91.3% 8.5 pp
Total NPL coverage ratio 167.5% 169.6% -2.1 pp
CET 1 CAR (Basel III) 15.0% 13.0% 2.0 pp
Tier 1 CAR (Basel III) 17.8% 15.5% 2.3 pp
Total CAR (Basel III) 21.2% 19.6% 1.6 pp
Leverage (Times) 6.5x 6.6x -0.1x
Net Interest Income
In 1H 2022, net interest income amounted to GEL 592.2 million, up by 26.6% on
a YoY basis.
The YoY rise in interest income by GEL 181.3 million, or 20.2%, was mostly
attributable to an increase in interest income from loans related to the GEL
2,259.6 million, or 14.8%, increase in the respective portfolio, as well as a
1.0 pp rise in the respective yield on the back of growing interest rates and
the loan composition change.
YoY interest expense increased by GEL 57.0 million, or 13.2%, mainly related
to an increase in the deposit portfolio of GEL 2,902.5 million, or 22.6%, and
a 0.3 pp growth in deposit cost, mainly driven GEL deposits.
In 1H 2022, our NIM stood at 5.7%, up by 0.9 pp on a YoY basis.
In thousands of GEL 1H'22 1H'21 Change YoY
Interest income 1,080,462 899,185 20.2%
Interest expense* (488,271) (431,287) 13.2%
Net interest income 592,191 467,898 26.6%
NIM 5.7% 4.8% 0.9 pp
* Interest expense includes net interest gains from currency swaps
Non-Interest Income
Total non-interest income amounted to GEL 284.7 million in 1H 2022, increasing
by 27.4% on a YoY basis.
Net fee and commission income increased by 30.6% on a YoY basis, related to
increased payments transactions both in Georgia and Uzbekistan.
Net gains from FX operations almost doubled YoY, mainly related to increased
margins and volume due to the high volatility of the exchange rate.
The decrease in other operating income was related to the gain from the
disposal of our investment property in the amount of GEL 26.3 million in 2Q
2021.
In thousands of GEL 1H'22 1H'21 Change YoY
Other non-interest income
Net fee and commission income 141,462 108,301 30.6%
Net gains from currency derivatives, foreign currency operations and 114,377 60,184 90.0%
translation
Net insurance premium earned after claims and acquisition costs 10,965 9,873 11.1%
Other operating income 17,906 45,120 -60.3%
Total other non-interest income 284,710 223,478 27.4%
Credit Loss Allowance
Credit loss allowance for loans in 1H 2022 amounted to GEL 50.5 million, which
translated into a 0.6% cost of risk.
In thousands of GEL 1H'22 1H'21 Change YoY
Credit loss (allowance)/recovery for loans to customers (50,522) 32,563 NMF
Credit loss allowance for other transactions (1,068) (4,516) -76.4%
Total credit loss (allowance)/recovery (51,590) 28,047 NMF
Operating income after expected credit and non-financial asset impairment 825,311 719,423 14.7%
losses
Cost of risk 0.6% -0.4% 1.0 pp
Operating Expenses
In 1H 2022, our operating expenses expanded by 22.4% on a YoY basis.
In the first half of 2022, the annual increase in operating expenses was
mainly driven by increased staff costs due to the expansion of business, both
locally and internationally. The increase in administrative and other
operating expenses was mainly related to marketing activities and the
maintenance of intangible assets, primarily attributable to the growth of our
Uzbek business.
Our cost to income ratio amounted to 35.9%, while the Bank's standalone cost
to income stood at 28.2%.
In thousands of GEL 1H'22 1H'21 Change YoY
Operating expenses
Staff costs (176,491) (148,071) 19.2%
Allowance of provision for liabilities and charges (60) (9) NMF
Depreciation and amortization (47,332) (36,701) 29.0%
Administrative and other operating expenses (90,702) (72,147) 25.7%
Total operating expenses (314,585) (256,928) 22.4%
Cost to income 35.9% 37.2% -1.3 pp
Bank's standalone cost to income 8 (#_ftn8) 28.2% 30.6% -2.4 pp
Net Income
In 1H 2022, we delivered robust profitability and generated GEL 458.5 million
in net profit, up by 13.7% YoY, driven by both interest and non-interest
income streams.
As a result, our ROE and ROA for 1H 2022 reached 24.2% and 3.7%, accordingly.
In thousands of GEL 1H'22 1H'21 Change YoY
Losses from modifications of financial instruments - (1,591) NMF
Profit before tax 510,726 460,904 10.8%
Income tax expense (52,181) (57,525) -9.3%
Profit for the period 458,545 403,379 13.7%
ROE 24.2% 25.9% -1.7 pp
Bank's standalone ROE(8) 25.4% 28.4% -3.0 pp
ROA 3.7% 3.6% 0.1 pp
Bank's standalone ROA(8) 3.9% 3.7% 0.2 pp
Funding and Liquidity
As of 30 June 2022, the total liquidity coverage ratio (LCR), as defined by
the NBG, was 121.2%, above the 100% limit, while the LCR in GEL and FC stood
at 113.3% and 124.5%, accordingly, above the respective limits of 75% and
100%. Over the same period, NSFR stood at 126.7%, compared to the regulatory
limit of 100%.
Jun-22 Jun-21 Change YoY
Minimum net stable funding ratio, as defined by the NBG 100.0% 100.0% 0.0 pp
Net stable funding ratio as defined by the NBG 126.7% 130.6% -3.9 pp
Net loans to deposits + IFI funding 97.7% 102.8% -5.1 pp
Leverage (Times) 6.5x 6.6x -0.1x
Minimum total liquidity coverage ratio, as defined by the NBG 100.0% 100.0% 0.0 pp
Minimum LCR in GEL, as defined by the NBG 75% 75.0% 0.0 pp
Minimum LCR in FC, as defined by the NBG 100.0% 100.0% 0.0 pp
Total liquidity coverage ratio, as defined by the NBG 121.2% 127.1% -5.9 pp
LCR in GEL, as defined by the NBG 113.3% 122.9% -9.6 pp
LCR in FC, as defined by the NBG 124.5% 129.2% -4.7 pp
Regulatory Capital
As of June 2022, our CET1, Tier 1 and Total Capital ratios stood at 15.0%,
17.8% and 21.2%, respectively, and remained comfortably above the minimum
regulatory requirements by 2.9%, 3.3% and 2.9%, accordingly.
The YoY increases in all CET1, Tier 1 and Total capital adequacy ratios were
mainly driven by net income generation and GEL appreciation, partially offset
by the issued 2021 final dividends and the growth of the loan book.
In thousands of GEL Jun-22 Jun-21 Change YoY
CET 1 Capital 3,069,501 2,382,595 28.8%
Tier 1 Capital 3,655,281 2,837,805 28.8%
Total Capital 4,357,184 3,573,282 21.9%
Total Risk-weighted Exposures 20,519,966 18,275,845 12.3%
Minimum CET 1 ratio 12.1% 11.2%* 0.9 pp
CET 1 Capital adequacy ratio 15.0% 13.0% 2.0 pp
Minimum Tier 1 ratio 14.5% 13.5%* 1.0 pp
Tier 1 Capital adequacy ratio 17.8% 15.5% 2.3 pp
Minimum total capital adequacy ratio 18.3% 17.8%* 0.5 pp
Total Capital adequacy ratio 21.2% 19.6% 1.6 pp
* Minimum requirements with restored buffers
Loan Portfolio
As of 30 June 2022, the gross loan portfolio reached GEL 17,534.5 million, up
by 14.8% YoY or 22.9% on a constant currency basis.
The proportion of gross loans denominated in foreign currency decreased by 4.4
pp on a YoY basis and accounted for 51.9% of total loans. On a constant
currency basis, the proportion of gross loans denominated in foreign currency
decreased by 1.2 pp YoY and stood at 55.1%.
As of 30 June 2022, our market share in total loans stood at 39.1%, up by 1.0
pp on a YoY basis. Our loan market share in legal entities was 39.7%, up by
1.7 pp YoY. Our loan market share in individuals stood at 38.5%, up by 0.2 pp
on a YoY basis.
In thousands of GEL Jun-22 Jun-21 Change YoY
Loans and advances to customers
Retail 6,666,569 5,719,393 16.6%
Retail loans GEL 3,994,645 3,131,032 27.6%
Retail loans FC 2,671,924 2,588,361 3.2%
CIB 6,462,635 5,851,634 10.4%
CIB loans GEL 2,083,255 1,746,149 19.3%
CIB loans FC 4,379,380 4,105,485 6.7%
MSME 4,405,311 3,703,899 18.9%
MSME loans GEL 2,357,651 1,797,390 31.2%
MSME loans FC 2,047,660 1,906,509 7.4%
Total loans and advances to customers 17,534,515 15,274,926 14.8%
The comparative figures for Jun-21 do not correspond with the figures
disclosed in 2Q and 1H 2021 financial report, since they include
re-segmentation effect as described in appendix 6. Also, the comparative
numbers for Jun-21 do not correspond with the numbers shown in note 17 of the
financial statements, since they exclude the effects of standard annual
re-segmentation.
1H'22 1H'21 Change YoY
Loan yields 11.0% 10.0% 1.0 pp
Loan yields GEL 15.6% 14.8% 0.8 pp
Loan yields FC 7.1% 6.6% 0.5 pp
Retail Loan Yields 13.0% 11.3% 1.7 pp
Retail loan yields GEL 16.5% 15.8% 0.7 pp
Retail loan yields FC 8.0% 6.3% 1.7 pp
CIB Loan Yields 9.3% 8.8% 0.5 pp
CIB loan yields GEL 14.2% 13.3% 0.9 pp
CIB loan yields FC 7.0% 7.1% -0.1 pp
MSME Loan Yields 10.8% 9.9% 0.9 pp
MSME loan yields GEL 15.2% 14.6% 0.6 pp
MSME loan yields FC 6.0% 6.0% 0.0 pp
The comparative rates for 1H'21 do not correspond with the rates disclosed in
2Q and 1H 2021 financial report, since they include re-segmentation effect as
described in appendix 6.
Loan Portfolio Quality
Par 30 maintained stable and amounted 2.2%. The increase in CIB portfolio was
mainly offset by retail segment, attributable to mortgage and secured consumer
portfolios.
NPLs improved significantly on a YoY basis, mainly driven by resumed
repayments of restructured loans in the retail and MSME segments. In the
retail segment, the improvement was driven by resumed repayments of
restructured loans in both mortgage and secured consumer portfolios, while the
decrease in the MSME segment was attributable to the Micro sub-segment. The
YoY improvement in the CIB portfolio was mainly attributable to the recovery
of one stage III borrower.
Par 30 Jun-22 Jun-21 Change YoY
Retail 2.5% 3.0% -0.5 pp
CIB 0.7% 0.3% 0.4 pp
MSME 3.8% 3.9% -0.1 pp
Total Loans 2.2% 2.2% 0.0 pp
Non-performing Loans Jun-22 Jun-21 Change YoY
Retail 2.2% 4.0% -1.8 pp
CIB 1.3% 1.6% -0.3 pp
MSME 3.9% 5.4% -1.5 pp
Total Loans 2.3% 3.4% -1.1 pp
NPL Coverage Jun-22 Jun-21
Provision Coverage Total Coverage Provision Coverage Total Coverage
Retail 171.8% 223.1% 118.9% 190.3%
CIB 55.4% 118.7% 82.9% 157.0%
MSME 59.0% 143.1% 63.3% 151.8%
Total 99.8% 167.5% 91.3% 169.6%
The comparative ratios for Jun-21 do not correspond with the ratios disclosed
in 2Q and 1H 2021 financial report, since they include re-segmentation effect
as described in appendix 6.
Cost of risk
In 1H 2022, the cost of risk amounted to 0.6%, while the cost of risk of 1H
2021 was driven by material COVID-19 related recoveries.
Cost of risk 1H'22 1H'21 Change YoY
Retail 1.5% 0.4% 1.1 pp
CIB -0.1% -1.1% 1.0 pp
MSME 0.2% -0.5% 0.7 pp
Total 0.6% -0.4% 1.0 pp
Deposit Portfolio
The total deposits portfolio amounted to GEL 15,772.9 million, increasing by
22.6% YoY or 30.1% on a constant currency basis.
The proportion of deposits denominated in a foreign currency decreased by 4.9
pp YoY and stood at 60.8% of total deposits. On a constant currency basis, the
proportion of deposits decreased by 2.6 pp YoY and accounted for 63.1% of
total deposits.
As of 30 June 2022, our market share in deposits amounted to 40.7%, up by 2.9
pp on a YoY basis, while our market share in deposits to legal entities stood
at 42.4%, up by 6.7 pp YoY. Our market share in deposits to individuals stood
at 39.2%, down by 0.4 pp on a YoY basis.
In thousands of GEL Jun-22 Jun-21 Change YoY
Customer Accounts
Retail 5,906,886 5,301,115 11.4%
Retail deposits GEL 1,571,548 1,282,794 22.5%
Retail deposits FC 4,335,338 4,018,321 7.9%
CIB 7,589,188 5,939,188 27.8%
CIB deposits GEL 3,170,605 2,218,972 42.9%
CIB deposits FC 4,418,583 3,720,216 18.8%
MSME 1,562,211 1,384,189 12.9%
MSME deposits GEL 718,622 662,605 8.5%
MSME deposits FC 843,589 721,584 16.9%
Total Customer Accounts* 15,772,905 12,870,418 22.6%
* Total deposit portfolio includes Ministry of Finance deposits in the amount
of, GEL 715 million and GEL 246 million as of 30 Jun 2022 and 30 Jun 2021,
respectively.
The comparative figures for Jun-21 do not correspond with the figures
disclosed in 2Q and 1H 2021 financial report, since they include
re-segmentation effect as described in appendix 6. Also, the comparative
numbers for Jun-21 do not correspond with the numbers shown in note 17 of the
financial statements, since they exclude the effects of standard annual
re-segmentation.
1H'22 1H'21 Change YoY
Deposit rates 3.7% 3.4% 0.3 pp
Deposit rates GEL 7.6% 6.6% 1.0 pp
Deposit rates FC 1.4% 1.8% -0.4 pp
Retail Deposit Yields 2.7% 2.4% 0.3 pp
Retail deposit rates GEL 5.4% 4.9% 0.5 pp
Retail deposit rates FC 1.8% 1.6% 0.2 pp
CIB Deposit Yields 4.5% 4.0% 0.5 pp
CIB deposit rates GEL 9.4% 8.0% 1.4 pp
CIB deposit rates FC 1.3% 2.2% -0.9 pp
MSME Deposit Yields 0.7% 0.8% -0.1 pp
MSME deposit rates GEL 1.2% 1.4% -0.2 pp
MSME deposit rates FC 0.2% 0.3% -0.1 pp
The comparative rates for 1H'21 do not correspond with the rates disclosed in
2Q and 1H 2021 financial report, since they include re-segmentation effect as
described in appendix 6.
Segment definitions and PL
Business Segments
Upon the annual review of business segmentation, the limits for corporate
segment have been changed as follows:
· annual revenue limit increased from GEL 12.0 million to GEL 20.0
million;
· granted facilities limit raised from GEL 5.0 million to GEL 7.0
million.
The definition has been updated starting from 1st of January 2022. The updated
changes are reflected in segments' definitions below:
· Corporate - a legal entity/group of affiliated entities with an
annual revenue exceeding GEL 20.0 million or which has been granted facilities
of more than GEL 7.0 million. Some other business customers may also be
assigned to the CIB segment or transferred to the MSME segment on a
discretionary basis. In addition, CIB includes Wealth Management private
banking services to high-net-worth individuals with a threshold of US$ 250,000
on assets under management (AUM), as well as on discretionary basis;
· Retail - Non-business individual customers including the
fully-digital bank, Space. The business is broadly divided into two segments:
o Mass retail
o Affluent retail (customers eligible for affluent retail have >3,000 GEL
in monthly income)
o Since 2021, the WM & VIP individual customers are managed in the CIB
directory;
· MSME - Business customers (Legal entities and private individual
customers that generate income from business activities), who are not included
in the CIB segment;
· Corporate centre and other operations - comprises the treasury,
other support and back-office functions, and non-banking subsidiaries of the
Group.
Business customers are all legal entities or individuals who have been granted
a loan for business purposes.
Income Statement by Segments
1H'22 Retail MSME CIB Corp. Centre Total
Interest income 419,335 226,646 304,834 129,647 1,080,462
Interest expense (79,072) (5,331) (164,737) (239,131) (488,271)
Net transfer pricing (121,894) (104,377) 51,754 174,517 -
Net interest income 218,369 116,938 191,851 65,033 592,191
Fee and commission income 159,233 15,305 39,489 26,356 240,383
Fee and commission expense (81,714) (5,780) (4,187) (7,240) (98,921)
Net fee and commission income 77,519 9,525 35,302 19,116 141,462
Insurance profit - - - 10,965 10,965
Net gains/(losses) from currency derivatives, foreign currency operations and 33,468 23,683 59,481 (2,255) 114,377
translation
Net gains from disposal of investment securities measured at fair value - - 910 1,315 2,225
through other comprehensive income
Other operating income 2,265 382 944 11,967 15,558
Share of (loss)/profit of associates - - (126) 249 123
Other operating non-interest income and insurance profit 35,733 24,065 61,209 22,241 143,248
Credit loss (allowance)/recovery for loans to customers (49,932) (3,670) 3,080 - (50,522)
Credit loss allowance for finance leases receivables - - - (562) (562)
Credit loss recovery/(allowance) for performance guarantees and credit related 146 79 (1,295) - (1,070)
commitments
Credit loss (allowance)/recovery for other financial assets (32) - 1,062 (1,728) (698)
Credit loss (allowance)/recovery for financial assets measured at fair value - - (140) 1,408 1,268
through other comprehensive income
Net (impairment)/recovery of non-financial assets (23) (217) 331 (97) (6)
Operating profit after expected credit and non-financial asset impairment 281,780 146,720 291,400 105,411 825,311
losses
Staff costs (80,643) (31,076) (27,117) (37,655) (176,491)
Depreciation and amortization (29,289) (6,823) (3,216) (8,004) (47,332)
Provision for liabilities and charges - - - (60) (60)
Administrative and other operating expenses (44,772) (11,394) (9,790) (24,746) (90,702)
Operating expenses (154,704) (49,293) (40,123) (70,465) (314,585)
Profit before tax 127,076 97,427 251,277 34,946 510,726
Income tax expense (13,651) (9,944) (25,434) (3,152) (52,181)
Profit for the period 113,425 87,483 225,843 31,794 458,545
In 1Q 2022, the management reclassified net fee and commission income from
acquiring and issuing business, utility payments income as well as fee expense
on self-service and POS terminal transactions to retail segment from other
segments.
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance sheet
In thousands of GEL Jun-22 Jun-21
Cash and cash equivalents 2,739,226 1,414,414
Due from other banks 42,552 59,314
Mandatory cash balances with National Bank of Georgia and Central Bank of 2,108,455 2,117,157
Uzbekistan
Loans and advances to customers 17,131,009 14,796,968
Investment securities measured at fair value through other comprehensive 1,915,987 2,022,385
income
Bonds carried at amortized cost 27,962 10,069
Finance lease receivables 253,057 245,261
Investment properties 20,506 33,407
Current income tax prepayment 1,565 14,966
Deferred income tax asset 13,876 6,747
Other financial assets 402,621 287,761
Other assets 454,779 311,218
Premises and equipment 429,726 371,909
Right of use assets 77,039 51,160
Intangible assets 345,291 284,555
Goodwill 59,964 59,964
Investments in associates 3,466 4,286
TOTAL ASSETS 26,027,081 22,091,541
LIABILITIES
Due to credit institutions 3,575,808 3,482,830
Customer accounts 15,772,905 12,870,418
Lease liabilities 70,491 53,755
Other financial liabilities 283,154 124,308
Current income tax liability 13,870 653
Debt Securities in issue 1,514,106 1,445,614
Deferred income tax liability 4,349 18,457
Provisions for liabilities and charges 31,000 21,435
Other liabilities 116,384 101,265
Subordinated debt 634,319 635,981
TOTAL LIABILITIES 22,016,386 18,754,716
EQUITY
Share capital 1,682 1,682
Shares held by trust (7,900) (25,489)
Share premium 283,430 283,430
Retained earnings 3,344,623 2,680,951
Merger reserve 402,862 402,862
Share based payment reserve (12,488) (15,348)
Fair value reserve for investment securities measured at fair value through (25,609) 170
other comprehensive income
Cumulative currency translation reserve (18,023) (5,199)
Net assets attributable to owners 3,968,577 3,323,059
Non-controlling interest 42,118 13,766
TOTAL EQUITY 4,010,695 3,336,825
TOTAL LIABILITIES AND EQUITY 26,027,081 22,091,541
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL 1H'22 1H'21
Interest income 1,080,462 899,185
Interest expense* (488,271) (431,287)
Net interest income 592,191 467,898
Fee and commission income 240,383 177,593
Fee and commission expense (98,921) (69,292)
Net fee and commission income 141,462 108,301
Net insurance premiums earned 43,268 30,289
Net insurance claims incurred and agents' commissions (32,303) (20,416)
Net insurance premium earned after claims and acquisition costs 10,965 9,873
Net gains from currency derivatives, foreign currency operations and 114,377 60,184
translation
Net gains from disposal of investment securities measured at fair value 2,225 7,041
through other comprehensive income
Other operating income 15,558 37,483
Share of profit of associates 123 596
Other operating non-interest income 132,283 105,304
Credit loss (allowance)/recovery for loans to customers (50,522) 32,563
Credit loss allowance for net finance leases receivables (562) (2,515)
Credit loss (allowance)/recovery for performance guarantees and credit related (1,070) 1,930
commitments
Credit loss allowance for other financial assets (698) (5,326)
Credit loss recovery for financial assets measured at fair value through other 1,268 1,842
comprehensive income
Net impairment of non-financial assets (6) (447)
Operating income after expected credit and non-financial asset impairment 825,311 719,423
losses
Losses from modifications of financial instruments - (1,591)
Staff costs (176,491) (148,071)
Depreciation and amortization (47,332) (36,701)
Allowance of provision for liabilities and charges (60) (9)
Administrative and other operating expenses (90,702) (72,147)
Operating expenses (314,585) (256,928)
Profit before tax 510,726 460,904
Income tax expense (52,181) (57,525)
Profit for the period 458,545 403,379
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve (14,747) (10,985)
Exchange differences on translation to presentation currency (8,573) (3,072)
Other comprehensive income for the period (23,320) (14,057)
Total comprehensive income for the period 435,225 389,322
Profit attributable to:
- Shareholders of TBCG 458,465 399,168
- Non-controlling interest 80 4,211
Profit for the period 458,545 403,379
Total comprehensive income is attributable to:
- Shareholders of TBCG 435,145 385,120
- Non-controlling interest 80 4,202
Total comprehensive income for the period 435,225 389,322
* Interest expense includes net interest gains from currency swaps
Key Ratios
Average Balances
The 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, which
were prepared from TBC's accounting records. These were used by the management
for monitoring and control purposes.
Ratios (based on monthly averages, where applicable) 1H'22 1H'21
Profitability ratios:
ROE(1) 24.2% 25.9%
ROA(2) 3.7% 3.6%
Cost to income(3) 35.9% 37.2%
NIM(4) 5.7% 4.8%
Loan yields(5) 11.0% 10.0%
Deposit rates(6) 3.7% 3.4%
Cost of funding(7) 4.8% 4.5%*
Asset quality & portfolio concentration:
Cost of risk(9) 0.6% -0.4%
PAR 90 to Gross Loans(9) 1.4% 1.2%
NPLs to Gross Loans(10) 2.3% 3.4%
NPL provision coverage(11) 99.8% 91.3%
Total NPL coverage(12) 167.5% 169.6%
Credit loss level to Gross Loans(13) 2.3% 3.1%
Related Party Loans to Gross Loans(14) 0.1% 0.1%
Top 10 Borrowers to Total Portfolio(15) 6.6% 7.8%
Top 20 Borrowers to Total Portfolio(16) 8.8% 11.9%
Capital & liquidity positions:
Net Loans to Deposits plus IFI** Funding(17) 97.7% 102.8%
Net Stable Funding Ratio(18) 126.7% 130.6%
Liquidity Coverage Ratio(19) 121.2% 127.1%
Leverage(20) 6.5x 6.6x
CET 1 CAR (Basel III)(21) 15.0% 13.0%
Tier 1 CAR (Basel III)(22) 17.8% 15.5%
Total 1 CAR (Basel III)(23) 21.2% 19.6%
*The Group enters into swap agreements denominated in foreign currencies with
a view to decrease cost of funding. Respective interest effect is presented
within net interest income, but has not been previously included in the cost
of funding ratio calculation. As the contracts reached significant volume, the
Group revisited the presentation of effects in the cost of funding ratio and
decided to include interest effect from swap agreements in the calculation of
cost of funding. The change was made retrospectively and ratios of previous
periods have also been restated.
** International Financial Institutions
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to
owners divided by the monthly average of total shareholders' equity
attributable to the PLC's equity holders for the same period; annualised 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. 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).
4. 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 CIB shares), net investment in
finance lease, net loans, and amounts due from credit institutions.
5. Loan yields equal interest income on loans and advances to customers
divided by monthly average gross loans and advances to customers; annualised
where applicable.
6. Deposit rates equal interest expense on customer accounts divided by
monthly average total customer deposits; annualised where applicable.
7. Cost of funding equals sum of the total interest expense and net interest
gains on currency swaps (entered for funding management purposes), divided by
monthly average interest bearing liabilities; annualised where applicable.
8. Cost of risk equals credit loss allowance for loans to customers divided by
monthly average gross loans and advances to customers; annualised where
applicable.
9. 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.
10. NPLs to gross loans equals loans with 90 days past due on principal or
interest payments, and loans with a 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.
11. NPL provision coverage equals total credit loss allowance for loans to
customers divided by the NPL loans.
12. Total NPL coverage equals total credit loss allowance plus the minimum of
collateral amount of the respective NPL loan (after applying haircuts in the
range of 0%-50% for cash, gold, real estate and PPE) and its gross loan
exposure divided by the gross exposure of total NPL loans.
13. Credit loss level to gross loans equals credit loss allowance for loans to
customers divided by the gross loan portfolio for the same period.
14. Related party loans to total loans equals related party loans divided by
the gross loan portfolio.
15. Top 10 borrowers to total portfolio equals the total loan amount of the
top 10 borrowers divided by the gross loan portfolio.
16. Top 20 borrowers to total portfolio equals the total loan amount of the
top 20 borrowers divided by the gross loan portfolio.
17. Net loans to deposits plus IFI funding ratio equals net loans divided by
total deposits plus borrowings received from international financial
institutions.
18. Net stable funding ratio equals the available amount of stable funding
divided by the required amount of stable funding as defined by NBG in line
with Basel III guidelines. Calculations are made for TBC Bank standalone,
based on local standards.
19. Liquidity coverage ratio equals high-quality liquid assets divided by the
total net cash outflow amount as defined by the NBG. Calculations are made for
TBC Bank standalone, based on local standards.
20. Leverage equals total assets to total equity.
21. CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both
calculated in accordance with requirements of the NBG Basel III standards.
Calculations are made for TBC Bank standalone, based on local standards.
22. Tier 1 CAR equals tier I capital divided by total risk weighted assets,
both calculated in accordance with the requirements of the NBG Basel III
standards. Calculations are made for TBC Bank standalone, based on local
standards.
23. Total CAR equals total capital divided by total risk weighted assets, both
calculated in accordance with the requirements of the NBG Basel III standards.
Calculations are made for TBC Bank standalone, based on local standards.
Exchange Rates
To calculate the YoY growth without the currency exchange rate effect, we used
the US$/GEL exchange rate of 3.1603 as of 30 June 2021. As of 30 June 2022,
the US$/GEL exchange rate equalled 2.9289. For P&L items growth
calculations without currency effect, we used the average US$/GEL exchange
rate for the following periods: 1H 2022 of 3.0531, 1H 2021 of 3.3207.
Additional Disclosures
1) TBC Bank - Background
TBC Bank Group PLC ("TBC PLC") is a public limited company registered in
England and Wales. TBC PLC is the parent company of JSC TBC Bank ("TBC Bank")
and a group of companies that principally operate in Georgia in the financial
sector and other closely related fields. TBC PLC also recently expanded its
operations in Uzbekistan. TBC PLC is listed on the London Stock Exchange under
the symbol TBCG and is a constituent of FTSE 250 Index. It is also a member of
the FTSE4Good Index Series and the MSCI United Kingdom Small Cap Index.
