REG-TCS Group Holding PLC TCS Group Holding PLC reports another quarter of record profit in 3Q 2019

TCS HoldingAnnouncement

20/11/2019 07:00

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   TCS Group Holding PLC (TCS)
   TCS Group Holding PLC reports another quarter of record profit in 3Q 2019
   20-Nov-2019 / 10:00 MSK
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   TCS Group Holding PLC reports another quarter of record profit in 3Q 2019

    

     • Net margin up 45% year-on-year to RUB 62.3 bn in 9M'19 (9M'18: RUB
       42.9 bn)
     • Net income of RUB 9.7 bn in 3Q'19 and RUB 25.1 bn in 9M'19
     • Over 3.2 mn new credit accounts added in 9M'19
     • Net loan portfolio growth of 61% YTD in 9M'19

    

   LIMASSOL, CYPRUS - 20 November 2019. TCS Group Holding PLC (LI: TCS, MOEX:
   TCSG) ("Tinkoff", "We", the "Group", the "Company"), Russia's leading
   provider of online financial and lifestyle services via its Tinkoff
   ecosystem, today announces its interim condensed consolidated IFRS results
   for the third quarter and nine months ended 30 September 2019.

    

   Oliver Hughes, CEO, commented:

   "I am happy to report substantial growth in our customer base and net loan
   portfolio, as we continued to deliver record-high quarterly profit and
   achieve important technological milestones.

    

   Tinkoff continues to deliver strong results amid the evolving regulatory
   environment and ongoing changes in Russia's consumer banking market. Our
   net loan portfolio grew by 61% in 9M'19, underpinned by strong customer
   base expansion. Meanwhile our net profit in the first nine months of the
   year rose by over 32% compared to the same period last year to reach RUB
   25.1 bn.

    

   A key focus of 2019 has been on further building the ecosystem and
   expanding our non-credit business lines, which accounted for 32% of our
   total revenue in the first nine months. The number of current account
   customers increased by 39%, while the number of customers in Tinkoff
   Investments increased 2.4x. These figures demonstrate that customers are
   increasingly turning to Tinkoff for a greater share of their lifestyle
   needs. We do far more than finance!

    

   In the first days of the third quarter we completed a successful SPO on
   the London Stock Exchange, raising $300 million in gross proceeds to
   further reinforce our capital position and support Tinkoff's continued
   growth. On 28 October, Tinkoff GDRs began trading on the Moscow Exchange,
   giving more Russian investors the opportunity to invest in a company they
   trust for all their financial and lifestyle needs. We are confident that
   this move will support the liquidity and market capitalisation growth of
   Tinkoff going forward.

    

   Tinkoff has delivered an excellent quarter, and this is a result of our
   dedication to product, interface and customer service. Customers respond
   eagerly to our initiatives to improve our app and services by engaging
   more actively with the app and the broader Tinkoff ecosystem. We will
   continue this impressive growth on all fronts in 2020."

    

    

   FINANCIAL AND OPERATING REVIEW

    

   RUB bn                      3Q'19 3Q'18     Change 9M'19 9M'18      Change
   Credit accounts acquired      1.0   0.7       +57%   3.2   1.7        +88%
   (mn pcs)
   Net margin                   22.9  14.8       +55%  62.3  42.9        +45%
   Net margin after credit            11.7
   loss allowance               15.0             +29%  42.9  33.4        +28%
                                          
   Profit before tax            12.5   9.6       +30%  32.2  24.8        +30%
   Net income                    9.7   7.3       +34%  25.1  19.0        +32%
   Return on equity            56.5% 80.4% -23.9 p.p. 59.0% 72.9%  -13.9 p.p.
   Net interest margin         21.9% 22.9%    -1 p.p. 22.0% 23.9%   -1.9 p.p.
   Cost of risk                 9.1%  6.2%  +2.9 p.p.  8.6%  6.7%   +1.9 p.p.

