REG - TCS Grp Hldg PLC - TCS Group IFRS 3Q and 9M 2015 Financial Statements <Origin Href="QuoteRef">TCSq.L</Origin>

TCS HoldingAnnouncement

01/12/2015 07:12

RNS Number : 5011H
TCS Group Holding PLC
01 December 2015
TCS Group Holding PLC Announces 3Q and 9M 2015 IFRS Results 
Moscow, Russia - 1 December 2015. TCS Group Holding PLC (TCS LI) (the "Group"), Russia's leading provider of online retail financial services, including Tinkoff Bank and Tinkoff Insurance, today announces its interim condensed consolidated IFRS results for the third quarter and nine months ended 30 September 2015.
KEY FINANCIAL HIGHLIGHTS
3Q 2015
 Net interest income increased by 12% to RUB 7.2 bn (2Q15: RUB 6.4 bn)
 Profit before tax grew by 86% to RUB 1.0 bn (2Q15: RUB 0.5 bn)
 Net income up 80% to RUB 0.7 bn (2Q15: RUB 0.4 bn)
 Net interest margin up to 29.1% (2Q15: 26.0%)
 Cost of risk decreased to 15.0% (2Q15: 16.6%)
9M 2015
 Net interest income stood at RUB 20.1 bn (9M14: RUB 23.1 bn)
 Profit before tax amounted to RUB 1.3 bn (9M14: RUB 3.8 bn)
 Net income amounted to RUB 0.9 bn (9M14: RUB 2.8 bn)
 Net interest margin at 28.1% (9M14: 34.9%)
 Total assets increased by 7% to RUB 116.0 bn (YE14: RUB 108.8 bn)
 Gross loans and advances to customers up by 4% to RUB 98.0 bn (YE14: RUB 93.9 bn)
 Net loans and advances to customers up 5% to RUB 78.2 bn (YE14: RUB 74.6 bn)
 Non-performing loan ratio (NPLs) reduced to 13.9% (YE14: 14.5%)
 Customer accounts increased by 72% to RUB 74.7 bn (YE14: RUB 43.4 bn)
 Total equity up by 4% YTD to RUB 21.9 bn (YE14: RUB 21.0 bn)
KEY BUSINESS HIGHLIGHTS FOR 9M 2015 
 Over 250,000 new active customers 
 Tinkoff Bank launched a range of new co-branded credit and debit cards together with the Svyaznoy Club and Malina loyalty programmes, as well as TNT-Club, in addition to AliExpress, eBay, Lamoda, Rendez-Vous and Tele2 which were launched earlier this year
 In June-July 2015, Tinkoff Bank acquired two parts of Svyaznoy Bank's credit card portfolio of RUB 3.1 bn 
 In July 2015, Tinkoff Bank launched its new MoneyTalk mobile mono app that combines an instant messenger with money transfers
 Launch of the Tinkoff SME platform for Tinkoff Bank is on track for year end
 In July and August 2015, Tinkoff Bank successfully executed the Tinkoff Quest marketing campaign resulting in a 20% increase in transaction volumes in the co-branded credit cards portfolio
 In September 2015, Tinkoff Bank enhanced its mortgage platform through a partnership with Uralsib Bank, one of Russia's largest mortgage providers 
 In September 2015, the Group redeemed the final tranche of its USD 250 mln Eurobond
KEY HIGHLIGHTS POST 9M 2015
 In October 2015, Tinkoff Bank became Russia's second largest credit card provider with a market share of 7.7% 
 As of 1 December 2015, over 5.4 million credit cards issued
 In October 2015, Tinkoff Bank acquired an additional RUB 3.33 bn of Svyaznoy Bank's credit card portfolio, bringing the total value of the acquired portfolio to RUB 6.43 bn
 In October 2015, Tinkoff Bank signed a partnership agreement with BCS Financial Group for the launch of its brokerage services offering, powered by the BCS Broker solution; launch is expected in early 2016
GUIDANCE AND OUTLOOK 
 Following its strong performance in 3Q15, the Group has revised its guidance for net profit for FY15 (previously guided for RUB 0.5-1 bn). Assuming no significant deterioration in the operating environment, the Group expects net income for 2015 to be around RUB 1.5 bn 
 In 2016, as a minimum, the Group expects to double its profit compared to 2015 assuming there are no major disruptions in the operating environment
Oliver Hughes, CEO of Tinkoff Bank, commented: 
"We are delighted to announce strong results for the reporting period. In9M2015, our net incometotalledRUB900mln, reaching the higher end of our full-year 2015 guidance range. There were a number of drivers behind these results. The economic environment is gradually normalising, with the consumer leverage ratio continuing to decrease. The banking sector clean-out is helping this process.
