3rd Quarter Results
TBC BANK GROUP PLC ("TBC Bank")
3Q AND 9M 2019 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
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 the 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, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a 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 subjected 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 and Nine Months of 2019 Unaudited Consolidated Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") publishes its unaudited consolidated financial results for the third quarter and the first nine months of 2019 on Thursday, 14 November 2019 at 7.00 am GMT (11.00 am GET).
On the same day at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST), Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Please dial-in approximately five minutes before the start of the call quoting the password TBC:
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TBC |
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Contacts
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Zoltan Szalai Director of International Media and Investor Relations
E-mail: ZSzalai@Tbcbank.com.ge Tel: +44 (0) 7908 242128 Web: www.tbcbankgroup.com Address: 68 Lombard St, London EC3V 9LJ, United Kingdom
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Anna Romelashvili Head of Investor Relations
E-mail: IR@tbcbank.com.ge Tel: +(995 32) 227 27 27 Web: www.tbcbankgroup.com Address: 7 Marjanishvili St. Tbilisi, Georgia 0102
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Investor Relations Department
E-mail: IR@tbcbank.com.ge Tel: +(995 32) 227 27 27 Web: www.tbcbankgroup.com Address: 7 Marjanishvili St. Tbilisi, Georgia 0102
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Table of Contents
3Q and 9M 2019 Results Announcement
TBC Bank - Background
Performance Highlights
Letter from the Chief Executive Officer
Operating Overview
Recent Developments
Establishment of Employee Benefit Trust
Economic Overview
Unaudited Consolidated Financial Results Overview for 3Q 2019
Unaudited Consolidated Financial Results Overview for 9M 2019
Additional Disclosures
TBC Bank Group PLC ("TBC Bank")
TBC Bank Announces Unaudited 3Q and 9M 2019 Consolidated Financial Results:
Net Profit for 3Q 2019 up by 18.1% YoY to GEL 126.8 million
Net Profit for 9M 2019 up by 23.7% YoY to GEL 380.3 million
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
TBC Bank is the largest banking group in Georgia, where 99.6% of its business is concentrated, with a 38.7% market share by total assets. It offers retail, corporate, and MSME banking nationwide.
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 segment on 10 August 2016.
TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The Group classifies and separately discloses certain incomes and expenses, which are non-recurring by nature and are caused by extraordinary events, as one-off items in order to provide a consistent view and enable better analysis of the financial performance of the Group. Adjusted performance is an alternative performance measure and the reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under Annex 1 section on pages 44-45.
Performance Highlights
3Q 2019 P&L Highlights
o Net profit amounted to GEL 126.8 million (3Q 2018: GEL 107.4 million)
o Return on equity (ROE) amounted to 20.4% (3Q 2018: 21.2%)
o Return on assets (ROA) amounted to 2.8% or 3.0% without excess liquidity and a subordinated loan pre-payment fee1 (3Q 2018: 3.1%)
o Cost to income was 39.9% or 37.9% without contribution of ecosystems, POS terminals and e-commerce (3Q 2018: 37.4%)
o Cost of risk stood at 0.7% (3Q 2018: 1.9%)
o Net interest margin (NIM) stood at 5.0% or 5.2% without excess liquidity and a subordinated loan pre-payment fee[1] (3Q 2018: 6.9%)
o Risk adjusted net interest margin (NIM) stood at 4.3% (3Q 2018: 5.4%)
9M 2019 P&L Highlights
o Net profit amounted to GEL 380.3 million (9M 2018: GEL 307.3 million)
o Return on equity (ROE) amounted to 21.6% (9M 2018: 21.2%)
o Return on assets (ROA) amounted to 3.1% (9M 2018: 3.1%)
o Cost to income stood at 39.3% (9M 2018: 37.0%)
o Cost of risk on loans stood at 1.1% (9M 2018: 1.7%)
o Net interest margin (NIM) stood at 5.5% (9M 2018: 7.0%)
o Risk adjusted net interest margin (NIM) stood at 4.5% (9M 2018: 5.3%)
Balance Sheet Highlights as of 30 September 2019
o Total assets amounted to GEL 18,169.8 million as of 30 September 2019, up by 26.0% YoY
o Gross loans and advances to customers stood at GEL 11,680.3 million as of 30 September 2019, up by 21.4% YoY
o Net loans to deposits + IFI[2] funding stood at 96.9%, up by 8.9 pp YoY, and Net Stable Funding Ratio (NSFR) stood at 137.7%, up by 5.8 pp YoY
o NPLs were 2.9%, down by 0.2 pp YoY
o NPLs coverage ratios stood at 97.7%, or 209.9% with collateral, on 30 September 2019 compared to 113.2% or 209.0% with collateral, as of 30 September 2018
o Total customer deposits amounted to GEL 9,897.3 million as of 30 September 2019, up by 13.2% YoY
o As of 30 September 2019, the Bank's Basel III CET 1, Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 11.9%, 14.7% and 19.4% respectively, while minimum requirements amounted to 9.8%, 11.9% and 16.7% respectively
Market Shares[3]
o Market share by total assets reached 38.7% as of 30 September 2019, up by 1.5 pp YoY
o Market share by total loans was 38.7% as of 30 September 2019, up by 0.3 pp YoY
o Market share of total deposits reached 39.3% as of 30 September 2019, down by 1.0 pp YoY
3Q 2019 operating highlights
o Number of affluent customers reached 68.9 thousand as of 30 September 2019, up by 84.9% YoY
o 92% of all transactions were conducted through digital channels (3Q 2018: 91%)
o The number of digital transactions amounted to 19.6 million up by 20.1% YoY, while number of branch transactions stood at 1.6 million, down by 4.7% YoY
o The penetration ratio for internet or mobile banking[4] stood at 42% for 3Q 2019 (3Q 2018: 40%)
o The penetration ratio for mobile banking[5] stood at 38% for 3Q 2019 (3Q 2018: 34%)
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Income Statement Highlights |
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in thousands of GEL |
3Q'19 |
3Q'18 |
Change YoY |
9M'19 |
9M'18 |
Change YoY |
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Net interest income |
186,225 |
199,612 |
-6.7% |
573,664 |
563,219 |
1.9% |
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Net fee and commission income |
47,105 |
39,384 |
19.6% |
132,446 |
113,466 |
16.7% |
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Other operating non-interest income |
46,428 |
39,093 |
18.8% |
117,896 |
98,521 |
19.7% |
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Credit loss allowance |
(25,749) |
(47,650) |
-46.0% |
(92,216) |
(122,203) |
-24.5% |
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Operating income after credit loss allowance |
254,009 |
230,439 |
10.2% |
731,790 |
653,003 |
12.1% |
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Operating expenses |
(111,705) |
(104,103) |
7.3% |
(323,602) |
(287,125) |
12.7% |
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Profit before tax |
142,304 |
126,336 |
12.6% |
408,188 |
365,878 |
11.6% |
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Income tax expense |
(15,527) |
(18,952) |
-18.1% |
(27,871) |
(58,530) |
-52.4% |
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Profit for the period |
126,777 |
107,384 |
18.1% |
380,317 |
307,348 |
23.7% |
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Balance Sheet and Capital Highlights |
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Sep-19 |
Sep-18 |
Change YoY |
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in thousands of GEL |
GEL |
GEL |
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Total Assets |
18,169,757 |
14,423,997 |
26.0% |
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Gross Loans |
11,680,257 |
9,622,563 |
21.4% |
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Customer Deposits |
9,897,323 |
8,740,449 |
13.2% |
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Total Equity |
2,499,175 |
2,055,950 |
21.6% |
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Regulatory Common Equity Tier I Capital (Basel III) |
1,770,734 |
1,532,058 |
15.6% |
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Regulatory Tier I Capital (Basel III) |
2,191,792 |
1,580,547 |
38.7% |
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Regulatory Total Capital (Basel III) |
2,894,704 |
2,020,501 |
43.3% |
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Regulatory Risk Weighted Assets (Basel III) |
14,889,695 |
12,305,756 |
21.0% |
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Key Ratios |
3Q'19 |
3Q'18 |
Change YoY |
9M'19 |
9M'18 |
Change YoY |
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Return on equity |
20.4% |
21.2% |
-0.8 pp |
21.6% |
21.2% |
0.4 pp |
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Return on assets |
2.8% |
3.1% |
-0.3 pp |
3.1% |
3.1% |
0.0 pp |
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NIM |
5.0% |
6.9% |
-1.9 pp |
5.5% |
7.0% |
-1.5 pp |
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Risk adjusted NIM |
4.3% |
5.4% |
-1.1pp |
4.5% |
5.3% |
-0.8 pp |
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Cost to income |
39.9% |
37.4% |
2.5 pp |
39.3% |
37.0% |
2.3 pp |
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Cost of risk |
0.7% |
1.9% |
-1.2 pp |
1.1% |
1.7% |
-0.6 pp |
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FX adjusted cost of risk |
0.7% |
1.5% |
-0.8 pp |
1.0% |
1.7% |
-0.7 pp |
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NPL to gross loans |
2.9% |
3.1% |
-0.2 pp |
2.9% |
3.1% |
-0.2 pp |
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NPLs coverage ratio exc. collaterals |
97.7% |
113.2% |
-15.5 pp |
97.7% |
113.2% |
-15.5 pp |
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CET 1 CAR (Basel III) |
11.9% |
12.4% |
-0.5 pp |
11.9% |
12.4% |
-0.5 pp |
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Regulatory Tier 1 CAR (Basel III) |
14.7% |
12.8% |
1.9 pp |
14.7% |
12.8% |
1.9 pp |
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Regulatory Total CAR (Basel III) |
19.4% |
16.4% |
3.0 pp |
19.4% |
16.4% |
3.0 pp |
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Leverage (Times) |
7.3x |
7.0x |
0.3x |
7.3x |
7.0x |
0.3x |
Letter from the Chief Executive Officer
I am delighted to present another set of strong financial results for the third quarter and the first nine months of 2019, as well as update you on the progress of our strategy and recent macroeconomic developments in Georgia.
Our consolidated net profit for the third quarter 2019 grew by 18.1% year-on-year and reached GEL 126.8 million. The growth in revenue was mainly driven by an increase in net fee and commission income and other operating income, which offset the decrease in net interest income. As anticipated, net interest margin decreased by 0.4 pp quarter-on-quarter, due to the continued effect of a new regulation that was introduced in January 2019, limiting the bank's ability to lend money to higher-yield retail customers, while a further decrease of 0.2 pp was related to excess liquidity and the pre-payment fee of a subordinated loan. As a result, our net interest margin stood at 5.0%, or 5.2% without the above-mentioned effects. We expect NIM to stabilize at this level. The increase in net profit was further amplified by a decrease in credit loss allowance that was driven by the improved performance of the loan book. As a result, our cost of risk stood at 0.7% in third quarter 2019. Over the same period, our operating expenses increased by 7.3% year-on-year. Our return on equity was 20.4%, while return on assets stood at 2.8% in third quarter 2019, or 3.0% without the above-mentioned effects.
In the first nine months of 2019 our consolidated net profit was GEL 380.3 million, up by 23.7% year-on-year, while our return on equity was 21.6%, and return on assets stood at 3.1%.
Regarding balance sheet growth, our loan book expanded by 21.4% year-on-year, or by 14.3% at a constant currency rate. As a result, our market share increased to 38.7%, up by 0.3 pp year-on-year. Over the same period, customer accounts grew by 13.2% year-on-year, or by 5.3% at a constant currency rate leading to a market share of 39.3%, down by 1.0 pp year-on-year. The slight decline in market share is the result of decreased focus on customer deposits during the third quarter due to high liquidity following the recent bond issuance.
We continue to operate with a strong capital base and a robust liquidity position. As of 30 September 2019, our regulatory CET 1, tier 1 and total capital adequacy ratios per Basel III guidelines stood at 11.9%, 14.7% and 19.4% respectively, while minimum requirements amounted to 9.8%, 11.9% and 16.7% respectively. Our regulatory liquidity coverage ratio stood at 132% compared to the minimum requirement of 100%, while the ratio of net loans to deposits + IFI funding was 97%. Starting from 30 September 2019, NBG introduced the net stable funding ratio (NSFR) per Basel III guidelines, which stood at 137.7%, above the minimum requirement of 100%.
According to the initial estimates, the economy expanded by 5.7% in 3Q 2019, however, mostly reflecting the low base effect. Growth is expected to be above 4.0% for 2019 and 2020, with a slower year-on-year increase in the forth quarter 2019 and the first half of 2020. From the second half of 2020, the economy is expected to deliver close to 5.0% growth rates. Despite the unfavourable developments in terms of tourism and FDI, the external sector remains balanced. While the flight ban had a negative impact on tourism inflows in the third quarter, the trade balance continued to improve and remittance inflows were steadily increasing. Long-term growth is expected to reach 5.2%, once again underlining strong growth fundamentals and the resilience of the economy.
As presented in June 2019 during our capital markets day, in line with our new mission statement, "to make life easier", we are enhancing our value proposition beyond financial services and are developing customer focused digital ecosystems. This will allow us to better engage with our customers and become part of their daily lives by helping them to satisfy their personal and business needs in the most convenient and seamless way possible. In this regard, we have already launched payments, housing and e-commerce ecosystems and are also actively developing an auto ecosystem. I would like very briefly to touch upon the recent achievements in each ecosystem:
o Payments[6]: For the first nine months of 2019, the number of payments transactions went up by 17.0% year-on-year and reached 175.6 mln, while the volume of payment transactions amounted to GEL 8.5 bln, up by 27.0% year-on-year. Also, in the third quarter, we launched Apple Pay and ATM QR withdrawal as new, innovative payment options. In addition, we increased our share in our associated company TKT.ge to 55% from 26%. TKT.ge is a leading online platform in Georgia, which allows people to buy tickets for various events such as cinema, theatre or concerts as well as airplane and train tickets. Furthermore, our Uzbek subsidiary, Payme, continued to grow rapidly: its number of customers increased by 10.4% quarter-on-quarter to reach 1.6 million, while its revenue increased by 12.4% over the same quarter, amounting to around GEL 2.2 million.
o E-commerce: Our newly launched e-commerce platform, Vendoo, is expanding rapidly by adding new product types and attracting more visitors. As of 30 September 2019, Vendoo offered more than 20,000 different product items, with the number of unique monthly visitors reaching around 514,000
o Housing: our housing ecosystem, Livo, which was launched in May 2019 is gaining popularity quickly: it attracted around 281,000 monthly unique visitors and had 17,000 listings as of 30 September 2019. For the first nine months of 2019, its revenue stood at GEL 1.4 million.
In addition, in August 2019, we acquired a 65% stake in LLC My.ge, the leading classified e-commerce player in Georgia, trading under the My.ge Group ("My Group") name. My Group operates in four online marketplace verticals: automotive, automotive spare parts, consumer-to-consumer ("C2C") and housing. The acquisition of My Group is a big leap in the development of our ecosystem strategy, as it is estimated to have the largest online traffic in Georgia with a combined 1.7 million unique monthly visitors across all platforms. For the first nine months of 2019, its revenue stood at GEL 4.2 million, while its EBITDA amounted to GEL 1.4 million.
We continue to harness our best-in-class digital channels by increasing the number of digital transactions and sales. In 3Q 2019, the total number of digital transactions went up by 20.2% year-on-year, while the share of deposit sold digitally went up to 66% from 63% a year ago. Our fully digital bank, Space, is also gaining popularity with the number of total registered customers reaching around 158,000. Total loans outstanding to Space customers amounted to GEL 22.5 million as of 30 September 2019. Recently, we have also launched terms deposits in Space.
I am also delighted that Eric Rajendra was re-appointed as an Independent Non-Executive Director of the Board of Directors of TBC Bank Group PLC and as an Independent Non-Executive Member of the Supervisory Board of JSC TBC Bank. Eric has a very good understanding of TBC Bank's strategy and operations, and his presence will enhance shareholder value by bringing expertise and stability to the Group.