TBC Bank is the largest banking group in Georgia, where 98.5% of its business
is concentrated, with a 38.6% market share by total assets. It offers retail,
CIB and MSME banking nationwide.
2) Subsidiaries of TBC Bank Group PLC 9 (#_ftn9)
Ownership / voting Country Year of incorporation Industry Total Assets
(after elimination)
Subsidiary % as of Amount % in TBC Group
30 June 2022
GEL'000
JSC TBC Bank 99.9% Georgia 1992 Banking 25,087,015 96.39%
United Financial Corporation JSC 99.5% Georgia 1997 Card processing 22,048 0.08%
TBC Capital LLC 100.0% Georgia 1999 Brokerage 3,668 0.01%
TBC Leasing JSC 100.0% Georgia 2003 Leasing 330,340 1.27%
TBC Kredit LLC 100.0% Azerbaijan 1999 Non-banking credit institution 23,109 0.09%
TBC Pay LLC 100.0% Georgia 2009 Processing 44,797 0.17%
Index LLC 100.0% Georgia 2011 Real estate management 105 0.00%
TBC Invest LLC 100.0% Israel 2011 PR and marketing 249 0.00%
TBC Capital Asset management LLC 100.0% Georgia 2021 Asset Management 0 0.00%
JSC TBC Insurance 100.0% Georgia 2014 Insurance 96,078 0.37%
Redmed LLC 100.0% Georgia 2019 E-commerce 1,593 0.01%
T NET LLC* 100.0% Georgia 2019 Asset Management 33,270 0.13%
Online Tickets LLC** 100.0% Georgia 2015 Software Services 2,830 0.01%
TKT UZ 100.0% Uzbekistan 2019 Retail Trade 68 0.00%
Vendoo LLC 100.0% Georgia 2019 Retail Leasing 1,499 0.01%
Mypost LLC 100.0% Georgia 2019 Postal Service 108 0.00%
Billing Solutions LLC 51.0% Georgia 2019 Software Services 400 0.00%
F Solutions LLC 100.0% Georgia 2019 Software Services 11 0.00%
Artarea.ge LLC 100.0% Georgia 2021 PR and marketing 64 0.00%
Marjanishvili 7 LLC 100.0% Georgia 2020 Food and Beverage 858 0.00%
Space JSC 100.0% Georgia 2021 Software Services 0 0.00%
Space International JSC 100.0% Georgia 2021 Software Services 38,473 0.15%
TBC Group Support LLC 100.0% Georgia 2020 Risk Monitoring 5 0.00%
Inspired LLC 51.0% Uzbekistan 2011 Processing 30,009 0.12%
TBC Bank JSC UZ 60.2% Uzbekistan 2020 Banking 293,322 1.13%
TBC Fin Service LLC *** 100.0% Uzbekistan 2019 Retail Leasing 17,175 0.07%
* In June 2022, TBC Net LLC legal name was changed to T Net LLC.
** In May 2022, TBC Bank Group PLC finalized acquisition process of remaining
45% interest in Online Tickets LLC.
*** In April 2022, Vendoo Uz legal name was changed to TBC Fin service LLC and
moved under TBC Bank Uzbekistan
.
3) TBC Insurance
TBC Insurance is a wholly-owned subsidiary of TBC Bank, which was acquired by
the Group in October 2016 and is the main bancassurance partner for the Bank,
with a share of around 29.4% in its total gross written premium (GWP) as of 30
June 2022.
TBC Insurance serves its customers with a highly digitalized approach, which
includes a website and a mobile app for health insurance. The company is
represented in both the non-health and health insurance segments. In 2021, TBC
Insurance was well regarded by its customers with an NPS 10 (#_ftn10) of 65%
- the best score among its peers.
In 2Q 2022, net profit including health insurance amounted 3,706 thousand, up
by 30.2% YoY or up by 44.8% on a QoQ basis. The YoY increase in net profit was
mainly driven by overall business growth, while the QoQ increase was supported
by a decreased net combined ratio.
Information excluding health insurance 2Q'22 1Q'22 2Q'21 1H'22 1H'21
In thousands of GEL
Gross written premium 30,769 27,349 22,831 58,118 44,094
Net earned premium 11 (#_ftn11) 23,349 20,934 18,595 44,283 35,248
Net profit 3,358 2,753 3,512 6,111 6,406
Net combined ratio 88.40% 94.30% 81.60% 91.20% 82.50%
Information including health insurance 2Q'22 1Q'22 2Q'21 1H'22 1H'21
In thousands of GEL
Gross written premium 39,071 34,138 26,414 73,209 51,929
Net earned premium 29,224 25,856 21,539 55,080 40,671
Net profit 3,706 2,560 2,846 6,266 5,039
Net combined ratio 89.50% 96.50% 88.00% 92.50% 89.00%
Note: IFRS standalone data
Market shares 12 (#_ftn12) Jun-22 Mar-22 Jun-21
Retail segment 22.0% 25.1% 16.7%
Total market share 37.1% 40.4% 32.2%
4) Fast Growing Digital Bank in Uzbekistan
in thousands Jun'21 Sep'21 Dec'21 Mar'22 Jun'22
# of total registered users 302 667 1,140 1,499 1,758
# of downloads 391 897 1,548 2,011 2,386
Retail gross loan portfolio* (GEL) 25,239 52,493 92,825 143,640 181,343
Retail deposit portfolio** (GEL) 15,543 91,979 207,510 168,669 235,780
# of total cards issued (cumulative figures) 66 117 224 312 377
# of other cards attached (cumulative figures) 126 328 386 550 695
Total monthly number of transactions 563 906 1,739 2,036 2,298
* Loans in Uzbekistan are disbursed in local currency
** Current, savings and time accounts. Deposits in Uzbekistan are accepted in
local currency.
5) Loan Book Breakdown by Stages According IFRS 9
Total (in million GEL)
30-Jun-22 31-Mar-22 30-Jun-21
Stage Gross LLP rate* Gross LLP rate* Gross LLP rate*
1 15,480 0.70% 14,977 0.70% 12,709 0.90%
2 1,610 7.10% 1,848 6.10% 1,803 5.60%
3 445 40.60% 495 37.10% 763 34.40%
Total 17,535 2.30% 17,320 2.30% 15,275 3.10%
CIB (in million GEL)**
30-Jun-22 31-Mar-22 30-Jun-21
Stage Gross LLP rate* Gross LLP rate* Gross LLP rate*
1 5,777 0.40% 5,664 0.40% 4,899 0.90%
2 602 0.20% 695 0.20% 826 1.00%
3 84 30.00% 103 23.90% 127 18.80%
Total 6,463 0.70% 6,462 0.80% 5,852 1.30%
MSME (in million GEL)**
30-Jun-22 31-Mar-22 30-Jun-21
Stage Gross LLP rate* Gross LLP rate* Gross LLP rate*
1 3,877 0.60% 3,714 0.60% 2,997 0.60%
2 338 6.30% 353 7.20% 458 6.30%
3 190 30.20% 209 30.40% 249 31.50%
Total 4,405 2.30% 4,276 2.60% 3,704 3.40%
Retail (in million GEL)**
30-Jun-22 31-Mar-22 30-Jun-21
Stage Gross LLP rate* Gross LLP rate* Gross LLP rate*
1 5,826 1.10% 5,599 1.10% 4,813 1.00%
2 670 13.70% 801 10.60% 519 12.30%
3 171 57.60% 183 52.00% 387 41.40%
Total 6,667 3.80% 6,583 3.70% 5,719 4.80%
**The comparative figures for Jun-21 do not correspond with the figures
disclosed in 2Q and 1H 2021 financial report, since they include
re-segmentation effect as described in appendix 6. Also, the comparative
numbers for Jun-21 do not correspond with the numbers shown in note 17 of the
financial statements, since they exclude the effects of standard annual
re-segmentation.
* LLP rate is defined as credit loss allowances divided by gross loans
6) Re-segmentation of Certain Balance Sheet Items
In 3Q 2021, following the demerger of the Space segment into a separate
entity, the management re-considered the classification of Space from the MSME
to the retail segment, which was applied retrospectively starting from 2021.
The underlying rationale was the composition of the product base offered by
Space to its customers. The majority of these products are consumer, fast
consumer and instalment loans, which by their nature represent the retail
segment. As a result, the management believes that analysing Space as part of
the retail segment would be more meaningful for the users of financial
statements.
Changes for the portfolios are given in the table below:
from MSME to retail Loan book (million GEL) Deposit book (million GEL)
(Changes related to Space re-segmentation)
30-Jun-2021 30.9 13.3
The above-mentioned changes also had immaterial impact on loan yields, deposit
rates, Par 30, NPLs, NPL coverages, LLP rates and cost of risks.
7) Glossary
Terminology Definition
Active retail digital users The number retail digital users, who logged into our digital channels at least
once for the past 3 months.
Daily active users (DAU) The number of retail digital users, who logged into our digital channels at
least once per day.
Monthly active users (MAU) The number of retail digital users, who logged into our digital channels at
least once a month.
DAU/MAU Average daily active users divided by monthly active users. TBC Group figure
includes TBC's digital channels in Georgia, as well as those at TBC UZ and
Payme.
Material Existing and Emerging Risks
Risk Management is a critical pillar of the Group's strategy. It is essential
to identify emerging risks and uncertainties that could adversely impact the
Group's performance, financial condition and prospects. This section analyses
the material principal and emerging risks and uncertainties that the Group
faces. However, we cannot exclude the possibility of the Group's performance
being affected by risks and uncertainties other than those listed below. Since
there remains some uncertainty regarding the war in Ukraine, its potential
impact is summarized as a separate risk in the emerging risks section. In the
sections covering material existing and emerging risks, the main focus is on
the key subsidiary of the Group - JSC TBC Bank (the Bank) - unless otherwise
noted.
PRINCIPAL RISKS AND UNCERTAINTIES
1. Credit risk is an integral part of the Group's business activities.
Risk description
Credit risk is the greatest material risk faced by the Group, given that the
Group is principally engaged in traditional lending activities. The Group's
customers include legal entities as well as individual borrowers. Due to the
high level of dollarization in Georgia's financial sector, currency-induced
credit risk is a component of credit risk, which relates to risks arising from
foreign currency-denominated loans to unhedged borrowers in the Group's
portfolio. Credit risk also includes concentration risk, which is the risk
related to credit portfolio quality deterioration as a result of large
exposures to single borrowers or groups of connected borrowers, or loan
concentration in certain economic industries. Losses may be further aggravated
by unfavourable macroeconomic conditions. These risks are described in more
detail as a separate principal risk.
Risk mitigation
A comprehensive credit risk assessment framework is in place with a clear
division of duties among the parties involved in the credit analysis and
approval process. The credit assessment process differs by segment and product
type to reflect the diverse nature of these asset classes. Corporate, SME, and
larger retail and micro loans are assessed on an individual basis, whereas the
decision-making process for smaller retail and micro loans is largely
automated.
The rules for manual and automated underwriting are developed by units within
the risk function, which are independent of the origination and business
development units. The credit scoring and underwriting models are developed by
an independent Credit Modelling team within the risk function. These models
are then validated as well by another independent Model Risk Management team,
which is also part of the risk function. The loan review process for corporate
and medium-sized business borrowers is conducted by specific sectoral teams,
which accumulate deep knowledge of the corresponding sectoral developments.
The Group uses a robust monitoring system to react promptly to macro and micro
developments, identify weaknesses in the credit portfolio, and outline
solutions to make informed risk management decisions. Monitoring processes are
tailored to the specifics of individual segments, as well as encompassing
individual credit exposures, overall portfolio performance, and external
trends that may impact the portfolio's risk profile. Additionally, the Group
uses a comprehensive portfolio supervision system to identify weakened credit
exposures and take prompt, early remedial actions, when necessary.
The Group's credit portfolio is highly diversified across customer types,
product types and industry segments, which minimizes credit risk at the Group
level. As of 30 June 2022, the retail segment represented 38% of the total
portfolio, which was comprised of 61.4% mortgage and 38.6% non-mortgage
exposures. No single business sector represented more than 9% of the total
portfolio in the first half of 2022.
Collateral represents the most significant credit risk mitigation tool for the
Group, making effective collateral management one of the key risk management
components. Collateral on loans extended by the Group may include, but is not
limited to, real estate, cash deposits, vehicles, equipment, inventory,
precious metals, securities and third-party guarantees. The Group has a
largely collateralised portfolio in all its segments, with real estate
representing a major share of collateral. As of 30 June 2022, 76% of the
Group's portfolio was secured by cash, real estate or gold. A sound collateral
management framework ensures that collateral serves as an adequate mitigating
factor for credit risk management purposes.
Additionally, the Bank actively performs stress testing and scenario analysis
in order to check the resilience of borrowers under various stress conditions.
The stress tests entail assumptions about the depreciation of the local
currency, GDP growth, sectoral growth, unemployment, inflation, changes in
real estate and commodity prices, changes in interest rates, and loan and
deposit portfolio developments. The Bank carries out intensive financial
monitoring to identify borrowers with weakened financial and business
prospects and offer them a restructuring plan that is tailored to their
individual needs.
2. The Group faces currency-induced credit risk due to the high share
of loans denominated in foreign currencies in the Group's portfolio.
Risk description
A potential material GEL depreciation is one of the most significant risks
that could negatively impact portfolio quality, due to the large presence of
foreign currencies on the Group's balance sheet. As of 30 June 2022, 51.9% of
the Group's total gross loans and advances to customers (before provision for
loan impairment) were denominated in foreign currencies. The income of many
customers is directly linked to foreign currencies via remittances, tourism or
exports. Nevertheless, customers may not be protected against significant
fluctuations in the GEL exchange rate against the currency of the loan. The
US$/GEL rate remained volatile throughout the first half of 2022, with the
average currency exchange rate of GEL strengthening by 8.1% year-on-year. The
GEL remains in free float and is exposed to many internal and external factors
that in some circumstances could result in its depreciation.
Risk mitigation
Particular attention is paid to currency-induced credit risk, due to the high
share of loans denominated in foreign currencies in the Group's portfolio. The
vulnerability to exchange rate depreciation is monitored in order to promptly
implement an action plan, as and when needed. The ability to withstand a
certain amount of exchange rate depreciation is incorporated in the credit
underwriting standards, which also include significant currency depreciation
buffers for unhedged borrowers. In addition, the Group holds significant
capital against currency-induced credit risk. Given the experience and
knowledge built through recent currency volatility, the Group is in a good
position to promptly mitigate exchange rate depreciation risks. In January
2019, government authorities continued their efforts to reduce the economy's
dependence on foreign currency financing by increasing the cap to GEL 200,000,
under which loans must be disbursed in the local currency. In addition, under
the NBG's responsible lending regulations, unhedged retail borrowers are
required to have highly conservative Payment-to-Income (PTI) and Loan-to-Value
(LTV) thresholds. The Bank has set a strategy to decrease the share of foreign
currency loans in its total portfolio. Annual targets have been defined in the
medium-term strategy, gradually decreasing the share of foreign currency. The
Assets and Liabilities Committee (ALCO) is closely monitoring the achievement
of these targets.
3. The Group's performance may be compromised by adverse developments
in the economic environment
Risk description
While the Georgian economy may have already overcome the exogenous economic
implications of the Covid-19 shock, the potential for a cyclical slowdown in
economy remains, which would likely have an adverse impact on borrowers'
repayment capacity, restraining their future investment and expansion plans.
These occurrences would be reflected in the Group's portfolio quality and
profitability and would also impede portfolio growth rates. Negative
macroeconomic developments could compromise the Group's performance in various
ways, such as exchange rate depreciation, a spike in interest rates, rising
unemployment, a decrease in household disposable income, falling property
prices, worsening loan collateralization, or companies' falling debt service
capabilities as a result of decreasing sales. As the future is unclear, there
may also be additional negative impacts from the Russian invasion of Ukraine,
which increased political and economic instability in neighbouring countries.
Although the war's exogenous economic effects appear to have mostly passed, as
demonstrated in the strong economic performance in HY 2022, possible
developments could still negatively affect Georgia's economic outlook through
worsening current and financial accounts in the balance of payments, for
example through decreased exports, tourism inflows, remittances and foreign
direct investments.
Post-pandemic economic growth has been strong. According to the National
Statistics Office of Georgia (Geostat), the Georgian economy has rebounded at
a speed that exceeded initial expectations, with real GDP increasing by 14.9%
year-on-year in the first quarter and, taking last year's base effect into
account, maintaining very strong growth figures both in April (2.6%) and May
(11.6%), leading to total growth in HY 2022 of 10.5%. Importantly, this growth
was broad-based and was reflected in all sources of inflows as well as in
domestic demand, underlined by higher imports of goods. Exports, credit, FDI,
tourism inflows and remittances also grew notably. Inflation, which has mostly
been supply driven, remains elevated, hitting 13.3% in May, which led the NBG
to increase its policy rate to 11%. For more detail on developments in the
Georgian economy in 2022, please refer to the economic overview section.
Risk mitigation
To decrease its vulnerability to economic cycles, the Group identifies
cyclical industries and proactively manages its underwriting approach and
clients within its risk appetite framework. The Group has in place a
macroeconomic monitoring process that relies on close, recurrent observation
of the economic developments in Georgia and neighbouring countries to identify
early warning signals indicating imminent economic risks. This system allows
the Group to promptly assess significant economic and political events and
analyse their implications for the Group's performance. These implications are
duly translated into specific action plans with regards to reviewing
underwriting standards, risk appetite metrics and limits, including the limits
for each of the most vulnerable industries. Additionally, the stress testing
and scenario analysis applied during the credit review and
portfolio-monitoring processes enable the Group to evaluate the impact of
macroeconomic shocks on its business in advance. Resilience in the face of
changes in the macroeconomic environment is incorporated into the Group's
credit underwriting standards. As such, borrowers are expected to withstand
certain adverse economic developments through prudent financials,
debt-servicing capabilities and conservative collateral coverage.
Considering the impact of the COVID-19 crisis on Georgia's economy, the Group
has adjusted its risk management framework leveraging its already existing
stress testing practices. This included more thorough and frequent monitoring
of the portfolio as well as stress testing, to ensure close control of changes
in capital, liquidity, and portfolio quality in times of increased
uncertainty.
4. The Group faces the risk of not meeting the minimum regulatory
requirements under the increasing capital requirement framework, which may
compromise growth and strategic targets. Additionally, adverse changes in FX
rates may impact capital adequacy ratios.
Risk description
In December 2017, the NBG introduced a new capital adequacy framework. Under
the updated regulation, capital requirements consist of a Pillar 1 minimum
requirement, a Pillar 2 requirement and combined systemic, countercyclical and
conservation buffers. The initial regulation included a phase-in schedule that
gradually introduced the buffer over a four-year period. Due to the Covid-19
pandemic, the NBG outlined a new schedule for the gradual introduction of the
pillar 2 buffers, with the phase-in of concentration risk and Net GRAPE
buffers beginning in March 2021 and completed by March 2023. In March 2022,
CET1 and Tier 1 capital requirements increased by 0.4pp and 0.6pp,
respectively. The increase was driven by the further introduction of the
Pillar 2 buffers
The Bank's capitalization as of June 2022 stood at:
· 15.0% for CET 1, with an updated regulatory minimum requirement
of 12.1%;
· 17.8% for Tier 1, with an updated regulatory minimum requirement
of 14.5%; and
· 21.2% for Total capital, with an updated regulatory minimum
requirement of 18.3%.
These ratios were well above the respective regulatory minimums.
In January 2022, the NBG made amendments in the CICR buffer calculation
methodology. According to the new methodology, the current fixed CICR rate
(75%) will be flexible in the range of 40% to 100%, depending on the share of
foreign currency loans in total portfolio: the lower the share, the lower the
CICR buffer requirement. According to the amendments in the CICR requirement,
the Bank must comply with the increased CICR requirement from March 2023,
while the reduction in the CICR requirement will have immediate effect.
GEL volatility has been and remains a significant risk to the Bank's capital
adequacy. A 10% GEL depreciation would translate into a 0.9pp, 0.7pp and 0.6
pp drop in the Bank's CET 1, Tier 1 and Total regulatory capital adequacy
ratios, respectively.
Risk mitigation
The Group undertakes stress testing and sensitivity analysis to quantify extra
capital consumption under different scenarios. Such analyses indicate that the
Group holds sufficient capital to meet the current minimum regulatory
requirements. Capital forecasts, as well as the results of stress testing and
what-if scenarios, are actively monitored with the involvement of the Bank's
Management Board and Risk Committee to ensure prudent management and timely
action, when needed.
5. The Group is exposed to regulatory and enforcement action risk
Risk description
The Bank's activities are highly regulated and thus face regulatory risk. The
NBG can increase prudential requirements across the whole sector as well as
for specific institutions within it. Therefore, the Group's profitability and
performance may be compromised by an increased regulatory burden. The NBG sets
lending limits and other economic ratios (including, inter alia, lending,
liquidity and investment ratios) in addition to mandatory capital adequacy
ratios. Under Georgian banking regulations, the Bank is required, among other
things, to comply with minimum reserve requirements and mandatory financial
ratios, and to regularly file periodic reports. The Bank is also regulated by
the tax code and other relevant laws in Georgia.
Following the Company's listing on the London Stock Exchange's premium
segment, the Group became subject to increased regulations from the UK
Financial Conduct Authority. In addition to its banking operations, the Group
also offers other regulated financial services products, including leasing,
insurance and brokerage services. As a result of its expansion into
Uzbekistan, the regulatory compliance requirements have increased for the
Group. The Group takes all necessary steps with the intention of ensuring
compliance with relevant legislation and regulations. The Group is also
subject to financial covenants in its debt agreements. For more information,
see the Group's Interim Financial Statements.
Risk mitigation
The Group has established systems and processes to ensure full regulatory
compliance, which are embedded in all levels of the Group's operations. The
dedicated compliance department reports directly to the Chief Executive
Officer and has a primary role in the management of regulatory compliance
risk. The Group's Risk Committee is responsible for regulatory compliance at
the Board level. In terms of banking regulations and Georgia's taxation
system, the Group is closely engaged with the regulator to ensure that new
procedures and requirements are discussed in detail before their
implementation. Although decisions made by regulators are beyond the Group's
control, significant regulatory changes are usually preceded by a consultation
period that allows all lending institutions to provide feedback and adjust
their business practices.
6. The Group is exposed to concentration risk
Risk description
The Group has large individual exposures to single-name borrowers whose
potential default would entail increased credit losses and higher impairment
charges. The Group's portfolio is well diversified across sectors, resulting
in only a moderate vulnerability to sector concentration risks. However,
should exposure to common risk drivers increase, the risks are expected to
amplify correspondingly. The Group's maximum exposure to the single largest
industry (Real Estate) stood at 9% of the loan portfolio as of 30 June 2022.
At the same time, exposure to the 20 largest borrowers stood at 8.8% of the
loan portfolio.
Risk mitigation
The Group constantly monitors the concentrations of its exposure to single
counterparties, as well as sectors and common risk drivers, and introduces
limits for risk mitigation. As part of its risk appetite framework, the Group
limits both single-name and sector concentrations. Any considerable change in
the economic or political environment in Georgia or in neighbouring countries
would trigger the Group to review the risk appetite criteria to mitigate the
emerging risk of concentration. Stringent monitoring tools are in place to
ensure compliance with the established limits. Close monitoring is carried out
consistently, based on macro expectations, to estimate the performance of our
top 20 corporate borrowers.
In addition, the Bank has dedicated restructuring teams to manage borrowers
who face financial difficulties. When deemed necessary, clients are
transferred to such teams for more efficient handling and, ultimately, to
limit any resulting credit risk losses. The NBG's new capital framework
introduced a concentration buffer under Pillar 2 that helps to ensure that the
Group remains adequately capitalised to mitigate concentration risks.
7. Liquidity risk is inherent in the Group's operations
Risk description
While the Group currently has sufficient financial resources available to meet
its obligations as they fall due, liquidity risk is inherent in banking
operations and can be heightened by numerous factors. These include an
overreliance on, or an inability to access, a particular source of funding, as
well as changes in credit ratings or market-wide phenomena, such as the global
financial crisis that took place in 2007. Access to credit for companies in
emerging markets is significantly influenced by the level of investor
confidence and, as such, any factors affecting investor confidence (e.g. a
downgrade in credit ratings, central bank or state interventions, or debt
restructurings in a relevant industry) could influence the price or
availability of funding for companies operating in any of these markets. The
Group is in compliance with the minimum liquidity requirements set by the NBG,
which include the Liquidity Coverage Ratio (LCR) and the Net Stable Funding
Ratio (NSFR). As of 30 June, 2022, the net loan to deposits plus international
financial institution funding ratio stood at 97.7%, the liquidity coverage
ratio at 121.2%, and the net stable funding ratio at 126.7%. These figures are
all comfortably above the NBG's minimum requirements or guidance for such
ratios.
Risk mitigation
To mitigate this risk, the Group holds a solid liquidity position and performs
outflow scenario analyses for both normal and stress circumstances to make
sure that it has adequate liquid assets and cash inflows. The Group maintains
a diversified funding structure to manage the respective liquidity risks.
There is adequate liquidity to withstand significant withdrawals of customer
deposits, but the unexpected and rapid withdrawal of a substantial amount of
deposits could have a material adverse impact on the Group's business,
financial condition, and results of operations and/ or prospects.
As part of its risk management framework, the Group has a recovery plan in
place outlining the liquidity risk indicators for different stress scenarios
and respective action plans. The liquidity risk position and compliance with
internal limits are closely monitored by the Assets and Liabilities Management
Committee (ALCO).
In April 2022, as part of the cost-optimization process, the Bank partially
redeemed its Senior EuroBonds in the amount of USD 54.68m. To support
business growth during H1 2022, the Bank attracted new funding in the amount
of GEL 761.5m, GEL 306m of which was raised from the ADB through a
back-to-back transaction.
8. Any decline in the Group's net interest income or net interest
margin (NIM) could lead to a reduction in profitability
Risk description
Net interest income accounts for most of the Group's total income.
Consequently, fluctuations in its NIM affect the results of operations. New
regulations and the high level of competition could drive interest rates down,
compromising the Group's profitability. At the same time, the cost of funding
is largely exogenous to the Group and is derived from both local and
international markets. In HY 2022, the NIM increased by 0.6pp YTD to 5.7%,
driven by an increase in loan yields, a decrease in the foreign currency (FC)
cost of fund and optimizations in wholesale funding, further accompanied by
increased loan larisation. The Bank manages its exposure to interest rate
risk, following the NBG IRR regulation introduced in September 2020. As of 30
June 2022, GEL 4,366m in assets (18%) and GEL 2,703m in liabilities (13%) were
floating in GEL currency, compared to GEL 5,850m in assets 13 (#_ftn13) (24%)
and GEL 1,001m in liabilities (5%) were floating related to the
LIBOR/SOFR/Euribor/ECB rates. The Bank was in compliance with the Economic
Value of Equity (EVE) sensitivity limit set by the NBG of 15% of Tier 1
capital, with the ratio standing at 2.3% as of 30 June 2022.
Risk mitigation
In 1H 2022, the Bank maintained the desired liquidity levels despite the
geopolitical tensions affecting local markets. In addition, the Bank has
seized the opportunity to improve funding structure and redeemed USD 54.68m
from outstanding 2024 senior bonds.
The Bank continues to focus on fee and commission income growth to safeguard
itself from possible margin compressions on lending and deposit products in
the future.
To meet its asset-liability objectives and manage the interest rate risk, the
Bank uses a high quality investment securities portfolio, long-term funding
and derivative contracts.
9. The Group faces an ever-growing threat of cyber-attacks.
Risk description
No cyber-security breaches have happened at the Bank in recent years.
Nonetheless, the Group's rising dependency on IT systems increases its
exposure to potential cyber-attacks. Given their increasing sophistication,
potential cyber-attacks may lead to significant security breaches. Such risks
change rapidly and require continued focus and investment.
Risk mitigation
In order to mitigate the risks associated with cyber-attacks and ensure
clients' security, the Group continuously updates and enhances its in-depth
security strategy, which covers multiple preventive and detective controls
ranging from the data and end-point computers to edge firewalls.
A Security Operations Centre has been built, which monitors every possible
anomaly that is identified across the organization's network in order to
detect potential incidents and respond to them effectively.
