REG-TCS Group Holding PLC TCS Group Holding PLC reports robust net income growth for 2Q and 1H'19

TCS HoldingAnnouncement

20/08/2019 08:05

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   TCS Group Holding PLC (TCS)
   TCS Group Holding PLC reports robust net income growth for 2Q and 1H'19

   20-Aug-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 robust net income growth for 2Q and 1H'19

    

     • Net margin up 41% year-on-year to RUB 39.7 bn in 1H'19 (1H'18: RUB
       28.2 bn)
     • Net income of RUB 15.4 bn in 1H'19 (1H'18: RUB 11.7 bn)
     • Over 2.2 mn new credit accounts added in 1H'19
     • Net loan portfolio growth of 46.3% YTD in 1H'19

    

   LIMASSOL, CYPRUS - 20 August 2019. TCS Group Holding PLC (TCS LI)
   ("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
   six months ended 30 June 2019.

    

   Oliver Hughes, CEO of Tinkoff, commented:

   "We've continued to deliver robust growth in the second quarter and first
   half of 2019 thanks to the momentum of our core credit business and
   ever-increasing revenue contributions from non-credit business lines, as
   well as significant development efforts across the entire Tinkoff
   ecosystem. In particular, for the first half of 2019, our net loan
   portfolio has demonstrated growth of 46.3% YTD, driven by new credit
   business lines, such as personal loans, POS loans, car loans and home
   equity loans. This translated into a 31% year-on-year increase in net
   income to RUB 15.4 bn in 1H'19.

    

   To seize the current profitable growth opportunity and to
   maintain ample capital buffers in the future, we successfully raised $300
   mn gross in capital in July through an SPO that was highly oversubscribed
   and saw significant interest from investors across a variety of regions.
   These funds will enable us to continue to deliver the growth that the
   investment community has come to expect from Tinkoff Group.

    

   Our revenue continues to become more balanced between credit and fees and
   commissions income, with our transactional and servicing business lines
   generating more than 30% of revenue despite rapid growth of the credit
   business for the past two quarters. We remain relentlessly focused on
   customer growth, and we have already begun to reap the rewards as we
   reached nearly 6 million current accounts customers in the second quarter
   and saw excellent results across our SME, Tinkoff Insurance and brokerage
   businesses."

    

    

   FINANCIAL AND OPERATING REVIEW

   RUB bn                       2Q'19 2Q'18    Change 1H'19 1H'18      Change
   Credit accounts acquired (mn   1.1   0.5      +96%   2.2   1.0       +108%
   pcs)
   Net margin                    21.6  14.2      +52%  39.7  28.2        +41%
   Net margin after credit loss        11.1
   allowance                     14.9            +35%  28.2  21.9        +29%
                                           
   Profit before tax             10.4   7.8      +34%  19.7  15.2        +30%
   Net income                     8.2   6.0      +36%  15.4  11.7        +31%
   Return on equity             64.7% 69.3% -4.6 p.p. 64.3% 69.3%   -5.0 p.p.
   Net interest margin          23.1% 24.0% -0.9 p.p. 22.4% 24.7%   -2.3 p.p.
   Cost of risk                  8.9%  6.6% +2.3 p.p.  8.2%  7.0%   +1.2 p.p.

    

   RUB bn                              30 June 2019 31 Dec 2018    Change
   Total Assets                               452.1       375.5      +20%
   Net loans and advances to customers        290.3       198.5    +46.3%
   Share of NPLs                               7.4%        9.4%   -2 p.p.
   Cash and treasury portfolio                117.9       135.1    -12.7%
   Total Liabilities                          397.6       333.2      +19%
   Customer accounts                          315.0       280.9      +12%
   Total Equity                                54.5        42.3      +29%
   Tier 1 capital ratio                       14.2%       14.9% -0.7 p.p.
   Total capital ratio                        14.2%       14.9% -0.7 p.p.
   CBR N1.0 (capital adequacy ratio)          11.1%       13.9% -2.8 p.p.

    

    

   In 2Q19, gross interest income grew by 52% y-o-y to RUB 27.4 bn (2Q'18:
   RUB 18.0 bn). This strong trend was underpinned by the growth of our
   customer base and the expansion of our product range, and despite a
   gradual decline in the loan book's gross interest yield, which amounted to
   33.5% in 2Q'19 due to increase of the non-credit card share of our
   portfolio. Meanwhile, the interest yield on the Group's securities
   portfolio rose to 6.9% (2Q'18: 6.8%).

