3rd Quarter Results
TBC BANK GROUP PLC ("TBC Bank")
9M 2017 AND 3Q 2017 Unaudited Financial Results
The information contained in this announcement and in the appendices is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 or interim financial statements in accordance with International Accounting Standard 34 'Interim Financial Reporting'. Statutory accounts for the year to 31 December 2016 were approved by the Board of Directors on 31 March 2017, published on 3 April 2017, and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.
This statement provides a summary of the unaudited business and financial trends for the nine months ended 30 September 2017 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited and also not subject to the interim review. Unless otherwise stated, references to results in previous periods and other general statements regarding past performance refer to the business results for the same period in 2016.
Forward-Looking Statements
This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause actual results, performance or achievements of TBC Bank Group PLC( "the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation has been extracted from the Group's unaudited management accounts and financial statements. The areas in which management accounts might differ from International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant and you should consult your own professional advisors and/or conduct your own due diligence for complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
Third Quarter 2017 Unaudited Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") will release its third quarter and nine month of 2017 unaudited financial results on Thursday, 16 November 2017 at 7.00 am GMT (11.00 am GET).
On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Date & time: Thursday, 16 November 2017 at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST)
Please dial-in approximately 5 minutes before the start of the call quoting the password TBC Bank:
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Password: |
TBC Bank |
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UK Toll Free: |
0808 109 0700 |
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Standard International Access: |
+44 (0) 20 3003 2666 |
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USA Toll Free: |
1 866 966 5335 |
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New York New York: |
+1 212 999 6659 |
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Russia Toll Free: |
8 10 8002 4902044 |
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Moscow: |
+7 (8) 495 249 9843 |
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Replay Numbers |
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Replay Passcode: |
9874634 |
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UK Toll Free: |
0800 633 8453 |
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Standard International Access: |
+44 (0) 20 8196 1998 |
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USA Toll Free: |
1 866 583 1035 |
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Russia Toll Free: |
8 10 8002 4832044 |
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Moscow: |
+7 (8) 495 249 9840 |
Contacts
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Sean Wade Director of International Media and IR
E-mail: SWade@Tbcbank.com.ge Web: www.tbcgroupbank.com Tel: +44 (0) 7464 609025 Address: 68 Lombard St, London EC3V 9LJ, United Kingdom
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Anna Romelashvili Head of Investor Relations
E-mail: ARomelashvili@Tbcbank.com.ge Web: www.tbcgroupbank.com Tel: +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102 |
Investor Relations Department
E-mail: ir@tbcbank.com.ge Web: www.tbcgroupbank.com Tel: +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102
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Table of Contents
3Q and 9M Results Announcement
Letter from the Chief Executive Officer
Results Overview 9M and 3Q 2017
Results by Segments and Subsidiaries
TBC BANK Group PLC ("TBC Bank")
TBC Bank Announces 9M 2017 and 3Q 2017 Consolidated Results:
Underlying1 Net Profit for 9M 2017 up by 39.8% YoY to GEL 272.3 million
Underlying1 Net Profit for 3Q 2017 up by 29.0% YoY to GEL 88.0 million
The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation
TBC Bank - Background
These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS") as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing on 10 August 2016.
In 4Q 2016, TBC Bank acquired Bank Republic which has been consolidated into the Group's results.
Results reported below prior to 30 September 2016 relate to the group previously headed by JSC TBC Bank Georgia.
TBC Bank is the largest banking group in Georgia. Following the acquisition of Bank Republic in late 2016, TBC Bank became the country's leading universal bank, accounting for 36.5% market share by total assets, where 99.7% of its business is concentrated. TBC Bank offers retail, corporate, and MSME banking nationwide.
Financial Highlights
3Q 2017 P&L Highlights
§ Underlying[1] net profit amounted to GEL 88.0 million (3Q 2016: GEL62.1 million; 2Q 2017: GEL 86.3 million)
§ Reported net profit amounted to GEL 86.8 million (3Q 2016: GEL 71.0 million; 2Q 2017: GEL 79.9 million)
§ Underlying1 return on equity (ROE) amounted to 20.02% (3Q 2016: 18.1%; 2Q 2017: 20.4%)
§ Reported return on equity (ROE) amounted to 19.8% (3Q 2016: 20.6%; 2Q 2017: 18.9%)
§ Underlying1 return on asset (ROA) amounted to 3.0% (3Q 2016: 3.5%; 2Q 2017: 3.2%)
§ Reported return on asset (ROA) amounted to 2.9% (3Q 2016: 4.0%; 2Q 2017: 3.0%)
§ Total operating income amounted to 207.1 million up by 28.0% YoY (up by 7.7% YoY to GEL 174.2 million without the Bank Republic estimated contribution) and unchanged from 2Q 2017
§ Underlying1 cost to income ratio stood at 39.8% (3Q 2016: 41.0%; 2Q 2017: 41.2%)
§ Reported cost to income was 40.5% (3Q 2016: 40.5%; 2Q 2017: 44.9%)
§ Cost of risk on loans stood at 1.3% (3Q 2016: 1.1%; 2Q 2017: 1.3%)
§ Net interest Margin (NIM) stood at 6.2% (3Q 2016: 8.3%; 2Q 2017: 6.8%), the estimated effect of new regulatory LCR is 0.4pp[2]
§ Risk adjusted net interest margin (NIM) stood at 5.0% (3Q 2016: 6.7%; 2Q 2017: 5.3%)
9M 2017 P&L Highlights
§ Underlying1 net profit amounted to GEL 272.3 million, up by 39.8% YoY, hence delivering a ROE without one-offs of 21.6% (9M 2016: 20.3%)
§ Reported net profit was up by 25.2% YoY to GEL 263.2 million, delivering ROE of 20.9% (9M 2016: 21.8%)
§ Underlying1 ROA was 3.3% (9M 2016: 3.8%)
§ Reported ROA was 3.2% (9M 2016: 4.1%)
§ Total operating income for the period was up by 33.5% YoY to GEL 617.7 million (up by 10.1% YoY to GEL 509.5 million without the Bank Republic estimated contribution effect)
§ Underlying1 cost to income ratio stood at 40.3% (9M 2016: 41.0%)
§ Reported cost to income stood at 42.1% (9M 2016: 43.3%)
§ Cost of risk on loans stood at 1.2% (9M 2016: 1.1%)
§ Net interest margin (NIM) stood at 6.5% (9M 2016: 7.9%)
§ Risk adjusted net interest margin (NIM) stood at 5.1% (9M 2016: 6.5%)
Balance Sheet Highlights as at 30 September 2017
§ Total assets amounted to GEL 12,136.9 million as of 30 September 2017, up by 60.0% YoY and 7.6% QoQ
§ Gross loans and advances to customers stood at GEL 7,767.6 million as of 30 September 2017, up by 55.2% YoY (up by 33.2% YoY to GEL 6,665.0 million without the Bank Republic estimated contribution effect) and up by 5.2% QoQ
§ Net loans to deposits + IFI funding stood at 91.6% and Net Stable Funding Ratio (NSFR) stood at 134.5%
§ NPLs stood at 3.5%, down by 1.1 pp YoY and up by 0.1 QoQ
§ NPLs coverage stood at 80.5% or 206.8% with collateral on 30 September 2017 compared to 84.3% or 205.0% with collateral on 30 September 2016
§ Total customer deposits stood at GEL 7,096.5 million as of 30 September 2017, up by 54.5% YoY (up by 43.1% YoY to GEL 6,572.8 million without the Bank Republic estimated contribution) and up by 6.5% QoQ
§ Regulatory tier I and total capital adequacy ratios stood at 10.8% and 14.5% respectively
Market Shares[3]
§ Market share in total assets stood at 36.5% up by 8.2 pp YoY and down by 0.2 pp QoQ
§ Market share in total loans was 38.2% as of 30 September 2017, up by 8.5 pp YoY and up by 0.2 pp QoQ
§ In terms of individual loans, the Bank had a market share of 40.5% as of 30 September 2017, up by 8.2 pp YoY and down by 0.3 pp QoQ. The market share for legal entity loans was 35.6% up by 8.4 pp YoY and up by 0.7 pp QoQ
§ Market share of total deposits stood at 38.6% as of 30 September 2017, up by 7.9 pp YoY and down by 1.3 pp QoQ
§ The Bank maintains its longstanding leadership in individual deposits with a market share of 40.9% up by 5.4 pp YoY and up by 0.7 pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 35.9%, up by 10.7 pp YoY and down by 3.5 pp QoQ
Recent Developments
TBC Bank Receives the Global Award "The Best Integrated Corporate Bank Site" from Global Finance
§ TBC Bank is pleased to announce that it has received the award for the Best Integrated Corporate Bank Site in the world from Global Finance magazine at its Best Digital Bank Awards 2017. This follows a number of other Global Finance digital bank awards won by TBC Bank on both local and regional (CEE) levels earlier this year.
Moody's upgrades TBC Bank Credit Rating
§ Moody's Investors Service (Moody's) upgraded the credit rating of TBC Bank. The Bank's local-currency deposit rating improved to Ba2 from Ba3 and its foreign-currency deposit rating to Ba3 from B1. The ratings continue to carry a stable outlook.
§ The change was driven by Moody's upgrade of Georgia's government bond ratings to Ba2 stable from Ba3 stable on 11 September 2017.
Georgia among world's Top 10 in Doing Business
§ World Bank's Doing Business recent report ranks Georgia on 9th place among world's 190 countries, highest in Europe and Central Asia. Georgia has advanced from 16th to 9th place and surpassed countries like Sweden, Macedonia, Estonia, Finland, Australia, Taiwan (China), and Latvia, according to the report.
TBC Bank signs a syndicated loan agreement of USD 106.5 million with FMO and OFID
§ This is the second syndicated loan agreement arranged by FMO (Netherlands Development Finance Company), a TBC's long-standing partner. The loan facility is provided in syndication with OFID (OPEC Fund for International Development). Other participants, financing USD 56.5 million in total are Symbiotics (through its MSME Bond Platform); Atlantic Forfaitierungs AG; London Forfaiting Company Limited and a number of undisclosed institutional investors through FMO's syndications platform.
§ The FMO funding enables TBC Bank to further support micro, small and medium-sized enterprise (MSME) financing in Georgia, while the OFID portion of the facility will support international trade finance projects.
Additional Information Disclosure
Additional historical information for certain P&L, balance sheet and capital items and on asset quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Financial Highlights section.
Letter from the Chief Executive Officer
I am pleased to present our third quarter financial results, which continue to show a solid performance. In addition to an overview of our operating achievements, I would also like to highlight the recent macro developments in the country.
Our underlying[4] consolidated net profit for the third quarter of 2017 reached GEL 88.0 million (reported net profit amounted to GEL 86.8 million) up from the GEL 68.2 million4 in the third quarter of 2016, marking a 29% increase. Over the reporting period, our return on equity excluding one-off costs related to the Bank Republic integration was 20.02% (19.8% including one-off costs), while the return on assets excluding one-off costs stood at 3.0% (2.9% including one-off costs). The net interest margin decreased in the reporting period and stood at 6.2%. An estimated effect of new liquidity requirements introduced by National Bank of Georgia is about 40 bp[5]. However, the decrease in net interest margin was offset by a strong increase in non-interest income. Net fee and commission income rose by 43.2% year-on-year or 35.6% without the Bank Republic estimated effect, mainly driven by growth of settlement and card operations. As a result, the share of net fee and commission income in total income reached 15.4% up by 1.7% year-on-year. At the same time, other non-interest income, excluding net fee and commission income, increased by 48.3% year-on-year or 28.4% without the Bank Republic estimated effect. In addition, our underlying4 cost to income ratio decreased to 39.8% or 40.5% including one-off items.
In terms of balance sheet growth, our loan book grew by 55.2% year-on-year, or 33.2% without Bank Republic estimated effect, resulting in a 38.2% market share, while our deposit portfolio increased by 54.5% year-on-year, or 43.1% without Bank Republic estimated effect, leading to the market share of 38.6%.
Our asset quality continues to remain solid with non-performing loans standing at 3.5% down by 1.1 pp year-on-year and non-performing loans coverage ratio at 81% or 207% including collateral.
Over the same period, we maintained strong capital and liquidity levels. Our total capital adequacy ratio (CAR) per Basel II/III regulation stood at 14.5% compared to the minimum requirement of 10.5%, and our regulatory tier I ratio stood at 10.8% compared to the minimum requirement of 8.5%. The newly introduced regulatory liquidity coverage ratio stood at 115% at the end of the quarter, compared to the minimum requirement of 100%, while net loans to deposits + IFI funding stood at 91.6%, and the net stable funding ratio (NSFR) stood at 134.5%.
In terms of the macroeconomic environment, the economy continues to grow steadily exceeding most external growth forecasts for the year. The real annual GDP growth rate reached 4.7% for the first nine months of 2017, mainly driven by high tourism receipts and an increase in net exports and remittances. An increase in the Government's capital expenditure and investments in infrastructure has also had a positive impact on growth. As a result of better-than-expected performance to date, the IMF revised its initial forecast from 3.5% to 4.3% for 2017. I would also like to highlight that the credit rating company Moody's has upgraded Government of Georgia's local and foreign currency issuer ratings to Ba2 from Ba3, while the outlook remains stable. The main rationale for the upgrade was the country's proven resilience towards the recent regional economic shocks and on-going process of diversification of trade and investment relationships. Following the country revision, Moody's has also upgraded our local-currency deposit rating to Ba2 from Ba3 and our foreign-currency deposit rating to Ba3 from B1. The ratings continue to carry a stable outlook.
Turning again to the operating performance, I would like to update you on our achievements in our digitalization strategy. The number of transaction conducted via digital channels continues to grow, especially in mobile banking. As a result, our off-loading ratio[6] reached 86.8%, while mobile banking penetration ratio increased to 26.9% up by 6.6 pp year-on-year. We also continue to innovate and offer new products and services to our customers, our Chat Bot, available through Facebook messenger, has become a "love mark", attracting around 94,000 customers with 4.6 million conversations. Just recently, we added new features to our Chat Bot and started selling travel insurance and movie tickets, which are expected to increase usage and user experience of our customers.