At least once a year, a full information security and cyber security threat
analysis is performed, taking into consideration the relevant regional and
sector specific perspectives. Also at least once a year, a detailed
examination of information security matters is presented to the Risk Committee
of the Board. At least once every two years, as part of this analysis, an
external consultant is contracted to assess the efficiency of our capabilities
against industry best practices and real-world cyber-attack scenarios. This
analysis gives the Group a broad overview as well as detailed insight, which
help to further enhance its information and cyber security systems. In
addition, cyber-attack readiness exercises are performed on a regular basis.
These exercises evaluate the actual position of the Group in this area and
provide a benchmark against international best practices. Our employees play a
crucial role in information security. As a result, annual mandatory training
sessions are conducted for all employees, comprised of remote learning courses
on security issues, fraud and phishing simulations, and informative emails to
further assist our employees with information security matters. New employees
are also given training as part of the onboarding process. These measures
ensure that employees are fully aware of their responsibilities and are
prepared for various security threats.
The Information Security Steering Committee governs information and cyber
security to ensure that relevant risks are at an acceptable level and that
management processes are continuously improved. Moreover, disaster recovery
plans are in place to ensure business continuity in case of need.
Since the beginning of the COVID-19 pandemic, the Group has activated secure
remote working policies, which ensure that homeworking environments are
protected against relevant cyber-threats, while the security team provides
effective oversight of teleworking channels. Although there has been a
noticeable increase in phishing attempts against employees, there have been no
major incidents. The Security Operation Centre and Threat Hunting teams have
successfully adopted effective remote collaboration and communication tools
and practices. In 2021, the Bank achieved ISO 27001 certification of its
information security management system, which demonstrates that the Bank is
following robust information security practices effectively, in order to
protect its information and information systems from different types of
threats. TBC Bank has not experienced any material information security breach
in the last three years. In December 2021, Ernst & Young Tbilisi office
conducted two audits to assess the Bank against the Cyber Security Management
Framework and the SWIFT Customer Security Controls Framework (CSCF). No
critical findings and major non-compliances were identified during these
exercises. Cyber Security Management Framework is defined by National Bank of
Georgia, based on the National Institute of Standards and Technology (NIST)
Cyber Security Management Framework.
10. External and internal fraud risks are part of the operational risk
inherent in the Group's business, and, unless proactively managed, could
materially impact the Group's profitability and reputation.
Risk description
The increased complexity and diversification of operations, coupled with the
digitalisation of the banking sector, mean that fraud risks are evolving.
External fraud events may arise from the actions of third parties against the
Group, most frequently involving events related to banking cards, loans and
client phishing. Internal frauds arise from actions committed by the Group's
employees, and such events happen less frequently. During the reporting
period, the Group faced several instances of fraud, none of which had a
material impact on the Group's profit and loss statement. The rapid growth
in digital crime has exacerbated the threat of fraud, with fraudsters adopting
new techniques and approaches to obtain funds illegally. Therefore, unless
properly monitored and managed, the potential impact could become substantial.
Risk mitigation
The Group actively monitors, detects and prevents risks arising from fraud
events and has permanent monitoring processes in place to detect unusual
activities in a timely manner. The risk and control self-assessment exercise
focuses on identifying residual risks in key processes, subject to the
respective corrective actions. Through our continuous efforts to monitor and
mitigate fraud risks, coupled with the high level of sophistication of our
internal processes, the Group ensures the timely identification and control of
fraud-related activities. The Bank is currently working on a strategic
initiative to further enhance fraud prevention systems and plans to utilize
client behavioural analytics to further minimize external fraud threats.
11. The Group remains exposed to some reputational risk.
Risk Description
There are reputational risks to which the Group may be exposed, such as risks
related to international sanctions imposed on Russia in response to the war in
Ukraine, isolated cases of anti-banking media narratives, cases of phishing
and other cybercrimes, as well as risks associated with the digitalization
process, such as digital service interruptions affecting our digital bank, ATM
and payment operations. However, none of these risks is unique to the Group.
In addition, some risks remain associated with the founders of TBC in the
aftermaths of their trial.
Risk Mitigation
To mitigate the possibility of reputational risks, the Group works
continuously to maintain strong brand recognition among its stakeholders. The
Group follows all relevant external and internal policies and procedures to
minimize the impact of direct and indirect reputational risks. The Group
monitors its brand value through public opinion studies and surveys and by
receiving feedback from stakeholders on an ongoing basis. Dedicated internal
and external marketing and communications teams actively monitor media
coverage daily. These teams monitor risks, develop scenarios and create
respective contingency plans. The Group tries to identify early warning signs
of potential reputational or brand damage in order to both mitigate and
elevate it to the attention of the Board before it escalates. A special Task
Force is in place at the top management level, comprised of strategic
communications, marketing and legal teams, to manage reputational risks when
they occur. A reputable international PR company has been contracted to build
communications strategies and contingency plans to mitigate and manage
reputational risks associated with the founders' case and implementation of
sanctions, if necessary. The communications and cyber security teams conduct
extensive awareness-raising campaigns on cyber security and financial
literacy, involving the media, the Banking Association of Georgia and Edufin
(TBC's inhouse financial education platform), aimed at mitigating and
preventing cyber threats and phishing cases.
12. The Group faces the risk that its strategic initiatives do not translate
into long-term sustainable value for its stakeholders.
Risk Description
The Group may face the risk of developing a business strategy that does not
safeguard long-term value creation in an environment of changing customer
needs, competitive environment and regulatory restrictions. In addition,
increased uncertainty stemming from the major economic and social disruptions
caused by the COVID-19 pandemic and the war in Ukraine, may hamper the Group's
ability to effectively develop and execute its strategic initiatives in a
timely manner and thereby compromise its capacity for long-term value
creation.
Risk Mitigation
The Group conducts annual strategic review sessions involving the Bank's top
and middle management in order to ensure that it remains on the right track
and assesses business performance from different perspectives, concentrating
its analysis on key trends and market practices, both in regional and global
markets. In addition, the Bank continuously works with the world's leading
consultants in order to enhance its strategy. Further, the Group conducts
quarterly analyses and monitors the metrics used to measure strategy
execution, and in case of any significant deviations, it takes corrective or
mitigation actions.
13. The Group is exposed to risks related to its ability to attract and
retain highly qualified employees.
Risk Description
The Group faces the risk of losing key personnel or the failure to attract,
develop and retain skilled or qualified employees. In particular, the
strategic decision to transform into a digital company entails increased
demands on high calibre IT professionals across the Group. In addition, to
adapt to the fast-changing business environment, the Group needs to foster an
"Agile" culture and equip employees with the necessary skills.
Risk Mitigation
The Group pays significant attention to human capital management strategies
and policies, which include approaches to the recruitment, retention and
development of talent, and offers competitive reward packages to its
employees. The Group has also developed and implemented an "Agile" framework
that aims to increase employee engagement and satisfaction. Moreover, the Bank
set up different academies to attract and train young professionals. The best
students are offered employment at the Bank. In addition, the Bank has an
in-house academy that provides a range of courses for employees in different
fields.
To ensure the maintenance of an effective internal communication system whilst
working from home, the Group has enhanced a range of digital channels to
engage with our employees. Regular management meetings are conducted with
staff in order to keep them updated with the Group's strategic initiatives and
financial position as well as address their concerns during this highly
uncertain period. In order to further promote and enhance our corporate
culture, the Bank's internal Facebook group has become more active by, for
example, posting employee profiles and sharing success stories. The Bank's new
remote working policy gives us the possibility to attract new talent from
beyond Georgia.
EMERGING RISKS
Emerging risks are those that have large unknown components and may affect the
performance of the Group over a longer time horizon. We believe the following
risks have the potential to increase in significance over time and could have
a similar impact on the Group as the principal risks.
1. The Group's performance may be compromised by adverse developments
in the region, in particular the war in Ukraine.
Risk description
While inflows to the Georgian economy are quite diversified, the country is
still vulnerable to geopolitical and economic developments in its
neighbourhood. In particular, the Russian invasion of Ukraine and the
consequent sanctions imposed on Russia have had an adverse impact on the
Georgian economy. As of 2021, Ukraine's and Russia's share of Georgia's
exports, remittances, tourism, and FDI inflows amounted to around 21%.
Specifically, Ukraine and Russia accounted for 7% and 14% of exports, 4% and
18% of remittance inflows, and 15% and 12% of total tourism inflows,
respectively. Ukraine and Russia's share of FDI exposure was lower at 1% and
6%, respectively, mainly comprised of reinvested earnings from previous waves
of FDI. Importantly, over half of Georgia's exports to Russia and Ukraine are
re-exports, while around 50% of tourism and remittance inflows are spent on
imports. These factors decrease the overall net negative impact from lost
inflows. The Georgian economy has been growing at a higher rate than initially
expected, amounting to 14.9% real growth in the first quarter which, when
taking last year's base effect into account, continued on a very strong level
in April (2.6%), May (11.6%) and June (7.2%). However, as it is unclear how
the invasion will develop in the future, the possibility of additional
negative impacts on the Georgian economy persist, which, taking into account
Georgia's vulnerability to developments in Ukraine and Russia, will still have
adverse implications on the growth outlook and other macro variables and may
negatively affect the Bank's capital adequacy, liquidity and credit risk. At
the same time, the adverse spillover effect from Georgia's other economic
partners should also be considered.
The Russian invasion of Ukraine will likely have an adverse impact on
Uzbekistan as well, given its exposure to remittances from Russia. However,
our expectation is that this will be mitigated to large extent by an increase
in the value of commodity exports, as already evidenced by the strong 93% YoY
growth of Uzbek exports in USD in the first five months of the year.
Risk mitigation
The Group actively employs stress testing and other risk measurement and
monitoring tools to ensure that early triggers are identified and translated
into specific action plans to minimize the negative impact on the Bank's
capital adequacy, liquidity, and portfolio quality in times of increased
uncertainty. As the war's exogenous economic effects appear to have mostly
passed, it can be stated that the Bank's capital, liquidity, and portfolio
quality have shown resilience towards the shock.
To deal with the increased number of international sanctions because of the
war, the Group updated its Sanctions Policy which considers the laws,
regulations, regulatory guidance and trends in sanctions and their enforcement
under the regulatory regimes imposed by a number of authorities and countries
(Georgia, the United Nations, the European Union, the United States and the
United Kingdom). Since new packages of sanctions were imposed against Russia
and Belarus, the Group has tightened its Sanctions Policy and carried out
several actions to minimize the sanctions risk, including updating the
Sanctions Policy and the subsequent Sanctions Program, amending the client
onboarding and due diligence procedures, and adjusting the screening and
analytical tools.
2. The Group is exposed to the risks inherent in international
operations.
Risk description
Our subsidiary, TBC Bank in Uzbekistan, launched its operations in 2020. We
have already invested US$ 26 million in the charter capital of the Bank while
our partners, EBRD and IFC, have invested a total of US$ 18.4 million. Our
plans foresee a minimum 51% shareholding. Our international activities are
expected to contribute to around 10%-15% of the Group's loan book over the
medium to long-term. TBC Bank Uzbekistan is a digital bank, which operates
through digital channels; a disruption of the digital platforms deployed may
have a material negative impact on the bank's operations. However, the risk
management framework deployed at TBC Bank Uzbekistan enables the Group to
manage potential disruptions swiftly. The risk posed by the operating
environment in Uzbekistan may change the Group's risk profile. This investment
exposes the Group to Uzbekistan's macro-economic, political and regulatory
environments, including but not limited to exposure to risks arising from
credit, market, operational and capital adequacy risks as well as risks
related to political stability.
The Uzbekistani economy is well diversified with no major reliance on a
particular industry. It has one of the lowest public debts as a percentage of
GDP in the region and high international reserves, implying macroeconomic
stability as well as room for future high growth. The government of Uzbekistan
is conducting economic reforms that open the country up to foreign investment.
While the operational environment in Uzbekistan can be assessed as attractive,
there are important risks that could materially affect the Group's performance
in the country. The Russian invasion of Ukraine did not have a material
adverse impact, despite Uzbekistan's exposure to remittances from Russia,
which, to a large extent, was mitigated by an increase in the value of
commodity exports of Uzbekistan.
Risk mitigation
The Group's strategy is to follow an asset-light, limited capital investment
approach with a strong focus on digital channels and to invest in stages, to
make sure that we are comfortable with the results and the operating
environment before committing additional investment. The digital platform
supporting TBC Bank Uzbekistan has strong governance and risk management
practices in place, which enables the Bank to identify and resolve problems in
a timely manner. The Group partners with international financial institutions,
which have taken a shareholding in the Uzbek bank in order to ensure the
funding of our business plan and provide sufficient flexibility across our
operations in Uzbekistan. Overall, from the Group's perspective, international
expansion will result in the diversification of business lines and revenue
streams, balancing the overall risk profile of the Group.
3. The Group is exposed to the risks arising from climate change.
Risk description
The risks associated with climate change have both a physical impact, arising
from more frequent and severe weather changes, and a transitional impact that
may entail extensive policy, legal and technological changes to reduce the
ecological footprint of households and businesses. For the Group, both risks
could materialize through impaired asset values and the deteriorating
creditworthiness of our customers, which could result in a reduction of the
Group's profitability. The Group may also become exposed to reputational risks
because of its lending to, or other business operations with, customers deemed
to be contributing to climate change.
Risk mitigation
The Group's objective is to act responsibly and manage the environmental and
social risks associated with its operations in order to minimize negative
impacts on the environment. This approach enables us to reduce our ecological
footprint by using resources efficiently and promoting environmentally
friendly measures in order to mitigate climate change.
The Group has in place an Environmental Policy, which governs its
Environmental Management System ("EMS") and ensures that the Group's
operations adhere to the applicable environmental, health, safety and labour
regulations and practices. We take all reasonable steps to support our
customers in fulfilling their environmental and social responsibilities. The
management of environmental and social risks is embedded in the Group's
lending process through the application of the EMS. The Group has developed
risk management procedures to identify, assess, manage and monitor
environmental and social risks. These procedures are fully integrated in the
Group's credit risk management process. Our Environmental Policy is fully
compliant with Georgian environmental legislation and follows international
best practices (the full policy is available at www.tbcbankgroup.com
(https://www.tbcbankgroup.com/) ).
To extend the Group's positive impact on the environment and climate change
mitigation, the Bank introduced a Green Lending Framework at the end of 2021,
which will encourage private companies and individuals to run their businesses
in ways that are energy and resource-efficient and more eco-friendly. In order
to increase our understanding of climate-related risks to TBC Bank's loan
portfolio, which is the largest subsidiary of TBC Bank Group PLC, the Bank
performed a high-level sectoral risk assessment, since different sectors might
be vulnerable to different climate-related risks over different time horizons.
The risk assessment focuses on economic sectors such as energy, oil and gas,
metals and mining, tourism, agriculture, food industry, healthcare,
construction and real estate. According to the maturity structure of the loan
portfolio, most assets have much shorter time horizons than the likely impacts
of climate change in Georgia, especially in terms of physical risks.
On the other hand, the understanding of climate related risks, which have
longer-term impacts need to be increased in coming years, therefore, if the
bank will have a plausible findings and conclusions, it will further develop
the approach, how to consider climate risks in mitigation. Furthermore, the
Group's portfolio has strong collateral coverage, with around 77% of the loan
book collateralized with cash, real estate or gold. Since the collateral
evaluation procedure includes monitoring, any need to change collateral values
arises from our regular collateral monitoring process.
In June 2022, the Group released its full-scale sustainability report for the
year 2021 in reference to Global Reporting Initiative (GRI) standards. The
Global Reporting Initiative (GRI) helps the private sector to realize and
understand its role and influence on sustainable development issues such as
climate change, human rights and governance. The report is designed for all
interested parties and groups in Georgia as well as abroad and aims to give
them clear, fact-based information about the social, economic and
environmental impact of our activities in 2021. It presents our endeavours to
create value for our employees, clients, suppliers, partners and society as a
whole. The Sustainability Report 2021 is available at www.tbcbankgroup.com
(https://www.tbcbankgroup.com/) .
4. The Group's performance may be affected by the LIBOR
discontinuation and transition.
Risk description
There are several different types of financial instruments on the Group's
balance sheet, each of which carries interest rates benchmarked to the London
Interbank Offered Rate ("LIBOR"). LIBOR is also used by the Group in its risk
measurement, accounting and valuation processes. In 2017, the UK's Financial
Conduct Authority (FCA) announced an agreement with LIBOR panel banks to
sustain LIBOR until the end of 2021 and called upon financial sector
participants to start working towards a transition to other reference rates.
On 5 March 2021, the FCA announced the dates that panel bank submissions for
all LIBOR setting would cease, after which representative LIBOR rates would no
longer be available, as follows:
· immediately after 31 December 2021, in the case of all sterling,
euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US
dollar settings; and
· immediately after 30 June 2023, in the case of the remaining US
dollar settings.
The majority of the Bank's US$ floating portfolio is linked to the 6-month US$
LIBOR, while the EUR floating portfolio is linked to the Euro Interbank
Offered Rate (Euribor), the discontinuation of which was not declared. The
discontinuation of LIBOR and the transition process exposes the Group to
execution, conduct, financial and operational risks, and may result in
earnings volatility, customer complaints and legal proceedings, or have other
adverse impact on the Group's business and operations.
Risk mitigation
The Group actively monitors international and local transition-related
developments to regulate and align the Group's transition process with market
practice. On 29 July 2021, the Alternative Reference Rates Committee (ARRC)
announced its recommendation to use Term Secured Overnight Financing Rate
(SOFR) published by CME Group, Inc. (CME). The ARRC recommendation allows loan
agreements to use term SOFR in place of LIBOR, either as a replacement for
LIBOR (whether pursuant to the operation of a fallback provision or otherwise)
or in new deals. The interest rate alternatives to US$ LIBOR recommended
previously were backward looking and have met with tepid acceptance.
The Group formed a steering committee to ensure a smooth transition away from
LIBOR, including efforts to introduce forward-looking term rates linked to
SOFR. The steering committee raises awareness of the transition, both
internally and externally, to ensure that staff have the necessary knowledge
and tools to facilitate the transition and that all the Group's customers are
treated fairly. From April 2022, the Bank has already started applying the
Term SOFR rate for all newly disbursed USD floating loans. The steering
committee continues its work to ensure that USD Libor is replaced by Term SOFR
for the remained USD floating portfolio.
Statement of Directors' Responsibilities
The Directors are required to prepare the condensed consolidated financial
statements on a going concern basis unless it is not appropriate. They are
satisfied that the Group has the resources to continue in business for the
foreseeable future and that the financial statements continue to be prepared
on a going concern basis.
The Directors confirm that to the best of their knowledge:
· the financial statements have been prepared in accordance with
IAS 34 'Interim Financial Reporting' as adopted by the UK, and the Disclosure
Guidance and Transparency Rules ('DTR') sourcebook of the UK's Financial
Conduct Authority;
· this Interim Report 2022 gives a true, fair, balanced and
understandable view of the assets, liabilities, financial position and profit
or loss of the Company; and
· this Interim Report 2022 includes a fair review of the
information required by:
o DTR 4.2.7R, being an indication of: important events that have occurred
during the first six months of the financial year ending 31 December 2022 and
their impact on the condensed set of financial statements; and a description
of the principal risks and uncertainties for the remaining six months of the
financial year; and
o DTR 4.2.8R, being: related party transactions that have taken place in the
first six months of the financial year ending 31 December 2022, which have
materially affected the financial position or performance of TBC Bank during
that period; and any changes in the related parties transactions described in
the Annual Report and Accounts 2021 that could materially affect the financial
position or performance of TBC Bank during the first six months of the
financial year ending 31 December 2022.
Signed on behalf of the Board by:
Vakhtang Butskhrikidze
CEO
11 August 2022
TBC Bank Group PLC Board of Directors:
Chairman
Arne Berggren
Executive Directors Non-executive Directors
Vakhtang Butskhrikidze (CEO) Eran Klein
Maria Luisa Cicognani
Tsira Kemularia
Per Anders Fasth
Thymios P. Kyriakopoulos
Nino Suknidze
Rajeev Sawhney
TBC BANK GROUP PLC
Condensed Consolidated Interim Financial
Statements (Unaudited)
30 June 2022
Contents
Independent Review Report
Unaudited Condensed Consolidated Interim Financial Statements
Condensed Consolidated Interim Statement of Financial Position
Condensed Consolidated Interim Statement of Profit or Loss and Other
Comprehensive Income
Condensed Consolidated Interim Statement of Changes in Equity
Condensed Consolidated Interim Statement of Cash Flows
Notes to the Condensed Consolidated Interim Financial Statements
1 (#_Toc111049796) (#_Toc111049796) Introduction (#_Toc111049796)
(#_Toc111049796)
2 (#_Toc111049797) (#_Toc111049797) Significant Accounting Policies
(#_Toc111049797) (#_Toc111049797)
3 (#_Toc111049798) (#_Toc111049798) Critical Accounting Estimates and
Judgements in Applying Accounting Policies (#_Toc111049798) (#_Toc111049798)
4 (#_Toc111049799) (#_Toc111049799) Cash and Cash Equivalents
(#_Toc111049799) (#_Toc111049799)
5 (#_Toc111049800) (#_Toc111049800) Due from Other Banks
(#_Toc111049800) (#_Toc111049800)
6 (#_Toc111049801) (#_Toc111049801) Mandatory Cash Balances with the
National Bank of Georgia and the Central Bank of Uzbekistan (#_Toc111049801)
(#_Toc111049801)
7 (#_Toc111049802) (#_Toc111049802) Loans and Advances to Customers
(#_Toc111049802) (#_Toc111049802)
8 (#_Toc111049803) (#_Toc111049803) Premises, Equipment and Intangible
Assets (#_Toc111049803) (#_Toc111049803)
9 (#_Toc111049804) (#_Toc111049804) Due to Credit Institutions
(#_Toc111049804) (#_Toc111049804)
10 (#_Toc111049805) (#_Toc111049805) Customer Accounts (#_Toc111049805)
(#_Toc111049805)
11 (#_Toc111049806) (#_Toc111049806) Provisions for Performance
Guarantees, Credit Related Commitment Liabilities and Charges (#_Toc111049806)
(#_Toc111049806)
12 (#_Toc111049807) (#_Toc111049807) Debt Securities in Issue
(#_Toc111049807) (#_Toc111049807)
13 (#_Toc111049808) (#_Toc111049808) Subordinated Debt (#_Toc111049808)
14 (#_Toc111049809) (#_Toc111049809) Share Capital (#_Toc111049809)
15 (#_Toc111049810) (#_Toc111049810) Share Based Payments
(#_Toc111049810) (#_Toc111049810)
16 (#_Toc111049811) (#_Toc111049811) Earnings per Share
(#_Toc111049811) (#_Toc111049811)
17 (#_Toc111049812) (#_Toc111049812) Segment Analysis (#_Toc111049812)
(#_Toc111049812)
18 (#_Toc111049813) (#_Toc111049813) Interest Income and Expense
(#_Toc111049813) (#_Toc111049813)
19 (#_Toc111049814) (#_Toc111049814) Fee and Commission Income and
Expense (#_Toc111049814) (#_Toc111049814)
20 Net Gains from Currency Derivatives, Foreign Currency Operations and
Translation (#_Toc111049815) (#_Toc111049815)
21 (#_Toc111049816) (#_Toc111049816) Income Taxes (#_Toc111049816)
(#_Toc111049816)
22 (#_Toc111049817) (#_Toc111049817) Financial and Other Risk
Management (#_Toc111049817)
23 (#_Toc111049818) (#_Toc111049818) Contingencies and Commitments
(#_Toc111049818) (#_Toc111049818)
24 (#_Toc111049819) (#_Toc111049819) Fair Value Disclosures
(#_Toc111049819) (#_Toc111049819)
25 (#_Toc111049820) (#_Toc111049820) Related Party Transactions
(#_Toc111049820) (#_Toc111049820)
26 (#_Toc111049821) (#_Toc111049821) Events after Reporting Period
(#_Toc111049821) (#_Toc111049821)
Independent review report to TBC Bank Group plc
Report on the unaudited condensed consolidated interim financial statements
Our conclusion
We have reviewed TBC Bank Group plc's unaudited condensed consolidated interim
financial statements (the "interim financial statements") in the 2Q and 1H
2022 Financial Results of TBC Bank Group plc for the 6-month period ended
30 June 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Interim Statement of Financial Position as
at 30 June 2022;
· the Condensed Consolidated Interim Statement of Profit or Loss and
Other Comprehensive Income for the period then ended;
· the Condensed Consolidated Interim Statement of Cash Flow for the
period then ended;
· the Condensed Consolidated Interim Statement of Changes in Equity for
the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the 2Q and 1H 2022 Financial
Results of TBC Bank Group plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the 2Q and 1H 2022 Financial
Results and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The 2Q and 1H 2022 Financial Results, including the interim financial
statements, is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the 2Q and 1H 2022 Financial
Results in accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In preparing
the 2Q and 1H 2022 Financial Results, including the interim financial
statements, the directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease operations, or have
no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the 2Q and 1H 2022 Financial Results based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Edinburgh
11-08-2022
In thousands of GEL Note 30 June 2022 31 December 2021
(Unaudited)
Assets
Cash and cash equivalents 4 2,739,226 1,722,137
Due from other banks 5 42,552 79,142
Mandatory cash balances with National Bank of Georgia and the Central Bank of 6 2,108,455 2,087,141
Uzbekistan
Loans and advances to customers 7 17,131,009 16,637,145
Investment securities measured at fair value through other comprehensive 1,915,987 1,938,196
income
Bonds carried at amortised cost 27,962 49,582
Finance lease receivables 253,057 262,046
Investment properties 20,506 22,892
Current income tax prepayment 1,565 194
Deferred income tax asset 13,876 12,357
Other financial assets 402,621 453,115
Other assets 454,779 397,079
Premises and equipment 8 429,726 392,506
Right of use assets 77,039 70,513
Intangible assets 8 345,291 319,963
Goodwill 59,964 59,964
Investments in associates 3,466 4,589
Total assets 26,027,081 24,508,561
Liabilities
Due to credit institutions 9 3,575,808 2,984,176
Customer accounts 10 15,772,905 15,038,172
Other financial liabilities 283,154 139,811
Current income tax liability 21 13,870 86,762
Deferred income tax liability 4,349 10,979
Debt securities in issue 12 1,514,106 1,710,288
Provision for liabilities and charges 11 31,000 25,358
Other liabilities 116,384 130,972
Lease liabilities 70,491 66,167
Subordinated debt 13 634,319 623,647
Total liabilities 22,016,386 20,816,332
Equity
Share capital 14 1,682 1,682
Shares held by trust 14 (7,900) (25,489)
Share premium 283,430 283,430
Retained earnings 3,344,623 3,007,132
Merger reserve 402,862 402,862
Share based payment reserve 15 (12,488) (5,135)
Fair value reserve for investment securities measured at fair value through (25,609) (10,862)
other comprehensive income
Cumulative currency translation reserve (18,023) (9,450)
Net assets attributable to owners 3,968,577 3,644,170
Non-controlling interest 42,118 48,059
Total equity 4,010,695 3,692,229
Total liabilities and equity 26,027,081 24,508,561
Note
30 June 2022
(Unaudited)
31 December 2021
Assets
Cash and cash equivalents
4
2,739,226
1,722,137
Due from other banks
5
42,552
79,142
Mandatory cash balances with National Bank of Georgia and the Central Bank of
Uzbekistan
6
2,108,455
2,087,141
Loans and advances to customers
7
17,131,009
16,637,145
Investment securities measured at fair value through other comprehensive
income
1,915,987
1,938,196
Bonds carried at amortised cost
27,962
49,582
Finance lease receivables
253,057
262,046
Investment properties
20,506
22,892
Current income tax prepayment
1,565
194
Deferred income tax asset
13,876
12,357
Other financial assets
402,621
453,115
Other assets
454,779
397,079
Premises and equipment
8
429,726
392,506
Right of use assets
77,039
70,513
Intangible assets
8
345,291
319,963
Goodwill
59,964
59,964
Investments in associates
3,466
4,589
Total assets
26,027,081
24,508,561
Liabilities
Due to credit institutions
9
3,575,808
2,984,176
Customer accounts
10
15,772,905
15,038,172
Other financial liabilities
283,154
139,811
Current income tax liability
21
13,870
86,762
Deferred income tax liability
4,349
10,979
Debt securities in issue
12
1,514,106
1,710,288
Provision for liabilities and charges
11
31,000
25,358
Other liabilities
116,384
130,972
Lease liabilities
70,491
66,167
Subordinated debt
13
634,319
623,647
Total liabilities
22,016,386
20,816,332
Equity
Share capital
14
1,682
1,682
Shares held by trust
14
(7,900)
(25,489)
Share premium
283,430
283,430
Retained earnings
3,344,623
3,007,132
Merger reserve
402,862
402,862
Share based payment reserve
15
(12,488)
(5,135)
Fair value reserve for investment securities measured at fair value through
other comprehensive income
(25,609)
(10,862)
Cumulative currency translation reserve
(18,023)
(9,450)
Net assets attributable to owners
3,968,577
3,644,170
Non-controlling interest
42,118
48,059
Total equity
4,010,695
3,692,229
Total liabilities and equity
26,027,081
24,508,561
The condensed consolidated interim financial statements on pages 53 to 101
were approved by the Board of Directors on 11 August 2022 signed on its behalf
by:
___________________________
Vakhtang
Butskhrikidze
Chief Executive Officer
Six months ended
Note 30 June 2022 (Unaudited) 30 June 2021
(Restated unaudited)
In thousands of GEL
Interest income 18 1,080,462 899,185
Interest income calculated using effective interest rate method 18 1,049,545 872,687
Other interest income 18 30,917 26,498
Interest expense 18 (489,988) (444,436)
Net interest gains on currency swaps 18 1,717 13,149
Net interest income 592,191 467,898
Fee and commission income 19 240,383 177,593*
Fee and commission expense 19 (98,921) (69,292)*
Net fee and commission income 141,462 108,301
Insurance premiums earned 51,369 36,857
Reinsurer's share in insurance premiums earned (8,101) (6,568)
Net insurance claims incurred and agents' commissions (37,143) (23,648)
Reinsurer's share in claims incurred 4,840 3,232
Insurance profit 10,965 9,873
Net gains from currency derivatives, foreign currency operations and 20 114,377 60,184
translation
Net gains from disposal of investment securities measured at fair value 2,225 7,041
through other comprehensive income
Other operating income 15,558 37,483
Share of profit of associates 123 596
Other operating non-interest income 132,283 105,304
Credit loss (allowance)/recovery for loans to customers 7 (50,522) 32,563
Credit loss allowance for finance lease receivables (562) (2,515)
Credit loss (allowance)/recovery for performance guarantees and credit related 11 (1,070) 1,930
commitments
Credit loss allowance for other financial assets (698) (5,326)
Credit loss recovery for financial assets measured at fair value through other 1,268 1,842
comprehensive income
Net impairment of non-financial assets (6) (447)
Operating income after expected credit and non-financial asset impairment 825,311 719,423
losses
Staff costs (176,491) (148,071)
Depreciation and amortization 8 (47,332) (36,701)
Allowance of provision for liabilities and charges (60) (9)
Administrative and other operating expenses (90,702) (72,147)
Operating expenses (314,585) (256,928)
Losses from modifications of financial instruments - (1,591)
Profit before tax 510,726 460,904
Income tax expense 21 (52,181) (57,525)
Profit for the period 458,545 403,379
Other comprehensive income for the period:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve for investment securities measured at fair (14,747) (10,985)
value through other comprehensive income
Exchange differences on translation to presentation currency (8,573) (3,072)
Other comprehensive expense for the period (23,320) (14,057)
Total comprehensive income for the PERIOD 435,225 389,322
* Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
Six months ended
30 June 2022 30 June 2021
In thousands of GEL Note (Unaudited) (Restated unaudited)
Profit is attributable to:
- Shareholders of TBCG 458,465 399,168
- Non-controlling interest 80 4,211
Profit for the period 458,545 403,379
Total comprehensive income is attributable to:
- Shareholders of TBCG 435,145 385,120
- Non-controlling interest 80 4,202
Total comprehensive income for the period 435,225 389,322
Earnings per share for profit attributable to the owners of the Group:
- Basic earnings per share 16 8.37 7.33
- Diluted earnings per share 16 8.13 7.24
Note Share Capital Shares held by trust Share premium* Merger reserve* Share based payments reserve Fair value reserve for investment securities at FVTOCI Cumulative currency translation reserve Retained earnings Total equity excluding non-controlling interest Non-controlling interest Total Equity
In thousands of GEL
Balance as of 1 January 2021 (Restated) 1,682 (33,413) 283,430 402,862 (20,568) 11,158 (2,124) 2,281,428 2,924,455 11,479 2,935,934
Profit for the six months ended 30 June 2021 (unaudited) - - - - - - - 399,168 399,168 4,211 403,379
Effect of change in business model - - - - - 26,062 - - 26,062 - 26,062
Other comprehensive loss for six months ended 30 June 2021 (unaudited) - - - - - (37,047) (3,063) - (40,110) (9) (40,119)
Total comprehensive (expense)/income for six months ended 30 June 2021 - - - - - (10,985) (3,063) 399,168 385,120 4,202 389,322
(Restated unaudited)
Share based payment expense 15 - - - - 14,258 - - 238 14,496 (3) 14,493
Delivery of shares to employees under SBP scheme - 7,924 - - (9,038) - - - (1,114) - (1,114)
Dividends paid to non-controlling interest - - - - - - - - - (1,741) (1,741)
Other movements - - - - - (3) (12) 117 102 (171) (69)
Balance as of 30 June 2021 (Restated unaudited) 1,682 (25,489) 283,430 402,862 (15,348) 170 (5,199) 2,680,951 3,323,059 13,766 3,336,825
( )
Balance as of 31 December 2021 ( ) 1,682 (25,489) 283,430 402,862 (5,135) (10,862) (9,450) 3,007,132 3,644,170 48,059 3,692,229
Profit for the six months ended 30 June 2022 (unaudited) - - - - - - - 458,465 458,465 80 458,545
Other comprehensive loss for six months ended 30 June 2022 (unaudited) - - - - - (14,747) (8,573) - (23,320) - (23,320)
Total comprehensive (expense)/income for six months ended 30 June 2022 - - - - - (14,747) (8,573) 458,465 435,145 80 435,225
Share based payment expense 15 - - - - 13,857 - - - 13,857 - 13,857
Delivery of shares to employees under SBP scheme - 17,589 - - (21,210) - - - (3,621) - (3,621)
Dividends declared - - - - - - - (118,653) (118,653) (6,393) (125,046)
Sale of interest to NCI - - - - - - - 432 432 (432) -
Purchase of additional interest from NCI - - - - - - - (1,150) (1,150) (676) (1,826)
Other movements - - - - - - - (1,603) (1,603) 1,480 (123)
Balance as of 30 June 2022 1,682 (7,900) 283,430 402,862 (12,488) (25,609) (18,023) 3,344,623 3,968,577 42,118 4,010,695
* Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in 2021
annual report.
