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TBC Bank Group PLC - 1st Quarter Results

Mon 13th May, 2019 7:00am
RNS Number : 7421Y
TBC Bank Group PLC
13 May 2019
 

 

TBC BANK GROUP PLC ("TBC Bank")

1Q 2019 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 necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.

 

None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.

 

Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.

 

  

First Quarter 2019 Unaudited Consolidated Financial Results

 

TBC Bank Group PLC ("TBC PLC") will release its first quarter 2019 unaudited consolidated financial results on Monday, 13 May 2019 at 7.00 am BST (10.00 am GET).

 

On the same day at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT), Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.

                                                                         

Please dial-in approximately five minutes before the start of the call quoting the password "TBC":

 

 

 

Password:

TBC

UK Toll Free:

0808 109 0700

Standard International Access:

+44 (0) 20 3003 2666

USA Toll Free:

1 866 966 5335

New York New York:                                               

+1 212 999 6659

Russia Toll Free:

8 10 8002 4902044

Moscow:

+7 (8) 495 249 9843

 

Replay Numbers

 

Replay Passcode:

9490274

UK Toll Free:

0800 633 8453

Standard International Access:                               

+44 (0) 20 8196 1998

USA Toll Free:

1 866 583 1035

Russia Toll Free:

8 10 8002 4832044

Moscow:

+7 (8) 495 249 9840

 

 

Contacts

 

 

Zoltan Szalai

Director of International Media and Investor Relations  

 

 

E-mail:  ZSzalai@Tbcbank.com.ge 

Tel:  +44 (0) 7908 242128

Web: www.tbcbankgroup.com

Address:  68 Lombard St, London EC3V 9LJ, United Kingdom 

 

Anna Romelashvili                                             

Head of Investor Relations

 

 

E-mail:  IR@tbcbank.com.ge 

Tel:  +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

 

Investor Relations Department

 

 

 

 

E-mail:  IR@tbcbank.com.ge 

Tel:  +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

 

 

 

 

Table of Contents

 

1Q 2019 Results Announcement

 

TBC Bank - Background

Financial Highlights

Recent Developments

Development of Customer Focused Ecosystems

Letter from the Chief Executive Officer

Economic Overview

Unaudited Consolidated Financial Results Overview for 1Q 2019

Additional Disclosures

 

 

TBC BANK Group PLC ("TBC Bank")

 

1Q 2019 Consolidated Financial Results:

Net Profit for 1Q 2019 up by 36.7% YoY to GEL 133.3 million

 

 European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation.

TBC Bank - Background

TBC Bank is the largest banking group in Georgia, where 99.8% of its business is concentrated, with a 37.4% market share by total assets. It offers retail, corporate, and MSME banking nationwide.

These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS"), as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing segment on 10 August 2016.

TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS.

 

Financial Highlights

1Q 2019 P&L Highlights                                                        

§ Net profit amounted to GEL 133.3 million (1Q 2018: GEL 97.5 million; 4Q 2018: GEL 130.1 million)

§ Return on equity (ROE) amounted to 23.8% (1Q 2018 : 21.0%; 4Q 2018: 24.3%)

§ Return on assets (ROA) amounted to 3.6 % (1Q 2018: 3.2%; 4Q 2018: 3.5%)

§ Total operating income amounted to GEL 271.9 million (1Q 2018: GEL 238.7 million; 4Q 2018: GEL 312.3 million)

§ Cost to income was 37.7% (1Q 2018: 38.1%; 4Q 2018: 39.7%)

§ Cost of risk stood at 1.4% (1Q 2018: 1.3%; 4Q 2018: 1.4%)

§ FX adjusted cost of risk stood at 1.4% (1Q 2018: 1.7%; 4Q 2018: 1.3%)

§ Net interest margin (NIM) stood at 6.1% (1Q 2018: 6.9%; 4Q 2018: 6.7%)

§ Risk adjusted net interest margin (NIM) stood at 4.7% (1Q 2018: 5.2%; 4Q 2018: 5.4%)

Balance Sheet Highlights as of 31 March 2019

§ Total assets amounted to GEL 15,172.3 million as of 31 March 2019, up by 22.3% YoY and down by 2.1% QoQ

§ Gross loans and advances to customers stood at GEL 10,366.9 million as of 31 March 2019, up by 22.9% YoY and down by 0.1% QoQ

§ Net loans to deposits + IFI funding stood at 90.5% and Net Stable Funding Ratio (NSFR) stood at 123.8%[1]

§ NPLs were 3.3%, up by 0.2 pp YoY and QoQ

§ NPLs coverage ratios stood at 100.1%, or 210.8% with collateral, on 31 March 2019 compared, to 114.6% or 225.8% with collateral, as of 31 March 2018 and 102.7%, or 216.4% with collateral on 31 December 2018

§ Total customer deposits amounted to GEL 9,166.8 million as of 31 March 2019, up by 20.4% YoY and down by 2.0% QoQ

§ As of 31 March 2019, the Bank's Basel III tier 1 and total capital adequacy ratios per NBG methodology stood at 13.8% and 19.1% respectively, while minimum requirements amounted to 11.9% and 16.9%

Market Shares[2]

§ Market share by total assets reached 37.4% as of 31 March 2019, up by 2.1pp YoY and down by 0.8pp QoQ

§ Market share by total loans was 38.4% as of 31 March 2019, up by 0.6pp YoY and down by 0.4pp QoQ

§ In terms of individual loans, TBC Bank had a market share of 39.3% as of 31 March 2019, down by 0.3pp YoY and by 0.7pp QoQ. The market share for legal entity loans was 37.4%, up by 1.8pp YoY and stable on QoQ basis

§ Market share of total deposits reached 40.4% as of 31 March 2019, up by 1.5pp YoY and down by 0.8pp QoQ

§ Market share of individual deposits stood at to 39.5%, down by 1.1pp YoY and by 1.7pp on QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 41.4%, up by 4.4pp YoY and up by 0.2pp QoQ.

 

Recent Developments

 

Payme - Expansion in Uzbekistan

TBC Bank has acquired 51% stake of LLC Inspired, a leading payment platform in Uzbekistan trading under the Payme brand.

Payme is a leading profitable payment service provider in Uzbekistan supplying high-quality payment solutions to its 1.3 million customers, including a marketplace platform for loans from certain Uzbek banks.

The company has grown rapidly in recent years, increasing its number of clients by around 70% during 2018, while its revenue and net income grew by 41.9% and 24.5% respectively year-on-year. The steady growth also continued in the first quarter 2019 with revenue and net profit growing by 21.9% and 73.0% quarter-on-quarter respectively.

The acquisition of Payme is another important step in our planned expansion into Uzbekistan. It will enable us to gain immediate access to a large customer base in the country and use our core digital strengths in Georgia to innovate the Uzbekistani market. With Payme joining our effort, we intend to further develop the payment business and also use it as a platform to develop new ecosystems in the country.

 

Awards

§ The Best Bank in Georgia 2019 - For the eighth consecutive year, TBC Bank has been awarded the Best Bank in Georgia 2019 by the prestigious Global Finance magazine, underlining our ongoing commitment to offering the very best banking services to our customers.

§ Special Award for Responsible Capitalism in Adversity - TBC Bank's CEO Vakhtang Butskhrikidze has won the Special Award for Responsible Capitalism in Adversity from the prestigious FIRST organisation - a multidisciplinary international affairs organization, which aims to enhance dialogue between leaders in industry, finance and government.

§ FMO - In October 2018, TBC Bank signed a loan agreement in the amount of GEL 103 million with FMO, the Dutch Development Bank. The local currency funding was obtained by FMO through a public placement of bonds on the Georgian Stock Exchange. This transaction was selected by EMEA Finance as the Best Local Currency Loan of 2018.

Development of Customer Focused Ecosystems

 

In order to integrate better with our customers, we started to develop customer focused ecosystems, which are closely linked with our financial products and services and enable us to create synergies with our core banking offerings.

E-commerce

§ In August 2018 we purchased Swoop, Georgia's well-known online discount and sales company for USD 70,000.

§ We have started developing an e-commerce market place in Georgia through building an innovative digital trading platform, Vendoo.

§ Our estimated investment for the next two years will be around USD 2-3 million.

Progress since acquisition:

§ Assembled a team of experienced professionals in digital business.

§ Designed a brand new cloud technology platform based on open source.

§ Beta version of the platform is already launched with electronics and personal care products on the following web-page: www.vendoo.ge. The launch of the full version is scheduled in May. 

 

Real Estate

§ In January 2019, we acquired 90% shares of the real estate platform Allproperty.ge for USD 225,000.

§ Started developing digital real estate ecosystem, that will offer our customers a wide range of products and services, including finding the suitable real estate, comparing different properties, getting financing, buying furniture, and many more.

§ Our estimated investment for the next two years is set at around USD 2 million.

Progress since acquisition:

§ Strengthened the management team.

§ Designed target agile operating model.

§ Started rebranding through new brand name Livo and developing new platform www.livo.ge.

§ Data mining and lead generation practices have been implemented.

 

 

 

Additional Information Disclosure

Additional historical information for certain P&L, balance sheet and capital items, and on asset quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under the Financial Highlights section.

Letter from the Chief Executive Officer

I am pleased to present the financial results for the first quarter 2019 and update you on our operating performance as well as provide an overview of the recent macroeconomic developments in Georgia.

Our consolidated net profit for the first quarter of 2019 reached GEL 133.3 million, up by 36.7% year-on-year, while our return on equity was 23.8% and our return on assets stood at 3.6%.  Our robust profitability was supported by strong growth in net fee and commission income of 19.7% and other operating income of 16.9% year-on-year, as well as positive operating jaws leading to the reduction of the cost to income ratio by 0.4 percentage points to 37.7%.  Over the same period, cost of risk remained at 1.4%.

As anticipated, our net interest margin decreased in the first quarter of 2019 mainly due to the new regulation limiting the banks' ability to lend money to higher-yield retail customers. The requirement came into force at the beginning of the year leading to the contraction in net interest margin by 0.5 percentage points. A further decrease of 0.1 percentage points was related to our higher than usual liquidity levels resulting in a net interest margin of 6.1% in the reporting period. Over the same period, our effective interest rate on loans decreased by 0.7 percentage points quarter-on-quarter and stood at 11.5% in first quarter 2019 driven by new regulation as well as decrease in NBG refinance rate.

In terms of balance sheet, our loan book expanded by 22.9% year-on-year, supported by growth across all business segments, which resulted in a market share of 38.4%, up by 0.6 percentage points year-on-year.  Over the same period, deposits increased by 20.4%, expanding our deposit market share to 40.4%, up by 1.5 percentage points year-on-year.

We continue to operate with solid capital and liquidity levels. As of 31 March 2019, our tier 1 and total capital adequacy ratios (CAR) per Basel III guidelines were 13.8% and 19.1%, respectively, compared to 12.8% and 17.9% as of year-end and well above the corresponding minimum requirements of 11.9% and 16.9%.  The increase in capital ratios were mainly related to the net profit generated in the quarter and the optimization of the credit risk weighted assets, as well as decrease in the market risk. As of 31 March 2019, our net loans to deposits + IFI funding ratio stood at 90.5% and the net stable funding ratio (NSFR) was 123.8%[3].

I am also pleased with the results of our insurance subsidiary, TBC Insurance, which continues to generate strong growth and strengthen its position as a leading player in the market. In the first quarter of 2019, its P&C and life insurance market share increased by 3.3 percentage points year-on-year and stood at 22.8%[4], while over the same period its market share in the retail segment amounted to 39.8%[4].

Regarding Georgia's macro environment, in the first quarter 2019 real GDP growth averaged 4.7% year-on-year, per initial estimates of GeoStat. Over the same period, the growth of exports, tourism and remittance inflows moderated and stood at 9.1% year-on-year. This reflects a slower growth in Georgia's trading partners and continued economic difficulties in Turkey. The total banking loan portfolio growth continues to moderate, primarily reflecting the regulations on retail lending, and, as of 31 March 2019, it had increased by 14.0% year-on-year, excluding FX effect[5]. From the segments perspective corporate, MSME and retail loans grew respectively by 12.9%, 21.8% and 11.2% year-on-year. It should be also noted, that in April 2019, the international rating company Standard&Poor's (S&P) improved Georgia's sovereign rating from stable to positive and confirmed the rating at "BB". The positive outlook primarily reflects the S&P's position that Georgia's economic and external performance has the potential to outperform its current forecast over the next 12 months. It also reflects the country's continued compliance with the conditions of the existing funded IMF arrangement.