On the corporate side, we continue to attract new clients. In the third quarter, we added a new blue chip client, a leading Georgian telecommunication company. Within our MSME business, in addition to attracting a new facility from FMO, we have enriched the product offering in our branches by combining leasing solutions with our traditional banking products. Initial feedback is very positive and we expect to achieve good synergies with this combined offering. I am also delighted to see first results of our insurance company, the number of customers has increased to around 240,000 from just 3,000 at the time of acquisition, while our market share[7] excluding health insurance reached 10.9% as of 30 September 2017 compared to 3.5% as of 31 December 2016.
Outlook
Our future growth outlook remains positive supported by accelerated economic activity, a continued recovery in regional economies, as well as an overall improvement in the risk outlook for the country. Therefore, we would like to reiterate our targets: ROE of 20% plus, cost to income ratio below 40%, divided pay-out ratio at 25-35% and loan book growth at c.15% and tier 1 capital adequacy ratio around 10.5%. At the same time, we will continue to focus on increasing our non-interest income, among other things, through our bancassurance, investment banking and brokerage services, trade finance products as well as cards and POS terminal operations. Improving cost efficiency through our automatisation efforts and extracting cost synergies after the successful integration of Bank Republic also remain among our highest priorities.
Economic Overview
GDP Growth
In the first nine months of 2017 GDP growth averaged 4.7% YoY in real terms, initial estimates of the statistics office (Geostat) sets growth at 4.4% in 3Q 2017 following the 4.9% growth in H1 2017. Acceleration of economic growth have been mostly driven by the sharp growth of exports, tourism and remittance inflows in the country. From the sectors perspective, the construction sector grew by +18.8% YoY, growth in trade and repairs, the largest sector of the Georgian economy, averaged 2.3% in H1 2017 as opposed to 0% growth in H1 2016. Transport and communications went up by 6.8% YoY in H1 2017, versus a 0.7% YoY contraction in H1 of 2016, reflecting the increased trade turnover among the countries in the region as well as a sharp increase in the number of international visitors. Growth remained robust in hotels and restaurants (+10.9% YoY), real estate (+6.8% YoY), financial intermediation (+6.6% YoY) while all other sectors have also contributed positively to GDP growth.
Inflation and Monetary Policy
Annual inflation retreated from its peak of 7.1% in June to 6.2% in September, 2017. Annual CPI inflation in September was mostly driven by increased prices on food and non-alcoholic beverages (+6.5% YoY), transport (+14.7% YoY) and alcoholic drinks and tobacco (+17.4% YoY). The price increases on transport and tobacco reflect the hike of excise tax rates on these goods at the beginning of 2017, with the estimated direct impact of 2.5 pp. out of 6.2% inflation figure in September. This impact should dissipate from the beginning of 2018. During the latest monetary policy committee meeting held on October 25th, the NBG maintained the policy rate unchanged at 7%. The NBG announced that the policy rate should gradually reach its neutral at 5-6% over the medium term, unless unexpected factors would alter the inflation path.
External Environment and Current Account Balance
The external environment improved markedly since the 2014-16 slowdown. The GDP growth of Georgia's main trading partners is gradually strengthening, while increased growth in the EU and firm recovery in the CIS economies positively affected the Georgian economy. In its October update of the World Economic Outlook, the IMF revised upwards its 2017 and 2018 growth projections for almost all Georgia's major trading partners. Better than expected performance year-to-date and improved outlook for the region economies suggests that downside risks in the external environment declined markedly.
Reflecting the improved growth in the trading partner economies, exports recovered strongly in the first nine months of 2017 (+28.3% YoY). Exports to EU increased by 18.9% YoY in 9m 2017, over the same period exports to CIS grew by 59.0% YoY, a figure that reversely reflects the sharp declines of 2015 and 2016. Exports to other countries went up by 10.1% YoY over the same period. Georgian exports are gradually becoming more geographically balanced, compared to the same period of 2014, in 9m 2017 share of total exports to CIS countries fell from c. 52% to c. 41%, while the share to EU countries increased from 21% to 24%, and share to other countries climbed significantly, from 26% to 36%. China is emerging among the top destination for Georgian exports, per 9 month 2017 figures, China entered top 5 exports markets. Over the same period exports to China went up by 15.4% YoY, following the 33.5% YoY growth in 2016 and c. 40% YoY growth in 2015. It is expected that FTA with China, which is slated to become operational from the beginning of 2018, should further accelerate exports growth to the second largest economy of the world. This diversification trend should continue along with the better application of the benefits offered by FTAs with the EU and China.
Georgia's image as an attractive tourism destination strengthens further as tourist numbers surged by 28.6% YoY in 3Q 2017 and by 28.8% YoY in 9m 2017. Growth in number of visitors has been the highest from EU (+24.8% YoY), followed by CIS (+19.0% YoY) and other countries (+18.6% YoY).
While immediate neighbours of Georgia still make up roughly 3/4th of the total incoming visitors, their share is gradually declining while visitors from other areas, like the Middle East, are increasing. In 2016, tourists from the Middle East increased by 130% YoY to reach c. 330,000 and accounted for 5.2% of total arrivals, while in 9m 2017 arrivals increased a further by 92.4% YoY and Middle Eastern tourists accounted for c. 9% of the total.
In 3Q remittance inflows went up by 19.7% YoY, mostly driven by increasing remittances from Israel (+102.2% YoY), Russia (+13.3% YoY), Italy (+23.8% YoY) and Turkey (+26.1% YoY). In the first nine months of 2017 remittances were up 19.7% YoY, but they remain below pre-2015 levels, suggesting that further growth in private money transfers should be expected as major remitting countries continue to recover from the 2015-16 economic slowdown.
In H1 2017 the CA deficit stood at 9.4% of the GPD, 3.2% below the same figure a year earlier. In absolute terms, the CA deficit improved by USD 202 million, mostly due to the sharp recovery of exports of goods and services as well as continued growth of remittance inflows. Continued positive dynamics in external inflows suggests the CA deficit improved further in 3Q 2017.
FDI continues to be the major source of financing the CA deficit. In H1 2017 the net FDI inflows stood at 9.2% of GDP and fully covered the CA deficit. In the first half of 2017 FDI inflows declined by 5.5% compared to the same period of 2016. As the South Caucasus Pipeline expansion project, financed by BP, nears its completion, FDI in transports and communication dropped by 30% YoY in H1 2017. The decline was partly offset by higher FDI in construction (up 7.5% YoY), hotels and restaurants (up 6.3% YoY) and real estate (up 2.1% YoY). Overall, FDI, measured as a share of GDP, remained above 10%, the highest level among the CIS and Central and Eastern European countries.
Fiscal Policy
The successful completion of the first review of the IMF's extended fund facility underlines Georgia's prudent macro management policies. The IMF team praised the government's efforts to boost much-needed public investment while maintaining the fiscal deficit below 2016 levels. In the 2017 budget the deficit is expected to come in at 3.5% of GDP against the initially planned 4.1% of GDP. In the first nine months of 2017 the budget deficit stood at c. 2% of GDP, compared to the 3.3% over the same period in previous year. Agreement with IMF envisages budget deficit at 3% for 2018 and further decrease of deficit to GDP ratio over the medium term. Public debt to GDP ratio stood at an estimated 43.1% as of the end of 3Q 2017, up by 1.0% compared to the previous quarter. According to the baseline scenario of debt sustainability analysis by the Ministry of Finance, public debt will remain below 44% of GDP over the next three years.
Recent Achievements and Growth Prospects
Moody's upgraded Georgia's sovereign credit rating to Ba2 from Ba3, with stable outlook. The decision reflects the resiliency of the Georgian economy during 2014-16 regional slowdown and its sharp recovery in H1 2017. Prudent macro and financial sector supervision policies, as well as the potential of further export diversification enabled by FTAs with all major economic powers in the broader region, were also cited as key factors in Moody's revision. We expect the improved credit rating to strengthen Georgia's role in the region as an economic "safe heaven". Lower sovereign credit risk implies improved access to external funding for the companies operating in Georgia to finance the growth and capitalize on the structural advantages of the economy.
Georgia entered top 10 countries in World Bank's Doing Business 2018 ranking, country moved up by 7 steps to 9th place, becoming the best performer in Europe and Central Asia region. Georgia's outstanding performance in this rankings highlights the continued efforts of government to improve the business environment and to make Georgia one of the easiest places to do business globally.
Going forward, it is expected that economic recovery will continue, IMF expects growth to average 4.3% in 2017 and to accelerate further over the medium term. Ongoing recovery in regional countries, improved sovereign risk rating and increased clarity of the fiscal policy directions over the medium will positively influence country risk and improve growth prospects of the economy. Long awaited Baku-Tbilisi-Kars railway was officially opened by the end of October, 2017. Completion of this project marks another major milestone for Georgia to strengthen its position as a regional tourism and transportation hub and represents the shortest route linking Chinese and central Asian economies to European countries. New transportation pillar along with the, free trade agreements with EU, China and all major economic powers in the broader region should give additional momentum to the growth and diversification of Georgia's exports. These factors, coupled with favourable business environment and continued reform efforts by the government is expected to keep Georgian economy growing at rates above the most of the peers in the broader region.
Results Overview 9M and 3Q 2017
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Income Statement Highlights |
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in thousands of GEL |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
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Net Interest Income |
438,620 |
336,764 |
30.2% |
146,546 |
149,742 |
120,227 |
21.9% |
-2.1% |
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Net Fee and Commission Income |
87,007 |
61,876 |
40.6% |
31,790 |
28,741 |
22,194 |
43.2% |
10.6% |
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Other Operating Non-Interest Income |
92,041 |
64,169 |
43.4% |
28,758 |
28,611 |
19,398 |
48.3% |
0.5% |
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Provisioning Charges |
-70,472 |
-43,728 |
61.2% |
-27,097 |
-25,717 |
-15,059 |
79.9% |
5.4% |
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Operating Income after Provisions for Impairment |
547,196 |
419,082 |
30.6% |
179,997 |
181,377 |
146,759 |
22.6% |
-0.8% |
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Operating Expenses |
-259,760 |
-200,204 |
29.7% |
-83,910 |
-92,929 |
-65,536 |
28.0% |
-9.7% |
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Profit Before Tax |
287,436 |
218,878 |
31.3% |
96,086 |
88,447 |
81,223 |
18.3% |
8.6% |
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Income Tax Expense |
-24,263 |
-8,653 |
180.4% |
-9,327 |
-8,590 |
-10,235 |
-8.9% |
8.6% |
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Profit for the Period |
263,173 |
210,225 |
25.2% |
86,759 |
79,857 |
70,988 |
22.2% |
8.6% |
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Balance Sheet and Capital Highlights |
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Sep-17 |
Jun-17 |
Change QoQ |
Sep-16 |
Change YoY |
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In Millions |
GEL |
USD |
GEL |
USD |
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GEL |
USD |
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Total Assets |
12,136.9 |
4,900.4 |
11,280.8 |
4,686.3 |
7.6% |
7,583.7 |
3,255.2 |
60.0% |
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Gross Loans |
7,767.6 |
3,136.3 |
7,386.4 |
3,068.5 |
5.2% |
5,003.6 |
2,147.7 |
55.2% |
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Customer Deposits |
7,096.5 |
2,865.3 |
6,666.4 |
2,769.4 |
6.5% |
4,593.2 |
1,971.6 |
54.5% |
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Total Equity |
1,790.3 |
722.9 |
1,690.5 |
702.3 |
5.9% |
1,388.6 |
596.1 |
28.9% |
|
Regulatory Tier I Capital |
1,354.7 |
547.0 |
1,282.9 |
532.9 |
5.6% |
1,124.6 |
482.7 |
20.5% |
|
Regulatory Total Capital |
1,821.8 |
735.6 |
1,732.8 |
719.8 |
5.1% |
1,368.7 |
587.5 |
33.1% |
|
Regulatory Risk Weighted Assets |
12,560.6 |
5,071.5 |
11,866.0 |
4,929.4 |
5.9% |
8,427.8 |
3,617.5 |
49.0% |
|
Key Ratios |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
|
ROE |
21.6%*/20.9% |
21.8% |
-0.9% |
20.02%*/19.8% |
18.9% |
20.6% |
-0.8% |
0.9% |
|
ROA |
3.3%*/3.2% |
4.1% |
-0.9% |
3.0%*/2.9% |
3.0% |
4.0% |
-1.1% |
0.1% |
|
Pre-Provision ROE |
27.3%*/26.6% |
26.4% |
0.2% |
26.3%*/26.1% |
25.1% |
25.1% |
1.0% |
1.0% |
|
Cost to Income |
40.3%*/42.1% |
43.3% |
-1.2% |
39.8%*/40.5% |
44.9% |
40.5% |
0.0% |
-4.4% |
|
Cost of Risk |
1.2% |
1.1% |
0.1% |
1.3% |
1.3% |
1.1% |
0.2% |
0.0% |
|
NPL to Gross Loans |
3.5% |
4.6% |
-1.1% |
3.5% |
3.4% |
4.6% |
-1.1% |
0.1% |
|
Regulatory Tier 1 CAR |
10.8% |
13.3% |
-2.5% |
10.8% |
10.8% |
13.3% |
-2.5% |
0.0% |
|
Regulatory Total CAR |
14.5% |
16.2% |
-1.7% |
14.5% |
14.6% |
16.2% |
-1.7% |
-0.1% |
|
Leverage (Times) |
6.8x |
5.5x |
1.3x |
6.8x |
6.7x |
5.5x |
1.3x |
0.1x |
* Without one-off costs
Income Statement Discussion
|
Net Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
|
Loans and Advances to Customers |
664,220 |
466,608 |
42.4% |
225,467 |
223,665 |
164,235 |
37.3% |
0.8% |
|
Investment Securities Available for Sale |
31,744 |
17,860 |
77.7% |
12,657 |
10,286 |
5,679 |
122.9% |
23.0% |
|
Due from Other Banks |
9,432 |
3,591 |
162.7% |
4,524 |
3,157 |
1,055 |
NMF |
43.3% |
|
Bonds Carried at Amortized Cost |
25,035 |
23,254 |
7.7% |
9,785 |
7,809 |
7,039 |
39.0% |
25.3% |
|
Investment in Leases |
15,486 |
11,671 |
32.7% |
5,819 |
4,981 |
3,950 |
47.3% |
16.8% |
|
Other |
- |
98 |
-100.0% |
- |
- |
98 |
-100.0% |
NMF |
|
Interest Income |
745,918 |
523,082 |
42.6% |
258,252 |
249,898 |
182,056 |
41.9% |
3.3% |
|
Customer Accounts |
167,740 |
106,954 |
56.8% |
59,329 |
54,560 |
36,501 |
62.5% |
8.7% |
|
Due to Credit Institutions |
111,360 |
55,504 |
100.6% |
42,407 |
36,589 |
17,040 |
148.9% |
15.9% |
|
Subordinated Debt |
26,681 |
22,563 |
18.3% |
9,494 |
8,502 |
7,847 |
21.0% |
11.7% |
|
Debt Securities in Issue |
1,517 |
1,297 |
17.0% |
476 |
505 |
442 |
7.7% |
-5.9% |
|
Interest Expense |
307,298 |
186,318 |
64.9% |
111,705 |
100,157 |
61,830 |
80.7% |
11.5% |
|
Net Interest Income |
438,620 |
336,764 |
30.2% |
146,546 |
149,742 |
120,227 |
21.9% |
-2.1% |
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin |
6.5% |
7.9% |
-1.4% |
6.2% |
6.8% |
8.3% |
-2.1% |
-0.6% |
9M 2017 to 9M 2016 Comparison
In 9M 2017, net interest income grew by 30.2% YoY to GEL 438.6 million (GEL 353.7 million without the Bank Republic estimated contribution effect), resulting from a 42.6% higher interest income and 64.9% higher interest expense.
