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TCS Group Holding PLC TCS Group Holding PLC: 3Q and 9M17 IFRS Results and Interim Dividends

Mon 20th November, 2017 6:00am
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   TCS Group Holding PLC (TCS)
   TCS Group Holding PLC: 3Q and 9M17 IFRS Results and Interim Dividends

   20-Nov-2017 / 07:00 CET/CEST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

   ═══════════════════════════════════════════════════════════════════════════

   TCS Group Holding PLC Announces 3Q and 9M 2017 IFRS Results and Interim
   Dividends

   Moscow, Russia - 20 November 2017. TCS Group Holding PLC (TCS LI) (the
   "Group"), Russia's leading provider of online retail financial services via
   its Tinkoff.ru financial supermarket, today announces its interim condensed
   consolidated IFRS results for the third quarter and for the nine months
   ended 30 September 2017.

    

   KEY FINANCIAL HIGHLIGHTS

    

   3Q 2017

    

     • Net margin up 41% y-o-y to RUB 12.2 bn (3Q16: RUB 8.7 bn)
     • Profit before tax up 67% y-o-y to RUB 6.6 bn (3Q16: RUB 4.0 bn)
     • Net income up 75% y-o-y to RUB 5.0 bn (3Q16: RUB 2.9 bn)
     • ROE increased to 53.7% (3Q16: 43.4%)
     • Net interest margin at 25.1% (3Q16: 25.5%)
     • Cost of risk at 6.0% (3Q16: 8.3%)

   9M 2017

    

     • Net margin grew by 37% y-o-y to RUB 33.1 bn (9M16: RUB 24.2 bn)
     • Profit before tax up 70% y-o-y to RUB 16.5 bn (9M16: RUB 9.7 bn)
     • Net income up 73% y-o-y to RUB 12.6 bn (9M16: RUB 7.3 bn)
     • ROE grew to 48.8% (9M16: 39.0%)
     • Net interest margin at 25.6% (9M16: 25.7%)
     • Total assets increased by 35% to RUB 236.0 bn (YE16: RUB 175.4 bn)
     • Gross loans and advances to customers up 27% to RUB 153.4 bn (YE16: RUB
       120.4 bn)
     • Net loans and advances to customers up 30% to RUB 134.1 bn (YE16: RUB
       102.9 bn)
     • Share of non-performing loans (NPLs) at 9.4% (YE16: 10.2%)
     • Customer accounts increased by 25% to RUB 155.7 bn (YE16: RUB 124.6 bn)
     • Total equity up by 33% to RUB 39.1 bn (YE16: RUB 29.5 bn)

    

    

   KEY HIGHLIGHTS FOR 9M 2017

    

     • In 9M17 over 1.3M new active credit card customers were acquired,
       underpinning net loan growth of 30% YTD
     • In July 2017 Tinkoff Bank was named the most profitable bank in Central
       and Eastern Europe by The Banker magazine
     • In July 2017 Global Finance declared Tinkoff Bank the winner in two of
       the World's Best Consumer Digital Banks 2017 award categories
     • In August 2017 Tinkoff Bank started the gradual deployment of its own
       ATM network. There are now approximately 200 installed across Russia
     • In August 2017 Tinkoff mobile banking app was recognized as best in
       Russia by Markswebb Rank & Report in four nominations - apps for
       iPhone, Android and Windows smartphones and apps for iPads

    

   KEY HIGHLIGHTS POST 9M 2017

    

     • As of 1 October 2017 Tinkoff Bank was the second largest credit card
       player in Russia with a market share of 11.6%
     • In October 2017, the Group acquired a 55% stake in CloudPayments, an
       innovative online payment solutions provider. The deal will enable
       Tinkoff to enhance its merchant acquiring business line as part of its
       growing SME offering

     • In November 2017, the Tinkoff mobile banking app was named as best in
       CIS by Markswebb Rank & Report

   Third 2017 Interim Dividend and Special Interim Dividend Announcements

    

   In line with the Group's dividend policy, the Board of Directors yesterday
   approved a third interim gross dividend for 2017 of USD 0.22 per share/GDR
   (with each GDR representing one share), with a total dividend payment of
   around USD 40.2 mn (RUB 2.4 bn).  In addition to this, and due to the
   stronger than expected bottom-line result, the Board of Directors approved
   a special interim dividend of USD 0.18 per share/GDR (with each GDR
   representing one share), with a total dividend payment of around USD 32.9
   mn (RUB 2.0 bn).

   Subject to London Stock Exchange regulations, indicatively the dividends
   will be payable around 6 December 2017, to those shareholders on the
   Group's register as at the record date of Friday, 1 December 2017. The
   ex-dividend date will be 30 November 2017.

   According to the terms of the GDR deposit agreement, holders of the Group's
   GDRs will receive their dividends approximately 5 business days after the
   payment date.

