REG-TCS Group Holding PLC TCS Group Holding PLC Announces 4Q and FY16 IFRS Results, Adopts New Dividend Policy <Origin Href="QuoteRef">TCSq.L</Origin>

TCS HoldingAnnouncement

14/03/2017 07:06

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   TCS Group Holding PLC / Final Results
   TCS Group Holding PLC Announces 4Q and FY16 IFRS Results, Adopts New
   Dividend Policy

   14-March-2017 / 08:00 CET/CEST
   Dissemination of a Regulatory Announcement, transmitted by EquityStory.RS,
   LLC - a company of EQS Group AG.
   The issuer is solely responsible for the content of this announcement.

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   TCS Group Holding PLC Announces 4Q and FY 2016 IFRS Results; Adopts New
   Dividend Policy

   Moscow, Russia - 14 March 2017. 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 audited
   IFRS results for the full year ended 31 December 2016, and a new dividend
   policy.

   KEY FINANCIAL HIGHLIGHTS

   4Q 2016

   - Net interest income increased by 38.8% y-o-y to RUB 9.5 bn (4Q15: RUB
   6.9 bn)

   - Profit before tax grew 3.8x y-o-y to RUB 4.8 bn (4Q15: RUB 1.3 bn)

   - Net income up 4.0x y-o-y to RUB 3.7 bn (4Q15: RUB 0.9 bn)

   - Net interest margin at 26.5% (4Q15: 26.9%)

   - Cost of risk declined to 5.0% (4Q15: 12.7%)

   FY 2016

   - Net interest income increased by 38.3% y-o-y to RUB 34.0 bn (FY15: RUB
   24.6 bn)

   - Profit before tax increased 5.7x y-o-y to RUB 14.6 bn (FY15: RUB 2.6 bn)

   - Record high net income of RUB 11 bn, above the upper range of the
   Group's guidance of RUB 9-10 bn (FY15: RUB 1.9 bn)

   - Net interest margin up at 26.2% (FY15: 25.1%)

   - Cost of risk fell to 7.6% (FY15: 15.3%)

   - Total assets increased by 25.6% to RUB 175.4 bn (YE15: RUB 139.7 bn)

   - Gross loans and advances to customers up by 19.1% to RUB 120.4 bn (YE15:
   RUB 101.1 bn)

   - Net loans and advances to customers up 25.4% to RUB 102.9 bn (YE15: RUB
   82.1 bn)

   - Non-performing loan (NPL) ratio reduced to 10.2% (YE15: 12.4%)

   - Customer accounts increased by 39.4% to RUB 124.6 bn (YE15: RUB 89.3 bn)

   - Total equity up by 28.6% to RUB 29.5 bn (YE15: RUB 22.9 bn)

   KEY BUSINESS HIGHLIGHTS FOR 2016

   - Over 1 mn new active customers were acquired in 2016, of which over
   290,000 in 4Q16

   - Tinkoff Bank solidified its position as Russia's second largest credit
   card market player with a 10.3% market share as at 1 January 2017

   - In December 2016, Tinkoff Bank announced plans to launch a network of
   software development hubs across Russia

   - In December 2016, Tinkoff Bank introduced a face recognition system for
   scoring

   - In December 2016, Tinkoff Bank acquired Vkarmane (MyPocket), an app for
   document and data storage

   - In November 2016,Tinkoff Bank became the first Russian bank to service
   customers via Viber

   - In November 2016, Fitch upgraded Tinkoff Bank's rating to BB-/Stable

   - In autumn 2016, Tinkoff Bank was among the first in Russia to launch
   Apple Pay and Samsung Pay

   - In October 2016, Tinkoff Bank launched Tinkoff Investments which now
   accounts for around 25% of all new accounts opened on the Moscow Exchange

   - In July 2016, Tinkoff Bank joined the Russian blockchain consortium

   KEY BUSINESS HIGHLIGHTS POST 2016

   - In February 2017, Moody's upgraded Tinkoff Bank's rating to B1/Stable

   - In February 2017, Tinkoff Bank was recognised as 'Bank of the Year 2016'
   by Banki.ru, Russia's leading online financial news portal

   GUIDANCE AND OUTLOOK FOR 2017

   - The Group expects net income for 2017 to be at the upper range of its
   previously communicated guidance and to amount to at least RUB 14 bn. The
   Group expects cost of risk in the range of 9-10%, cost of funds around 9%,
   and net portfolio growth of at least 20%

   - In terms of non-credit card revenue the Group reiterates its
   expectations from October 2016 that it will account for around 30% of the
   Group's net income by 2019

   NEW DIVIDEND POLICY

   A new dividend policy takes effect from 14 March 2017 and replaces the
   previous policy which took effect on 2 March 2016.