Six months ended
Note 30 June 2022 (Unaudited) 30 June 2021 (restated unaudited)
In thousands of GEL
Cash flows from/(used in) operating activities
Interest received 1,066,917 906,444
Interest received on currency swaps 18 1,717 13,149
Interest paid (457,690) (452,751)
Fees and commissions received 238,253 162,098*
Fees and commissions paid (100,019) (70,233)*
Insurance and reinsurance received 58,476 43,358
Insurance claims paid (25,406) (16,239)
Cash received from trading in foreign currencies 20 122,269 32,659
Other operating income received 15,176 28,880
Staff costs paid (203,676) (134,594)
Administrative and other operating expenses paid (109,560) (79,430)
Income tax paid (141,955) (4,446)
Cash flows from operating activities before changes in operating assets and 464,502 428,895
liabilities
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of 69,536 23,326
Georgia and Central Bank of Uzbekistan
Loans and advances to customers (1,379,575) (711,980)
Finance lease receivables 21,659 24,158
Other financial assets (3,765) (38,835)
Other assets (3,306) 14,151
Net change in operating liabilities
Due to other banks 216,265 11,940
Customer accounts 1,413,867 667,190
Other financial liabilities 15,162 (137,291)
Other liabilities and provision for liabilities and charges 1,902 16,659
Net cash flows from operating activities 816,247 298,213
Cash flows from/(used in) investing activities
Acquisition of investment securities measured at fair value through other (823,569) (196,871)
comprehensive income
Proceeds from redemption at maturity/disposal of investment securities 829,150 757,583
measured at fair value through other comprehensive income
Acquisition of bonds carried at amortised cost (133,443) -
Proceeds from redemption of bonds carried at amortised cost 152,162 19,633
Acquisition of premises, equipment, and intangible assets 8 (80,250) (91,993)
Proceeds from disposal of premises, equipment, and intangible assets 8 6,991 6,334
Proceeds from disposal of investment properties 4,241 20,210
Purchase of additional interest from minority shareholders (1,826) -
Net cash (used in)/ from investing activities (46,544) 514,896
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds 1,691,343 1,757,879
Redemption of other borrowed funds (1,232,431) (2,736,476)
Repayment of principal of lease liabilities (7,872) (5,591)
Proceeds from subordinated debt 46,259 -
Redemption of subordinated debt - (12,562)
Proceeds from debt securities in issue 12 47,209 -
Redemption of debt securities in issue 12 (161,978) -
Dividends paid (5,867) (1,741)
Net cash flows from/(used in) financing activities 376,663 (998,491)
Effect of exchange rate changes on cash and cash equivalents (129,277) (35,609)
Net increase/(decrease) in cash and cash equivalents 1,017,089 (220,991)
Cash and cash equivalents at the beginning of the period 4 1,722,137 1,635,405
Cash and cash equivalents at the end of the period 4 2,739,226 1,414,414
* Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
1 Introduction
Principal activity. TBC Bank Group PLC ("TBCG" or "Group") is a public
limited company, incorporated in England and Wales. TBCG held 99.88% of the
share capital of JSC TBC Bank (hereafter the "Bank") as at 30 June 2021 (31
December 2021: 99.88%), thus representing the Bank's ultimate parent company.
The Bank is a parent of a group of companies incorporated in Georgia,
Azerbaijan and Uzbekistan and its primary business activities include
providing banking, leasing, insurance, brokerage and card processing services
to corporate and individual customers. The Group's list of subsidiaries is
provided below.
The shares of TBCG ("TBCG Shares") were admitted to the Premium Listing
segment of the Official List of the UK Listing Authority and admitted to
trading on the London Stock Exchange PLC's main market for listed securities
effective on 10 August 2016 (the "Admission"). TBC Bank Group PLC's registered
legal address is 100 Bishopsgate C/O Law Debenture London EC2N 4AG. Registered
number of TBC Bank Group PLC is 10029943. The Bank is the Group's main
operating unit and it accounts for most of the Group's activities.
JSC TBC Bank was incorporated on 17 December 1992 and is domiciled in Georgia.
The Bank is a joint stock company limited by shares and was arranged in
accordance with Georgian regulations. The Bank's registered address and place
of business is 7 Marjanishvili Street, 0102 Tbilisi, Georgia.
The Bank's principal business activity is universal banking operations that
include corporate, small and medium enterprises, retail and micro operations
within Georgia. The Bank has been operating since 20 January 1993 under a
general banking license issued by the National Bank of the Georgia ("NBG"). In
2018, the Bank launched fully digital bank, Space.
The Bank had 144 branches within Georgia as at 30 June 2022. (As at 30 June
2021: 146 branches).
The Group had 10,065 employees mainly within Georgia as at 30 June 2022. (As
at 30 June 2021: 8,937 employees).
As at 30 June 2022 and 31 December 2021, the following shareholders directly
owned more than 3% of the total outstanding shares of the Group. Other
shareholders individually owned less than 3% of the outstanding shares. As at
30 June 2022 and 31 December 2021, the Group had no ultimate controlling
party.
Shareholders 30 June 2022 ownership interest 31 December 2021 ownership interest
Dunross & Co. 7.39% 7.45%
Allan Gray Investment Management 6.41% 4.89%
European Bank for Reconstruction and Development 5.05% 5.05%
Fidelity International 4.04% 3.13%
BlackRock 3.36% 2.90%
Creation Investments Capital Management 3.03% 3.12%
Founders* 15.90% 14.61%
Other** 54.82% 58.85%
Total 100.00% 100.00%
* Includes effective ownership of Mamuka Khazaradze and Badri Japaridze.
** Other includes individual as well as corporate shareholders.
The condensed consolidated interim financial statements ("financial
statements") include the following principal subsidiaries:
Subsidiary Name Proportion of voting rights and ordinary share capital
30 June 2022 31 December 2021 Principal place of business or incorporation Year of incorpo-ration Industry
JSC TBC Bank 99.88% 99.88% Tbilisi, Georgia 1992 Banking
United Financial Corporation JSC 99.53% 99.53% Tbilisi, Georgia 2001 Card processing
TBC Capital LLC 100.00% 100.00% Tbilisi, Georgia 1999 Brokerage
TBC Leasing JSC 100.00% 100.00% Tbilisi, Georgia 2003 Leasing
TBC Kredit LLC 100.00% 100.00% Baku, Azerbaijan 1999 Non-banking credit institution
TBC Pay LLC 100.00% 100.00% Tbilisi, Georgia 2008 Processing
TBC Invest LLC 100.00% 100.00% Ramat Gan, Israel 2011 PR and marketing
Index LLC 100.00% 100.00% Tbilisi, Georgia 2009 Real estate management
TBC Capital Asset Management LLC 100.00% 100.00% Tbilisi, Georgia 2021 Asset Management
JSC TBC Insurance 100.00% 100.00% Tbilisi, Georgia 2014 Insurance
Redmed LLC 100.00% 100.00% Tbilisi, Georgia 2019 Insurance
T Net LLC 14 (#_ftn14) 100.00% 100.00% Tbilisi, Georgia 2019 Asset management
Online Tickets LLC 15 (#_ftn15) 100.00% 55.00% Tbilisi, Georgia 2015 Computer and software services
TKT UZ 100.00% 75.00% Tashkent, Uzbekistan 2019 Retail trade
Mypost LLC 100.00% 100.00% Tbilisi, Georgia 2019 Postal service
Billing Solutions LLC 51.00% 51.00% Tbilisi, Georgia 2019 Software services
Vendoo LLC (Geo) 100.00% 100.00% Tbilisi, Georgia 2018 Retail leasing
F Solutions LLC 100.00% 100.00% Tbilisi, Georgia 2016 Software services
Artarea.ge LLC 100.00% 100.00% Tbilisi, Georgia 2012 PR and marketing
SABA LLC 85.00% 85.00% Tbilisi, Georgia 2012 Education
TBC Art Gallery LLC 100.00% 100.00% Tbilisi, Georgia 2012 PR and marketing
Inspired LLC 51.00% 51.00% Tashkent, Uzbekistan 2011 Processing
Marjanishvili 7 LLC 100.00% 100.00% Tbilisi, Georgia 2020 Food and beverage
TBC Bank JSC UZ 60.24% 60.24% Tashkent, Uzbekistan 2020 Banking
TBC Fin service LLC 16 (#_ftn16) 100.00% 100.00% Tashkent, Uzbekistan 2019 Retail leasing
TBC Group Support LLC 100.00% 100.00% Tbilisi, Georgia 2020 Risk monitoring
Space JSC 100.00% 100.00% Tbilisi, Georgia 2021 Software services
Space International JSC 100.00% 100.00% Tbilisi, Georgia 2021 Software services
The country of registration or incorporation is also the principal area of
operation of each of the above subsidiaries.
The Group has investments in the following associates:
Associate name 30 June 2022 31 December 2021 Principal place of business or incorporation Year of incorporation Principal activities
Credit Info Georgia JSC 21.08% 21.08% Tbilisi, Georgia 2005 Financial intermediary
Tbilisi Stock Exchange JSC 28.87% 28.87% Tbilisi, Georgia 2015 Finance, Service
Georgian Central Securities Depository JSC 22.87% 22.87% Tbilisi, Georgia 1999 Finance, Service
Georgian Stock Exchange JSC 17 (#_ftn17) 17.33% 17.33% Tbilisi, Georgia 1999 Finance, Service
Kavkasreestri JSC4 10.03% 10.03% Tbilisi, Georgia 1998 Finance, Service
The Group's corporate structure consists of related undertakings, comprising
subsidiaries and associates, not consolidated or equity accounted for due to
immateriality. A full list of these undertakings, the country of incorporation
is set out in appendix A below.
Proportion of voting rights and ordinary share capital
Company Name
30 June 31 December 2021 Principal place of business or incorporation Year of incorpo-ration Industry
2022
TBC Invest International Ltd 18 (#_ftn18) 100.00% 100.00% Tbilisi, Georgia 2016 Investment Vehicle
University Development Fund5 33.33% 33.33% Tbilisi, Georgia 2007 Education
Natural Products of Georgia LLC5 25.00% 25.00% Tbilisi, Georgia 2001 Trade, Service
TBC Trade 100.00% 100.00% Tbilisi, Georgia 2008 Trade, Service
Georgia Large Cap Diversified Credit Portfolio JSC 100.00% 100.00% Tbilisi, Georgia 2021 Asset Management
Freeshop.ge LLC 100.00% 100.00% Tbilisi, Georgia 2010 Retail Trade
The.ge LLC 100.00% 100.00% Tbilisi, Georgia 2012 Retail Trade
Operating environment of the Group
Georgia, where Group's most activities are located, displays certain
characteristics of an emerging market. The legal, tax and regulatory
frameworks continue to develop and are subject to frequent changes and varying
interpretations (Note 22). In 2021 the Georgian economy rebounded at 10.4%,
mainly on the back of recovery of inflows, as well as stronger domestic
demand. As for 2022, despite the adverse impact of Russia's invasion of
Ukraine, the expansion continued at a speed that exceeded initial
expectations, with real GDP increasing by 14.9% year-on-year in the first
quarter and, especially taking last year's base effect into account,
maintaining very strong growth at 7.2% in the second quarter. Consequently,
the outlook for the Georgian economy improved. The main reasons behind
stronger outlook are the resilience of Georgia's terms of trade at the time of
risen commodity prices as well as Georgia's broadly balanced net exposure to
oil prices. Moreover, while since Russia's invasion of Ukraine tourism
recovery has slowed, when adding the migration effect from citizens of Russia,
Belarus and also to some extent Ukraine, the tourism recovery has even
strengthened. Additionally, high remittance inflows are the bullish outlook
supportive as well as gradually recovering FDIs.
However, the baseline strongly depends on the global developments. While the
Georgian economy is so far resilient against recently elevated global slowdown
risks and adverse economic impacts of Russia's invasion of Ukraine, there is a
probability of more severe spill-over effects, as well as COVID resurgence due
to recently elevated infection cases. The materialization of these risks could
severely restrict economic activity in Georgia, negatively impact business
environment and clients of the Group.
For the purpose of measurement of expected credit losses ("ECL") the Group
uses supportable forward-looking information, including forecasts of
macroeconomic variables. As with any economic forecast, however, the
projections and likelihoods of their occurrence are subject to a high degree
of inherent uncertainty and therefore the actual outcomes may be significantly
different from those projected.
Climate Impact
Although, global market conditions have affected market confidence and
consumer spending patterns, the Group remains well placed to continue
displaying strong financial results through investing in local and Uzbekistan
markets. The Group has reviewed its exposure to climate-related and other
emerging business risks, but has not identified any risks, that could
significantly impact the financial performance or position of the Group as at
30 June 2022. See more details outlined in risk management disclosures in note
22.
2 Significant Accounting Policies
Basis of preparation
These condensed consolidated interim financial statements for six months ended
30 June 2022 for the Group has been prepared in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the Financial Conduct Authority
(FCA), and in accordance with UK-adopted International Accounting Standard
(IAS) 34 'Interim Financial Reporting'. These condensed consolidated interim
financial statements do not include all the notes, normally included in annual
consolidated financial statements. Accordingly, this report is to be read in
conjunction with the annual consolidated financial statements for the year
ended 31 December 2021, which were prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006 and, for the group, in accordance with, international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
These condensed consolidated interim financial statements have been reviewed,
not audited. Auditor's review conclusion is included in this report. These
condensed consolidated interim financial statements were approved for issue on
11 August 2022.
These condensed interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2021 were approved by the
board of directors on 13 April 2022 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of the matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
Going Concern. The Board of Directors of TBC Bank Group PLC have prepared
these interim financial statements on a going concern basis. In making this
judgement, the Board considered the Group's financial position, current
strategic plan, profitability of operations and access to financial resources.
The Directors are not aware of any material uncertainties that may cast
significant doubt upon the Group's ability to continue as a going concern. In
reaching this assessment, the Directors have specifically considered the
implications of political instability in the region and the war in Ukraine
upon the Group's performance and projected funding and capital position and
also taken into account the impact of further stress scenarios. On this basis,
the Directors are satisfied that the Group will maintain adequate levels of
liquidity, capital and the overall financial position while being able to
comply with the covenants of its funding structure for the foreseeable future.
Presentation currency. These condensed consolidated interim financial
statements are presented in thousands of Georgian Lari ("GEL thousands"),
except per-share amounts and unless otherwise indicated.
Restatement of cashbacks and incentive payments received for card operations.
To further foster clarity of the condensed consolidated interim statement of
comprehensive income, the Group has re-considered the presentation of cash
backs and incentive payments received from Visa and Mastercard for card
operations. The amount of cash backs and incentive payments receivable depend
on the scale of Groups operations with Visa and Mastercard cards and related
commission expenses paid to them. Management believes, presenting commission
expenses made to Visa and Mastercard net of cash backs and incentive payments
received from them, will increase clarity and understandability of the
condensed consolidated interim financial statements and related accounting
treatments. As a result of reclassification, Management has moved cashbacks
and incentive payments from Visa and Mastercard from "Fee and commission
income" to "Fee and commission expense". The presentation of comparative
figures has been adjusted to confirm to the presentation of the current period
amounts:
in thousands of GEL 30 June 2021 Reclassification 30 June 2021
(As originally presented) (as restated)
Fee and commission income 186,153 (8,560) 177,593
Fee and commission expense (77,852) 8,560 (69,292)
in thousands of GEL 30 June 2021 Reclassification 30 June 2021
(As originally presented) (as restated)
Fee and commission income 170,658 (8,560) 162,098
Fees and commissions paid (78,793) 8,560 (70,233)
Consolidated financial statements. Subsidiaries are those investees, including
structured entities, that the Group controls because it (i) has power to
direct relevant activities of the investees that significantly affect their
returns, (ii) has exposure, or rights, to variable returns from its
involvement with the investees, and (iii) has the ability to use its power
over the investees to affect the amount of investor's returns. The existence
and effect of substantive rights, including substantive potential voting
rights, are considered when assessing whether the Group has power over another
entity. For a right to be substantive, the holder must have practical ability
to exercise that right when decisions about the direction of the relevant
activities of the investee need to be made. The Group may have power over an
investee even when it holds less than the majority of voting power in it. In
such a case, the Group assesses the size of its voting rights relative to the
size and dispersion of holdings of the other vote holders to determine if it
has de-facto power over the investee. Protective rights of other investors,
such as those that relate to fundamental changes of investee's activities or
apply only in exceptional circumstances, do not prevent the Group from
controlling an investee. Subsidiaries are consolidated from the date on which
control is transferred to the Group, and are deconsolidated from the date on
which control ceases.
Accounting policies and relevant changes within. The same accounting policies
and methods of computation were followed in the preparation of this condensed
consolidated interim financial statements as compared with the annual
consolidated financial statements of the Group for the year ended 31 December
2021.
Interim period tax measurement. Interim period income tax expense is accrued
using the effective tax rate that would be applicable to expected total annual
earnings, that is, the estimated weighted average annual effective income tax
rate applied to the pre-tax income of the interim period.
Adoption of New or Revised Standards and Interpretations. The group adopts
every required standard enhancement that becomes effective during the period.
During six months period ended 2022, the group did not have effects from
adopting the new pronouncements effective from 1 January 2022:
Classification of liabilities as current or non-current - Amendments to IAS 1
(issued on 23 January 2020 and effective for annual periods beginning on or
after 1 January 2022).
Proceeds before intended use, Onerous contracts - cost of fulfilling a
contract, Reference to the Conceptual Framework - narrow scope amendments to
IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 -
amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and
effective for annual periods beginning on or after 1 January 2022).
Interest rate benchmark (IBOR) reform. The group will finalise transition in
June 2023. There have been no changes to the information as disclosed in
Annual report 2021 related to the effects and exposures.
Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and
effective for annual periods beginning on or after 1 January 2023). The group
is assessing the impact. The effects will be disclosed in 2022 Annual Report.
3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
The Bank makes estimates and assumptions that affect the reported amounts of
assets and liabilities. Estimates and judgements are continually evaluated and
are based on the management's experience and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances. The management also makes certain judgements, apart from those
involving estimations, in the process of applying the accounting policies.
Judgements and estimates that have the most significant effect on the amounts
recognised in the consolidated financial statements and estimates that can
cause a significant adjustment to the carrying amount of assets and
liabilities include following:
Judgements and estimates related to ECL measurement Measurement of ECLs is a
significant estimate that involves determination of methodology, development
of models and preparation of data inputs. Expert management judgement is an
also an essential part of calculating expected credit losses.
Management considers the significant management judgements and estimates in
calculating ECL as follows:
Judgements used to define criteria used in definition of default. The Bank
defines default using both quantitative and qualitative criteria. Borrower is
classified as defaulted if:
· any amount of contractual repayments is past due more than 90
days; or
· factors indicating the borrower's unlikeliness-to-pay.
In addition, default exit criteria is defined using judgement as well as
whether default should be applied on a borrower or exposure level.
Judgements used to define criteria for assessing, if there has been a
significant increase in credit risk (SICR) which is defined using both
quantitative and qualitative criteria.
Qualitative factors usually include judgements around delinquency period of
more than 30 days on contractual repayments; exposure is restructured, but is
not defaulted; borrower is classified as "watch".
On a quantitative basis the Bank assess change in probability of default
parameter for each particular exposure since initial recognition and compares
it to the predefined threshold. When absolute change in probability of default
exceeds the applicable threshold, SICR is deemed to have occurred and exposure
is transferred to Stage 2. Quantitative indicator of SICR is applied to retail
and micro segments, where the Bank has sufficient number of observations.
The table below represents the sensitivity analysis of (i) 20% decrease of
SICR thresholds (quantitative criteria applied for retail and micro exposures
described above. (ii) 10% increase in total number of stage 2 borrowers:
In thousands of GEL 30 June 2022 31 December 2021
20% decrease in SICR thresholds Increase credit loss allowance on loans and advances by GEL 2,760. Change of Increase credit loss allowance on loans and advances by GEL 2,470. Change of
the Bank's cost of credit risk ratio by 3 basis points. the Bank's cost of credit risk ratio by 2 basis points.
10% increase in Number of Stage 2 Contracts Increase credit loss allowance on loans and advances by GEL 2,256. Increase credit loss allowance on loans and advances by GEL 2,511.
Change of the Bank's cost of credit risk ratio by 3 basis points. Change of the Bank's cost of credit risk ratio by 2 basis points.
Judgements used for calculation of credit risk parameters namely exposure at
default (EAD), probability of default (PD) and loss given default (LGD). The
judgements includes and are not limited by:
(i) definition of the segmentation for risk parameters
estimation purposes,
(ii) decision whether simplified or more complex models can be
used,
(iii) time since default date after which no material recoveries
are expected,
(iv) collateral haircuts from market value as well as the average
workout period for collateral discounting.
The table below describes sensitivity on 10% increase of PD and LGD estimates:
In thousands of GEL 30 June 2022 31 December 2021
10% increase (decrease) in PD estimates Increase (decrease) credit loss allowance on loans and advances by GEL 24,330 Increase (decrease) credit loss allowance on loans and advances by GEL 25,043
(GEL 19,259). Change of the Bank's cost of credit risk ratio by 29 (23) basis (GEL 18,905). Change of the Bank's cost of credit risk ratio by 16 (12) basis
points points
10% increase (decrease) in LGD estimates Increase (decrease) credit loss allowance on loans and advances by GEL Increase (decrease) credit loss allowance on loans and advances by GEL 39,900
38,350 (GEL 34,478). (GEL 35,129).
Change of the Bank's cost of credit risk ratio by 46 (41) basis points. Change of the Bank's cost of credit risk ratio by 26 (22) basis points.