In9M2015, our net portfolio grew by5%, both organically and inorganically. Our organic growth was linked to a gradual increase in the number of issued credit cards. The issuance rate early in the year stood at 30thousand cards per month; in December, we are planning to bring it up to 85-90thousand cards per month. Our inorganic growth is primarily associated with the acquisition of high quality portfolios from other market players. Following the completion of several deals, TinkoffBank purchased part ofSvyaznoyBank's portfolio worthRUB6.43bn. We keep monitoring market opportunities for similar deals going forward.
The quality of our portfolio remains a priority for us. Cost of risk moved down steadily throughout the year to reach15% in3Q15. In September, we fully repaid our Eurobond issue reducing our funding costs.
We are currently busy diversifying our business and increasing sources of commission income. TinkoffBank'sfive-yearstrategy is underpinned by our ambition to become a full-fledged cloud-based financial marketplace where customers can shop not only for our products, but also for those of our partners. We have already rolled out a number of new services (including online acquiring and mortgage) and are all set to introduce brokerage and SME services in the near future. It did not take long for the first results to show through: our commission income for 9M2015 increased by a factor offivey-o-y, while our insurance income went up by over30%y-o-y."
FINANCIAL AND OPERATING REVIEW
RUB bn
3Q15
3Q14
Change
9M15
9M14
Change
Credit cards issued ('000 pcs)
187
235
(21%)
386
763
(49%)
Credit cards transactions
27.8
22.8
22%
73.9
67.5
10%
RUB bn
3Q15
2Q15
Change 
9M15
9M14
Change
Net interest income
7.2
6.4
12% 
20.1
23.1
(13%)
Net interest income after loan impairment
3.6
2.6
40%
8.5
10.9
(22%)
Profit before tax
1.0
0.5
86%
1.3
3.8
(65%)
Net income
0.7
0.4
80%
0.9
2.8
(67%)
RUB bn
30 September 2015
31 December 2014
Change
Total Assets
116.0
108.8
7%
Net loans and advances to customers
78.2
74.6
5%
Cash and treasury portfolio
19.7
16.3
21%
Total Liabilities
94.1
87.8
7%
Customer accounts (deposits)
74.7
43.4
72%
Total Equity
21.9
21.0
4%
Tier 1 capital ratio
15.8%
15.9%
(0.1 p.p.)
Total capital ratio
21.1%
21.8%
(0.7 p.p.)
CBR N1
(capital adequacy ratio)
13.0%
15.5%
(2.5 p.p.)
As a result of the improved operating environment and accelerated consumer deleveraging, the Group demonstrated a solid set of results for 3Q and 9M 2015, driven by stronger profitability in 3Q15 compared to 2Q15.
In 3Q and 9M 2015, Tinkoff Bank issued 187,000 and 386,000 new credit cards respectively, while the volume of credit cards transactions in 9M15 increased to RUB 73.9 bn compared to RUB 67.5 bn in 9M14. 
In 3Q15, the Group's gross interest income increased by RUB 0.7 bn q-o-q to RUB 10.4 bn (2Q15: RUB 9.7 bn) and by 5.1% y-o-y (3Q14: RUB 9.9 bn), with gross yield up by 
1 p.p. to 41.6% as a result of resumed portfolio growth. In 9M15, gross interest income grew 0.3% y-o-y to RUB 29.5 bn (9M14: 29.4 bn). 