 

Finally, I would like to update you on our progress towards our strategic priorities:

·     Digitalization. In the first quarter of 2019, our offloading ratio in the retail segment reached 91.9%[6], up by 2.9 percentage points year-on-year, while sales conducted through digital channels amounted to 44.7%. Furthermore, our mobile banking penetration increased by 5.7 percentage points year-on-year and amounted to 36.7%, while the mobile or internet banking penetration ratio grew by 3.9 percentage pionts to reach 41.9%.

·    Agile transformation. We have also successfully completed the first wave of our agile transformation and established the new organisation structure for our back office operations, which we believe will lead to faster time-to-market, improved productivity and higher employee engagement.

·     Ecosystems. We continue to actively develop our e-commerce platform, Vendoo by deploying a brand new cloud technology based on open source. The launch of the marketplace is scheduled in May 2019 with electronics and personal care products.  In relation to our real estate platform, we have designed a target agile operating model, implemented data mining and lead generation practices and started the rebranding process.

·     International expansion:

Uzbekistan. In April 2019, we acquired a 51% stake in Payme, a leading payment platform in Uzbekistan, for a consideration of USD 5.5 million. Payme supplies high-quality payment solutions to its 1.3 million customers through facilitating utility payments, P2P transfers, loan repayments, mPOS for QR-based payments and e-commerce purchases. It also provides a marketplace platform for loans from selected Uzbek banks. Payme has grown rapidly in recent years, increasing the number of clients by around 70% during 2018, while during the same period its revenue and net profit grew by 41.9% and 24.5% respectively. The steady growth also continued in the first quarter 2019 with revenue and net profit growing by 21.9% and 73.0% quarter-on-quarter respectively. The acquisition of Payme is another important step in our planned expansion into Uzbekistan. It will enable us to gain immediate access to a large customer base in the country and use our core digital strengths in Georgia to innovate in the Uzbek market. With Payme joining our effort, we intend to further develop the payment business and also use it as a platform to develop new ecosystems in the country. 

Azerbaijan. I am proud to report that our joint efforts with Nikoil Bank's management continue to pay off. The bank has generated a net profit of USD 1.8 million in the first quarter 2019 on the back of improved income generation and cost efficiency.

 

Overall, I am delighted with our first quarter financial and operating results and I feel confident that we are well-positioned to achieve sustainable growth and to deliver high returns to our shareholders. Therefore, we would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 35%, dividend pay-out ratio of 25-35% and loan book growth of 10-15%.

 

Economic Overview[7]

Economic growth

Economic growth remained strong in 2018, despite the higher volatility in Georgia's economic partners and the contractionary fiscal stance domestically GDP increased by 4.7% the 4.8% of 2017. The growth was broad-based across almost all sectors, with trade and repairs (+5.9% YoY), transport and communications (+8.2% YoY), real estate (+12.1% YoY), and manufacturing (+3.4% YoY), as major drivers in 2018. Almost all other sectors posted growth rates. Construction declined by 3.1% YoY mostly due to the finalisation of the BP's SCPX project and underperformance in the public infrastructure spending, while the development of residential and non-residential buildings maintained solid growth. In 1Q 2019 real GDP growth averaged 4.7% YoY, per initial estimates of GeoStat.

Positive tendency of the CA balance improvement continued in 4Q 2018 as well with CA deficit to GDP ratio at 7.7% in 2018 compared to 8.8% in 2017. This is mostly due to the robust growth of tourism, exports and remittance inflows as well as the narrower income account deficit for 2018. FDI inflows, representing a major source of financing for the CA deficit, declined by 34.9% YoY and came in at still solid 7.9% of GDP in 2018 - this is a normalised level following the above trend inflows over 2014-17. The reduction mostly reflected the finalisation of the BP's SCPX project and the change of ownership of non-resident companies to residents as well as repayment of some FDI related debt.

Growth of exports, tourism and remittance inflows moderated and stood at 9.1% YoY in 1Q 2019, reflecting the normalisation of growth in Georgia's economic partners and continued economic difficulties in Turkey. Also, the effect of stronger USD should be considered as when measured in EUR and GEL, better reflecting the underlying value of assets in the country, growth of inflows stood at 18.1% and 17.2% YoY, respectively.

Imports of goods further declined by 4.7% YoY, due to the retail lending regulations, lower oil prices, high base effect in the previous year reflecting some one-off imports in 1Q 2018 and a stronger USD. As a result, balance of trade in goods improved by a solid 14.2% YoY.

The National Bank of Georgia continued to refill reserves and purchased sizeable USD 186 million - an estimated 7% of 1Q 2019 GDP. As of the end of March, the NBG's gross international reserves stood at USD 3.5 billion, up by 15.2% YoY. The estimated net international reserves exceeded the lower threshold for June 2019 as defined at USD 1.456 billion for June 2019 as defined in the agreement with the IMF by around USD 200 million.

Growth of bank loan portfolio continues to moderate, primarily reflecting regulations on retail lending. As of 1Q 2019 the total bank loan portfolio increased by 14.0% YoY, excluding the FX effect[8]. From a segment perspective, corporate, MSME and retail loans increased by 12.9%, 21.8% and 11.2% YoY, respectively. Excluding one-offs in corporate segment, total loan portfolio growth would have stood at an estimated 15.3% YoY with corporate segment up by 17.0%. Overall, even taking into account one-offs, slower growth of the loan portfolio is still evident driven by retail lending regulations on the one hand and normalizing growth rates in business credit following cyclical pick up in 2018 on the other. Bank loans-to-GDP ratio stood at 64.7% in 2018, up by 5.8 pp from end 2017, driven by the higher credit growth and the exchange rate weakening. When measured in constant currency terms, the bank loans-to-GDP ratio remains close to its long-term trend, indicating that there are no signs of excessive lending growth.

Following the contractionary stance in 2018, budget spending accelerated since the beginning of 2019. In Q1 2019 the total government spending went up by 15.5% YoY. The budget deficit stood at an estimated 0.2% of GDP, compared to surplus of 1.9% over the same period last year. Stronger fiscal spending, coupled with sizeable advance payments by the end of 2018, is expected to provide significant growth stimulus in the coming months.

Annual inflation stood at 3.7% as of March 2019, mostly driven by an higher excise tax on tobacco, increased prices on travel and a low base effect. Excluding the one-off impact of excise taxes, CPI inflation remained somewhat below the NBG's 3% target. Low inflation, relatively lower risks to inflation stemming from the external sector, and likely weak demand side pressures on prices, led the NBG to cut the policy rate twice, from 7% at the end of 2018 to 6.5%. During their latest meeting on the 1st of May monetary policy committee left the policy rate unchanged at 6.5%.

As of the end of March 2019, the USD/GEL exchange rate depreciated by 11.5% YoY, while the EUR/GEL exchange rate depreciated by a more modest 1.5% YoY. Over the same period, the GEL real effective exchange rate was almost unchanged, depreciating by only 0.1% YoY.

Resilience of Georgia's economy have been confirmed by the S&P as the agency improved the outlook to Georgia's credit rating from stable to positive. According to the rating commentary, demonstrated economic resilience amid turbulent region over 2014-18, efforts to widen the exports and foreign investment geography along with the continued investments in infrastructure, country's its strong institutional framework compared to region economies in the wider region, stable public debt levels and prudent policymaking all remain supportive to the country's credit rating. 

 

Going forward

Georgia continues to position itself as an attractive business environment with structural reforms and high GDP growth potential. According to the IMF's recently published World Economic Outlook[9], Georgian economy is projected to increase at 4.6% in 2019 and 5.0% in 2020. Thereafter, over 2021-2024 the economy is expected to expand at 5.2%.

More information on the Georgian economy and financial sector can be found at www.tbcresearch.ge

 

 

Unaudited Consolidated Financial Results Overview for 1Q 2019

This statement provides a summary of the unaudited business and financial trends for 1Q 2019 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.

TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. Starting from 1 January 2019, TBC Bank adopted IFRS 16. Therefore, the comparative information for 2018 is not comparable to the information presented for 2019.

Please note, that there might be slight differences in previous periods' figures due to rounding.

Income Statement Highlights

 

 

 

 

 

in thousands of GEL

1Q'19

4Q'18

1Q'19

Change YoY

Change QoQ

Net interest income

       196,958

    214,803

       175,403

12.3%

-8.3%

Net fee and commission income

         41,807

      44,064

         34,919

19.7%

-5.1%

Other operating non-interest income

         33,181

      53,395

         28,377

16.9%

-37.9%

Credit loss allowance

       (33,095)

     (44,036)

       (39,463)

-16.1%

-24.8%

Operating income after credit loss allowance

       238,851

    268,226

       199,236

19.9%

-11.0%

Operating expenses

     (102,514)

   (123,904)

       (90,932)

12.7%

-17.3%

Profit before tax

       136,337

    144,322

       108,304

25.9%

-5.5%

Income tax expense

         (3,015)

     (14,235)

       (10,778)

-72.0%

-78.8%

Profit for the period

       133,322

    130,087

         97,526

36.7%

2.5%

 

 

Balance Sheet and Capital Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mar-19

Dec-18

Change QoQ

Mar-18

Change YoY

In thousands of GEL

GEL

USD

GEL

USD

 

GEL

USD

 

 

Total Assets

15,172,306

 5,637,329

15,497,993

5,790,179

-2.1%

12,401,047

 5,136,285

22.3%

 

Gross Loans

10,366,915

 3,851,867

10,372,582

3,875,283

-0.1%

8,432,916

 3,492,758

22.9%

 

Customer Deposits

9,166,789

 3,405,956

9,352,142

3,494,038

-2.0%

7,610,804

 3,152,255

20.4%

 

Total Equity

2,347,756

    872,318

2,205,968

824,168

6.4%

1,930,404

    799,538

21.6%

 

Regulatory Tier I Capital (Basel III)

1,746,745

    649,010

1,678,716

627,182

4.1%

1,517,250

    628,417

15.1%

 

Regulatory Total Capital (Basel III)

2,421,461

    899,703

2,351,269

878,454

3.0%

1,943,425

    804,931

24.6%

 

Regulatory Risk Weighted Assets (Basel III)

12,689,740

 4,714,922

13,154,872

4,914,769

-3.5%

10,999,578

 4,555,823

15.4%

 

                             

 

 

Key Ratios

1Q'19

4Q'18

1Q'18

Change YoY

Change QoQ

ROE

23.8%

24.3%

21.0%

2.8 pp

-0.5 pp

ROA

3.6%

3.5%

3.2%

0.4 pp

0.1 pp

NIM

6.1%

6.7%

6.9%

-0.8 pp

-0.6 pp

Cost to income

37.7%

39.7%

38.1%

-0.4 pp

-2.0 pp

Cost of risk

1.4%

1.4%

1.3%

0.1 pp

0.0 pp

FX adjusted Cost of Risk

1.4%

1.3%

1.7%

-0.3 pp

0.1 pp

NPL to gross loans

3.3%

3.1%

3.1%

0.2 pp

0.2 pp

Regulatory tier 1 CAR (Basel III)

13.8%

12.8%

13.8%

0.0 pp

1.0 pp

Regulatory total CAR (Basel III)

19.1%

17.9%

17.7%

1.4 pp

1.2 pp

Leverage (times)

6.5x

7.0x

6.4x

0.1x

-0.5x

 

  

 

Income Statement Discussion

 

Net Interest Income

 

In thousands of GEL

1Q'19

4Q'18

1Q'18

Change YoY

Change QoQ

Loans and advances to customers

    292,055

    309,106

      256,053

14.1%

-5.5%

Investment securities measured at fair value through other comprehensive income

      19,934

      16,612

        13,168

51.4%

20.0%

Due from other banks

        5,866

        6,261

          4,919

19.3%

-6.3%

Bonds carried at amortised cost

        9,429

      11,752

          8,037

17.3%

-19.8%

Investment in leases

      10,631

      11,812

          7,672

38.6%

-10.0%

Interest income

    337,915

    355,543

      289,849

16.6%

-5.0%

Customer accounts

      75,133

      70,288

        62,922

19.4%

6.9%

Due to credit institutions

      49,246

      58,247

        41,477

18.7%

-15.5%

Subordinated debt

      15,672

      11,939

          9,640

62.6%

31.3%

Finance Lease

           637

              -  

                -  

NMF

NMF

Debt securities in issue

           269

           266

             407

-33.9%

1.1%

Interest expense

    140,957

    140,740

      114,446

23.2%

0.2%

Net interest income

    196,958

    214,803

      175,403

12.3%

-8.3%

 

 

 

 

 

 

Net interest margin

6.1%

6.7%

6.9%

-0.8 pp

-0.6 pp

NMF - no meaningful figures

 

1Q 2019 to 1Q 2018 Comparison

Net interest income increased by GEL 21.6 million, or 12.3%, to GEL 197.0 million, compared to 1Q 2018, driven by a GEL 48.1 million, or 16.6%, higher interest income and a GEL 26.5 million, or 23.2%, higher interest expense.

