1st Quarter Results

RNS Number : 3584O

TBC Bank Group PLC

17 May 2018

 

TBC BANK GROUP PLC ("TBC Bank")

1Q 2018 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 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.

First Quarter 2018 Unaudited Consolidated Financial Results Conference Call

TBC Bank Group PLC ("TBC PLC") will release its unaudited consolidated financial results for the first quarter 2018 on Thursday, 17 May 2018 at 7.00 am BST (10.00 am GET).

On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.

Date & time:  Thursday, 17 May 2018 at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT)

Please dial-in approximately five minutes before the start of the call quoting the password TBC:

Password:	TBC
UK Toll Free:	0808 109 0700
Standard International Access:	[phone]
USA Toll Free:	1 866 966 5335
New York New York:	[phone]
Russia Toll Free:	8 10 8002 4902044
Moscow:	[phone]

Replay Numbers
Replay Passcode:	7398612
UK Toll Free:	0800 633 8453
Standard International Access:	[phone]
USA Toll Free:	1 866 583 1035
Russia Toll Free:	8 10 8002 4832044
Moscow:	[phone]

Contacts

Anna Romelashvili Head of Investor Relations E-mail:  [e-mail]   Web: www.tbcbankgroup.com Tel:  +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Investor Relations Department E-mail:  [e-mail]   Web: www.tbcbankgroup.com Tel:  +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Table of Contents

1Q 2018 Results Announcement

TBC Bank - Background

Financial Highlights

Letter from the Chief Executive Officer

Economic Overview

Unaudited Consolidated Financial Results Overview for 1Q 2018

Results by Segments and Subsidiaries

Additional Disclosures

TBC BANK Group PLC ("TBC Bank")

1Q 2018 Consolidated Financial Results

Net Profit for 1Q 2018 amounted to GEL 97.5 million

The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation

TBC Bank - Background

TBC Bank is the largest banking group in Georgia, where 99.7% of its business is concentrated, and it accounts for 35.3% market share by total assets. TBC Bank 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.

In 4Q 2016, TBC Bank acquired Bank Republic which has been consolidated into the Group's results.

Results reported below prior to 30 September 2016 relate to the group previously headed by JSC TBC Bank Georgia.

Financial Highlights

1Q 2018 P&L Highlights                                                        

§ Net profit amounted to GEL 97.5 million (1Q 2017: GEL 96.6 million; 4Q 2017: GEL 96.8 million)

§ Pre-provision profit amounted to GEL 147.8 million (1Q 2017: GEL 120.6 million; 4Q 2017: GEL 143.7 million)

§ Return on equity (ROE) amounted to 21.0% (1Q 2017: 24.2%; 4Q 2017: 21.0%)

§ Pre-provision return on equity stood at 29.6% (1Q 2017: 28.7%; 4Q 2017: 29.0%)

§ Return on asset (ROA) amounted to 3.2% (1Q 2017: 3.7%; 4Q 2017: 3.0%)

§ Total operating income amounted to 238.7 million up by 17.3% YoY and down by 1.9% relative to 4Q 2017

§ Cost to income was 38.1% (1Q 2017: 40.8%; 4Q 2017: 41.0%)

§ Cost of risk stood at 1.3% (1Q 2017: 0.9%; 4Q 2017: 1.4%)

§ Net interest Margin (NIM) stood at 6.9% (1Q 2017: 6.6%; 4Q 2017: 6.4%)

§ Risk adjusted net interest margin (NIM) stood at 5.2% (1Q 2017: 5.1%; 4Q 2017: 5.2%)

Balance Sheet Highlights as of 31 March 2018

§ Total assets amounted to GEL 12,401.0 million as of 31 March 2018, up by 19.7% YoY and down by 4.4% QoQ

§ Gross loans and advances to customers stood at GEL 8,432.9 million as of 31 March 2018, up by 18.4% YoY and down by 1.4% QoQ

§ Net loans to deposits + IFI funding stood at 93.2% and Net Stable Funding Ratio (NSFR) stood at 123.5%

§ NPLs stood at 3.1%, down by 0.3 pp YoY and down by 0.2 QoQ

§ NPL coverage ratios stood at 114.6% or 225.8% with collateral on 31 March 2018 compared to 104.7% or 209.4% with collateral as of 31 December 2017

§ Total customer deposits stood at GEL 7,610.8 million as of 31 March 2018, up by 25.4% YoY and down by 2.6% QoQ

§ As of 31 March 2018, the Bank's Tier 1 and Total Capital Adequacy Ratios (CAR) per new NBG methodology stood at 13.8% and 17.7% respectively, while minimum requirements amounted to 10.2% and 15.0%

Market Shares[1]

§ Market share in total assets stood at 35.3% as of 31 March 2018 up by 0.9 pp YoY and down by 1.1 pp QoQ

§ Market share in total loans was 37.8% as of 31 March 2018, unchanged YoY and down by 0.4pp QoQ

§ In terms of individual loans, the Bank had a market share of 39.6% as of 31 March 2018, down by 2.2 pp YoY and down by 0.5 pp QoQ. The market share for legal entity loans was 35.6% up by 2.2 pp YoY and down by 0.4 pp QoQ

§ Market share of total deposits stood at 38.9% as of 31 March 2018, up by 1.3 pp YoY and down by 0.9 pp QoQ

§ Market share of individual deposits stood at 40.6% up by 0.5 pp YoY and down by 0.7 pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 37.0%, up by 2.5 pp YoY and down by 1.0 pp QoQ.

Additional Information Disclosure

Additional historical information for certain P&L, balance sheet and capital items, and on asset quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Financial Highlights section.

Letter from the Chief Executive Officer

I am delighted to present a strong set of financial and operating results for the first quarter 2018, as well as to provide a brief overview of recent macroeconomic developments in the Georgian economy.

Our consolidated net profit for the first quarter 2018 reached GEL 97.5 million, while our return on equity was 21.0% and return on assets stood at 3.2%. Our robust profitability was supported by an improved net interest margin, which increased by 0.3 percentage point year-on-year to 6.9% and a strong increase in net fee and commission income, which grew by 31.9% year-on-year. The improvement in net interest margin is mainly related to an increase in loan yields. We were successful in increasing higher yield, higher risk loan share of our portfolio, which will continue to support our NIM in the future, however will have a negative impact on cost of risk. In this context, our expectation for NIM in the medium to short term is be around 6.6% with 0.4 percentage point acceptable deviation and cost of risk to be in the range of 1.4-2.0%.

The growth in net fee and commission income was achieved across the board with the most significant contribution coming from card operations. Over the same period, we also achieved good results on the cost side and reduced our cost to income ratio to 38.1%, down by 2.7 percentage point year-on-year.

In the first quarter 2018, our loan book expanded by 18.4% year-on-year, while deposits increased by 25.4% year-on-year. As a result, we maintained our leadership in terms of total loan and deposit market shares which stood at 37.8% and 38.9% respectively.

In terms of asset quality, we continue to maintain prudent risk management and, as a result, our non-performing loans stood low at 3.1% at the end of the first quarter 2018, down by 0.3 percentage point year-on-year. Our non-performing loans coverage ratio stood high at 114.6%, or 225.8% with collateral.

Our capital and liquidity levels remain strong. As of 31 March 2018, our total capital adequacy ratio (CAR) per Basel III guidelines stood at 17.7%, higher than the minimum requirement of 15.0%, while the tier I capital ratio was 13.8%, above the minimum requirement of 10.2%. At the same quarter end, the regulatory liquidity coverage ratio stood at 114.4% compared to the minimum requirement of 100%, while net loans to deposits + IFI funding stood at 93.2% and the net stable funding ratio (NSFR) was 123.5%.

On macro side, I am pleased to report that the strong economic growth experienced in 2017 continued in the first quarter of 2018. GDP growth stood at 5.2% for the first quarter 2018, mainly driven by the continued growth of exports, tourism revenues and remittances - up by 28.4%, a 29.2% and a 22.4% year-on-year respectively - as well as an increase in domestic and foreign investments. Continued growth of external inflows also had a positive effect on the current account deficit, which declined by 4.2 percentage point year-on-year to 8.7% of GDP in 2017 despite an acceleration in domestic demand, which could have led to increasing account deficit.

The above-mentioned positive trends are expected to continue through the year and the NBG has just upgraded its growth forecast to 4.8%. I would also like to mention that Fitch Ratings revised its outlook on Georgia's long-term foreign- and local-currency issuer default ratings to positive from stable and it affirmed the rating at BB- on the back of the favorable growth prospects. 

Turning to our operating performance, I would like to highlight that we continue to improve the performance of our digital channels and, as a result, our off-loading ratio[2] in the retail segment reached 89.0% in the first quarter 2018, up by 0.7 percentage point quarter-on-quarter.  The main drivers of this increase are transactions conducted in mobile banking and self-service terminals which have become the most widely used channels among our customers after the ATMs.

I am delighted to see the first results of our voice biometrics recognition system, which was launched in our call centre at the end of 2017. We have taken around 50,000 voiceprints since launch and conducted 36,000 authentications in March 2018, which represents 18% of total calls received.

Our insurance subsidiary continues to grow rapidly, increasing total market share by 5.7 percentage point to around 19.0%[3] quarter-on-quarter. Over the same period, the number of customers has increased by 6.8% to around 296,000.

Outlook

I am pleased with our first quarter 2018 financial results and feel confident our customer-centric approach and digitalisation strategy will enable us to further strengthen our leading position in the Georgian banking sector and deliver strong returns to our shareholders.  Therefore, I would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 40%, dividend pay-out ratio of 25-35% and loan book growth at around 15%.