    

   RUB bn                             30 September 2019 31 Dec 2018    Change
   Total Assets                                   507.6       375.5      +35%
   Net loans and advances to                      319.9       198.5      +61%
   customers
   Share of NPLs                                   7.9%        9.4% -1.5 p.p.
   Cash and treasury portfolio                    139.4       135.1       +3%
   Total Liabilities                              424.2       333.2      +27%
   Customer accounts                              346.7       280.9      +23%
   Total Equity                                    83.4        42.3      +97%
   Basel III Tier 1 capital ratio                 20.1%       14.9% +5.2 p.p.
   Basel III Total capital ratio                  20.1%       14.9% +5.2 p.p.
   CBR N1.0 (capital adequacy ratio)              11.9%       13.9% -2.0 p.p.

    

   In 3Q'19, the Group's total revenue grew by 50% y-o-y to RUB 43.6 bn
   (3Q'18: RUB 29.0 bn). Gross interest income increased by 51% y-o-y to RUB
   28.8 bn (3Q'18: RUB 19.0 bn), thanks to the continued growth of our
   customer base and the expansion of our product range.
    

   Gross interest yield declined to 32.3% in 9M'19 due to the increase of the
   non-credit card share of our portfolio. The interest yield on the Group's
   securities portfolio decreased to 6.8% (3Q'18: 6.9%).

    

   In 3Q'19, interest expense grew by 39% y-o-y to RUB 5.5 bn (3Q'18: RUB 3.9
   bn), driven by both significant growth of customer base and new bond
   issues. At the same time, our cost of borrowing decreased to 5.7% in 3Q'19
   following gradual decrease in deposit rates.

    

   In 3Q'19, net margin grew by a remarkable 55% y-o-y to RUB 22.9 bn (3Q'18:
   RUB 14.8 bn), primarily as a result of solid net loan growth.

    

   Cost of risk rose to 9.1% in 3Q'19 (2Q'19: 8.9%), reflecting high loan
   growth rates, front-loaded provisioning under IFRS9, and continued
   fine-tuning of our credit risk and approval models. Meanwhile, our
   risk-adjusted net interest margin decreased to 14.4% in 3Q'19 (3Q'18:
   18.1%) due to the continued product diversification of our loan portfolio
   towards more secured and lower interest rate products.

    

   Our non-credit business lines continue to deliver robust performance
   thanks to customer base growth, and represent 32% of the Group's total
   revenue in the first nine months of 2019. Fee and commission income rose
   by 33% y-o-y to RUB 9.4 bn in 3Q'19 (3Q'18: RUB 7.0 bn), accounting for
   21% of total revenue, while Tinkoff Insurance more than doubled its income
   y-o-y to RUB 4.3 bn (3Q'18: RUB 2.0 bn).

    

   As at the end of 9M'19, the Group had:

     • over 6.3 mn current account customers with a total balance of RUB
       169.2 bn across all accounts
     • over 514k SME customers, with RUB 45.3 bn in total on their current
       accounts
     • 750k Tinkoff Investments customers.

    

   Operating expenses decreased q-o-q from RUB 11.8 bn in 2Q'19 to RUB 11.5
   bn in 3Q'19 (3Q'18: RUB 8.7 bn) due to lower advertising activity. The
   cost-to-income ratio decreased to 34.4% in 3Q'19 (3Q'18: 39.6%).

    

   The Group reported record quarterly net income of RUB 9.7 bn in 3Q'19
   (3Q'18: RUB 7.3 bn). Net income for 9M'19 amounted to RUB 25.1 bn (9M'18
   RUB 19.0 bn). As a result, ROE for 9M'19 stood at 59.0% (9M'18: 72.9%).

    

   In 9M'19, the Group continued to maintain a healthy balance sheet with
   total assets growing by 35% since the start of 2019 to RUB 507.6 bn (31
   Dec'18: RUB 375.5 bn).