Interest income grew by GEL 48.1 million, or 16.6%, YoY to GEL 337.9 million, mainly due to an increase in interest income from loans and advances to customers of GEL 36.0 million, or 14.1%. This is primarily related to an increase in net loan portfolio of GEL 1,892.5 million, or 23.3%, YoY. This effect was partially offset by a 0.8 pp drop in loan yields, driven by a decrease in rates on both LC and FC-denominated loans. The gain in interest income was also driven by increased interest income from investment securities (comprising of investment securities measured at fair value through other comprehensive income and bonds carried at amortized cost) by GEL 8.2 million, or 38.5%, which resulted from a significant increase in the respective net portfolios by GEL 540.1 million, or 53.4%. This effect was partially offset by a 0.6 pp decline in respective yield, related to the declining refinance rate. The yield on interest earning assets decreased by 1.0 pp to 10.5%, compared to 1Q 2018.

The GEL 26.5 million, or 23.2%, YoY growth in interest expense to GEL 141.0 million in 1Q 2019 was mainly due to GEL 12.2 million, or 19.4%, increase in interest expense on customer accounts and a GEL 7.8 million, or 18.7%, increase in interest expense on amounts due to credit institutions. The rise in interest expense on customer accounts was attributable to a GEL 1,556.0 million, or 20.4%, increase in the respective portfolio and the expenses of the mandatory deposit insurance, which was reclassified to interest expense from administrative and other operating costs starting from January 1st 2019. Without this expense, the growth of interest expense on customer account would have been GEL 10.9 million, or 17.3%. Cost of deposits remained stable on a YoY basis. The higher interest expense on amounts due to credit institutions was attributable to a GEL 422.5 million, or 18.6%, growth in the respective portfolio. This effect was further magnified by a 0.1 pp increase in the respective yield to 7.1%. The cost of funding increased by 0.1 pp and stood at 4.5%.

Consequently, NIM stood at 6.1% in 1Q 2019, compared to 6.9% in 1Q 2018, while the risk adjusted NIM was 4.7%, compared to 5.2% in 1Q 2018.

  

1Q 2019 to 4Q 2018 Comparison

On a QoQ basis, net interest income declined by GEL 17.8 million, or 8.3% as a result of a GEL 17.6 million, or 5.0% decrease in interest income and a GEL 0.2 million, or 0.2% higher interest expense.

The decrease in interest income by GEL 17.6 million, or 5.0%, QoQ mainly resulted from the drop in interest income on loans by GEL 17.1 million, or 5.5%. This in turn was due to a decline in loan yields by 0.7 pp, which was attributable to a decrease in rates on both LC and FC-denominated loans. The net loan portfolio remained broadly stable on a QoQ basis. The decrease in interest income was also magnified by a decline in interest income from investment in leases by GEL 1.2 million, or 10.0%, due to decrease in the respective yield by 3.1 pp to 20.8%. This effect was partially offset by a GEL 4.4 million or 2.2% increase in portfolio of investment in leases. The yield on interest earning assets decreased by 0.6 pp from 11.1%, compared to 4Q 2018.

The increase in interest expense by GEL 0.2 million, or 0.2%, QoQ was primarily due to a GEL 4.8 million, or 6.9%, rise in interest expense on customer accounts. The main driver was a rise in the respective effective rate by 0.2 pp, to 3.3%, related to an increase in effective rate on LC-denominated deposits by 0.6 pp, to 5.9%. This effect was partially offset by a 0.1 pp drop in effective rate on FC-denominated deposit, to 1.9% and a decrease in customer accounts by GEL 185.4 million, or 2.0% on a QoQ basis. Another contributor to the rise in interest expense was the GEL 3.7 million, or 31.3% higher interest expense on subordinated loans. This resulted from a 0.2 pp rise in respective yield to 9.7%, which was further magnified by a GEL 13.4 million, or 2.1%, increase in the respective portfolio. The increase was offset by a drop in interest expense on amounts due to credit institutions by GEL 9.0 million, or 15.5%. This decline was primarily attributable to decrease in effective rate by 0.5 pp, to 7.1% and a decline in respective portfolio by GEL 338.9 million, or 11.2%, related to decreased borrowing from NBG. The cost of funding increased by 0.1 pp and stood at 4.5%.

Consequently, on a QoQ basis, NIM decreased by 0.6 pp and stood at 6.1%. Meanwhile risk adjusted NIM was down by 0.7 pp and stood at 4.7%.

Fee and Commission Income

 

 

 

 

In thousands of GEL

1Q'19

4Q'18

1Q'18

Change YoY

Change QoQ

Card operations

      28,486

      30,830

        21,736

31.1%

-7.6%

Settlement transactions

      17,617

      19,319

        16,239

8.5%

-8.8%

Guarantees issued

        5,857

        6,084

          4,220

38.8%

-3.7%

Issuance of letters of credit

        1,040

        2,081

          1,072

-3.0%

-50.0%

Cash transactions

        3,169

        4,209

          4,445

-28.7%

-24.7%

Foreign currency exchange transactions

           757

           805

             490

54.5%

-6.0%

Other

        3,976

        3,721

          2,632

51.1%

6.9%

Fee and commission income

      60,902

      67,049

        50,834

19.8%

-9.2%

Card operations

      14,350

      17,720

        10,467

37.1%

-19.0%

Settlement transactions

        2,749

        2,347

          2,142

28.3%

17.1%

Guarantees issued

           402

           415

             306

31.4%

-3.1%

Letters of credit

           389

           382

             260

49.6%

1.8%

Cash transactions

        1,017

        1,297

          1,117

-9.0%

-21.6%

Foreign currency exchange transactions

             28

               2

                 2

NMF

NMF

Other

           160

           822

          1,621

-90.1%

-80.5%

Fee and commission expense

      19,095

      22,985

        15,915

20.0%

-16.9%

Card operations

      14,136

      13,110

        11,269

25.4%

7.8%

Settlement transactions

      14,868

      16,972

        14,097

5.5%

-12.4%

Guarantees

        5,455

        5,669

          3,914

39.4%

-3.8%

Letters of credit

           651

        1,699

             812

-19.8%

-61.7%

Cash transactions

        2,152

        2,912

          3,328

-35.3%

-26.1%

Foreign currency exchange transactions

           729

           803

             488

49.4%

-9.2%

Other

        3,816

        2,899

          1,011

NMF

31.6%

Net fee and commission income

      41,807

      44,064

        34,919

19.7%

-5.1%

                 

NMF - no meaningful figures

 

 

 

1Q 2019 to 1Q 2018 Comparison

In 1Q 2019, net fee and commission income totalled GEL 41.8 million, up by GEL 6.9 million, or 19.7%, compared to 1Q 2018. This mainly resulted from an increase in net fee and commission income from card operations of GEL 2.9 million, or 25.4% and an increase in other net fee and commission income of GEL 2.8 million.

The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 12.1% and 20.5% respectively. The increase in other net fee and commission income was mainly driven by corporate and investment banking segment performance.

 

1Q 2019 to 4Q 2018 Comparison

On a QoQ basis, net fee and commission income fell by GEL 2.3 million, or 5.1%, compared to 4Q 2018. This was primarily driven by a decline in net fee and commission income from settlement transactions of GEL 2.1 million, or 12.4% and a GEL 0.8 million decrease in net fee and commission income from cash transaction. This effect was partially offset by a GEL 1.0 million, or 7.8% increase in net fee and commission income from card operations.

The drop is explained by a seasonal high number of transactions, volumes and related fee and commission income in the fourth quarter.

 

Other Operating Non-Interest Income and Gross Insurance Profit

 

 

 

 

In thousands of GEL

1Q'19

4Q'18

1Q'18

Change YoY

Change QoQ

Net income from foreign currency operations

      25,214

      33,029

        19,553

29.0%

-23.7%

Share of profit of associates

           169

           212

             307

-45.0%

-20.3%

Gains less losses/(losses less gains) from derivative financial instruments

          (158)

          (184)

               17

NMF

-14.1%

Gains less losses from disposal of investment securities measured at fair value through OCI

             68

              -  

                -  

NMF

NMF

Revenues from sale of cash-in terminals

           214

           225

          1,026

-79.1%

-4.9%

Revenues from operational leasing

           863

        1,731

          1,575

-45.2%

-50.1%

Gain from sale of investment properties

           148

        7,392

          1,041

-85.8%

-98.0%

Gain from sale of inventories of repossessed collateral

           260

        1,504

             105

NMF

-82.7%

Revenues from non-credit related fines

             68

           367

             142

-52.1%

-81.5%

Gain on disposal of premises and equipment

        1,231

           117

               45

NMF

NMF

Other

        1,375

        5,149

          2,520

-45.4%

-73.3%

Other operating income

        4,159

      16,485

          6,454

-35.6%

-74.8%

Gross insurance profit[10]

        3,729

        3,853

          2,046

82.3%

-3.2%

Other operating non-interest income and gross insurance profit

      33,181

      53,395

        28,377

16.9%

-37.9%

NMF - no meaningful figures

 

 

 

 

 

                           

 

1Q 2019 to 1Q 2018 Comparison 

Total other operating non-interest income and gross insurance profit grew by GEL 4.8 million, or 16.9%, to GEL 33.2 million in 1Q 2019. This primarily resulted from the growth in net income from foreign currency operations by GEL 5.7 million, or 29.0% and the increase in gross insurance profit of GEL 1.7 million. This increase was partially offset by a GEL 2.3 million, or 35.6% decrease in other operating income. Higher net income from foreign currency operations resulted from an increased number and volume of FX transactions, broadly consistent with the growth of the scale of business. 

Higher gross insurance profit mainly resulted from increased cross-selling of various insurance products. More information about TBC insurance can be found in Annex 23 on pages 33-34.

1Q 2019 to 4Q 2018 Comparison

On a QoQ basis, total other operating non-interest income and gross insurance profit decreased by GEL 20.2 million, or by 37.9%. This mainly resulted from the decline in net income from foreign currency operations by GEL 7.8 million, or 23.7%, a fall in gains from sale of investment property by GEL 7.2 million and a GEL 3.8 million, or 45.4% decrease in other operating income, mainly related to the recognition of an option to buy equity shares of one large corporate client in 4Q 2018. The decrease in net income from foreign currency was mainly driven by seasonal decrease in economic activity in the first quarter as compared to the most active fourth quarter.

Credit Loss Allowance

 

 

 

 

 

In thousands of GEL

1Q'19

4Q'18

1Q'18

Change YoY

Change QoQ

Credit loss allowance for loan to customers

     (36,416)

     (34,398)

      (27,999)

30.1%

5.9%

Credit loss allowance for investments in finance lease

            (41)

          (779)

           (240)

-82.9%

-94.7%

Credit loss allowance for performance guarantees and credit related commitments

           432

       (1,532)

        (3,875)

NMF

NMF

Credit loss allowance for other financial assets

        2,969

       (7,305)

        (7,326)

NMF

NMF

Credit loss allowance for financial assets measured at fair value through other comprehensive income

            (39)

            (22)

             (23)

69.6%

77.3%

Total credit loss allowance

     (33,095)

     (44,036)

      (39,463)

-16.1%

-24.8%

Operating income after credit loss allowance

    238,851

    268,226

      199,236

19.9%

-11.0%

 

 

 

 

 

 

Cost of risk

1.4%

1.4%

1.3%

0.1 pp

0.0 pp

NMF - no meaningful figures

 

 

 

 

 

 

 

1Q 2019 to 1Q 2018 Comparison

In 1Q 2019, total credit loss allowance declined by GEL 6.4 million to GEL 33.1 million compared to 1Q 2018.