 

Economic Overview

Economic growth

Georgia's strong economic performance continued in 2018. In 1Q 2018 economic growth amounted to 5.2% as per initial estimates of the statistics office, Geostat, up from the 5.0%  in 2017. The sustained recovery in external inflows, coupled with the strengthened consumer and business confidence remained the core drivers of growth.

Sector-wise trade and repairs (+6.6% YoY), construction (+11.2% YoY), transport and communication (+6.2% YoY), real estate (+6.3% YoY), and manufacturing (3.6% YoY) were major drivers of growth in 2017. Generally, favorable economic conditions were reflected in almost all sectors of the economy.

Household consumption continues to recover amid increasing incomes and improved consumer sentiments. In 2017 household consumption went up by 8.9% YoY in nominal terms compared to the 3.4% growth the year before. Investments also increased by 9.0% YoY, reflecting the growth of inventories (+8.3% YoY) and higher capital formation (+9.0% YoY). Higher investment growth was supported by public as well as private investments. Public infrastructure spending went up by 29.6% YoY. Public capital spending grew by a solid 2.5 times YoY (albeit from a lower base) and it supported the economic growth in the first two months of 2018.

Bank lending to the economy also accelerated. As of 1Q 2018 the total loan portfolio expanded by 18.6% YoY^[4] compared to 13.0%[5] growth a year ago. Over the same period lending accelerated to both the business (+14.9% YoY) and retail segment (+22.8% YoY).

Exports of goods increased by 28.4%^[6] YoY in 1Q 2018, continuing the robust growth trend of 2017. Exports to the EU increased by 31.4% YoY while exports to the Commonwealth of Independent States (CIS) went up by 48.0% YoY. Exports to other countries increased by a more modest 7.3% YoY over the same period. Growth of imports also accelerated reflecting the recovery in domestic investment and consumption demand. In 1Q 2018 imports of goods increased by 21.6% YoY. Capital and intermediate goods (+29.7% YoY) accounted for 11.4pp, of the total imports' growth, consumer goods for 3.4pp (+11.2% YoY), petroleum and transportation imports added another 3.3pp (+10.6% YoY), while 3.5pp was due to one-off items.

Tourism inflows continue to deliver stellar performance. In 1Q 2018 tourism inflows grew by 29.2% YoY and the number of visitors from the EU countries hiked by 28.7% YoY. Upward trend also for visitors from the CIS (+8.5% YoY) and other countries (+31.8% YoY).

Amid improved economic performance in the major remitting countries, remittances grew by 22.4% YoY. The growth of inflows was fastest from the EU (+35.4% YoY), followed by other countries (+26.1% YoY), and the CIS (+8.8% YoY). The share of the EU in remittance inflows exceeded that of CIS countries for the first time in 1Q 2018, marking an important milestone and further underlining the continued diversification of the geographic base of remittances and other external inflows.

The Current Account deficit declined to 8.7% of GDP in 2017, compared to 12.8% of GDP in 2016. The drop mainly resulted from the improved balance of trade in goods and services (+4.0pp). Current transfers (+0.6pp) also had a positive influence on the CA deficit, while the income account (-0.4pp) had a slightly negative impact.

The USD/GEL exchange rate appreciated by 6.9% YTD as of the end of 1Q 2018 and by 1.3% YoY. The EUR/GEL exchange rate also appreciated by 4.1% YTD and weakened by 13.3% YoY as of the end of March, 2018.

Inflation and monetary policy

The consumer price inflation decelerated markedly in 1Q 2018 and the impact of excise taxes growth on prices dissipated. As of March 2018, CPI inflation stood at 2.8% YoY, close to the NBG's target of 3%. In the reporting period, prices growth on alcoholic beverages and tobacco and transportation moderated to single digits, bringing down the headline inflation closer to the NBGs target. Despite the continued recovery in domestic demand, it still has not passed through the point when growth becomes inflation and, according to the NBG, the output gap still remains negative and is expected to close down gradually by the end of 2019.

The NBG kept policy rate unchanged at 7.25% during the latest meeting of the monetary policy committee on 1 May 2018. The central bank, however, expects the economic growth to remain strong, and the still negative output gap is not expected to put upward pressure on prices. The current stance of the monetary policy can be considered relatively tight. However, considering that the external pressure on inflation could be further increased, the central bank waits for a more conclusive evidence regarding the future inflation developments before acting accordingly. Over the medium term, the policy rate is expected to decline closer to its neutral level of around 6%.

Fiscal policy

The favorable economic growth supports budget tax revenues which, in the first 2 months of 2018 increased by 14.0% while total revenues went up by 20.5% YoY. Over the same period, current spending increased by a modest 3.0% YoY.

Along with the strong economic performance fiscal sustainability indicators continue to improve. As of the end of 2017, the external public debt stood at 34.7% of GDP, down by 0.4pp YoY and total public debt also declined by 0.4pp to 44.0% of GDP.

Budget deficit remains anchored with the IMF's EFF program, which envisages bringing down the deficit below 3% of GDP from 2018 and accelerate the public investment at the expense of more moderate growth current spending.

Since the beginning of 2018 series the Ministry of Finance (MoF) has proposed a series of tax reforms. The MoF plans to introduce one unified form for tax payments to further reduce the administrative burden for tax payers. The Ministry has also initiated the decrease of taxes rate for micro businesses and, at the same time, it broadened the definition of micro business to cover a wider range of activities. These initiatives should contribute to a higher business activity.

Going forward

The Georgian economy continues its solid growth performance forward supported by the favorable external conditions. In addition, continued reforms help to accelerate growth and outperform most of Georgia's peer countries in Eastern Europe and CIS. As per IMF projections, growth is expected to average 5% over the next five years, well above the average growth in the broader region.

Unaudited Consolidated Financial Results Overview for 1Q 2018

This statement provides a summary of the unaudited business and financial trends for 1Q 2018 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited.

Income Statement Highlights
in thousands of GEL	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
Net Interest Income	175,403	142,333	165,395	23.2%	6.1%
Net Fee and Commission Income	34,919	26,477	38,954	31.9%	-10.4%
Other Operating Non-Interest Income	28,377	34,672	38,969	-18.2%	-27.2%
Provisioning Charges	(39,463)	(17,659)	(36,436)	123.5%	8.3%
Operating Income after Provisions for Impairment	199,236	185,823	206,882	7.2%	-3.7%
Operating Expenses	(90,932)	(82,920)	(99,641)	9.7%	-8.7%
Profit Before Tax	108,304	102,903	107,241	5.2%	1.0%
Income Tax Expense	(10,778)	(6,345)	(10,487)	69.9%	2.8%
Profit for the Period	97,526	96,558	96,754	1.0%	0.8%

Balance Sheet and Capital Highlights
	Mar-18		Dec-17		Change QoQ	Mar-17		Change YoY
In Millions	GEL	USD	GEL	USD		GEL	USD
Total Assets	12,401	5,136	12,966	5,002	-4.4%	10,362	4,238	19.7%
Gross Loans	8,433	3,493	8,553	3,300	-1.4%	7,121.0	2,912	18.4%
Customer Deposits	7,611	3,152	7,817	3,016	-2.6%	6,071	2,483	25.4%
Total Equity	1,931	800	1,890	729	2.2%	1,680	687	14.9%
Regulatory Tier I Capital (Basel III)*	1,517	628	1,437	554	5.6%	NA	NA	NA
Regulatory Total Capital (Basel III)*	1,943	805	1,885	727	3.1%	NA	NA	NA
Regulatory Risk Weighted Assets (Basel III)*	11,000	4,556	10,753	4,148	2.3%	NA	NA	NA

 *Per new NBG methodology in line with Basel III guidelines, which came into force in December 2017

  NA-Not Available

Key Ratios[7]	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
ROE	21.0%	24.2%	21.0%	-3.2%	0.0%
ROA	3.2%	3.7%	3.0%	-0.5%	0.2%
Cost to Income	38.1%	40.8%	41.0%	-2.7%	-2.9%
Cost of Risk	1.3%	0.9%	1.4%	0.4%	-0.1%
NPL to Gross Loans	3.1%	3.4%	3.3%	-0.3%	-0.2%
Regulatory Tier 1 CAR (Basel III)	13.8%	NA	13.4%	N/A	0.4%
Regulatory Total CAR (Basel III)	17.7%	NA	17.5%	N/A	0.2%
Leverage (Times)	6.4x	6.2x	6.9x	0.2x	-0.5x

  *Per new NBG methodology in line with Basel III guidelines, which came into force in December 2017

  NA-Not Available

Income Statement Discussion

Net Interest Income
In thousands of GEL	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
Loans and Advances to Customers	256,053	215,089	255,576	19.0%	0.2%
Investment Securities Available for Sale	13,168	8,801	11,991	49.6%	9.8%
Due from Other Banks	4,919	1,752	5,374	180.8%	-8.5%
Bonds Carried at Amortized Cost	8,037	7,441	7,292	8.0%	10.2%
Investment in Leases	7,672	4,686	7,787	63.7%	-1.5%
Interest Income	289,849	237,769	288,020	21.9%	0.6%
Customer Accounts	62,922	53,852	66,144	16.8%	-4.9%
Due to Credit Institutions	41,477	32,363	45,762	28.2%	-9.4%
Subordinated Debt	9,640	8,685	10,293	11.0%	-6.3%
Debt Securities in Issue	407	536	426	-24.1%	-4.5%
Interest Expense	114,446	95,436	122,625	19.9%	-6.7%
Net Interest Income	175,403	142,333	165,395	23.2%	6.1%
Net Interest Margin	6.9%	6.6%	6.4%	0.3%	0.5%

1Q 2018 to 1Q 2017 Comparison

Net interest income increased by 23.2% to GEL 175.4 million, compared to 1Q 2017, driven by 21.9% higher interest income and 19.9% higher interest expense.