I would also like to highlight our strong performance in affluent sub-segment. The number of TBC Status customers, increased by 31.5% QoQ and reached around 69 thousands in third quarter 2019. The sharp increase in number of Status Clients was driven by new digital service model that was introduced in March 2019. This service includes fully digital onboarding, self-managing digital banking operations, financial advising, education tutorials and personalized digital offers.
Finally, I would like to reiterate our medium term targets: ROE of above 20%, cost to income ratio below 35%, dividend payout ratio of 25-35% and loan book growth of 10-15%.
Operating Overview
Recent Developments
Board changes
o TBC Bank strengthened its supervisory board by re-appointing Eric Rajendra as an independent non-executive director of the TBC Bank Group PLC Supervisory Board in September 2019.
o TBC Bank also announced changes to the membership of TBC PLC Board Committees and the equivalent committees of the Supervisory Board of the Bank:
o Arne Berggren has been appointed as the new chairperson of the Risks, Ethics and Compliance Committee and as a member of the Audit Committee;
o Tsira Kemularia has been appointed as the chairperson of the Corporate Governance and Nomination Committee;
o Nikoloz Enukidze left his position as the chairperson of the Risk, Ethics and Compliance Committee and as a member of the Audit Committee;
o Eric Rajendra has been appointed as a member of the Remuneration Committee and the Corporate, Governance and Nomination Committee of TBC PLC.
Improved corporate governance score and ESG rating
o Corporate governance score: As of 31.10.2019, we achieved an excellent ISS corporate governance score, which stood at 2.0. The ISS scores indicate decile ranking relative to index or region. A decile score of 1 indicates low governance risk, while a 10 indicates higher governance risk.
o ESG rating: "In 2019, TBC Bank Group received a rating of A (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment." This represents an improvement from the previous score of BBB a year ago.
IFI
TBC Bank and the European Fund for Southeast Europe (EFSE) signed three loan agreements totaling in excess of EUR 23 million (c. GEL 77 million). The funds will be lent to TBC Bank customers spanning micro and small enterprises (MSEs) and private households to finance their future plans using loans in Georgian Lari, thereby reducing their dependence upon borrowing in foreign currencies.
Expansion into new ecosystems
TBC Bank Group PLC has entered into an agreement to acquire a 65% stake in LLC My.ge, the leading classified e-commerce player in Georgia trading under the My.ge Group ("My Group") name. My Group operates in four online marketplace verticals: automotive, automotive spare parts, consumer-to-consumer ("C2C") and housing. With a total of 1.7 million unique monthly visitors, the online traffic of My Group is one of the largest in Georgia. It is the market leader in the automotive, spare parts and C2C verticals, with estimated market shares of approximately 80% in each, while it is a top two player in housing with an estimated market share of 30%-40%.
World's best in mobile banking 2019 by Global Finance
Best Consumer Digital Banks 2019
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Best Online Deposit, Credit and Investment Product Offerings |
Taipei Fubon Bank |
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Best Bill Payment & Presentment |
Sberbank |
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Best Web Site Design |
DBS Bank |
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Best Integrated Consumer Banking Site |
Emirates NBD |
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Best in Mobile Banking |
TBC Bank |
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Best Information Security and Fraud Management |
Banco Popular Puerto Rico |
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Best in Social Media Marketing and Services |
Taishin Bank |
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Best Mobile Banking App |
CaixaBank |
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Most Innovative Digital Bank |
Tatra banka |
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Best Mortgage Bank |
Bidaya Home Finance |
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Best Open Banking APIs |
Citi |
Awards
o Multiple Digital awards from Global Finance Magazine - TBC Bank has won a number of prestigious awards from Global Finance, including World's best in Mobile Banking 2019, The Best Consumer Digital Bank in Georgia 2019, The Best in Consumer Mobile Banking and The Best Consumer Mobile Banking App in Central & Eastern Europe 2019. These awards underline our advanced digital capabilities, offering customers globally innovative services and an unrivalled customer experience.
o Trade Finance Award for Excellent Partnership from Commerzbank - TBC has received a Trade Finance Award for Excellent Partnership from Commerzbank for the second consecutive year. This award recognizes our leading position in trade finance and emphasizes our successful cooperation.
o Safest Bank in Georgia - TBC Bank received the Safest Bank in Georgia 2019 award from Global Finance magazine. The award series recognizes the banks that are best positioned to help their clients maintain effectiveness and stability in the face of rapidly evolving trends in the global business and political environments. Among other factors, the judging panel evaluated the long-term foreign currency ratings from top credit rating agencies, alongside the total assets of the 1000 largest banks worldwide, when choosing the winners.
o Best Private Banking in Georgia - TBC Bank has been named the Best for Private Banking in Georgia by two leading industry magazines. We have received the country's Best Private Bank 2019 award from The Banker and Professional Wealth Management (PWM) magazine and have won Global Finance's Best Private Bank Award in Georgia 2020. These prestigious awards acknowledge our leading position in delivering exceptional private banking services and the highest standards of client satisfaction.
Establishment of Employee Benefit Trust
TBC Bank Group PLC established the TBC Bank Group PLC Employee Benefit Trust (the "EBT") in August 2019. It is intended that the EBT will be used to satisfy obligations arising from the TBC Bank Group PLC Deferred Share Plan (the "Deferred Share Plan"), the TBC Bank Group PLC Long Term Incentive Plan and other shares awards granted to employees. The EBT will be administered by Sanne Fiduciary Services Limited.
As of 14 November 2019, the EBT was in possession of 451,000 shares of TBC Bank Group PLC.
Additional Information Disclosure
The following materials in connection with TBC PLC's financial results are disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Results Announcement section.
Economic Overview
Economic growth and the external sector
Real GDP growth stood at 4.7% YoY in the first half of 2019. According to the initial estimates, the economy expanded by 5.7% in 3Q 2019, however, mostly reflecting the low base effect. Growth continues to be strongly supported by the expansionary fiscal stance and business credit. At the same time, weakening inflows, an undervalued exchange rate and weaker business and consumer sentiments negatively affect economic performance. Overall, growth is expected to come in at above 4% for 2019 and 2020, with slower YoY increases in 4Q 2019 and the first half of 2020. From the second half of 2020, the economy should deliver close to 5% growth rates.
In terms of sectors, growth in the second quarter of 2019 was mostly driven by transport and communications (+15.7% YoY), real estate (+16.9% YoY), hotels and restaurants (+14.1% YoY), and trade (+7.4% YoY). On the other hand, this was partly offset by weakness in construction (-4.6% YoY) and manufacturing (-4.5% YoY). The decline in the construction sector reflected the finalization of BP's pipeline construction project. At the same time, slower mortgage growth and tighter construction permit regulations also affected the construction industry. Public capital expenditures remained strong, countering the decline.
Despite the unfavourable developments in terms of tourism and FDI, the external sector remains balanced. In 2Q 2019, the CA deficit-to-GDP ratio declined sharply to 3.2%, compared to 8.2% a year ago. The bulk of the improvement reflected a reduction in the trade deficit, while higher services exports and an improved income account also contributed positively. On the financing side, even though FDI inflows were down by 53.7% in 2Q 2019, FDI inflows to GDP still stood at 4.6%, which is high when compared internationally, and the CA deficit was fully covered.
Following Russia's flight ban, estimated tourism inflows declined by 6.9% YoY in 3Q 2019, even though the number of tourists is still increasing. At the same time, it is important to mention that the rate of decline has slowed down since the introduction of the flight ban. According to the central bank estimates, inflows fell by 8.6% in July, 6.8% in August and 4.9% in September, indicating that the impact of lower inflows from Russia and Iran was gradually offset by increasing tourism from the EU, Israel, Gulf countries, and Central Asia. The trade balance continued to improve in 3Q 2019, with exports of goods up by 10.6% and imports down by 0.8%. As a result, the trade deficit improved by 7.6% YoY, all in USD terms. Over the same period, remittance inflows increased by 9.5% YoY.
Bank credit growth came in at 14.6% YoY in September 2019, at a constant exchange rate. In terms of segments, corporate loans were the main driver with a 21.5% YoY growth rate. MSME lending also increased by a solid 16.8% YoY. On the other hand, retail credit continues to moderate with an 8.1% YoY increase. Mortgage lending growth slowed to 19.4% YoY, while non-mortgage lending declined by 3.6%: this is a smaller drop compared to the previous months, which suggests that this segment should soon turn into positive growth rates. At the same time, there are ongoing discussions on a possible revision of the retail credit regulatory framework.
Inflation and the exchange rate
As of the end of September 2019, the GEL depreciated against USD by 13.0% YoY, while the EUR/GEL exchange rate depreciated by 6.5% YoY. The GEL also depreciated compared to the major trading country currencies, as evidenced by the weaker effective exchange rate. The estimated real effective exchange rate was around 8-10% below its medium term average and stayed at approximately this level throughout the third quarter, consequently creating inflationary pressures. As a result, annual inflation increased to 6.4% in September.
Due to the heavily undervalued GEL and inflationary pressures, the National Bank of Georgia stated that it would pursue a tightening policy regarding GEL and a loosening stance in FX until inflationary pressures recede and price stability is ensured. Therefore, as of October 24th, the monetary policy rate stands at 8.5%, coming from a 200 basis points rate hike in total over this quarter. The NBG also decreased the reserve requirement ratio for FX deposits to stimulate FX credit as a tool for a stronger GEL exchange rate.
Going forward
According to the IMF's recently published World Economic Outlook[7], the Georgian economy is projected to grow by 4.6% in 2019 and 4.8% in 2020. Long-term growth is expected at 5.2%, once again underlying strong growth fundamentals and the resilience of the economy.
More information on the Georgian economy and financial sector can be found at www.tbcresearch.ge.
Unaudited Consolidated Financial Results Overview for 3Q 2019
This statement provides a summary of the unaudited business and financial trends for 3Q 2019 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.
Starting from 1 January 2019, TBC Bank adopted IFRS 16. Therefore, the comparative information for 2018 is not comparable to the information presented for 2019.
TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The Group classifies and separately discloses certain incomes and expenses, which are non-recurring by nature and are caused by extraordinary events, as one-off items in order to provide a consistent view and enable better analysis of the financial performance of the Group. Adjusted performance is an alternative performance measure and the reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under Annex 1 section on pages 44-45.
Please note, that there might be slight differences in previous periods' figures due to rounding.
Net Interest Income
In 3Q 2019, net interest income amounted to GEL 186.2 million, down by 6.7% YoY and by 2.2% on QoQ.
This YoY decrease in net interest income was primarily related to the pre-payment fee[8] of a subordinated loan, excess liquidity and decreasing yields related to the continued effect of the regulations introduced in January 2019. The loan yields decreased by 1.6 pp, primarily driven by retail segment. This effect was partially offset by a 21.4% increase in the loan portfolio.
Without pre-payment fee8 of the subordinated loan and excess liquidity mentioned above, net interest income would have increased by 1.0% on QoQ basis. The rise was mainly driven by an increase in the loan portfolio by 4.8% on a QoQ basis, which was offset by a 0.2 pp drop in loan yields.
Consequently, NIM was 5.0%, or 5.2% without the above-mentioned effects in 3Q 2019, compared to 6.9% and 5.6% in 3Q 2018 and 2Q 2019, respectively. Risk adjusted NIM for the period amounted to 4.3%, down by 0.5 pp YoY and by 1.1 pp QoQ.
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Interest income |
367,417 |
340,301 |
330,691 |
11.1% |
8.0% |
|
Interest expense |
(181,192) |
(149,820) |
(131,079) |
38.2% |
20.9% |
|
Net interest income |
186,225 |
190,481 |
199,612 |
-6.7% |
-2.2% |
|
|
|
|
|
|
|
|
NIM |
5.0% |
5.6% |
6.9% |
-0.6 pp |
-1.9 pp |
|
Risk adjusted NIM |
4.3% |
4.8% |
5.4% |
-0.5 pp |
-1.1 pp |
Net fee and commission income
In 3Q 2019, net fee and commission income totalled GEL 47.1 million, up by 19.6% on YoY basis and by 8.2% on QoQ basis.
The YoY rise was mainly driven by increase in net fee and commission income from settlement transactions and other net fee and commission income. The former increase was mainly related to the increase in the number of TBC Status's clients (our affluent retail sub-segment), up by 84.9% to 68.9 thousand and the growth in the number of money transfer transactions, while the increase in other fee and commission income was driven by our new digital ecosystems: Payme, My GE and TKT.
On a QoQ basis, the rise was mainly driven by net fee and commission income from settlement transactions, which was related to the increased number and volume of transactions in our self-service terminals (through our subsidiary TBC Pay) and the growth in net fee and commission income from our affluent retail sub-segment, TBC Status as mentioned above.
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Net fee and commission income |
|
|
|
|
|
|
Card operations |
13,479 |
11,773 |
13,497 |
-0.1% |
14.5% |
|
Settlement transactions |
18,355 |
15,119 |
15,672 |
17.1% |
21.4% |
|
Guarantees issued and letters of credit |
8,197 |
7,155 |
5,814 |
41.0% |
14.6% |
|
Other |
7,074 |
9,487 |
4,401 |
60.7% |
-25.4% |
|
Total net fee and commission income |
47,105 |
43,534 |
39,384 |
19.6% |
8.2% |
Other Non-Interest Income
Total other non-interest income increased by 18.8% on YoY basis and by 21.3% on QoQ basis, amounting to GEL 46.4 million in 3Q 2019. This primarily resulted from the rise in net income from foreign currency operations, mainly related to the increased number and volume of FX transactions. Net insurance premium earned after claims and acquisition costs increased by 53.2% on a YoY and by 10.3% on a QoQ basis, mainly related to the increased scale of the insurance business. More information about TBC insurance can be found in Annex 2 on page 46.
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Other non-interest income |
|
|
|
|
|
|
Net income from foreign currency operations |
35,858 |
30,119 |
31,040 |
15.5% |
19.1% |
|
Net insurance premium earned after claims and acquisition costs[9] |
4,784 |
4,338 |
3,123 |
53.2% |
10.3% |
|
Other operating income |
5,786 |
3,830 |
4,930 |
17.4% |
51.1% |
|
Total other non-interest income |
46,428 |
38,287 |
39,093 |
18.8% |
21.3% |
|
|
|
|
|
|
|
Credit Loss Allowance
In 3Q 2019, total credit loss allowance amounted to GEL 25.7 million, down by 46.0% on a YoY basis and by 22.8% on a QoQ basis.
The YoY decrease was mainly due to a decrease in credit loss allowance on loans to customers, driven by strong performance in all segments, as well as to a portfolio product mix change, related to the continued impact of the regulations introduced in January 2019.
The main contributor to the QoQ decrease was credit loss allowance for loans. If negative effect of local currency depreciation was excluded from 2Q 2019, credit loss allowance on loans to customers would have been broadly stable.
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Credit Loss Allowance |
|
|
|
|
|
|
Credit loss allowance for loan to customers |
(20,695) |
(30,067) |
(43,345) |
-52.3% |
-31.2% |
|
Credit loss allowance for other financial assets |
(5,054) |
(3,305) |
(4,305) |
17.4% |
52.9% |
|
Total credit loss allowance |
(25,749) |
(33,372) |
(47,650) |
-46.0% |
-22.8% |
|
Operating income after credit loss allowance |
254,009 |
238,930 |
230,439 |
10.2% |
6.3% |
|
|
|
|
|
|
|
|
Cost of risk |
0.7% |
1.1% |
1.9% |
-1.2 pp |
-0.4 pp |
Operating Expenses
In 3Q 2019, total operating expenses expanded 7.3% on YoY basis and by 2.1% on QoQ basis and amounted to GEL 111.7 million. Cost to income stood at 39.9%, up by 2.5 pp on YoY and down by 0.3 pp on QoQ. Without contribution of ecosystems, POS terminals and e-commerce cost to income would have stood at 37.9% in 3Q 2019.