Without the Bank Republic estimated contribution effect, the interest income increased by GEL 94.6 million, or 18.1% YoY, mainly driven by a higher interest income from loans to customers by GEL 78.2 million, or 16.8%, which is primarily related to the 33.2% gross loan portfolio increase. A rise in interest income from investment securities (comprising both investment securities available for sale and bonds carried at amortized cost) of GEL 8.6 million, or 20.9% also contributed to the overall increase. That in turn was driven by the significant rise in the respective portfolio. In addition, net interest income from due from other banks increased by GEL 4.1 million or 114.7%, which was also caused by the large increase in respective portfolio.
In 9m 2017 the Bank Republic effect mainly contributed a GEL 119.4 million, or 18.0% to the interest income from loans and advances to customers, which totalled GEL 664.2 million, and GEL 7.1 million, or 12.5%, to interest income from investment securities, which amounted to GEL 56.8 million in 9M 2017. As a result, the overall Bank Republic estimated contribution effect was GEL 128.2 million, or 17.2%, to the interest income.
Loan yields declined over the same period from 13.5% to 12.0%. The drop was driven by a decrease in rates on FC-denominated loans, from 10.3% to 9.1%, as well as by decline in GEL-denominated loans rates from 19.4% to 16.8%. The decline of yields on investment securities, from 8.9% to 8.1%, over the same period is related to a lower average refinance rate in the country in 9M 2017 compared to 9M 2016. As a result, the yields on average interest earning assets dropped from 12.3% in 9M 2016 to 11.1% in 9M 2017.
In the reporting period, without the Bank Republic estimated contribution effect, interest expense increased by GEL 77.7 million, or 41.7% YoY. The rise was mainly due to a higher interest expense on due to customer accounts by GEL 40.2 million, or 37.6%, and due to credit institutions by GEL 36.0 million or 64.8%. The hike in interest expense on both customer accounts and on due to credit institutions was driven by the large increase in respective portfolios related to the overall business growth, as well as to the implementation of the new regulatory liquidity framework.[8]
The Bank Republic estimated contribution effect added a GEL 20.6 million, or 12.3%, to the interest expense on customer accounts, which amounted GEL 167.7 million in 9M 2017 and GEL 19.9 million or 17.9% to interest expense on interest expense due to credit institutions, which amounted GEL 111.4 million. As a result, the overall Bank Republic contribution effect was a GEL 43.3 million, or 14.1%, to the interest expense.
The cost of deposits remained flat at 3.4% in 9M 2017 and in the same period the cost of borrowing dropped to 6.4%, from 7.5% in 9M 2016. This was mainly due to the 2.0 pp decrease in rates on Lari-denominated borrowings and the 0.8 pp decrease in rates on FC-denominated borrowings. As a result, the cost of funding ratio declined by 0.1 pp to 4.4% in 9M 2017.
Consequently, NIM was 6.5% in 9M 2017, compared to 7.9% in 9M 2016.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017, the net interest income increased by GEL 26.3 million, or 21.9% YoY to GEL 146.5 million (GEL 119.2 million without the Bank Republic estimated contribution effect), as a result of a GEL 76.2 million, or 41.9%, increase in interest income and a GEL 49.9 million, or 80.7%, rise in interest expense, compared to 3Q 2016.
Without the Bank Republic estimated contribution effect, the GEL 38.8 million, or 21.3% YoY, increase in interest income was mainly due to a GEL 26.7 million, or 16.3%, increase in interest income from loans. This in turn was due to the 33.2% rise in the loan portfolio more than offsetting declining yield effect as discussed below. The gain in interest income was also driven by the growth in interest income from investment securities (comprising both investment securities available for sale and bonds carried at amortized cost) by GEL 7.6 million, or 59.7%, which resulted from the significant increase in respective portfolio.
The Bank Republic estimated contribution effect added a GEL 34.5 million, or 15.3%, to the interest income from loans and advances to customers, which amounted to GEL 225.5 million in 3Q 2017, as well as GEL 2.1 million, or 9.5%, to interest income from investment securities, which totalled GEL 22.4 million in 2Q 2017. Consequently, the overall Bank Republic contribution effect was a GEL 37.4 million, or 14.5%, to the interest income.
In the reporting period loan yields declined from 13.5% to 11.9% as a result of the decrease in FC rates from 10.3% to 8.8% and decrease in GEL rates from 19.4% to 16.5%. The yields on investment securities remained broadly flat at 8.4%. Consequently, these changes led to the decrease in yields on average interest earning assets from 12.3% in 2Q 2016 to 10.9% in 3Q 2017.
Without the Bank Republic estimated contribution effect, interest expense amounted to GEL 101.6 million, making an increase of GEL 39.8 million, or 64.4% YoY. The growth was primarily attributable to the increased interest expense on due to credit institutions by GEL 21.8 million, or 128.2%, and due to customer accounts by GEL 17.1 million, or 46.8% related to the significant increase in respective portfolios related to the overall business growth, as well as to the implementation of the new regulatory liquidity framework.[9]
The Bank Republic estimated contribution added GEL 5.8 million, or 9.7%, to the interest expense on customer accounts, which amounted to GEL 59.3 million in 3Q 2017. It also added GEL 3.5 million, or 8.3%, to the interest expense on due to credit institutions, which totalled GEL 42.4 million in 3Q 2017. Consequently, the Bank Republic contribution effect was GEL 10.1 million or 9.0%.
The rate on credit institutions decreased by 0.3 pp to 6.6%, while the cost of deposits increased by 0.1 pp to 3.4%. As a result, the cost of funds increased to 4.5%, up by 0.2pp in 3Q 2016.
Consequently, NIM decreased to 6.2% in 3Q 2017, compared to 8.3% in 3Q 2016.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, net interest income decreased by GEL 3.2 million, or 2.1% QoQ, to GEL 146.5 million due to 8.4 million, or 3.3%, higher interest income and GEL 11.5 million, or 11.5%, higher interest expense.
The increase in interest income mainly resulted from the increase in interest income on loans by GEL 1.8 million, or 0.8%, which was the result of a 5.2% increase in respective portfolio. This was partially offset by a 0.5pp decrease in yields on loans to 11.9%. The drop in loan yields stemmed from 0.5pp fall in GEL rates to 16.5% and 0.7 pp decrease in FC rates to 8.8%. The rise in interest income was also driven by the increase in interest income from investment securities by GEL 4.3 million, or 24.0%, which was mainly driven by a 10.6% increase in respective portfolio, as well as 0.6 pp increase to 8.4% on yields on investment securities. Yields on investment securities increased mainly due to higher proportion of longer term securities in total portfolio. As a result, yields on average interest earning assets decreased to 10.9%, compared to 11.3% in 2Q 2017.
The increase in interest expense was primarily due to the rise in the interest expense on borrowed funds due to credit institutions by GEL 5.8 million, or 15.9%, which resulted from the 15.1% increase in the respective portfolio and 0.2pp increase in respective rate to 6.6%, mainly related to libor rate increase. The GEL 4.8 million, or 8.7% QoQ increase in interest expense on customer deposits was driven by 6.5% increased respective portfolio, while cost of deposits remained unchanged at 3.4%. As a result, the cost of funds stayed stable at 4.5%. Increase in borrowed funds due to credit institutions and customer deposits, was mainly driven by the implementation of the new regulatory liquidity framework.[10]
Consequently, on a QoQ basis, NIM decreased by 0.6 pp to 6.2%. In September 2017, the NBG introduced more stringent liquidity requirements resulting in higher level of liquid assets. Estimated effect of newly introduced regulatory liquidity coverage ratio is 0.4%[11].
|
Net fee and commission income |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||
|
In thousands of GEL |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
||||
|
Card Operations |
60,907 |
42,282 |
44.0% |
20,662 |
19,416 |
15,434 |
33.9% |
6.4% |
||||
|
Settlement Transactions |
43,328 |
28,844 |
50.2% |
15,170 |
14,063 |
10,730 |
41.4% |
7.9% |
||||
|
Guarantees Issued |
10,367 |
8,391 |
23.5% |
4,295 |
3,328 |
2,259 |
90.1% |
29.0% |
||||
|
Issuance of Letters of Credit |
4,449 |
3,906 |
13.9% |
990 |
2,050 |
1,353 |
-26.8% |
-51.7% |
||||
|
Cash Transactions |
12,046 |
9,083 |
32.6% |
4,576 |
4,042 |
3,594 |
27.3% |
13.2% |
||||
|
Foreign Exchange Operations |
1,003 |
793 |
26.5% |
420 |
362 |
239 |
76.0% |
16.1% |
||||
|
Other |
6,171 |
4,040 |
52.7% |
2,440 |
1,957 |
1,502 |
62.4% |
24.6% |
||||
|
Fee and Commission Income |
138,271 |
97,340 |
42.0% |
48,552 |
45,219 |
35,112 |
38.3% |
7.4% |
||||
|
Card Operations |
35,414 |
23,766 |
49.0% |
11,409 |
11,229 |
8,856 |
28.8% |
1.6% |
||||
|
Settlement Transactions |
5,282 |
4,074 |
29.7% |
1,897 |
1,866 |
1,476 |
28.6% |
1.7% |
||||
|
Guarantees Issued |
1,319 |
476 |
176.9% |
758 |
294 |
210 |
NMF |
158.0% |
||||
|
Letters of Credit |
705 |
1,327 |
-46.9% |
239 |
252 |
424 |
-43.5% |
-4.9% |
||||
|
Cash Transactions |
3,282 |
1,883 |
74.4% |
1,177 |
1,098 |
614 |
91.9% |
7.3% |
||||
|
Foreign Exchange Operations |
92 |
67 |
36.6% |
3 |
1 |
- |
NMF |
222.2% |
||||
|
Other |
5,170 |
3,871 |
33.6% |
1,279 |
1,740 |
1,339 |
-4.5% |
-26.5% |
||||
|
Fee and Commission Expense |
51,264 |
35,464 |
44.6% |
16,763 |
16,478 |
12,918 |
29.8% |
1.7% |
||||
|
Card Operations |
25,493 |
18,516 |
37.7% |
9,253 |
8,187 |
6,578 |
40.7% |
13.0% |
||||
|
Settlement Transactions |
38,046 |
24,771 |
53.6% |
13,272 |
12,198 |
9,254 |
43.4% |
8.8% |
||||
|
Guarantees |
9,048 |
7,915 |
14.3% |
3,537 |
3,034 |
2,050 |
72.6% |
16.6% |
||||
|
Letters of Credit |
3,745 |
2,579 |
45.2% |
751 |
1,798 |
929 |
-19.2% |
-58.2% |
||||
|
Cash Transactions |
8,764 |
7,201 |
21.7% |
3,398 |
2,944 |
2,980 |
14.0% |
15.4% |
||||
|
Foreign Exchange Operations |
911 |
726 |
25.5% |
417 |
361 |
239 |
74.8% |
15.5% |
||||
|
Other |
1,001 |
170 |
NMF |
1,161 |
218 |
163 |
NMF |
NMF |
||||
|
Net Fee and Commission Income |
87,007 |
61,876 |
40.6% |
31,790 |
28,741 |
22,194 |
43.2% |
10.6% |
||||
9M 2017 to 9M 2016 Comparison
In 9M 2017, net fee and commission income totalled GEL 87.0 million, up by GEL 25.1 million, or 40.6%, compared to 9M 2016. This increase resulted mainly from a GEL 13.3 million, or 53.6%, rise in net fee and commission income from settlement transactions (which among other things is related to one of the subsidiaries, TBC Pay), a GEL 7.0 million, or 37.7%, increase in net card operations; a GEL 1.2 million, or 45.2%, rise in net letters of credit issued, and a GEL 1.6 million, or 21.7%, increase in net cash transactions. The Bank Republic estimated contribution was GEL 5.4 million, or 6.2%, in the net fee and commission income.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017, net fee and commission income totalled GEL 31.8 million, up by GEL 9.6 million, or 43.2% compared to 3Q 2016. This hike resulted mainly from a GEL 4.0 million, or 43.4%, gain in net fee and commission income from settlement transactions (which among other things is related to one of the subsidiaries, TBC Pay), a GEL 2.7 million, or 40.7%, increase in net card operations; a GEL 1.5 million, or 72.6% in guarantees and GEL 0.4 million, or 14.0% increase in cash transactions. The Bank Republic estimated contribution effect was a GEL 1.7 million, or 5.3%, in net fee and commission income.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, net fee and commission income increased by GEL 3.0 million, or 10.6%, compared to 2Q 2017. This was primarily driven by a GEL 1.1 million, or 8.8%, increase in net fee and commission income from net settlement transactions, by a GEL 1.1 million, or 13.0%, increase in net card operations, and by a GEL 0.5 million, or 16.6%, increases in the net guarantees issued.