Interest income grew by 21.9% YoY to GEL 289.8 million, mainly due to the increase in interest income from loans and advances to customers, which are primarily related to an increase in gross loan portfolio by 18.4% YoY. This effect was further magnified by 0.4pp increase in loan yields (partially due to product composition change), which stemmed from a 0.9pp increase in GEL denominated loans effective rates. This was partially offset by 0.7pp drop in FC denominated loan effective rates. The growth of the interest income also resulted from higher interest income from investment securities available for sale and due from other banks, primarily due to an increase in the size of the respective portfolios. Yields on interest earning assets expanded by 0.4pp to 11.5%, compared to 1Q 2017.

The 19.9% YoY growth in interest expense to GEL 114.4 million in 1Q 2018 was mainly due to 16.8% increase in interest expense on customer accounts and due to 28.2%  increase in interest expense on due to credit institutions. The increase in interest expense on customer accounts was attributable to a 25.4% growth in respective portfolio. This effect was slightly offset by a 0.1pp drop in cost of deposits, which resulted from 0.1pp decrease in cost of deposits of GEL denominated deposits and 0.4pp decrease in cost of deposits of FC denominated deposits. The expansion in interest expense on amounts due to credit institutions was attributable to a 7.5% increase in respective portfolio and 0.9pp increase in effective rates due to credit institutions. Cost of funding remained unchanged at 4.4%.

Consequently, NIM was 6.9% in 1Q 2018, compared to 6.6% in 1Q 2017. While Risk adjusted NIM stood at 5.2%, compared to 5.1%.

1Q 2018 to 4Q 2017 Comparison

On a QoQ basis, net interest income grew by 6.1% as a result of 0.6% higher interest income and 6.7% lower interest expense.

The GEL 1.8 million, or 0.6%, QoQ increase in interest income mainly resulted from the growth in interest income on investment securities available for sale. This in turn was due to 1.5pp higher yield on available for sale securities, as well as due to accounting adjustment effect between 3Q 2017 and 4Q 2017, which effectively decreased the amount reported in the last quarter of the year.  It is worth mentioning that compared to the previous quarter, the average local currency appreciated by about 3% which had a negative influence on interest income from loans, due to which it was flat. Yield on interest earning assets increased by 0.3pp, compared to 11.2% in 4Q 2017.

The GEL 8.2 million, or 6.7%, QoQ decline in interest expense was primarily due to the 9.4% decrease in interest expense on amounts due to credit institutions. This decline resulted by the 13.4% fall in the balance of respective portfolio, primarily related to the NBG loan repayment. Another contributor to the decrease was the 4.9% contraction in interest expense on customer accounts. This, in turn, resulted from the 2.6% drop in respective portfolio and to 0.2pp decrease in deposit effective rates due to our initiatives as well as broadly in line with the overall market trend. Again, the appreciation of the local currency had a technical effect, decreasing the interest expense on foreign exchange currency liabilities. Cost of funding contracted by 0.2%, from 4.6% in 4Q 2017.

Consequently, on QoQ basis, NIM increased by 0.5pp in 1Q 2018, compared to 6.4% in 4Q 2017. Meanwhile risk adjusted NIM stood remained stable at 5.2% on QoQ basis.

Fee and Commission Income
In thousands of GEL	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
Card Operations	21,736	20,829	21,618	4.4%	0.5%
Settlement Transactions	16,239	14,095	16,410	15.2%	-1.0%
Guarantees Issued	4,220	2,744	4,754	53.8%	-11.2%
Issuance of Letters of Credit	1,072	1,409	1,286	-23.9%	-16.6%
Cash Transactions	4,445	3,428	5,378	29.7%	-17.3%
Foreign Exchange Operations	490	220	337	NMF	NMF
Other	2,632	1,775	5,890	48.3%	-55.3%
Fee and Commission Income	50,834	44,500	55,673	14.2%	-8.7%
Card Operations	10,467	12,777	10,946	-18.1%	-4.4%
Settlement Transactions	2,142	1,520	2,139	40.9%	0.1%
Guarantees Issued	306	267	483	14.6%	-36.6%
Letters of Credit	260	213	368	22.1%	-29.3%
Cash Transactions	1,117	1,007	1,111	10.9%	0.5%
Foreign Exchange Operations	2	88	2	-97.7%	0.0%
Other	1,621	2,151	1,670	-24.6%	-2.9%
Fee and Commission Expense	15,915	18,023	16,719	-11.7%	-4.8%
Card Operations	11,269	8,052	10,672	40.0%	5.6%
Settlement Transactions	14,097	12,575	14,271	12.1%	-1.2%
Guarantees	3,914	2,477	4,271	58.0%	-8.4%
Letters of Credit	812	1,196	918	-32.1%	-11.5%
Cash Transactions	3,328	2,421	4,267	37.5%	-22.0%
Foreign Exchange Operations	488	132	335	NMF	NMF
Other	1,011	(376)	4,220	NMF	-76.0%
Net Fee And Commission Income	34,919	26,477	38,954	31.9%	-10.4%
NMF - Non Material Figures

1Q 2018 to 1Q 2017 Comparison

In 1Q 2018, net fee and commission income totalled GEL 34.9 million, up by GEL 8.4 million, or 31.9% compared to 1Q 2017. This mainly resulted from an increase in net fee and commission income from net card operations by GEL 3.2 million, net fee and commission income from net settlement transactions by GEL 1.5 million, and from net fee and commission income from net guarantees received by GEL 1.4 million.

The rise in net fee and commission income from net card operations is related to the increased number of active cards and POS terminals by 33% and 11% respectively.

1Q 2018 to 4Q 2017 Comparison

On a QoQ basis, net fee and commission income fell by GEL 4.0 million, or 10.4%, compared to 4Q 2017. This was primarily driven by a decrease in net fee and commission income from net card transactions by GEL 0.6 million, net guarantees issued by GEL 0.4 million and other net fee and commission income by GEL 3.2 million. The drop is explained by seasonally high number of transactions, volumes and related fee and commission income in the fourth quarter.

Other Operating Non-Interest Income
In thousands of GEL	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations	19,553	22,192	25,714	-11.9%	-24.0%
Share of Profit of Associates	307	92	249	NMF	23.3%
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments	17	(3)	3	NMF	NMF
Gains less Losses from Disposal of Investment Securities Available for Sale	-	-	93	NMF	-100.0%
Revenues from Cash-In Terminal Services	1,026	262	255	NMF	NMF
Revenues from Operational Leasing	1,575	1,784	1,411	-11.7%	11.6%
Gain from Sale of Investment Properties	1,041	192	2,775	NMF	-62.5%
Gain from Sale of Inventories of Repossessed Collateral	105	354	682	-70.3%	-84.6%
Administrative Fee Income from International Financial Institutions	-	151	-	-100.0%	NMF
Revenues from Non-Credit Related Fines	142	50	1,284	184.0%	-88.9%
Gain on Disposal of Premises and Equipment	45	27	760	66.7%	-94.1%
Other	2,520	8,346	3,824	-69.8%	-34.1%
Other Operating Income	6,454	11,166	10,991	-42.2%	-41.3%
Gross insurance Profit[8]	2,046	1,225	1,919	67.0%	6.6%
Other Operating Non-Interest Income	28,377	34,672	38,969	-18.2%	-27.2%
NMF - Non Material Figures

1Q 2018 to 1Q 2017 Comparison

Total other operating non-interest income and gross insurance profit fell by GEL 6.3 million to GEL 28.4 million in 1Q 2018. This decrease primarily resulted from the fall in gains less losses from trading in foreign currencies and foreign exchange translations by GEL 2.6 million, which was caused by lower volatility and tighter margins in 1Q 2018, as well as to the one-off FX income in 1Q 2017. Another contributor was the GEL 5.9 million contraction in other subcategory of other operating non-interest income, which was attributable to the fair value adjustment of the previously acquired loan portfolio in 1Q 2017.  This effect was partially offset by a GEL 0.8 million increase in gross insurance profit and by a GEL 0.8 million increase in gain from sale of investment properties.

The increase in gross insurance profit was related to the sharp increase in number of customers by c.179,000, which in turn led to high increase in gross written premium by 190.2% YoY on standalone basis. As a result, according to internal estimates market share[9] reached 19.0%. More information about TBC insurance can be found in annex 20 on page 34.

1Q 2018 to 4Q 2018 Comparison

On a QoQ basis, total other operating non-interest income and gross insurance profit fell by GEL 10.6 million, or by 27.2%, primarily driven by decreased gains less losses from trading in foreign currencies and foreign exchange transactions by GEL 6.2 million, or 24.0%. This in turn was caused by seasonality factors, higher turnover and volatility in 4Q 2017. The decrease was also caused by a GEL 1.7 million drop in gains from the sale of investment properties and a GEL 1.3 million decline in other subcategory of other operating non-interest income.