Estimates used for forward-looking macroeconomic scenarios and judgements made
for their probability weightings.
For forward-looking information purposes the Bank defines three macro
scenarios. The scenarios are defined as baseline (most likely), upside (better
than most likely) and downside (worse than most likely) scenarios of the state
of the Georgian economy.
Estimates applied in differentiating between these three scenarios represent
GDP, USD/GEL rate, RE price, employment levels, monetary policy rate and other
macro variables. Under usual conditions, the scenario weights applied are 50%,
25% and 25% for the base case, upside and downside scenarios respectively. As
at 30 June 2022 the weights remained the same as at 31 December 2021 - 50%,
25% and 25% for the base, upside and downside scenarios respectively. Based on
the changes of the macro environment the Bank modifies the weightings based on
expert judgement.
The table below describes the unweighted ECL for each economic scenario as at
30 June 2022:
In thousands of GEL Baseline Upside Downside Weighted
Corporate 45,943 45,936 49,161 46,745
Micro, small and medium enterprises 100,246 93,616 108,961 100,646
Consumer 212,446 208,639 216,452 212,477
Mortgage 43,385 41,302 46,527 43,638
Total 402,020 389,493 421,101 403,506
The table below describes the unweighted ECL for each economic scenario as at
31 December 2021:
In thousands of GEL Baseline Upside Downside Weighted
Corporate 48,220 46,752 59,640 50,731
Micro, small and medium enterprises 112,592 104,856 122,768 113,101
Consumer 182,881 179,516 186,478 182,928
Mortgage 63,080 59,464 68,491 63,486
Total 406,773 390,588 437,377 410,246
The following table describes the key macroeconomic variables under each
scenario for future 3-year period as at 30 June 2022:
Baseline Upside Downside
Growth rates YoY, % 2022 2023 2024 2022 2023 2024 2022 2023 2024
GDP 8.0% 5.5% 5.0% 9.0% 7.7% 7.9% 6.9% 3.1% 2.0%
USD/GEL rate end of period (EOP) 2.90 2.90 2.90 2.59 2.56 2.54 3.12 3.17 3.19
RE Price (in USD) 10.1% 4.9% 1.8% 13.8% 7.4% 3.7% 5.4% 2.4% -0.6%
Employment 1.2% 1.1% 0.8% 1.7% 1.7% 1.6% 0.8% 0.5% 0.2%
Monetary policy rate (EOP, Level) 10.8% 8.25% 7.5% 10.3% 7.54% 6.62% 11.5% 9.41% 8.95%
The following table describes the key macroeconomic variables under each
scenario for future 3-year period as at 31 December 2021:
Baseline Upside Downside
Growth rates YoY, % 2022 2023 2024 2022 2023 2024 2022 2023 2024
GDP 6.0% 5.5% 5.0% 7.8% 8.2% 8.3% 4.1% 2.8% 1.7%
USD/GEL rate (EOP) 3.30 3.25 3.20 2.95 2.87 2.80 3.55 3.55 3.52
RE Price (in USD) 1.6% 2.1% 2.6% 4.6% 6.3% 7.7% -1.6% -2.5% -3.5%
Employment 1.0% 1.0% 0.5% 1.5% 1.7% 1.3% 0.6% 0.4% -0.2%
Monetary policy rate (EOP, Level) 8.5% 7.5% 7.0% 8.0% 6.8% 6.1% 9.4% 8.7% 8.4%
The Bank assessed the impact of changes in GDP growth, unemployment and
monetary policy rate variables on ECL as a most critical estimates applied in
ECL assessment.
The sensitivity analysis was performed separately for each of the variable to
show their significant in ECL assessment, but changes in those variables may
not happen in isolation as various economic factors tend to be correlated
across the scenarios. The variables were adjusted in all three macroeconomic
scenarios and the staging has been maintained unchanged. From the assessment
of forward looking scenarios, management is comfortable with the scenarios
capturing the non-linearity of the losses.
The table below shows the impact of +/-20% change in GDP growth, unemployment
and monetary policy variables across all scenarios on the Bank's ECL as at 30
June 2022:
Change in GDP growth Change in unemployment Change in Monetary Policy
in thousands of GEL 20% increase 20% decrease 20% increase 20% decrease 20% increase 20% decrease
Impact on ECL (5,011) 5,797 5,532 (5,231) 3,529 (3,041)
The table below shows the impact of +/-20% change in GDP growth, unemployment
and monetary policy variables across all scenarios on the Bank's ECL as at 31
December 2021:
Change in GDP growth Change in unemployment Change in Monetary Policy
in thousands of GEL 20% increase 20% decrease 20% increase 20% decrease 20% increase 20% decrease
Impact on ECL (9,036) 10,359 4,805 (4,541) 4,045 (3,493)
Individual assessment: Individual assessment is mainly used for stage 2 and
stage 3 individually significant borrowers.
For selecting individually significant exposures, the management uses the
following estimated thresholds above which exposures(( 19 (#_ftn19) )) are
selected for individual review: for stage 2 - to GEL 10 million and for stage
3 - GEL 4 million. Additionally, the Bank may arbitrarily designate selected
exposures to individual measurement of ECL based on the Bank's credit risk
management or underwriting departments' decision. The individual assessment
takes into account latest available information in order to define ECL under
baseline, upside and downside scenarios.
Post model adjustments
We call PMAs specific set of management adjustments to address known model
limitations, either in model methodology or model inputs. PMAs are made based
on analysis of model inputs and parameters to determine the required
modifications in order to improve model accuracy.
Post model overlays
Post model overlays (PMOs) reflect management judgement that mainly rely on
expert judgement and are applied directly to expected credit losses at an
aggregated level.
Once implemented, post model overlays and adjustments are re-assessed at each
reporting date to determine the validity of the adjustments. The
appropriateness of PMAs and PMOs is subject to rigorous review and challenge.
Post model overlays and adjustments review and approval process goes through
same phases as made for ECL process governance.
As a result of COVID-19 pandemic, the Bank applied expert judgement to the
measurement of the expected credit losses in the form of post model
adjustments (PMAs). The adjustments made were all in model adjustments, which
means that we made adjustments either to model inputs or its parameters and
run the models based on the updated adjustments. No post model overlays has
been processed.
Below are summarized COVID-19 pandemic related in model PMAs that are remained
as at 30 June 2022 and PMA introduced in 2022 due to the war in Ukraine.
Effect of pandemic-related and war-related PMAs on expected credit losses as
at 30 June 2022 amounted to GEL 9,342 thousand and GEL 1,610 thousand
respectively:
· Loss given default (LGD) - Recovery rate: As reported at 31
December 2021, the Bank had applied a downward adjustment on recovery rates in
stage 3 to reflect the expected impact of the COVID- 19 pandemic. The
adjustments are remained only for secured consumer and micro exposures as at
30 June 2022. The effect of LGD related PMA on ECL as at 30 June 2022
amounted to GEL 7,150 thousand, compared to the GEL 12,835 thousand effect as
at 31 December 2021 ;
· Loss given default (LGD) - AWT: As reported at 31 December 2021,
the Bank had extended AWT (average workout period) from 1 Year to 2 years
for SME and non-significant corporate portfolios, in order to reflect delayed
recoveries, mainly driven by COVID-19 pandemic. An adjustment was applied
across all stages. As for 30 June 2022, adjustment remains the same. The
effect of this PMA on ECL as at 30 June 2022 amounted to GEL 2,192 thousand,
compared to the GEL 2,754 thousand effect as at 31 December 2021.
Apart from COVID-19 pandemic related PMAs, the Bank introduced a PMA for
clients affected by the Russian invasion in Ukraine. Specifically, the default
definition was modified for restructured, war-affected exposures amounting to
GEL 10,379 thousand. Restructured exposures are transferred to stage 2 instead
of stage 3; however, for that particular exposures a lower number of days
past due ('DPD') will be used for default recognition: namely, instead of
applying a standard 90 DPD, default will be recognised earlier at 30 DPD
after the end of grace period. The effect of this PMA on staging shares
amount to 0.06 pp. while the effect on ECL amounted GEL 1,610 thousand as at
30 June 2022 in case those exposures were in stage 3.
4 Cash and Cash Equivalents
In thousands of GEL 30 June 2022 31 December 2021
Cash on hand 936,596 839,821
Cash balances with the National Bank of Georgia and the Central Bank of 436,340 244,303
Uzbekistan (other than mandatory reserve deposits)
Correspondent accounts and overnight placements with other banks 605,683 632,376
Placements with and receivables from other banks with original maturities of 760,696 5,767
less than three months
Total gross amount of cash and cash equivalents 2,739,315 1,722,267
Less: Credit loss allowance (89) (130)
Stage 1 (89) (130)
Stage 2 - -
Stage 3 - -
Total cash and cash equivalents 2,739,226 1,722,137
As 30 June 2022, 96% of the correspondent accounts and overnight placements
with other banks was placed with OECD (The Organization for Economic
Co-operation and Development) banking institutions (31 December 2021: 94%).
As 30 June 2022, GEL 757,696 thousand was placed on interbank term deposits
with four OECD banks and none with non-OECD (As at 31 December 2021, GEL 5,767
thousand was placed on interbank term deposits with two non-OECD banks and
none with OECD bank).
5 Due from Other Banks
Amounts due from other banks include placements with original maturities of
more than three months, that are not collateralised and do not represent past
due amounts at the 30 June 2022 and 31 December 2021.
As at 30 June 2022 the Group had 4 placements, with original maturities of
more than three months and with aggregated amounts above GEL 5,000 thousand
amounting GEL 39,732 thousand (2021: GEL 54,526 thousand). The total
aggregated amount of placements with other banks with original maturities of
more than three months was GEL 41,848 thousand (2021: GEL 65,333 thousand) or
94.9% of the total amount due from other banks (2021: 82.6%).
As at 30 June 2022 GEL 709 thousand (2021: GEL 13,819 thousand) were kept on
deposits as restricted cash under an arrangement with a credit card company or
credit card related services with other banks. Refer to Note 24 for the
estimated fair value of amounts due from other banks.
For the purpose of ECL measurement due from other banks balances are included
in Stage 1. The ECL for these balances at 30 June 2022 is GEL 4.8 thousand
(2021: GEL 9.9 thousand).
6 Mandatory Cash Balances with the National Bank of Georgia and the Central Bank of Uzbekistan
Mandatory cash balances with the National Bank of Georgia ("NBG") represent
amounts deposited with the NBG. Resident financial institutions are required
to maintain an interest-earning obligatory reserve with the NBG, the amount of
which depends on the level of funds attracted by the financial institutions.
The Bank earned up to 11.0%, 0% and (0.7%) annual interest in GEL, USD and EUR
respectively on mandatory reserve with NBG during six months period ended 30
June 2022 (2021: 10.5%, (0.25%) and (0.7%) in GEL, USD and EUR respectively).
Mandatory cash balances with the Central Bank of Uzbekistan ("CBU") represents
of 20% amount placed and frozen on special account with Central Bank of
Uzbekistan ("CBU") 80% of amount maintained on corresponding account with CBU.
Resident financial institutions are required to keep non-interest-earning
obligatory balances with the CBU, the amount of which depends on the level of
funds attracted by the financial institutions and through clients' accounts.
The amount placed in CBU are denominated in UZS.
In February 2022, Fitch Ratings has affirmed Georgia's Long-Term Foreign and
Local Currency Issuer Default Rating (IDRs) at 'BB'. The Outlook is Stable;
The Country Ceiling Rating is affirmed at 'BBB-', short-term foreign and
local-currency IDRs at 'B'.
7 Loans and Advances to Customers
In thousands of GEL 30 June 2022 31 December 2021
Corporate loans 6,462,635 6,547,741
Consumer loans 2,575,325 2,245,904
Mortgage loans 4,091,244 4,112,441
Loans to micro, small and medium enterprises 4,405,311 4,141,305
Total gross loans and advances to customers at amortised cost 17,534,515 17,047,391
Less: credit loss allowance (403,506) (410,246)
Stage 1 (108,953) (104,058)
Stage 2 (113,970) (120,832)
Stage 3 (180,583) (185,356)
Total loans and advances to customers at amortised cost 17,131,009 16,637,145
As at 30 June 2022, loans and advances to customers carried at GEL 725,944
thousand have been pledged to local banks or other financial institutions as
collateral with respect to other borrowed funds (31 December 2021: GEL 843,006
thousand).
The following tables disclose the changes in the credit loss allowance and
gross carrying amount for loans and advances to customers carried at amortised
cost between the beginning and the end of the reporting periods. Major
movements in the table are described below:
· Transfers occur between Stage 1, 2 and 3, due to significant
increases (or decreases) of credit risk or exposures becoming defaulted in the
period, and the consequent "step up" (or "step down") between 12-month and
Lifetime ECL. It should be noted, that:
o For loans, which existed at the beginning of the period, opening exposures
are disclosed as transfer amounts;
o For newly issued loans, exposures upon issuance are disclosed as transfer
amounts;
· New originated or purchased gives us information regarding gross
loans issued and corresponding credit loss allowance created during the period
(however, exposures which were issued and repaid during the period and issued
to refinance existing loans are excluded);
· Derecognised during the period refers to the balance of loans and
credit loss allowance at the beginning of the period, which were repaid during
the period. Exposures which were issued and repaid during the period, written
off or refinanced by other loans, are excluded;
· Net repayments refers to the net changes in gross carrying
amounts, which is loan disbursements less repayments;
· Write-offs refer to write off of loans during the period;
· Foreign exchange movements refers to the translation of assets
denominated in foreign currencies and effect to translation in presentational
currency for foreign subsidiary;
· Net re-measurement due to stage transfers and risk parameters
changes refers to the movements in ECL as a result of transfer of
exposure between stages or changes in risk parameters and forward looking
expectations;
· Re-segmentation refers to the transfer of loans from one
reporting segment to another. For presentation purposes, amounts are rounded
to the nearest thousands of GEL, which in certain cases is disclosed as nil.
In 2022, the Group has reassessed its definition of segments as disclosed in
Note 17. Space segment has been fully transferred from micro, small and medium
enterprises to retail segment due to changes in segment definitions. Other
transfers between segments were primarily due to changes in client size and
specifications compared to prior period.
Information on related party balances is disclosed in Note 25.
Total loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2022 14,602,402 1,935,370 509,619 17,047,391 104,058 120,832 185,356 410,246
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) (1,282,597) 1,360,185 (77,588) - (42,556) 71,545 (28,989) -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (17,791) (183,725) 201,516 - (5,618) (48,929) 54,547 -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 1,195,748 (1,183,785) (11,963) - 76,059 (75,608) (451) -
New originated or purchased 4,748,310 - - 4,748,310 97,102 - - 97,102
Derecognised during the period (2,114,706) (103,815) (45,497) (2,264,018) (24,694) (7,603) (14,791) (47,088)
Net repayments (1,001,427) (106,619) (35,604) (1,143,650) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (94,255) 54,772 67,009 27,526
repayments 20 (#_ftn20)
Movements without impact on credit loss allowance charge for the period:
Write-offs - - (80,121) (80,121) - - (80,121) (80,121)
Changes in accrued interest (22,631) 3,780 3,903 (14,948) - - - -
Modification 2,413 485 398 3,296 - - - -
Foreign exchange movements (629,412) (112,300) (20,033) (761,745) (1,143) (1,039) (1,977) (4,159)
At 30 June 2022 15,480,309 1,609,576 444,630 17,534,515 108,953 113,970 180,583 403,506
Total loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2021 11,860,556 2,448,127 891,837 15,200,520 130,226 142,912 333,108 606,246
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) 805,405 (805,405) - - 36,456 (36,456) - -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (507,875) 563,130 (55,255) - (9,269) 32,399 (23,130) -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) (70,295) (113,970) 184,265 - (8,238) (20,480) 28,718 -
New originated or purchased 2,470,736 - - 2,470,736 28,957 - - 28,957
Derecognised during the period (636,690) (86,633) (59,962) (783,285) (96) (5,552) (27,777) (33,425)
Net repayments (871,862) (133,469) (71,902) (1,077,233) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (62,587) (11,346) 60,821 (13,112)
repayments
Movements without impact on credit loss allowance charge for the period:
Write-offs - - (107,321) (107,321) - - (107,321) (107,321)
Other movements 297 648 3,890 4,835 - - - -
Modification 3,237 1,068 1,718 6,023 - - - -
Foreign exchange movements (344,723) (70,762) (23,864) (439,349) (808) (643) (1,936) (3,387)
At 30 June 2021 12,708,786 1,802,734 763,406 15,274,926 114,641 100,834 262,483 477,958
Corporate loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2022 5,743,444 712,548 91,749 6,547,741 24,404 1,310 25,017 50,731
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) (125,146) 126,638 (1,492) - (596) 1,225 (629) -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (180) (15,283) 15,463 - (21) (126) 147 -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 113,965 (102,115) (11,850) - 1,351 (976) (375) -
New originated or purchased 1,605,744 - - 1,605,744 31,927 - - 31,927
Derecognised during the period (1,178,698) (32,914) (4,724) (1,216,336) (10,036) (170) (548) (10,754)
Net repayments (113,347) (32,155) (1,651) (147,153) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (26,086) (185) 2,949 (23,322)
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation 63,965 12,049 - 76,014 171 10 - 181
Write-offs - - (1,127) (1,127) - - (1,127) (1,127)
Changes in accrued interest (36,469) (52) 733 (35,788) - - - -
Modification 1,000 81 39 1,120 - - - -
Foreign Exchange movements (297,468) (67,020) (3,092) (367,580) (596) (48) (247) (891)
At 30 June 2022 5,776,810 601,777 84,048 6,462,635 20,518 1,040 25,187 46,745
Corporate loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2021 4,700,871 965,036 165,964 5,831,871 54,160 8,408 46,489 109,057
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) 129,211 (129,211) - - 785 (785) - -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (88,857) 95,068 (6,211) - (1,388) 1,883 (495) -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 973 (14,096) 13,123 - 9,034 (267) (8,767) -
New originated or purchased 680,196 - - 680,196 (2,352) - - (2,352)
Derecognised during the period (244,255) (2,570) (16,907) (263,732) (1,227) (47) (7,778) (9,052)
Net repayments (205,683) (63,554) (27,631) (296,868) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (12,726) (1,135) (7,054) (20,915)
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation 90,053 19,704 1,865 111,622 322 91 1,865 2,278
Write-offs - - (1) (1) - - (1) (1)
Modification 273 563 623 1,459 - - - -
Foreign Exchange movements (164,035) (45,374) (3,504) (212,913) (529) (113) (349) (991)
At 30 June 2021 4,898,747 825,566 127,321 5,851,634 46,079 8,035 23,910 78,024
Loans to micro, small and medium enterprises Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2022 3,519,842 413,339 208,124 4,141,305 20,487 32,234 60,380 113,101
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) (318,444) 343,438 (24,994) - (6,483) 15,053 (8,570) -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (985) (69,996) 70,981 - (313) (12,804) 13,117 -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 276,127 (276,127) - - 19,518 (19,518) - -
New originated or purchased 1,260,886 - - 1,260,886 15,280 - - 15,280
Derecognised during the period (365,611) (24,171) (15,963) (405,745) (4,129) (2,024) (3,945) (10,098)
Net repayments (304,876) (25,701) (16,854) (347,431) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (22,077) 8,656 18,630 5,209
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation (59,468) (11,287) 27 (70,728) (134) 60 - (74)
Write-offs - - (21,375) (21,375) - - (21,375) (21,375)
Changes in accrued interest 15,971 2,509 1,002 19,482 - - - -
Modifications 324 140 198 662 - - - -
Foreign exchange movements (146,702) (14,248) (10,795) (171,745) (293) (276) (828) (1,397)
At 30 June 2022 3,877,064 337,896 190,351 4,405,311 21,856 21,381 57,409 100,646
Loans to micro, small and medium enterprises Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2021 2,661,786 631,347 262,951 3,556,084 24,490 46,852 88,567 159,909
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) 243,352 (243,352) - - 12,810 (12,810) - -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (150,051) 162,650 (12,599) - (1,342) 6,061 (4,719) -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) (20,344) (35,602) 55,946 - (4,085) (5,521) 9,606 -
New originated or purchased 821,123 - - 821,123 9,004 - - 9,004
Derecognised during the period (200,535) (35,251) (9,958) (245,744) (306) (1,409) (4,624) (6,339)
Net repayments (195,150) (17,612) (18,640) (231,402) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (18,909) (4,650) 16,257 (7,302)
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation (58,422) 9,423 (1,346) (50,345) (294) 521 (1,768) (1,541)
Write-offs - - (22,148) (22,148) - - (22,148) (22,148)
Other movements 6 131 3,588 3,725 - - - -
Modifications 673 210 279 1,162 - - - -
Foreign exchange movements (76,541) (13,331) (7,810) (97,682) (172) (179) (1,359) (1,710)
At 30 June 2021 3,025,897 458,613 250,263 3,734,773 21,196 28,865 79,812 129,873
Consumer loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2022 1,920,145 239,240 86,519 2,245,904 56,365 65,208 61,355 182,928
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) (343,847) 354,918 (11,071) - (33,740) 40,719 (6,979) -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (10,820) (78,136) 88,956 - (4,488) (34,428) 38,916 -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 208,669 (208,556) (113) - 42,800 (42,724) (76) -
New originated or purchased 1,265,105 - - 1,265,105 49,248 - - 49,248
Derecognised during the period (415,618) (20,118) (10,516) (446,252) (10,399) (4,287) (5,420) (20,106)
Net repayments (386,266) (25,030) (6,817) (418,113) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (35,335) 55,247 35,894 55,806
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation 1,353 (139) (27) 1,187 (52) (12) - (64)
Write-offs - - (55,021) (55,021) - - (55,021) (55,021)
Changes in accrued interest 1,274 2,392 2,911 6,577 - - - -
Modification 647 156 66 869 - - - -
Foreign exchange movements (22,303) (1,849) (779) (24,931) (113) (109) (92) (314)
At 30 June 2022 2,218,339 262,878 94,108 2,575,325 64,286 79,614 68,577 212,477
Consumer loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2021 1,499,148 267,075 187,328 1,953,551 48,240 66,330 126,984 241,554
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) 109,255 (109,255) - - 16,828 (16,828) - -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (103,770) 121,644 (17,874) - (6,994) 19,988 (12,994) -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) (24,762) (42,815) 67,577 - (9,538) (13,084) 22,622 -
New originated or purchased 467,005 - - 467,005 21,234 - - 21,234
Derecognised during the period (127,652) (13,609) (15,632) (156,893) (304) (3,282) (8,754) (12,340)
Net repayments (236,450) (29,243) (8,317) (274,010) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (24,439) 650 40,629 16,840
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation (2,165) (1,003) (403) (3,571) (10) (25) (104) (139)
Write-offs - - (84,905) (84,905) - - (84,905) (84,905)
Other movements 291 517 302 1,110 - - - -
Modification 1,378 223 627 2,228 - - - -
Foreign exchange movements (9,651) (984) (1,439) (12,074) (25) (166) (48) (239)
At 30 June 2021 1,572,627 192,550 127,264 1,892,441 44,992 53,583 83,430 182,005
Mortgage loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2022 3,418,971 570,243 123,227 4,112,441 2,802 22,080 38,604 63,486
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) (495,160) 535,191 (40,031) - (1,737) 14,548 (12,811) -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (5,806) (20,310) 26,116 - (796) (1,571) 2,367 -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 596,987 (596,987) - - 12,390 (12,390) - -
New originated or purchased 616,575 - - 616,575 647 - - 647
Derecognised during the period (154,779) (26,612) (14,294) (195,685) (130) (1,122) (4,878) (6,130)
Net repayments (196,938) (23,733) (10,282) (230,953) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (10,757) (8,946) 9,536 (10,167)
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation (5,850) (623) - (6,473) 15 (58) - (43)
Write-offs - - (2,598) (2,598) - - (2,598) (2,598)
Changes in accrued interest (3,407) (1,069) (743) (5,219) - - - -
Modification 442 108 95 645 - - - -
Foreign exchange movements (162,939) (29,183) (5,367) (197,489) (141) (606) (810) (1,557)
At 30 June 2022 3,608,096 407,025 76,123 4,091,244 2,293 11,935 29,410 43,638
Mortgage loans Gross carrying amount Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
In thousands of GEL (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired) (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit im-paired)
At 1 January 2021 2,998,751 584,669 275,594 3,859,014 3,336 21,322 71,068 95,726
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to lifetime (from Stage 1 and Stage 3 to Stage 2) 323,587 (323,587) - - 6,033 (6,033) - -
- to defaulted (from Stage 1 and Stage 2 to Stage 3) (165,197) 183,768 (18,571) - 455 4,467 (4,922) -
- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) (26,162) (21,457) 47,619 - (3,649) (1,608) 5,257 -
New originated or purchased 502,412 - - 502,412 1,071 - - 1,071
Derecognised during the period (64,248) (35,203) (17,465) (116,916) 1,741 (814) (6,621) (5,694)
Net repayments (234,579) (23,060) (17,314) (274,953) - - - -
Net re-measurement due to stage transfers, changes in risk parameters and - - - - (6,513) (6,211) 10,989 (1,735)
repayments
Movements without impact on credit loss allowance charge for the period:
Re-segmentation (29,466) (28,124) (116) (57,706) (18) (587) 7 (598)
Write-offs - - (267) (267) - - (267) (267)
Modification 913 72 189 1,174 - - - -
Foreign exchange movements (94,496) (11,073) (11,111) (116,680) (82) (185) (180) (447)
At 30 June 2021 3,211,515 326,005 258,558 3,796,078 2,374 10,351 75,331 88,056
The contractual amounts outstanding on loans to customers that have been
written off during the period partially or fully, but are still subject to
enforcement activity was principal amount GEL 13,290 thousand (31 December
2021: GEL 19,238 thousand), accrued interest GEL 2,250 thousand (31 December
2021: GEL 4,963 thousand) and accrued off balance sheet penalty GEL 1,102
thousand (31 December 2021: GEL 2,113 thousand).
The table below presents the economic sector risk concentrations within the
customer loan portfolio:
30 June 2022 31 December 2021
In thousands of GEL Amount % Amount %
Individual 6,787,113 39% 6,500,009 38%
Real Estate 1,627,620 9% 1,591,277 9%
Hospitality, restaurants & Leisure 1,188,489 7% 1,350,184 8%
Energy & Utilities 1,029,938 6% 1,095,387 7%
Construction 994,097 6% 1,041,416 6%
Trade 981,878 6% 860,286 5%
Food Industry 878,734 5% 994,780 6%
Agriculture 775,650 4% 838,719 5%
Healthcare 409,680 2% 406,608 2%
Automotive 406,405 2% 309,043 2%
Services 342,206 2% 348,738 2%
Transportation 236,563 1% 224,066 1%
Pawn Shops 187,453 1% 159,851 1%
Metals and Mining 167,240 1% 43,132 0%
Financial Services 92,133 1% 112,937 1%
Communication 36,481 0% 41,191 0%
Other 1,392,835 8% 1,129,767 7%
Total gross loans and advances to customers 17,534,515 100% 17,047,391 100%
As of 30 June 2022, the Group had 181 borrowers (31 December 2021: 188
borrowers) with the aggregated gross loan amounts above GEL 5,000 thousand.
The total aggregated amount of these loans was GEL 4,804,576 thousand (31
December 2021: GEL 5,017,758 thousand) or 27% of the gross loan portfolio (31
December 2021: 29.4%).
The amount and type of collateral required depends on an assessment of the
credit risk of the counterparty. There are three key types of collateral:
· Real estate;
· Movable property including fixed assets, inventory and precious
metals;
· Financial assets including deposits, shares, and third party
guarantees.
The gross carrying amount of loans by stages, that have been modified since
initial recognition and for which stages have changed during the reporting
period:
in thousands of GEL 30 June 2022 31 December 2021
Stage 1 568,578 487,742
Stage 2 346,113 431,160
Stage 3 43,170 50,792
Total 957,861 969,694
At the central level a specific unit manages collateral to ensure that they
serve as an adequate mitigation for credit risk management purposes. In line
with the Group's internal policies, collateral provided to loans are evaluated
by the internal appraisal group (external reviewers are used in case of loans
to related parties or specific cases when complex objects are appraised). The
internal appraisal group is part of the collateral management unit and, in
order to ensure adequate and objective appraisal procedures, it is independent
from the loan granting process. Real estate collateral of significant value is
re-evaluated annually by internal appraisers. Statistical methods are used to
monitor the value of real estate collateral that are of non-significant value
and other types of collateral such as movable assets and precious metals.