    

   In 2Q'19, interest expense grew by 50% y-o-y to RUB 5.4 bn (2Q'18: RUB 3.6
   bn), driven by both significant growth of customer base and review of
   salary costs so that they can be included in the effective interest rate
   rather than acquisition cost. At the same time, our cost of borrowing
   remained at a comfortable level of 6.1% in 2Q'19 thanks to strong inflows
   of customer accounts.

    

   In 1H'19, net margin grew by a remarkable 41% y-o-y to RUB 39.7 bn (1H'18:
   RUB 28.2 bn), primarily as a result of solid net loan growth.

    

   We continue to focus on controlling the Group's cost of risk and
   efficiently managing the quality of our portfolio. Cost of risk rose to
   8.2% in 1H'19 (1H'18: 7.0%) due to the significant increase in the loan
   portfolio in 1H'19 combined with IFRS 9 requirement to recognize
   provisions earlier. Meanwhile, our risk-adjusted net interest margin
   decreased to 15.9% in 1H'19 (1H'18: 19.2%) due to the continued product
   diversification of our loan portfolio.

    

   We have further developed and expanded our new non-credit business lines,
   all of which are delivering exceptional performance thanks to customer
   base growth, and now represent over 30% of the Group's revenue. In 2Q'19,
   the Group's fee and commission income increased by 36% y-o-y to RUB 8.6 bn
   (2Q'18: RUB 6.3 bn). In 2Q'19, Tinkoff Insurance doubled its income to RUB
   2.9 bn (2Q'18: RUB 1.4 bn).

    

   As at the end of 1H'19, the Group had

     • over 5.7 mn current account customers with a total balance of RUB
       154.8 bn across all their accounts
     • over 484k SME customers, with RUB 39.7 bn in total on their current
       accounts
     • 593k brokerage accounts, with nearly half of all retail accounts
       opened at MOEX in the second quarter coming through Tinkoff
       Investments. In July, Tinkoff investments broke even ahead of plan and
       despite the heavy investment in growth of the customer base.

    

   In 2Q'19 operating expenses increased by 39% year-on-year to RUB 12.0 bn
   (2Q'18: RUB 8.6 bn) mainly due to rise in customer acquisition cost. The
   cost-to-income ratio decreased to 39.7% in 2Q'19 (2Q'18: 42.8%).

    

   The Group reported net income of RUB 15.4 bn in 1H'19 (1H'18: RUB 11.7
   bn). As a result, ROE for the reporting period reached 64.3% (1H'18:
   69.3%).

    

   In 1H'19, the Group continued to maintain a healthy balance sheet with
   total assets growing by 20% since the start of 2019 to RUB 452.1 bn (31
   Dec'18: RUB 375.5 bn).

    

   The Group's gross loan book grew by 42% YTD to RUB 333.0 bn (31 Dec'18:
   RUB 234.7 bn), while the net loan book grew by 46.3% YTD to RUB 290.3 bn
   (31 Dec'18: RUB 198.5 bn).

    

   The Group's NPL ratio fell to 7.4%. The Group's loan loss provision
   coverage stood at 1.7x non-performing loans.

    

   The Group's customer accounts increased by 12% YTD to RUB 315.0 bn (31
   Dec'18: RUB 280.9 bn).

    

   Tinkoff's total equity increased by 29% YTD to RUB 54.5 bn (31 Dec'18: RUB
   42.3 bn). As of 1 July 2019, the Group's statutory N1.0 ratio had
   decreased to 11.1%, and its N1.2 ratio had decreased to 10.4%. N1.1 stood
   at a sufficient 7.7%.

    

   As announced on 11 June 2019, the Group will pay no dividend for the
   remainder of 2019.
    