This was primarily attributable to a recovery of credit loss allowance for other financial assets driven by a single corporate debtor. The recovery was partially offset by a GEL 8.4 million increase in credit loss allowance for loans to customers. GEL appreciation in 1Q 2018 had a positive effect on credit loss allowance for loans to customers.

In 1Q 2019, the cost of risk stood at 1.4% (1.4% without the FX effect), compared to 1.3% (1.7% without the FX effect) in 1Q 2018.

1Q 2019 to 4Q 2018 Comparison

On a QoQ basis, total credit loss allowance declined by GEL 10.9 million to GEL 33.1 million.

This was attributable to a recovery of credit loss allowance for other financial assets due to a single corporate debtor.

In 1Q 2019, the cost of risk stood at 1.4% (1.4% without the FX effect), compared to 1.4% (1.3% without the FX effect) in 4Q 2018.  

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL

1Q'19

4Q'18

1Q'18

Change YoY

Change QoQ

Staff costs

      57,753

      63,213

        52,116

10.8%

-8.6%

Provisions for liabilities and charges

          (200)

              -  

                -  

NMF

NMF

Depreciation and amortization

      16,169

      12,333

        10,470

54.4%

31.1%

Professional services

        3,526

        5,385

          2,962

19.0%

-34.5%

Advertising and marketing services

        4,478

      10,738

          4,527

-1.1%

-58.3%

Expenses related to lease contracts[11]

2,630

-

-

NMF

NMF

Rent

-

        6,666

          5,864

NMF

NMF

Utility services

        1,947

        1,602

          1,735

12.2%

21.5%

Intangible asset enhancement

        2,741

        3,672

          2,494

9.9%

-25.4%

Taxes other than on income

        1,817

        1,356

          1,656

9.7%

34.0%

Communications and supply

        1,435

        1,422

          1,034

38.8%

0.9%

Stationary and other office expenses

        1,119

        1,312

          1,184

-5.5%

-14.7%

Insurance

           229

        2,558

             485

-52.8%

-91.0%

Security services

           504

           522

             496

1.6%

-3.4%

Premises and equipment maintenance

        2,035

        1,767

          1,035

96.6%

15.2%

Business trip expenses

           409

           706

             320

27.8%

-42.1%

Transportation and vehicles maintenance

           410

           549

             378

8.5%

-25.3%

Charity

        1,004

           332

             280

NMF

NMF

Personnel training and recruitment

           291

        1,006

             176

65.3%

-71.1%

Write-down of current assets to fair value less costs to sell

              -  

            (19)

               (3)

-100.0%

-100.0%

Loss on disposal of Inventory

             14

               1

               20

-30.0%

NMF

Loss on disposal of investment properties

              -  

             36

               31

-100.0%

-100.0%

Loss on disposal of premises and equipment

           233

           425

             278

-16.2%

-45.2%

Impairment of intangible assets

              -  

               1

                -  

NMF

-100.0%

Other

        3,970

        8,321

          3,394

17.0%

-52.3%

Administrative & other operating expenses

      28,792

      48,358

        28,346

1.6%

-40.5%

Operating expenses

    102,514

    123,904

        90,932

12.7%

-17.3%

Profit before tax

    136,337

    144,322

      108,304

25.9%

-5.5%

Income tax expense

       (3,015)

     (14,235)

      (10,778)

-72.0%

-78.8%

Profit for the period

    133,322

    130,087

        97,526

36.7%

2.5%

 

 

 

 

 

 

Cost to income

37.7%

39.7%

38.1%

-0.4 pp

-2.0 pp

ROE

23.8%

24.3%

21.0%

2.8 pp

-0.5 pp

ROA

3.6%

3.5%

3.2%

0.4 pp

0.1 pp

NMF - no meaningful figures

 

1Q 2019 to 1Q 2018 Comparison

In 1Q 2019, total operating expenses expanded by GEL 11.6 million, or 12.7% YoY to GEL 102.5 million, primarily due to an increase in staff costs of GEL 5.6 million, or 10.8% YoY and a rise in depreciation and amortization, of GEL 5.7 million, or 54.4%. The growth in staff cost was mainly driven by a higher scale and performance, while increase in depreciation and amortization was primarily related to IFRS 16.

We have continued to deliver positive operational JAWS ratio[12], leading to a decrease in cost to income ratio by 0.4 pp to 37.7% in 1Q 2019.

1Q 2019 to 4Q 2018 Comparison

On a QoQ basis, total operating expenses decreased by GEL 21.4 million, or 17.3%. This was primarily attributable to a GEL 19.6 million, or 40.5% decline in administrative & other operating expenses and a GEL 5.5 million, or 8.6% drop in staff cost. The decrease in operating expenses was related to seasonally high costs across various categories of expenses in 4Q.

 

Our cost to income ratio improved by 2.0 pp from 39.7%, compared to 4Q 2018.

 

Net Income

Net income for the first quarter increased by GEL 3.2 million, or 2.5%, QoQ and by GEL 35.8 million, or 36.7%, YoY and amounted to GEL 133.3 million.

As a result, ROE stood at 23.8%, up by 2.8 pp YoY and down by 0.5 pp QoQ, while ROA stood at 3.6%, up by 0.4 pp YoY and down by 0.1 pp QoQ.

 

Balance Sheet Discussion

 

 

 

 

 

In thousands of GEL

Mar-19

Dec-18

Change QoQ

Mar-18

Change YoY

Cash, due from banks and mandatory cash balances with NBG

       2,373,893

      2,637,036

-10.0%

     2,246,989

5.6%

Loans and advances to customers (Net)

     10,029,320

    10,038,452

-0.1%

     8,136,820

23.3%

Financial securities

       1,550,767

      1,659,442

-6.5%

     1,010,659

53.4%

Fixed and intangible assets & investment property

          570,047

         561,020

1.6%

        531,297

7.3%

Right of use assets

            60,951

                   -  

NMF

-

NMF

Other assets

          587,328

         602,043

-2.4%

        475,282

23.6%

Total assets

     15,172,306

    15,497,993

-2.1%

   12,401,047

22.3%

Due to credit institutions

       2,692,585

      3,031,503

-11.2%

     2,270,119

18.6%

Customer accounts

       9,166,789

      9,352,142

-2.0%

     7,610,804

20.4%

Debt securities in issue

            13,415

           13,343

0.5%

          19,371

-30.7%

Subordinated debt

          664,330

         650,919

2.1%

        402,058

65.2%

Other liabilities

          287,431

         244,118

17.7%

        168,291

70.8%

Total liabilities

     12,824,550

    13,292,025

-3.5%

   10,470,643

22.5%

Total equity

       2,347,756

      2,205,968

6.4%

     1,930,404

21.6%

NMF - no meaningful figures

 

Assets

As of 31 March 2019, the Group's total assets amounted to GEL 15,172.3 million, up by GEL 2,771.3 million, or by 22.3% YoY. The increase was mainly due to the rise in net loans to customers by GEL 1,892.5 million, or by 23.3% YoY. The YoY increase in total assets also resulted from a GEL 540.1 million, or 53.4%, rise in financial securities compared to 31 March 2018.

On a QoQ basis, total assets dropped by GEL 325.7 million, or 2.1%, mainly due to a GEL 263.1 million, or 10.0%, decline in liquid assets (comprising cash, due from banks and mandatory cash balances with the NBG) and a GEL 108.7 million or 6.5% decrease in financial securities. The decline was slightly offset by an increase in fixed and intangible assets & investment property by GEL 70.0 million, or 12.5%.  

As of 31 March 2019, the gross loan portfolio reached GEL 10,366.9 million, up by 22.9% YoY and down by 0.1% QoQ. At the same time, gross loans denominated in foreign currency accounted for 59.6% of total loans, compared to 58.2% and 60.1% as of 31 March 2018 and 31 December 2018 respectively.

 

Asset Quality

Borrowers with FX income

 

31-Mar-19

31-Dec-18

31-Mar-18

Segments

% of FX loans

of which borrowers with FX income**

% of FX loans

of which borrowers with FX income**

% of FX loans

of which borrowers with FX income**

Retail

56.0%

28.7%

56.1%

28.5%

49.4%

25.4%

Non-mortgage

19.9%

23.6%

19.9%

24.1%

18.0%

24.5%

Mortgage

81.1%

29.6%

82.7%

29.3%

80.1%

25.6%

Corporate

70.0%

51.4%*

71.5%

51.4%*

75.6%

53.1%*

MSME

52.2%

14.3%

53.1%

15.2%

53.2%

14.9%

Total loan portfolio

59.6%

34.4%

60.1%

34.0%

58.2%

34.0%

 (Based on internal estimates)

* Pure exports account for 6.4%, 7.0% and 7.0% of total corporate FX denominated loans as at 31 March 2019, 31 December 2018 and 31 March 2018, respectively.

** FX income implies both direct and indirect income.

 

 

PAR 30 by Segments and Currencies

Mar-19

Dec-18

Mar-18

 

GEL

FC

Total

GEL

FC

Total

GEL

FC

Total

Corporate

1.1%

1.2%

1.2%

0.7%

0.3%

0.4%

0.0%

1.1%

0.9%

Retail

4.4%

1.8%

2.9%

4.0%

1.5%

2.6%

2.9%

1.7%

2.3%

MSME

2.7%

3.5%

3.1%

2.4%

3.2%

2.8%

1.9%

3.5%

2.7%

Total

3.2%

1.9%

2.4%

2.8%

1.4%

2.0%

2.2%

1.9%

2.0%

Loans overdue by more than 30 days to gross loans

 

 

 

 

 

 

 

 

 

                                   

Total

Total PAR 30 increased by 0.4 pp on QoQ basis as well as on YoY basis, standing at 2.4%, which was driven by increase of PAR 30 in all segments.

Retail Segment

The retail segment's PAR 30 amounted to 2.9%, up by 0.3 pp QoQ and by 0.6pp YoY. The increase was mainly attributable to higher yield products such as credit cards and unsecured consumer loans, which have been substantially reduced by new regulations this year.

Corporate

The corporate segment's PAR 30 amounted to 1.2%, up by 0.8 pp QoQ and by 0.3 pp YoY. This was driven by two mid-sized corporate clients.

MSME

The MSME segment's PAR 30 increased by 0.3 pp QoQ and by 0.4 pp YoY and stood at 3.1% as of 31 March 2019. This was mainly driven by SME sub-segment.

 

NPLs

Mar-19

Dec-18

Mar-18

 

GEL

FC

Total

GEL

FC

Total

GEL

FC

Total

Corporate

1.7%

3.0%

2.6%

1.6%

3.1%

2.7%

0.9%

3.0%

2.5%

Retail

4.3%

2.3%

3.2%

3.7%

2.3%

2.9%

2.4%

3.0%

2.7%

MSME

3.0%

5.6%

4.4%

2.6%

5.5%

4.2%

2.6%

6.2%

4.5%

Total

3.3%

3.2%

3.3%

2.9%

3.3%

3.1%

2.2%

3.7%

3.1%

 

Total

Total NPLs rose by 0.2 pp on QoQ and YoY basis and stood at 3.3%. The increase was mainly driven by consumer loans.

Retail Segment

The retail segment's NPLs remained increased by 0.3 pp QoQ and by 0.5 pp YoY and stood at 3.2%, driven by consumer loans.

Corporate

On both QoQ and YoY basis, the corporate segment's NPLs ratio remained broadly stable.

MSME

The MSME segment's NPLs increased by 0.2 pp QoQ and was broadly stable on YoY basis. QoQ increase was due to both SME and micro sub-segments.

 

NPLs Coverage

Mar-19

Dec-18

Mar-18

 

Exc. Collateral

Incl. Collateral

Exc. Collateral

Incl. Collateral

Exc. Collateral

Incl. Collateral

Corporate

95.4%

288.7%

96.4%

286.9%

103.8%

275.5%

Retail

123.8%

190.0%

132.4%

204.4%

157.6%

235.6%

MSME

71.4%

175.2%

68.4%

174.0%

70.2%

179.2%

Total

100.1%

210.8%

102.7%

216.4%

114.6%

225.8%

 

Liabilities

As of 31 March 2019, TBC Bank's total liabilities amounted to GEL 12,824.6 million, up by GEL 2,353.9 million, or by 22.5% YoY. This primarily resulted from a GEL 1,556.0 million, or 20.4%, increase in customer accounts and GEL 422.5 million or 18.6% increase in amounts due to credit institutions.