In 3Q15, cost of borrowing fell to 13.7% driven by the redemption of the final tranche of Group's USD 250 mn Eurobond in September 2015. The Group expects the cost of funding to continue decreasing as expensive deposits roll off the book. 
In 3Q15, net interest income increased by 12% q-o-q to RUB 7.2 bn (2Q15: RUB 6.4 bn). In 9M15, net interest income stood at RUB 20.1 bn compared to RUB 23.1 bn in 9M14. 
The Group also saw a positive trend in the net interest margin which increased to 29.1% in 3Q15 (2Q15: 26.0%). In 9M15, the net interest margin stood at 28.1% (9M14: 34.9%). The risk-adjusted net interest margin went up to 14.5% in 3Q15 (2Q15: 10.4%) due to lower credit losses and better net interest income results. Risk-adjusted net interest margin for 9M15 stood at 11.9% (9M14: 16.4%).
The Group continues to prioritise risk management through a strict underwriting policy by maintaining low approval rates and credit limits. In 3Q15, cost of risk continued to improve and came down to 15.0% (2Q15:16.6%). While cost of risk still remained at an elevated level compared to recent years, the Group was seeing a moderate recovery with the 9M15 cost of risk at 16.4% compared to 18.4% in 9M14. 
The Group's strategic initiatives to diversify its commission based products yielded positive results with a steady increase in fee and commission income as well as insurance premiums. In 3Q15, fee and commission income amounted to RUB 0.34 bn, a RUB 100 mn increase q-o-q. In 9M15, fee and commission income reached RUB 0.7 bn compared to RUB 0.14 bn in 9M14. Earned insurance premiums increased by 32% y-o-y to RUB 0.87 bn in 9M15. In 9M15, fee and commission income constituted 2.2% of total revenue, while together with insurance premiums it amounted to 5.0% of total revenue. 
The structure of the Group's operating expenses has overall remained stable over several reporting periods. 9M15 operating expenses increased by 14.3% to RUB 7.7 bn y-o-y mainly due to salary indexation and investment in new business lines. The q-o-q increase in operating expenses to RUB 2.8 bn in 3Q15 was due to resumed credit card issuance, growth in personnel, and continued investment initiatives. 
In 3Q15, the Group reported a net income of RUB 0.7 bn, an 80% increase q-o-q. This resulted in a net income of RUB 0.9 bn for 9M15 which is almost double the lower range of the guidance the Group gave for the full year 2015. The strong profitability of the Group once again proves the resilience and robustness of its business model and serves as further indication of the Group's business potential. 
In 9M15, the Group continued to maintain a healthy balance sheet, with total assets increasing by 7% to RUB 116.0 bn (YE14: RUB 108.8 bn).
In 3Q15, the Group's net loan portfolio continued to grow, increasing to RUB 78.2 bn. At the same time total assets decreased 5.1% q-o-q to RUB 116 bn in 3Q15 which is a result of the redemption of the final tranche of the Group's USD 250 mn Eurobond. Treasury portfolio and cash equivalents combined stood at RUB 19.7 bn at the end of 3Q15 compared to RUB 16.3 bn at the end of 2014. The Group retains a high liquidity cushion with cash and investments at 15% of assets and 24% of customer accounts. 
In 3Q15, the Group's gross loans increased by 3.1% to RUB 98.0 bn, while net loans grew by 3.5% to RUB 78.2 bn during the same period. This growth reflects resumed organic customer acquisition activity which resulted in 250,000 new customers over 9M15 as well as the acquisition of portions of high-quality credit card portfolios from Svyaznoy Bank. 
The share of NPLs (non-performing loans) continued to decrease in the gross loan portfolio. In 3Q15, the total share of NPLs was down to 13.9% from 14.3% in 2Q15 and 14.5% at the end of 2014. The loan loss provisioning coverage remained at 1.4x NPLs. Balance sheet provisioning for impairment of loans increased to RUB 19.8 bn compared to RUB 19.3 bn as at the end of 2014.