    

    

   GUIDANCE FOR 2018

    

   Following strong underlying growth in the first nine months of 2017, the
   Group is pleased to reaffirm its FY17 performance guidance and provide the
   following guidance for FY18:

     • net income to be at least RUB 24 bn
     • net loan growth to be at least 25%
     • cost of risk to be around 7-8%
     • cost of borrowing to be around 7-8%

   NB. This guidance is based on IAS39 and not IFRS9.  There may be some
   changes when Tinkoff moves to IFRS9 from 1 January 2018.

    

   Oliver Hughes, CEO of Tinkoff Bank, commented:

    

   "In 3Q 2017, the Group delivered another strong set of results, driven by
   significant loan growth, good credit quality, and the new business lines
   hitting break-even. We have posted net income of RUB 5.0 bn, bringing our
   total net income for nine months to RUB 12.6 bn. With continued robust net
   income performance, the Group reports an ROE of 48.8% for the year to date.

    

   "Our diversification process has continued to show impressive results, with
   non-credit businesses contributing increasingly to both the top and bottom
   lines. As of today over 22% of our top line result comes from non-credit
   business lines. Tinkoff Business broke even in June this year and doubled
   its customer base since the beginning of the year, and we plan to reach
   around 250,000 opened accounts by year-end. Tinkoff Mortgage is well on
   track to exceed our target of RUB 7 bn of mortgage loans disbursed by the
   end of the year. We now have 10 partner banks and expect this business line
   to break even by year-end. We continue to expand Tinkoff Investments, which
   now has almost 65,000 brokerage accounts opened. 

    

   "At the same time, our core credit card business is having another
   excellent year. We added over 550,000 new credit cards activated in the
   third quarter, underpinning net loan growth of 30% year-to-date. Credit
   quality is good, the risk profile of incoming customers is stable and cost
   of risk is low at 6.0% for the second quarter in a row. Tinkoff's cost of
   borrowing stands at 7.7% after the placement of the USD 300 mn perpetual
   Tier 1 Eurobond in June.

    

   "We also continue to innovate our processes to continuously increase
   operational efficiency. For example, our use of voice recognition
   technology allows us to save around 720 hours of employee time per month,
   while using chat bots to field 20% of all of the incoming queries without
   connecting to an employee also helps keep costs down.

    

   "Thanks to the robust performance in 3Q, we can reiterate our guidance for
   net profit of over RUB 17 bn for the full year and give new guidance of at
   least RUB 24 bn for 2018. We are also delighted to announce that, in line
   with the Group's dividend policy, the Board of Directors has approved two
   dividends: the first is RUB 2.4 bn in line with the dividend policy; the
   second is a special interim dividend of RUB 2.0 bn which we are able to pay
   as a result of the stronger than expected bottom-line results."

    

   FINANCIAL AND OPERATING REVIEW

    

   RUB bn                           3Q17 3Q16 Change  9M17  9M16 Change
   Credit cards issued ('000 pcs)    735  334   2.2x 1,760   958   +84%
   Credit card                      75.2 46.7   +61% 194.6 124.7   +56%
   transactions
   Net margin                       12.2  8.7   +41%  33.1  24.2   +37%
   Net margin after loan impairment 10.0  6.3   +59%  26.5  17.3   +53%
   Profit before tax                 6.6  4.0   +67%  16.5   9.7   +70%
   Net income                        5.0  2.9   +75%  12.6   7.3   +73%

    

   RUB bn                              30 September 31 December  Change
                                               2017        2016
   Total Assets                               236.0       175.4    +35%
   Net loans and advances to customers        134.1       102.9    +30%
   Cash and treasury portfolio                 76.9        49.5    +55%
   Total Liabilities                          196.9       145.9    +35%
   Customer accounts                          155.7       124.6    +25%
   Total Equity                                39.1        29.5    +33%
   Tier 1 capital ratio                       23.6%       14.8%  +8.8pp
   Total capital ratio                        23.9%       16.3%  +7.6pp
   CBR N1.0 (capital adequacy ratio)         15.99%      11.13% +4.86pp

    

    

   The Group delivered another strong set of results for 3Q and 9M17 following
   accelerating growth of its core credit card business and the excellent
   performance of its new business lines.

    

   As a result, the Group reported a net income for 3Q17 and 9M17 of RUB 5.0
   bn and RUB 12.6 bn respectively. This translated into ROE of 53.7% for 3Q17
   and 48.8% for 9M17.

    

   In 9M17, the Group issued 1.76M credit cards, including 735,000 in 3Q17.
   The total volume of credit card transactions in 9M17 grew by 56% y-o-y to
   RUB 194.6 bn (9M16: RUB 124.7 bn).