|
Other Operating Non-Interest Income and Gross Insurance Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
|
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations |
65,759 |
44,810 |
46.8% |
20,330 |
23,237 |
16,724 |
21.6% |
-12.5% |
|
Share of Profit of Associates |
661 |
- |
NMF |
84 |
484 |
- |
NMF |
-82.6% |
|
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments |
-39 |
-299 |
-86.9% |
-1 |
-35 |
173 |
-100.5% |
NMF |
|
Gains less Losses from Disposal of Investment Securities Available for Sale |
- |
8,795 |
-100.0% |
- |
- |
- |
-100.0% |
NMF |
|
Revenues from Cash-In Terminal Services |
838 |
800 |
4.7% |
241 |
334 |
292 |
-17.2% |
-27.8% |
|
Revenues from Operational Leasing |
5,134 |
4,614 |
11.3% |
1,623 |
1,726 |
1,086 |
49.5% |
-5.9% |
|
Gain from Sale of Investment Properties |
1,578 |
230 |
NMF |
404 |
982 |
- |
NMF |
-58.9% |
|
Gain from Sale of Inventories of Repossessed Collateral |
1,701 |
1,391 |
22.3% |
756 |
591 |
222 |
NMF |
28.0% |
|
Administrative Fee Income from International Financial Institutions |
- |
505 |
-100.0% |
- |
-151 |
147 |
-100.0% |
-100.0% |
|
Revenues from Non-Credit Related Fines |
125 |
447 |
-72.1% |
29 |
46 |
46 |
-38.5% |
-37.9% |
|
Gain on Disposal of Premises and Equipment |
257 |
99 |
160.0% |
66 |
164 |
3 |
NMF |
-59.8% |
|
Other |
11,174 |
2,778 |
NMF |
3,452 |
-623 |
706 |
NMF |
NMF |
|
Other Operating Income |
20,806 |
10,864 |
91.5% |
6,572 |
3,069 |
2,501 |
NMF |
NMF |
|
Gross Insurance Profit |
4,854 |
- |
NMF |
1,773 |
1,856 |
- |
NMF |
-4.4% |
|
Other Operating Non-Interest Income |
92,041 |
64,169 |
43.4% |
28,758 |
28,611 |
19,398 |
48.3% |
0.5% |
9M 2017 to 9M 2016 Comparison
Total other operating non-interest income and insurance profit increased by GEL 27.9 million, or by 43.4%, YoY to GEL 92.0 million in 9M 2017. This increase was mainly driven by a GEL 21.0 million or 46.8% increase in net gains less losses from trading in foreign currencies and foreign exchange translations mainly driven by increased trade volume. The rise is also due to a GEL 4.9 million increase in gross insurance profit and a GEL 1.3 million increase in gain from sale of investment properties as well as GEL 8.4 increase in "other" subsection of other operating income. The latter is mainly attributable to GEL 2.6 million reimbursed taxes, a GEL 2.9 million related to fair value adjustment of previously acquired portfolio due to better than expected performance, and a GEL 2.1 million related to expense sharing programme by our partner payment technology companies. The rise across these items, was largely offset by a GEL 8.8 million drop in net gains less losses from disposal of investment securities available for sale due to one-off gain from sale of investment security in 2Q 2016. The Bank Republic's estimated contribution in total other operating non-interest income was GEL 17.9 million or 19.5% , out of which GEL 10.8 million was related to gains less losses from trading in foreign currencies and foreign exchange translations.
3Q 2017 to 3Q 2016 Comparison
Total other operating non-interest income and insurance profit increased by GEL 9.4 million, or by 48.3%, YoY to GEL 28.8 million in 3Q 2017. This increase was mainly driven by the GEL 3.6 million, or 21.6%, increase in gains less losses from trading in foreign currencies and foreign exchange translations. These in turn were caused by the increased trade volume, plus a GEL 1.8 million gain in gross insurance profit and GEL 2.7 million rise in "other" subsection of other operating income mainly related to the reimbursed taxes as mentioned above. The Bank Republic's estimated contribution was GEL
3.9 million, or 13.4%, out of which GEL 3.1 million was related to gains less losses from trading in foreign currencies and foreign exchange translations.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, total other operating non-interest income and insurance profit increased by GEL 0.1 million, or by 0.5%, primarily driven by increase in "other" subsection of other operating income by GEL 4.1 million related to reimbursed taxes mentioned above. This was largely offset by the GEL 2.9 million decrease in gains minus losses from trading in foreign currencies and foreign exchange translations, attributable to lower margins in 3Q related to less volatility of the currency rate in 3Q vs 2Q, as well as accounting impact of dividend distribution whereby distribution had negative impact in 3Q fully offsetting its positive impact in 2Q.
|
Provision for Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
|
Provision for Loan Impairment |
-65,403 |
-38,796 |
68.6% |
-25,036 |
-23,444 |
-13,518 |
85.2% |
6.8% |
|
Provision for Impairment of Investments in Finance Lease |
-414 |
-236 |
75.1% |
-285 |
-97 |
-126 |
126.7% |
192.7% |
|
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments |
866 |
-3,557 |
-124.3% |
-680 |
1,454 |
-1,481 |
-54.1% |
-146.8% |
|
Provision for Impairment of Other Financial Assets |
-5,522 |
-1,128 |
NMF |
-1,097 |
-3,628 |
66 |
NMF |
-69.8% |
|
Impairment of Investment Securities Available for Sale |
0 |
-11 |
-100.0% |
0 |
0 |
0 |
NMF |
NMF |
|
Total Provision Charges for Impairment |
-70,472 |
-43,728 |
61.2% |
-27,097 |
-25,717 |
-15,059 |
79.9% |
5.4% |
|
Operating Income after Provisions for Impairment |
547,196 |
419,082 |
30.6% |
179,997 |
181,377 |
146,759 |
22.6% |
-0.8% |
|
|
|
|
|
|
|
|
|
|
|
Cost of Risk |
1.2% |
1.1% |
0.1% |
1.3% |
1.3% |
1.1% |
0.2% |
0.0% |
9M 2017 to 9M 2016 Comparison
In 9M 2017, total provision charges increased by GEL 26.7 million to GEL 70.5 million, compared to 9M 2016, mainly driven by the increased charges on loans by GEL 26.6 million, while the cost of risk on loans was broadly stable at 1.2%. There was a GEL 4.4 million increase in provision for impairment of other financial assets, which was offset by a GEL 4.4 million decrease in provision for performance guarantees and credit related commitments.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017, total provision charges grew by GEL 12.0 million to GEL 27.1 million compared to 3Q 2016. The rise is mainly caused by higher charges on loans, by GEL 11.5 million, and by a GEL 1.2 million increase in provision for impairment of other financial assets. This effect was slightly offset by a GEL 0.8 million decline in provision for performance guarantees and credit related commitments.
In 3Q 2017, the cost of risk on loans was 1.3%, compared to 1.1% in 3Q 2016. The difference is driven by fluctuation in GEL exchange rate; the cost of risk without currency effect was stable at 1.2% in 3Q 2017 and 3Q 2016.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, total provision charges increased by a GEL 1.4 million, amounting to GEL 27.1 million. Provision charges on loans increased by GEL 1.6 million. A GEL 2.1 million increase in provisions for other financial assets also contributed to increase in total provision charges. The increase was partially offset by the GEL 2.5 million drop in provision charges for performance guarantees and credit related commitments.
The cost of risk on loans amounted to 1.3%, unchanged from 2Q 2017.
Further details on asset quality are available under Balance Sheet Discussion section.
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
9M'17 |
9M'16 |
Change in % |
3Q'17 |
2Q'17 |
3Q'16 |
Change YoY |
Change QoQ |
|
Staff Costs |
148,995 |
109,677 |
35.8% |
46,620 |
54,838 |
40,205 |
16.0% |
-15.0% |
|
Provisions for Liabilities and Charges |
-2,495 |
- |
NMF |
- |
-2,400 |
- |
NMF |
-100.0% |
|
Depreciation and Amortization |
26,840 |
20,647 |
30.0% |
9,317 |
8,919 |
7,037 |
32.4% |
4.5% |
|
Professional services |
9,659 |
18,951 |
-49.0% |
3,834 |
2,410 |
2,143 |
78.9% |
59.1% |
|
Advertising and marketing services |
10,289 |
7,528 |
36.7% |
3,492 |
3,737 |
2,682 |
30.2% |
-6.6% |
|
Rent |
17,224 |
12,654 |
36.1% |
5,635 |
5,753 |
4,257 |
32.4% |
-2.0% |
|
Utility services |
4,552 |
3,634 |
25.3% |
1,533 |
1,302 |
1,212 |
26.4% |
17.7% |
|
Intangible asset enhancement |
6,958 |
5,605 |
24.1% |
2,177 |
2,567 |
1,905 |
14.3% |
-15.2% |
|
Taxes other than on income |
4,576 |
3,677 |
24.4% |
1,763 |
1,301 |
1,185 |
48.8% |
35.5% |
|
Communications and supply |
2,868 |
2,246 |
27.7% |
1,067 |
1,015 |
742 |
43.9% |
5.1% |
|
Stationary and other office expenses |
3,397 |
2,406 |
41.2% |
1,157 |
1,140 |
773 |
49.6% |
1.5% |
|
Insurance |
1,705 |
1,954 |
-12.8% |
-271 |
1,446 |
684 |
-139.6% |
-118.7% |
|
Security services |
1,476 |
1,323 |
11.6% |
477 |
483 |
442 |
7.8% |
-1.2% |
|
Premises and equipment maintenance |
3,839 |
1,940 |
97.9% |
1,142 |
1,054 |
671 |
70.2% |
8.4% |
|
Business trip expenses |
1,376 |
1,226 |
12.2% |
468 |
543 |
350 |
33.7% |
-13.7% |
|
Transportation and vehicles maintenance |
1,184 |
961 |
23.2% |
386 |
381 |
319 |
21.0% |
1.4% |
|
Charity |
763 |
699 |
9.1% |
346 |
145 |
214 |
61.8% |
137.9% |
|
Personnel training and recruitment |
918 |
768 |
19.5% |
191 |
323 |
259 |
-26.3% |
-40.9% |
|
Write-down of current assets to fair value less costs to sell |
-373 |
-1,645 |
-77.3% |
-189 |
-126 |
-1,697 |
-88.8% |
50.4% |
|
Loss on disposal of Inventory |
1,188 |
652 |
82.3% |
2 |
231 |
115 |
-98.5% |
-99.2% |
|
Loss on disposal of investment properties |
385 |
- |
NMF |
0 |
385 |
- |
NMF |
-100.0% |
|
Loss on disposal of premises and equipment |
306 |
333 |
-8.0% |
135 |
48 |
259 |
-47.8% |
182.5% |
|
Impairment of intangible assets |
1,916 |
19 |
NMF |
66 |
1,850 |
- |
NMF |
-96.4% |
|
Acquisition costs |
1,887 |
- |
NMF |
1,063 |
518 |
- |
NMF |
105.1% |
|
Gross Change in IBNR |
- |
- |
NMF |
-391 |
170 |
- |
NMF |
NMF |
|
Other |
10,325 |
4,947 |
108.7% |
3,890 |
4,897 |
1,776 |
119.0% |
-20.6% |
|
Administrative and Other Operating Expenses |
86,420 |
69,880 |
23.7% |
27,974 |
31,573 |
18,294 |
52.9% |
-11.4% |
|
Operating Expenses |
259,760 |
200,204 |
29.7% |
83,910 |
92,929 |
65,536 |
28.0% |
-9.7% |
|
Profit before Tax |
287,436 |
218,878 |
31.3% |
96,086 |
88,447 |
81,223 |
18.3% |
8.6% |
|
Income Tax Expense |
-24,263 |
-8,653 |
180.4% |
-9,327 |
-8,590 |
-10,235 |
-8.9% |
8.6% |
|
Profit for the Period |
263,173 |
210,225 |
25.2% |
86,759 |
79,857 |
70,988 |
22.2% |
8.6% |
|
|
|
|
|
|
|
|
|
|
|
Cost to Income |
42.1% |
43.3% |
-1.2% |
40.5% |
44.9% |
40.5% |
0.0% |
-4.4% |
|
ROE |
20.9% |
21.8% |
-0.9% |
19.8% |
18.9% |
20.6% |
-0.8% |
0.9% |
|
ROA |
3.2% |
4.1% |
-0.9% |
2.9% |
3.0% |
4.0% |
-1.1% |
-0.1% |
9M 2017 to 9M 2016 Comparison
Total operating expenses, excluding one-offs and the Bank Republic estimated contribution effect, amounted to GEL 203.4 million YoY, up by 10.4%, or GEL 19.2 million. This increase was mainly driven by a GEL 10.1 million increase in staff costs, primarily related to the expanded business scale and performance. The remaining increase in operating expenses was attributable to a GEL 8.9 million increase in administrative expenses and a GEL 2.7 million increase in depreciation and amortization. This effect was slightly offset by a GEL 2.5 million reversal of provision for liabilities and charges.
In 9m 2016 the one-off costs related to the Premium Listing amounted to 16.0 million, while in 9M 2017 one-off costs were related to the Bank Republic integration and amounted to GEL 10.9 million.
Out of the total operating expenses the Bank Republic estimated contribution amounted to GEL 45.4 million, or 17.5%, of which GEL 26.2 million were related to staff costs and GEL 15.7 million to administrative and other operating expenses. Total operating expense including one-offs and the Bank Republic estimated contribution effect, amounted to GEL 259.8 million.
As a result, the cost to income ratio stood at 42.1% (40.3% with one-offs) in 9M 2017, compared to 43.3% (41.0% with one-offs) in 9M 2016.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017 total operating expense, excluding one-offs and the Bank Republic estimated contribution effect, was GEL 65.7 million, up by GEL 1.2 million, or 1.8% YoY. This resulted from a GEL 3.3 million increase in administrative and other operating expenses, mainly related to the expanded business scale and performance and was partially offset by a GEL 3.3 million decrease in staff costs compared to 3Q 2016.