The YoY growth was primarily due to an increase in staff costs and a rise in depreciation and amortization. The growth in staff cost was mainly driven by the increase in the share price[10] over a three-year period for the purpose of top and middle management share based bonuses accruals (while there was no material change in expected total share compensation) as well as by the increase in business scale. The increase in depreciation and amortization was mainly due to IFRS 16.
On a QoQ basis, without one-off consulting fees paid in the amount of GEL 5.6 million in 2Q 2019 (for further details, please see the following press release) total operating expenses would have increased by 7.6%. The increase was mainly due to an uneven distribution of expenses across the quarters, local currency depreciation and about GEL 1.0 million expenses related to the recent events regarding historic matters surrounding TBC Bank as mentioned above.
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Operating expenses |
|
|
|
|
|
|
Staff costs |
(62,230) |
(58,886) |
(54,294) |
14.6% |
5.7% |
|
Provisions for liabilities and charges |
(73) |
1,241 |
(4,000) |
-98.2% |
NMF |
|
Depreciation and amortization |
(17,433) |
(15,955) |
(11,944) |
46.0% |
9.3% |
|
Administrative & other operating expenses |
(31,969) |
(35,783) |
(33,865) |
-5.6% |
-10.7% |
|
Total operating expenses |
(111,705) |
(109,383) |
(104,103) |
7.3% |
2.1% |
|
|
|
|
|
|
|
|
Cost to income |
39.9% |
40.2% |
37.4% |
2.5pp |
-0.3pp |
NMF - no meaningful figures
Net Income
Net income for the third quarter increased by GEL 19.4 million, or 18.1%, YoY and increased by GEL 6.6 million, or 5.5%, QoQ, amounting to GEL 126.8 million.
As a result, ROE stood at 20.4%, down by 0.8 pp on a YoY basis and by 0.3 pp QoQ, while ROA stood at 2.8%, down by 0.3 pp YoY and by 0.2 pp on a QoQ basis.
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
|
|
|
|
|
|
|
Profit before tax |
142,304 |
129,547 |
126,336 |
12.6% |
9.8% |
|
Income tax expense |
(15,527) |
(9,329) |
(18,952) |
-18.1% |
66.4% |
|
Profit for the period |
126,777 |
120,218 |
107,384 |
18.1% |
5.5% |
|
|
|
|
|
|
|
|
Return on equity |
20.4% |
20.7% |
21.2% |
-0.8 pp |
-0.3 pp |
|
Return on assets |
2.8% |
3.0% |
3.1% |
-0.3 pp |
-0.2 pp |
Funding and Liquidity
In September 2019, the National Bank of Georgia introduced net stable funding ratio (NSFR) per Basel III standards. NSFR for 30 September 2019 per NBG's new methodology stood at 137.7%, compared to 100% limit. Issuance of USD 125.0 million AT1 bonds in July 2019 has increased our liquidity position and as a result liquidity ratio and total liquidity coverage ratios, were up by 3.3 pp and 5.3 pp respectively. The drop in LCR in GEL by 12.8 pp was due to the growth of loan book in local currency.
|
|
30-Sep-19 |
30-Jun-19 |
Change |
|
|
|
|
|
|
|
|
|
|
|
Minimum net stable funding ratio, as defined by the NBG |
100.0% |
N/A |
N/A |
|
Net stable funding ratio |
137.7% |
138.1%[11] |
-0.4 pp |
|
|
|
|
|
|
Net loans to deposits + IFI funding |
97.0% |
91.4% |
5.6 pp |
|
Leverage (Times) |
7.3x |
7.3x |
0.0x |
|
|
|
|
|
|
Minimum liquidity ratio, as defined by the NBG |
30.0% |
30.0% |
0.0 pp |
|
Liquidity ratio, as defined by the NBG |
39.2% |
35.9% |
3.3 pp |
|
|
|
|
|
|
Minimum total liquidity coverage ratio, as defined by the NBG |
100.0% |
100.0% |
0.0 pp |
|
Minimum LCR in GEL, as defined by the NBG |
75.0% |
75.0% |
0.0 pp |
|
Minimum LCR in FC, as defined by the NBG |
100.0% |
100.0% |
0.0 pp |
|
|
|
|
|
|
Total liquidity coverage ratio, as defined by the NBG |
131.6% |
126.3% |
5.3 pp |
|
LCR in GEL, as defined by the NBG |
87.7% |
100.4% |
-12.8 pp |
|
LCR in FC, as defined by the NBG |
162.8% |
143.8% |
19.0 pp |
Regulatory Capital
As of 30 September 2019, the Bank's Basel III CET 1 capital stood at 11.9%, broadly stable on a QoQ basis. The proceeds from the issuance of the AT1 bonds in amount of USD 125 million were reflected in the capital in July 2019 and was the main factor in increasing our tier 1 and total capital ratios on a QoQ basis by 2.3 pp and 2.0 pp respectively.
|
In thousands of GEL |
30-Sep-19 |
30-Jun-19 |
Change |
|
|
|
|
|
|
CET 1 Capital |
1,770,734 |
1,678,050 |
5.5% |
|
Tier 1 Capital |
2,191,792 |
1,730,302 |
26.7% |
|
Total Capital |
2,894,704 |
2,430,135 |
19.1% |
|
Total Risk-weighted Exposures |
14,889,695 |
13,986,201 |
6.5% |
|
|
|
|
|
|
Minimum CET 1 ratio |
9.8% |
9.8% |
0.0 pp |
|
CET 1 Capital adequacy ratio |
11.9% |
12.0% |
-0.1 pp |
|
|
|
|
|
|
Minimum Tier 1 ratio |
11.9% |
11.9% |
0.0 pp |
|
Tier 1 Capital adequacy ratio |
14.7% |
12.4% |
2.3 pp |
|
|
|
|
|
|
Minimum total capital adequacy ratio |
16.7% |
16.7% |
0.0 pp |
|
Total Capital adequacy ratio |
19.4% |
17.4% |
2.0 pp |
Loan Portfolio
As of 30 September 2019, the gross loan portfolio reached GEL 11,680.3 million, up by 4.8% QoQ, or by 3.7% on constant currency basis, mainly supported by growth in the corporate segment. Over the same period, the proportion of gross loans denominated in foreign currency decreased by 1.7 pp on a QoQ basis and accounted for 58.2% of total loans, while on constant currency basis the proportion of gross loans denominated in foreign currency decreased by 2.2 pp and stood at 57.7%.
At the end of 3Q 2019, our market share in total loans stood at 38.7% up by 0.2 pp QoQ, while our loan market share in legal entities was 37.7% up by 0.4 pp QoQ and our loan market share in individuals stood at 39.5% down by 0.1 pp QoQ.
|
In thousands of GEL |
30-Sep-19 |
30-Jun-19 |
Change |
|
Loans and advances to customers |
|
|
|
|
|
|
|
|
|
Retail |
4,903,134 |
4,835,320 |
1.4% |
|
Retail loans GEL |
2,284,431 |
2,170,941 |
5.2% |
|
Retail loans FC |
2,618,703 |
2,664,379 |
-1.7% |
|
Corporate |
4,029,321 |
3,658,340 |
10.1% |
|
Corporate loans GEL |
1,248,851 |
1,045,076 |
19.5% |
|
Corporate loans FC |
2,780,470 |
2,613,264 |
6.4% |
|
MSME |
2,747,802 |
2,647,700 |
3.8% |
|
MSME loans GEL |
1,354,789 |
1,251,812 |
8.2% |
|
MSME loans FC |
1,393,013 |
1,395,888 |
-0.2% |
|
Total loans and advances to customers |
11,680,257 |
11,141,360 |
4.8% |
|
|
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Loan yields |
10.8% |
11.0% |
12.4% |
-1.6 pp |
-0.2 pp |
|
Loan yields GEL |
15.3% |
15.6% |
17.9% |
-2.6 pp |
-0.3 pp |
|
Loan yields FC |
7.7% |
7.8% |
8.5% |
-0.8 pp |
-0.1 pp |
|
Retail Loan Yields |
11.8% |
12.2% |
14.1% |
-2.3 pp |
-0.4 pp |
|
Retail loan yields GEL |
17.2% |
18.4% |
20.8% |
-3.6 pp |
-1.2 pp |
|
Retail loan yields FC |
7.3% |
7.3% |
7.9% |
-0.6 pp |
0.0 pp |
|
Corporate Loan Yields |
9.2% |
8.8% |
9.6% |
-0.4 pp |
0.4 pp |
|
Corporate loan yields GEL |
11.7% |
9.9% |
11.0% |
0.7 pp |
1.8 pp |
|
Corporate loan yields FC |
8.1% |
8.4% |
9.1% |
-1.0 pp |
-0.3 pp |
|
MSME Loan Yields |
11.2% |
11.5% |
12.6% |
-1.4 pp |
-0.3 pp |
|
MSME loan yields GEL |
15.0% |
15.5% |
16.6% |
-1.6 pp |
-0.5 pp |
|
MSME loan yields FC |
7.7% |
7.8% |
8.9% |
-1.2 pp |
-0.1 pp |
Loan Portfolio Quality
Total PAR 30 was broadly stable on QoQ basis, while total NPLs stood at 2.9%, down by 0.2 pp, primarily attributable the strong performance of the corporate loan book. The NPL coverage ratio remained broadly stable.
|
Par 30 |
30-Sep-19 |
30-Jun-19 |
Change |
|
Retail |
2.3% |
2.7% |
-0.4 pp |
|
Corporate |
0.8% |
1.0% |
-0.2 pp |
|
MSME |
3.0% |
2.8% |
0.2 pp |
|
Total Loans |
2.0% |
2.1% |
-0.1 pp |
|
Non-performing Loans |
30-Sep-19 |
30-Jun-19 |
Change |
|
Retail |
3.2% |
3.3% |
-0.1 pp |
|
Corporate |
1.8% |
2.1% |
-0.3 pp |
|
MSME |
4.3% |
4.2% |
0.1 pp |
|
Total Loans |
2.9% |
3.1% |
-0.2 pp |
|
NPL Coverage |
Sep-19 |
Jun-19 |
||
|
|
Exc. Collateral |
Incl. Collateral |
Exc. Collateral |
Incl. Collateral |
|
Corporate |
118.5% |
317.8% |
103.3% |
299.1% |
|
Retail |
113.2% |
183.9% |
113.8% |
180.4% |
|
MSME |
64.9% |
179.2% |
71.5% |
179.0% |
|
Total |
97.7% |
209.9% |
97.9% |
206.0% |
Cost of risk
The total cost of risk for 3Q 2019 stood at 0.7% down by 0.4 pp QoQ and by 1.2 pp YoY.
The decrease on a YoY basis was related to the strong performance across all segments, as well as the portfolio product mix change driven by the continued impact of the regulations introduced in January 2019.
If negative effect of GEL depreciation was excluded from 2Q 2019, on a QoQ basis the cost of risk would have been broadly stable.
|
Cost of Risk |
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
|
|
|
|
|
|
|
Retail |
1.4% |
2.4% |
2.7% |
-1.3 pp |
-1.0 pp |
|
Corporate |
0.4% |
-0.5% |
1.1% |
-0.7 pp |
0.9 pp |
|
MSME |
-0.1% |
0.9% |
1.2% |
-1.3 pp |
-1.0 pp |
|
Total |
0.7% |
1.1% |
1.9% |
-1.2 pp |
-0.4 pp |
Deposit Portfolio
Total deposit portfolio increased by 0.2% QoQ and amounted to GEL 9,897.3 million, while on a constant currency basis the total deposit portfolio was down by 1.9%. The decrease was mainly related to the banks policy of decreasing deposits after having high liquidity from the recent bonds issuance. The proportion of deposits denominated in foreign currency increased by 2.7 pp on a QoQ basis and accounted for 65.5% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency increased by 2.0 pp and stood at 64.8%.
By the end September 2019, our market share in deposits amounted to 39.3% down by 1.7 pp QoQ and our market share in deposits to legal entities stood at 40.1% down by 2.7 pp. Our market share in deposits to individuals stood at 38.6% down by 0.9 pp QoQ.
|
In thousands of GEL |
30-Sep-19 |
30-Jun-19 |
Change |
|
Customer Accounts |
|
|
|
|
|
|
|
|
|
Retail |
5,550,227 |
5,360,114 |
3.5% |
|
Retail deposits GEL |
1,057,854 |
1,044,181 |
1.3% |
|
Retail deposits FC |
4,492,373 |
4,315,933 |
4.1% |
|
Corporate |
3,242,875 |
3,510,179 |
-7.6% |
|
Corporate deposits GEL |
1,770,123 |
2,069,230 |
-14.5% |
|
Corporate deposits FC |
1,472,752 |
1,440,949 |
2.2% |
|
MSME |
1,104,221 |
1,006,520 |
9.7% |
|
MSME deposits GEL |
586,603 |
557,163 |
5.3% |
|
MSME deposits FC |
517,618 |
449,357 |
15.2% |
|
Total Customer Accounts |
9,897,323 |
9,876,813 |
0.2% |
|
|
3Q'19 |
2Q'19 |
3Q'18 |
Change YoY |
Change QoQ |
|
Deposit rates |
3.2% |
3.4% |
3.3% |
-0.1 pp |
-0.2 pp |
|
Deposit rates GEL |
5.3% |
5.8% |
5.6% |
-0.3 pp |
-0.5 pp |
|
Deposit rates FC |
2.1% |
2.1% |
2.1% |
0.0 pp |
0.0 pp |
|
Retail Deposit Yields |
2.8% |
3.0% |
2.7% |
0.1 pp |
-0.2 pp |
|
Retail deposit rates GEL |
4.4% |
5.3% |
4.4% |
0.0 pp |
-0.9 pp |
|
Retail deposit rates FC |
2.4% |
2.4% |
2.3% |
0.1 pp |
0.0 pp |
|
Corporate Deposit Yields |
4.7% |
4.9% |
4.9% |
-0.2 pp |
-0.2 pp |
|
Corporate deposit rates GEL |
6.9% |
7.2% |
7.5% |
-0.6 pp |
-0.3 pp |
|
Corporate deposit rates FC |
1.8% |
1.8% |
2.0% |
-0.2 pp |
0.0 pp |
|
MSME Deposit Yields |
1.0% |
1.0% |
1.0% |
0.0 pp |
0.0 pp |
|
MSME deposit rates GEL |
1.5% |
1.5% |
1.7% |
-0.2 pp |
0.0 pp |
|
MSME deposit rates FC |
0.3% |
0.3% |
0.4% |
-0.1 pp |
0.0 pp |
Segment definition and PL
Business Segments
The segment definitions are as follows (updated in 2019):
· Corporate - legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which have been granted facilities with more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;
· Retail - non-business individual customers; all individual customers are included in retail deposits;
· MSME - business customers who are not included in the corporate segment; or legal entities which have been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and
· Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.
Business customers are all legal entities or individuals who have been granted a loan for business purposes.