    

   The Group's gross loan book grew by 57% YTD to RUB 369.0 bn (31 Dec'18:
   RUB 234.7 bn), while the net loan book grew by 61% YTD to RUB 319.9 bn (31
   Dec'18: RUB 198.5 bn).

    

   The Group's NPL ratio rose to 7.9%, while our loan loss provision coverage
   remained stable at 1.68 non-performing loans.

    

   The Group's customer accounts increased by 23% YTD to RUB 346.7 bn (31
   Dec'18: RUB 280.9 bn).

    

   Tinkoff's total equity increased by 97% YTD to RUB 83.4 bn (31 Dec'18: RUB
   42.3 bn). As of 1 October 2019, the Group's statutory N1.0 ratio stood at
   11.9%, and its N1.2 ratio was at 10.9%. N1.1 stood at a comfortable 8.4%.
    

   UPDATED GUIDANCE FOR 2019

    

   Following strong underlying growth year to date in 2019, the Group is
   pleased to update its FY'19 performance guidance:

    

     • We expect net loan growth to be noticeably higher than 60%
     • We expect cost of risk to be in the 8% area (previously 7-8%)
     • We expect net income of over RUB 35 bn
     • We expect cost of borrowing to be in the 6% area (previously 6-7%)

    

   9M'2019 AND POST-REPORTING PERIOD OPERATING HIGHLIGHTS

    

   Customer base and engagement growth has led to increased market share

     • The Group had over 6.3 mn current accounts customers as at the end of
       9M'19
     • As of 1 November 2019, Tinkoff app had over 17.3 mn installs, MAU
       stood at 4.6 mn, DAU stood at 1.5 mn
     • Tinkoff Bank's credit card market share increased to 13.2% as of 1
       November 2019, further solidifying its position as Russia's second
       largest credit card issuer

    

   Superior and innovative offering combined with targeted marketing
   activities secure Tinkoff's place as Russia's leading fintech brand

     • In July, Tinkoff launched sales of proprietary Tinkoff VoiceKit
       text-to-speech and speech-to-text technologies to corporate customers
     • In September, Tinkoff signed an exclusive sponsorship contract with
       Russian tennis ace Daniil Medvedev
     • In September, Tinkoff launched Pulse, a free social network for retail
       investors
     • In September, Tinkoff reached a new milestone, issuing our 10
       millionth Mastercard card
     • In October, Tinkoff held a hackathon in partnership with McKinsey with
       a prize pool of RUB 1 mn
     • In October, Tinkoff launched CloudTips, an app for paying tips
     • In October, Tinkoff and Kassir signed an agreement with Crocus Group,
       one of the leading entertainment players in Russia, for Kassir to
       become the exclusive seller of tickets to events held at Crocus venues
     • In November, Tinkoff launched a payments app for car refueling at BP
       stations in Russia
     • In November, Tinkoff launched a series of debit cards featuring
       characters from the popular television show 'Rick and Morty'
     • Tinkoff continued its educational outreach to retail investors: In
       November, Tinkoff Journal launched a free course for beginner
       investors. Earlier in October, Tinkoff launched a YouTube show for
       investors called 'Money Doesn't Sleep'

    

   The investment community and industry associations recognize Tinkoff's
   strong performance

     • In November, Institutional Investor and Moscow Exchange recognized
       Tinkoff as the Best IR Team among Russian mid-cap companies based on
       the results of the annual global Extel survey of portfolio managers
       and sell-side research analysts
     • In October, Fitch upgraded Tinkoff Bank's credit rating to BB with a
       Stable Outlook. Earlier in the year, Moody's upgraded Tinkoff Bank's
       rating to Ba3 with a Stable Outlook while the Russian National
       Analytical Credit Rating Agency (ACRA) reaffirmed Tinkoff Bank's
       rating at A(RU) with a stable outlook
     • In October, Tinkoff GDRs were admitted to trading on the Moscow
       Exchange, making the shares more accessible to Russian investors and
       supporting liquidity and market capitalization growth
     • In October, Global Finance named Tinkoff the World's Best Corporate
       Digital Bank in Information Security, as well as the Best Consumer
       Digital Bank in Central and Eastern Europe
     • In July, Tinkoff Group raised $300 mn gross in additional capital
       through a successful SPO that was highly oversubscribed and saw
       significant interest from investors across a variety of regions,
       including strong demand from the US
     • In August, Tinkoff was named Best Russian Consumer and Corporate
       Digital Bank in Global Finance magazine's 2019 World's Best Digital
       Banks in Central & Eastern Europe awards
     • In August, Tinkoff was named indisputable leader in Markswebb's
       Internet Banking Rank for 2019
     • In July, Tinkoff was named the most profitable bank in CEE by The
       Banker, a leading international financial publication which is part
       of the Financial Times Group