On a QoQ basis, total liabilities dropped by GEL 467.5 million, or 3.5%. The decrease was mainly driven by decline in amounts due to credit institutions by GEL 338.9 million, or 11.2% and in customer accounts by GEL 185.4 million, or 2.0%. The decrease in customer accounts on a QoQ basis was related to seasonality, reduction in loan growth due to new regulation and retail deposit reduction mostly in January before the settlement of the dispute with NBG (for further details please refer to our website: www.tbcbankgroup.com).

Liquidity

As of 31 March 2019 the Bank's liquidity ratio, as defined by the NBG, stood at 35.9%, compared to 33.3% and 30.8% as of 31 December 2018 and 31 March 2018 respectively, above the NBG limit of 30%. As of 31 March 2019, the total liquidity coverage ratio (LCR), as defined by the NBG, was 117.5%, above the 100.0% limit. The LCR in GEL and FC stood at 111.9% and 122.2% respectively, above the respective limits of 75% and 100%.

Total Equity

As of 31 March 2019, TBC's total equity totalled GEL 2,347.8 million, up by GEL 417.4 million from GEL 1,930.4 million as of 31 March 2018. The YoY change in equity was primarily attributable to net profit contribution of GEL 473.2 million during last 12 months, which was partially offset by dividend distribution of GEL 88.9 million in May 2018.

On a QoQ basis TBC's total equity increased by GEL 141.8 million, or 6.4%. The QoQ change in equity was due to increase in net income by GEL 133.3 million.

Regulatory Capital

As of 31 March 2019 the Bank's Basel III tier 1 and total capital adequacy ratios (CAR) stood at 13.8% and 19.1%, respectively, compared to the minimum required levels of 11.9% and 16.9%. In comparison, as of 31 March 2018, the Bank's Basel III tier 1 and total capital adequacy ratios (CAR) stood at 13.8% and 17.7%, respectively, higher than the minimum required levels of 10.2% and 15.0%. As of 31 December 2018 the Bank's Basel III tier 1 and total capital adequacy ratios (CAR) stood at 12.8% and 17.9%, respectively, higher than the minimum required levels of 11.8% and 16.7%. We are exploring the opportunity to further strengthen our capital structure through AT1 security, which could be in the form of an USD denominated AT1 note issuance in 2019.

In 31 March 2019, the Bank's Basel III tier 1 capital amounted to GEL 1,746.7 million, up by GEL 229.5 million, or 15.1%, compared to March 2018, due to an increase in net income.  The Bank's Basel III total capital amounted to GEL 2,421.5 million, up by GEL 478.0 million, or 24.6%, YoY. The increase in total capital was attributable to the generated income within the period, as well as attraction of new subordinated loans with total amount GEL 230.5 million. Risk weighted assets stood at GEL 12,689.7 million as of 31 March 2019, up by GEL 1,690.2 million, or 15.4%, compared to March 2018, mainly related to the rise in loan book, as well as growth in risk weighted assets for operational risk.

On a QoQ basis, the Bank's Basel III tier 1 capital amounted increased by GEL 68.0 million, or 4.1%, compared to December 2018, while the Bank's Basel III total capital increased by GEL 70.2 million, or 3.0%, YoY. The increase in tier 1 capital and total capital was attributable to the increase in net income. Risk weighted assets decreased by GEL 465.1 million, or 3.5%, compared to December 2018, mainly related to the optimization of the credit risk weighted assets, as well as decrease in market risk.

 

Results by segments and subsidiaries

The segment definitions are as follows:

·     Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million, or which have been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;

·     MSME (Micro, Small and Medium) - business customers who are not included in either the corporate or the retail segments; or legal entities who have been granted a pawn shop loan; or individual customers of the newly launched, fully digital bank - Space;

·   Retail - non-business individual customers or individual business customers who have been granted mortgage loans; all individual customers are included in retail deposits;

·    Corporate Centre - comprises the Treasury, other support and back office functions, and the non-banking subsidiaries of the Group;

Business customers are all legal entities or individuals who have been granted a loan for business purposes.

Summary of key changes:

·    Some customers were moved to the corporate segment on a discretionary basis considering practical aspects of client account servicing and administration. As a result, the corporate loan portfolio increased by GEL 128 million and the corporate deposit portfolio grew by GEL 70 million.

 

Income Statement by Segments

1Q'19

Retail

MSME

Corporate

Corp.Centre

Total

Interest income

       145,814

       69,376

      78,904

          43,821

    337,915

Interest expense

       (34,666)

        (2,204)

     (38,898)

 (65,189)

   (140,957)

Net transfer pricing

       (17,024)

      (23,463)

      11,585

          28,902

              -  

Net interest income

         94,124

       43,709

      51,591

            7,534

    196,958

Fee and commission income

         44,021

         5,255

      11,250

               376

      60,902

Fee and commission expense

       (15,727)

        (1,666)

       (1,603)

 (99)

     (19,095)

Net fee and commission income

         28,294

         3,589

        9,647

               277

      41,807

Gross insurance profit

                 -  

               -  

              -  

            3,729

        3,729

Net income from foreign currency operations

           6,159

         4,446

      12,207

 (1,225)

      21,587

Foreign exchange translation gains less losses/(losses less gains)

                 -  

               -  

              -  

            3,627

        3,627

Net losses from derivative financial instruments

            (148)

               -  

              -  

 (10)

          (158)

Gains less losses from disposal of investment securities measured at fair value through OCI

                 -  

               -  

              -  

                 68

             68

Other operating income

           2,409

            460

           264

            1,026

        4,159

Share of profit of associates

                 -  

               -  

              -  

               169

           169

Other operating non-interest income and insurance profit

           8,420

         4,906

      12,471

            7,384

      33,181

Credit loss allowance for loan to customers

       (27,359)

        (9,485)

           428

                  -  

     (36,416)

Credit loss allowance for performance guarantees and credit related commitments

              393

            183

          (144)

                  -  

           432

Credit loss allowance for investments in finance lease

                 -  

               -  

              -  

 (41)

            (41)

Credit loss allowance for other financial assets

                38

               -  

        3,864

 (933)

        2,969

Credit loss allowance for financial assets measured at fair value through other comprehensive income

                 -  

               -  

            (39)

                  -  

            (39)

Profit before G&A expenses and income taxes

       103,910

       42,902

      77,818

          14,221

    238,851

Staff costs

       (33,134)

      (11,368)

       (8,164)

 (5,087)

     (57,753)

Depreciation and amortization

       (12,499)

        (2,015)

          (717)

 (938)

     (16,169)

Provision for liabilities and charges

                 -  

               -  

              -  

               200

           200

Administrative and other operating expenses

       (17,769)

        (4,800)

       (2,925)

           (3,298)

     (28,792)

Operating expenses

       (63,402)

      (18,183)

     (11,806)

 (9,123)

   (102,514)

Profit before tax

         40,508

       24,719

      66,012

            5,098

    136,337

Income tax expense

         (5,217)

        (3,750)

       (9,871)

          15,823

       (3,015)

Profit for the year

         35,291

       20,969

      56,141

          20,921

    133,322

 

 

 

Portfolios by Segments

 

 

 

In thousands of GEL

Mar-19

Dec-18

Mar-18

Loans and advances to customers

 

 

 

Non-mortgage

    1,882,816

      1,989,516

  1,961,411

Mortgage

    2,695,457

      2,709,183

  2,007,914

Retail

    4,578,273

      4,698,699

  3,969,325

Corporate

    3,364,911

      3,177,289

  2,489,516

MSME

    2,423,731

      2,496,594

  1,974,075

Total loans and advances to customers (Gross)

  10,366,915

    10,372,582

  8,432,916

Less: credit loss allowance for loans to customers

     (337,595)

        (334,130)

    (296,096)

Total loans and advances to customers (Net)

  10,029,320

    10,038,452

  8,136,820

 

 

 

 

Customer accounts

 

 

 

Retail

    4,914,927

      5,103,971

  4,197,277

Corporate

    3,316,436

      3,230,653

  2,474,559

MSME

       935,426

      1,017,518

     938,968

Total Customer accounts

    9,166,789

      9,352,142

  7,610,804

Retail Banking

As of 31 March 2019, retail loans stood at GEL 4,578.3 million, up by GEL 608.9 million, or 15.3%, YoY and they accounted for 39.3% market share of total individual loans. Compared to December 2018, retail loans declined by GEL 120.4 million, or 2.6%. As of March 2019 foreign currency loans represented 56.0% of the total retail loan portfolio.

In the reporting period, retail deposits stood at GEL 4,914.9 million, up by GEL 717.7 million, or 17.1%, YoY and accounted for 39.5% market share of total individual deposits. On a QoQ basis, retail deposits decreased by GEL 189 million, or 3.7%. As of 31 March 2019 term deposits accounted for 54.3% of the total retail deposit portfolio, while foreign currency deposits represented 80.8% of the total.

In 1Q 2019, retail loan yields and deposit rates stood at 12.8% and 2.8%, respectively. The segment's cost of risk on loans was 2.4% . The retail segment contributed 26.5%, or GEL 35.3 million, to the total net income in 1Q 2019.

Corporate Banking

As of 31 March 2019, corporate loans amounted to GEL 3,364.9 million, up by GEL 747.4 million, or 30.0%, YoY and up by GEL 59.7 million, or 1.9% QoQ without re-segmentation effect[13]. Foreign currency loans accounted for 70.0% of the total corporate loan portfolio as of March 2019. The market share of total legal entities loans stood at 37.4%.

As of the same date, corporate deposits totalled GEL 3,316.4 million, up by GEL 771.9 million, or 31.2%, YoY and up by GEL 15.9 million, or 0.5%, QoQ without re-segmentation effect[14]. Foreign currency corporate deposits represented 41.9% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 41.4%.

In 1Q 2019, corporate loan yields and deposit rates stood at 9.5% and 4.9%, respectively. In the same period, the cost of risk on loans was -0.1%. In terms of profitability, the corporate segment's net profit reached GEL 56.1 million, or 42.1%, of the total net income.

MSME Banking

As of 31 March 2019, MSME loans amounted to GEL 2,423.7 million, up by GEL 577.6 million, or 29.3%, YoY and up by GEL 55.1 million, or 2.2%, QoQ without re-segmentation effect1. Foreign currency loans accounted for 52.2% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 935.4 million, up by GEL 66.4 million, or 7.1%, YoY and down by GEL 12.2 million, or 1.2%, QoQ without re-segmentation effect2. Foreign currency MSME deposits represented 46.1% of the total MSME deposit portfolio.

In 1Q 2019, MSME loan yields and deposit rates stood at 11.7% and 0.9% respectively, while the cost of risk on loans was 1.6%. In terms of profitability, net profit for the MSME segment amounted to GEL 21.0 million, or 15.7%, of the total net income.