Income Statement by Segments
|
3Q'19 |
Retail |
MSME |
Corporate |
Corp.Centre |
Total |
|
Interest income |
146,098 |
76,640 |
91,323 |
53,356 |
367,417 |
|
Interest expense |
(38,823) |
(2,763) |
(39,354) |
(100,252) |
(181,192) |
|
Net transfer pricing |
(15,273) |
(25,129) |
5,900 |
34,502 |
- |
|
Net interest income |
92,002 |
48,748 |
57,869 |
(12,394) |
186,225 |
|
Fee and commission income |
54,762 |
7,069 |
12,566 |
2,398 |
76,795 |
|
Fee and commission expense |
(24,940) |
(2,515) |
(1,686) |
(549) |
(29,690) |
|
Net fee and commission income |
29,822 |
4,554 |
10,880 |
1,849 |
47,105 |
|
Net insurance premium earned after claims and acquisition costs |
- |
- |
- |
4,784 |
4,784 |
|
Net income from foreign currency operations |
9,601 |
7,797 |
14,252 |
214 |
31,864 |
|
Foreign exchange translation gains less losses/(losses less gains) |
- |
- |
- |
3,994 |
3,994 |
|
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income |
(47) |
- |
- |
827 |
780 |
|
Net losses from derivative financial instruments |
- |
- |
- |
2 |
2 |
|
Other operating income |
3,028 |
206 |
702 |
895 |
4,831 |
|
Share of profit of associates |
- |
- |
- |
173 |
173 |
|
Other operating non-interest income and insurance profit |
12,582 |
8,003 |
14,954 |
10,889 |
46,428 |
|
Credit loss allowance for loans to customers |
(17,560) |
460 |
(3,595) |
- |
(20,695) |
|
Credit loss allowance for performance guarantees and credit related commitments |
4 |
365 |
(1,843) |
- |
(1,474) |
|
Credit loss allowance for investments in finance lease |
- |
- |
- |
(211) |
(211) |
|
Credit loss allowance for other financial assets |
44 |
- |
(570) |
(2,987) |
(3,513) |
|
Credit loss allowance for financial assets measured at fair value through other comprehensive income |
- |
- |
228 |
(84) |
144 |
|
Profit before G&A expenses and income taxes |
116,894 |
62,130 |
77,923 |
(2,938) |
254,009 |
|
Staff costs |
(33,305) |
(12,441) |
(9,627) |
(6,857) |
(62,230) |
|
Depreciation and amortization |
(13,421) |
(2,033) |
(797) |
(1,182) |
(17,433) |
|
Provision for liabilities and charges |
- |
- |
- |
(73) |
(73) |
|
Administrative and other operating expenses |
(20,270) |
(5,691) |
(4,916) |
(1,092) |
(31,969) |
|
Operating expenses |
(66,996) |
(20,165) |
(15,340) |
(9,204) |
(111,705) |
|
Profit before tax |
49,898 |
41,965 |
62,583 |
(12,142) |
142,304 |
|
Income tax expense |
(5,056) |
(4,959) |
(7,237) |
1,725 |
(15,527) |
|
Profit for the year |
44,842 |
37,006 |
55,346 |
(10,417) |
126,777 |
Consolidated Financial Statements of TBC Bank Group PLC
|
Consolidated Balance Sheet |
|
|
|
|||||
|
In thousands of GEL |
Sep-19 |
Jun-19 |
|
|||||
|
Cash and cash equivalents |
1,349,260 |
1,628,344 |
|
|||||
|
Due from other banks |
30,297 |
27,860 |
|
|||||
|
Mandatory cash balances with National Bank of Georgia |
1,954,662 |
1,841,237 |
|
|||||
|
Loans and advances to customers |
11,344,779 |
10,801,264 |
|
|||||
|
Investment securities measured at fair value through other comprehensive income |
1,177,963 |
908,158 |
|
|||||
|
Bonds carried at amortized cost |
871,640 |
766,663 |
|
|||||
|
Investments in finance leases |
241,840 |
220,871 |
|
|||||
|
Investment properties |
78,449 |
79,114 |
|
|||||
|
Current income tax prepayment |
29,599 |
19,417 |
|
|||||
|
Deferred income tax asset |
2,179 |
1,753 |
|
|||||
|
Other financial assets |
243,330 |
165,382 |
|
|||||
|
Other assets |
205,066 |
211,850 |
|
|||||
|
Premises and equipment |
381,065 |
373,322 |
|
|||||
|
Right of use assets |
59,040 |
61,555 |
|
|||||
|
Intangible assets |
134,837 |
123,910 |
|
|||||
|
Goodwill |
63,215 |
45,301 |
|
|||||
|
Investments in associates |
2,536 |
2,363 |
|
|||||
|
TOTAL ASSETS |
18,169,757 |
17,278,364 |
|
|||||
|
LIABILITIES |
|
|
|
|||||
|
Due to credit institutions |
3,613,093 |
3,052,742 |
|
|||||
|
Customer accounts |
9,897,323 |
9,876,813 |
|
|||||
|
Lease liabilities |
62,126 |
62,598 |
|
|||||
|
Other financial liabilities |
96,781 |
252,280 |
|
|||||
|
Current income tax liability |
1,128 |
727 |
|
|||||
|
Debt Securities in issue |
1,251,649 |
848,838 |
|
|||||
|
Deferred income tax liability |
21,142 |
21,361 |
|
|||||
|
Provisions for liabilities and charges |
22,729 |
20,116 |
|
|||||
|
Other liabilities |
88,672 |
85,882 |
|
|||||
|
Subordinated debt |
615,939 |
688,002 |
|
|||||
|
TOTAL LIABILITIES |
15,670,582 |
14,909,359 |
|
|||||
|
EQUITY |
|
|
|
|||||
|
Share capital |
1,682 |
1,672 |
|
|||||
|
Shares held by trust |
(15) |
N/A |
|
|||||
|
Share premium |
828,936 |
831,773 |
|
|||||
|
Retained earnings |
1,794,054 |
1,668,810 |
|
|||||
|
Group re-organisation reserve |
(162,166) |
(162,166) |
|
|||||
|
Share based payment reserve |
(28,104) |
(37,968) |
|
|||||
|
Revaluation reserve for premises |
56,606 |
56,606 |
|
|||||
|
Fair value reserve |
7,351 |
12,680 |
|
|||||
|
Cumulative currency translation reserve |
(6,368) |
(6,478) |
|
|||||
|
Net assets attributable to owners |
2,491,976 |
2,364,929 |
|
|||||
|
Non-controlling interest |
7,199 |
4,076 |
|
|||||
|
TOTAL EQUITY |
2,499,175 |
2,369,005 |
|
|||||
|
TOTAL LIABILITIES AND EQUITY |
18,169,757 |
17,278,364 |
|
|||||
|
Consolidated Statement of Profit or Loss and Other Comprehensive Income |
|
|
|
|||||
|
In thousands of GEL |
3Q'19 |
2Q'19 |
3Q'18 |
|||||
|
Interest income |
367,417 |
340,301 |
330,691 |
|||||
|
Interest expense |
(181,192) |
(149,820) |
(131,079) |
|||||
|
Net interest income |
186,225 |
190,481 |
199,612 |
|||||
|
Fee and commission income |
76,795 |
68,983 |
59,553 |
|||||
|
Fee and commission expense |
(29,690) |
(25,449) |
(20,169) |
|||||
|
Net fee and commission income |
47,105 |
43,534 |
39,384 |
|||||
|
Net insurance premiums earned |
9,821 |
8,663 |
5,976 |
|||||
|
Net insurance claims incurred and agents' commissions |
(5,037) |
(4,325) |
(2,853) |
|||||
|
Net insurance premium earned after claims and acquisition costs |
4,784 |
4,338 |
3,123 |
|||||
|
Net income from foreign currency operations |
31,864 |
24,532 |
24,638 |
|||||
|
Net gain/(losses) from foreign exchange translation |
3,994 |
5,587 |
6,402 |
|||||
|
Net gains/(losses) from derivative financial instruments |
780 |
(71) |
(56) |
|||||
|
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income |
2 |
79 |
2 |
|||||
|
Other operating income |
4,831 |
3,650 |
4,690 |
|||||
|
Share of profit of associates |
173 |
172 |
294 |
|||||
|
Other operating non-interest income |
41,644 |
33,949 |
35,970 |
|||||
|
Credit loss allowance for loans to customers |
(20,695) |
(30,067) |
(43,345) |
|||||
|
Credit loss allowance for investments in finance lease |
(211) |
219 |
(493) |
|||||
|
Credit loss allowance for performance guarantees and credit related commitments |
(1,474) |
(824) |
(24) |
|||||
|
Credit loss allowance for other financial assets |
(3,513) |
(2,389) |
(3,759) |
|||||
|
Credit loss allowance for financial assets measured at fair value through other comprehensive income |
144 |
(311) |
(29) |
|||||
|
Operating income after credit loss allowance for impairment |
254,009 |
238,930 |
230,439 |
|||||
|
Staff costs |
(62,230) |
(58,886) |
(54,294) |
|||||
|
Depreciation and amortization |
(17,433) |
(15,955) |
(11,944) |
|||||
|
(Provision for)/ recovery of liabilities and charges |
(73) |
1,241 |
(4,000) |
|||||
|
Administrative and other operating expenses |
(31,969) |
(35,783) |
(33,865) |
|||||
|
Operating expenses |
(111,705) |
(109,383) |
(104,103) |
|||||
|
Profit before tax |
142,304 |
129,547 |
126,336 |
|||||
|
Income tax expense |
(15,527) |
(9,329) |
(18,952) |
|||||
|
Profit for the period |
126,777 |
120,218 |
107,384 |
|||||
|
Other comprehensive income: |
|
|
|
|||||
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|||||
|
Movement in fair value reserve |
(5,327) |
2,976 |
2,365 |
|||||
|
Exchange differences on translation to presentation currency |
111 |
815 |
71 |
|||||
|
Items that will not be reclassified to profit or loss: |
|
|
|
|||||
|
Other comprehensive income for the period |
(5,216) |
3,791 |
2,436 |
|||||
|
Total comprehensive income for the period |
121,561 |
124,009 |
109,820 |
|||||
|
Profit attributable to: |
|
|
|
|||||
|
- Shareholders of TBCG |
125,244 |
119,998 |
106,779 |
|||||
|
- Non-controlling interest |
1,533 |
220 |
605 |
|||||
|
Profit for the period |
126,777 |
120,218 |
107,384 |
|||||
|
Total comprehensive income is attributable to: |
|
|
|
|||||
|
- Shareholders of TBCG |
120,034 |
123,785 |
109,183 |
|||||
|
- Non-controlling interest |
1,527 |
224 |
637 |
|||||
|
Total comprehensive income for the period |
121,561 |
124,009 |
109,820 |
|||||
Key Ratios
Average Balances
The 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. These were used by the management for monitoring and control purposes.
|
Key Ratios |
|
|
|
|
|
|
|
|
|
Ratios (based on monthly averages, where applicable) |
3Q'19 |
2Q'19 |
3Q'18 |
|
|
|
|
|
|
Profitability ratios: |
|
|
|
|
Underlying ROE1 |
20.4% |
21.5% |
21.2% |
|
Reported ROE2 |
20.4% |
20.7% |
21.2% |
|
Underlying ROA3 |
2.8% |
3.1% |
3.1% |
|
Reported ROA4 |
2.8% |
3.0% |
3.1% |
|
ROE before credit loss allowance5 |
24.6% |
26.4% |
30.7% |
|
Underlying Cost to Income6 |
39.9% |
38.1% |
37.4% |
|
Reported Cost to Income7 |
39.9% |
40.2% |
37.4% |
|
NIM8 |
5.0% |
5.6% |
6.9% |
|
Risk Adjusted NIM9 |
4.3% |
4.8% |
5.4% |
|
Loan Yields10 |
10.8% |
11.0% |
12.4% |
|
Risk Adjusted Loan Yields11 |
10.1% |
10.2% |
10.9% |
|
Deposit rates12 |
3.2% |
3.4% |
3.3% |
|
Yields on interest Earning Assets13 |
9.8% |
10.0% |
11.4% |
|
Cost of Funding14 |
4.8% |
4.5% |
4.4% |
|
Spread15 |
5.0% |
5.5% |
7.0% |
|
|
|
|
|
|
Asset quality and portfolio concentration: |
|
|
|
|
Cost of Risk16 |
0.7% |
1.1% |
1.9% |
|
PAR 90 to Gross Loans17 |
1.2% |
1.3% |
1.3% |
|
NPLs to Gross Loans18 |
2.9% |
3.1% |
3.1% |
|
NPLs coverage19 |
97.7% |
97.9% |
113.2% |
|
NPLs coverage with collateral20 |
209.9% |
206.0% |
209.0% |
|
Credit loss level to Gross Loans21 |
2.9% |
3.1% |
3.6% |
|
Related Party Loans to Gross Loans22 |
0.1% |
0.1% |
0.1% |
|
Top 10 Borrowers to Total Portfolio23 |
9.0% |
8.6% |
10.3% |
|
Top 20 Borrowers to Total Portfolio24 |
13.0% |
12.6% |
14.1% |
|
|
|
|
|
|
Capital optimisation: |
|
|
|
|
Net Loans to Deposits plus IFI Funding25 |
96.9% |
91.4% |
88.0% |
|
Net Stable Funding Ratio26 |
137.7% |
138.1%12 |
131.9%[12] |
|
Liquidity Coverage Ratio27 |
131.6% |
126.3% |
111.6% |
|
Leverage28 |
7.3x |
7.3x |
7.0x |
|
CET 1 CAR (Basel III)29 |
11.9% |
12.0% |
12.4% |
|
Regulatory Tier 1 CAR (Basel III)30 |
14.7% |
12.4% |
12.8% |
|
Regulatory Total 1 CAR (Basel III)31 |
19.4% |
17.4% |
16.4% |
Ratio definitions
1. Underlying return on average total equity (ROE) equals underlying net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period adjusted for the respective one-off items; Annualised where applicable.
2. Reported return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.
3. Underlying return on average total assets (ROA) equals underlying net income of the period divided by monthly average total assets for the same period. Annualised where applicable.
4. Reported return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Annualised where applicable.
5. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.
6. Underlying cost to income ratio equals total underlying 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).
7. Reported 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).
8. 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, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG that currently have negative interest, and includes other earning items from due from banks.
9. Risk Adjusted Net Interest Margin is NIM minus the cost of risk without one-offs and the currency effect.
10. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
11. Risk Adjusted Loan yield is loan yield minus the cost of risk without one-offs and currency effect.
12. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
13. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
14. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
15. 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).
16. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
17. 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.
18. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a 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.
19. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.
20. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
21. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
22. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
23. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
24. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
25. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
26. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines.
27. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
28. Leverage equals total assets to total equity.
29. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
30. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
31. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.8687 as of 30 June 2019. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6151 as of 30 September 2018. As of 30 September 2019 the USD/GEL exchange rate equalled 2.9552. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 3Q 2019 of 2.9194, 2Q 2019 of 2.7393, 3Q 2018 of 2.5295.
Unaudited Consolidated Financial Results Overview for 9M 2019
This statement provides a summary of the unaudited business and financial trends for 9M 2019 for TBC Bank Group plc and its subsidiaries. The financial information and trends are unaudited.
Starting from 1 January 2019, TBC Bank adopted IFRS 16. Therefore, the comparative information for 2018 is not comparable to the information presented for 2019.
TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The Group classifies and separately discloses certain incomes and expenses, which are non-recurring by nature and are caused by extraordinary events, as one-off items in order to provide a consistent view and enable better analysis of the financial performance of the Group. Adjusted performance is an alternative performance measure and the reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under Annex 1 section on pages 44-45.
Please note, that there might be slight differences in previous periods' figures due to rounding.
Net Interest Income
In 9M 2019, net interest income amounted to GEL 573.7 million, up by 1.9% YoY, or by 3.0% without the pre-payment fee[13] of a subordinated loan and excess liquidity in 3Q 2019.
The YoY increase in interest income was primarily related to a 21.4% increase in the gross loan portfolio, offset mainly by a drop in yields on retail loans, which was driven by the continued impact of the NBG's regulation effective from January 2019, which limits the banks' ability to lend money to higher-yield retail customers. Over the same period, the rise in interest expense, without one-off reasons mentioned above, was related to the increased cost of deposits driven by the increase in the deposit portfolio by the higher share of LC denominated deposits in the total deposit portfolio.