Provision for Impairment
In thousands of GEL	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
Provision for Loan Impairment	(27,999)	(16,922)	(28,421)	65.5%	-1.5%
Provision for Impairment of Investments in Finance Lease	(240)	(31)	(79)	NMF	NMF
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments	(3,875)	92	(1,019)	NMF	NMF
Provision for Impairment of Other Financial Assets	(7,420)	(798)	(6,917)	NMF	7.3%
Impairment of Investment Securities Available for Sale	71	-	-	NMF	NMF
Total Provision Charges for Impairment	(39,463)	(17,659)	(36,436)	123.5%	8.3%
Operating Income after Provisions for Impairment	199,236	185,823	206,882	7.2%	-3.7%
Cost of Risk	1.3%	0.9%	1.4%	0.4%	-0.1%
NMF - Non Material Figures

1Q 2018 to 1Q 2017 Comparison

In 1Q 2018, total provision charges expanded by GEL 21.8 million to GEL 39.5 million compared to 1Q 2017. This increase was primarily attributable to loan portfolio, driven by higher recovery of provisions in corporate segment in 1Q 2017. The growth in total provision charges was also driven by a GEL 6.6 million rise in provision for impairment of other financial assets and by a GEL 4.0 million rise in charges on provision for performance guarantees and credit related commitments.

In 1Q 2018, the cost of risk on loans stood at 1.3% (1.7% without FX effect) compared to 0.9% (1.5% without FX effect) in 1Q 2017.

1Q 2018 to 4Q 2017 Comparison

On a QoQ basis, total provision charges grew by a GEL 3.0 million, or 8.3%, amounting to GEL 39.5 million. The rise mainly resulted from a GEL 2.9 million increase in provisions for performance guarantees and credit related commitments, and a GEL 0.5 million rise in provision for impairment of other financial. Increase in guarantees was related to one corporate borrower. Provision charges on loans fell by GEL 0.4 million due to GEL appreciation.

QoQ cost of risk without FX effect increased by 0.5pp from 1.2% in 4Q 2017 mainly due to seasonally low provision expense in retail segment in 4Q 2017, as well as increased share of higher yield, higher risk loans in our total loan in 1Q 2018.

Further details on asset quality are available in the Balance Sheet Discussion section.

Operating Expenses
In thousands of GEL	1Q'18	1Q'17	4Q'17	Change YoY	Change QoQ
Staff Costs	52,116	47,538	54,105	9.6%	-3.7%
Provisions for Liabilities and Charges	-	(95)	-	-100.0%	NMF
Depreciation and Amortization	10,470	8,604	10,425	21.7%	0.4%
Professional services	2,962	3,415	4,672	-13.3%	-36.6%
Advertising and marketing services	4,527	3,060	8,141	47.9%	-44.4%
Rent	5,864	5,836	5,908	0.5%	-0.7%
Utility services	1,735	1,717	1,515	1.0%	14.5%
Intangible asset enhancement	2,494	2,214	3,346	12.6%	-25.5%
Taxes other than on income	1,656	1,511	1,095	9.6%	51.2%
Communications and supply	1,034	786	1,195	31.6%	-13.5%
Stationary and other office expenses	1,184	1,100	1,539	7.6%	-23.1%
Insurance	485	530	756	-8.5%	-35.8%
Security services	496	517	488	-4.1%	1.6%
Premises and equipment maintenance	1,035	1,644	1,574	-37.0%	-34.2%
Business trip expenses	320	365	645	-12.3%	-50.4%
Transportation and vehicles maintenance	378	416	453	-9.1%	-16.6%
Charity	280	271	282	3.3%	-0.7%
Personnel training and recruitment	176	404	526	-56.5%	-66.5%
Write-down of current assets to fair value less costs to sell	(3)	(57)	(165)	-94.7%	-98.2%
Loss on disposal of Inventory	20	955	51	-97.9%	-60.8%
Loss on disposal of investment properties	31	-	57	NMF	-45.6%
Loss on disposal of premises and equipment	278	123	186	126.0%	49.5%
Acquisition costs	-	307	560	-100.0%	-100.0%
Gross Change in IBNR	-	221	-	-100.0%	NMF
Other	3,394	1,538	2,287	NMF	48.4%
Administrative and Other Operating Expenses	28,346	26,873	35,111	5.5%	-19.3%
Operating Expenses	90,932	82,920	99,641	9.7%	-8.7%
Profit before Tax	108,304	102,903	107,241	5.2%	1.0%
Income Tax Expense	(10,778)	(6,345)	(10,487)	69.9%	2.8%
Profit for the Period	97,526	96,558	96,754	1.0%	0.8%
Cost to Income	38.1%	40.8%	41.0%	-2.7%	-2.9%
ROAE	21.0%	24.2%	21.0%	-3.2%	0.0%
ROAA	3.2%	3.7%	3.0%	-0.5%	0.2%

1Q 2018 to 1Q 2017 Comparison

In 1Q 2018 the total operating expenses increased to GEL 90.9 million, up by GEL 8.0 million, or by 9.7% YoY, primarily due to the rise in staff costs by GEL 4.6 million, or 9.6% YoY. This was mainly due to the general increase in salaries, bonuses and various HR management-related costs at the TBC Group level and related to the overall increase in the scale and performance of the business. Other contributors were the increase in administrative expenses by GEL 1.5 million, related to the overall growth of the scale of the business, and the increase in the depreciation and amortization expenses by GEL 1.9 million, related to the growth of the book value of both fixed and intangible assets.

As a result, the cost to income ratio was 38.1% in 1Q 2018, compared to 40.8% in 1Q 2017.

1Q 2018 to 4Q 2017 Comparison

On a QoQ basis, the total operating expenses fell by a GEL 8.7 million, or 8.7%. The decrease was primarily attributable to a GEL 3.6 million contraction in expenses related to advertising and marketing, by a GEL 1.7 million decrease in professional services and a GEL 2.0 million fall in staff costs. The overall decline in operating expenses is related to the seasonally high costs in the last quarter of the year.

As a result, the cost to income ratio decreased by 2.9pp from 41.0%, compared to 4Q 2017.

Balance Sheet Discussion
In millions of GEL	Mar-18	Dec-17	Mar-17	Change QoQ	Change YoY
Cash, Due from Banks and Mandatory Cash Balances with NBG	2,247	2,505	1,753	-10.3%	28.2%
Loans and Advances to Customers (Net)	8,137	8,325	6,918	-2.3%	17.6%
Financial Securities	1,011	1,107	813	-8.7%	24.4%
Fixed and Intangible Assets & Investment Property	531	530	481	0.2%	10.4%
Other Assets	475	499	397	-4.8%	19.6%
Total Assets	12,401	12,966	10,362	-4.4%	19.7%
Due to Credit Institutions	2,270	2,621	2,112	-13.4%	7.5%
Customer Accounts	7,611	7,817	6,071	-2.6%	25.4%
Debt Securities in Issue	19	21	24	-9.5%	-20.8%
Subordinated Debt	402	427	345	-5.9%	16.5%
Other Liabilities	168	190	130	-11.6%	29.2%
Total Liabilities	10,470	11,076	8,682	-5.5%	20.6%
Total Equity	1,931	1,890	1,680	2.2%	14.9%

As of 31 March 2018, the Group's total assets amounted to GEL 12,401 million, up by GEL 2,039 million, or by 19.7% YoY. The increase was mainly due to the rise in net loans to customers by GEL 1,219 million, or by 17.6% YoY. The YoY increase in total assets also resulted from a GEL 494 million, or 28.2%, rise in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) and a GEL 198 million, or 24.4%, increase in financial securities, compared to 31 March 2017.

On a QoQ basis, total assets declined by GEL 565 million, or 4.4%, primarily due to a GEL 258 million, or 10.3% decrease in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG), due to a GEL 188 million or 2.3% drop in net loans to customers and due to GEL 96 million, or 8.7% decrease in financial securities. The decline across the balance sheet items were also related to the appreciation of the local currency, which had a negative effect on assets denominated in foreign currency.

As of 31 March 2018, the gross loan portfolio reached GEL 8,433 million, up by 18.4% YoY and down by 1.4% QoQ. At the same time, gross loans denominated in foreign currency accounted for 58.2% of total loans, compared to 61.4% as of 31 March 2017 and 59.7% as of 31 December 2017.

Asset Quality

Foreign Currency Income Linked Borrowers

	31-Mar-18		31-Dec-17
Segments	FC share	FC linked income borrowers share	FC share	FC linked income borrowers share
Retail	49.4%	25.4%	49.3%	24.9%
Consumer	18.0%	24.5%	18.5%	22.7%
Mortgage	80.1%	25.6%	81.4%	25.4%
Corporate	75.6%	53.1%*	74.6%	56.3%**
MSME***	53.3%	14.9%	63.8%	16.6%
Total Loan Portfolio	58.2%	34.0%	59.7%	34.3%