Consolidated Financial Statements of TBC Bank Group PLC

 

Consolidated Balance Sheet

 

 

 

In thousands of GEL 

Mar-19

Dec-18

Mar-18

Cash and cash equivalents

          927,830

      1,166,911

     1,245,562

Due from other banks

            29,981

           47,316

          23,311

Mandatory cash balances with National Bank of Georgia

       1,416,082

      1,422,809

        978,116

Loans and advances to customers

     10,029,320

    10,038,452

     8,136,820

Investment securities measured at fair value through other comprehensive income

          889,137

      1,005,239

        580,784

Bonds carried at amortised cost

          661,630

         654,203

        429,875

Investments in finance leases

          208,243

         203,802

        145,546

Investment properties

            84,055

           84,296

          76,690

Current income tax prepayment

            11,102

             2,116

            8,454

Deferred income tax asset

              1,973

             2,097

            2,527

Other financial assets

          124,093

         167,518

        127,851

Other assets

          207,518

         192,792

        160,662

Premises and equipment

          366,327

         367,504

        369,610

Right of use assets

            60,951

                   -  

                 -  

Intangible assets

          119,665

         109,220

          84,997

Goodwill

            31,798

           31,286

          28,657

Investments in associates

              2,601

             2,432

            1,585

TOTAL ASSETS    

     15,172,306

    15,497,993

   12,401,047

LIABILITIES     

 

 

 

Due to Credit Institutions

       2,692,585

      3,031,503

     2,270,119

Customer accounts    

       9,166,789

      9,352,142

     7,610,804

Other financial liabilities   

          171,421

           98,714

          90,499

Current income tax liability  

                   36

                  63

                 44

Debt Securities in issue

            13,415

           13,343

          19,371

Deferred income tax liability  

            19,337

           22,237

               663

Provisions for liabilities and charges 

            18,250

           18,767

          12,467

Other liabilities     

            78,387

         104,337

          64,618

Subordinated debt    

          664,330

         650,919

        402,058

TOTAL LIABILITIES    

     12,824,550

    13,292,025

   10,470,643

EQUITY     

 

 

 

Share capital

              1,672

             1,650

            1,626

Share premium

          831,773

         796,854

        753,298

Retained earnings

       1,657,330

      1,523,879

     1,266,299

Group reorganisation reserve

        (162,166)

        (162,166)

      (162,166)

Share based payment reserve

          (43,080)

          (16,294)

        (24,608)

Revaluation reserve for premises

            56,701

           57,240

          70,039

Fair value reserve

              9,702

             8,680

            4,146

Cumulative currency translation reserve

            (7,295)

            (6,937)

          (7,425)

Net assets attributable to owners

       2,344,637

      2,202,906

     1,901,209

Non-controlling interest    

              3,119

             3,062

          29,195

TOTAL EQUITY    

       2,347,756

      2,205,968

     1,930,404

TOTAL LIABILITIES AND EQUITY  

     15,172,306

    15,497,993

   12,401,047

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

 

 

In thousands of GEL 

1Q'19

4Q'18

1Q'18

Interest income 

    337,915

    355,543

      289,849

Interest expense

   (140,957)

   (140,740)

    (114,446)

Net interest income

    196,958

    214,803

      175,403

Fee and commission income

      60,902

      67,049

        50,834

Fee and commission expense

     (19,095)

     (22,985)

      (15,915)

Net fee and commission income

      41,807

      44,064

        34,919

Net insurance premiums earned

        7,329

        7,023

          4,435

Net insurance claims incurred and agents' commissions

       (3,600)

       (3,170)

        (2,389)

Insurance profit

        3,729

        3,853

          2,046

Net income from foreign currency operations  

      21,587

      28,258

        17,080

Net gain/(losses) from foreign exchange translation

        3,627

        4,771

          2,473

Net gains/(losses) from derivative financial instruments

          (158)

          (184)

               17

Gains less losses from disposal of investment securities measured at fair value through other comprehensive income

             68

              -  

                -  

Other operating income

        4,159

      16,485

          6,454

Share of profit of associates

           169

           212

             307

Other operating non-interest income

      29,452

      49,542

        26,331

Credit loss allowance for loan to customers

     (36,416)

     (34,398)

      (27,999)

Credit loss allowance for investments in finance lease

            (41)

          (779)

           (240)

Credit loss allowance for performance guarantees and credit related commitments

           432

       (1,532)

        (3,875)

Credit loss allowance for other financial assets

        2,969

       (7,305)

        (7,326)

Credit loss allowance for financial assets measured at fair value through other comprehensive income

            (39)

            (22)

             (23)

Operating income after credit loss allowance for impairment

    238,851

    268,226

      199,236

Staff costs

     (57,753)

     (63,213)

      (52,116)

Depreciation and amortization

     (16,169)

     (12,333)

      (10,470)

(Provision for)/ recovery of liabilities and charges

           200

              -  

                -  

Administrative and other operating expenses

     (28,792)

     (48,358)

      (28,346)

Operating expenses

   (102,514)

   (123,904)

      (90,932)

Profit before tax

    136,337

    144,322

      108,304

Income tax expense

       (3,015)

     (14,235)

      (10,778)

Profit for the period

    133,322

    130,087

        97,526

Other comprehensive income:

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

Movement in fair value reserve

        1,023

        3,757

          2,374

Exchange differences on translation to presentation currency

          (358)

           340

             (67)

Items that will not be reclassified to profit or loss:

 

 

 

Revaluation of premises and equipment

          (539)

      10,749

                -  

Income tax recorded directly in other comprehensive income

              -  

        2,788

                -  

Other comprehensive income for the period

           126

      17,634

          2,307

Total comprehensive income for the period

    133,448

    147,721

        99,833

Profit attributable to:

 

 

 

 - Shareholders of TBCG

    133,237

    129,952

        95,758

 - Non-controlling interest

             85

           135

          1,768

Profit for the period

    133,322

    130,087

        97,526

Total comprehensive income is attributable to:

 

 

 

 - Shareholders of TBCG

    133,363

    147,628

        98,031

 - Non-controlling interest

             85

             93

          1,802

Total comprehensive income for the period

    133,448

    147,721

        99,833

           

 

 

 

Consolidated Statements of Cash Flows

 

 

In thousands of GEL

31-Mar-19

31-Mar-18

Cash flows from/(used in) operating activities

 

 

Interest received

332,214

286,870

Interest paid

 (128,621)

(114,810)

Fees and commissions received

61,001

50,177

Fees and commissions paid

 (19,076)

(15,988)

Insurance premium received

15,568

10,632

Insurance claims paid

 (2,083)

(4,547)

Income received from trading in foreign currencies

21,588

17,080

Other operating income received

 (7,403)

(6,747)

Staff costs paid

 (68,852)

(81,180)

Administrative and other operating expenses paid

 (39,165)

(34,351)

Income tax paid

 (15,619)

(113)

Cash flows from operating activities before changes in operating assets and liabilities

149,552

107,023

Net change in operating assets

 

 

Due from other banks and mandatory cash balances with the National Bank of Georgia

44,243

24,793

Loans and advances to customers

 (14,169)

(254,413)

Investment in finance lease

 (9)

(10,397)

Other financial assets

49,780

27,467

Other assets

 (6,977)

2,262

Net change in operating liabilities

 

 

Due to other banks

159,324

27,601

Customer accounts

 (199,925)

142,411

Other financial liabilities

11,798

(10,447)

Financial lease liabilities

 (3,202)

-

Other liabilities and provision for liabilities and charges

2,039

406

Net cash from operating activities

192,454

          56,706

Cash flows from/(used in) investing activities

 

 

Acquisition of investment securities measured at fair value through other comprehensive income

 (29,994)

 (80,411)

Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income

145,921

158,849

Acquisition of bonds carried at amortised cost

 (119,747)

 (56,429)

Proceeds from redemption of bonds carried at amortised cost

98,613

71,405

Acquisition of premises, equipment and intangible assets

 (24,729)

 (15,394)

Disposal of premises, equipment and intangible assets

4,965

910

Proceeds from disposal of investment property

1,414

4,192

Acquisition of subsidiaries, net of cash acquired

 (596)

-  

Net cash used in investing activities

75,847

83,122

Cash flows from/(used in) financing activities

 

 

Proceeds from other borrowed funds

267,489

645,260

Redemption of other borrowed funds

 (778,163)

 (935,698)

Proceeds from subordinated debt

-  

-  

Redemption of subordinated debt

-  

-  

Proceeds from debt securities in issue

 (14)

75

Redemption of debt securities in issue

-  

-  

Dividends paid

-

-  

Issue of ordinary shares

  - 

17,397

Net cash flows from financing activities

 (510,688)

 (272,966)

Effect of exchange rate changes on cash and cash equivalents

3,306

 (52,777)

Net increase in cash and cash equivalents

 (239,081)

 (185,915)

Cash and cash equivalents at the beginning of the year

1,166,911

1,431,477

Cash and cash equivalents at the end of the year

927,830

1,245,562

 

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 prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.

   Key Ratios

 

 

 

 

 

 

 

Ratios (based on monthly averages, where applicable)

1Q'19

4Q'18

1Q'18

ROE1

23.8%

24.3%

21.0%

ROA2

3.6%

3.5%

3.2%

ROE before credit loss allowance3

29.7%

32.5%

29.6%

Cost to income4

37.7%

39.7%

38.1%

Cost of risk5

1.4%

1.4%

1.3%

FX adjusted cost of risk6

1.4%

1.3%

1.7%

NIM7

6.1%

6.7%

6.9%

Risk adjusted NIM8

4.7%

5.4%

5.2%

Loan yields9

11.5%

12.2%

12.3%

Risk adjusted loan yields10

10.1%

10.9%

10.6%

Deposit rates11

3.3%

3.1%

3.3%

Yields on interest earning assets12

10.5%

11.1%

11.5%

Cost of funding13

4.5%

4.4%

4.4%

Spread14

6.0%

6.6%

7.1%

PAR 90 to gross loans15

1.3%

1.2%

1.2%

NPLs to gross loans16

3.3%

3.1%

3.1%

NPLs coverage17

100.1%

102.7%

114.6%

NPLs coverage with collateral18

210.8%

216.4%

225.8%

Credit loss level to gross loans19

3.3%

3.2%

3.5%

Related party loans to gross loans20

0.1%

0.1%

0.1%

Top 10 borrowers to total portfolio21

9.6%

10.1%

9.4%

Top 20 borrowers to total portfolio22

13.5%

14.2%

13.4%

Net loans to deposits plus IFI Funding23

90.5%

89.9%

93.2%

Net stable funding ratio*24

123.8%

124.2%

124.5%

Liquidity coverage ratio25

117.5%

113.9%

104.6%

Leverage26

6.5x

7.0x

6.4x

Regulatory tier 1 CAR (Basel III)27

13.8%

12.8%

13.8%

Regulatory total 1 CAR (Basel III)28

19.1%

17.9%

17.7%

(*)Per updated methodology.

 

 

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 the monthly average total assets for the same period. Annualised where applicable.

3. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.

4. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

5. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

6. FX adjusted cost of risk is calculated based on currency rates of the respective prior periods.

7. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks.

8. Risk Adjusted Net interest margin is NIM minus the cost of risk without one-offs and currency effect.

9. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

10. Risk Adjusted Loan yield is loan yield minus the cost of risk without one-offs and currency effect.

11. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.

12. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.

13. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.

14. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).

15. 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.

16. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.

17. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.

18. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.

19. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.

20. Related party loans to total loans equals related party loans divided by the gross loan portfolio.

21. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.

22. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.

23. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.

24. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined in Basel III.

25. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.

26. Leverage equals total assets to total equity.

27. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

28. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

 

 

 

 

Exchange Rates

To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6766 as of 31 December 2018. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4144 as of 31 March 2018. As of 31 March 2019 the USD/GEL exchange rate equalled 2.6914. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2019 of 2.6680, 4Q 2018 of 2.6752, 1Q 2018 of 2.4854.

  

Additional Disclosures

Subsidiaries of TBC Bank Group PLC[15]  

 

Ownership / voting
% as of 31 March 2019

Country

Year of incorporation

Industry

Total Assets 
(after elimination)

Subsidiary

Amount

GEL'000

% in TBC Group

JSC TBC Bank

99.9%

Georgia

1992

Banking

14,746,354

97.19%

    United Financial Corporation JSC

98.7%

Georgia

2001

Card processing

9,393

0.06%

    TBC Capital LLC

100.0%

Georgia

1999

Brokerage

6,082

0.04%

    TBC Leasing JSC

99.6%

Georgia

2003

Leasing

269,612

1.78%

    TBC Kredit LLC

100.0%

Azerbaijan

1999

Non-banking credit institution

30,484

0.20%

    Banking System Service Company LLC

100.0%

Georgia

2009

Information services

956

0.01%

    TBC Pay LLC

100.0%

Georgia

2008

Processing

32,797

0.22%

    Index LLC

100.0%

Georgia

2009

Real estate management

611

0.00%

    Real Estate Management Fund JSC*

0.0%

Georgia

2010

Real estate management

21

0.00%

    TBC Invest LLC

100.0%

Israel

2011

PR and marketing

156

0.00%

    BG LLC*

0.0%

Georgia

2018

Asset management

12,786

0.08%

JSC TBC Insurance

100.0%

Georgia

2014

Insurance

58,607

0.39%

    Swoop JSC

100.0%

Georgia

2010

Retail Trade

922

0.01%

    All Property LTD

90.0%

Georgia

2013

Real Estate

134

0.00%

    GE Commerce LTD

100.0%

Georgia

2018

Retail Trade

1,053

0.01%

(*)The Group has de facto control over these subsidiaries

1) Earnings per Share

In GEL

1Q 2019

4Q 2018

1Q 2018

Earnings per share for profit attributable to the owners of the Group:

 

 

 