Consequently, NIM stood at 5.5% in 9M 2019, compared to 7.0% in 9M 2018. Risk adjusted NIM for the period amounted to 4.5%, down by 0.8 pp YoY.
|
In thousands of GEL |
9M'19 |
9M'18 |
Change |
|
Interest income |
1,045,633 |
928,692 |
12.6% |
|
Interest expense |
(471,969) |
(365,473) |
29.1% |
|
Net interest income |
573,664 |
563,219 |
1.9% |
|
|
|
|
|
|
NIM |
5.5% |
7.0% |
-1.5 pp |
|
Risk adjusted NIM |
4.5% |
5.3% |
-0.8 pp |
Net fee and commission income
In 9M 2019, net fee and commission income totalled GEL 132.4 million, up by 16.7% on a YoY basis.
The increase on a YoY basis was mainly related to the rise in net fee and commission income on guarantees and letters of credit, as well as in other net fee and commission income. The increase in net fee and commission income on guarantees and letters of credit was due to a 53.8% YoY increase in the respective portfolios. The rise in other net fee and commission income was related to our new digital ecosystems (Payme, My GE and TKT) and the reclassification of certain fee expenses from this category to settlement transactions.
|
In thousands of GEL |
9M'19 |
9M'18 |
Change |
|
Net fee and commission income |
|
|
|
|
Card operations |
39,388 |
37,064 |
6.3% |
|
Settlement transactions |
48,341 |
45,080 |
7.2% |
|
Guarantees issued and letters of credit |
21,459 |
16,048 |
33.7% |
|
Other |
23,258 |
15,274 |
52.3% |
|
Total net fee and commission income |
132,446 |
113,466 |
16.7% |
Other Non-Interest Income
Total other non-interest income increased by 19.7% on a YoY basis and amounted to GEL 117.9 million in 9M 2019. This primarily resulted from the rise in net income from foreign currency operations, mainly related to the increased number and volume of FX transactions, as well as the significantly higher volatility of the local currency during 9M 2019, compared to 9M 2018.
Net insurance premium earned after claims and acquisition costs increased by 52.6% YoY, mainly related to the increased scale of the insurance business. More information about TBC insurance can be found in Annex 2 on page 46.
|
In thousands of GEL |
9M'19 |
9M'18 |
Change |
|
Other non-interest income |
|
|
|
|
Net income from foreign currency operations |
91,191 |
73,845 |
23.5% |
|
Net insurance premium earned after claims and acquisition costs[14] |
12,851 |
8,422 |
52.6% |
|
Other operating income |
13,854 |
16,254 |
-14.8% |
|
Total other non-interest income |
117,896 |
98,521 |
19.7% |
|
|
|
|
|
Credit Loss Allowance
In 9M 2019, total credit loss allowance amounted to GEL 92.2 million, down by 24.5% on a YoY basis.
The decrease was mainly due to a decrease in the credit loss allowance on loans to customers, which was driven by strong performance in all segments, as well as the portfolio product mix change, related to the continued impact of the regulations introduced in January 2019.
|
In thousands of GEL |
9M'19 |
9M'18 |
Change |
|
Credit Loss Allowance |
|
|
|
|
Credit loss allowance for loan to customers |
(87,178) |
(109,325) |
-20.3% |
|
Credit loss allowance for other financial assets |
(5,038) |
(12,878) |
-60.9% |
|
Total credit loss allowance |
(92,216) |
(122,203) |
-24.5% |
|
Operating income after credit loss allowance |
731,790 |
653,003 |
12.1% |
|
|
|
|
|
|
Cost of risk |
1.1% |
1.7% |
-0.6 pp |
Operating Expenses
In 9M 2019, total operating expenses expanded 12.7% on a YoY basis and amounted to GEL 323.6 million.
The increase was primarily due to an increase in staff costs and a rise in depreciation and amortization. The growth in staff cost was mainly driven by the increase of the scale of business and the rise in the share price[15] over the three-year period for the purpose of top and middle management share based bonuses (while the change in the number of shares did not have material effect). The increase in depreciation and amortization was mainly due to IFRS 16.
|
In thousands of GEL |
9M'19 |
9M'18 |
Change |
|
Operating expenses |
|
|
|
|
Staff costs |
(178,869) |
(157,141) |
13.8% |
|
Provisions for liabilities and charges |
1,368 |
(4,000) |
NMF |
|
Depreciation and amortization |
(49,557) |
(33,407) |
48.3% |
|
Administrative & other operating expenses |
(96,544) |
(92,577) |
4.3% |
|
Total operating expenses |
(323,602) |
(287,125) |
12.7% |
|
|
|
|
|
|
Cost to income |
39.3% |
37.0% |
2.3 pp |
NMF - no meaningful figures
Net Income
Net income for the first nine months of 2019 increased by GEL 73.0 million, or 23.7% and stood at GEL 380.3 million.
As a result, ROE stood at 21.6%, up by 0.4 pp, while ROA remained unchanged and stood at 3.1%.
|
In thousands of GEL |
9M'19 |
9M'18 |
Change |
|
|
|
|
|
|
Profit before tax |
408,188 |
365,878 |
11.6% |
|
Income tax expense |
(27,871) |
(58,530) |
-52.4% |
|
Profit for the period |
380,317 |
307,348 |
23.7% |
|
|
|
|
|
|
Return on equity |
21.6% |
21.2% |
0.4 pp |
|
Return on assets |
3.1% |
3.1% |
0.0 pp |
Funding and Liquidity
In September 2019, the National Bank of Georgia introduced net stable funding ratio (NSFR) per Basel III standards. NSFR for 30 September 2019 per NBG's new methodology stood at 132.6%, compared to 100% limit. The issuance of USD 300 million Eurob ond in June 2019 and USD 125 million AT1 bonds in July 2019 increased our liquidity positions, as a result, our liquidity ratio and total liquidity coverage ratio were up by 7.3 pp and 19.9 pp on a YoY basis, respectively.
|
|
30-Sep-19 |
30-Sep-18 |
Change |
|
|
|
|
|
|
|
|
|
|
|
Minimum net stable funding ratio, as defined by NBG |
100.0% |
N/A |
N/A |
|
Net stable funding ratio |
137.7% |
131.9%[16] |
5.8 pp |
|
|
|
|
|
|
Net loans to deposits + IFI funding |
96.9% |
88.0% |
8.9 pp |
|
Leverage (Times) |
7.3x |
7.0x |
0.3x |
|
|
|
|
|
|
Minimum liquidity ratio, as defined by the NBG |
30.0% |
30.0% |
0.0 pp |
|
Liquidity ratio, as defined by the NBG |
39.2% |
31.9% |
7.3 pp |
|
|
|
|
|
|
Minimum total liquidity coverage ratio, as defined by the NBG |
100.0% |
100.0% |
0.0 pp |
|
Minimum LCR in GEL, as defined by the NBG |
75.0% |
75.0% |
0.0 pp |
|
Minimum LCR in FC, as defined by the NBG |
100.0% |
100.0% |
0.0 pp |
|
|
|
|
|
|
Total liquidity coverage ratio, as defined by the NBG |
131.6% |
111.6% |
19.9 pp |
|
LCR in GEL, as defined by the NBG |
87.7% |
86.5% |
1.2 pp |
|
LCR in FC, as defined by the NBG |
162.8% |
128.1% |
34.7 pp |
Regulatory Capital
As of 30 September 2019, the Bank's Basel III CET 1 capital stood at 11.9%, down by 0.5 pp on a YoY basis. The drop was mainly driven by the portfolio increase and GEL depreciation during 2019. The effect was partially offset by net income generation over the same period. Despite the above mentioned factors, the Bank's total and tier 1 capital ratios increased by 1.9 pp and 3.0 pp on a YoY basis, respectively. The increase was mainly driven by the issuance of the AT1 bonds in the amount of USD 125 million, that were reflected in the capital in July 2019.
|
In thousands of GEL |
30-Sep-19 |
30-Sep-18 |
Change |
|
|
|
|
|
|
CET 1 Capital |
1,770,734 |
1,532,058 |
15.6% |
|
Tier 1 Capital |
2,191,792 |
1,580,547 |
38.7% |
|
Total Capital |
2,894,704 |
2,020,501 |
43.3% |
|
Total Risk-weighted Exposures |
14,889,695 |
12,305,756 |
21.0% |
|
|
|
|
|
|
Minimum CET 1 ratio |
9.8% |
8.3% |
1.5 pp |
|
CET 1 Capital adequacy ratio |
11.9% |
12.4% |
-0.5 pp |
|
|
|
|
|
|
Minimum Tier 1 ratio |
11.9% |
10.3% |
1.6 pp |
|
Tier 1 Capital adequacy ratio |
14.7% |
12.8% |
1.9 pp |
|
|
|
|
|
|
Minimum total capital adequacy ratio |
16.7% |
15.8% |
0.9 pp |
|
Total Capital adequacy ratio |
19.4% |
16.4% |
3.0 pp |
Loan Portfolio
As of 30 September 2019, the gross loan portfolio reached GEL 11,680.3 million, up by 21.4% YoY, or by 14.3% on a constant currency basis, mainly supported by growth in the corporate and MSME segments. Over the same period, the proportion of gross loans denominated in foreign currency decreased by 1.0 pp on a YoY basis and accounted for 58.2% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency decreased by 3.6 pp and stood at 55.6%.
At the end of September 2019, our market share in total loans stood at 38.7% up by 0.3 pp YoY, while our loan market share in legal entities was 37.7% up by 1.1 pp YoY, and our loan market share in individuals stood at 39.5%, down by 0.4 pp YoY.
|
In thousands of GEL |
30-Sep-19 |
30-Sep-18 |
Change |
|
Loans and advances to customers |
|
|
|
|
|
|
|
|
|
Retail |
4,903,134 |
4,446,397 |
10.3% |
|
Retail loans GEL |
2,284,431 |
2,059,297 |
10.9% |
|
Retail loans FC |
2,618,703 |
2,387,100 |
9.7% |
|
Corporate |
4,029,321 |
2,891,628 |
39.3% |
|
Corporate loans GEL |
1,248,851 |
771,611 |
61.8% |
|
Corporate loans FC |
2,780,470 |
2,120,017 |
31.2% |
|
MSME |
2,747,802 |
2,284,538 |
20.3% |
|
MSME loans GEL |
1,354,789 |
1,093,199 |
23.9% |
|
MSME loans FC |
1,393,013 |
1,191,339 |
16.9% |
|
Total loans and advances to customers |
11,680,257 |
9,622,563 |
21.4% |
|
|
9M'19 |
9M'18 |
Change |
|
Loan yields |
11.1% |
12.4% |
-1.3 pp |
|
Loan yields GEL |
15.7% |
18.0% |
-2.3 pp |
|
Loan yields FC |
7.9% |
8.5% |
-0.6 pp |
|
Retail Loan Yields |
12.3% |
14.4% |
-2.1 pp |
|
Retail loan yields GEL |
18.3% |
20.8% |
-2.5 pp |
|
Retail loan yields FC |
7.3% |
8.0% |
-0.7 pp |
|
Corporate Loan Yields |
9.2% |
9.4% |
-0.2 pp |
|
Corporate loan yields GEL |
10.8% |
11.1% |
-0.3 pp |
|
Corporate loan yields FC |
8.5% |
8.8% |
-0.3 pp |
|
MSME Loan Yields |
11.4% |
12.1% |
-0.7 pp |
|
MSME loan yields GEL |
15.3% |
16.1% |
-0.8 pp |
|
MSME loan yields FC |
7.9% |
8.7% |
-0.8 pp |
Loan Portfolio Quality
The total PAR 30 improved by 0.3 pp on a YoY basis, driven by the retail segment, while total NPLs stood at 2.9%, down by 0.2 pp, which was primarily attributable to the strong performance of the corporate segment. NPLs coverage ratio excluding collaterals stood at 97.7%, down by 15.5 pp, which was mainly driven by the retail and MSME segment.
|
Par 30 |
30-Sep-19 |
30-Sep-18 |
Change |
|
Retail |
2.3% |
3.0% |
-0.7 pp |
|
Corporate |
0.8% |
0.8% |
0.0 pp |
|
MSME |
3.0% |
2.7% |
0.3 pp |
|
Total Loans |
2.0% |
2.3% |
-0.3 pp |
|
Non-performing Loans |
30-Sep-19 |
30-Sep-18 |
Change |
|
Retail |
3.2% |
3.0% |
0.2 pp |
|
Corporate |
1.8% |
2.6% |
-0.8 pp |
|
MSME |
4.3% |
4.1% |
0.2 pp |
|
Total Loans |
2.9% |
3.1% |
-0.2 pp |
|
NPLs Coverage |
Sep-19 |
Sep-18 |
||
|
|
Exc. Collateral |
Incl. Collateral |
Exc. Collateral |
Incl. Collateral |
|
Corporate |
118.5% |
317.8% |
104.3% |
242.5% |
|
Retail |
113.2% |
183.9% |
140.8% |
206.4% |
|
MSME |
64.9% |
179.2% |
80.8% |
184.8% |
|
Total |
97.7% |
209.9% |
113.2% |
209.0% |
Cost of risk
The total cost of risk for 9M 2019 stood at 1.1%, down by 0.6 pp YoY, driven by strong performance in all segments, as well as the portfolio product mix change, related to the continued impact of the regulations introduced in January 2019.
|
Cost of Risk |
9M'19 |
9M'18 |
Change |
|
|
|
|
|
|
Retail |
2.1% |
2.7% |
-0.6 pp |
|
Corporate |
0.0% |
0.5% |
-0.5 pp |
|
MSME |
0.8% |
1.1% |
-0.3 pp |
|
Total |
1.1% |
1.7% |
-0.6 pp |
Deposit Portfolio
The total deposit portfolio increased by 13.2% YoY and amounted to GEL 9,897.3 million, while on a constant currency basis the total deposit portfolio was up by 5.3%. The proportion of deposits denominated in foreign currency decreased by 1.1 pp on a YoY basis and accounted for 65.5% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency decreased by 3.7 pp and stood at 62.9%.
By the end September 2019, our market share in deposits amounted to 39.3%, down by 1.0 pp YoY, and our market share in deposits to legal entities stood at 40.1% up by 0.7 pp. Our market share in deposits to individuals stood at 38.6%, down by 2.5 pp YoY.
|
In thousands of GEL |
30-Sep-19 |
30-Sep-18 |
Change |
|
Customer Accounts |
|
|
|
|
|
|
|
|
|
Retail |
5,550,227 |
4,850,586 |
14.4% |
|
Retail deposits GEL |
1,057,854 |
825,879 |
28.1% |
|
Retail deposits FC |
4,492,373 |
4,024,707 |
11.6% |
|
Corporate |
3,242,875 |
2,920,526 |
11.0% |
|
Corporate deposits GEL |
1,770,123 |
1,585,126 |
11.7% |
|
Corporate deposits FC |
1,472,752 |
1,335,400 |
10.3% |
|
MSME |
1,104,221 |
969,337 |
13.9% |
|
MSME deposits GEL |
586,603 |
509,021 |
15.2% |
|
MSME deposits FC |
517,618 |
460,316 |
12.4% |
|
Total Customer Accounts |
9,897,323 |
8,740,449 |
13.2% |
|
|
9M'19 |
9M'18 |
Change |
|
Deposit rates |
3.3% |
3.3% |
0.0 pp |
|
Deposit rates GEL |
5.7% |
5.7% |
0.0 pp |
|
Deposit rates FC |
2.0% |
2.1% |
-0.1 pp |
|
Retail Deposit Yields |
2.8% |
2.7% |
0.1 pp |
|
Retail deposit rates GEL |
5.0% |
4.4% |
0.6 pp |
|
Retail deposit rates FC |
2.3% |
2.4% |
-0.1 pp |
|
Corporate Deposit Yields |
4.9% |
5.1% |
-0.2 pp |
|
Corporate deposit rates GEL |
7.3% |
7.8% |
-0.5 pp |
|
Corporate deposit rates FC |
1.7% |
1.9% |
-0.2 pp |
|
MSME Deposit Yields |
0.9% |
1.0% |
-0.1% |
|
MSME deposit rates GEL |
1.5% |
1.7% |
-0.2 pp |
|
MSME deposit rates FC |
0.3% |
0.4% |
-0.1 pp |
Segment definition and PL
Business Segments
The segment definitions are as follows (updated in 2019):
· Corporate - legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which have been granted facilities with more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;
· Retail - non-business individual customers; all individual customers are included in retail deposits;
· MSME - business customers who are not included in the corporate segment; or legal entities which have been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and
· Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.