    

   In 9M17, gross interest income grew by 23% y-o-y to RUB 42.9 bn (9M16: RUB
   34.8 bn), while in 3Q17 it was up 30% y-o-y to RUB 15.8 bn (3Q16: RUB 12.2
   bn), driven by growth in both the loan book and securities portfolio. Gross
   interest yield stayed at 40.0% in 3Q17, while the interest yield on the
   Group's securities portfolio stayed at 7.3%. Gross yield for 9M17 amounted
   to 39.5% (9M16: 40.0%).

    

   In 3Q17, interest expense grew by 2% y-o-y to RUB 3.45 bn (3Q16: RUB 3.4
   bn). The cost of borrowing stayed at 7.7% in 3Q17 following declining
   retail deposit rates.

    

   In 3Q17, net margin grew by 41% y-o-y to RUB 12.2 bn (3Q16: RUB 8.7 bn),
   while in 9M17 it increased by 37% y-o-y to RUB 33.1 bn (9M16: RUB 24.2 bn).
   The net interest margin (NIM) stood at 25.1% in 3Q17 (3Q16: 25.5%) and at
   25.6% in 9M17 (25.7% in 9M16). Due to lower cost of risk, the risk-adjusted
   net interest margin increased to 20.6% in 3Q17 (3Q16: 18.6%) and to 20.5%
   in 9M17 (9M16: 18.3%).

    

   The Group continues to focus on controlling its cost of risk and
   efficiently managing the quality of its portfolio. In 3Q17, the cost of
   risk stayed at a low 6.0% for the second quarter in a row (3Q16: 8.3%),
   with the 9M17 cost of risk decreasing to 6.5% from 8.5% in 9M16.

    

   The Group continues to develop its new business lines, all of which are
   demonstrating robust growth, with the SME business performing exceptionally
   well. In 9M17, the Group's fee and commission income increased by 74% y-o-y
   to RUB 10.1 bn (9M16: RUB 5.8 bn).

    

   At the end of 9M17, the Group had over 2.4 mn current account customers
   with a total balance of over RUB 62 bn across all their accounts. The
   Group's SME business doubled its customer base since the beginning of the
   year to 190,000 SME customers, with over RUB 17.5 bn in total on their
   current accounts. This business line broke even in June 2017 and is on
   track to reach over 250,000 opened accounts by year-end. Net income for
   3Q17 amounted to RUB 0.37 bn.

    

   The Group continues to develop its mortgage platform in partnership with 10
   banks, through which it originated over RUB 3.0 bn of mortgage loans in
   3Q17. The Group expects the mortgage platform to break-even in 4Q17 and
   expects the platform to originate over RUB 7 bn of mortgage loans by the
   end of the year.

    

   Tinkoff Investments continues to demonstrate robust growth with around
   65,000 brokerage accounts opened as of 1 October 2017. With every fourth
   brokerage account currently opened via this service, the Group expects it
   to break even next year.

   In 3Q17, operating expenses increased by 14% q-o-q due to continued  growth
   of acquisition expenses. The cost-to-income  ratio stood at a stable  42.3%
   in 3Q17.

   In 3Q17, the Group reported a net income of RUB 5.0 bn (3Q16: RUB 2.9 bn).
   Net income for 9M17 amounted to RUB 12.6 bn (9M16: RUB 7.3 bn). As a
   result, ROE for 3Q17 reached 53.7%.

    

   In 9M17, the Group continued to maintain a healthy balance sheet with total
   assets having increased by 35% to RUB 236.0 bn due to strong credit
   portfolio growth and proceeds from the Perpetual Subordinated Eurobond
   (YE16: RUB 175.4 bn).

    

   In 9M17, the Group's gross loan book grew by 27% to RUB 153.4 bn (YE16: RUB
   120.4 bn) due to the increased number of new customers with over 550,000
   new active credit card customers in 3Q17 and over 1.3M in 9M17.

    

   The Group's net loan book grew by 30% to RUB 134.1 bn (YE16: RUB 102.9 bn).
   As a result, Tinkoff Bank's market share increased to 11.6% as of 1 October
   2017, further solidifying its position as Russia's second largest credit
   card issuer.

    

   In 3Q17, the Group's NPL ratio stayed flat at 9.4%. The Group's loan loss
   provision coverage decreased to 1.3x non-performing loans.

    

   The Group's customer accounts increased by 25% YTD to RUB 155.7 bn (2Q17:
   RUB 140.2 bn; YE16: RUB 124.6 bn). In April 2017, Tinkoff Bank issued a
   5-year RUB 5 bn bond with a put option in April 2019. In June 2017, Tinkoff
   Bank issued (through TCS Finance D.A.C., its Irish SPV) a USD 300 mln
   perpetual bond with a 9.25% coupon and with a call option in September
   2022. Simultaneously, the Group bought back a substantial amount of its
   Tier 2 subordinated debt.