- Basic earnings per share

2.45

2.40

1.80

- Diluted earnings per share

2.45

2.37

1.79

Source: IFRS Consolidated

2) Sensitivity Analysis

Sensitivity Analysis

31-Mar-19

10% Currency Devaluation Effect

NIM*

 

-0.14%

Technical Cost of Risk

 

+0.11%

Regulatory Total Capital

2,421

2,466

Regulatory Capital adequacy ratios tier 1 and total capital decrease by

 

0.63% - 0.82%

(*) Linear depreciation is assumed for NIM sensitivity analysis

Source: IFRS statements and Management Figures

3) The share of selected FC denominated P/L Items

Selected P&L Items 1Q 2019

Interest Income

40%

Interest Expense

49%

Fee and Commission Income

30%

Fee and Commission Expense

67%

Administrative Expenses

18%

Source: IFRS statements and Management figures

 

4) Open Interest Rate Position as of 31 March 2019

 

Open interest rate position in GEL

GEL     662 m

 

Open interest rate position in FC

GEL 2,610 m

 

GEL m

% share in totals

 

 

GEL m

% share in totals

Assets

3,361

22%

 

Assets

4,353

29%

Securities with fixed yield(≤1y)*

391

25%

 

Nostro**

85

24%

Securities with floating yield

542

35%

 

NBG Reserves**

1,416

96%

Loans with floating yield

2,272

22%

 

NBG Deposits

0

0%

Reserves in NBG

137

9%

 

Libor Loans

2,852

28%

Interbank loans& Deposits & Repo

19

5%

 

Interest Rate Swap

0

0%

Liabilities

2,699

21%

 

 

 

 

Current accounts***

788

9%

 

Liabilities

1,743

14%

Saving accounts***

524

6%

 

 Senior Loans

1,324

56%

Refinancing Loan of NBG & MoF   Deposits

808

34%

 

 Subordinated Loans

419

63%

Interbank Loans &Deposits & Repo

63

20%

 

 

 

 

IFI Borrowings

516

22%

 

 

 

 

 

 

 

 

 

 

 

(*) 52% of the less than 1 year securities are maturing in 6 months.

(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. From June 2018,  according to NBG regulation is it possible to apply negative interest rates on NBG reserves and correspondent accounts. However, negative rate is floored by 0% in case of USD and by (-0.6)% in case of EUR accounts.

(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification).

 

5) Yields and Rates

 

 

 

 

 

 

 

 

 

 

 

Yields and Rates

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

Loan yields

11.5%

12.2%

12.4%

12.5%

12.3%

Retail loan yields GEL

19.6%

20.7%

20.8%

21.3%

20.5%

Retail loan yields FX

7.4%

7.8%

7.9%

8.0%

8.4%

Retail Loan Yields

12.8%

13.6%

14.1%

14.7%

14.6%

Corporate loan yields GEL

10.8%

10.9%

11.0%

11.4%

11.2%

Corporate loan yields FX

9.0%

9.7%

9.1%

8.7%

8.6%

Corporate Loan Yields

9.5%

10.0%

9.6%

9.4%

9.2%

MSME loan yields GEL

15.7%

16.2%

16.6%

15.9%

15.0%

MSME loan yields FX

8.1%

8.6%

8.9%

8.5%

8.9%

MSME Loan Yields

11.7%

12.2%

12.6%

12.0%

11.3%

Deposit rates

3.3%

3.1%

3.3%

3.3%

3.3%

Retail deposit rates GEL

5.4%

4.6%

4.4%

4.3%

4.4%

Retail deposit rates FX

2.2%

2.2%

2.3%

2.4%

2.5%

Retail Deposit Yields

2.8%

2.6%

2.7%

2.7%

2.8%

Corporate deposit rates GEL

7.5%

6.8%

7.5%

7.9%

8.0%

Corporate deposit rates FX

1.6%

1.8%

2.0%

1.9%

2.0%

Corporate Deposit Yields

4.9%

4.5%

4.9%

5.2%

5.2%

MSME deposit rates GEL

1.4%

1.6%

1.7%

1.7%

1.8%

MSME deposit rates FX

0.3%

0.3%

0.4%

0.4%

0.5%

MSME Deposit Yields

0.9%

1.0%

1.0%

1.0%

1.1%

Yields on Securities

7.5%

7.6%

7.8%

7.7%

8.1%

Source: IFRS Consolidated

 

 

 

6) Risk Adjusted Yields & Cost of Risk 

 

 

 

 

 

Risk-adjusted Yields

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

Loan yields

10.1%

10.9%

10.9%

10.8%

10.6%

Retail Loan Yields

10.4%

10.6%

11.6%

12.1%

11.6%

Corporate Loan Yields

9.6%

10.1%

9.1%

8.6%

9.3%

MSME Loan Yields

10.1%

12.4%

11.8%

11.1%

9.8%

 

 

 

 

 

 

 

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

 

 

 

 

 

 

Cost of Risk

1.4%

1.4%

1.9%

1.8%

1.3%

Retail

2.4%

2.9%

2.7%

2.6%

2.7%

Corporate

-0.1%

0.1%

1.1%

0.9%

-0.8%

MSME

1.6%

-0.1%

1.2%

1.0%

1.0%

 

 

 

 

 

 

Source: IFRS Consolidated

 

7) Loan Quality per NBG

 

Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG  

 

Mar-19

Dec-18

Sep-18

Jun-18

Mar-18

SDL Loans as % of Gross Loans

3.9%

3.6%

3.8%

3.3%

3.1%

  Source: NBG

 

8) Cross Sell Ratio[16] and Number Active Products

 

 

Mar-19

Sep-18

Mar-18

Sep-17

Mar-17

Cross Sell Ratio

3.75

3.85

3.88

3.78

3.57

Number of Active Products (in million)

4.62

4.58

4.58

4.06

3.16

Source: Management's figures.

 

 

9) Diversified Deposit Base

 

Status: monthly income >=GEL 3,000 or loans/deposits >=GEL 30,000

VIP: deposit >=USD 100,000 as well as on discretionary basis; WM: >=USD 100,000 as well as on discretionary basis

Wealth Management includes UHNW and HNW non-resident clients

 

 

31 March 2019

Volume of Deposits

Number of Deposits

MASS

36%

91.4%

STATUS

32%

8.1%

VIP

23%

0.4%

Wealth Management for non-resident clients

9%

0.1%

 Source: Management figures.

 

 

10) Loan Concentration

 

Mar-19

Dec-18

Sep-18

Jun-18

Mar-18

Top 20 Borrowers as % of total portfolio

13.5%

14.2%

14.1%

13.2%

13.4%

Top 10 Borrowers as % of total portfolio

9.6%

10.1%

10.3%

9.2%

9.4%

Related Party Loans as % of total portfolio

0.1%

0.1%

0.1%

0.1%

0.1%

 Source: IFRS consolidated.

 

 

 

11) Number of Transactions in Digital Channels (in thousands)

 

1Q 19

1Q 18

1Q 17

1Q 16

Internet banking number of transactions

2,499

2,449

2,098

1,669

Mobile banking number of transactions

9,194

5,315

2,622

1,150

Source: Management figures.

 

12) Penetration Ratios of Digital Channels  

 

1Q 19

1Q 18

1Q 17

1Q 16

Internet or Mobile Banking Penetration Ratio*

42%

38%

34%

32%

Mobile Banking Penetration Ratio**

37%

31%

25%

17%

Source: Management figures.

* Internet or Mobile Banking penetration equals active clients of Interment or Mobile Banking divided by total active clients.

** Mobile Banking penetration equals active clients of Mobile Banking divided by total active clients.

13) Number of Active Clients (in thousands)

 

Mar-19

Mar-18

Mar-17

Mar -16

Internet or mobile banking

529

447

298

220

Mobile banking

411

365

219

121

Source: Management figures.

14) Distribution of Transactions in Digital Channels

 

1Q 19

Mobile Banking

29%

Internet Banking

11%

Branches

8%

TBC Pay terminals

21%

ATMs

30%

Other

1%

 

92% of all transactions are conducted through digital channels

 

15) Distribution of Sales in Channels  

 

1Q 19

1Q 18

1Q 17

1Q 16

IB, MB, ATM, Web

45%

30%

24%

27%

Branches & Call Centre

55%

70%

76%

73%

45% of sales are conducted through digital channels*.

* For products being offered through remote channels: pre-approved loans, credit cards, limit increase and opening of accounts.

16) Percentage of Selected Product Sales in Digital Channels

 

1Q 19

1Q 18

1Q 17

Deposits

72%

59%

50%

Pre-approved loans

23%*

35%

14%

Debit cards

26%

14%

-

* The decrease is due to new regulations.

17) POS Terminal Transactions

 

Mar-19

Dec-18

Sep-18

Jun-18

Mar-18

POS number of transactions (in millions)

26.6

27.4

24.1

22.3

17.9

POS volume of transactions (in mln GEL)

1,017

1,117

986

850

661

* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches.

 

18) Funding repayment ladder

Subordinated and Senior Loans' Principal Amount Outflow by Year (USD million)

 

 

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Senior loans

113.9

182.1

261.1

107.0

89.4

36.8

28.2

10.6

4.6

-

Subordinated loans

6.4

13.9

11.1

11.4

32.2

1.1

39.0

72.9

16.1

37.0

Source: Management figures, revolving non IFI loans from NBG are excluded.

19) NPL Build Up (in GEL million)

NPLs

NPLs as of Dec-18

Real Growth

FX Effect

Write-Offs

Repossessed

NPLs as of Mar-19

Retail

137

43

-

(34)

(2)

144

Corporate

85

4

-

-

(2)

87

MSME

103

12

1

(7)

(3)

106

Total

325

59

1

(41)

(7)

337

 

 

20) Net Write-Offs, 1Q 2019

 

 

 

 In GEL million

Write-Offs

Recoveries

Net Write-Offs

Retail

(34)

4

(30)

Corporate

-

1

1

MSME

(7)

3

(4)

Total

(41)

8

(33)

Source: IFRS Consolidated.

 

 

21) Portfolio Breakdown by Collateral Types as of 31-Mar-19

Cash Cover

2%

Gold

3%

Inventory

9%

Real Estate

67%

Third Party Guarantees

6%

Other

2%

Unsecured

11%

72% of the loans are secured by cash, gold and real estate.  

Source: IFRS Consolidated.

 

22) Loan to Value by Segments as of 31-Mar-19

 

 

 

 

Retail

Corporate

MSME

Total

56%

49%

47%

51%

Mortgage loan's LTV stood at 51%

 

 

           

23) TBC Insurance

TBC Insurance is a rapidly growing, wholly owned subsidiary of TBC Bank and it is the Bank's main bancassurance partner. The company was acquired by the Group in October 2016 and it has since grown significantly, becoming the second largest player on the P&C and life insurance market and the largest player in the retail segment, holding 22.8% and 39.8% market shares[17] without border motor third party liability (MTPL) insurance, respectively in 1Q 2019[18].

TBC insurance serves both individual and legal entities and it provides a broad range of insurance products covering motor, travel, personal accident, credit life and property, business property, liability, cargo and agro insurance products. The company differentiates itself for its advanced digital channels, which include TBC bank's award winning Internet and mobile banking applications, a wide network of self-service terminals, a web channel, as well as a Georgian-speaking chat-bot B-Bot, which is available through Facebook messenger.

In 1Q 2019, TBC Insurance achieved strong growth results. The gross written premium grew by 39.8% YoY and amounted to GEL 17.5 million driven by strong focus on cross-selling. Over the same period, the net combined ratio[19] increased by 6.8 pp and stood at 82.8%. This was mainly driven by several new products launched at the end of December 2018 leading to the increase in operating expenses. As a result, the net profit for 1Q 2019 stood at GEL 2.0 million without subsidiaries. At the same time TBC insurance maintains strong capital levels, with solvency ratio above regulatory minimum of 100%, standing at 140.8%.

In thousands of GEL

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

Gross written premium

17,471

17,075

15,833

14,677

12,494

Net earned premium[20]

10,677

10,554

9,841

8,804

6,458

Net profit

2,004

2,556

2,271

1,497

1,260

 

1Q'19

4Q'18

3Q'18

2Q'18

1Q'18

Net combined ratio

82.8%

80.7%

78.8%

81.0%

76.0%

Market share

22.8%

23.0%

20.7%

18.5%

19.5%

Figures are provided without subsidiaries of TBC Insurance:  Swoop JSC, GE Commerce LTD, All Property LTD.