   UPDATED FINANCIAL GUIDANCE FOR FY2019

    

     • We expect net loan growth to be substantially higher than 60%
       (previously at least 60%)
     • Given that the loan growth will be substantially higher than 60%, we
       therefore adjust the guidance for cost of risk to 7-8% (previously
       6-7%)
     • We expect net income of at least RUB 35 bn
     • We expect cost of borrowing to be within 6-7%

    

   1H'2019 AND POST-REPORTING PERIOD OPERATING HIGHLIGHTS

    

   Customer base and engagement growth has led to increased market share

     • The Group had over 5.7 mn current accounts customers as at the end of
       1H'19
     • As of 1 August 2019, Tinkoff mobile banking app had over 15.3 mn
       installs, MAU stood at 4.2 mn, DAU stood at 1.3 mn
     • Tinkoff Bank's credit card market share increased to 13% as of 1 July
       2019, further solidifying its position as Russia's second largest
       credit card issuer

    

   Innovation and first-mover advantage cement our position as a fintech
   leader

     • In June, Tinkoff launched 'Oleg', the world's first proprietary voice
       assistant for financial and lifestyle tasks developed by a financial
       organization.
     • In April, Tinkoff Group announced it had built the most powerful
       supercomputer, the Kolmogorov cluster, among financial institutions.
       The cluster reduces time required for machine learning and
       artificial intelligence-related tasks
     • In July, Tinkoff launched sales of proprietary Tinkoff VoiceKit
       technologies to corporate customers

    

   Superior offering and targeted marketing activities galvanize loyalty to
   the Tinkoff brand

     • Tinkoff Bank was a general partner of the St. Petersburg International
       Economic Forum (SPIEF) on 6-8 June 2019 for a second year in a row
     • We launched a co-branded card with Yandex in April, offering up to 10%
       of cashback for one of 15 services available through Yandex.Plus
     • In April 2019, we announced the expansion of our long-term management
       incentive and retention plan (MLTIP), making awards to 10 new
       participants
     • In February, Tinkoff Investments rolled out a web-based platform for
       securities trading for advanced investors. In May, Tinkoff Investments
       offered its customers an opportunity to invest in IPOs
     • In June, Tinkoff announced the launch of its own management company
       Tinkoff Capital which at the initial stage will offer customers
       Tinkoff's own ETFs
     • In May, Tinkoff launched its own online travel agency
     • In May, Tinkoff increased its stake in CloudPayments to 90%

    

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

     • Tinkoff Group raised $300 mn gross in additional capital in July
       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 April, we placed a 3-year RUB 10 bn local bond with a 9.25% coupon
     • Moody's upgraded our rating to Ba3 with a stable outlook from B1 in
       February. And in April, the Russian National Analytical Credit Rating
       Agency - ACRA - reaffirmed Tinkoff Bank's rating at A(RU) with a
       stable outlook
     • 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.
     • Tinkoff Bank won four accolades in February at the Bank of the Year

   awards by Banki.ru, Russia's leading banking news portal. Tinkoff topped
   the

   2018 list in the categories Investment Company of the Year, Online
   Mortgage

   Application, The People's Ranking of banks and The People's Ranking for
   mobile operators (Tinkoff Mobile)

     • 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 value-accretive opportunities to strengthen the Group

     • In May, Tinkoff announced the discontinuation of Tinkoff Mortgage
       product offering to focus on higher margin business lines
     • In August, Tinkoff management decided not to move the Group's
       headquarters to the yet-to-be-constructed Aquatoria business centre in
       2022. Instead, Tinkoff is exploring other more attractive options for
       the Group headquarters

   CONFERENCE CALL INFORMATION

   The Tinkoff management team will host an investor and analyst conference
   call at 15:00 UK time (17:00 Moscow time, 10:00 U.S. Eastern Standard
   Time), on Tuesday, 20 August 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
                            5472536
    
   Russian Federation       +7 495 646 9190
                            +44 (0)330 336 9411 
   United Kingdom
                             
   United States of America +1 (929) 477-0402

   A live webcast of the presentation will be available at:
   https://webcasts.eqs.com/tcsgroup20190820 

    

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

    

   For enquiries:
                                 Tinkoff
   Tinkoff
                                 Larisa Chernysheva
   Darya Ermolina                IR Department
   Head of PR
                                 + 7 495 648-10-00 (ext. 2312)
   + 7 495 648-10-00 (ext. 2009)
                                  3 ir@tinkoff.ru
    2 d.ermolina@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
   over 9 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%. The 1H 2019 IFRS net income of TCS Group
   Holding PLC amounted to RUB 15.4 bn. The ROE was 64.3%.

   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.

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   ISIN:          US87238U2033
   Category Code: IR
   TIDM:          TCS
   LEI Code:      549300XQRN9MR54V1W18
   Sequence No.:  17297
   EQS News ID:   859981


    
   End of Announcement EQS News Service

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References

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


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