In some instances, where the discounted recovery from the liquidation of
collateral (adjusted for the liquidity haircut and discounted for the period
of expected selling time) is larger than the estimated exposure at default, no
credit loss allowance is recognised. Collateral values include the contractual
price of third-party guarantees, which, due to their nature, are capped at the
loan's carrying value.
8 Premises, Equipment and Intangible Assets
In thousands of GEL Land, Premises and leasehold improvements Office and Other Construction in Total premises and Intangible Assets Total
equipment*
progress
equipment
Carrying amount at 1 January 2021 163,747 105,453 103,756 372,956 239,523 612,479
Additions 4,605 16,364 6,869 27,838 60,811 88,649
Transfers 2,708 (32) (2,708) (32) 32 -
Disposals (16,306) (4,975) (1,649) (22,930) (561) (23,491)
Transfer to financial leases and repossessed assets (614) (1,887) - (2,501) - (2,501)
Impairment charge to profit or loss - (3) - (3) - (3)
Depreciation/amortisation charge (2,789) (11,226) - (14,015) (15,164) (29,179)
Elimination of accumulated depreciation/amortisation on disposals 7,141 3,385 - 10,526 9 10,535
Effect of translation to presentation currency cost (58) (75) - (133) (134) (267)
Effect of translation to presentation currency accumulated depreciation 44 159 - 203 39 242
Carrying amount at 30 June 2021 158,478 107,163 106,268 371,909 284,555 656,464
Cost at 30 June 2021 202,731 273,380 106,268 582,379 396,952 979,331
Accumulated depreciation/amortisation including accumulated impairment loss at (44,253) (166,217) - (210,470) (112,397) (322,867)
30 June 2021
Carrying amount at 1 January 2022 159,748 122,269 110,489 392,506 319,963 712,469
Additions 6,848 32,986 15,503 55,337 57,515 112,852
Transfers 4,390 - (4,390) - - -
Disposals (424) (6,609) (1,475) (8,508) (7,531) (16,039)
Transfer to financial leases and repossessed assets - (323) - (323) - (323)
Reversal of/(charges to) impairment to profit or loss 618 (5) 490 1,103 - 1,103
Depreciation/amortisation charge (3,011) (11,133) - (14,144) (23,886) (38,030)
Elimination of accumulated depreciation/amortisation on disposals 127 3,805 - 3,932 - 3,932
Effect of translation to presentation currency cost (25) (223) (38) (286) (789) (1,075)
Effect of translation to presentation currency accumulated depreciation 29 80 - 109 19 128
Carrying amount at 30 June 2022 168,300 140,847 120,579 429,726 345,291 775,017
Cost at 30 June 2022 217,291 320,463 120,579 658,333 499,676 1,158,009
Accumulated depreciation/amortisation including accumulated impairment loss at (48,991) (179,616) - (228,607) (154,385) (382,992)
30 June 2022
*Office and other equipment include furniture and fixtures, computer and
office equipment, motor vehicles as well as other equipment.
On 18 June 2021, the Group sold land and buildings, where some of its back
office functions were located, for cash consideration of USD 25 million. USD
25 million (GEL 79.7 million) was received by 30 April 2022. Selling of those
assets was part of the Group's plan to gradually prepare for relocation to new
headquarter, which is in the process of construction. Under the plan, the
Group gradually discharged the occupied part of the buildings by 30 April 2022
and staff have been distributed to existing offices before the new headquarter
will be completed. During this period the property was being leased back using
IFRS 16 exemption for short term leases. Net carrying amount of disposed
properties was GEL 37,416 thousand, out of which net balance disposed from
premises and equipment were GEL 5,442 thousand, while the remaining part was
disposed from investment property. Net gain on disposal from the sale was
recognised as part of other operating income in the 2021 consolidated
financial statements of profit or loss in the amount of GEL 26,294 thousand.
Depreciation and amortisation charge presented on the face of the statement of
profit or loss and other comprehensive income include depreciation and
amortisation charge of premises and equipment, investment properties and
intangible assets.
Construction in progress consists of construction and refurbishment of branch
premises and the Bank's new headquarters. Upon completion, assets are to be
transferred to premises.
9 Due to Credit Institutions
In thousands of GEL 30 June 2022 31 December 2021
Due to other banks
Correspondent accounts and overnight placements 364,958 181,905
Deposits from banks 186,816 142,752
Total due to other banks 551,774 324,657
Other borrowed funds
Borrowings from foreign banks and international financial institutions 2,098,232 1,653,245
Borrowings from other local banks and financial institutions 34,190 24,855
Borrowings from National Bank of Georgia 891,612 981,419
Total other borrowed funds 3,024,034 2,659,519
Total amounts due to credit institutions 3,575,808 2,984,176
10 Customer Accounts
In thousands of GEL 30 June 2022 31 December 2021
State and public organisations
- Current/settlement accounts 581,552 577,020
- Term deposits 745,315 364,121
Other legal entities
- Current/settlement accounts 5,062,051 4,830,093
- Term deposits 1,050,085 914,824
Individuals
- Current/demand accounts 4,681,241 4,574,537
- Term deposits 3,652,661 3,777,577
Total customer accounts 15,772,905 15,038,172
State and public organisations include government owned businesses.
Economic sector concentrations within customer accounts are as follows:
In thousands of GEL 30 June 2022 31 December 2021
Amount %
Amount %
Individuals 8,322,881 53% 8,352,114 55%
Trade 1,321,199 8% 1,237,656 8%
Financial services 1,315,494 8% 1,178,046 8%
Government sector 976,151 6% 480,046 3%
Services 669,183 4% 713,164 5%
Construction 565,417 4% 598,856 4%
Energy & utilities 450,770 3% 542,425 4%
Real estate 443,397 3% 418,062 3%
Transportation 401,690 3% 403,248 3%
Healthcare 182,416 1% 194,648 1%
Hospitality & leisure 135,393 1% 155,778 1%
Metals and mining 99,082 1% 32,675 0%
Agriculture 63,670 0% 78,810 1%
Other 826,162 5% 652,644 4%
Total customer accounts 15,772,905 100% 15,038,172 100%
As at 30 June 2022 the Group had 129 customers (31 December 2021: 141
customers) with balances above GEL 10,000 thousand. Their aggregate balance
was GEL 5,342,068 thousand (31 December 2021: GEL 4,754,533 thousand) or 34%
of total customer accounts (31 December 2021: 32%).
As at 30 June 2022 included in customer accounts are deposits of GEL 46,066
thousand and GEL 100,010 thousand (31 December 2021: GEL 28,379 thousand and
GEL 109,404 thousand) held as collateral for irrevocable commitments under
letters of credit and guarantees issued, respectively. The latter is discussed
in Note 23. As at 30 June 2022, deposits held as collateral for loans to
customers amounted to GEL 409,127 thousand (31 December 2021: GEL 576,261
thousand). Refer to Note 24 for the disclosure of the fair value of customer
accounts. Information on related party balances is disclosed in Note 25.
11 Provisions for Performance Guarantees, Credit Related Commitment Liabilities and Charges
Movements in provisions for performance guarantees, credit related commitment
and liabilities and charges are as follows:
In thousands of GEL Perfor-mance guarantees Credit related commitments Provision for other liabilities and charges Provision related to insurance activities Total
Carrying amount as of 1 January 2022 4,620 3,624 7,952 25,358
9,162
Charges less releases recorded in profit or loss 1,352 (282) 60 4,918 6,048
Effect of translation to presentation currency (139) (127) - (140) (406)
Carrying amount at 30 June 2022 5,833 3,215 8,012 13,940 31,000
In thousands of GEL Perfor-mance guarantees Credit related commitments Provision for other liabilities and charges Provision related to insurance activities Total
Carrying amount as of 1 January 2021 4,427 5,424 7,979 7,505 25,335
Charges less releases recorded in profit or loss (1,251) (679) 9 (1,691) (3,612)
Effect of translation to presentation currency (163) (125) - - (288)
Carrying amount at 30 June 2021 3,013 4,620 7,988 5,814 21,435
Credit related commitments and performance guarantees: Impairment allowance
estimation methods differ for (i) letter of credits and guarantees and (ii)
undrawn credit lines. For letter of credits and guarantees allowance
estimation purposes the Group applies the staged approach and classifies them
in stage 1, stage 2 or stage 3. Significant stage 2 and stage 3 guarantees are
assessed individually. Non-significant stage 3 as well as all stage 1 and
stage 2 guarantees and letter of credits are assessed collectively using
exposure, marginal probability of conversion, loss given default and discount
factor. Amount of the expected allowance differs based on the classification
of the facility in the respective stage.
For impairment allowance assessment purposes, for undrawn exposures the Group
distinguishes between revocable and irrevocable loan commitments. For
revocable commitments, the Group does not create an impairment allowance. As
for the irrevocable undisbursed exposures the Group estimates utilization
parameter (which represents expected limit utilization percentage conditional
on the default event) in order to convert off-balance part of the exposure to
on-balance.
Once the respective on balance exposure is estimated, the Group applies the
same impairment framework approach as the one used for the respective type of
on balance exposures.
12 Debt Securities in Issue
As of 30 June 2022, debt securities in issue comprised of:
in thousands of GEL Currency Carrying amount as of 30 June 2022 Maturity Date Coupon rate Effective interest rate
Bonds issued on Irish Stock Exchange USD 711,126 6/19/2024 5.80% 6.40%
Bonds issued on Irish Stock Exchange USD 370,635 10/3/2024 10.80% 11.40%
Bonds issued on Irish Stock Exchange USD 220,998 2/4/2027 8.90% 9.90%
Private placement USD 91,618 8/18/2024 5.00% 5.40%
Private placement USD 44,851 5/11/2024 6.00% 6.10%
Bonds issued on Georgian Stock Exchange GEL 38,545 3/20/2023 TIBR 3M+3.25% 12.50%
Private placement USD 29,355 3/19/2023 6.50% 7.10%
Baku Stock Exchange CJSC AZN 5,261 9/23/2023 12.00% 12.40%
Baku Stock Exchange CJSC AZN 1,717 6/30/2024 12.00% 12.40%
Total debt securities in issue 1,514,106
As of 31 December 2021, debt securities in issue comprised of:
in thousands of GEL Currency Carrying amount as of 31 December 2021 Maturity Date Coupon rate Effective interest rate
Bonds issued on Irish Stock Exchange USD 918,504 6/19/2024 5.80% 6.40%
Bonds issued on Irish Stock Exchange USD 391,484 10/3/2024 10.80% 11.40%
Bonds issued on Irish Stock Exchange USD 228,174 2/4/2027 8.90% 9.90%
Private placement USD 96,723 8/18/2024 5.00% 5.40%
Bonds issued on Georgian Stock Exchange GEL 38,532 3/20/2023 TIBR 3M+3.25% 12.50%
Private placement USD 31,222 3/19/2023 6.50% 7.10%
Baku Stock Exchange CJSC AZN 5,649 9/23/2023 12.00% 12.40%
Total debt securities in issue 1,710,288
On 7 June 2022 the TBC Kredit completed the transaction of AZN 1 million
2-year 12% named, interest-baring, paperless, unsecured bonds issue (the
"Notes").
On 12 May 2022 the TBC Bank Group PLC completed the transaction of USD 15
million 2-year 6% senior unsecured bonds issue (the "Notes"). The private
placement is direct, unsecured and unsubordinated obligations of the Group,
issued in Georgia.
On 6 April 2022 the Bank completed the partial redemption of 2019 issued
senior bond in the amount of USD 55 million and incurred transaction fee of
USD 0.2 million. Consideration paid amounted to USD 52 million. The difference
between amount paid and amortised cost of the bond adjusted with transaction
fee was accounted as a gain on extinguishment of debt in the amount of USD 2
million recognized within other operating income.
On 28 October 2021, the Bank completed the transaction of USD 75 million
8.894% yield Additional Tier 1 Capital Perpetual Subordinated Notes issue
("AT1 Notes") and successfully returned to the international capital markets.
The AT1 Notes are listed on the regulated market of Euronext Dublin and are
rated B- by Fitch.
On 23 September 2021 the TBC Kredit completed the transaction of AZN 3 million
2-year 12% named, interest-baring, paperless, unsecured bonds issue (the
"Notes").
On 18 August 2021 the TBC Bank Group PLC completed the transaction of USD 31
million 3-year 5% senior unsecured bonds issue (the "Notes"). The private
placement is direct, unsecured and unsubordinated obligations of the Group,
issued in Georgia.
13 Subordinated Debt
As of 30 June 2022, subordinated debt issued by the following counterparties
comprised of:
In thousands of GEL Grant Date Maturity Date Currency Outstanding amount in original currency Outstanding amount in GEL
Asian Development Bank 10/18/2016 12/31/2026 USD 50,529 147,993
Private Lenders 6/8/2017 12/19/2024 USD 35,321 103,458
Global Climate Partnership Fund 11/20/2018 11/20/2028 USD 25,091 73,488
European Fund for Southeast Europe 12/21/2018 12/21/2028 USD 20,074 58,794
Green for Growth Fund 12/18/2015 12/16/2030 USD 15,236 44,624
BlueOrchard Microfinance Fund 12/14/2018 12/15/2025 USD 14,972 43,851
BlueOrchard Microfinance Fund 12/14/2018 12/14/2028 USD 14,957 43,807
European Fund for Southeast Europe 12/18/2015 12/16/2030 USD 7,617 22,310
European Fund for Southeast Europe 3/15/2016 3/17/2031 USD 7,616 22,305
ResponsAbility SICAV (Lux) Micro and SME Finance Fund 11/30/2018 11/30/2028 USD 5,938 17,392
ResponsAbility SICAV (Lux) Micro and SME Finance Fund 4/7/2022 4/7/2032 USD 5,133 15,033
ResponsAbility SICAV (Lux) - Micro and SME Finance Leaders 4/7/2022 4/7/2032 USD 6,038 17,685
ResponsAbility SICAV (Lux) - Financial Inclusion Fund 4/7/2022 4/7/2032 USD 3,925 11,496
ResponsAbility SICAV (Lux) - Financial Inclusion Fund 11/30/2018 11/30/2028 USD 3,119 9,136
ResponsAbility SICAV (Lux) - Microfinance Leaders 11/30/2018 11/30/2028 USD 1,006 2,947
Total subordinated debt 216,572 634,319
As of 31 December 2021, subordinated debt issued by the following
counterparties comprised of:
In thousands of GEL Grant Date Maturity Date Currency Outstanding amount in original currency Outstanding amount in GEL
Asian Development Bank 10/18/2016 12/31/2026 USD 50,486 156,386
Private lenders 6/8/2017 12/19/2024 USD 35,304 109,427
Global Climate Partnership Fund 11/20/2018 11/20/2028 USD 25,097 77,739
European Fund for Southeast Europe 12/21/2018 12/21/2028 USD 20,079 62,195
Green for Growth Fund 12/18/2015 12/16/2030 USD 15,189 47,048
BlueOrchard Microfinance Fund 12/14/2018 12/15/2025 USD 14,966 46,360
BlueOrchard Microfinance Fund 12/14/2018 12/14/2028 USD 14,954 46,321
European Fund for Southeast Europe 12/18/2015 12/16/2030 USD 7,594 23,523
European Fund for Southeast Europe 3/15/2016 3/17/2031 USD 7,592 23,517
ResponsAbility SICAV (Lux) Micro and SME Finance Fund 11/30/2018 11/30/2028 USD 5,930 18,369
ResponsAbility SICAV (Lux) - Financial Inclusion Fund 11/30/2018 11/30/2028 USD 3,115 9,649
ResponsAbility SICAV (Lux) - Microfinance Leaders 11/30/2018 11/30/2028 USD 1,005 3,113
Total subordinated debt 201,311 623,647
The debt ranks after all other creditors in case of liquidation.
Refer to Note 24 for the disclosure of the fair value of subordinated debt.
14 Share Capital
In thousands of GEL except for number of shares Number of Share capital
ordinary shares
As of 1 January 2021 55,155,896 1,682
As of 31 December 2021 55,155,896 1,682
As of 30 June 2022 55,155,896 1,682
As of 30 June 2022 the total authorised number of ordinary shares was
55,155,896 shares (31 December 2021: 55,155,896 shares). Each share has a
nominal value of one British Penny. All issued ordinary shares are fully paid
and entitled to dividends.
On 16 June 2022, TBC Bank Group PLC's shareholders passed a resolution to
declare a final dividend of GEL 2.16 per share. The dividend was recorded on
17 June 2022 and was paid on 15 July 2022.
On 12 August 2021, TBC Bank Group PLC's Board of directors declared an interim
dividend of GEL 1.5 per share. The dividend was recorded on 20 August 2021 and
was paid on 17 September 2021.
Part of the shares are held by employee benefit trust (EBT) for the purpose of
future employee share based payments plan. The number of shares held by trust
as at 30 June 2022 comprised 225,184 shares (31 December 2021: 641,391
shares). The EBT has waived its rights to receive dividends on such shares.
15 Share Based Payments
2022-2024 remuneration scheme:
The current compensation system was approved by shareholders at the TBC Bank
Group PLC's Annual General Meeting in June 2021 and came into effect on 1
January 2022. It covers the period 2022-2024 inclusive.
Share salary 2022-2024
The base salary of the executive management board members of the Bank,
including TBC Bank Group PLC CEO (the "Top Management") is determined based on
market practice and provides with a competitive fixed income to efficiently
retain and reward TBC's leadership.
For the CEO (both in his capacity as JSC TBC Bank's and TBC Bank Group PLC's
CEO) the base salary comprises cash salary payable in GEL on a monthly basis
and share salary. Salary shares are delivered during the first quarter of
the second year (i.e. the year after the performance year). The number of
shares is calculated based on the average share price of the last 10 days
preceding the Remuneration Committee decision date. Shares do not have
deferral period, are not subject to malus and claw back or any other
restrictions and are vested immediately upon delivery.
The Deputy CEO's base salary comprises only cash and is payable in GEL on a
monthly basis.
Variable Remuneration
Variable remuneration of the Top Management consists of the annual bonus
delivered in shares (the "Annual Bonus") and the share awards under Long Term
Incentive Plan (the "LTIP Award"). 60% of variable remuneration is LTIP Award
and the remainder 40% constitutes the Annual Bonus.
Variable remuneration (Annual Bonus and LTIP Awards) are subject to meeting
eligibility "gate KPIs", which, based on the Remuneration Committee's
recommendation, can be amended every year by the Board, and will only be
paid if the "gate KPIs" are met.
(a) Annual Bonus under Deferred Share plan 2022-2024
Annual Bonus is delivered in TBC PLC shares. The Top Management receives
annual bonus entirely in TBC PLC shares and it does not comprise any cash
component. The Annual Bonus KPIs are set at the beginning of each year in
relation to that year by the Remuneration Committee.
The maximum opportunity of the Annual Bonus for each member of the Top
Management is fixed at 135% of fixed salary. For achieving target
performance, no more than 50% of the maximum Annual Bonus opportunity is
payable. For threshold performance, no Annual Bonus is paid. The number of
Shares to be allocated is calculated based on the average share price of the
last 10 days preceding the Remuneration Committee's decision date. Annual
Bonus share awards are governed by the Deferred Share Plan of TBC PLC as
amended from time to time (the "Deferred Share Plan").
The Top Management's Annual Bonus awards are subject to a holding period (but
not continued employment) over 2 years period with 50% being released after
one year and remaining 50% being released at the end of second year. The
Annual Bonus is subject to malus and claw back provisions as described in the
Deferred Share Plan. During the holding period, participants are entitled to
vote at the shareholder meetings and receive dividends.
Full details of the current Annual Bonus scheme are described in the FY 2020
Annual Report of TBC Bank Group PLC.
(b) Long Term Incentive Plan (LTIP) 2022-2024
Long term incentive plan is used to provide a strong motivational tool to
achieve long term performance conditions and to provide rewards to the extent
those performance conditions are achieved. Performance conditions are chosen
to align the Group's and the Bank's executive directors' interests with
strategic objectives of the Group over multi-year periods and encourage a
long-term view.
The level of LTIP Award grant is determined pro rata from the LTIP maximum
opportunity based on the assessment of the base i.e., prior year's Annual
Bonus corporate KPIs performance. LTIP Awards granted will then be subject to
3-year LTIP forward-looking performance conditions and will vest at the end of
5-year period following the grant. LTIP Award forward-looking KPIs are set at
the beginning of each year in relation to that year's cycle by the
Remuneration Committee.
The maximum opportunity of the LTIP Award in any given year is 161% of salary.
100% of the award will crystalize for achieving the maximum performance set
for each measure. At threshold level of performance, for each measure, 25% of
the award will crystalize.
The Remuneration Committee has the discretion, any time after an award has
been granted, to reduce (including to zero) an award if the Remuneration
Committee considers that either the underlying financial performance of the
Bank or the performance of the individual is such that the level of vesting
cannot be justified. The Participants are not entitled to any dividend or
voting rights until the LTIP Award vests.
Full details of the current LTIP scheme are described in the FY 2020 Annual
Report of TBC Bank Group PLC.
2019-2021 remuneration system:
The compensation system was approved by shareholders at the AGM on 21 May 2018
and came into effect on 1 January 2019 and it covers the period 2019-2021
inclusive.
Deferred share salary 2019-2021
Part of the top management salary was paid with shares with the objective of
closely promoting the long-term success of the Group and aligning senior
executive directors' and shareholders' interests. Shares were usually
delivered during the first quarter of the second year (i.e. the year after the
performance year). 50% of the shares had 1 year deferral period and the
remaining 50% were deferred for 2 years from the delivery date. The shares
were registered in the trustees name as nominee for the participants and the
participants were entitled to receive dividends. Starting from 2021, deferred
share salary is no longer subject to the deferral and will be vested
immediately upon delivery.
Deferred Bonus plan 2019-2021
The annual bonus for the top management was determined as to the extent that
the annual KPIs have been met. Shares were usually delivered during the first
quarter of the second year (i.e. the year after the performance year) and the
exact date was determined by the Board. 50% of the shares had 1 year deferral
period and the remaining 50% was deferred for 2 years from the delivery date.
The shares were registered in the trustees name as nominee for the
participants and the participants were entitled to receive dividends.
Annual KPIs were set by the Remuneration Committee at the beginning of each
year in relation to that year and approved by the Board. To the extent that
the KPIs were achieved, the Remuneration Committee may recommend to the Board
whether an award may be made and the amount of such award. The Group did not
pay guaranteed bonuses to executive directors. The nature of the KPIs with
their specific weightings and targets is disclosed in the published annual
report. Awards are subject to the Group's malus and clawback policies until
the end of the relevant holding period. If at any time after making the award
there is a material misstatement in the financial results for the year in
respect of which the award was formally granted, the Remuneration Committee
can recommend to the Board that some or all of the award for that year or any
subsequent financial year that is unvested (or unpaid) to lapse (or not be
paid).
The number of shares was calculated based on the average share price of the
last 10 days preceding the committee decision date.
Long Term Incentive Plan (LTIP) 2019-2021
Long term incentive plan is used to provide a strong motivational tool to
achieve long term performance conditions and to provide rewards to the extent
those performance conditions are achieved. Performance conditions are chosen
to align the Group's and the Bank's executive directors' interests with
strategic objectives of the Group over multi-year periods and encourage a
long-term view. In order for the shares to be delivered, the executive
directors need to meet rolling performance conditions over the 3 year
performance period.
More details about the share based payments (deferred share salary, deferred
annual bonus and LTIP) are given in Remuneration Committee reports for FY 2019
and 2020 available publicly.
Tabular information on the schemes is given below:
30 June 2022 31 December 2021
Number of unvested shares at the beginning of the period 2,125,246 3,028,818
Number of shares granted
Number of shares granted - Deferred salary 36,659 -
Number of shares granted - Deferred bonus 286,301 -
Number of shares granted - LTIP 424,114 -
Number of shares granted - Middle management, subsidiaries' management and - 321,453
other eligible employees
Number of shares granted 747,074 321,453
Change in estimates for 2019-2021 awards - (361,739)
Change in estimates of number of shares expected to be granted - (361,739)
Change in estimate of number of shares expected to vest based on changes in (35,879) (169,753)
share price and exchange rate
Number of shares vested
2017 year award - 80% vesting - (451,251)
2018 year award - 10% vesting - (57,102)
2018 year award - 80% vesting (456,815) -
2019 year award - MM 33% vesting (47,401) (47,401)
2019 year award - TM 50% vesting (137,779) (137,779)
2020 year award - MM 33% vesting (14,846) -
2020 year award - TM 50% vesting (45,902) -
2021 year award - TM 100% vesting (89,094) -
Number of shares vested (791,837) (693,533)
Number of unvested shares at the end of the period 2,044,604 2,125,246
* The maximum amount is fixed share compensations for deferred for top
management, the exact number will be calculated as per policy.
Expense recognised as staff cost during the period was GEL 13,857 thousand (30
June 2021: GEL 13,616 thousand).
Tax part of the existing bonus system is accounted under equity settled basis.
Staff costs related to equity settled part of the share based payment schemes
are recognised in the income statement on a straight line basis over the
vesting period of each relevant tranche and corresponding entry is credited to
share based payment reserve in equity.
In 2019 the Group established employee benefit trust (EBT) set up by the
Executive Equity Compensation Trustee - Sanne Fiduciary Services Limited (the
"Trustee") which acts as the trustee of the Group's share based payments plan.
It purchases TBC Bank Group PLC's shares from the open market and holds them
before they are awarded to participants and vesting date is due. The number of
shares to be purchased and held are instructed by the TBC Bank Group PLC's .
The shares are presented as treasury shares under Shares held by trust
category in the Statement of Financial Position until they are awarded to
participants. As at 30 June 2022 the share number held by Trustee was 225,184
(31 December 2021: 641,391), which represents 0.4% of total outstanding shares
(31 December 2021:1.2%).
16 Earnings per Share
Basic earnings per share are calculated by dividing the profit or loss
attributable to the owners of the Group by the weighted average number of
ordinary shares in issue during the period.
In thousands of GEL except for number of shares 30 June 2022 30 June 2021
Profit for the period attributable to the owners of the Group 458,465 399,168
Weighted average number of ordinary shares in issue 54,772,304 54,451,777
Basic earnings per ordinary share attributable to the owners of the Group 8.37 7.33
(expressed in GEL per share)
Diluted earnings per share are calculated by dividing the profit or loss
attributable to owners of the Group by the weighted average number of ordinary
shares adjusted for the effects of all dilutive potential ordinary shares
during the year. Ordinary shares with dilutive potential represent those
shares, that were granted to the participants of the share based payments
scheme and are not yet distributed .
In thousands of GEL except for number of shares 30 June 2022 30 June 2021
Profit for the period attributable to the owners of the Group 458,465 399,168
Weighted average number of ordinary shares in issue adjusted for the effects 56,423,254 55,156,405
of all dilutive potential ordinary shares during the period
Diluted earnings per ordinary share attributable to the owners of the Group 8.13 7.24
(expressed in GEL per share)
17 Segment Analysis
The Management Board (the "Board") is the chief operating decision maker and
it reviews the Group's internal reporting in order to assess the performance
and to allocate resources. In 2022 the Group made following re-segmentations:
· Standard annual re-segmentation after which some of the
clients were reallocated to different segments - GEL 69,578 thousand of loans
and GEL 65,630 thousand of customer accounts were transferred from micro,
small and medium enterprises to Corporate segment.
· Space segment has been fully transferred from micro,
small and medium enterprises to retail segment during the second half of 2021
in the amount of GEL 30,907 thousand of loans and GEL 13,328 thousand of
customer accounts due to changes in segment definitions. The underlying
rationale was the composition of product base, offered by Space to its
customers. The majority of such products are consumer, fast consumer and
instalment loans, which by their nature represent the retail segment.
Upon the annual review of business segmentation, the limits for corporate
segment has been changed as follows:
· Annual revenue limit increased from GEL 12.0 million to
GEL 20.0 million;
· Granted facilities limit raised from GEL 5.0 million to
GEL 7.0 million.
The definition has been updated starting from 1st of January 2022. The updated
changes are reflected in segments' definitions below.