   In 9M17, the Group's total equity increased by 33% to RUB 39.1 bn (YE16:
   RUB 29.5 bn). The Group's statutory capital ratios went up following the
   inclusion of perpetual debt in additional Tier 1 capital. As of 1 October
   2017, the Group's statutory N1.0 ratio was up at 16.0% and its N1.2 ratio
   had increased to 14.4%. N1.1 stood at a comfortable 9.8%. The Group expects
   the N1 total capital ratio to grow during the remainder of the year driven
   by retained earnings.

    

    

    

    

    

   TENDER FOR EXTERNAL AUDITOR OF THE GROUP

    

   The Group intends to conduct an audit tender during 2018, in the context of
   the EU Regulation on audit reform of public interest entities.  A
   competitive tender process, open on equal terms to registered audit
   companies that meet the statutory requirements and the professional
   standards including the current external auditors, PwC, overseen by the
   Audit Committee of the Company, will be launched in 2018 with a view to
   identifying and appointing external auditors of the Group for accounting
   periods commencing on 1 January 2019 and thereafter.

    

   ***

   The management team will host an investor and analyst conference call at
   09.00 UK time (12.00 Moscow time, 04.00 U.S. Eastern Standard Time), on
   Monday, 20 November 2017.

   The press release, presentation and financial statements will be available
   on the Tinkoff Bank website
   at  1 https://www.tinkoff.ru/eng/investor-relations/results-and-reports/

   To participate in the conference call, please use the following access
   details:

   Conference ID
                                        8793966
    
   Russian Federation - Local           +7 495 213 1767
   Russian Federation - Toll Free       8 800 500 9283
   United Kingdom - Local               +44 (0)330 336 9105
   United Kingdom - Toll Free           0800 358 6377
   United States of America - Local     +1 323-794-2551
   United States of America - Toll Free 800-239-9838

   A live webcast of the presentation will be available
   at  2 http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=5087 

   Please register approximately 10 minutes prior to the start of the call.

    

   For enquiries:
                                 Tinkoff Bank
   Tinkoff Bank
                                 Larisa Chernysheva
   Darya Ermolina                IR Department
   Head of PR
                                 + 7 495 648-10-00 (ext. 2312)
   + 7 495 648-10-00 (ext. 2009)
                                  4 ir@tinkoff.ru
    3 d.ermolina@tinkoff.ru
                                  

   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. TCS
   Group includes Tinkoff Bank, mobile virtual operator network Tinkoff
   Mobile, Tinkoff Insurance, and Tinkoff Software DC, a network of
   development hubs across Russia.

   The Group was founded in 2006 by the Russian entrepreneur Oleg Tinkov and
   has been listed on the London Stock Exchange since October 2013.

   With no retail branches, the Group serves its customers remotely via online
   channels and its call centre, and operates a network of over 1,800
   representatives to ensure smooth delivery of its products. The network
   covers all of Russia and allows next day delivery to most customers.

   The Group's key business is Tinkoff Bank, Russia's first and only direct
   bank offering both own brand and partner retail financial services via its
   Tinkoff.ru platform. The product range includes daily banking (credit and
   debit cards, payments, money transfers), savings, investments, loyalty
   programmes, travel services, SME services, mortgage platform, and
   insurance. 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, Card 2 Card instant money transfers).

   As at 1 October 2017, the bank was the second largest player in the Russian
   credit card market, with a market share of 11.6%. The 9M 2017 IFRS net
   income of TCS Group Holding PLC amounted to RUB 12.6 bn, ROE stood at
   48.8%.

   Banki.ru, Russia's largest financial news portal, named Tinkoff Bank the
   Bank of the Year 2016. In October 2016 Tinkoff Bank was named the largest
   independent global direct bank by Frost & Sullivan. In 2015 and 2016, the
   Global Finance magazine named Tinkoff Bank as the Best Consumer Digital
   Bank in Russia. In 2016, the bank also won Global Finance's Best Integrated
   Consumer Bank Site award and was named the Best Digital Bank in the CEE by
   Euromoney. The bank's mobile application was recognised as the best in
   Russia by Markswebb Rank & Report for three consecutive years in 2014, 2015
   and 2016, and by Deloitte for four consecutive years from 2013 to 2016.

   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.

    

    

   ═══════════════════════════════════════════════════════════════════════════

   ISIN:          US87238U2033
   Category Code: QRT
   TIDM:          TCS
   LEI Code:      549300XQRN9MR54V1W18
   Sequence No.:  4888


    
   End of Announcement EQS News Service

   ══════════════════════════════════════════════════════════════════════════

   630707  20-Nov-2017 

    5 fncls.ssp?fn=show_t_gif&application_id=630707&application_name=news&site_id=reuters8

References

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   3. mailto:d.ermolina@tinkoff.ru
   4. mailto:ir@tcsbank.ru


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