In 3Q15, the Group's liabilities decreased by 7% q-o-q to RUB 94.1 due to the redemption of the final tranche of its Eurobond. The only outstanding debt security in issue now is the Group's USD 200 mln subordinated loan maturing in 2018. Customer accounts remained stable and increased slightly to RUB 74.7 bn in 3Q15 (2Q15: RUB 71.7). The Group has sufficient liquidity to meet its refinancing needs and therefore has deliberately slowed down its deposit growth. 
The Group continued to maintain a solid capital position with the statutory CBR N1 capital ratio at 13.0% at the end of 3Q15. The Group maintained the Core Tier 1 (or N1.1) capital ratio of 9.9% (the same for Tier 1, or N1.2, capital ratio), well above the 5% and 6% minimum requirements respectively. As at the end of 3Q15, the Group's total equity increased to RUB 21.9 bn (2Q15: RUB 21.1 bn). 
***
The management team will host an investor and analyst conference call at 14.00 UK time (17.00 Moscow time, 9.00U.S. Eastern Daylight Time), on Tuesday, 1December 2015.
The press release, presentation and financial statements will be available on the Tinkoff Bank website athttps://www.tinkoff.ru/eng/investor-relations/results-and-reports/
To participate in the conference call, please use the following access details:
Conference ID
6147857
Russian Federation - Local
+7495 213 0977
Russian Federation - Toll Free
8 800 500 9311
United Kingdom - Local
+44(0)20 3427 0503
United Kingdom - Toll Free
0800 279 5004
United States of America - Local
+1646 254 3388
United States of America - Toll Free
1877 280 1254
A live webcast of the presentation will be available at: 
http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=3123
Please register approximately 10 minutes prior to the start of the call.
***
For enquiries:
Tinkoff Bank
Darya Ermolina
Head of PR
+ 7 495 648-10-00 (ext. 2009)
d.ermolina@tinkoff.ru
Tinkoff Bank
Larisa Chernysheva
IR Department
+ 7 495 648-10-00 (ext. 2312)
ir@tinkoff.ru
FTI Consulting London
Elena Kalinskaya/ Leonid Fink
+44 (0) 020 3727 1000
About the Group
TCS Group Holding PLC is an innovative provider of online retail financial services operating in Russia through a high-tech branchless platform. In order to support its branchless platform, the Group has also developed a "smart courier" network covering almost 600 cities and towns in Russia which allows next day delivery to many customers. 
Tinkoff Bank's product range includes credit, debit and prepaid cards, deposits, co-branded cards, and agent-based mortgage products. With its special focus on mobile business, the bank offers mobile applications both for its customer base (Mobile Bank) and beyond it (Traffic Fines, MoneyTalk, Card2Card instant money transfers).
The Group's five-year strategy has the ambition of becoming a financial supermarket where customers can shop not only for our products, but also for those of our partners.
The 9M2015 IFRS net income of the Group amounted to RUB0.9bn.
As at 1November 2015, the bank was the second largest player in the Russian credit card market, with a market share of 7.7%. As at 1December 2015, the bank issued over 5.4mcredit cards. The bank is well capitalised: its CBR N1 total capital ratio stood at 13% as at 1December 2015.
In 2013, Tinkoff Bank was recognised as the Bank of the Year and the most profitable bank in Russia by the Banker magazine, the world's premier banking and finance resource, published by the Financial Times Group. In 2015, the Global Finance magazine named TinkoffBank as the Best Internet Retail Bank inRussia. 
Forward-looking statements
Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of the Group and Tinkoff Bank. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might", the negative of such terms or other similar expressions. The Group and Tinkoff Bank wish to caution you that these statements are only predictions and that actual events or results may differ materially. The Group and Tinkoff Bank do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group and Tinkoff Bank, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries the Group operates in, as well as many other risks specifically related to the Group, Tinkoff Bank and their respective operations.

This information is provided by RNS
The company news service from the London Stock Exchange
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