* Pure exports account for 7.0% of total Corporate FX denominated loans

** Pure exports account for 8.0% of total Corporate FX denominated loans

*** MSME dollarization level decreased due to re-segmentation in Q1 2018

PAR 301 by Segments and Currencies Par 30                        Mar-18   Dec-17   Mar-17 GEL FC Total GEL FC Total GEL FC Total Corporate 0.0% 1.1% 0.9% 0.0% 2.0% 1.5% 0.3% 1.6% 1.2% Retail 2.9% 1.7% 2.3% 2.9% 2.0% 2.4% 2.7% 2.4% 2.6% MSME 1.9% 3.5% 2.7% 1.5% 3.1% 2.5% 1.9% 4.0% 3.3% Total 2.2% 1.9% 2.0% 2.1% 2.2% 2.2% 2.1% 2.5% 2.4% 1 loans overdue by more than 30 days to gross loans                       Total The total PAR 30 decreased by 0.2pp QoQ. The decline in PAR 30 ratio in 1Q 2018 is mainly related to repayment of one large corporate borrower. The total PAR 30 contracted by 0.4pp YoY. The YoY decrease is related to improved performance across all segments. Retail Segment The retail segment PAR 30 amounted to 2.3%, down by 0.1% QoQ and down by 0.3% YoY basis. Without re-segmentation effect PAR 30 would have been stable QoQ. Corporate The corporate segment PAR 30 amounted to 0.9%, down by 0.6pp QoQ and down by 0.3pp YoY. QoQ decrease is mainly driven by repayment of one large corporate client. The YoY decline is related to overall improved performance of the corporate book. MSME The MSME segment PAR 30 amounted to 2.7%, up by 0.2pp QoQ. The increase was driven by re-segmentation effect. Without re-segmentation effect Par 30 would have been flat The MSME segment PAR 30 decreased by 0.6pp YoY. The decrease was mainly driven by SME sub-segment. NPLs NPLs Mar-18 Dec-17 Mar-17 GEL FC Total GEL FC Total GEL FC Total Corporate 0.9% 3.0% 2.5% 0.0% 4.2% 3.2% 0.7% 5.2% 4.1% Retail 2.4% 3.0% 2.7% 2.6% 2.8% 2.7% 2.1% 2.9% 2.5% MSME 2.6% 6.2% 4.5% 2.2% 6.0% 4.6% 2.5% 5.4% 4.5% Total 2.2% 3.7% 3.1% 2.1% 4.1% 3.3% 1.9% 4.3% 3.4% Total Total NPLs stood at 3.1%, down by 0.2pp on a QoQ basis and down by 0.3pp on YoY basis.  Both YoY and QoQ decrease is attributable to improved performance of the corporate loan book. Retail Segment Retail NPLs stood at 2.7%, stable on QoQ basis and up by 0.2pp YoY. Corporate Corporate NPLs stood at 2.5%, down by 0.7pp on a QoQ basis. QoQ decrease is mainly driven by repayment of one large corporate client. Corporate NPLs decreased by 1.6pp on a YoY basis driven by improved performance of the corporate loan book. MSME MSME NPLs declined by 0.1pp on a QoQ basis, to 4.5% and remained stable on YoY basis. NPLs Coverage NPLs Coverage Mar-18 Dec-17 Mar-17* Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral Corporate 103.8% 275.5% 86.6% 211.0% 69.2% 271.0% Retail 157.6% 235.6% 154.0% 237.3% 121.4% 207.6% MSME 70.2% 179.2% 54.6% 170.6% 54.4% 170.9% Total 114.6% 225.8% 104.7% 209.4% 84.6% 217.4%

*per IAS 39

Total

NPL coverage ratios per IFRS 9 stood at 114.6% and 225.8%, including collateral, compared to 104.7% and 209.4% as of December 2017. 

Retail Segment

NPL coverage ratios per IFRS 9 stood at 157.6% and 235.6%, including collateral, compared to 154.0% and 237.3% as of December 2017.

Corporate

NPL coverage ratios per IFRS 9 stood at 103.8% and 275.5%, including collateral, compared to 86.6% and 211.0% as of December 2017.

MSME

NPL coverage ratios per IFRS 9 stood at 70.2% and 179.2%, including collateral, compared to 54.6% and 170.6% as of December 2017.

Liabilities

As of 31 March 2018, TBC Bank's total liabilities amounted to GEL 10,470.6 million, down by GEL 604,8 million, or 5.5% QoQ. The contraction was primarily due to a GEL 350.6 million, or 13.4%, decrease in amounts due to credit institutions and a drop in customer accounts by a GEL 206.0 million. The declines across the balance sheet items were also related to the appreciation of the local currency, which effected liabilities denominated in foreign currency.

As for year-on-year comparison, total liabilities increased by a GEL 1,788.6 million, or 20.6%. This increase was primarily attributable to a GEL 1,540.0 million, or 25.4% increase in customer accounts, as well as a GEL 157.8 million, or 7.5% rise in amounts due to credit institutions.

Liquidity

As of 31 March 2018 the Bank's liquidity ratio, as defined by the NBG, stood at 30.8%, compared to 29.4% as of 31 March 2017 and compared to 32.5% as of 31 December 2017. As of 31 March 2018, the total liquidity coverage ratio (LCR), as defined by NBG, was 104.6%, above the 100.0% limit, while the LCR in GEL and FC stood at 90.4% and 114.4% respectively, above the respective limits of 75% and 100%.

Total Equity

As of 31 March 2018, TBC's total equity amounted to GEL 1,930.4 million, up by GEL 39.9 million from GEL 1,890.5 million as of 31 December 2017. The QoQ change in equity was mainly due to a GEL 33.4 million increase in retained earnings.

As for YoY comparison, total equity increased by a GEL 250.0 million, or 14.9%. This increase was primarily attributable to a GEL 211.3 million increase in retained earnings and a GEL 76.1 million increase in share premium.

Regulatory Capital

According to the newly introduced methodology, as of 31 March 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.8% and 17.7%, respectively, compared to the minimum required levels of 10.2% and 15.0%. In comparison, as of 31 December 2017, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.4% and 17.5%, respectively, compared to the minimum required levels of 10.3% and 12.9%.

In March 2018, The Bank's Basel III Tier 1 Capital amounted to GEL 1,517.2 million up by GEL 80.0 million, or 5.6% compared to December 2017.  The Bank's Basel III Total Capital amounted to GEL 1,943.4 million up by GEL 58.1 million, or 3.1% on QoQ basis. Risk Weighted Assets amounted to GEL 10,999.6 million as of 31 March 2018, compared to GEL 10,753.2 million as of 31 December 2017.

Results by Segments and Subsidiaries

The segment definitions are as per below (updated in 2018):

·      Corporate - legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or who 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 MSME on a discretionary basis;

·      MSME (Micro, Small and Medium) - business customers who are not included in either corporate and retail segments; or legal entities who have been granted a Pawn shop loan;

·      Retail - non-business individual customers and individual business customers, who have been granted mortgage loans; all individual customers are included in retail deposits;

·      Corp. Centre - comprise the Treasury, other support and back office functions, and non-banking subsidiaries of the Group;

Businesses customers are all legal entities or individuals who have been granted a loan for business purpose.

Summary of key changes:

·      The limits for corporate customers have been increased from GEL 8.0 million to GEL 12.0 million for annual revenue and from USD 1.5 million to GEL 5.0 million for granted facilities; As a result, GEL 66 mln was added to corporate loan portfolio and GEL 78 mln was added to corporate deposit portfolio.

·      Certain sub-categories for the individual business customers that are granted non mortgage loans have been moved from retail to MSME segment.  As a result, GEL 236 mln was transferred from retail to MSME loan portfolio.

 

Income Statement by Segments
1Q'18	Retail	MSME	Corporate	Corp.Centre	Total
Interest Income	149,300	50,999	57,217	32,333	289,849
Interest Expense	(29,436)	(2,593)	(30,893)	(51,524)	(114,446)
Net Transfer Pricing	(22,996)	(17,984)	4,292	36,688	-
Net Interest Income	96,868	30,422	30,616	17,497	175,403
Fee and Commission Income	37,449	5,152	6,837	1,396	50,834
Fee and Commission Expense	(13,031)	(1,540)	(1,275)	(69)	(15,915)
Net fee and Commission Income	24,418	3,612	5,562	1,327	34,919
Gross Insurance Profit	-	-	-	2,046	2,046
Gains Less Losses from Trading in Foreign Currencies	5,661	4,862	8,770	(2,213)	17,080
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)	-	-	-	2,473	2,473
Net Losses from Derivative Financial Instruments	-	-	-	17	17
Other Operating Income	3,148	209	2,292	805	6,454
Share of profit of associates	-	-	-	307	307
Other Operating Non-Interest Income	8,809	5,071	11,062	3,435	28,377
Provision for Loan Impairment	(27,884)	(4,683)	4,568	-	(27,999)
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments	149	284	(4,070)	(238)	(3,875)
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease	-	-	-	(240)	(240)
(Provision)/Recovery of Provision for Impairment of other Financial Assets	-	(2)	(7,026)	(392)	(7,420)
Recovery of Impairment/(Impairment) of Investment Securities Available for Sale	-	-	(9)	80	71
Profit before G&A Expenses and Income Taxes	102,360	34,704	40,703	21,469	199,236
Staff Costs	(32,690)	(9,070)	(7,045)	(3,311)	(52,116)
Depreciation and Amortization	(8,519)	(1,134)	(506)	(311)	(10,470)
Administrative and Other Operating Expenses	(20,337)	(3,440)	(2,016)	(2,553)	(28,346)
Operating Expenses	(61,546)	(13,644)	(9,567)	(6,175)	(90,932)
Profit before Tax	40,814	21,060	31,136	15,294	108,304
Income Tax Expense	(5,399)	(3,214)	(4,867)	2,702	(10,778)
Profit for the Year	35,415	17,846	26,269	17,996	97,526

Portfolios by Segments
In thousands of GEL	Mar-18	Dec-17	Mar-17
Loans and Advances to Customers
Consumer	1,926,828	2,128,658	1,859,865
Mortgage	2,007,914	2,069,728	1,736,302
Pawn	34,583	34,767	33,985
Retail	3,969,325	4,233,153	3,630,152
Corporate	2,489,516	2,475,392	1,922,615
MSME	1,974,075	1,844,672	1,568,270
Total Loans and Advances to Customers (Gross)	8,432,916	8,553,217	7,121,037
Less: Provision for Loan Impairment	(296,096)	(227,864)	(202,791)
Total Loans and Advances to Customers (Net)	8,136,820	8,325,353	6,918,246
Customer Accounts
Retail	4,197,277	4,378,266	3,543,911
Corporate	2,474,560	2,410,862	1,733,114
MSME	938,967	1,027,689	793,808
Total Customer Accounts	7,610,804	7,816,817	6,070,833

Retail Banking

As of 31 March 2018, retail loans stood at GEL 3,969.3 million up by GEL 339.2 million, or 9.3% YoY. Without the re-segmentation and the currency effect the retail loan portfolio would have increased by 2.8% QoQ. As of 31 March 2018, TBC Bank's retail loans accounted for 39.6% market share of total individual loans. As of 31 March 2018, foreign currency loans represented 49.4% of the total retail loan portfolio.