The operating segments according to the definition are determined as follows:
· Corporate - a legal entity/group of affiliated entities
with an annual revenue exceeding GEL 20 million or which has been granted
facilities of more than GEL 7.0 million. Some other business customers may
also be assigned to the CIB segment or transferred to the micro, small and
medium enterprises segment on a discretionary basis. In addition, CIB includes
Wealth Management private banking services to high-net-worth individuals
with a threshold of US$ 250,000 on assets under management (AUM), as well as
on discretionary basis;
· Retail - non-business individual customers; or
individual customers of the fully digital bank, Space, TBC Bank Uzbekistan;
· Micro, small and medium enterprises - business
customers who are not included in the CIB segment;
· Corporate centre and other operations - comprises the
Treasury, other support and back office functions, and non-banking
subsidiaries of the Group.
Business customers are all legal entities or individuals who have been granted
a loan for business purposes.
The Board of Directors assesses the performance of the operating segments
based on a measure of profit before income tax.
The reportable segments are the same as the operating segments.
No revenue from transactions with a single external customer or counterparty
amounted to 10% or more of the Group's total revenue in as 30 June 2022 and 31
December 2021.
The vast majority of the entity's revenues are attributable to Georgia.
A summary of the Group's reportable segments as 30 June 2022 and 2021 is
provided below:
Segment disclosure below is prepared with the effect of 2022 re-segmentations
as described above.
In thousands of GEL Corpo-rate Retail Micro, small and medium enterprises Corpo-rate center and other operations Total
30 June 2022
- Interest income 304,834 419,335 226,646 129,647 1,080,462
- Interest expense (164,737) (79,072) (5,331) (240,848) (489,988)
- Net gains on currency swaps - - - 1,717 1,717
- Inter-segment interest income/(expense) 51,754 (121,894) (104,377) 174,517 -
- Net interest income 191,851 218,369 116,938 65,033 592,191
- Fee and commission income 39,489 159,233 15,305 26,356 240,383
- Fee and commission expense (4,187) (81,714) (5,780) (7,240) (98,921)
- Net fee and commission income 35,302 77,519 9,525 19,116 141,462
- Insurance profit - - - 10,965 10,965
- Net gains/(losses) from derivatives, foreign currency operations and 59,481 33,468 23,683 (2,255) 114,377
translation
- Net gains from disposal of investment securities measured at fair value 910 - - 1,315 2,225
through other comprehensive income
- Other operating income 944 2,265 382 11,967 15,558
- Share of (loss)/profit of associate (126) - - 249 123
- Other operating non-interest income and insurance profit 61,209 35,733 24,065 22,241 143,248
- Credit loss recovery/(allowance) for loans to customers 3,080 (49,932) (3,670) - (50,522)
- Credit loss (allowance)/recovery for performance guarantees and credit (1,295) 146 79 - (1,070)
related commitments
- Credit loss allowance for finance lease receivables - - - (562) (562)
- Credit loss recovery/(allowance) for other financial assets 1,062 (32) - (1,728) (698)
- Credit loss (allowance)/recovery for financial assets measured at fair (140) - - 1,408 1,268
value through other comprehensive income
- Net recovery/(impairment) of non-financial assets 331 (23) (217) (97) (6)
- Operating profit after expected credit and non-financial asset impairment 291,400 281,780 146,720 105,411 825,311
losses
- Staff costs (27,117) (80,643) (31,076) (37,655) (176,491)
- Depreciation and amortization (3,216) (29,289) (6,823) (8,004) (47,332)
- Provision for liabilities and charges - - - (60) (60)
- Administrative and other operating expenses (9,790) (44,772) (11,394) (24,746) (90,702)
- Operating expenses (40,123) (154,704) (49,293) (70,465) (314,585)
- Profit before tax 251,277 127,076 97,427 34,946 510,726
- Income tax expense (25,434) (13,651) (9,944) (3,152) (52,181)
- Profit for the period 225,843 113,425 87,483 31,794 458,545
30 June 2022
Total gross loans and advances to customers reported 6,462,635 6,666,569 4,405,311 - 17,534,515
Total customer accounts reported 7,589,188 5,906,886 1,562,211 714,620 15,772,905
Total credit related commitments and performance guarantees 2,485,086 168,123 378,571 - 3,031,780
For comparison purposes segment disclosure for 2021 below is prepared both
with and without re-segmentations effect of 2022 as described above.
In thousands of GEL Corporate Retail Micro, small and medium enterprises Corpo-rate centre and other operations Total
30 June 2021
- Interest income 273,556 325,252 175,079 125,298 899,185
- Interest expense (121,590) (63,388) (5,215) (254,243) (444,436)
- Net gains on currency swaps - - - 13,149 13,149
- Inter-segment interest income/(expense) 24,916 (73,809) (67,702) 116,595 -
- Net interest income 176,882 188,055 102,162 799 467,898
- Fee and commission income 31,257 120,944 11,274 14,118 177,593*
- Fee and commission expense (5,212) (54,863) (5,181) (4,036) (69,292)*
- Net fee and commission income 26,045 66,081 6,093 10,082 108,301
- Insurance profit - - - 9,873 9,873
- Net gains from derivatives, foreign currency operations and translation 23,245 14,201 11,061 11,677 60,184
- Net gains from disposal of investment securities measured at fair value 515 - - 6,526 7,041
through other comprehensive income
- Other operating income 1,642 3,795 442 31,604 37,483
- Share of profit of associates - - - 596 596
- Other operating non-interest income and insurance profit 25,402 17,996 11,503 60,276 115,177
- Credit loss recovery/(allowance) for loans to customers 33,993 (10,157) 8,727 - 32,563
- Credit loss recovery/(allowance) for performance guarantees and credit 1,599 405 (74) - 1,930
related commitments
- Credit loss allowance for finance lease receivables - - - (2,515) (2,515)
- Credit loss allowance for other financial assets (625) (3,309) - (1,392) (5,326)
- Credit loss recovery for financial assets measured at fair value through 738 - - 1,104 1,842
other comprehensive income
- Net recovery/(impairment) of non-financial assets 7 108 23 (585) (447)
- Operating profit after expected credit and non-financial asset impairment 264,041 259,179 128,434 67,769 719,423
losses
- Staff costs (22,140) (67,553) (26,281) (32,097) (148,071)
- Depreciation and amortisation (2,454) (24,060) (5,408) (4,779) (36,701)
- Provision for liabilities and charges - - - (9) (9)
- Administrative and other operating expenses (7,618) (37,999) (10,165) (16,365) (72,147)
- Operating expenses (32,212) (129,612) (41,854) (53,250) (256,928)
- Losses from modifications of financial instruments (856) (642) (93) - (1,591)
- Profit before tax 230,973 128,925 86,487 14,519 460,904
- Income tax expense (26,845) (13,754) (10,978) (5,948) (57,525)
- Profit for the period 204,128 115,171 75,509 8,571 403,379
30 June 2021
Total gross loans and advances to customers reported 5,921,212 5,719,426 3,634,288 - 15,274,926
Total customer accounts reported 6,004,819 5,301,115 1,318,558 245,926 12,870,418
Total credit related commitments and performance guarantees 2,997,768 177,427 335,610 - 3,510,805
*Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
Segment disclosure for 2021 below is prepared without the effect of 2022
re-segmentations as described above.
In thousands of GEL Corpo-rate Retail Micro, small and medium enterprises Corpo-rate centre and other operations Total
30 June 2021
- Interest income 271,402 321,483 181,002 125,298 899,185
- Interest expense (121,201) (63,061) (5,931) (254,243) (444,436)
- Net gains on currency swaps - - - 13,149 13,149
- Inter-segment interest income/(expense) 24,865 (72,867) (68,593) 116,595 -
- Net interest income 175,066 185,555 106,478 799 467,898
- Fee and commission income 46,861 93,291* 23,323 14,118 177,593*
- Fee and commission expense (34,754) (15,804)* (14,698) (4,036) (69,292)*
- Net fee and commission income 12,107 77,487 8,625 10,082 108,301
- Insurance profit - - - 9,873 9,873
- Net gains from derivatives, foreign currency operations and translation 22,576 14,201 11,730 11,677 60,184
- Net gains from disposal of investment securities measured at fair value 515 - - 6,526 7,041
through other comprehensive income
- Other operating income 1,642 3,511 726 31,604 37,483
- Share of profit of associates - - - 596 596
- Other operating non-interest income and insurance profit 24,733 17,712 12,456 60,276 115,177
- Credit loss recovery/(allowance) for loans to customers 33,220 (10,344) 9,687 - 32,563
- Credit loss recovery/(allowance) for performance guarantees and credit 1,599 405 (74) - 1,930
related commitments
- Credit loss allowance for finance lease receivables - - - (2,515) (2,515)
- Credit loss allowance for other financial assets (625) (3,309) - (1,392) (5,326)
- Credit loss recovery for financial assets measured at fair value through 738 - - 1,104 1,842
other comprehensive income
- Net recovery/(impairment) of non-financial assets 7 108 23 (585) (447)
- Operating profit after expected credit and non-financial asset impairment 246,845 267,614 137,195 67,769 719,423
losses
- Staff costs (22,140) (66,060) (27,774) (32,097) (148,071)
- Depreciation and amortisation (2,454) (23,609) (5,859) (4,779) (36,701)
- Provision for liabilities and charges - - - (9) (9)
- Administrative and other operating expenses (7,618) (34,525) (13,639) (16,365) (72,147)
- Operating expenses (32,212) (124,194) (47,272) (53,250) (256,928)
- Losses from modifications of financial instruments (856) (642) (93) - (1,591)
- Profit before tax 213,777 142,778 89,830 14,519 460,904
- Income tax expense (24,846) (15,329) (11,402) (5,948) (57,525)
- Profit for the period 188,931 127,449 78,428 8,571 403,379
30 June 2021
Total gross loans and advances to customers reported 5,851,634 5,688,519 3,734,773 - 15,274,926
Total customer accounts reported 6,185,115 5,287,787 1,397,516 - 12,870,418
Total credit related commitments and performance guarantees 2,999,097 177,427 334,281 - 3,510,805
*Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
Segment disclosure for 2021 below is prepared without the effect of 2022
re-segmentations as described above.
In thousands of GEL
Corpo-rate
Retail
Micro, small and medium enterprises
Corpo-rate centre and other operations
Total
30 June 2021
- Interest income
271,402
321,483
181,002
125,298
899,185
- Interest expense
(121,201)
(63,061)
(5,931)
(254,243)
(444,436)
- Net gains on currency swaps
-
-
-
13,149
13,149
- Inter-segment interest income/(expense)
24,865
(72,867)
(68,593)
116,595
-
- Net interest income
175,066
185,555
106,478
799
467,898
- Fee and commission income
46,861
93,291*
23,323
14,118
177,593*
- Fee and commission expense
(34,754)
(15,804)*
(14,698)
(4,036)
(69,292)*
- Net fee and commission income
12,107
77,487
8,625
10,082
108,301
- Insurance profit
-
-
-
9,873
9,873
- Net gains from derivatives, foreign currency operations and translation
22,576
14,201
11,730
11,677
60,184
- Net gains from disposal of investment securities measured at fair value
through other comprehensive income
515
-
-
6,526
7,041
- Other operating income
1,642
3,511
726
31,604
37,483
- Share of profit of associates
-
-
-
596
596
- Other operating non-interest income and insurance profit
24,733
17,712
12,456
60,276
115,177
- Credit loss recovery/(allowance) for loans to customers
33,220
(10,344)
9,687
-
32,563
- Credit loss recovery/(allowance) for performance guarantees and credit
related commitments
1,599
405
(74)
-
1,930
- Credit loss allowance for finance lease receivables
-
-
-
(2,515)
(2,515)
- Credit loss allowance for other financial assets
(625)
(3,309)
-
(1,392)
(5,326)
- Credit loss recovery for financial assets measured at fair value through
other comprehensive income
738
-
-
1,104
1,842
- Net recovery/(impairment) of non-financial assets
7
108
23
(585)
(447)
- Operating profit after expected credit and non-financial asset impairment
losses
246,845
267,614
137,195
67,769
719,423
- Staff costs
(22,140)
(66,060)
(27,774)
(32,097)
(148,071)
- Depreciation and amortisation
(2,454)
(23,609)
(5,859)
(4,779)
(36,701)
- Provision for liabilities and charges
-
-
-
(9)
(9)
- Administrative and other operating expenses
(7,618)
(34,525)
(13,639)
(16,365)
(72,147)
- Operating expenses
(32,212)
(124,194)
(47,272)
(53,250)
(256,928)
- Losses from modifications of financial instruments
(856)
(642)
(93)
-
(1,591)
- Profit before tax
213,777
142,778
89,830
14,519
460,904
- Income tax expense
(24,846)
(15,329)
(11,402)
(5,948)
(57,525)
- Profit for the period
188,931
127,449
78,428
8,571
403,379
30 June 2021
Total gross loans and advances to customers reported
5,851,634
5,688,519
3,734,773
-
15,274,926
Total customer accounts reported
6,185,115
5,287,787
1,397,516
-
12,870,418
Total credit related commitments and performance guarantees
2,999,097
177,427
334,281
-
3,510,805
* Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
in thousands of GEL Corporate Retail Micro, small and medium enterprises Corporate centre and other operations Total
30 June 2022
- Fee and commission income 39,489 159,233 15,305 26,356 240,383
- Other operating income 944 2,265 382 11,967 15,558
Total 40,433 161,498 15,687 38,323 255,941
Timing of revenue recognition:
- At point in time 40,433 161,015 15,687 38,323 255,458
- Over a period of time - 483 - - 483
in thousands of GEL Corporate Retail Micro, small and medium enterprises Corporate centre and other operations Total
30 June 2021
- Fee and commission income 46,861 93,291* 23,323 14,118 177,593*
- Other operating income 1,642 3,511 726 31,604 37,483
Total 48,503 96,802* 24,049 45,722 215,076*
Timing of revenue recognition:
- At point in time 48,474 95,892* 24,046 45,722 214,134*
- Over a period of time 29 910 3 - 942
* Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
Reportable segments' assets were reconciled to total assets as
follows:
in thousands of GEL 30 June 2022 31 December 2021
Total segment assets (gross loans and advances to customers) 17,534,515 17,047,391
Credit loss allowance (403,506) (410,246)
Cash and cash equivalents 2,739,226 1,722,137
Mandatory cash balances with National Bank of Georgia and the Central Bank of 2,108,455 2,087,141
Uzbekistan
Due from other banks 42,552 79,142
Investment securities measured at fair value through other comprehensive 1,915,987 1,938,196
income
Bonds carried at amortised cost 27,962 49,582
Current income tax prepayment 1,565 194
Deferred income tax asset 13,876 12,357
Other financial assets 402,621 453,115
Finance lease receivables 253,057 262,046
Other assets 454,779 397,079
Premises and equipment 429,726 392,506
Intangible assets 345,291 319,963
Investment properties 20,506 22,892
Goodwill 59,964 59,964
Right of use assets 77,039 70,513
Investments in associates 3,466 4,589
Total assets per statement of financial position 26,027,081 24,508,561
Reportable segments' liabilities are reconciled to total liabilities as
follows:
in thousands of GEL 30 June 2022 31 December 2021
Total segment liabilities (customer accounts) 15,772,905 15,038,172
Due to credit institutions 3,575,808 2,984,176
Debt securities in issue 1,514,106 1,710,288
Current income tax liability 13,870 86,762
Deferred income tax liability 4,349 10,979
Provisions for liabilities and charges 31,000 25,358
Other financial liabilities 283,154 139,811
Other liabilities 116,384 130,972
Subordinated debt 634,319 623,647
Lease Liabilities 70,491 66,167
Total liabilities per statement of financial position 22,016,386 20,816,332
18 Interest Income and Expense
In thousands of GEL 30 June 2022 30 June 2021
Interest income calculated using effective interest method
Loans and advances to customers 939,473 762,432
Investment securities measured at fair value through OCI 87,612 98,500
Due from other banks 16,279 9,225
Bonds carried at amortised cost 3,512 1,344
Other financial asset 2,669 1,186
Other interest income
Finance lease receivables 30,917 26,498
Total interest income 1,080,462 899,185
Interest expense
Customer accounts 279,815 230,839
Due to credit institutions 116,639 125,448
Subordinated debt 25,803 27,624
Debt securities in issue 65,726 58,989
Other interest expense
Lease liabilities 1,884 1,452
Other 121 84
Total interest expense 489,988 444,436
Net gains on currency swaps 1,717 13,149
Net interest income 592,191 467,898
During the six months ended 30 June 2022 the interest accrued on defaulted
loans amounted to GEL 17,099 thousand (30 June 2021: 34,663 GEL thousand).
During six months ended 30 June 2022 capitalized borrowing costs in the amount
of GEL 897 thousand (six months ended 30 June 2021: GEL 874 thousand), was
attributable to the development of the Bank's headquarters. The capitalisation
rate used to determine the amount of borrowing costs eligible for
capitalisation is weighted average of interest bearing liabilities by
currencies: 8.6% in GEL, 2.5% in USD and 0.5 % in EUR. (2021: 7.5% in GEL,
3.0% in USD and 1.4% in EUR).
19 Fee and Commission Income and Expense
In thousands of GEL 30 June 2022 30 June 2021
Fee and commission income in respect of financial instruments not at fair
value through profit or loss:
Card operations 111,175 81,331*
Settlement transactions 82,936 61,375
Guarantees issued 19,851 18,369
Cash transactions 5,419 3,959
Issuance of letters of credit 3,165 2,913
Foreign exchange operations 2,526 964
Other 15,311 8,682
Total fee and commission income 240,383 177,593*
Fee and commission expense in respect of financial instruments not at fair
value through profit or loss:
Card operations 70,863 48,381*
Settlement transactions 10,337 8,373
Cash transactions 3,879 3,104
Guarantees received 1,470 1,279
Letters of credit 524 1,040
Foreign exchange operations 148 156
Other 11,700 6,959
Total fee and commission expense 98,921 69,292*
Net fee and commission income 141,462 108,301
* Certain amounts do not correspond to the 2021 condensed consolidated interim
statements as they reflect the certain restatements as described in Note 2.
20 Net Gains from Currency Derivatives, Foreign Currency Operations and Translation
in thousands of GEL 30 June 2022 30 June 2021
Net gains/(losses) from trading in foreign currencies 122,269 32,650
Net gains/(losses) from foreign exchange translation (7,999) 27,230
Net gains/(losses) from derivative financial instruments 107 304
Total net gains from currency derivatives, foreign currency operations and 114,377 60,184
translation
21 Income Taxes
As at 30 June 2022, the statutory income tax rate applicable to the majority
of the Group's income is 15% (six months ended 30 June 2021: 15%). On 12 June
2018, the new amendment to the current corporate taxation model came into
force that postpones tax relief for re-invested profit from 1 January 2019 to
1 January 2023 for commercial banks, credit unions, insurance organizations,
microfinance organizations and pawnshops. As a result, deferred tax
assets/liabilities are measured to the amounts that are realizable until 31
December 2022.
22 Financial and Other Risk Management
Climate risk
The Group's largest operations are located in Georgia hence the climate risk
overview is done by the management from Georgian perspective. The Georgia's
2030 Climate Change Strategy and Climate Action Plan lays out different policy
measures on which TBC Bank based its identification of the potential impact of
the policy measures on different economic sectors. As a summary of the
potential impact of the various transition risks and physical risks
identified, the transitional risks in Georgia are low, considering, that trade
and services dominate the Georgian economy, the policy measures outlined in
the Georgia's 2030 Climate Change Strategy will have overall low impact on the
economic sectors, especially in short and medium term. The Georgia's 2030
Climate Change Strategy takes into consideration that Georgia is a
transitional and growing economy, and therefore the government strategy is not
to impede the growth of the GDP with policy measures and rather to support a
smooth transition where necessary. It is worth noting, that the economic
sectors most affected by transitional risks world-wide such as mining crude
petroleum, natural gas and metal ores, manufacturing coke and refined
petroleum products are present to the extremely limited extend in Georgia,
resulting in a low overall impact of transitional measures on economic growth,
if any. In order to increase the understanding of climate-related risks on
its loan portfolio, the Bank performed a high-level sectoral risk assessment,
as different sectors might be vulnerable to different climate-related risks
over different time horizons. The maturity structure of the loan portfolio
shows that the largest part of assets is distributed in the time horizons that
are much shorter that the impacts of climate change, especially of physical
risks, can be materialized in Georgia. Therefore, the bank has not made any
adjustment to the level of provisions purely related to climate risk. On the
other hand, the understanding of climate related risks, which have longer-term
impacts need to be increased in coming years, therefore, if the bank will have
a plausible findings and conclusions, it will further develop the approach,
how to consider climate risks in provisioning. No post model adjustments
(PMAs) or Post model overlays (PMOs) have been posted for 2021 in this regard.
Details of climate related risks and steps taken are disclosed in the material
existing and emerging risks section of the 2021 annual report.
Market risk
The Bank follows the Basel Committee's definition of market risk as the risk
of losses in on- and off-balance sheet positions arising from movements in
market prices. This risk is principally made up of (a) risks pertaining to
interest rate instruments and equities in the trading book and (b) foreign
exchange rate risk (or currency risk) and commodities risk throughout the
Bank. The Bank's strategy is not to be involved in trading book activity or
investments in commodities. Accordingly, the Bank's exposure to market risk is
primarily limited to foreign exchange rate risk in the structural book.
Currency risk
Foreign exchange rate risk arises from the potential change in foreign
currency exchange rates, which can affect the value of a financial instrument.
This risk stems from the open currency positions created due to mismatches in
foreign currency assets and liabilities. The NBG requires the Bank to monitor
both balance sheet and total aggregate (including off-balance sheet) open
currency positions and to maintain the later one within 20% of the Bank's
regulatory capital. The Asset-Liability Management Committee ("ALCO") has set
limits on the level of exposure by currency as well as on aggregate exposure
positions which are more conservative than those set by the NBG. The Bank's
compliance with such limits is monitored daily by the heads of the Treasury
and Financial Risk Management Departments.
On 13 August 2018 the NBG introduced new regulation on changes to OCP ("open
currency position") calculation method, according to this regulation, from
March 2019 special reserves assigned to FC balance-sheet assets would be
deductible gradually for OCP calculation purposes. Due to the COVID-19
pandemic as part of the countercyclical measure in relation to OCP
requirements NBG suspended the phasing in of special reserves; In March 2022
NBG restored the regulation and provided Banks with the updated transition
scheme applied to FC special reserves created per both NBG and IFRS accounting
principles.
Currency risk management framework is governed through the Market Risk
Management Policy. The table below summarises the Group's exposure to
foreign currency exchange rate risk at the balance sheet date. While managing
open currency position the Group considers part of the provisions to be
denominated in the USD, Euro and other currencies. Gross amount of currency
swap deposits is included in Derivatives. Therefore, total financial assets
and liabilities below are not traceable with either balance sheet or liquidity
risk management tables, where net amount of gross currency swaps is presented.
As of 30 June 2022 Monetary financial assets Monetary financial liabilities Derivatives Net position
in thousands of GEL
Georgian Lari 11,081,643 8,137,313 (834) 2,943,496
US Dollar 8,914,281 11,633,651 2,677,296 (42,074)
Euro 4,081,795 1,603,984 (2,505,365) (27,554)
Other 543,150 506,835 6,182 42,497
Total 24,620,869 21,881,783 177,279 2,916,365
As of 31 December 2021 Monetary financial assets Monetary financial liabilities Derivatives Net position
in thousands of GEL
Georgian Lari 10,265,265 7,401,028 (113,407) 2,750,830
US Dollar 8,106,000 11,108,986 3,014,476 11,490
Euro 4,422,716 1,686,664 (2,725,047) 11,005
Other 434,523 365,583 (39) 68,901
Total 23,228,504 20,562,261 175,983 2,842,226
US Dollar strengthening by 20% (weakening 20%) would decrease Group's profit
or loss and equity in 2022 by GEL 8,415 thousand (increase by GEL 8,415
thousand). Euro strengthening by 20% (weakening 20%) would decrease Group's
profit or loss and equity in 2022 by GEL 5,511 thousand (increase by GEL 5,511
thousand.
US Dollar strengthening by 20% (weakening 20%) would increase Group's profit
or loss and equity in 2021 by GEL 2,298 thousand (decrease by GEL 2,298
thousand). Euro strengthening by 20% (weakening 20%) would increase Group's
profit or loss and equity in 2021 by GEL 2,201 thousand (decrease by GEL 2,201
thousand).
Interest rate risk
Interest rate risk arises from potential changes in the market interest rates
that can adversely affect the fair value or future cash flows of the financial
instrument. This risk can arise from maturity mismatches of assets and
liabilities, as well as from the re-pricing characteristics of such assets and
liabilities.
The biggest share of the Bank's deposits and the part of the loans are at
fixed interest rates, while a portion of the Bank's borrowings is at a
floating interest rate. In case of need, the Bank also applies for interest
rate risk hedging instruments in order to mitigate interest rate risk.
Furthermore, many of the Bank's loans to customers contain a clause allowing
it to adjust the interest rate on the loan in case of adverse interest rate
movements, thereby limiting the Bank's exposure to interest rate risk. The
management also believes that the Bank's interest rate margins provide a
reasonable buffer to mitigate the effect of possible adverse interest rate
movements.
The Group employs an advanced framework for the management of interest rate
risk by establishing appropriate Risk Appetite limits, monitoring compliance
with them and preparing forecasts. From September, 2020 the NBG introduced
regulation on interest rate risk and set the limit for Economic Value of
Equity (EVE) sensitivity at 15% of NBG Tier 1 Capital. The main principles and
assumptions of NBG IRR methodology are in line with Basel standards and EBA
guidelines developed for IRR management purposes.
As of 30 June 2022 the Bank was in compliance with the regulatory requirement
with EVE=2.3%. According to NBG guidelines the net interest income
sensitivity under parallel shifts of interest rate scenarios are maintained
for monitoring purposes, while EVE sensitivity is calculated under 6
predefined stress scenarios of interest rate changes and the limit is applied
to the worst case scenario result. Interest rate risk is managed by the
financial risk management department and is monitored by the ALCO, which
decides on actions that are necessary for effective interest rate risk
management and follows up on their implementation. The major aspects of
interest rate risk management development and the respective reporting are
periodically provided to the Management Board, the Supervisory Board and the
Risk Committee.
Following main assumptions under NBG IRR Regulation and EBA 2018 guidelines,
at 30 June, 2022, if interest rates had been 200 basis points higher, with all
other variables held constant, profit would have been GEL 92 million higher,
mainly as a result of higher interest income on variable interest assets (30
June 2021: GEL 105 million). If interest rates at 30 June, 2022 had been 200
basis points lower with all other variables held constant, profit for the year
would have been GEL 49 million lower, mainly as a result of lower interest
income on variable interest assets (30 June 2021: GEL 31.6 million).
At 30 June, 2022, if interest rates had been 200 basis points lower, with all
other variables held constant, other comprehensive income would have been GEL
52.7 million higher (30 June 2021: GEL 39.2 million), as a result of an
increase in the fair value of fixed rate financial assets measured at fair
value through other comprehensive income and repurchase receivables. If
interest rates at 30 June, 2022 had been 200 basis points higher with all
other variables held constant, Other comprehensive income would have been GEL
43.1 million lower (30 June 2021: GEL 39.2 million), as a result of decrease
in the fair value of fixed rate financial assets measured at fair value
through other comprehensive income.
The Bank calculates the impact of changes in interest rates using both Net
Interest Income and Economic Value sensitivity. Net Interest Income
sensitivity measures the impact of a change of interest rates along the
various maturities on the yield curve on the net interest revenue for the
nearest year. Economic Value measures the impact of a change of interest rates
along the various maturities on the yield curve on the present value of the
Group's assets, liabilities and off-balance sheet instruments. When performing
Net Interest Income and Economic Value sensitivity analysis, the Bank uses
parallel shifts in interest rates as well as number of different scenarios.
TBC Bank closely monitors the adverse effect of possible parallel yield curve
shift scenarios on net interest income over a one-year period to ensure
compliance with the predefined risk appetite of the Bank.
In order to manage interest rate risk the Bank establishes appropriate limits.
The Bank monitors compliance with the limits and prepares forecasts. ALCO
decides on actions that are necessary for effective interest rate risk
management and follows up on the implementation. Periodic reporting is done to
Management Board and the Board's Risk, Committee.
Liquidity Risk
The liquidity risk is the risk that TBC Bank either does not have sufficient
financial resources available to meet all of its obligations and commitments
as they fall due, or can access those resources only at a high cost. The risk
is managed by the Financial Risk Management and Treasury Departments and is
monitored by the ALCO.