In 3Q 2016 the one-off costs amounting to GEL 1.0 million were related to Premium Listing, while in 3Q 2017 the one-off costs totalled GEL 1.4 million and were attributable to BR integration costs.
Bank Republic estimated contribution to total operating expenses is an addition of GEL 16.7 million, which is comprised of GEL 9.7 million staff cost and GEL 5.9 million administrative and other operating expenses. Total operating expense, including one-offs and the Bank Republic estimated contribution effect, amounted to GEL 83.9 million.
As a result, the cost to income ratio was 40.5%, or 39.8% without one-off effect, in 3Q 2017, compared to 40.5% in 3Q 2016, or 41.0% without one-offs.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, total operating expenses excluding one-offs and reversal of provision for liabilities and charges (in amount of GEL 2.4 mln in 2Q 2017) declined by GEL 5.2 million, or 5.9%, compared to 2Q 2017, mostly due to a GEL 5.1 million decrease in staff costs, mainly related to synergies from Bank Republic integration. Bank Republic integration costs amounted GEL 7.6 million in 2Q and GEL 1.4 million in 3Q.
Total operating expenses including the Bank Republic integration cost were GEL 83.9 million. As a result, the cost to income ratio stood at 40.5%, 39.8% with one-offs, down by 4.4pp from 2Q 2017, 41.2% with one-offs.
|
Balance Sheet Discussion |
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions of GEL |
Sep-17 |
Jun-17 |
Sep-16 |
Change QoQ |
Change YoY |
|
Cash, Due from Banks and Mandatory Cash Balances with NBG |
2,507.9 |
2,191.9 |
1,532.5 |
14.4% |
63.6% |
|
Loans and Advances to Customers (Net) |
7,549.1 |
7,174.3 |
4,809.5 |
5.2% |
57.0% |
|
Financial Securities |
1,113.4 |
1,007.1 |
605.9 |
10.6% |
83.8% |
|
Fixed and Intangible Assets & Investment Property |
480.0 |
478.7 |
375.0 |
0.3% |
28.0% |
|
Other Assets |
486.5 |
428.9 |
260.8 |
13.4% |
86.5% |
|
Total Assets |
12,136.9 |
11,280.8 |
7,583.7 |
7.6% |
60.0% |
|
Due to Credit Institutions |
2,675.9 |
2,313.5 |
1,195.0 |
15.7% |
123.9% |
|
Customer Accounts |
7,096.5 |
6,666.4 |
4,593.2 |
6.5% |
54.5% |
|
Debt Securities in Issue |
19.8 |
24.1 |
24.2 |
-17.8% |
-18.2% |
|
Subordinated Debt |
411.2 |
390.1 |
283.6 |
5.4% |
45.0% |
|
Other Liabilities |
143.2 |
196.2 |
98.9 |
-27.0% |
44.7% |
|
Total Liabilities |
10,346.6 |
9,590.3 |
6,195.1 |
7.9% |
67.0% |
|
Total Equity |
1,790.3 |
1,690.5 |
1,388.6 |
5.9% |
28.9% |
Assets
As of 30 September 2017, TBC Bank's total assets amounted to GEL 12,136.9 million, up by GEL 4,553.2 million, or 60.0%, YoY. This was mainly due to the increase in gross loans to customers by the GEL 2,764.1 million, or 55.2%. In addition, the YoY increase resulted from a GEL 975.4 million, or 63.6%, hike in cash due from banks and mandatory cash balances with NBG, a GEL 507.5 million or 83.8% rise in financial securities and a GEL 105.0 million, or 28.0%, increase in fixed and intangible assets and investment property, largely attributable to the Bank Republic estimated contribution effect.
On a QoQ basis, total assets increased by GEL 856.1 million, or 7.6%, mainly due to increased cash. This was due from banks and mandatory cash balances with the NBG by GEL 316.1 million, or 14.4%, increased net loans by GEL 374.8 million or 5.2% and increased financial assets by GEL 106.3 million or 10.6%. The liquid assets to liability ratio stood at 35.0%, compared to 33.5% as of 30 September 2016 and 33.3% as of 30 June 2017.
As of 30 September 2017, the gross loan portfolio amounted to GEL 7,767.6 million, up by GEL 2,764.1 million or 55.2% YoY (up by GEL 1,661.4 or 33.2% increase without the Bank Republic estimated contribution effect) and by GEL 381.2 million or 5.2% QoQ. Gross loans denominated in foreign currency accounted for 59.2% of the total, compared to 63.4% as of 30 September 2016 and 60.8% as of 30 June 2017. As of 30 September 2017, NPLs stood at 3.5%, compared to 4.6% and 3.4% as of 30 September 2016 and 30 June 2017, respectively. The NPLs provision coverage ratio stood at 80.5% (206.8% including the collateral), compared to 84.3% as of 30 September 2016 and 84.3% as of 30 June 2017.
Asset Quality
Foreign Currency Income Linked Borrowers
|
|
30-Sep-17 |
30-Jun-17 |
||
|
Segments |
FC share |
FC linked income borrowers share |
FC share |
FC linked income borrowers share |
|
Retail |
49.9% |
25.5% |
50.4% |
25.6% |
|
Consumer |
19.8% |
21.6% |
21.3% |
21.0% |
|
Mortgage |
81.7% |
26.5% |
83.0% |
27.0% |
|
Corporate |
72.0% |
53.9%* |
74.9% |
51.3% |
|
MSME |
64.6% |
16.7% |
66.3% |
17.0% |
|
Total Loan Portfolio |
59.2% |
32.9% |
60.8% |
34.4% |
(Based on internal estimates)
* Pure exports account for 5.2% of total Corporate FX denominated loans
|
1 loans overdue by more than 30 days to gross loans
Total The total PAR 30 ratio increased on QoQ and YoY basis by 0.2pp and 0.4pp respectively. The rise is mainly driven by one large corporate borrower, whose exposure is guaranteed by the AAA-rated Export Development Agency.[12]
Retail Segment The retail segment PAR 30 amounted to 2.7%, 0.3 pp YoY drop, and remained unchanged on QoQ basis. The YoY decrease is driven by the improved performance of the mortgage book.
Corporate The corporate segment PAR 30 amounted to 2.1%, a 1.3pp increase YoY, and 0.8pp on QoQ basis. The rise is driven by one large corporate borrower mentioned above.
MSME The MSME segment PAR 30 amounted to 3.2%, a 0.4 pp increase YoY, and stayed broadly stable on QoQ basis.
Total Total NPLs stood at 3.5% down by 1.1 pp on YoY basis and broadly unchanged QoQ. The YoY drop was mainly driven by the improved performance of the corporate book.
Retail Segment Retail NPLs stood at 2.9% down by 0.2pp on YoY basis and up by 0.3pp QoQ.
Corporate Corporate NPLs stood at 3.4% down by 3.7pp on YoY basis and down by 0.4pp QoQ. The decline is related to the overall improved performance of the book.
MSME MSME NPLs increased by 0.5pp on YoY basis and remained broadly stable on QoQ.
|
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Total
NPL coverage ratio stood at 80.5% down by 3.8% on YoY and QoQ basis.
NPL collateral coverage ratio stood at 206.8% up by 1.8pp and down by 12.6pp on YoY and QoQ respectively.
Liabilities
As of 30 September 2017, TBC Bank's total liabilities amounted to GEL 10,346.6 million, up by 67.0% YoY and by 7.9% QoQ. The YoY growth of GEL 4,151.6 million was primarily due to a GEL 2,503.3 million, or 54.5%, increase in customer deposits. Total liabilities also grew due to the increase in amounts due to credit institutions by GEL 1,480.9 million and following a rise in subordinated debt by GEL 127.6 million. All these increases in liabilities largely resulted from the Bank Republic estimated contribution effect.
On a QoQ basis, total liabilities rose by GEL 756.3 million, or 7.9%, primarily due to the GEL 430.1 million, or 6.5%, increase in customer deposits. This mainly resulted from the growth in retail deposits. A GEL 362.4 million, or 15.7%, rise in amounts due to credit institutions also contributed to the growth of total liabilities.
Liquidity
The Bank's liquidity ratio, as defined by the NBG, stood at 35.3% as of 30 September 2017, compared to 34.9% and 34.2% as of 30 September 2016 and 30 June 2017, respectively. As of 30 September 2017, the newly introduced short term liquidity ratio, total LCR, as defined by NBG, stood at 115.2% above the 100.0% limit, while LCR for GEL and FC stood at 92.4% and 130.2% respectively, both higher of their respective limits, 75% and 100%.
Total Equity
As of 30 September 2017, TBC's total equity amounted to GEL 1,790.3 million, up from GEL 1,388.6 million as of 30 September 2016, and from GEL 1,690.5 million as of 30 June 2017. The YoY change in equity was mainly due to the net profit contribution of GEL 351.2 million, which was offset by a GEL 74.8 million (consisting of GEL 66.7 million cash-based and GEL 8.1 million share-based) dividend distribution (gross of tax). The QoQ change was primarily due to net profit, which increased the total equity by GEL 86.8 million.
Regulatory Capital
As of 30 September 2017, the Bank's Basel II/III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 10.8% and 14.5%, respectively, compared to 13.3% and 16.2% as of 30 September 2016, and 10.8% and 14.6% as of 30 June 2017. The minimum capital requirements set by the NBG for Basel II/III Tier 1 and Total Capital Adequacy Ratios are 8.5% and 10.5%, respectively.
The Bank's Basel II/III Tier 1 Capital amounted to GEL 1,354.7 million, compared to GEL 1,124.6 million as of 30 September 2016 and GEL 1,282.9 million as of 30 June 2017. The Bank's Basel II/III Total Capital amounted to GEL 1,821.8 million, compared to GEL 1,368.7 million as of 30 September 2016 and GEL 1,732.8 million as of 30 June 2017. Risk Weighted Assets were GEL 12,560.6 million as of 30 September 2017, up by GEL 4,132.9 million YoY and up by GEL 694.6 million QoQ.
QoQ Tier 1 Capital increased by GEL 71.8 million and Total Capital increased by GEL 89.1 million mostly due to net profit. The rest was due to the increase in subordinated loans and general reserves in Tier 2 Capital in the amount of GEL 17.3 million. The QoQ rise in Risk Weighted Assets is mainly due to the growth of the loan book, while YoY it increased due to the addition of Bank Republic's risk weighted assets as well as organic growth of the Bank's loan book.
Results by Segments and Subsidiaries
The segment definitions are as per below:
· Corporate - Legal Entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to this segment or transferred to the MSME segment on a discretionary basis.
· MSME (Micro, Small and Medium) - all business customers who are not included in either Corporate and Retail segments; or Legal Entities who have been granted a Pawn shop loan;
· Retail - all non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8.0 thousand. All individual customers are included in retail deposits.
Businesses customers are all legal entities or individuals who have been granted a loan for business purpose.
|
Income Statement by Segments |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
9M'17 |
Retail |
MSME |
Corporate |
Corp.Centre |
Total |
||
|
Interest Income |
388,527 |
134,267 |
142,615 |
80,510 |
745,918 |
||
|
Interest Expense |
-87,073 |
-8,193 |
-72,474 |
-139,558 |
-307,298 |
||
|
Net Transfer Pricing |
-51,698 |
-36,934 |
13,494 |
75,138 |
0 |
||
|
Net Interest Income |
249,757 |
89,139 |
83,634 |
16,090 |
438,620 |
||
|
Fee and Commission Income |
103,008 |
14,575 |
19,017 |
1,670 |
138,271 |
||
|
Fee and Commission Expense |
-39,397 |
-6,327 |
-5,312 |
-227 |
-51,264 |
||
|
Net fee and Commission Income |
63,611 |
8,248 |
13,705 |
1,443 |
87,007 |
||
|
Insurance Profit |
- |
- |
- |
4,854 |
4,854 |
||
|
Gains Less Losses from Trading in Foreign Currencies |
15,553 |
20,920 |
25,075 |
-71 |
61,478 |
||
|
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains) |
- |
- |
- |
4,282 |
4,282 |
||
|
Net Losses from Derivative Financial Instruments |
- |
- |
- |
-39 |
-39 |
||
|
Other Operating Income |
9,388 |
1,008 |
6,342 |
4,068 |
20,806 |
||
|
Share of profit of associates |
- |
- |
- |
661 |
661 |
||
|
Other Operating Non-Interest Income and Insurance Profit |
24,941 |
21,928 |
31,418 |
13,754 |
92,041 |
||
|
Provision for Loan Impairment |
-85,417 |
-11,197 |
31,212 |
- |
-65,403 |
||
|
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments |
-302 |
485 |
1,108 |
-424 |
866 |
||
|
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease |
- |
- |
- |
-414 |
-414 |
||
|
(Provision)/Recovery of Provision for Impairment of other Financial Assets |
14 |
-107 |
-1,080 |
-4,350 |
-5,522 |
||
|
Profit before G&A Expenses and Income Taxes |
252,603 |
108,496 |
159,998 |
26,100 |
547,196 |
||
|
Staff Costs |
-93,445 |
-24,183 |
-18,524 |
-12,843 |
-148,995 |
||
|
Depreciation and Amortization |
-21,482 |
-3,595 |
-1,059 |
-704 |
-26,840 |
||
|
Provision for Liabilities and Charges |
- |
- |
- |
2,495 |
2,495 |
||
|
Administrative and Other Operating Expenses |
-58,192 |
-10,640 |
-5,231 |
-12,356 |
-86,420 |
||
|
Operating Expenses |
-173,120 |
-38,417 |
-24,814 |
-23,408 |
-259,760 |
||
|
Profit before Tax |
79,484 |
70,078 |
135,183 |
2,691 |
287,436 |
||
|
Income Tax Expense |
-9,916 |
-10,074 |
-20,531 |
16,258 |
-24,263 |
||
|
Profit for the Year |
69,567 |
60,004 |
114,652 |
18,950 |
263,173 |
||
|
Portfolios by Segments |
|
|
|
||||
|
|
|
|
|
||||
|
In thousands of GEL |
Sep-17 |
Jun-17 |
Sep-16 |
||||
|
Loans and Advances to Customers |
|
|
|
||||
|
|
|
|
|
||||
|
Consumer |
1,972,012 |
1,919,788 |
1,276,859 |
||||
|
Mortgage |
1,900,186 |
1,744,421 |
1,015,550 |
||||
|
Pawn |
34,861 |
35,648 |
32,973 |
||||
|
Retail |
3,907,059 |
3,699,858 |
2,325,383 |
||||
|
Corporate |
2,128,478 |
2,057,644 |
1,471,931 |
||||
|
MSME |
1,732,096 |
1,628,934 |
1,206,251 |
||||
|
Total Loans and Advances to Customers (Gross) |
7,767,634 |
7,386,434 |
5,003,564 |
||||
|
Less: Provision for Loan Impairment |
-218,573 |
-212,129 |
-194,035 |
||||
|
Total Loans and Advances to Customers (Net) |
7,549,061 |
7,174,305 |
4,809,530 |
||||
|
|
|
|
|
||||
|
Customer Accounts |
|
|
|
||||
|
|
|
|
|
||||
|
Retail Deposits |
4,015,754 |
3,707,854 |
2,807,996 |
||||
|
Corporate Deposits |
2,130,763 |
2,057,651 |
1,006,739 |
||||
|
MSME |
950,005 |
900,908 |
778,502 |
||||
|
Total Customer Accounts |
7,096,523 |
6,666,413 |
4,593,237 |
||||
Retail Banking
As of 30 September 2017, retail loans stood at GEL 3,907.1 million (or GEL 3,124.5 million without Bank Republic estimated contribution effect), up by GEL 1581.7 million, or 68.0%, YoY. The main contributor to the growth was the 87.1% hike in mortgage loans on YoY basis. Retail loans increased by GEL 207.2 million, or 5.6%, QoQ. As of 30 September 2017, TBC Bank's retail loans accounted for 40.5% market share of total individual loans. As of 30 September 2017, foreign currency loans represented 49.9% of the total retail loan portfolio.