   The new dividend policy of the Group is to distribute surplus capital on a
   quarterly basis as determined by the Board with a target dividend payout
   ratio in respect of each quarter of each financial year of 50% of the net
   income achieved in the preceding financial quarter based on IFRS financial
   statements for that period. This is always subject to: any bank, funding
   or other covenants by which the Group is bound from time to time; and
   minimum regulatory capital requirements and other applicable prudential
   considerations/solvency commitments.

   The full text of the new dividend policy can be found in the Appendix.

   Oliver Hughes, CEO of Tinkoff Bank, commented:

   '2016 is the best year that Tinkoff has ever had. With net income at a
   record high of RUB 11 bn which translates into an ROE of 42.5% for 2016,
   the Group comfortably met all of its targets. The results were driven by
   the strong performance of our core credit card business as well as the
   rapid development of new non-credit business lines as part of the
   Tinkoff.ru financial platform.

   In 2016, we cemented our position as Russia's second largest credit card
   market player with a 10.3% market share. Our core credit card business was
   buoyed by continued consumer deleveraging as the macroeconomic environment
   further improved and by the ongoing clean-up of the market. This allowed
   us to increase our portfolio by 25%, or more than 1 million new customers,
   whilst keeping the cost of risk at record low levels of 7.6%.

   Growth of non-credit business lines as part of the Tinkoff.ru financial
   platform exceeded our expectations in 2016 and we expect the new Tinkoff
   SME and Tinkoff Mortgage lines to break even this year. Our numerous
   loyalty programmes are also increasingly contributing to the bottom line,
   and we expect to announce new large-scale programmes in the near future.
   Finally, in 2016 we invested heavily in our brand via a high-GRP, federal
   TV advertising campaign. This helps us drive our customer acquisition in
   all categories as well as promoting Tinkoff as a leading financial
   services provider to broad sections of the population.

   Moving into 2017, we are confident that the Group is well-positioned to
   further build on its success whilst enhancing its market position.'

   FINANCIAL AND OPERATING REVIEW

   RUB bn                                 4Q16 4Q15 Change  FY16  FY15 Change
   Credit cards issued ('000 pcs)          408  267  52.8% 1,368   651   2.1x
   Credit card                            50.7 32.8  54.6% 175.1 106.7  64.1%
   transactions
   Net interest income                     9.5  6.9  38.8%  34.0  24.6  38.3%
   Net interest income after loan          8.0  3.7   2.2x  25.6   9.9   2.6x
   impairment
   Profit before tax                       4.8  1.3   3.8x  14.6   2.6   5.7x
   Net income                              3.7  0.9   4.0x  11.0   1.9   5.9x

    

   RUB bn                              31 December 31 December Change
                                              2016        2015
   Total Assets                              175.4       139.7  25.6%
   Net loans and advances to customers       102.9        82.1  25.4%
   Cash and treasury portfolio                49.5        32.0  54.8%
   Total Liabilities                         145.9       116.7  25.0%
   Customer accounts                         124.6        89.3  39.4%
   Total Equity                               29.5        22.9  28.6%
   Tier 1 capital ratio                      14.8%       14.0% +0.8pp
   Total capital ratio                       16.3%       18.3% -2.0pp
   CBR N1 (capital adequacy ratio)           11.1%       13.0% -1.9pp

    

   The Group demonstrated the strongest set of results in its history in both
   4Q and FY2016 following the continuing improvement of the macroeconomic
   environment, robust growth of its core business and tight control over
   portfolio quality. There is also growing contribution from non-credit card
   business streams to its bottom line. In 2016, the Group had four
   consecutive quarters of all-time high net income, which resulted in a
   record net income of RUB 11 bn for FY16.

   Tinkoff Bank issued 408k and over 1.3 mn new credit cards in 4Q and FY16,
   respectively, while the volume of credit card transactions in 2016
   increased by 64% to RUB 175 bn compared to RUB 107 bn in 2015.

   In 4Q16, the Group's gross interest income increased by 26.2% y-o-y to RUB
   12.9 bn (4Q15: RUB 10.2 bn), while gross interest income for 2016 grew by
   27.3% y-o-y to RUB 47.8 bn (FY15: RUB 37.6 bn). In 2016, gross interest
   yield increased to 40.4% from 37.9% in 2015 following the improvement in
   the cost of risk.