    

   Focus on acquiring best talent to strengthen the Group

     • On 1 November, Tinkoff appointed Dmitry Panchenko to lead its retail
       investment business
     • On 6 November, Neri Tollardo joined Tinkoff IR team to focus on
       international IR and partnership projects

    

    

   CONFERENCE CALL INFORMATION

   The Tinkoff management team will host an investor and analyst conference
   call at 13:00 UK time (16:00 Moscow time, 8:00 U.S. Eastern Standard
   Time), on Wednesday, 20 November 2019.

   The press release, presentation and financial statements will be available
   on the Tinkoff website
   at  1 https://www.tinkoff.ru/eng/ir/financials/quarterly-earnings/

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

   Conference ID            3702106

                             
   Russian Federation       +7 495 646 9190
                            +44 (0)330 336 9411 
   United Kingdom
                             
   United States of America +1 (646) 828-8193

   A live webcast of the presentation will be available at:
    2 https://webcasts.eqs.com/tcsgroup20191120 

    

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

    

   For enquiries:
                                 Tinkoff

                                 Larisa Chernysheva
   Tinkoff                       IR Department

   Darya Ermolina                + 7 495 648-10-00 (ext. 2312)
   Head of PR
                                 Neri Tollardo
   + 7 495 648-10-00 (ext. 2009)
                                 +44 7741 078383
    3 d.ermolina@tinkoff.ru
                                  4 ir@tinkoff.ru

                                  

   About Tinkoff Group
    

   TCS Group Holding PLC is an innovative provider of online retail financial
   services. It includes Tinkoff Bank, mobile virtual network operator
   Tinkoff Mobile, Tinkoff Insurance, management company Tinkoff Capital,
   Tinkoff Software DC, a network of development hubs in major Russian
   cities, and Tinkoff Education. The Group is currently developing
   Tinkoff ecosystem, which offers financial and lifestyle services.

    

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

    

   The Group's key business is Tinkoff Bank, a fully online bank that serves
   around 10 mn customers and forms the core of the Tinkoff ecosystem.

    

   Tinkoff Bank is the second largest player in the Russian credit card
   market, with a share of 13.2%. The 9M 2019 IFRS net income of TCS Group
   Holding PLC amounted to RUB 25.1 bn. The ROE was 59%.

    

   With no branches, the Group serves all its customers remotely via online
   channels and a cloud-based call centre. The centre is staffed by over
   10,000 employees, making it one of the largest in Europe. To ensure smooth
   delivery of the Group's products, the Group has a nationwide network of
   over 2,500 representatives.

    

   In 2018, Global Finance named Tinkoff Bank the world's Best Consumer
   Digital Bank, and in 2019, 2018, 2016 and 2015, the Best Consumer Digital
   Bank in Russia. In 2017 and 2013, the Banker recognised Tinkoff Bank as
   the Bank of the Year in Russia. The bank's mobile app has been
   consistently praised by local and global independent experts as the best
   of its kind (in 2013, 2014, 2015, 2016 by Deloitte and in 2018 by Global
   Finance).

    

   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.:  30308
   EQS News ID:   917147


    
   End of Announcement EQS News Service

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References

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   4. mailto:ir@tcsbank.ru


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