In the reporting period, retail deposits increased to GEL 4,015.8 million (or to GEL 3722.1 million without Bank Republic estimated contributed effect), up by GEL 1,207.8 million or 43.0% YoY. Retail deposits grew by GEL 307.9 million, or 8.3%, on a QoQ basis and accounted for 40.9% market share of total individual deposits. The increase in retail deposits was mainly attributable to the increase in current deposits by 58.3% YoY and 11.1% QoQ. Term deposits accounted for 55.4% of the total retail deposit portfolio as of 30 September 2017, while foreign currency deposits represented 84.4% of the total retail deposit portfolio.
In 9M 2017, retail loan yields and deposit rates stood at 14.0% and 3.1% respectively, and the segment's cost of risk on loans was 3.1%. The retail segment contributed 26.4%, or GEL 69.6 million, to the TBC's total net income in 9M 2017.
Corporate Banking
As of 30 September 2017, corporate loans amounted to GEL 2,128.5 million (or GEL 1,956.8 million excluding Bank Republic estimated effect), up by GEL 656.5.0 million or 44.6% YoY. QoQ growth in corporate loans accounted for GEL 70.8 million or 3.4%. Foreign currency loans accounted for 72.0% of the total corporate loan portfolio. Market share in legal entities increased by 0.7pp QoQ to 35.6% mainly due to attracting a new blue chip customer, a leading Georgian telecommunication company.
As of the same date, corporate deposits totalled GEL 2,130.8 million (or GEL 1,974.5 million without the Bank Republic effect), up by GEL 1,124.0 million or 111.7% YoY. Corporate deposits grew by GEL 73.1 million or 3.6% QoQ. Foreign currency corporate deposits represented 48.8% of the total corporate deposit portfolio. Market share stood at 35.9%, a decrease due to excess liquidity in foreign currency.
In 9M 2017, corporate loan yields and deposit rates stood at 9.3% and 5.1%, respectively. In the same period, the cost of risk on loans was -2.1%. In terms of profitability, the corporate segment's net profit reached GEL 114.7 million, or 43.6% of the Bank's total net income.
MSME Banking
As of 30 September 2017, MSME loans amounted to GEL 1,732.1 million (GEL 1,583.7 million excluding Bank Republic estimated loan portfolio), up by GEL 525.8 million, or 43.6%, YoY. MSME loan portfolio growth was GEL 103.2 million or 6.3% QoQ. Foreign currency loans accounted for 63.8% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 950.0 million (GEL 876.2 million excluding Bank Republic estimated deposit portfolio), up by GEL 171.5million or 22.0% YoY and by GEL 49.1 million or 5.4% QoQ. Foreign currency MSME deposits represented 53.0% of the total MSME deposit portfolio.
In 9M 2017, MSME loan yields and deposit rates stood at 11.0% and 1.3%, respectively while the cost of risk on loans was 0.9%. In terms of profitability, net profit for the MSME segment amounted to GEL 60.0 million, or 22.8%, of TBC's total net income.
Annexes
Subsidiaries of TBC Bank Group PLC[13]
|
|
Ownership / voting |
Country |
Year of incorporation or acquisition |
Industry |
Total Assets |
|
|
Subsidiary |
Amount GEL'000 |
% in TBC Group |
||||
|
TBC Insurance |
100.0% |
Georgia |
2016 |
Insurance |
21,449 |
0.18% |
|
JSC TBC Bank |
98.2% |
Georgia |
2016 |
Financial sector |
11,895,462 |
98.01% |
|
United Financial Corporation JSC |
98.7% |
Georgia |
1997 |
Card processing |
6,959 |
0.06% |
|
TBC Capital LLC |
100.0% |
Georgia |
1999 |
Brokerage |
3,959 |
0.03% |
|
TBC Leasing JSC |
99.6% |
Georgia |
2003 |
Leasing |
145,546 |
1.20% |
|
TBC Kredit LLC |
75.0% |
Azerbaijan |
2008 |
Non-banking credit institution |
33,417 |
0.28% |
|
Banking System Service Company LLC |
100.0% |
Georgia |
2009 |
Information services |
627 |
0.01% |
|
TBC Pay LLC |
100.0% |
Georgia |
2009 |
Processing |
27,165 |
0.22% |
|
Mali LLC |
100.0% |
Georgia |
2011 |
Real estate management |
93 |
0.00% |
|
Real Estate Management Fund JSC |
100.0% |
Georgia |
2010 |
Real estate management |
23 |
0.00% |
|
TBC Invest LLC |
100.0% |
Israel |
2011 |
PR and marketing |
218 |
0.00% |
|
LTD Merckhali Pirveli |
100.0% |
Georgia |
2009 |
Operating Leasing |
- |
0.00% |
Consolidated Financial Statements of TBC Bank Group PLC
|
Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
In thousands of GEL |
Sep-17 |
Jun-17 |
Sep-16 |
|
Cash and cash equivalents |
1,445,521 |
1,219,108 |
843,431 |
|
Due from other banks |
41,696 |
41,096 |
12,284 |
|
Mandatory cash balances with National Bank of Georgia |
1,020,695 |
931,654 |
676,780 |
|
Loans and advances to customers (Net) |
7,549,061 |
7,174,305 |
4,809,530 |
|
Investment securities available for sale |
674,210 |
608,083 |
252,736 |
|
Investment in subsidiaries |
1,309 |
1,021 |
- |
|
Repurchase receivables |
11,000 |
9,961 |
57,232 |
|
Investment securities held to maturity |
428,163 |
389,036 |
295,901 |
|
Investments in finance leases |
111,223 |
96,329 |
77,496 |
|
Investment properties |
88,750 |
93,501 |
71,122 |
|
Goodwill |
28,657 |
28,657 |
2,726 |
|
Intangible assets |
69,864 |
65,034 |
49,663 |
|
Premises and equipment |
321,431 |
320,139 |
254,214 |
|
Other financial assets |
103,487 |
88,852 |
62,799 |
|
Deferred tax asset |
3,592 |
3,407 |
2,181 |
|
Current income tax prepayment |
18,380 |
7,719 |
9,515 |
|
Insurance and reinsurance receivables |
10,456 |
5,386 |
- |
|
Other assets |
209,427 |
197,533 |
106,103 |
|
TOTAL ASSETS |
12,136,922 |
11,280,822 |
7,583,712 |
|
LIABILITIES |
|
|
|
|
Due to Credit Institutions |
2,675,930 |
2,313,550 |
1,195,031 |
|
Customer accounts |
7,096,523 |
6,666,413 |
4,593,237 |
|
Current income tax liability |
362 |
273 |
551 |
|
Debt Securities in issue |
19,818 |
24,106 |
24,227 |
|
Deferred income tax liability |
851 |
2,138 |
1,822 |
|
Provisions for liabilities and charges |
11,072 |
10,733 |
13,908 |
|
Other financial liabilities |
52,182 |
120,076 |
42,732 |
|
Subordinated debt |
411,193 |
390,070 |
283,637 |
|
Insurance contracts liabilities |
7,434 |
1,943 |
- |
|
Other liabilities |
71,251 |
61,014 |
39,917 |
|
TOTAL LIABILITIES |
10,346,615 |
9,590,315 |
6,195,063 |
|
EQUITY |
|
|
|
|
Share capital |
1,605 |
1,601 |
1,494 |
|
Share premium |
714,651 |
706,580 |
572,780 |
|
Retained earnings |
1,137,497 |
1,051,974 |
781,463 |
|
Group reorganisation reserve |
-162,167 |
-162,167 |
- |
|
Share based payment reserve |
7,291 |
4,753 |
20,398 |
|
Revaluation reserve for premises |
70,045 |
70,045 |
-12,672 |
|
Revaluation reserve for available-for-sale securities |
863 |
-1,105 |
2,025 |
|
Cumulative currency translation reserve |
-7,301 |
-7,695 |
-7,681 |
|
TOTAL EQUITY |
1,762,485 |
1,663,985 |
1,357,808 |
|
Non-controlling interest |
27,822 |
26,522 |
30,842 |
|
TOTAL EQUITY |
1,790,307 |
1,690,506 |
1,388,649 |
|
TOTAL LIABILITIES AND EQUITY |
12,136,922 |
11,280,822 |
7,583,712 |
|
Consolidated Statement of Profit or Loss and Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
9M'17 |
9M'16 |
3Q'17 |
2Q'17 |
3Q'16 |
|
Interest income |
745,918 |
523,082 |
258,252 |
249,898 |
182,056 |
|
Interest expense |
-307,298 |
-186,318 |
-111,705 |
-100,157 |
-61,830 |
|
Net interest income |
438,620 |
336,764 |
146,546 |
149,742 |
120,227 |
|
Fee and commission income |
138,271 |
97,340 |
48,552 |
45,219 |
35,112 |
|
Fee and commission expense |
-51,264 |
-35,464 |
-16,763 |
-16,478 |
-12,918 |
|
Net Fee and Commission Income |
87,007 |
61,876 |
31,790 |
28,741 |
22,194 |
|
Insurance profit |
4,854 |
- |
1,773 |
1,856 |
- |
|
Gains less losses from trading in foreign currencies |
61,478 |
44,798 |
18,086 |
22,246 |
15,713 |
|
Foreign exchange translation gains less losses |
4,282 |
12 |
2,245 |
991 |
1,012 |
|
Gains less losses/(losses less gains) from derivative financial instruments |
-39 |
-299 |
-1 |
-35 |
173 |
|
(Losses less gains) / Gains less losses from disposal of investment securities available for sale |
- |
8,795 |
- |
- |
- |
|
Share of profit of associates |
661 |
- |
84 |
484 |
- |
|
Other operating income |
20,806 |
10,864 |
6,572 |
3,069 |
2,501 |
|
Other operating non-interest income |
87,187 |
64,169 |
26,985 |
26,755 |
19,398 |
|
Provision for loan impairment |
-65,403 |
-38,796 |
-25,036 |
-23,444 |
-13,518 |
|
Provision for impairment of investments in finance lease |
-414 |
-236 |
-285 |
-97 |
-126 |
|
Provision for/ (recovery of provision) performance guarantees and credit related commitments |
866 |
-3,557 |
-680 |
1,454 |
-1,481 |
|
Provision for impairment of other financial assets |
-5,522 |
-1,128 |
-1,097 |
-3,628 |
66 |
|
Impairment of investment securities available for sale |
- |
-11 |
- |
- |
- |
|
Operating income after provisions for impairment |
547,196 |
419,082 |
179,997 |
181,377 |
146,759 |
|
Staff costs |
-148,995 |
-109,677 |
-46,620 |
-54,838 |
-40,205 |
|
Depreciation and amortisation |
-26,840 |
-20,647 |
-9,317 |
-8,919 |
-7,037 |
|
Provision for liabilities and charges |
2,495 |
- |
- |
2,400 |
- |
|
Administrative and other operating expenses |
-86,420 |
-69,880 |
-27,974 |
-31,573 |
-18,294 |
|
Operating expenses |
-259,760 |
-200,204 |
-83,910 |
-92,929 |
-65,536 |
|
Profit before tax |
287,436 |
218,878 |
96,086 |
88,447 |
81,223 |
|
Income tax expense |
-24,263 |
-8,653 |
-9,327 |
-8,590 |
-10,235 |
|
Profit for the period |
263,173 |
210,225 |
86,759 |
79,857 |
70,988 |
|
Other Comprehensive income: |
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
Revaluation |
4,544 |
3,717 |
-1,929 |
-4,022 |
-573 |
|
Gains less losses reclassified to profit or loss upon disposal |
- |
-8,853 |
- |
- |
- |
|
Income tax recorded directly in other comprehensive income |
- |
1,401 |
- |
- |
- |
|
Exchange differences on translation to presentation currency |
241 |
-1,095 |
-399 |
62 |
770 |
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
Income tax recorded directly in other comprehensive income |
-422 |
10,506 |
- |
422 |
- |
|
Other comprehensive income for the year |
4,363 |
5,675 |
2,328 |
3,538 |
-197 |
|
Total comprehensive income for the year |
267,536 |
215,900 |
89,086 |
83,395 |
70,791 |
|
Profit attributable to: |
|
|
|
|
|
|
- Owners of the Bank |
259,043 |
209,786 |
85,524 |
78,544 |
69,526 |
|
- Non-controlling interest |
4,130 |
438 |
1,235 |
1,313 |
1,462 |
|
Profit for the period |
263,173 |
210,225 |
86,759 |
79,857 |
70,988 |
|
Total comprehensive income is attributable to: |
|
|
|
|
|
|
- Owners of the Bank |
263,427 |
215,462 |
87,902 |
82,052 |
69,328 |
|
- Non-controlling interest |
4,109 |
438 |
1,184 |
1,343 |
1,462 |
|
Total comprehensive income for the year |
267,536 |
215,900 |
89,086 |
83,395 |
70,791 |
Consolidated Statements of Cash Flows
|
In thousands of GEL |
As of 30-Sep-2017 |
As of 30-Sep-2016 |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
Interest received |
726,012 |
506,288 |
|
Interest paid |
(304,258) |
(184,749) |
|
Fees and commissions received |
139,408 |
98,373 |
|
Fees and commissions paid |
(51,358) |
(35,660) |
|
Insurance premium received |
13,908 |
- |
|
Insurance claims paid |
(5,946) |
- |
|
Income received from trading in foreign currencies |
61,478 |
44,798 |
|
Other operating income received |
9,638 |
10,249 |
|
Staff costs paid |
(143,370) |
(103,141) |
|
Administrative and other operating expenses paid |
(78,995) |
(58,448) |
|
Income tax (paid) / refunded |
(42,785) |
(24,101) |
|
Cash flows from operating activities before changes in operating assets and liabilities |
323,732 |
253,609 |
|
Net change in operating assets |
|
|
|
Due from other banks and mandatory cash balances with the National Bank of Georgia |
(73,036) |
(198,929) |
|
Loans and advances to customers |
(777,837) |
(499,749) |
|
Investment in finance lease |
(20,647) |
(4,018) |
|
Other financial assets |
(11,776) |
(1,225) |
|
Other assets |
1,119 |
7,883 |
|
Due to other banks |
(219,247) |
141,395 |
|
Customer accounts |
914,052 |
498,230 |
|
Other financial liabilities |
(4,403) |
(6,094) |
|
Other liabilities and provision for liabilities and charges |