   In 4Q16, cost of borrowing fell to 9.7% from 13.1% in 4Q15 and 10.5% in
   3Q16. The Group expects its cost of borrowing to decrease further in 2017
   as it maintains lower rates for deposits and current accounts. Interest
   expense has stayed flat in absolute terms for the last five quarters at
   RUB 3.3 bn.

   In 4Q16, net interest income grew by 38.8% y-o-y to RUB 9.5 bn. For FY16,
   net interest income increased by 38.3% to RUB 34.0 bn. The net interest
   margin stood at 26.5%. Following the decline in the cost of risk, the
   risk-adjusted net interest margin increased to 22.4%.

   The Group's tight control over risk continues to pay off. In 4Q16 the cost
   of risk fell to a record low level of 5% compared to 12.7% in 4Q15. This
   is due to seasonal factors, the continuing improvement in the
   macroeconomic environment as well as the results of the Group's efforts to
   improve the quality of its portfolio. For FY16, the cost of risk decreased
   to 7.6% (FY15: 15.3%).

   The Group's efforts to diversify its sources of income continue to yield
   positive results with a steady increase in fee and commission income, as
   well as insurance premiums. Fee and commission income grew steadily
   throughout 2016 and amounted to RUB 2.6 bn in 4Q16, representing a 57%
   y-o-y increase (4Q15: RUB 1.6 bn). For FY16, fee and commission income
   increased by 76% to RUB 8.4 bn (FY15: RUB 4.8 bn). The growth in the fee
   and commission income is mainly driven by debit cards, online acquiring
   and SME services. The current accounts business continues to evolve; as of
   31 December 2016 we had 1.8 mn current accounts customers with a balance
   of almost RUB 47 bn. This resulted in fee income of RUB 0.6 bn for 4Q16.
   In 2016, fee and commission income constituted 14% of total revenue.
   Earned insurance premiums increased by 15.2% to RUB 1.3 bn for the FY16
   (FY15: RUB 1.2 bn).

   The Group's SME business is developing rapidly. As of 4Q16 the Group had
   50,000 customers with a balance of almost RUB 5 bn in current accounts.
   All the cash is profitably deployed in treasury operations. Fee and
   commission income generated by the SME business amounted to RUB 150 mn in
   2016.

   The Group continues to develop its mortgage business. As at the end of
   2016, the Group had seven bank partners, and a total of RUB 2.9 bn in
   loans were originated through the Tinkoff.ru financial platform.

   As at the end of 2016, every fourth account in the Russian securities
   trading market was opened via the Group's Tinkoff Investments service
   following its launch in 3Q16.

   In 4Q16, the Group's operating expenses increased due to salary indexation
   and the Group's continuing advertising activity and amounted to RUB 5.5
   bn. For 2016, the Group's operating expenses remained elevated due to
   investment in the Tinkoff.ru financial platform. In 2016, the Group's cost
   to income ratio stood at 43.7% (FY15: 38%).

   In 4Q16, the Group reported a record high quarterly net income of RUB 3.7
   bn which translated into an ROE of 51.4%. As a result of four consecutive
   quarters of record net income, the Group recorded all-time high net income
   for FY16 which reached RUB 11 bn. This is above the upper range of the
   Group's guidance of RUB 9-10 bn. ROE for the FY16 amounted to 42.5%.

   In 2016, the Group continued to maintain a healthy balance sheet. In 4Q16,
   total assets grew by 7% and amounted to RUB 175.4 bn (YE15: RUB 139.7 bn).
   Cash and cash equivalents increased by RUB 3 bn reflecting the inflow of
   retail customer accounts. The Group maintained a securities portfolio of
   RUB 33 bn consisting of highly liquid CBR-repoable bonds.

   The Group's gross retail loan book grew by 3% in 4Q16 and by 19% YTD in
   2016 and amounted to RUB 120.4 bn. That growth was driven by organic
   customer acquisition of 290,000 new customers in 4Q16 and 1m new customers
   in 2016. The net retail portfolio increased by 4% in 4Q16 and by 25.4%
   YTD. This has cemented Tinkoff Bank's position as the second largest
   player in the Russian credit card market with its market share of 10.3% as
   at the end of 2016.

   The quality of the loan portfolio improved throughout the year with the
   NPL ratio dropping to 10.2% at the end of the year. Loan loss provision
   coverage stayed at 1.4x.