Business customers are all legal entities or individuals who have been granted a loan for business purposes.
Income Statement by Segments
|
9M'19 |
Retail |
MSME |
Corporate |
Corp.Centre |
Total |
|
Interest income |
435,007 |
218,437 |
248,678 |
143,511 |
1,045,633 |
|
Interest expense |
(111,665) |
(7,445) |
(118,772) |
(234,087) |
(471,969) |
|
Net transfer pricing |
(48,882) |
(72,695) |
30,483 |
91,094 |
- |
|
Net interest income |
274,460 |
138,297 |
160,389 |
518 |
573,664 |
|
Fee and commission income |
146,770 |
18,434 |
36,568 |
4,908 |
206,680 |
|
Fee and commission expense |
(62,196) |
(6,304) |
(4,936) |
(798) |
(74,234) |
|
Net fee and commission income |
84,574 |
12,130 |
31,632 |
4,110 |
132,446 |
|
Net insurance premium earned after claims and acquisition costs |
- |
- |
- |
12,851 |
12,851 |
|
Net income from foreign currency operations |
22,971 |
17,916 |
36,540 |
556 |
77,983 |
|
Foreign exchange translation gains less losses/(losses less gains) |
- |
- |
- |
13,208 |
13,208 |
|
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income |
(266) |
- |
- |
817 |
551 |
|
Net losses from derivative financial instruments |
- |
- |
- |
149 |
149 |
|
Other operating income |
7,531 |
907 |
1,742 |
2,460 |
12,640 |
|
Share of profit of associates |
- |
- |
- |
514 |
514 |
|
Other operating non-interest income and insurance profit |
30,236 |
18,823 |
38,282 |
30,555 |
117,896 |
|
Credit loss allowance for loans to customers |
(73,077) |
(14,765) |
664 |
- |
(87,178) |
|
Credit loss allowance for performance guarantees and credit related commitments |
425 |
359 |
(2,650) |
- |
(1,866) |
|
Credit loss allowance for investments in finance lease |
- |
- |
- |
(33) |
(33) |
|
Credit loss allowance for other financial assets |
137 |
- |
2,440 |
(5,510) |
(2,933) |
|
Credit loss allowance for financial assets measured at fair value through other comprehensive income |
- |
- |
(92) |
(114) |
(206) |
|
Profit before G&A expenses and income taxes |
316,755 |
154,844 |
230,665 |
29,526 |
731,790 |
|
Staff costs |
(99,378) |
(35,640) |
(27,301) |
(16,550) |
(178,869) |
|
Depreciation and amortization |
(38,275) |
(5,957) |
(2,291) |
(3,034) |
(49,557) |
|
Provision for liabilities and charges |
- |
- |
- |
1,368 |
1,368 |
|
Administrative and other operating expenses |
(60,115) |
(16,614) |
(12,481) |
(7,334) |
(96,544) |
|
Operating expenses |
(197,768) |
(58,211) |
(42,073) |
(25,550) |
(323,602) |
|
Profit before tax |
118,987 |
96,633 |
188,592 |
3,976 |
408,188 |
|
Income tax expense |
(12,041) |
(10,388) |
(21,792) |
16,350 |
(27,871) |
|
Profit for the year |
106,946 |
86,245 |
166,800 |
20,326 |
380,317 |
Consolidated Financial Statements of TBC Bank Group PLC
|
Consolidated Balance Sheet |
|
|
|
|
In thousands of GEL |
30-Sep-19 |
30-Sep-18 |
|
|
Cash and cash equivalents |
1,349,260 |
1,114,672 |
|
|
Due from other banks |
30,297 |
152,010 |
|
|
Mandatory cash balances with National Bank of Georgia |
1,954,662 |
1,426,773 |
|
|
Loans and advances to customers |
11,344,779 |
9,279,982 |
|
|
Investment securities measured at fair value through other comprehensive income |
1,177,963 |
868,060 |
|
|
Bonds carried at amortized cost |
871,640 |
518,179 |
|
|
Investments in finance leases |
241,840 |
183,715 |
|
|
Investment properties |
78,449 |
78,274 |
|
|
Current income tax prepayment |
29,599 |
7,650 |
|
|
Deferred income tax asset |
2,179 |
2,499 |
|
|
Other financial assets |
243,330 |
103,520 |
|
|
Other assets |
205,066 |
186,061 |
|
|
Premises and equipment |
381,065 |
375,002 |
|
|
Right of use assets |
59,040 |
- |
|
|
Intangible assets |
134,837 |
96,662 |
|
|
Goodwill |
63,215 |
28,718 |
|
|
Investments in associates |
2,536 |
2,220 |
|
|
TOTAL ASSETS |
18,169,757 |
14,423,997 |
|
|
LIABILITIES |
|
|
|
|
Due to credit institutions |
3,613,093 |
2,981,269 |
|
|
Customer accounts |
9,897,323 |
8,740,449 |
|
|
Lease liabilities |
62,126 |
- |
|
|
Other financial liabilities |
96,781 |
90,966 |
|
|
Current income tax liability |
1,128 |
30 |
|
|
Debt Securities in issue |
1,251,649 |
13,027 |
|
|
Deferred income tax liability |
21,142 |
27,202 |
|
|
Provisions for liabilities and charges |
22,729 |
16,329 |
|
|
Other liabilities |
88,672 |
85,972 |
|
|
Subordinated debt |
615,939 |
412,803 |
|
|
TOTAL LIABILITIES |
15,670,582 |
12,368,047 |
|
|
EQUITY |
|
|
|
|
Share capital |
1,682 |
1,650 |
|
|
Shares held by trust |
(15) |
N/A |
|
|
Share premium |
828,936 |
796,854 |
|
|
Retained earnings |
1,794,054 |
1,372,798 |
|
|
Group re-organisation reserve |
(162,166) |
(162,166) |
|
|
Share based payment reserve |
(28,104) |
(18,689) |
|
|
Revaluation reserve for premises |
56,606 |
64,962 |
|
|
Fair value reserve |
7,351 |
4,875 |
|
|
Cumulative currency translation reserve |
(6,368) |
(7,277) |
|
|
Net assets attributable to owners |
2,491,976 |
2,053,007 |
|
|
Non-controlling interest |
7,199 |
2,943 |
|
|
TOTAL EQUITY |
2,499,175 |
2,055,950 |
|
|
TOTAL LIABILITIES AND EQUITY |
18,169,757 |
14,423,997 |
|
|
Consolidated Statement of Profit or Loss and Other Comprehensive Income |
|
|
|
|
In thousands of GEL |
9M'19 |
9M'18 |
|
|
Interest income |
1,045,633 |
928,692 |
|
|
Interest expense |
(471,969) |
(365,473) |
|
|
Net interest income |
573,664 |
563,219 |
|
|
Fee and commission income |
206,680 |
168,652 |
|
|
Fee and commission expense |
(74,234) |
(55,186) |
|
|
Net fee and commission income |
132,446 |
113,466 |
|
|
Net insurance premiums earned |
25,813 |
16,578 |
|
|
Net insurance claims incurred and agents' commissions |
(12,962) |
(8,156) |
|
|
Net insurance premium earned after claims and acquisition costs |
12,851 |
8,422 |
|
|
Net income from foreign currency operations |
77,983 |
63,420 |
|
|
Net gain/(losses) from foreign exchange translation |
13,208 |
10,425 |
|
|
Net gains/(losses) from derivative financial instruments |
551 |
357 |
|
|
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income |
149 |
2 |
|
|
Other operating income |
12,640 |
14,953 |
|
|
Share of profit of associates |
514 |
942 |
|
|
Other operating non-interest income |
105,045 |
90,099 |
|
|
Credit loss allowance for loans to customers |
(87,178) |
(109,325) |
|
|
Credit loss allowance for investments in finance lease |
(33) |
(986) |
|
|
Credit loss allowance for performance guarantees and credit related commitments |
(1,866) |
(2,524) |
|
|
Credit loss allowance for other financial assets |
(2,933) |
(9,304) |
|
|
Credit loss allowance for financial assets measured at fair value through other comprehensive income |
(206) |
(64) |
|
|
Operating income after credit loss allowance for impairment |
731,790 |
653,003 |
|
|
Staff costs |
(178,869) |
(157,141) |
|
|
Depreciation and amortization |
(49,557) |
(33,407) |
|
|
(Provision for)/ recovery of liabilities and charges |
1,368 |
(4,000) |
|
|
Administrative and other operating expenses |
(96,544) |
(92,577) |
|
|
Operating expenses |
(323,602) |
(287,125) |
|
|
Profit before tax |
408,188 |
365,878 |
|
|
Income tax expense |
(27,871) |
(58,530) |
|
|
Profit for the period |
380,317 |
307,348 |
|
|
Other comprehensive income: |
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
Movement in fair value reserve |
(1,328) |
3,192 |
|
|
Exchange differences on translation to presentation currency |
568 |
85 |
|
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
Income tax recorded directly in other comprehensive income |
- |
(5,151) |
|
|
Other comprehensive income for the period |
(760) |
(1,874) |
|
|
Total comprehensive income for the period |
379,557 |
305,474 |
|
|
Profit attributable to: |
|
|
|
|
- Shareholders of TBCG |
378,479 |
305,126 |
|
|
- Non-controlling interest |
1,838 |
2,222 |
|
|
Profit for the period |
380,317 |
307,348 |
|
|
Total comprehensive income is attributable to: |
|
|
|
|
- Shareholders of TBCG |
377,721 |
303,273 |
|
|
- Non-controlling interest |
1,836 |
2,201 |
|
|
Total comprehensive income for the period |
379,557 |
305,474 |
|
|
Consolidated Statements of Cash Flows |
|
|
|
In thousands of GEL |
30-Sep-19 |
30-Sep-18 |
|
Cash flows from/(used in) operating activities |
|
|
|
Interest received |
993,757 |
898,534 |
|
Interest paid |
(452,461) |
(357,224) |
|
Fees and commissions received |
200,884 |
180,489 |
|
Fees and commissions paid |
(74,179) |
(55,190) |
|
Insurance premium received |
30,108 |
18,045 |
|
Insurance claims paid |
(15,821) |
(7,803) |
|
Income received from trading in foreign currencies |
77,983 |
63,420 |
|
Other operating income received |
28,589 |
4,379 |
|
Staff costs paid |
(167,557) |
(153,876) |
|
Administrative and other operating expenses paid |
(124,244) |
(97,685) |
|
Income tax paid |
(57,330) |
(24,758) |
|
Cash flows from operating activities before changes in operating assets and liabilities |
439,729 |
468,331 |
|
Net change in operating assets |
|
|
|
Due from other banks and mandatory cash balances with the National Bank of Georgia |
(507,948) |
(479,208) |
|
Loans and advances to customers |
(818,366) |
(1,064,695) |
|
Investment in finance lease |
(25,113) |
(37,065) |
|
Other financial assets |
(70,535) |
38,446 |
|
Other assets |
20,757 |
(9,900) |
|
Net change in operating liabilities |
|
|
|
Due to other banks |
56,845 |
116,376 |
|
Customer accounts |
208,271 |
887,193 |
|
Other financial liabilities |
(81,840) |
(9,738) |
|
Other liabilities and provision for liabilities and charges |
7,683 |
6,484 |
|
Net cash from operating activities |
(770,517) |
(83,776) |
|
Cash flows from/(used in) investing activities |
|
|
|
Acquisition of investment securities measured at fair value through other comprehensive income |
(1,212,044) |
(479,092) |
|
Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income |
1,061,708 |
272,477 |
|
Acquisition of bonds carried at amortized cost |
(441,715) |
(235,480) |
|
Proceeds from redemption of bonds carried at amortized cost |
209,683 |
167,258 |
|
Acquisition of premises, equipment and intangible assets |
(83,494) |
(55,321) |
|
Disposal of premises, equipment and intangible assets |
13,030 |
1,140 |
|
Proceeds from disposal of investment property |
10,040 |
8,448 |
|
Acquisition of subsidiaries, net of cash acquired |
(33,741) |
- |
|
Net cash used in investing activities |
(476,533) |
(320,570) |
|
Cash flows from/(used in) financing activities |
|
|
|
Proceeds from other borrowed funds |
1,479,407 |
1,456,759 |
|
Redemption of other borrowed funds |
(1,121,017) |
(1,250,372) |
|
Redemption of subordinated debt |
(104,079) |
(32,166) |
|
Proceeds from debt securities in issue |
1,182,844 |
(7,446) |
|
Redemption of debt securities in issue |
(5,980) |
- |
|
Dividends paid |
(91,926) |
(85,483) |
|
Net cash flows from financing activities |
1,339,249 |
81,292 |
|
Effect of exchange rate changes on cash and cash equivalents |
90,150 |
6,249 |
|
Net increase in cash and cash equivalents |
182,349 |
(316,805) |
|
Cash and cash equivalents at the beginning of the year |
1,166,911 |
1,431,477 |
|
Cash and cash equivalents at the end of the year |
1,349,260 |
1,114,672 |
Key Ratios
Average Balances
The 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. These were used by the management for monitoring and control purposes.
|
Key Ratios |
|
|
|
|
|
|
|
Ratios (based on monthly averages, where applicable) |
9M'19 |
9M'18 |
|
|
|
|
|
Profitability ratios: |
|
|
|
Underlying ROE1 |
21.8% |
22.3% |
|
Reported ROE2 |
21.6% |
21.2% |
|
Underlying ROA3 |
3.2% |
3.3% |
|
Reported ROA4 |
3.1% |
3.1% |
|
ROE before credit loss allowance5 |
26.9% |
29.6% |
|
Underlying Cost to Income6 |
38.6% |
37.0% |
|
Reported Cost to Income7 |
39.3% |
37.0% |
|
NIM8 |
5.5% |
7.0% |
|
Risk Adjusted NIM9 |
4.5% |
5.3% |
|
Loan Yields10 |
11.1% |
12.4% |
|
Risk Adjusted Loan Yields11 |
10.1% |
10.7% |
|
Deposit rates12 |
3.3% |
3.3% |
|
Yields on interest Earning Assets13 |
10.1% |
11.5% |
|
Cost of Funding14 |
4.6% |
4.4% |
|
Spread15 |
5.5% |
7.1% |
|
|
|
|
|
Asset quality and portfolio concentration: |
|
|
|
Cost of Risk16 |
1.1% |
1.7% |
|
PAR 90 to Gross Loans17 |
1.2% |
1.3% |
|
NPLs to Gross Loans18 |
2.9% |
3.1% |
|
NPLs coverage19 |
97.7% |
113.2% |
|
NPLs coverage with collateral20 |
209.9% |
209.0% |
|
Credit loss level to Gross Loans21 |
2.9% |
3.6% |
|
Related Party Loans to Gross Loans22 |
0.1% |
0.1% |
|
Top 10 Borrowers to Total Portfolio23 |
9.0% |
10.3% |
|
Top 20 Borrowers to Total Portfolio24 |
13.0% |
14.1% |
|
|
|
|
|
Capital optimisation: |
|
|
|
Net Loans to Deposits plus IFI Funding25 |
96.9% |
88.0% |
|
Net Stable Funding Ratio26 |
137.7% |
131.9%[17] |
|
Liquidity Coverage Ratio27 |
131.6% |
111.6% |
|
Leverage28 |
7.3x |
7.0x |
|
CET 1 CAR (Basel III)29 |
11.9% |
12.4% |
|
Regulatory Tier 1 CAR (Basel III)30 |
14.7% |
12.8% |
|
Regulatory Total 1 CAR (Basel III)31 |
19.4% |
16.4% |
Ratio definitions
1. Underlying return on average total equity (ROE) equals underlying net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period adjusted for the respective one-off items; Annualised where applicable.