In the reporting period, retail deposits stood at GEL 4,197.3 million up by GEL 653.4 million, or 18.4% YoY. Without the re-segmentation and the currency effect retail deposits would have increased by 1.3% QoQ. Retail deposits accounted for 40.6% market share of total individual deposits. As of 31 March 2018 term deposits accounted for 54.7% of the total retail deposit portfolio, while foreign currency deposits represented 83.1% of the total retail deposit portfolio.

In 1Q 2018, retail loan yields and deposit rates stood at 14.6% and 2.8% respectively. The segment's cost of risk on loans was 2.7% (without re-segmentation effect 2.9%).  The retail segment contributed 36.3%, or GEL 35.4 million, to the TBC's total net income in 1Q 2018.

Corporate Banking

As of 31 March 2018, corporate loans amounted to GEL 2,489.5 million up by GEL 566.9 million, or 29.5% YoY. Without the re-segmentation and the currency effect the portfolio would have increased by 3.2% QoQ. Foreign currency loans accounted for 76.1% of the total corporate loan portfolio. Market share of total legal entities loans stood at 35.6%.

As of the same date, corporate deposits totalled GEL 2,474.6 million up by GEL 741.4 million, or 42.8% YoY. Without the re-segmentation and the currency effect corporate deposits would have increased by 2.4% QoQ. Foreign currency corporate deposits represented 44.0% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 37.0%.

In 1Q 2018, corporate loan yields and deposit rates stood at 9.2% and 5.2%, respectively. In the same period, the cost of risk on loans was -0.8% (without re-segmentation effect also -0.8%) In terms of profitability, the corporate segment's net profit reached GEL 26.3 million, or 26.9% of the Group's total net income.

MSME Banking

As of 31 March 2018, MSME loans amounted to GEL 1,974.1 up by GEL 405.8 million, or 25.9% YoY. Without the re-segmentation and the currency effect the portfolio would have increased by 1.9% QoQ. Foreign currency loans accounted for 53.2% of the total MSME portfolio.

As of the same date, MSME deposits stood at GEL 939.0 million up by GEL 145.2 million, or 18.3% YoY. Without the re-segmentation and the currency effect the deposit portfolio would have increased by 2.3% QoQ.  Foreign currency MSME deposits represented 51.9% of the total MSME deposit portfolio.

In 1Q 2018, MSME loan yields and deposit rates stood at 11.3% and 1.1% respectively, while the cost of risk on loans was 1.0% (without the re-segmentation effect 0.6%). In terms of profitability, net profit for the MSME segment amounted to GEL 17.8 million, or 18.3%, of TBC's total net income.

Consolidated Balance Sheet
In thousands of GEL	Mar-18	Dec-17	Mar-17
Cash and cash equivalents	1,245,562	1,431,477	697,118
Due from other banks	23,311	39,643	151,780
Mandatory cash balances with National Bank of Georgia	978,116	1,033,818	904,487
Loans and advances to customers (Net)	8,136,820	8,325,353	6,918,246
Investment securities available for sale	580,784	657,938	428,138
Investment in subsidiaries	1,585	1,277	537
Investment securities held to maturity	429,875	449,538	384,756
Investments in finance leases	145,546	143,837	88,627
Investment properties	76,690	79,232	96,064
Goodwill	28,657	28,657	28,658
Intangible assets	84,997	83,492	63,906
Premises and equipment	369,610	366,913	320,659
Other financial assets	107,726	130,402	82,254
Deferred tax asset	2,527	2,855	3,406
Current income tax prepayment	8,454	19,084	10,058
Insurance and Reinsurance Receivables	20,125	15,742	3,414
Other assets	160,662	156,652	180,479
TOTAL ASSETS	12,401,047	12,965,910	10,362,587
LIABILITIES
Due to Credit Institutions	2,270,119	2,620,714	2,112,360
Customer accounts	7,610,804	7,816,817	6,070,833
Current income tax liability	44	447	2,902
Debt Securities in issue	19,371	20,695	24,376
Deferred income tax liability	663	602	3,727
Provisions for liabilities and charges	12,467	13,200	15,528
Other financial liabilities	76,438	80,762	54,780
Subordinated debt	402,058	426,788	344,841
Insurance Contracts Liabilities	14,061	10,992	342
Other liabilities	64,618	84,440	52,354
TOTAL LIABILITIES	10,470,643	11,075,457	8,682,043
EQUITY
Share capital	1,626	1,605	1,581
Share premium	753,298	714,651	677,211
Retained earnings	1,266,299	1,232,865	1,055,011
Group reorganisation reserve	(162,167)	(162,167)	(162,167)
Share based payment reserve	(24,608)	9,828	21,303
Revaluation reserve for premises	70,039	70,045	70,460
Revaluation reserve for available-for-sale securities	4,146	1,731	(5,088)
Cumulative currency translation reserve	(7,425)	(7,360)	(7,636)
TOTAL EQUITY	1,901,208	1,861,198	1,650,675
Non-controlling interest	29,196	29,255	29,869
TOTAL EQUITY	1,930,404	1,890,453	1,680,544
TOTAL LIABILITIES AND EQUITY	12,401,047	12,965,910	10,362,587

Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL	1Q'18	1Q'17	4Q'17
Interest income	289,849	237,769	288,020
Interest expense	(114,446)	(95,436)	(122,625)
Net interest income	175,403	142,333	165,395
Fee and commission income	50,834	44,500	55,673
Fee and commission expense	(15,915)	(18,023)	(16,719)
Net Fee and Commission Income	34,919	26,477	38,954
Gross insurance profit	2,046	1,225	1,919
Gains less losses from trading in foreign currencies	17,080	21,146	25,622
Foreign exchange translation gains less losses	2,473	1,046	92
Gains less losses/(losses less gains) from derivative financial instruments	17	(3)	3
(Losses less gains) / gains less losses from disposal of investment securities available for sale	-	-	93
Share of profit of associates	307	92	249
Other operating income	6,454	11,166	10,991
Other operating non-interest income	26,331	33,447	37,050
Provision for loan impairment	(27,999)	(16,922)	(28,421)
Provision for  impairment of investments in finance lease	(240)	(31)	(79)
Provision for/ (recovery of provision)  performance guarantees and credit related commitments	(3,875)	92	(1,019)
Provision for  impairment of other financial assets	(7,420)	(798)	(6,917)
Impairment of investment securities available for sale	71	-	-
Operating income after provisions for impairment	199,236	185,823	206,882
Staff costs	(52,116)	(47,538)	(54,105)
Depreciation and amortisation	(10,470)	(8,604)	(10,425)
Provision for liabilities and charges	-	95	-
Administrative and other operating expenses	(28,346)	(26,873)	(35,111)
Operating expenses	(90,932)	(82,920)	(99,641)
Profit before tax	108,304	102,903	107,241
Income tax expense	(10,778)	(6,345)	(10,487)
Profit for the period	97,526	96,558	96,754
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Revaluation	2,374	(1,407)	946
Exchange differences on translation to presentation currency	(67)	(96)	(60)
Items that will not be reclassified to profit or loss:
Other comprehensive income for the year	2,307	(1,503)	886
Total comprehensive income for the year	99,833	95,055	97,640
Profit attributable to:
- Owners of the Bank	95,758	94,975	95,367
- Non-controlling interest	1,768	1,583	1,387
Profit for the period	97,526	96,558	96,754
Total comprehensive income is attributable to:
- Owners of the Bank	98,031	93,473	96,179
- Non-controlling interest	1,802	1,582	1,461
Total comprehensive income for the year	99,833	95,055	97,640

Consolidated Statements of Cash Flows
In thousands of GEL	31-Mar-18	31-Mar-17
Cash flows from operating activities
Interest received	286,870	236,723
Interest paid	-114,810	-93,869
Fees and commissions received	50,177	43,697
Fees and commissions paid	-15,988	-18,193
Insurance premium received	10,632	2,472
Insurance claims paid	-4,547	-1,407
Income received from trading in foreign currencies	17,080	21,303
Other operating income received	-6,747	7,493
Staff costs paid	-81,180	-51,305
Administrative and other operating expenses paid	-34,351	-32,771
Income tax (paid) / refunded	-113	-10,379
Cash flows from operating activities before changes in operating assets and liabilities	107,023	103,764
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia	24,793	-214,398
Loans and advances to customers	-254,413	-190,209
Investment in finance lease	-10,397	363
Other financial assets	27,467	24,090
Other assets	2,262	-17,175
Due to other banks	27,601	-49,578
Customer accounts	142,411	-53,309
Other financial liabilities	-10,447	6,351
Other liabilities and provision for liabilities and charges	406	-1,669
Net cash from operating activities	56,706	-391,770
Cash flows from investing activities
Acquisition of investment securities available for sale	-80,411	-37,753
Proceeds from disposal of investment securities available for sale	-	-2250
Proceeds from redemption at maturity of investment securities available for sale	158,849	41,583
Acquisition of subsidiaries	-	-350
Acquisition of bonds carried at amortised cost	-56,429	-129,956
Proceeds from redemption of bonds carried at amortised cost	71,405	119,285
Acquisition of premises, equipment and intangible assets	-15,394	-19,573
Disposal of premises, equipment and intangible assets	910	1,458
Proceeds from disposal of investment property	4,192	872
Net cash used in investing activities	83,122	-26,684
Cash flows from financing activities
Proceeds from other borrowed funds	645,260	497,714
Redemption of other borrowed funds	-935,698	-473,649
Proceeds from debt securities in issue	75	2,805
Issue of ordinary shares	17,397	29
Net cash from / (used in) financing activities	-272,966	26,899
Effect of exchange rate changes on cash and cash equivalents	-52,777	-25,003
Net increase / (decrease) in cash and cash equivalents	-185,915	-416,558
Cash and cash equivalents at the beginning of the year	1,431,477	1,113,676
Cash and cash equivalents at the end of the year	1,245,562	697,118

Key Ratios

Average Balances

Average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the Management for monitoring and control purposes.