   Customer accounts increased by 12.6% q-o-q demonstrating strong
   performance despite the fact that the Group gradually reduced deposit
   rates in line with market trends. The Group's wholesale funding consists
   of two bond issues: a RUB 3 bn bond with a put option in December 2017 and
   a USD 200 mn subordinated Eurobond maturing in 2Q18.

   Total equity increased by 28.6% YTD to RUB 29.5bn. The Group continued to
   maintain a solid capital position with a statutory CBR N1 capital ratio of
   11.1% and N1.2 ratio of 8.6%.

   ***

   The management team will host an investor and analyst conference call at
   14.00 UK time (17.00 Moscow time, 9.00 EDT), on Tuesday, 14 March 2017.

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

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

   Conference ID                        3525701
   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     +1 719-325-2213
   United States of America - Toll Free 1888-352-6803

    

   A live webcast of the presentation will be available at:
    1 http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=4241

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

   ***

   For enquiries:
   Tinkoff Bank                  Tinkoff Bank
   Darya Ermolina                Larisa Chernysheva
   Head of PR                    IR Department
   + 7 495 648-10-00 (ext. 2009) + 7 495 648-10-00 (ext. 2312)
    2 d.ermolina@tinkoff.ru       3 ir@tinkoff.ru
   FTI Consulting London          
   Elena Kalinskaya/ Leonid Fink
   +44 (0) 020 3727 1000

    

   Appendix

   New Dividend Policy

   TCS Group Holding PLC Dividend Policy Effective from 14 March 2017

   This dividend policy takes effect from 14 March 2017 and replaces the
   policy which took effect on 2 March 2016.

   Pursuant to the Articles of Association, the Group may pay dividends out
   of its profits. All shares in the Group rank equally in all respects for
   dividends and interim dividends.

   To the extent the Group declares and pays dividends, owners of GDRs on the
   relevant record date will be entitled to receive dividends payable in
   respect of class A shares underlying the GDRs, subject to the terms of the
   Deposit Agreement. If dividends are not paid in U.S. dollars, again
   subject to the terms of the Deposit Agreement, they will be converted into
   U.S. dollars by the Depositary and paid to holders of GDRs net of currency
   conversion expenses.

   The dividend policy of the Group, with the aim of enhancing total
   shareholder returns, is to distribute surplus capital on a quarterly basis
   as determined by the Board with a target dividend payout ratio in respect
   of each quarter of each financial year of 50% of the net income achieved
   in the preceding financial quarter based on IFRS financial statements for
   that period, subject always to: any bank, funding or other covenants by
   which the Group is bound from time to time; and minimum regulatory capital
   requirements and other applicable prudential considerations/solvency
   commitments.

   Dividends, if declared, would be declared and paid as soon as reasonably
   practicable after the end of a financial year/relevant quarter.

   This statement is a general declaration of intention and the actual
   declaration of dividends will require corporate action at the time a
   decision is taken, depending on the precise circumstances and the
   condition of the operating environment at that time.

   In addition and as described, declaration and payment of any such dividend
   will be subject to any restrictions under applicable law and regulation,
   the Articles of Association, available cash flow, dividends from the
   Group's subsidiaries, taxation considerations and the Group's actual and
   projected capital investment requirements.

   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. The
   Group has also developed a 'smart courier' network covering almost all
   cities and towns in Russia which allows next day delivery to many
   customers.

   Tinkoff Bank's 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).

   Tinkoff is transitioning to become an online financial marketplace,
   Tinkoff.ru, which offers an entire range of both own brand and partner
   retail financial services via mobile and desktop.

   As at 1 January 2017, the bank was the second largest player in the
   Russian credit card market, with a market share of 10.3%. The FY2016 IFRS
   net income of the parent company, TCS Group Holding PLC, which includes
   Tinkoff Bank and the insurance company Tinkoff Insurance, amounted to RUB
   11 bn, ROE stood at 43%.

   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.

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

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

   Language:      English
   Company:       TCS Group Holding PLC
                  2nd Floor, Sotiri Tofini 4, Agios Athanasios
                  4102 Limassol
                  Cyprus
   Phone:         +7 495 648-10-00
   Fax:           +7 495 645-59-09
   E-mail:        media@tinkoff.ru
   Internet:      https://www.tinkoff.ru
   ISIN:          US87238U2033
   Listed:        Foreign Exchange(s) London, Moscow
   Category Code: FR
   TIDM:          TCS
   LEI Code:      549300XQRN9MR54V1W18
   Sequence No.:  3943


    
   End of Announcement EquityStory.RS, LLC News Service


   553725  14-March-2017 

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References

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   2. mailto:d.ermolina@tinkoff.ru
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