2. Reported return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.
3. Underlying return on average total assets (ROA) equals underlying net income of the period divided by monthly average total assets for the same period. Annualised where applicable.
4. Reported return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Annualised where applicable.
5. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.
6. Underlying cost to income ratio equals total underlying 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).
7. Reported 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).
8. 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, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG that currently have negative interest, and includes other earning items from due from banks.
9. Risk Adjusted Net Interest Margin is NIM minus the cost of risk without one-offs and the currency effect.
10. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
11. Risk Adjusted Loan yield is loan yield minus the cost of risk without one-offs and currency effect.
12. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
13. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
14. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
15. 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).
16. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
17. 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.
18. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a 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.
19. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.
20. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
21. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
22. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
23. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
24. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
25. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
26. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines.
27. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
28. Leverage equals total assets to total equity.
29. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
30. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
31. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the YoY growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6151 as of 30 September 2018. As of 30 September 2019, the USD/GEL exchange rate equalled 2.9552. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 9M 2019 of 2.7765, 9M 2018 of 2.4871.
Additional Disclosures
Subsidiaries of TBC Bank Group PLC[18]
|
|
Ownership / voting |
Country |
Year of incorporation |
Industry |
Total Assets |
|
|
Subsidiary |
Amount GEL'000 |
% in TBC Group |
||||
|
JSC TBC Bank |
99.9% |
Georgia |
1992 |
Banking |
17,662,713 |
97.21% |
|
United Financial Corporation JSC |
98.7% |
Georgia |
1997 |
Card processing |
9,108 |
0.05% |
|
TBC Capital LLC |
100.0% |
Georgia |
1999 |
Brokerage |
3,027 |
0.02% |
|
TBC Leasing JSC |
100.0% |
Georgia |
2003 |
Leasing |
306,941 |
1.69% |
|
TBC Kredit LLC |
100.0% |
Azerbaijan |
1999 |
Non-banking credit institution |
26,119 |
0.14% |
|
Banking System Service Company LLC |
100.0% |
Georgia |
2009 |
Information services |
1,064 |
0.01% |
|
TBC Pay LLC |
100.0% |
Georgia |
2009 |
Processing |
33,856 |
0.19% |
|
Index LLC |
100.0% |
Georgia |
2011 |
Real estate management |
873 |
0.00% |
|
TBC Invest LLC |
100.0% |
Israel |
2011 |
PR and marketing |
211 |
0.00% |
|
BG LLC* |
0.0% |
Georgia |
2018 |
Asset management |
16,854 |
0.09% |
|
JSC TBC Insurance |
100.0% |
Georgia |
2014 |
Insurance |
60,272 |
0.33% |
|
Redmed LTD |
100.0% |
Georgia |
2019 |
E-commerce |
221 |
0.00% |
|
TBC International LLC |
100.0% |
Georgia |
2019 |
Asset management |
217 |
0.00% |
|
Swoop JSC |
100.0% |
Georgia |
2010 |
Retail Trade |
513 |
0.00% |
|
GE Commerce LTD |
100.0% |
Georgia |
2018 |
Retail Trade |
3,361 |
0.02% |
|
LLC Online Tickets |
55.0% |
Georgia |
2015 |
Software Services |
1,563 |
0.01% |
|
All property ge LLC |
90.0% |
Georgia |
2013 |
Real estate management |
1,022 |
0.01% |
|
My.ge LLC |
65.0% |
Georgia |
2008 |
E-commerce, Housing and Auto |
3,253 |
0.02% |
|
Inspired LLC |
51.0% |
Uzbekistan |
2011 |
Processing |
2,011 |
0.01% |
|
(*)The Group has de facto control over the subsidiaries (control without legal form of ownership) |
||||||
Update on strategic objectives
Our mission: Make life easier
Financial services with strong focus on digital:
o Book value as of 30 September 2019 - GEL 2.3 billion
o Total assets as of 30 September 2019 - GEL 18.0 billion
o Number of customers as of 30 September 2019 - 2.6 million
Ecosystems:
o Revenue[19] - GEL 56.6 million for 9M 2019, up by 76% YoY
o Net profit[20] - GEL 25.1 million for 9M 2019, up by 75% YoY
o Number of visitors[21] in September 2019 - 3.0-5.5 million
TBC Bank drives 25% of the ecosystems' revenue
Our customer centric ecosystems
We are increasing our touchpoints with customers by creating secure customer-centric digital ecosystems that help our customers to satisfy their needs in the most convenient and seamless way possible.
Our ambitions are to:
o Establish new standards of customer experience;
o Facilitate digital sales and engagement;
o Create new revenue streams;
o Collect more valuable customer data.
Payments ecosystem
|
|
9M'19 |
9M'18 |
Change |
|
Number of payments[22] (million) |
245.5 |
208.4 |
17.8% |
|
Payments ecosystem[23] |
175.6 |
150.1 |
17.0% |
|
Other payments business[24] |
69.9 |
58.3 |
19.9% |
|
Volume of payments22 (GEL billion) |
107.3 |
89.2 |
20.3% |
|
Payments ecosystem23 |
8.5 |
6.7 |
26.9% |
|
Other payments business24 |
98.8 |
82.5 |
19.8% |
o We are Number 1 in E-com & POS transactions volume, with a market share of above 53%[25];
o We are among the world's best with a number of contactless payments above 86%[26]; and
o We have a great innovation record with a lot of "first in the region" payment innovations such as stickers, P2P, contactless cash withdrawal, Voice payments, Apple Pay, ATM QR withdrawal etc.
Our aspirations
o Annual growth rate for payments commission income of 20%;
o Increase annual net revenue from GEL 109 mln (with 42% contribution from ecosystems) in 2018 to GEL 218 mln by 2022.
TBC Pay
TBC Pay is one of Georgia's leading payment companies. TBC Pay operates a wide network of self-service terminals all over Georgia.
Services:
o Traditional services: self-service terminals and an online platform (www.tbcpay.ge) that enable individuals to perform payments for various daily services instantly in an interactive way on a 24-hour basis;
o New services: mobile application, easiest instant money transfer services between Georgian cards, template management and e-wallet.
Financials:
o The business is self-sustainable;
o TBC Bank drives 25% of TBC Pay's revenue.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million) |
24.4 |
25.0[27] |
|
Number of transactions (million) |
39.0 |
41.527 |
|
EBITDA (GEL million) |
12.1 |
|
Payme
Payme is a leading digital payment service provider in Uzbekistan that supplies high-quality payment solutions to its 1.6 million users[28].
Services:
o Traditional services: Utility payments, P2P transfers, Loan repayments, mPOS for QR-based payments, E-commerce purchases;
o New services: New application, Payme 2.0, was created and beta version was launched in July with upgraded interface design and new capabilities.
Financials:
o Investment in 2019 - USD 5.5 million for 51% shareholding;
o The business is self-sustainable.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million) |
5.6 |
15.2[29] |
|
Number of registered users (thousand) |
1,577 |
2,517 |
|
Number of transactions (million) |
26.7 |
45.7 |
|
EBITDA (GEL million) |
3.7 |
|
Housing ecosystem
Livo
Livo is the first housing digital ecosystem in Georgia, offering a full range of services needed when buying or renting a home, with an estimated market share of 20%[30].
Services:
o Traditional services: personal profiles, advertisements and 3D tours & photographers;
o Innovative services: mortgage loans (TBC and VTB Bank) the first real-estate valuation service in Georgia within 24 hours, premier agent service for brokers.
Financials:
o Investment in 2019 - USD 725 thousand (USD 225 thousand for 90% shareholding plus USD 500 thousand for future development);
o Planned investment in 2020 is - GEL 2.5 million from TBC;
o Break-even is planned in 3Q 2020;
o TBC Bank drives 85% of Livo's revenue, which we plan to reduce to 65% in 2020.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million) |
1.4 |
3.9 |
|
Number of unique visitors (thousand) |
281 |
450 |
|
Number of listings (thousand) |
17 |
48 |
|
EBITDA (GEL million) |
(0.4) |
|
MyHome.ge
The leading classified digital platform in Georgia for real-estate purchase and renting, with an estimated market share of 35%30.
Services:
o Traditional services: personal profiles, advertisements, drone & photographers;
o Given the large number of current visitors, the strategy for 2020 is to diversify service offerings and increase revenue stream.
Financials:
o Allocated initial investment in August 2019 based on revenue contribution (35%) - GEL 6.7 million[31];
o The business is self-sustainable.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million) |
1.2 |
1.6 |
|
Number of unique visitors (thousand) |
467 |
500 |
|
Number of listings (thousand) |
130 |
139 |
|
EBITDA (GEL million) |
0.4 |
|
E-commerce ecosystem
Vendoo
An asset light platform, which is a key intermediary between buyers and sellers, modelled on industry peers such as Alibaba and Rakuten.
The estimated total addressable market is around GEL 200 million in 2019 and is expected to growth by 30% in 2020.
Offerings:
o Delivery within 24 hours;
o Offerings: Electronics, personal care products, gardening & housing, toys, household chemistry, books & stationary and beverages;
o Over 200 large merchants; and
o Synergies with our banking operations: installment loans, participation in the loyalty program - Ertguli.
Financials:
o Investment in 2018 and 2019 was GEL 1.5 million and GEL 3.9 million respectively;
o Planned investment in 2019-2020 is GEL 3.4 million from TBC;
o Break-even is planned in 4Q 2020;
o GMV (Gross Merchandise Volume) amounted to GEL 0.8 million in 9M 2019 and is forecasted to reach GEL 26.8 million in 9M 2020.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million)[32] |
1.1 |
22.7 |
|
Number of unique visitors (thousand) |
514 |
600 |
|
SKUs[33] (thousand) |
20 |
60 |
|
EBITDA (GEL million)32 |
(2.5) |
|
MyMarket.ge & MyShop.ge
These platforms are the number one players in C2C and B2C e-commerce in Georgia, with an estimate market share of 80%[34].
Offerings:
o Myshop is an online outlet platform offering a wide range of products;
o Mymarket offers both brand new and secondary products as well as various household services.
Financials:
o Allocated initial investment in August 2019 based on revenue contribution (22%) was GEL 4.2 million[35];
o The business is self-sustainable.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million) |
1.0 |
1.4 |
|
Number of unique visitors (thousand) |
837 |
917 |
|
Number of sellers (thousand) |
35 |
44 |
|
EBITDA (GEL million) |
0.3 |
|
Auto ecosystem
MyAuto.ge & MyParts.ge
Market leader in the automotive and spare parts with an estimated market share of 80%[36] in each.
Offerings:
o Purchase and renting of secondary cars;
o Purchase of auto parts;
o Myauto has 50 dealers and 33,000 sellers; and
o Myparts has 44 Merchants and 8,440 sellers.
Financials:
o Allocated initial investment in August 2019 based on revenue contribution (43%) was GEL 8.5 million[37];
o The business is self-sustainable.
|
|
9M'19 |
9M'20 F |
|
Revenue (GEL million) |
2.0 |
2.5 |
|
Number of unique visitors (thousand) |
1,391 |
1,530 |
|
Number of listings (thousand) |
345 |
404 |
|
EBITDA (GEL million) |
0.7 |
|
Space - Fully digital bank
Space was developed over the course of just 8 months[38] by a dedicated team of 35 professionals. The development costs before launch of Beta version in May 2019 amounted to GEL 1.4 million.
Key metrics as of 30 September 2019
|
Number of downloads |
428 thousand |
|
Total registered customers |
158 thousand, out of whom 47% are TBC's dormant customers |
|
Number of transactions (3Q'19) |
700 thousand, out of which 8% was conducted by TBC cards and 8% by other Georgian banks' cards |
|
Transaction amount (3Q'19) |
GEL 38 million, out of which 12% was conducted by TBC cards and 12% by other Georgian banks' cards |
|
Loan portfolio |
GEL 23 million |
|
Number of borrowers |
9 thousand |
|
Number of total cards |
101 thousand, out of which 26% was TBC cards and 17% other Georgian banks' cards |
|
Number of space cards |
58 thousand |
Our Products
o Instant Consumer Loan 24/7;
o Instant Money Transfer to any bank 24/7;
o Use app with other bank cards;
o Mobile top and bill payments; and
o QR instalments.
Transformation into a data driven organization
Strengthen TBC's market leading position by becoming a data driven organization.
Why?
In order to become customer centric company and reach a non-replicable competitive advantage on the market, which will:
o Have a significant impact on our profitability;
o Bring our superior customer experience to the next level; and
o Reveal hidden opportunities.
How?
o Implementing best-in-class data analytical projects across the bank designed with the help of world's leading consultants;
o Building modern IT infrastructure; and
o Developing strong in-house data analytical capabilities by recruiting and training the best talent.
Current Progress:
o 4 Data analytics projects have already been finished; and
o GEL 5 million extra profit in the first nine months of 2019.
Aspirations:
o 23 Data analytics projects already finished; and
o GEL 100 million annual extra profit by 2023.
International Expansion
Azerbaijan
No investment has been made in relation to this project during 2019 and no material expenses were incurred
Main highlights:
o TBC Bank and Nikoil Bank agreed on shareholders agreement in late December 2018 and signed it in early January 2019. According to which our shareholding in the joint entity will be 8.34%. The transaction is subject to regulatory approval.
o Currently bank is in the process of significant reorganization which includes re-branding and shift to digitalization.
Achievements
o During 2019, Nikoil Bank implemented significant developments across business and operating directions:
o New management team was recruited including: CDM, CRO, CFO and CIO;
o Core banking was revised and improved, including data warehouse;
o Risk management was improved in terms of operational risks, credit risks, and compliance;
o Concept for rebranding, new branches and head office was developed and is awaiting regulatory approval.
Current Development
|
|
3Q 2019 |
2Q 2019 |
3Q 2018 |
|
Loan disbursements in thousand USD[39] |
40,567 |
32,912 |
22,312 |
|
Number of customers[40] |
85,605 |
78,422 |
64,608 |
Mid-term vision
|
In million USD |
3Q'19 results of Nikoil Bank[41] |
Mid-term targets of joint entity |
|
Gross loan portfolio |
c. 219 |
c. 1,400 |
|
Equity |
c. 32 |
c. 200 |
|
Return on equity |
NMF |
20% + |
o Core segments: Retail and MSME (not large SMEs and Corporates)
o Product offerings: A mix of Nikoil Bank and TBC Bank products adapted to the local needs and offered primarily through digital channels, including Space Bank
Uzbekistan
This is still in the concept stage and subject to approval (including approval from the authorities), therefore it could change as we progress. The pre-license is expected in 2019
Why Uzbekistan?
o Large underpenetrated market:
o with a population of more than 33.45 million
o Retail loans to GDP stood at 7.2% at the end of 2018
o Similar history as part of the Soviet Union and good cultural links.
o Right time given implementation of reforms, many of which were designed by former Georgian government officials.
o Both Uzbekistan and Georgia are included into China's One Belt One Road initiative.
o No digital bank operates in Uzbekistan currently
Strategic Positioning
o Build a next generation bank for retail and MSME;
o Focus on digital channels and SPACE;
o Operate asset light, smart branches;
o Establishing the highest standards of corporate governance;
o Simple and intuitive products and processes;
o A transparent and straightforward commissions structure;
o Best customer experience; and
o An automated decision-making system.