1,241 |
500 |
|
Net cash from operating activities |
133,198 |
191,602 |
|
Cash flows from investing activities |
|
|
|
Acquisition of investment securities available for sale |
(545,956) |
(99,730) |
|
Proceeds from redemption at maturity of investment securities available for sale |
299,890 |
8,854 |
|
Acquisition of bonds carried at amortised cost |
(215,883) |
(230,326) |
|
Proceeds from redemption of bonds carried at amortised cost |
168,130 |
126,240 |
|
Acquisition of premises, equipment and intangible assets |
(47,410) |
(34,462) |
|
Disposal of premises, equipment and intangible assets |
1,436 |
462 |
|
Proceeds from disposal of investment property |
7,831 |
(254) |
|
Acquisition of subsidiaries, net of cash acquired |
(350) |
- |
|
Net cash used in investing activities |
(332,311) |
52,632 |
|
Cash flows from financing activities |
|
|
|
Proceeds from other borrowed funds |
1,464,205 |
411,889 |
|
Redemption of other borrowed funds |
(771,829) |
(459,423) |
|
Proceeds from subordinated debt |
60,188 |
18,131 |
|
Redemption of subordinated debt |
- |
(13,644) |
|
Proceeds from debt securities in issue |
- |
7,780 |
|
Redemption of debt securities in issue |
(2.075) |
(4,636) |
|
Dividends paid |
(67,927) |
(54,560) |
|
Issue of ordinary shares |
29 |
- |
|
Net cash from / (used in) financing activities |
682,591 |
(94,463) |
|
Effect of exchange rate changes on cash and cash equivalents |
16,863 |
(26,691) |
|
Net increase / (decrease) in cash and cash equivalents |
500,341 |
123,080 |
|
Cash and cash equivalents at the beginning of the year |
945,180 |
720,351 |
|
Cash and cash equivalents at the end of the year |
1,445,521 |
843,431 |
3Q 2017 Bank Republic Financial Results Based on Internal Estimates
|
Bank Republic Profit and Loss
|
|
|
In thousands of GEL |
3Q 2017 |
|
Interest income |
37,413 |
|
Interest expense |
10,077 |
|
Net interest income |
27,336 |
|
Net F&C income |
1,700 |
|
Card operations |
-353 |
|
Settlement transactions |
1,242 |
|
Guarantees and letters of credit |
713 |
|
Other |
98 |
|
Other non-interest income |
3,858 |
|
FX gain/losses |
3,148 |
|
Other |
710 |
|
Operating income |
32,894 |
|
Operating expenses |
16,733 |
|
Staff costs |
9,718 |
|
Depreciation and amortization |
1,145 |
|
Administrative and other operating expenses |
5,869 |
|
Operating profit |
16,161 |
|
Bank Republic Loan Portfolio |
|
|
In thousands of GEL |
as of 30 September 2017 |
|
Total gross loans |
1,102,629 |
|
Retail |
782,521 |
|
Corporate |
171,689 |
|
MSME |
148,418 |
|
Bank Republic Deposit Portfolio |
|
|
In thousands of GEL |
as of 30 September 2017 |
|
Total deposits |
523,720 |
|
Retail |
293,661 |
|
Corporate |
156,268 |
|
MSME |
73,791 |
Key Ratios
Average Balances
Average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records, which were used by the Management for monitoring and control purposes.
|
Key Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios (based on monthly averages, where applicable) |
9M'17 |
9M'16 |
3Q'17 |
2Q'17 |
3Q'16 |
|
ROE1 |
21.6%*/20.9% |
21.8% |
20.02%*/19.8% |
18.9% |
20.6% |
|
ROA2 |
3.3*/3.2% |
4.1% |
3.0%*/2.9% |
3.0% |
4.0% |
|
Pre-provision ROE |
27.3%*/26.6% |
26.4% |
26.3%*/26.1% |
25.1% |
25.1% |
|
Pre-provision ROA |
4.1%*/4.0% |
4.9% |
3.9%*/3.9% |
3.9% |
4.8% |
|
Cost to income3 |
40.3*/42.1% |
43.3% |
39.8%*/40.5% |
44.9% |
40.5% |
|
Cost of risk4 |
1.2% |
1.1% |
1.3% |
1.3% |
1.1% |
|
NIM5 |
6.5% |
7.9% |
6.2% |
6.8% |
8.3% |
|
Risk adjusted nIM6 |
5.1% |
6.5% |
5.0% |
5.3% |
6.7% |
|
Loan yields7 |
12.0% |
13.5% |
11.9% |
12.4% |
13.5% |
|
Risk adjusted loan yields8 |
10.6% |
12.2% |
10.7% |
10.9% |
12.2% |
|
Deposit rates9 |
3.4% |
3.4% |
3.4% |
3.5% |
3.3% |
|
Yields on interest earning assets10 |
11.1% |
12.3% |
10.9% |
11.3% |
12.5% |
|
Cost of funding11 |
4.4% |
4.5% |
4.5% |
4.5% |
4.3% |
|
Spread12 |
6.6% |
7.8% |
6.4% |
6.8% |
8.2% |
|
PAR 90 to gross loans13 |
1.6% |
1.5% |
1.6% |
1.6% |
1.5% |
|
NPLs to gross loans14 |
3.5% |
4.6% |
3.5% |
3.4% |
4.6% |
|
NPLs coverage15 |
80.5% |
84.3% |
80.5% |
84.3% |
84.3% |
|
NPLs coverage plus collateral16 |
206.8% |
205.0% |
206.8% |
219.3% |
205.0% |
|
Provision level to gross loans17 |
2.8% |
3.9% |
2.8% |
2.9% |
3.9% |
|
Related party loans to gross loans18 |
0.1% |
0.1% |
0.1% |
0.1% |
0.1% |
|
Top 10 borrowers to total portfolio19 |
8.6% |
8.6% |
8.6% |
9.1% |
8.6% |
|
Top 20 borrowers to total portfolio20 |
12.3% |
13.4% |
12.3% |
13.0% |
13.4% |
|
Net loans to deposits plus IFI funding21 |
91.6% |
93.8% |
91.6% |
90.6% |
93.8% |
|
Net stable funding ratio22 |
134% |
114% |
134% |
129% |
114% |
|
Liquidity coverage ratio23 |
115% |
N/A |
115% |
106% |
N/A |
|
Leverage24 |
6.8x |
5.5x |
6.8x |
6.7x |
5.5x |
|
Hypothetical Tier 1 CAR25 |
14.7% |
18.0% |
14.7% |
19.4 |
18.0 |
|
Hypothetical Total CAR25 |
19.2% |
21.9% |
19.2% |
14.4 |
21.9 |
|
Regulatory Tier 1 CAR26 |
10.8% |
13.3% |
10.8% |
10.8% |
13.3% |
|
Regulatory Total CAR27 |
14.5% |
16.2% |
14.5% |
14.6% |
16.2% |
*without one-offs
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period; Pre-provision ROE excludes all provision charges. Annualized where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Pre-provision ROE excludes all provision charges. Annualised where applicable.
3. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
4. Cost of risk equals provision for loan impairment divided by monthly average gross loans and advances to customers. Annualized where applicable.
5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, amount due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks
6. Risk Adjusted Net interest margin is NIM minus Cost of Risk without one -offs and currency effect
7. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers. Annualised where applicable.
8. Risk Adjusted Loan yield is loan yield minus cost of risk without one-offs and currency effect
9. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits. Annualised where applicable.
10. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets. Annualized where applicable.
11. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities. Annualised where applicable.
12. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).
13. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.
14. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.
15. NPLs coverage ratio equals total loan loss provision divided by the NPL loans.
16. NPLs coverage with collateral ratio equals loan loss provision plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
17. Provision level to gross loans equals loan loss provision divided by the gross loan portfolio for the same period.
18. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
19. Top 10 borrowers to total portfolio equals total loan amount of top 10 borrowers divided by the gross loan portfolio.
20. Top 20 borrowers to total portfolio equals total loan amount of top 20 borrowers divided by the gross loan portfolio.
21. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
22. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III. NSFR ratio for 9m '17, 3Q'17 and 2Q'17 is calculated per updated internal methodology in line with Basel 2014 guidelines.
23. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined by NBG.
24. Leverage equals total assets to total equity.
25. Hypothetical ratios - hypothetical ratio based on the Basel III guidelines except for calculation of credit equivalent amounts for interest rate and foreign exchange related contracts, which are calculated based on original exposure method being in line with NBG Pillar 1 requirements. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.
27. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the Balance Sheet items' QoQ growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.4072 as of 30 June 2017. For calculations of YoY growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.3297 as of 30 September 2016. The USD/GEL exchange rate as of 30 September 2017 equaled 2.4767. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 3Q 2017 of 2.4207, 2Q 2017 of 2.4315, 3Q 2016 of 2.3224.
Segment Definition & Bank Republic Contribution Assumption
Segment Definitions:
Corporate: legal entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis.
MSME: business customers who are not included in either corporate or retail segments; or legal entities who have been granted a Pawn shop loan.
Retail: non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8.0 thousand; all individual customers are included in retail deposits.
Corporate Centre and Other Operations: comprise the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.
Business customers: legal entities or individuals who have been granted a loan for business purpose.
Bank Republic Contribution Assumptions:
To make YoY analyses more comparable, the Bank has segregated the Bank Republic contribution after the merger on May 8, 2017, which is based on direct income and cost attribution calculation and where not practicable, based on established allocation rules, appropriate management assumptions and estimates.
The management has estimated the Bank Republic contribution effect within the Group's financial results based on the following rationale:
§ Loan and deposit portfolio as well as the interest income and expense from these portfolios have been calculated for all Bank Republic's existing clients with outstanding exposure for the reporting period, as well as for all new clients attracted through the former branches of Bank Republic
§ For the remaining items of B/S and P&L where the direct attribution is not practical, the management has used the allocation based on Bank Republic loan and deposit books contribution to each operating segment
Additional Disclosures
1) Earnings per Share
|
In GEL |
3Q 2017 |
|
Earnings per share for profit attributable to the owners of the Group: |
|
|
- Basic earnings per share |
4.92 |
|
- Diluted earnings per share |
4.85 |
Source: IFRS Consolidated
2) Sensitivity Scenario
|
Sensitivity Scenario |
30-Sep-17 |
10% Currency Devaluation Effect |
|
NIM* |
|
-0.1% |
|
Technical Cost of Risk |
|
+0.2% |
|
Regulatory Total Capital |
1,822 |
1,858 |
|
Regulatory Capital adequacy ratios tier 1 and total capital decrease by |
|
0.67% - 0.72% |
(*) Linear depreciation is assumed for NIM sensitivity analysis
Source: IFRS statements and Management Figures
3) FC details for Selected P/L Items
|
Selected P&L Items 3Q 2017 |
FC % of Respective Totals |
|
Interest Income |
44% |
|
Interest Expense |
54% |
|
Fee and Commission Income |
35% |
|
Fee and Commission Expense |
58% |
|
Administrative Expenses |
20% |
Source: IFRS statements and Management figures
4) GEL Refinance Rate and Libor Linked B/S Items 30 September 2017
|
GEL Refinance Rate Gap |
GEL -183 m |
|
Libor Gap |
GEL 791 m |
||
|
|
GEL m |
% share in totals |
|
|
GEL m |
% share in totals |
|
Assets |
1,645 |
14% |
|
Assets |
2,129 |
18% |
|
Securities with fixed yield(≤1y)* |
470 |
42% |
|
Nostro** |
278 |
47% |
|
Securities with floating yield |
127 |
11% |
|
NBG Reserves** |
1,021 |
71% |
|
Loans with Floating yield |
932 |
12% |
|
NBG Deposits |
171 |
12% |
|
Reserves in NBG |
106 |
7% |
|
Libor Loans |
626 |
8% |
|
Interbank loans& Deposits & Repo |
9 |
2% |
|
Interest Rate Options |
33 |
|
|
Liabilities |
1,828 |
18% |
|
|
|
|
|
Current accounts*** |
380 |
5% |
|
Liabilities |
1,338 |
13% |
|
Saving accounts*** |
319 |
4% |
|
Senior Loans |
1,027 |
40% |
|
Refinancing Loan of NBG |
775 |
30% |
|
Subordinated Loans |
311 |
76% |
|
Interbank Loans &Deposits & Repo |
83 |
55% |
|
|
|
|
|
IFI Borrowings |
271 |
11% |
|
|
|
|
|
|
|
|
|
|
|
|
(*) 67% of the less than 1 year securities are maturing in 6 months
(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. According to NBG regulation from March, 2016 it is possible to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.