24) Regulatory Capital

Total capital and tier 1 capital limits  

 

31-Mar-2019 Actual

31-Dec-2019 F

31-Dec-2020 F

31-Dec-2021 F

 

Tier 1

Total

Tier 1

Total

Tier 1

Total

Tier 1

Total

Minimum Requirement

6.0%

8.0%

6.0%

8.0%

6.0%

8.0%

6.0%

8.0%

Conservation Buffer

2.5%

2.5%

2.5%

2.5%

2.5%

2.5%

2.5%

2.5%

Counter-Cyclical Buffer

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

Systemic Buffer

1.0%

1.0%

1.5%

1.5%

2.0%

2.0%

2.5%

2.5%

Pillar 1 buffers

9.5%

11.5%

10.0%

12.0%

10.5%

12.5%

11.0%

13.0%

Pillar 2

2.4%

5.4%

2.5%-4.0%

4.0%-5.5%

2.5%-4.0%

4.0%-5.5%

2.5%-4.0%

4.0%-5.5%

Total

11.9%

16.9%

12.5%-14.0%

16.0%-17.5%

13.0%-14.5%

16.5%-18.0%

13.5%-15.0%

17.0%-18.5%

 

25) NBG Initiatives

The new regulation on responsible lending to individuals:

Starting from January 2019, the National Bank of Georgia has adopted the regulation on responsible lending to individuals, which replaces the former regulation introduced in May 2018. The regulation requires financial institutions to conduct solvency analysis of a borrower before issuing a loan and it also sets new limits on Payment to Income (PTI) and Loan to Value (LTV) for individual loans. The thresholds are different for domestic and foreign currency loans in order to protect a borrower and the financial system against the risks stemming from exchange rate fluctuations.

Maximum Payment to Income Ratios:

Monthly income, net (in GEL) 

For non-hedged borrower

in case of maximum/contractual maturity

For hedged borrowers

in case of maximum/contractual maturity

<1,000

20% / 25%

25% / 35%

>=1,000-2,000<

35% / 45%

>=2,000-4,000<

25% / 30%

45% / 55%

>=4,000

30% / 35%

50% / 60%

 

Maximum Loan to Value Ratios:

Maximum loan to value ratio (LTV) for GEL loans

    85%

Maximum loan to value ratio (LTV) for foreign currency loans

    70% 

 

Maximum tenures:

Mortgage

15 years

Consumer mortgages collateralized by real estate

10 years

Auto Loans

6 years

Other consumer loans

4 years

 

26) Space - fully digital bank

Date

# of app. downloads

# of registered customers

 

loans in thousands GEL

30-Jun-2018

99,646

47,657

1,112

30-Sep-2018

186,044

72,447

5,814

31-Dec-2018

258,846

93,994

14,693

31-Mar-2019

292,423

114,675

16,843

27) International strategy: expansion into Azerbaijan market

Main highlights

•     TBC Bank and Nikoil Bank agreed on shareholders agreement in late December 2018 and signed it in early January 2019.

•     Our shareholding in the joint entity will be 8.34%.

•     We will have the right to exercise a call option during the next four years to obtain 50%+1 shareholding in the joint entity.

•    The call option is based on a fixed price formula and in most scenarios it is between 1-1.15x of the merged entity's book value (it is closer to the book value when exercised in later years).

•    Our additional estimated investment during the next four years will be consistent with our 8.34% shareholding and is estimated to be around USD 3-5 million per year.

 

Strengthening Management Team

 

Existing management team of the joint entity

CEO   -

Nikoloz Shurghaia

First Deputy CEO, Head of MSME  -

Farhad Hajinski

Deputy CEO, Head of Retail             -

Fuad Tagiyev

 

 

New management team of the joint entity

COO   -

Nukri Tetrashvili, former CEO at TBC Kredit 

CDM  -

Senior Digital Manager with a solid track record at large Georgian bank

CRO   -

David Tediashvili, former Head of Retail Credit Risk Department at TBC Bank

CFO   -

Emil Dushdurov, former Associate Director, Deal Advisory at KPMG Azerbaijan

CIO   -

Avtandil Tabatadze, former strategic projects manager at TBC Bank

 

 

Current Developments

 

 

Loans Disbursements (USD '000)

Number of customers

1Q 2018

11,738

61,012

4Q 2018

29,376

61,275

1Q 2019

25,030

66,691

 

 

Mid-term vision

 

 

 In USD millions

1Q 2019 results of Nikoil Bank*

Mid-term targets of joint entity

Loan Portfolio

c. 227

c. 1,400

Equity

c. 36

c. 200

ROE

NMF

20%+

*Based on management accounts.

 

 

 

•     Core segments: Retail and MSME (not large SMEs and Corporates);

•     Product offerings: A mix of Nikoil Bank and TBC Bank products adapted to the local needs and offered primarily through digital channels, including Space Bank.

28) International strategy: digital greenfield bank in Uzbekistan

This is still in the concept stage and subject to approval (including approval from the authorities), therefore it could change as we progress. The license is expected in 2019.

 

Why Uzbekistan?

•     Large underpenetrated market:

•     with a population of more than 33.45 million

•     retail loans to GDP stood at 7.2% at the end of 2018

•     Similar history as part of the Soviet Union and good cultural links

•     Right time given the implementation of reforms, many of which were designed by former Georgian government officials

•     Both Uzbekistan and Georgia are included into China's One Belt One Road initiative

•     No digital bank operates in Uzbekistan currently

Strategic Positioning

•     Build a next generation bank for retail and MSME

•     Focus on digital channels and SPACE

•     Operate asset light, smart branches

•     Establishing the highest standards of corporate governance

•     Simple and intuitive products and processes

•     Transparent and straightforward commissions structure

•     Best customer experience

•     Automated decision making system.

 Main highlights

•     Initial investments from TBC Bank around USD 20-30 million, resulting in 51% shareholding

•     Medium to long-term financial targets after license is granted:

•     Achieve sustainable ROE up to 25%

•     Cost to income ratio below 35%

Our Uzbek and Azerbaijan subsidiaries together will contribute c. 30% to the Group's loan book.

 

 

Upcoming Events

·      Opening pilot branch in 2019 for a proof of concept

·      Core banking implementation with local IT company

·      Multichannel development including Space

·      Our international partners, EBRD and IFC have expressed their interest to participate in this project subject to completion of their internal procedures and approvals

·      We have reached an agreement on main terms with Uzbek-Oman Investment Company (UOIC) to act as our local partner.

29) Payme

Main Highlights

·    TBC Bank Group PLC has entered into an agreement to acquire a 51% stake in LLC Inspired, a leading profitable payment platform in Uzbekistan under the Payme brand

·      The consideration for the 51% stake is USD 5.5 million, implying a valuation of USD 10.8 million for Payme

·      TBC Bank has also entered into a put/call arrangement for the remaining 49% of Payme, which, in normal circumstances, may only be exercised between the fourth and seventh anniversary of the date of completion of the transaction

·    The exercise price will depend on a set of parameters including Payme's revenue, EBIT and the number of active customers that Payme achieves.

Strategic Positioning

The transaction is in line with TBC Bank's international strategy to expand its regional operations, giving us the immediate access to a large customer base in the country and use our core digital strengths in Georgia to innovate in the Uzbekistani market.

Management Team

·      Founded in 2011 and continues to be managed by the three original founding shareholders;

·      The team was strengthened by two other shareholders:

one acting as Business Development and Research Director;

the other as the Chief Technology Officer.

The management team will remain with Payme on a long-term basis and will continue to be actively involved in the development and execution of Payme's strategy.

Payme Financial and Operating Highlights

In million USD 

1Q 19

Growth QoQ

Revenue

0.6

21.9%

Net profit

0.4

73.0%

Number of customers

1.3

13.6%

Product Types

§  Utility and Top-up 

§  E-commerce Acquiring and Payment GW

§  P2P

§  White Label Mobile Banking

§  Loan Repayment

§  Invoicing System

§  mPOS for QR Payments

§  Personal Finance Manager

 

 

 

30) Nikoil Bank Financials

Profit & Loss Statement

In thousands of USD 

1Q'19

4Q'18

1Q'18

Interest income 

4,610

        4,280  

3,630

Interest expense

(2,069)

(2,068)  

(2,414)

Net interest income

2,541

        2,212  

1,216

Fee and commission income

551

           958  

486

Fee and commission expense

(267)

(426)  

(221)

Net Fee and Commission Income

284

           532  

265

Net income from foreign currency operations

176

           313  

350

Net gain/(losses) from foreign exchange translation

(1)

           119  

10

Gains less losses/(losses less gains) from derivative financial instruments

                       -  

(28)  

-

Other operating non-interest income

175

           404  

360

Credit loss allowance of loans

2,326

(23,670)  

135

Credit loss allowance of other financial assets

44

(8,446)  

(68)

Operating income after credit loss allowance

5,370

(28,968)  

1,908

Staff costs

(2,036)

(2,276)  

(1,544)

Depreciation and amortisation

(321)

(312)  

(344)

Administrative and other operating expenses

(1,165)

(1,519)  

(996)

Operating expenses

(3,522)

(4,107)  

(2,884)

Profit before tax

1,848

(33,075)  

(976)

Income tax expense

                       -  

-

0

Profit for the period

1,848

(33,075)

(976)

 

 

 

 

Balance Sheet

In thousands of USD

31-Mar-19

31-Dec-18

31-Mar-18

Cash and cash equivalents

44,711

29,591

59,728

Due from other banks

36,654

26,833

21,483

Net Loans

135,655

120,704

166,375

Investment securities measured at fair value through other comprehensive income

7,085

46,794

14,517

Current income tax prepayment

4

2

82

Deferred income tax asset

768

768

768

Other financial assets

10,252

545

12,548

Other assets

1,100

7,195

577

Premises and equipment (Net)

5,663

5,571

5,782

Intangible assets (Net)

1,849

1,924

2,008

TOTAL ASSETS

243,741

239,927

283,868

Due to other banks

20,152

20,152

23,708

Customer Accounts

136,900

137,244

150,785

Other borrowed funds

41,112

41,237

33,823

Other financial liabilities

4,998

3,054

5,287

Subordinated debt

5,000

5,000

15,000

TOTAL LIABILITIES

208,162

206,687

228,603

Share capital

204,705

204,705

144,118

Additional paid-in-capital

500

500

500

Retained earnings

(169,626)

(171,965)

(89,353)

TOTAL EQUITY

35,579

33,240

55,265

TOTAL LIABILITIES AND EQUITY

243,741

239,927

283,868

 

 

 

[1]Per updated methodology.

[2]Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.

[3]Per updated methodology.

[4]The calculation of the market share figure excludes the mandatory third-party liability (MTLP) insurance that foreign vehicles entering Georgia are required to buy at the border.  This was introduced in March 2018 and the premium collected is shared evenly between 17 insurance companies, thus reducing our market share. Including the MTPL, our total market shares stood at 21.3% and our retail market share amounted to 32.9% as of 1Q  2019.

[5]Taking into account loans issued in EUR and USD.

[6]The number of transactions conducted through remote channels divided by the total number of transactions.

[7]Latest available information.

[8]Taking into account loans issued in EUR and USD.

[9]IMF WEO April 2019 update.

[10]Gross insurance profit can be reconciled to the standalone net insurance profit (as shown in Annex 23 on pages 33-34) as follows: gross insurance profit  minus credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.

[11] As at 1 January 2019, the group adopted IFRS 16, under which short term and low value lease contracts, also contracts that do not qualify for lease arrangements and taxes on lease contracts are expensed under this category of administrative expenses

[12]Total operating income growth minus operating expense growth.

[13]In 1Q 2019, GEL 128 million was transferred from MSME to corporate loans.

[14]In 1Q 2019, GEL 70 million was transferred from MSME to corporate deposits.

[15]TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016.

[16]Cross-sell ratio is defined as the number of active products divided by the number of active customers.

[17]Or 21.3% and 32.9% respectively, with MTPL insurance. Starting from March 1, 2018 border MTPL was introduced and GWP was divided evenly between 17 insurance companies, therefore it has decreased our market share.

[18]Based on internal estimates.

[19]Net insurance claims plus acquisition costs and administrative expenses divided net earned premium.

[20]Net earned premium equals earned premium minus reinsurer's share of earned premium.


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