The principal objectives of the TBC Bank's liquidity risk management policy
are to: (i) ensure the availability of funds in order to meet claims arising
from total liabilities and off-balance sheet commitments, both actual and
contingent, at an economic price; (ii) recognise any structural mismatch
existing within TBC Bank's statement of financial position and set monitoring
ratios to manage funding in line with well-balanced growth; and (iii) monitor
liquidity and funding on an on-going basis to ensure that approved business
targets are met without compromising the risk profile of the Bank.
The liquidity risk is categorised into two risk types: the funding liquidity
risk and the market liquidity risk.
Funding liquidity risk
Funding liquidity risk is the risk that TBC will not be able to efficiently
meet both expected and unexpected current and future cash flow and collateral
needs without affecting either its daily operations or its financial
condition. To manage funding liquidity risk TBC Bank uses the Liquidity
Coverage ratio and the Net Stable Funding ratio set, forth under Basel III,
and defined further by the NBG. In addition the Bank performs stress tests and
"what-if" scenario analysis. With Liquidity Coverage Ratio ("NBG LCR"), in
addition to Basel III guidelines conservative approaches are applied to the
deposits' withdrawal rates depending on the clients group's concentration. For
NBG LCR the limits are set by currency (GEL, FC, Total). TBC monitors
compliance with NBG LCR limits on a daily basis. On a monthly basis the Bank
also monitors compliance with the set limit for NBG NSFR.
The Liquidity Coverage Ratio is used to help manage short-term liquidity
risks. The Bank's liquidity risk management framework is designed to
comprehensively project cash flows arising from assets, liabilities and
off-balance sheet items over certain time buckets and ensure that NBG LCR
limits, are met on a daily basis.
The Net Stable Funding ratio is used for long-term liquidity risk management
to promote resilience over a longer time horizon by creating additional
incentives for TBC Bank to rely on more stable sources of funding on a
continuous basis. The Bank also monitors deposit concentration for large
deposits and set limits for non-Georgian residents deposits share in total
deposit portfolio.
The management believes, that a strong and diversified funding structure is
one of TBC Bank's differentiators. The Bank relies on relatively stable
deposits from Georgia as the main source of funding. In order to maintain and
further enhance the liability structure TBC Bank sets the targets for deposits
and IFI funding within the Bank's risk appetite.
The Bank's liquidity position was strong as of 30 June 2022, both LCR and NSFR
ratios well above the NBG minimum requirements of 100%.
23 Contingencies and Commitments
Legal proceedings
When determining the level of provision to be set up with regards to such
claims, or the amount (not subject to provisioning) to be disclosed in the
financial statements, the management seeks both internal and external
professional advice. The management believes that the provision recorded in
these condensed consolidated interim financial statements is adequate and the
amount (not subject to provisioning) need not be disclosed as it will not have
a material adverse effect on the financial condition or the results of future
operations of the Group.
Tax legislation
Georgian, Azerbaijani and Uzbekistan tax and customs legislation is subject to
varying interpretations, and changes, which can occur frequently. The
management's interpretation of the legislation as applied to the Group's
transactions and activity may be challenged by the relevant authorities.
Fiscal periods remain open to review by the authorities in respect of taxes
for five calendar years preceding the review period. To respond to the risks,
the Group has engaged external tax specialists to carry out periodic reviews
of Group's taxation policies and tax filings. The Group's management believes
that its interpretation of the relevant legislation is appropriate and the
Group's tax and customs positions will be sustained. Accordingly, as of 30
June 2022 and 31 December 2021 no material provision for potential tax
liabilities has been recorded.
Compliance with covenants
The Group is subject to certain covenants primarily related to its borrowings.
Non-compliance with such covenants may result in negative consequences for the
Group including growth in the cost of borrowings and declaration of default.
The Group was in compliance with all covenants as of 30 June 2022 and 31
December 2021.
Management of Capital
The Bank manages capital requirements under regulatory rules. The Bank
complied with all its imposed capital requirements throughout the reporting
period.
Credit related commitments and financial guarantees
The primary purpose of these instruments is to ensure that funds are available
to a customer as required. Financial guarantees and standby letters of credit,
which represent the irrevocable assurances that the Group will make payments
in the event that a customer cannot meet its obligations to third parties,
carry the same credit risk as loans. Documentary and commercial letters of
credit, that are written undertakings by the Group on behalf of a customer
authorising a third party to draw drafts on the Group up to a stipulated
amount under specific terms and conditions, are collateralised by the
underlying shipments of goods to which they relate or cash deposits and
therefore carry less risk than a direct borrowing
Commitments to extend credit represent unused portions of authorisations to
prolong credit in the form of loans, guarantees or letters of credit. With
respect to credit risk on commitments to extend credit, the Group is
potentially exposed to a loss in an amount equal to the total unused
commitments. However, the likely amount of loss is lower than the total unused
commitments since most commitments to extend credit are contingent upon
customers maintaining specific credit standards. The Group monitors the term
to maturity of credit related commitments because longer-term commitments
generally have a greater degree of credit risk than shorter-term ones.
As of 30 June 2022 outstanding credit related commitments are as follows:
in thousands of GEL Stage 1 Stage 2 Stage 3
Undrawn credit lines 953,653 42,940 3,585
Letters of credit issued 181,863 - -
Financial guarantees issued 371,754 1,132 53
Total credit related commitments (before provision) 1,507,270 44,072 3,638
Undrawn credit lines (1,574) (568) (19)
Letters of credit issued (323) - -
Financial guarantees issued (731) - -
Credit loss allowance for credit related commitments (2,628) (568) (19)
Total credit related commitments 1,504,642 43,504 3,619
As of 31 December 2021 Outstanding credit related commitments are as follows:
in thousands of GEL Stage 1 Stage 2 Stage 3
Undrawn credit lines 1,628,437 40,572 3,856
Letters of credit issued 170,174 208 -
Financial guarantees issued 343,536 8,510 56
Total credit related commitments (before provision) 2,142,147 49,290 3,912
Undrawn credit lines (1,961) (578) (22)
Letters of credit issued (320) - -
Financial guarantees issued (734) (9) -
Credit loss allowance for credit related commitments (3,015) (587) (22)
Total credit related commitments 2,139,132 48,703 3,890
Performance guarantees. Performance guarantees are contracts that provide
compensation in case of another party fails to perform a contractual
obligation. Such contracts do not transfer credit risk. The risk under the
performance guarantee contracts is the possibility that the insured event
occurs (i.e.: the failure to perform the contractual obligation by another
party). The key risks the Group faces are significant fluctuations in the
frequency and severity of payments incurred on such contracts, relative to
expectations.
Outstanding amount of performance guarantees and respective provision as at 30
June 2022 amounted to GEL 1,476,800 thousand and GEL 5,833 thousand (31
December 2021: GEL 1,565,486 thousand and GEL 4,620 thousand).
Fair value of credit related commitments and financial guarantees provisions
was GEL 3,215 thousand as at 30 June 2022 (31 December 2021: GEL 3,624
thousand). Total credit related commitments and performance guarantees are
denominated in currencies as follows:
In thousands of GEL 30 June 2022 31 December 2021
Georgian Lari 1,360,541 897,969
US Dollars 1,135,204 901,092
Euro 461,998 220,068
Other 74,037 68,841
Total 3,031,780 2,087,970
Capital expenditure commitments. As at 30 June 2022, the Group had contractual
capital expenditure commitments amounting to GEL 100,312 thousand (31 December
2021: GEL 104,162 thousand). Out of total amount contractual commitments
related to the head office construction amounted GEL 66,854 thousand (31
December 2021: GEL 79,004 thousand).
24 Fair Value Disclosures
(a) Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards
require or permit in the statement of financial position at the end of each
reporting period. The level in the fair value hierarchy into which the
recurring fair value measurements are categorised as follows:
30 June 2022
in thousands of GEL Level 1 Level 2 Level 3 Total Fair Value Carrying value
ASSETS CARRIED AT FAIR VALUE
FINANCIAL ASSETS
Investment securities measured at fair value through other comprehensive
income
- Corporate bonds - 691,782 - 691,782 691,782
- Netherlands government notes - 104,296 - 104,296 104,296
- Ministry of Finance of Uzbekistan treasury bills - 1,315 - 1,315 1,315
- Ministry of Finance of treasury bills - 1,115,045 - 1,115,045 1,115,045
- Corporate shares - - 3,549 3,549 3,549
Investment securities measured at fair value through Profit and loss
- Foreign exchange forwards and gross settled currency swaps, included in - 208,088 - 208,088 208,088
other financial assets or due from banks
-Investment held at fair value through profit or loss - - 8,779 8,779 8,779
TOTAL ASSETS RECURRING FAIR VALUE MEASUREMENTS - 2,120,526 12,328 2,132,854 2,132,854
LIABILITIES CARRIED AT FAIR VALUE
FINANCIAL LIABILITIES
Foreign exchange forwards and gross settled currency swaps, included in other - 30,809 - 30,809 30,809
financial liabilities
TOTAL LIABILITIES RECURRING FAIR VALUE MEASUREMENTS - 30,809 - 30,809 30,809
31 December 2021
in thousands of GEL Level 1 Level 2 Level 3 Total Fair Value Carrying value
ASSETS CARRIED AT FAIR VALUE
FINANCIAL ASSETS
Investment securities measured at fair value through other comprehensive
income
- Corporate bonds - 704,435 - 704,435 704,435
- Netherlands government notes
- Ministry of Finance of Uzbekistan treasury bills - 1,683 - 1,683 1,683
- Ministry of Finance of treasury bills - 1,231,024 - 1,231,024 1,231,024
- Corporate shares - - 1,054 1,054 1,054
Investment securities measured at fair value through Profit and loss
- Foreign exchange forwards and gross settled currency swaps, included in - 185,710 - 185,710 185,710
other financial assets or due from banks
-Investment held at fair value through profit or loss - - 11,125 11,125 11,125
TOTAL ASSETS RECURRING FAIR VALUE MEASUREMENTS - 2,122,852 12,179 2,135,031 2,135,031
LIABILITIES CARRIED AT FAIR VALUE
FINANCIAL LIABILITIES
Foreign exchange forwards and gross settled currency swaps, included in other - 9,727 - 9,727 9,727
financial liabilities
TOTAL LIABILITIES RECURRING FAIR VALUE MEASUREMENTS - 9,727 - 9,727 9,727
There were no transfers between levels during the six months ended 30 June
2022 (2021: none).
The description of the valuation technique and the description of inputs used
in the fair value measurement for level 2 measurements:
in thousands of GEL 30 June 2022 31 December 2021 Valuation technique Inputs used
ASSETS CARRIED AT FAIR VALUE
FINANCIAL ASSETS
- Certificates of deposits of NBG, Ministry of Finance treasury bills, 1,912,438 1,937,142 Discounted cash flows ("DCF") Government bonds yield curve
Government notes, Corporate bonds
- Foreign exchange forwards and gross settled currency swaps, included in due 208,088 185,710 Forward pricing using present value calculations Official exchange rate, risk-free rate
from banks
Total assets recurring fair value measurements at level 2 2,120,526 2,122,852
LIABILITIES CARRIED AT FAIR VALUE
FINANCIAL LIABILITIES
- Foreign exchange forwards included in other financial liabilities 30,809 9,727 Forward pricing using present value calculations Official exchange rate, risk-free rate
Total liabilities recurring fair value measurements at level 2 30,809 9,727
The description of the valuation technique and the description of inputs used
in the fair value measurement for level 3 measurements:
in thousands of GEL 30 June 2022 31 December 2021 Valuation technique Inputs used
Assets carried at fair value
- Investment held at fair value through profit or loss 8,779 11,125 Discounted cash flows ("DCF") Government bonds yield curve
- Corporate shares 3,549 1,054 Discounted cash flows ("DCF") Government bonds yield curve
Total assets recurring fair value measurements at level 3 12,328 12,179
There were no changes in the valuation technique for the level 2 and level 3
recurring fair value measurements during the six month period ended 30 June
2022 (2021: none).
Sensitivity of the input to fair value - increase/(decrease) in projected cash
flows by 10% would result in increase/
(decrease) in fair value by GEL 852 thousand/ (GEL 852 thousand).
(b) Assets and liabilities not measured at fair value but for which fair
value is disclosed
Fair values analysed by level in the fair value hierarchy and carrying value
of assets not measured at fair value are as follows:
30 June 2022
in thousands of GEL Level 1 Level 2 Level 3 Total Fair Value Carrying Value
FINANCIAL ASSETS
Cash and cash equivalents 936,596 1,802,630 - 2,739,226 2,739,226
Due from other banks - 42,552 - 42,552 42,552
Mandatory cash balances with the NBG and the CBU - 2,108,455 - 2,108,455 2,108,455
Loans and advances to customers:
- Corporate loans - - 6,321,537 6,321,537 6,415,890
- Consumer loans - - 2,705,549 2,705,549 2,362,848
- Mortgage loans - - 4,390,919 4,390,919 4,047,606
- Loans to micro, small and medium enterprises - - 4,366,507 4,366,507 4,304,665
Bonds carried at amortised cost - 27,962 - 27,962 27,962
Finance lease receivables - - 251,716 251,716 253,057
Other financial assets - - 185,754 185,754 185,754
NON-FINANCIAL ASSETS
Investment properties, at cost - - 28,630 28,630 20,506
TOTAL ASSETS 936,596 3,981,599 18,250,612 23,168,807 22,508,521
FINANCIAL LIABILITIES
Customer accounts - 10,324,844 5,364,642 15,689,486 15,772,905
Debt securities in issue 1,513,433 - - 1,513,433 1,514,106
Due to credit institutions - - 3,577,027 3,577,027 3,575,808
Other financial liabilities - - 322,836 322,836 322,836
Subordinated debt - - 648,636 648,636 634,319
TOTAL LIABILITIES 1,513,433 10,324,844 9,913,141 21,751,418 21,819,974
31 December 2021
in thousands of GEL Level 1 Level 2 Level 3 Total Fair Value Carrying Value
FINANCIAL ASSETS
Cash and cash equivalents 839,821 882,316 - 1,722,137 1,722,137
Due from other banks - 79,142 - 79,142 79,142
Mandatory cash balances with the NBG and the CBU - 2,087,141 - 2,087,141 2,087,141
Loans and advances to customers:
- Corporate loans - - 6,492,668 6,492,668 6,497,010
- Consumer loans - - 2,394,481 2,394,481 2,062,976
- Mortgage loans - - 4,522,528 4,522,528 4,048,955
- Loans to micro, small and medium enterprises - - 4,126,318 4,126,318 4,028,204
Bonds carried at amortised cost - 49,582 - 49,582 49,582
Finance lease receivables - - 261,561 261,561 262,046
Other financial assets - - 256,280 256,280 256,280
NON-FINANCIAL ASSETS
Investment properties, at cost - - 29,493 29,493 22,892
TOTAL ASSETS 839,821 3,098,181 18,083,329 22,021,331 21,116,365
FINANCIAL LIABILITIES
Customer accounts - 9,982,595 5,026,676 15,009,271 15,038,172
Debt securities in issue 1,798,023 - - 1,798,023 1,710,288
Due to credit institutions - - 2,986,731 2,986,731 2,984,176
Other financial liabilities - - 196,249 196,249 196,249
Subordinated debt - - 626,503 626,503 623,647
TOTAL LIABILITIES 1,798,023 9,982,595 8,836,159 20,616,777 20,552,532
The fair values of financial assets and liabilities in the level 2 and level 3
of fair value hierarchy were estimated using the discounted cash flows
valuation technique. The fair value of unquoted fixed interest rate
instruments was calculated based on estimated future cash flows expected to be
received discounted at current interest rates for new instruments with similar
credit risk and remaining maturity.
The fair value of investment properties was estimated using market
comparatives. The unobservable input to which the fair value estimate for
premises is most sensitive is price per square meter: the higher the price per
square meter, the higher the fair value. Management assessed the prices per
square meter and they have not changed significantly from the end of 2021.
Amounts due to credit institutions were discounted at the Group's own
incremental borrowing rate. Liabilities due on demand were discounted from the
first date that the Group could be required to pay the amount.
There were no changes in the valuation technique for the level 2 and level 3
measurements of assets and liabilities not measured at fair values in the six
months ended 30 June 2022 (2021: none).
25 Related Party Transactions
Pursuant to IAS 24 "Related Party Disclosures", parties are generally
considered to be related if the parties are under common control or one party
has the ability to control the other or it can exercise significant influence
over the other party in taking financial or operational decisions. In
considering each possible related party relationship, attention is directed to
the substance of the relationship, not merely the legal form:
· Parties with material ownership stake (more than 5% beneficial
ownership stake for 2022 and 2021) in the TBCG or with representatives in the
Board of Directors are considered as Significant Shareholders. Their close
family members and related companies with ownership stake of more than 50% are
also considered as significant shareholders.
· The key management personnel include members of TBCG's Board of
Directors, the Management Board of the Bank and their close family members.
Transactions between TBC Bank Group PLC and its subsidiaries also meet the
definition of related party transactions. Where these are eliminated on
consolidation, they are not disclosed in the Group Financial Statements.
The outstanding balances with related parties were as follows:
in thousands of GEL Contractual interest rate Significant shareholders Key management personnel
30 June 2022
Gross amount of loans and advances to customers 4.0%-33.0% 3 11,947
Credit loss allowance for loans and advances to customers - - 7
Customer accounts 0%-12.7% 4,764 25,528
Other borrowed funds from EBRD 3.12%-13.95% 274,669 -
31 December 2021
Gross amount of loans and advances to customers 4.0%-36.0% 24 12,394
Credit loss allowance for loans and advances to customers - - 6
Customer accounts 0%-12.5% 19,460 23,620
Other borrowed funds from EBRD 0.86%-12.85% 360,889 -
The Group's income and expense items with related parties except from key
management compensation were as follows:
in thousands of GEL Significant shareholders Key management personnel
30 June 2022
Interest income - loans and advances to customers 1 149
Interest expense 42 483
Interest expense with EBRD 22,488 -
Fee and commission income 12 75
Administrative and other operating expenses (excluding staff costs) - 297
30 June 2021
Interest income - loans and advances to customers 3 153
Interest expense - 1
Interest expense with EBRD 13,355* -
Fee and commission income 14 28
Administrative and other operating expenses (excluding staff costs) - 177
*The management has added and separately disclosed the interest expense
incurred for EBRD borrowings for current and comparative periods, considering,
the data was incomplete and that the latter represents more than 5%
shareholder of the Group. Other borrowed funds from EBRD were GEL 274,669
thousand and GEL 360,889 thousand as at 30 June 2022 and 31 December 2021 and
interest expense with EBRD were GEL 22,488 thousand and GEL 13,355 thousand
for 30 June 2022 and 2021 respectively.
The aggregate loan amounts advanced to, and repaid, by related parties during
the period end 30 June 2022 were as follows:
In thousands of GEL Significant shareholders Key management personnel
Amounts advanced to related parties during the period 73 1,773
Amounts repaid by related parties during the period (91) (2,001)
Aggregate amounts of loans advanced to and repaid by related parties during
the six months ended 30 June 2021 were as follows:
In thousands of GEL Significant shareholders Key management personnel
Amounts advanced to related parties during the period 41 4,056
Amounts repaid by related parties during the period (55) (2,453)
The compensation of the TBCG Board of Directors and the Bank's Management
Board is presented below:
Expense over the six months ended
In thousands of GEL 30 June 2022 30 June 2021
Salaries and related benefits 7,216 4,972
Equity-settled share-based compensation 10,109 5,805
Total 17,325 10,777
Included in salaries and bonuses for six months ended 30 June 2022 GEL 1,275
thousand relates to compensation for directors of TBCG paid by TBC Bank Group
PLC (six months ended 30 June 2021: GEL 1,236 thousand).
26 Events after Reporting Period
In August 2022, JSC TBC Bank has signed a GEL 300 million loan agreement with
FMO, the Dutch entrepreneurial development bank. The facility has a maturity
of five year and will primarily be used to finance young entrepreneurs and
mortgage borrowers, green projects, as well as micro, small and medium size
enterprises in Georgia.
In July 2022, 323,524 new ordinary shares were admitted to the premium segment
of the Official List of the Financial Conduct Authority and to be traded on
the main market of the London Stock Exchange for listed securities. The shares
were issued as the scrip dividend shares pursuant to the terms of a scrip
dividend programme in respect of the final dividend declared on 16 June 2022,
and ranks pari passu in all respects with TBC PLC's existing ordinary
shares.
Appendix A - A full list of related undertakings and the country of
incorporation is set out below.
Company Name Country of incorporation
JSC TBC Bank 7 Marjanishvili Street, 0102, Tbilisi, Georgia
United Financial Corporation JSC 154 Agmashenebeli Avenue, 0112, Tbilisi, Georgia
TBC Capital LLC 11 Chavchavadze Avenue, 0179, Tbilisi, Georgia
TBC Leasing JSC 76 Chavchavadze Avenue, 0162,, Tbilisi, Georgia
TBC Kredit LLC 71-77, 28 May Street, AZ1010, Baku, Azerbaijan
TBC Pay LLC 7 Marjanishvili Street, 0102, Tbilisi, Georgia
TBC Invest LLC 7 Jabonitsky street, , 52520, Tel Aviv, Israel
Index LLC 8 Tetelashvili,0102,, Tbilisi, Georgia
JSC TBC Insurance 24B, Al. Kazbegi Avenue, 0160, Tbilisi, Georgia
TBC Invest International Ltd 7 Marjanishvili Street, 0102, Tbilisi, Georgia
University Development Fund 1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
CreditInfo Georgia JSC 2 Tarkhnishvili street, 0179, Tbilisi, Georgia
Online Tickets LLC 3 Irakli Abashidze street, 0179, Tbilisi, Georgia
VENDOO LLC (Geo) 44 Petre Kavtaradze street, 0128, Tbilisi, Georgia
Natural Products of Georgia LLC 1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
Mobi Plus JSC 45 Vajha Pshavela Street, 0177, Tbilisi, Georgia
Mineral Oil Distribution Corporation JSC 11 Tskalsadeni Street, 0153, Tbilisi, Georgia
Georgian Card JSC 106 Beliashvili Street, 0159, Tbilisi Georgia
Georgian Central Securities Depositor JSC 74 Chavchavadze Avenue, 0162, Tbilisi, Georgia
JSC Givi Zaldastanishvili American Academy In Georgia 37 Chavchavadze Avenue, 0162, Tbilisi Georgia
United Clearing Centre 5 Sulkhan Saba Street, 0105, Tbilisi, Georgia
Banking and Finance Academy of Georgia 123, Agmashenebeli Avenue, 0112, Tbilisi, Georgia
Tbilisi's City JSC 15 Rustaveli Avenue, 0108, Tbilisi Georgia
TBC Trade LLC 11A Chavchavadze Ave, 0179, Tbilisi, Georgia
Redmed LLC 25 Al. Kazbegi Avenue, 0160, Tbilisi, Georgia
T Net LLC 7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
(file:///C%3A/Users/salpirtskhalava/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/GU4BI804/Book2.xlsx#RANGE!B34)
TKT UZ 12, Shota Rustaveli, Yakkasaray district, Tashkent, Uzbekistan
Mypost LLC 129a Sh. Nutsubidze St. Vake,Tbilisi, Georgia
Billing Solutions LLC 14 Khelovanta St. Isani, Tbilisi, Georgia
F Solutions LLC 36, Kakheti Hwy, Isani-Samgori District, Tbilisi, Georgia
Inspired LLC 1, Chust, Mirzo Ulugbek district, Tashkent, Uzbekistan
TBC Fin service LLC 10B, Fidokor, Yakkasaray, Tashkent, Uzbekistan
Marjanishvili 7 LLC 7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
TBC Bank JSC UZ 118/1, Amir Temur avenue, Yunusobod district, Tashkent, Uzbekistan
TBC Group Support LLC 7 Marjanishvili st. Didube-chugureti District, Tbilisi,Georgia
Tbilisi Stock Exchange JSC floor 2th block 8, 71 Vazha Pshavela Ave, Tbilisi, Georgia
Georgian Stock Exchange JSC 74a chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
Kavkasreestri JSC 74a chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
Freeshop.ge LLC 74 chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
The.ge LLC 20 amaglebis st. old Tbilisi, Georgia
SABA LLC 5, Gabashvili street, vake-saburtalo Tbilisi, Georgia
Artarea.ge LLC 25 Al. Kazbegi Avenue, 0160, Tbilisi, Georgia
TBC Art Gallery LLC 6, Tsimakuridze str, Tbilisi, Georgia
TBC Capital Asset Management LLC 7 Marjanishvili Street, 0102, Tbilisi, Georgia
Swift 1 Adele Avenue, B-1310, La Hulpe, Belgium
Space International JSC 7 Marjanishvili Street, 0102, Tbilisi, Georgia
Space JSC 7 Marjanishvili Street, 0102, Tbilisi, Georgia
Georgia Large Cap Diversified Credit Portfolio JSC 7 Marjanishvili Street, 0102, Tbilisi, Georgia
1 (#_ftnref1) Note: For better presentation purposes, certain financial
numbers are rounded the nearest whole number
2 (#_ftnref2) Note: For better presentation purposes, certain financial
numbers are rounded the nearest whole number
3 (#_ftnref3) Remittances from Russia are adjusted for double counting with
tourism inflows and other similar effects, based on TBC Capital estimates.
4 (#_ftnref4) For the ratio calculation, all relevant group recurring costs
are allocated to the bank.
5 (#_ftnref5) Net insurance premium earned after claims and acquisition
costs can be reconciled to the standalone net insurance profit (as shown in
Annex 3) as follows: net insurance premium earned after claims and acquisition
costs less credit loss allowance, administrative expenses and taxes, plus fee
and commission income and net interest income.
6 (#_ftnref6) For the ratio calculation, all relevant group recurring costs
are allocated to the bank.
7 (#_ftnref7) For the ratio calculation, all relevant group recurring costs
are allocated to the bank.
8 (#_ftnref8) For the ratio calculation, all relevant group recurring costs
are allocated to the bank.
9 (#_ftnref9) TBC Bank Group PLC became the parent company of JSC TBC Bank
on 10 August 2016.
10 (#_ftnref10) The Net Promoter Score (NPS) was measured in January 2022 by
an independent research company, Anova
11 (#_ftnref11) Net earned premium equals earned premium minus the
reinsurer's share of earned premium.
12 (#_ftnref12) Market shares are based on internal estimates, excluding
border motor third party liability (MTPL) insurance. Source is Insurance State
Supervision Service of Georgia.
13 (#_ftnref13) Excluding USD Mandatory reserves, where no interest is
accrued from May, 2022 per NBG regulation
14 (#_ftnref14) In June 2022 TBC Net LLC legal name was changed to T Net
LLC.
15 (#_ftnref15) In May 2022 TBC Bank Group PLC finalized acquisition process
of remaining 45% interest in Online Tickets LLC.
16 (#_ftnref16) In April 2022 Vendoo Uz legal name was changed to TBC Fin
service LLC and on April 22, 2022 TBC Bank Group PLC sold the full interest in
TBC Fin service to its subsidiary TBC Bank Uzbekistan.
17 (#_ftnref17) The Group has a significant influence on Georgian Stock
Exchange JSC and Kavkasreestri JSC held as an investment in associates.
18 (#_ftnref18) Dormant.
19 (#_ftnref19) Total exposure of the bank toward the borrower or group of
interconnected borrowers
20 (#_ftnref20) Movements with impact on credit loss allowance charge for
the period differs from statement of profit or loss with amount of recoveries
GEL 27,018 thousand as at 30 June 2022 (30 June 2021: GEL 14,983 thousands).
The amount of recoveries include recoveries from sale of written off portfolio
in the amount of GEL 12.7 million sold in January 2022.
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. END IR FZGMRRMLGZZMRecent news on TBC Bank
See all newsREG - TBC Bank Group PLC - TBC to announce 1Q 2024 Financial Results
AnnouncementREG - J.P. Morgan Sec PLC - Stabilisation Notice
AnnouncementREG - TBC Bank Group PLC - JSC TBC Bank Prices $300 million AT1 Capital Notes
AnnouncementREG - J.P. Morgan Sec PLC - Stabilisation Notice
AnnouncementREG - TBC Bank Group PLC - Notice of AGM
Announcement