(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification)
Source: IFRS Group Data
|
5) Yields and Rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields and Rates |
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
3Q'16 |
2Q'16 |
|
Loan yields |
11.9% |
12.4% |
11.9% |
13.8% |
13.5% |
13.3% |
|
Retail loan yields GEL |
19.2% |
19.7% |
20.0% |
23.3% |
22.8% |
22.7% |
|
Retail loan yields FX |
8.5% |
9.0% |
9.1% |
9.9% |
9.9% |
10.3% |
|
Retail Loan Yields |
13.8% |
14.2% |
13.9% |
15.8% |
16.0% |
16.3% |
|
Corporate loan yields GEL |
11.0% |
10.6% |
10.0% |
9.6% |
12.4% |
13.7% |
|
Corporate loan yields FX |
8.6% |
9.5% |
8.8% |
12.5% |
10.6% |
8.8% |
|
Corporate Loan Yields |
9.2% |
9.8% |
9.1% |
11.8% |
11.0% |
9.7% |
|
MSME loan yields GEL |
13.1% |
13.4% |
13.3% |
14.3% |
14.2% |
14.8% |
|
MSME loan yields FX |
9.4% |
10.4% |
10.1% |
11.1% |
10.6% |
10.8% |
|
MSME Loan Yields |
10.7% |
11.4% |
11.0% |
12.0% |
11.7% |
11.9% |
|
Deposit rates |
3.4% |
3.5% |
3.4% |
3.3% |
3.3% |
3.4% |
|
Retail deposit rates GEL |
4.0% |
3.9% |
3.9% |
3.7% |
4.0% |
4.1% |
|
Retail deposit rates FX |
2.8% |
3.0% |
3.2% |
3.4% |
3.5% |
3.6% |
|
Retail Deposit Yields |
3.0% |
3.1% |
3.3% |
3.4% |
3.6% |
3.7% |
|
Corporate deposit rates GEL |
8.3% |
8.5% |
8.7% |
7.5% |
7.3% |
7.5% |
|
Corporate deposit rates FX |
2.2% |
2.1% |
1.7% |
2.0% |
1.5% |
1.3% |
|
Corporate Deposit Yields |
5.2% |
5.2% |
4.9% |
4.4% |
4.2% |
4.0% |
|
MSME deposit rates GEL |
2.2% |
2.2% |
2.0% |
1.7% |
2.1% |
2.5% |
|
MSME deposit rates FX |
0.7% |
0.6% |
0.5% |
0.6% |
0.4% |
0.4% |
|
MSME Deposit Yields |
1.4% |
1.3% |
1.1% |
1.1% |
1.1% |
1.2% |
|
Yields on Securities |
8.4% |
7.8% |
8.1% |
8.1% |
8.3% |
9.1% |
Source: IFRS Consolidated
|
|
|
|
|
|
|
|
||||
|
6) Risk Adjusted Yields |
|
|
|
|
|
|
||||
|
Risk-adjusted Yields |
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
3Q'16 |
2Q'16 |
||||
|
Loan yields |
10.7% |
10.9% |
10.5% |
12.6% |
12.2% |
12.1% |
||||
|
Retail Loan Yields |
10.8% |
10.9% |
10.6% |
13.0% |
13.3% |
13.5% |
||||
|
Corporate Loan Yields |
11.1% |
11.3% |
11.1% |
14.3% |
12.5% |
11.1% |
||||
|
MSME Loan Yields |
9.9% |
10.5% |
9.4% |
9.6% |
9.9% |
10.7% |
||||
Source: IFRS Consolidated
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||
|
Cost of Risk |
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
3Q'16 |
2Q'16 |
|||
|
Retail |
3.2% |
3.1% |
2.9% |
3.5% |
2.6% |
2.8% |
|||
|
Corporate |
-1.7% |
-1.6% |
-2.9% |
-6.4% |
-1.6% |
-1.7% |
|||
|
MSME |
0.9% |
0.7% |
1.1% |
3.3% |
1.6% |
1.2% |
|||
|
Total |
1.3% |
1.3% |
0.9% |
0.6% |
1.1% |
1.1% |
|||
Source: IFRS Consolidated
7) Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
|
|
Sep-17 |
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
|
SDL Loans as % of Gross Loans |
3.4% |
3.3% |
4.1% |
4.3% |
5.1% |
Source: NBG
8) Cross Sell Ratio[14] and Number Active Products
|
|
Sep-17 |
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
|
Cross Sell Ratio |
3.79 |
3.67 |
3.57 |
3.68 |
3.55 |
|
Number of Active Products (in millions) |
4.06 |
3.78 |
3.16 |
3.14 |
2.83 |
Source: Management figures
9) Diversified Deposit Base
Status: monthly income >=GEL 2,000 or loans/deposits >=GEL 20,000
VIP: deposit >=USD 100,000 as well as on discretionary basis; WM: >=USD 100,000 as well as on discretionary basis
Wealth Management includes UHNW and HNW non-resident clients
|
30 September 2017 |
Volume of Deposits |
Number of Deposits |
|
MASS |
39% |
93.9% |
|
STATUS |
28% |
5.5% |
|
VIP |
23% |
0.4% |
|
Wealth Management for non-resident clients |
10% |
0.2% |
Source: Management figures
10) Loan Concentration
|
|
Sep-17 |
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
|
Top 20 Borrowers as % of total portfolio |
13.4% |
13.0% |
12.2% |
11.3% |
13.4% |
|
Top 10 Borrowers as % of total portfolio |
8.6% |
9.1% |
8.3% |
7.6% |
8.6% |
|
Related Party Loans as % of total portfolio |
0.1% |
0.1% |
0.1% |
0.1% |
0.1% |
Source: IFRS consolidated
11) Sales breakdown (for products offered through Multichannel)
|
|
Sep-17 |
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
Jun-16 |
Mar-16 |
Dec-15 |
|
Digital Channels |
25% |
22% |
24% |
26% |
24% |
23% |
27% |
21% |
|
Call Center |
20% |
27% |
28% |
29% |
33% |
32% |
23% |
28% |
|
Branches |
55% |
51% |
49% |
45% |
43% |
46% |
50% |
51% |
Source: Management figures
12) Number of Transactions in Digital Channels
|
|
3Q 17 |
2Q 17 |
1Q 17 |
4Q 16 |
3Q 16 |
|
Internet banking number of transactions (in thousands) |
2,175 |
2,166 |
2,098 |
2,280 |
1,828 |
|
Mobile banking number of transactions (in thousands) |
3,953 |
3,163 |
2,622 |
2,532 |
1,814 |
|
POS number of transactions (in thousands) |
13,326 |
11,328 |
9,636 |
8,508 |
7,146 |
|
POS volume of transactions (in mln GEL) |
543 |
447 |
394 |
376 |
319 |
* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches
Source: Management figures
13) Penetration Ratios of Digital Channels
|
|
Sep-17 |
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
Jun-16 |
Mar-16 |
Dec-15 |
|
IB&MB Penetration Ratio |
35% |
33% |
34% |
37% |
34% |
34% |
32% |
32% |
|
Mobile Banking Penetration Ratio |
27% |
25% |
25% |
24% |
20% |
19% |
17% |
15% |
Source: Management figures
The mid-term targets for digital channels are to broaden the penetration ratio of internet or mobile banking users to above 45% from the current level of 35% and to increase the mobile banking penetration ratio to above 35% from the current level of 27%.
14) Net outflow of borrowed funds
|
Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million) |
|||||||||
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
|
57 |
502 |
264 |
339 |
273 |
132 |
148 |
28 |
68 |
150 |
Source: Management figures, revolving non IFI loans from NBG are excluded
|
15) Portfolio Breakdown by Collateral Types as of 30-Sep-17
|
|
|
|
|
|
Cash Cover |
2% |
|
Gold |
4% |
|
Inventory |
6% |
|
Real Estate |
64% |
|
Third Party Guarantees |
7% |
|
Other |
1% |
|
Unsecured |
16% |
Source: IFRS Consolidated
|
16) Loan to Value by Segments as of 30-Sep-17 |
|||
|
|
|
|
|
|
Retail |
Corporate |
MSME |
Total |
|
42% |
46% |
45% |
44% |
|
|
|
|
|
17) IFRS 9 project update
The Bank is in the process of implementing the IFRS 9 standard, which will come into effect starting from 1st January 2018.
Relevant Change Areas for the Bank
§ Key areas of the IFRS 9 standard are classification and measurement, impairment and hedge accounting
§ Based on the Bank's Business model no significant changes are expected from classification and measurement and hedge accounting
§ Key changes come from the impairment part, where the standard moved from incurred credit loss to expected credit loss model
IFRS 9 Project
§ The Bank started the IFRS 9 implementation project in June 2016
§ The project is carried out with support from Deloitte
§ In parallel to methodology and model development, the Bank is in the process of respective software implementation
High Level Expected Impact
§ The expected impact is GEL 45-65 million increase in provisions
§ There will be no impact on profit and loss statement
§ There will be no impact on Regulatory Capital Ratios
18) NBG Initiatives
Newly introduced Liquidity Coverage Ratio
NBG has introduced new liquidity requirements (NBG LCR) for short-term liquidity risk management purposes The new requirements, which are in line with Basel III with additional constraints above the Basel standards, have come into force in September 2017 and increased the effective liquidity requirements. The limits are defined for total and as well for both GEL and FC currencies:
Limits
§ Total LCR>=100%
§ GEL LCR>=75%
§ FC LCR>=100%
In addition, in order to improve management of long-term liquidity, the NBG plans to implement Net Stable Funding Ratio (NSFR), which will void existing liquidity requirement.
In 2016, the NBG initiated several measures to promote the Larization and increase public trust in the domestic currency. Within NBG LCR framework the national currency is treated preferentially.
Newly introduced changes to RWA under Capital Adequacy Framework
The NBG has also introduced PTI and LTV ratio for retail loans which will affect loans issued after 30 November 2017. The exposures which are out of the defined range will be assigned higher risk weights from normal 75-100% to higher 100-150%. These changes will have negative effects on the capital, however they are expected to be compensated through higher pricing of such loans. In addition, the NBG has also increased the group exposure limit from GEL 350,000 to GEL 2 million for the regulatory retail category.
Required PTI
|
Income range |
Hedged borrowers |
Non-hedged borrowers |
|
<1000 |
30% |
25% |
|
1,000 - 2,000 |
35% |
30% |
|
2,000 - 4,000 |
40% |
35% |
|
4,000 - 8,000 |
45% |
40% |
|
>8,000 |
50% |
45% |
Required LTV
|
Collateral type |
GEL loans |
FX loans |
|
Ordinary liquid asset |
80% |
75% |
|
High liquid asset |
90% |
85% |
Upcoming changes in the Capital Adequacy Framework
The NBG is reviewing the existing capital adequacy regulation and is planning to introduce certain changes from Q4 2017. Currently these changes are in draft form and are being discussed with the banks and other stakeholders.
Main changes are as per below:
§ Current capital requirement will be divided across Pillar 1 and Pillar 2 buffers to increase clarity and comparability
§ Capital conservation buffer currently incorporated in minimum capital requirements will be separated
§ Systemic risk buffer will be introduced for systematically important banks over 3 year period
§ Countercyclical capital buffer will be introduced and the rate will be 0%
§ Additional loan portfolio concentration buffer will be introduced under Pillar 2
§ Current conservative weighting for CICR will be replaced by appropriate Pillar 2 buffer (Unhedged Currency Induced Credit Risk Buffer)
§ GRAPE buffer defined by the supervisor will be applied based on the bank specific risks
The exact requirements, as well as the amount of the buffers and its impact on the capital planning are not yet determined. The initial assessments show that the changes should not impact the growth and dividend guidelines.
19) TBC Insurance
|
In thousands of GEL |
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
|
Gross written premium |
8,584 |
6,275 |
4,306 |
2,227 |
|
Net earned premium |
4,622 |
3,873 |
2,475 |
1,827 |
|
Net profit |
885 |
-94 |
-458 |
-929 |
|
|
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
|
Net combined ratio |
92% |
107% |
114% |
166% |
|
|
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
|
Market share[15] |
10.9% |
9.0% |
7.9% |
3.5% |
|
|
|
|
|
|
|
|
3Q'17 |
2Q'17 |
1Q'17 |
4Q'16 |
|
Number of clients |
239,472 |
174,385 |
116,456 |
2,887 |
|
|
|
|
|
|
[1]Excluding one-off items
[2] Calculated as the difference in cost of incremental funding in 3Q 2017 applied to the difference between actual average liquidity in 3Q and minimum requirement plus internal buffer per old requirement
[3] Market share figures are based on data from the National Bank of Georgia (NBG). NBG includes interbank loans for calculating market share in loans
[4] Excluding one-off items
[5] Calculated as the difference in cost of incremental funding in 3Q 2017 applied to the difference between actual average liquidity in 3Q and minimum requirement plus internal buffer per old requirement
[6] Number of transactions conducted in remote channels divided by total number of transactions
[7] Based on data provided by Insurance State Supervision Service of Georgia
[8] Detailed information is provided in Annex 18 (NBG initiatives) on pages 39-40
[9] Detailed information is provided in Annex 18 (NBG initiatives) on pages 39-40
[10] Detailed information is provided in Annex 18 (NBG initiatives) on pages 39-40
[11] Calculated as the difference in cost of incremental funding in 3Q 2017 applied to the difference between actual average liquidity in 3Q and minimum requirement plus internal buffer per old requirement
[12] According to the international credit rating agencies
[13] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016
[14] Cross-sell ratio is defined as the number of active products divided by the number of active customers
[15] Market share excluding health insurance; Source: Insurance State Supervision Service of Georgia
This information is provided by RNS
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