Key Ratios
Ratios (based on monthly averages, where applicable)	1Q'18	1Q'17	4Q'17
ROE1	21.0%	24.2%	21.0%
ROA2	3.2%	3.7%	3.0%
Pre-Provision ROE3	29.6%	28.7%	29.0%
Cost to Income4	38.1%	40.8%	41.0%
Cost of Risk5	1.3%	0.9%	1.4%
NIM6	6.9%	6.6%	6.4%
Risk Adjusted NIM7	5.2%	5.1%	5.2%
Loan Yields8	12.3%	11.9%	12.3%
Risk Adjusted Loan Yields9	10.6%	10.5%	11.1%
Deposit rates10	3.3%	3.4%	3.5%
Yields on interest Earning Assets11	11.5%	11.1%	11.2%
Cost of Funding12	4.4%	4.4%	4.6%
Spread13	7.1%	6.7%	6.6%
PAR 90 to Gross Loans14	1.2%	1.5%	1.4%
NPLs to Gross Loans15	3.1%	3.4%	3.3%
NPLs coverage16	114.6%	84.6%*	104.7%
NPLs coverage with collateral17	225.8%	217.4%*	209.4%
Provision Level to Gross Loans18	3.5%	2.8%	2.7%
Related Party Loans to Gross Loans19	0.1%	0.1%	0.1%
Top 10 Borrowers to Total Portfolio20	9.4%	8.3%	8.2%
Top 20 Borrowers to Total Portfolio21	13.4%	12.2%	12.4%
Net Loans to Deposits plus IFI Funding22	93.2%	97.2%	92.5%
Net Stable Funding Ratio23	123.5%	106.8%	124.4%**
Liquidity Coverage Ratio24	114.4%	NA	112.7%
Leverage25	6.4x	6.2x	6.9x
Regulatory Tier 1 CAR (Basel III)26	13.8%	NA	13.4%
Regulatory Total CAR (Basel III)27	17.7%	NA	17.5%

   * Figures per  IAS39

** Per updated internal methodology in line with Basel 2014 guidelines

Ratio definitions

1.Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period; Annualized where applicable.

2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Annualised where applicable.

3.Pre-Provision Return on average total equity (ROE) equals net income attributable to owners excluding all provision charges divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period

4. 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).

5. Cost of risk equals provision for loan impairment divided by monthly average gross loans and advances to customers. Annualized where applicable.

6. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, amount due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks.

7. Risk Adjusted Net interest margin is NIM minus cost of risk without one -offs and currency effect

8. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers. Annualised where applicable.

9. Risk Adjusted Loan yield is loan yield minus cost of risk without one-offs and currency effect

10. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits. Annualised where applicable.

11. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets. Annualized where applicable.

12. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities. Annualised where applicable.

13. 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).

14. 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.

15. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.

16. NPLs coverage ratio equals total loan loss provision calculated per IFRS 9 divided by the NPL loans.

17. NPLs coverage with collateral ratio equals loan loss provision calculated per IFRS 9 plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.

18. Provision level to gross loans equals loan loss provision divided by the gross loan portfolio for the same period.

19. Related party loans to total loans equals related party loans divided by the gross loan portfolio.

20. Top 10 borrowers to total portfolio equals total loan amount of top 10 borrowers divided by the gross loan portfolio.

21. Top 20 borrowers to total portfolio equals total loan amount of top 20 borrowers divided by the gross loan portfolio.

22. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.

23. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III. NSFR ratio for before 2Q 2017 is calculated per updated internal methodology in line with Basel 2014 guidelines.

24. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined by NBG.

25. Leverage equals total assets to total equity.

26. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

27. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel 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 2.5922 as of 31 December 2017. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4452 as of 31 March 2017. As of 31 March 2018 the USD/GEL exchange rate equalled 2.4144. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2018 of 2.4854, 4Q 2017 of 2.5933, 1Q 2017 of 2.6029.

Additional Disclosures

Subsidiaries of TBC Bank Group PLC[10]

	Ownership / voting % as of 31 March 2018	Country	Year of incorporation	Industry	Total Assets  (after elimination)
Subsidiary					Amount GEL'000	% in TBC Group
TBC Insurance	100.0%	Georgia	2014	Insurance	38,496	0.31%
JSC TBC Bank	98.7%	Georgia	1992	Banking sector	12,082,192	97.43%
United Financial Corporation JSC	98.7%	Georgia	1997	Card processing	7,907	0.06%
TBC Capital LLC	100.0%	Georgia	1999	Brokerage	14,745	0.12%
TBC Leasing JSC	99.6%	Georgia	2003	Leasing	190,746	1.54%
TBC Kredit LLC	75.0%	Azerbaijan	2008	Non-banking credit institution	31,639	0.26%
Banking System Service Company LLC	100.0%	Georgia	2009	Information services	565	0.00%
TBC Pay LLC	100.0%	Georgia	2009	Processing	31,867	0.26%
Mali LLC	100.0%	Georgia	2011	Real estate management	181	0.00%
Real Estate Management Fund JSC	100.0%	Georgia	2010	Real estate management	21	0.00%
TBC Invest LLC	100.0%	Israel	2011	PR and marketing	393	0.00%

1) Earnings per Share

In GEL	31-Mar-2018	31-Mar-2017
Earnings per share for profit attributable to the owners of the Group:
- Basic earnings per share	1.80	1.80
- Diluted earnings per share	1.79	1.75

Source: IFRS Consolidated

2) Sensitivity Scenario

Sensitivity Scenario	31-Mar-18	10% Currency Devaluation Effect
NIM*		-0.1%
Technical Cost of Risk		+0.2%
Regulatory Total Capital per new NBG regulation	1,943	1,978
Regulatory Capital adequacy ratios tier 1 and total capital per new NBG regulation decrease by		0.59% - 0.71%

The table above shows the effect of a 10% currency devaluation on TBC Bank's balance sheet as of 31 March or Q1 2018 income statement, as applicable.

 (*) Linear depreciation is assumed for NIM sensitivity analysis

Source: IFRS statements and Management accounts

3) FC details for Selected P/L Items

Selected P&L Items 1Q 2018	FC % of Respective Totals
Interest Income	39%
Interest Expense	49%
Fee and Commission Income	31%
Fee and Commission Expense	68%
Administrative Expenses	23%

Source: IFRS statements

4) GEL Refinance Rate and Libor Linked B/S Items 31 March 2018

GEL Refinance Rate Gap	GEL     -242 m			Libor Gap	GEL 1,079 m
	GEL m	% share in totals			GEL m	% share in totals
Assets	1,709	14%		Assets	2,393	19%
Securities with fixed yield(≤1y)*	409	41%		Nostro**	180	41%
Securities with floating yield	49	5%		NBG Reserves**	978	72%
Loans with Floating yield	1,119	13%		NBG Deposits	167	12%
Reserves in NBG	116	9%		Libor Loans	1,405	12%
Interbank loans& Deposits & Repo	15	4%		Interest Rate Options	21
Liabilities	1,951	19%
Current accounts***	405	5%		Liabilities	1,314	13%
Saving accounts***	494	6%		Senior Loans	1,011	46%
Refinancing Loan of NBG	732	34%		Subordinated Loans	303	76%
Interbank Loans &Deposits & Repo	98	87%
IFI Borrowings	222	10%

(*) 48% of the less than 1 year securities are maturing in 6 months

(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. From March, 2016  according to NBG regulation is it possible  to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.