Main Highlights
o Initial investments from TBC Bank around USD 20-30 mln, resulting in 51% shareholding;
o Medium term financial targets after license is granted:
o Achieve sustainable ROE up to 25%; and
o Cost to income ratio below 35%.
o Our Uzbek and Azerbaijan subsidiaries together will contribute c. 30% to the Group's loan book in medium to long term;
o We started working on developing new ecosystems in Uzbekistan.
Upcoming Events
o Opening pilot branch in 2019 for proof of concept;
o Core banking implementation with local IT company;
o Multichannel development including Space:
o Define user experience;
o Testing of main processes among 100 clients including: onboarding, account opening and card ordering.
o Documents submitted to Central Bank of Uzbekistan in October 2019;
o Client contact center development;
o Our international partners, EBRD and IFC have expressed their interest to participate in this project subject to completion of their internal procedures and approvals; and
o We have reached an agreement on main terms with Uzbek-Oman Investment Company (UOIC) to act as our local partner.
ESG
Corporate responsibility is deeply embedded in our culture. We are dedicated to delivering value to our shareholders, employees, customers and business partners whilst preserving the environment and making positive contribution to the community.
Environmental matters
The main principles of our Environmental Policy are as following:
o Defining the environmental aspects and impacts of our business activity
o Elaborating and developing measures to minimize negative impact on the environment
o Take efficiency and responsible resource management into account
o Be in compliance with applicable environmental, health, safety and labour regulations
o Awareness raising among our staff
o Do not finance businesses that have negative effect on environment and society
o Promoting sustainability finance among our clients
Social matters
o Supporting Georgian's business and entrepreneurs by providing access to finance and full-scale business support program.
o Supporting young generation through varies projects including online charity platform www.statusdonotes.ge, partnership with Tbilisi State University and Young Researchers and Innovators Completion, Leonard da Vinci and many more.
o Supporting Georgian culture through many inanities including establishment of leading literary award in Georgia, Saba and the country's first online channel dedicated to art and culture, Artarea as well hosting various cultural events in TBC's art galleries.
o Supporting professional development of our employees through providing various in-house training opportunities as well as providing financial support to attend external courses.
Governance matters
o Listed on the premium segment of London Stock Exchange, full compliance with UK Corporate Governance Code
o The most experienced board in the region, drawing on the diverse and eminent backgrounds of its members
In 2019, TBC Bank Group received a rating of A (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment.
1) Reconciliation of reported IFRS consolidated figures with the underlying numbers
|
Item (in thousands of GEL ) |
2Q 2019 |
2Q 2018 |
Description |
Reason for exclusion from the Group's current reported performance |
|
Consulting fees |
(5,605) |
- |
Consulting fees, in relation to the recent events regarding historic matters surrounding TBC Bank. For further details, please see the following press release. |
These costs are significant and non-recurring in nature, and therefore are not indicative of the Group's current underlying performance. |
|
Reversal of deferred tax gain |
- |
(17,426) |
TBC Bank reversed the one-off deferred tax gain recognized in 2016 due to the recent amendment to the Georgian Tax Code in relation to corporate income tax. The amendment, which came into force on 12 June 2018, postponed tax relief for re-invested profit from 1 January 2019 to 1 January 2023 for financial institutions. |
These costs are significant and non-recurring in nature, and therefore are not indicative of the Group's current underlying performance. |
|
in thousands of GEL |
2Q 2019 |
3Q 2019 |
9M 2019 |
|
Reported net interest income |
190,481 |
186,225 |
573,664 |
|
Reported net fee and commission income |
43,534 |
47,105 |
132,446 |
|
Reported net insurance premium earned after claims and acquisition costs |
4,338 |
4,784 |
12,851 |
|
Reported other operating income |
33,949 |
41,644 |
105,045 |
|
Reported operating income |
272,302 |
279,758 |
824,006 |
|
Reported total credit loss allowance |
(33,372) |
(25,749) |
(92,216) |
|
Reported operating income after provisions |
238,930 |
254,009 |
731,790 |
|
Reported operating expenses |
(109,383) |
(111,705) |
(323,602) |
|
One-off consulting fees |
(5,605) |
- |
(5,605) |
|
Underlying operating expenses |
(103,778) |
(111,705) |
(317,997) |
|
|
|
|
|
|
Reported profit before tax |
129,547 |
142,304 |
408,188 |
|
Underlying profit before tax |
135,152 |
142,304 |
413,793 |
|
|
|
|
|
|
Reported income tax |
(9,329) |
(15,527) |
(27,871) |
|
Effect on tax of one-off items |
841 |
- |
841 |
|
Underlying income tax |
(10,170) |
(15,527) |
(28,712) |
|
|
|
|
|
|
Reported net profit |
120,218 |
126,777 |
380,317 |
|
Underlying net profit |
124,982 |
126,777 |
385,081 |
|
|
|
|
|
|
Reported non-controlling interest (NCI) |
220 |
1,533 |
1,838 |
|
Effect on NCI of one-off items |
- |
- |
- |
|
Underlying NCI |
220 |
1,533 |
1,838 |
|
Reported net profit less NCI |
119,998 |
125,244 |
378,479 |
|
Underlying net profit less NCI |
124,762 |
125,244 |
383,243 |
|
in thousands of GEL |
2Q 2019 |
3Q 2019 |
9M 2019 |
|
Average reported equity attributable to the PLC's equity holders |
2,325,788 |
2,435,216 |
2,342,805 |
|
Adjustment for one-off items on monthly average basis |
2,306 |
- |
5,046 |
|
Average underlying equity attributable to the PLC's equity holders |
2,328,094 |
2,435,216 |
2,347,851 |
|
Average reported total assets |
15,988,280 |
17,814,079 |
16,341,986 |
|
Adjustment for one-off items on monthly average basis |
- |
- |
- |
|
Average underlying total assets |
15,988,280 |
17,814,079 |
16,341,986 |
|
|
2Q 2019 |
3Q 2019 |
9M 2019 |
|
Reported cost to income |
40.2% |
39.9% |
39.3% |
|
Underlying cost to income (APM) |
38.1% |
39.9% |
38.6% |
|
Reported return on equity |
20.7% |
20.4% |
21.6% |
|
Underlying return on equity (APM) |
21.5% |
20.4% |
21.8% |
|
Reported return on assets |
3.0% |
2.8% |
3.1% |
|
Underlying return on assets (APM) |
3.1% |
2.8% |
3.2% |
|
in thousands of GEL |
3Q 2018 |
9M 2018 |
|
Reported net interest income |
199,612 |
563,219 |
|
Reported net fee and commission income |
39,384 |
113,466 |
|
Reported net insurance premium earned after claims and acquisition costs |
3,123 |
8,422 |
|
Reported other operating income |
35,970 |
90,099 |
|
Reported operating income |
278,089 |
775,206 |
|
Reported total provision expenses |
(47,650) |
(122,203) |
|
Reported operating income after provisions |
230,439 |
653,003 |
|
Reported operating expenses |
(104,103) |
(287,125) |
|
|
|
|
|
Reported profit before tax |
126,336 |
365,878 |
|
|
|
|
|
Reported income tax |
(18,952) |
(58,530) |
|
Reversal of the one-off deferred tax gain |
- |
(17,426) |
|
Underlying income tax |
(18,952) |
(41,104) |
|
|
|
|
|
Reported net profit |
107,384 |
307,348 |
|
Underlying net profit |
107,384 |
324,774 |
|
|
|
|
|
Reported non-controlling interest (NCI) |
605 |
2,222 |
|
Effect on NCI of one-off items |
- |
- |
|
Underlying NCI |
605 |
2,222 |
|
Reported net profit less NCI |
106,779 |
305,126 |
|
Underlying net profit less NCI |
106,779 |
322,552 |
|
in thousands of GEL |
3Q 2018 |
9M 2018 |
|
Average reported equity attributable to the PLC's equity holders |
1,998,099 |
1,927,113 |
|
Adjustment for one-off items on monthly average basis |
17,426 |
7,887 |
|
Average underlying equity attributable to the PLC's equity holders |
2,015,525 |
1,935,000 |
|
Average reported total assets |
13,929,421 |
13,181,811 |
|
Adjustment for one-off items on monthly average basis |
- |
- |
|
Average underlying total assets |
13,929,421 |
13,181,811 |
|
|
3Q 2018 |
9M 2018 |
|
Reported Return on Equity |
21.2% |
21.2% |
|
Underlying Return on Equity (APM) |
21.2% |
22.3% |
|
Reported Return on Assets |
3.1% |
3.1% |
|
Underlying Return on Assets (APM) |
3.1% |
3.3% |
2) TBC Insurance
TBC Insurance is a rapidly growing, wholly owned subsidiary of TBC Bank and it is the Bank's main bancassurance partner. The company was acquired by the Group in October 2016 and it has since grown significantly. In 3Q 2019[42], TBC Insurance held a total market share of 21.1%[43] without border motor third party liability (MTPL) insurance, while it was number one player on market in the retail segment.
TBC Insurance serves both individual and legal entities and provides a broad range of insurance products covering motor, travel, personal accident, credit life and property, business property, liability, cargo and agro insurance products. The company differentiates itself through its advanced digital channels, which include TBC bank's award-winning internet and mobile banking applications, a wide network of self-service terminals, a web channel, and a Georgian-speaking chat-bot B-Bot, which is available through Facebook messenger.
In 2Q 2019, TBC Insurance entered the health insurance market with a focus on the premium segment. Our strategy is to focus on affluent individuals and capture the affluent market by leveraging our strong brand name, leading digital capabilities and cross selling opportunities with payroll customers. Our medium term target is to reach 25% market share in the premium health insurance business.
In 3Q 2019, TBC Insurance achieved strong growth results in non-health business lines. The gross written premium grew by 20.0% YoY and amounted to GEL 19.0 million. Over the same period, the net combined ratio[44] decreased by 1.0 pp and stood at 77.8%. As a result, net profit for 3Q 2019 stood at GEL 2.6 million.
|
Information excluding health insurance |
3Q'19 |
2Q'19 |
3Q'18 |
|
9M'19 |
9M'18 |
|
In thousands of GEL |
|
|
|
|
|
|
|
Gross written premium |
18,999 |
19,557 |
15,833 |
|
56,026 |
43,004 |
|
Net earned premium[45] |
13,412 |
12,218 |
9,841 |
|
36,307 |
25,103 |
|
Net profit |
2,567 |
2,210 |
2,271 |
|
6,819 |
5,028 |
|
|
|
|
|
|
|
|
|
Net combined ratio |
77.8% |
76.6% |
78.8% |
|
77.9% |
78.6% |
|
Market share |
21.1% |
19.0% |
20.7% |
|
20.8% |
19.5% |
|
Information including health insurance |
3Q'19 |
2Q'19 |
3Q'18 |
|
9M'19 |
9M'18 |
|
In thousands of GEL |
|
|
|
|
|
|
|
Gross written premium |
19,760 |
19,991 |
15,833 |
|
57,223 |
43,003 |
|
Net earned premium45 |
13,579 |
12,259 |
9,841 |
|
36,515 |
25,103 |
|
Net profit |
2,227 |
1,803 |
2,271 |
|
6,034 |
5,028 |
|
|
|
|
|
|
|
|
|
Net combined ratio |
81.6% |
81.3% |
78.8% |
|
81.5% |
78.6% |
2Q 2019 figures are provided without subsidiaries of TBC Insurance: Swoop JSC, GE Commerce LTD, All Property LTD and 3Q 2019 figures are given without Redmed LTD;
3) Earnings per share
|
Earnings per share for profit attributable to the owners of the Group: |
3Q'19 |
2Q'19 |
3Q'18 |
|
9M'19 |
9M'18 |
|
In GEL |
|
|
|
|
|
|
|
- Basic earnings per share |
2.28 |
2.19 |
1.97 |
|
6.91 |
5.67 |
|
- Diluted earnings per share |
2.27 |
2.17 |
1.95 |
|
6.81 |
5.62 |
Source: IFRS Consolidated
[1] Given high liquidity and high capital adequacy, the bank pre-paid subordinated loan from the Netherlands Development Finance Company (FMO).
[2] International financial institutions
[3] Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.
[4] Internet or Mobile Banking penetration equals active clients of Internet or Mobile Banking divided by total active clients.
[5] Mobile Banking penetration equals active clients of Mobile Banking divided by total active clients.
[6] Payments ecosystem includes: Payme, TKT.ge, TBC Pay, E-commerce and POS
[7] IMF WEO October 2019 update
[8] Given high liquidity and high capital adequacy, the bank pre-paid subordinated loan from the Netherlands Development Finance Company (FMO).
[9] Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit (as shown in Annex 2 on page 46) as follows: net insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.
[10] The new share based payments compensation scheme was approved in December 2018. Expense is accrued based on grant date share price, which was fixed at GBP 14.88 whilst grant date share price of old scheme was USD 11.00. GEL/USD exchange rate at grant date was fixed at 2.2399 in old scheme, while in new schemes currency exchange rate is not fixed.
[11] Based on internal estimates
[12] Based on internal estimates
[13] Given high liquidity and high capital adequacy, the bank pre-paid subordinated loan from the Netherlands Development Finance Company (FMO).
[14] Net insurance premium earned after claims and acquisition costs income after claims can be reconciled to the standalone net insurance profit (as shown in Annex 2 on page 46) as follows: net insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.
[15] New share based payments compensation scheme was approved in December 2018. Expense is accrued based on grant date share price which was fixed at GBP 14.88 whilst grant date share price of old scheme was USD 11.00. GEL/USD exchange rate at grant date was fixed at 2.2399 in old scheme, while in new schemes currency exchange rate is not fixed.
[16] Based on internal estimate
[17] Based on internal estimates
[18] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016
[19] Total ecosystems' revenue also includes net fee and commission income from POS terminals and e-commerce
[20] Total ecosystems' net profit also includes net fee and commission income and related operating costs from POS terminals and e-commerce
[21] Total number of visitors across all systems, some individuals may be visitors of multiple systems. For Payme, the number of registered customers is used
[22] Includes both retail & business payments
[23] Payments ecosystem includes: Payme, TKT, TBC Pay, E-commerce and POS
[24] Other payments business includes: ATM_TBC Cards, branch, internet and mobile banking
[25] Source: NBG
[26] The data from Business Insider Intelligence was used for comparison purposes.
[27] Forecasted figures are given without effects of new regulations effective from March 2020
[28] Number of registered users
[29] Including revenue from new services (GEL 6.4 million), which will be launched in 2020 and will have positive impact on EBITDA from 2021.
[30] Based on number of visitors
[31] In August 2019 we acquired 65% of My.ge for GEL 19.45 million.
[32] The revenue and EBITDA include Swoop figures.
[33] Stock Keeping Units
[34] Based on number of visitors
[35] In August 2019 we acquired 65% of My.ge for GEL 19.45 million.
[36] Based on number of visitors
[37] In August 2019 we acquired 65% of My.ge for GEL 19.45 million.
[38] From launching the App's first prototype in January 2018 to the end of the beta version of Space in September 2018.
[39] Based on management accounts
[40] Number of customers with loan or deposit above 1 AZN
[41] Based on management accounts
[42] Based on internal estimates
[43] Or 19.2% with MTPL insurance. Starting from March 1, 2018 border MTPL was introduced and GWP was divided evenly between 17 insurance companies, which therefore decreased our market share.
[44] Net insurance claims plus acquisition costs and administrative expenses divided by net earned premium.
[45] Net earned premium equals earned premium minus reinsurer's share of earned premium.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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