(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification)

Source: IFRS Consolidated

5) Yields and Rates
Yields and Rates	1Q'18	4Q'17	3Q'17	2Q'17	1Q'17
Loan yields	12.3%	12.3%	11.9%	12.4%	11.9%
Retail loan yields  GEL	20.5%	19.7%	19.2%	19.7%	20.0%
Retail loan yields FX	8.4%	8.8%	8.5%	9.0%	9.1%
Retail Loan Yields	14.6%	14.2%	13.8%	14.2%	13.9%
Corporate loan yields  GEL	11.2%	12.2%	11.0%	10.6%	10.0%
Corporate loan yields FX	8.6%	9.2%	8.6%	9.5%	8.8%
Corporate Loan Yields	9.2%	10.0%	9.2%	9.8%	9.1%
MSME loan yields  GEL	15.0%	13.6%	13.1%	13.4%	13.3%
MSME loan yields FX	8.9%	9.4%	9.4%	10.4%	10.1%
MSME Loan Yields	11.3%	10.9%	10.7%	11.4%	11.0%
Deposit rates	3.3%	3.5%	3.4%	3.5%	3.4%
Retail deposit rates GEL	4.4%	4.4%	4.0%	3.9%	3.9%
Retail deposit rates FX	2.5%	2.7%	2.8%	3.0%	3.2%
Retail Deposit Yields	2.8%	2.9%	3.0%	3.1%	3.3%
Corporate deposit rates GEL	8.0%	8.5%	8.3%	8.5%	8.7%
Corporate deposit rates FX	2.0%	2.1%	2.2%	2.1%	1.7%
Corporate Deposit Yields	5.2%	5.3%	5.2%	5.2%	4.9%
MSME deposit rates GEL	1.8%	2.1%	2.2%	2.2%	2.0%
MSME deposit rates FX	0.5%	0.8%	0.7%	0.6%	0.5%
MSME Deposit Yields	1.1%	1.4%	1.4%	1.3%	1.1%
Yields on Securities	8.1%	6.9%	8.4%	7.8%	8.1%

Source: IFRS Consolidated

6) Risk Adjusted Yields & Cost of Risk
Risk-adjusted Yields		1Q'18	4Q'17		3Q'17		2Q'17	1Q'17
Loan yields		10.6%	11.1%		10.7%		10.9%	10.5%
Retail Loan Yields		11.6%	12.2%		10.8%		10.9%	10.6%
Corporate Loan Yields		9.3%	9.6%		11.1%		11.3%	11.1%
MSME Loan Yields		9.8%	10.4%		9.9%		10.5%	9.4%

Source: IFRS Consolidated

Cost of Risk			1Q'18	4Q'17	3Q'17		2Q'17	1Q'17
Retail			2.7%	2.0%	3.2%		3.1%	2.9%
Corporate			-0.8%	0.7%	-1.7%		-1.6%	-2.9%
MSME			1.0%	0.7%	0.9%		0.7%	1.1%
Total			1.3%	1.4%	1.3%		1.3%	0.9%

Source: IFRS Consolidated

7) Loan Quality per NBG

Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG

	Mar-18	Dec-17	Sep-17	Jun-17	Mar-17
SDL Loans as % of Gross Loans	3.1%	3.2%	3.4%	3.3%	4.1%

  Source: NBG, TBC standalone

8) Cross Sell Ratio[11] and Number Active Products

	Mar-18	Dec-17	Sep-17	Jun-17	Mar-17
Cross Sell Ratio	3.88	3.94	3.79	3.67	3.57
Number of Active Products (in millions)	4.56	4.50	4.06	3.78	3.16

Source: Management accounts

9) Diversified Deposit Base

Status: monthly income >=GEL 3,000 or loans/deposits >=GEL 30,000

VIP: deposit >=USD 100,000 as well as on discretionary basis;

Wealth Management for non-resident customers >=USD 100,000 as well as on discretionary basis

31 March 2018	Volume of Deposits	Number of Deposits
MASS	39%	93.0%
STATUS	29%	6.5%
VIP	23%	0.4%
Wealth Management for non-resident clients	9%	0.1%

 Source: Management accounts

10) Loan Concentration

	Mar-18	Dec-17	Sep-17	Jun-17	Mar-17
Top 20 Borrowers as % of total portfolio	13.4%	12.4%	12.5%	13.0%	12.2%
Top 10 Borrowers as % of total portfolio	9.4%	8.2%	8.3%	9.1%	8.3%
Related Party Loans as % of total portfolio	0.1%	0.1%	0.1%	0.1%	0.1%

 Source: IFRS consolidated

11) Number of Active Clients (in thousands)

	Mar-18	Dec-17	Sep-17	Jun-17	Mar-17
Internet or Mobile Banking	447	461	375	340	298
Mobile Banking	365	359	289	254	219

Source: Management accounts

12) Number of Transactions in Digital Channels

	1Q 18	4Q 17	3Q 17	2Q 17	1Q 17
Internet banking number of transactions (in thousands)	2,449	2,743	2,175	2,166	2,098
Mobile banking number of transactions (in thousands)	5,315	5,207	3,953	3,163	2,622
POS number of transactions (in thousands)	17,887	16,416	13,326	11,328	9,636
POS volume of transactions (in mln GEL)	661	631	543	447	394

* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches

Source: Management accounts

13) Penetration Ratios of Digital Channels

	Mar-18	Dec-17	Sep-17	Jun-17	Mar-17
IB&MB Penetration Ratio	38%	40%	35%	33%	34%
Mobile Banking Penetration Ratio	31%	31%	27%	25%	25%

Source: Management accounts

14) Net outflow of borrowed funds

Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million)
2018	2019	2020	2021	2022	2023	2024	2025	2026
331	303	402	312	170	154	41	66	146

Source: Management accounts, revolving non IFI loans from NBG are excluded

15) NPL Build Up (in GEL millions)

NPLs		NPLs as of Dec-17	Real Growth	FX Effect	Write-Offs	Repossessed	NPLs as of Mar-18
Retail		115	26	-4	-27	-2	107
Corporate		78	-12	-4	0	0	62
MSME		85	15	-5	-5	-2	89
Total		278	29	-13	-32	-4	258

16) Net Write-Offs, 1Q 2018  In GEL millions Write-Offs Recoveries Net Write-Offs Retail -27 6 -21 Corporate 0 1 1 MSME -5 2 -3 Total -32 9 -23 Source: IFRS Consolidated             17) Portfolio Breakdown by Collateral Types as of 31-Mar-18

Cash Cover	2%
Gold	3%
Inventory	7%
Real Estate	63%
Third Party Guarantees	6%
Other	3%
Unsecured	17%

Source: IFRS Consolidated

18) Loan to Value by Segments as of 31-Mar-18
Retail	Corporate	MSME	Total
45%	44%	45%	45%
LTV is defined as loan amount divided by the value of collateral

19) Regulatory Capital

Total Capital and Tier 1 Capital Limits

	2017 Actual		2018  F		2019 F		2020 F		2021 F
	Tier 1	Total	Tier 1	Total	Tier 1	Total	Tier 1	Total	Tier 1	Total
Minimum Requirement	6.0%	8.0%	6.0%	8.0%	6.0%	8.0%	6.0%	8.0%	6.0%	8.0%
Conservation Buffer	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%	2.5%
Counter-Cyclical Buffer	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Systemic Buffer	0.0%	0.0%	1.0%	1.0%	1.5%	1.5%	2.0%	2.0%	2.5%	2.5%
Pillar 1 buffers	8.5%	10.5%	9.5%	11.5%	10.0%	12.0%	10.5%	12.5%	11.0%	13.0%

In addition, the pillar 2 buffers in tier 1 will be in the range of 1.5%-2.5% in 2018 and gradually increase to the range of 2.5%-4.0% by 2021. The pillar 2 buffers in total capital will be in the range of 3.0%-5.0% from 2018 to 2021

20) TBC Insurance

TBC Insurance is a wholly owned subsidiary of the Company and the Bank's main bancassurance partner. It was acquired by the Group in October 2016 and it has been growing rapidly since then. TBC Insurance's product offering comprises motor, travel, personal accident, credit life and property, business property, liability, and cargo insurance products. The company uses a broad range of channels to sell its products, including insurance agents, auto dealerships, web platforms, as well as TBC Bank's market-leading multichannel network.

In line with the Group's digitalisation strategy, TBC Insurance actively uses digital channels to market and sell its products. In 2017, TBC Insurance launched on the local market the first insurance chat bot, B Bot, which sells different types of insurance products. B Bot is fun to use and is quickly gaining popularity among our clients, especially the younger generation. Another popular sales channel is the wide network of TBC Bank's self-service terminals, where customers can buy travel and motor third-party liability (MTPL) insurance in a very short time. In addition, travel insurance can be purchased through TBC Bank's internet and mobile banking services, and more products are planned to be added to this channel in 2018, including payment protection insurance (PPI), CASCO and MTPL.

The insurance business delivered outstanding financial results in a short period of time. In March 2018, its market share[12] grew from 7.9% to 19.0% YoY. Over the same period, the number of clients increased from 116,456 to 295,607 and TBC insurance posted GEL 12,494 thousand in gross written premium, up by 190.2% YoY and its net earned premium reached GEL 6,458 thousand, up by 160.9%.  As a result, net profit amounted to GEL 1,260 thousand in 1Q 2018.

In thousands of GEL		1Q'18				4Q'17				3Q'17					2Q'17		1Q'17
Gross written premium		12,494				12,153				8,584					6,275		4,306
Net earned premium		6,458				5,881				4,622					3,873		2,475
Net profit		1,260				601				885					(94)		(458)
		1Q'18				4Q'17				3Q'17					2Q'17		1Q'17
Net combined ratio		76%				93%				92%					107%		114%
	Mar-18				Dec-17				Sep-17				Jun-17					Mar-17
Market share12				19.0%				13.3%				10.9%				9.0%	7.9%
Number of clients			295,607				276,848				239,472			174,385					116,456

 

---

[1] 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.

[2] Number of transactions conducted in remote channels divided by total number of transactions.

[3] Excluding health insurance, based on internal estimates

[4] Excluding exchange rate effect

[5] Excluding exchange rate effect and Credo bank effect

[6] Growth in USD terms

[7] Please refer to page 28 for key ratio definitions

[8] Gross insurance profit can be reconciled to the standalone net insurance profit (as shown in annex 20 on page 34) as follows: gross insurance profit  less provisions, administrative expenses and taxes, plus fee and commission income and net interest income

[9] Excluding health insurance, based on internal estimates

[10] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016

[11] Cross-sell ratio is defined as the number of active products divided by the number of active customers.

[12] Market share excluding health insurance; Source: Insurance State Supervision Service of Georgia. Market share for 1Q'2018 is based on internal estimates

 

END

 

 

QRFGMGMKKNKGRZG