3rd Quarter Results
TBC BANK GROUP PLC ("TBC Bank")
3
Q AND 9M 2021 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 the necessary regulatory approvals and licenses; the impact of developments in the Georgian economy; the impact of COVID-19; the 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 regulations, 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 accounts and financial statements. The areas in which the management 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, the 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 2021 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 2021 on Thursday, 18 November 2021 at 7.00 am GMT (11.00 am GET), while the results call will be held at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST).
Please click the link below to join the webinar:
https://tbc.zoom.us/j/97719750220?pwd=dVlNciswem4vQjZLUW1CWWt2b3lIZz09
Webinar ID: 977 1975 0220
Passcode: 124283
Or, use the following dial-ins:
· Georgia: +995 3224 73988 or +995 7067 77954 or 800 100 293 (Toll Free)
· United Kingdom: 0 800 031 5717 (Toll Free) or 0 800 260 5801 (Toll Free) or 0 800 358 2817 (Toll Free) or 0 800 456 1369 (Toll Free)
· US: 833 548 0276 (Toll Free) or 833 548 0282 (Toll Free) or 877 853 5257 (Toll Free) or 888 475 4499 (Toll Free)
· Russia: 8800 100 6938 (Toll Free) or 8800 301 7427 (Toll Free)
Webinar ID 977 1975 0220#, please dial the ID number slowly.
Other international numbers available at: https://tbc.zoom.us/u/aef0FWxaD4
The call will be held in two parts: the first part will comprise presentations, while during the second part of the call, participants will have the opportunity to ask questions. All participants will be muted throughout the webinar.
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For those participants who will be joining through the webinar, in order to ask questions, please use the "hand icon" that you will see at the bottom of the screen. The host will unmute those participants who have raised hands one after another. After the question is asked, the participant will be muted again.
Call Instructions:
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Contacts
Zoltan Szalai Director of International Media and Investor Relations
E-mail: ZSzalai@Tbcbank.com.ge Tel: +44 (0) 7908 242128 Web: www.tbcbankgroup.com
| Anna Romelashvili Head of Investor Relations
E-mail: IR@tbcbank.com.ge Tel: +(995 32) 227 27 27 Web: www.tbcbankgroup.com
| Investor Relations Department
E-mail: IR@tbcbank.com.ge Tel: +(995 32) 227 27 27 Web: www.tbcbankgroup.com
|
Table of Contents
3Q and 9M 2021 Results Announcement
Key Highlights
Letter from the Chief Executive Officer
Economic Overview
Unaudited Consolidated Financial Results Overview for 3Q 2021
Unaudited Consolidated Financial Results Overview for 9M 2021
Additional Disclosures
1)TBC Bank - Background
2)Subsidiaries of TBC Bank Group PLC
3)TBC Insurance
4)Fast growing digital bank in Uzbekistan
5)Reclassification of certain balance sheet profit and loss items and changes in methodology
6)Loan book breakdown by stages according IFRS 9
7)Reconciliation of Return on Equity (ROE) with ROE before expected credit loss allowances
TBC Bank's Unaudited 3Q and 9M 2021 Consolidated Financial Results
Continued to deliver robust profitability and steady growth supported by solid capital
Strong progress in exploiting our international growth potential
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.
Key Highlights
Economic recovery continued in 3Q - After a record-high rebound of 29.9% in 2Q 2021, which was driven by pent-up demand and re-opening of the economy, GDP posted solid, 9.0% YoY real growth in 3Q 2021. Importantly, the growth has been broad-based, supported by strong external inflows and increased domestic demand.In the first nine months of 2021, the economy grew by 11.3% YoY in real terms, surpassing the 2019 level by 4.8%. For the FY 2021 and 2022, our GDP growth outlook is 10.5% and 6.0%, respectively.
The group maintained robust profitability… - Our net profit amounted to GEL 207.1 million (up by 35.8% YoY) and GEL 610.5 million (almost tripled YoY), respectively, in 3Q and 9M 2021. The growth was driven by increased operating income spread across all revenue categories, further supported by recoveries in loan provision charges. As a result, our ROE for 3Q and 9M stood at 24.1% and 25.3%, respectively.
.... backed by solid capital levels, allowing the resumption of dividend payments- CET1, Tier 1 and Total Capital ratios stood at 13.4%, 15.4% and 19.3%, respectively, comfortably above the prudent respective minimum regulatory requirements of 11.3%, 13.5% and 17.9%. The strong capital generation over the quarter fully offset the interim dividend payment of GEL 81.8 million in September 2021.
Our Georgian banking franchise maintained steady growth across all business segment… - Our loan book increased by 12.6% year-on-year in constant currency terms, mainly driven by the CIB and MSME segments, which translated into a 38.4% market share as of 30 September 2021. Over the same period, our deposits increased by 20.0% in constant currency terms. As a result, our market share in total deposits amounted to 40.1% as of 30 September 2021. We hold the #1 position in the market in terms of both loan and deposit market shares.
…while our Uzbek bank continued to expand its operations having secured strong IFI support - In September, we entered into a partnership with IFC and the EBRD. Under the terms of the agreement, by the end of 2021, IFC and the EBRD will, subject to certain conditions, each invest USD 9.4 million into TBC UZ in exchange for up to a 20% equity interest each. TBC PLC will retain 60% ownership of TBC UZ.
As of 31 October 2021, the number of registered and active users of TBC UZ's digital banking app reached around 785,000 and 170,000, respectively. We already cover 25 regions of the country through our 33 customer acquisition points and 8 showrooms. At the end of October 2021, the bank's deposit portfolio amounted to GEL115.0 million, while the loan book stood at GEL 59.8 million.
Further progress towards digitalization - In 3Q, we launched a fully end-to-end digital consumer loan disbursement process in our mobile banking, which is expected to accelerate our sales through remote channels. We have also launched 'open banking' in our mobile banking for our retail and business customers.
In 3Q, the number of transactions conducted in remote channels amounted to 37.2 million, up by 24.8% and 6.0% on a YoY and QoQ basis, respectively. Over the same period, the number of active digital users increased by 10.7% YoY or 2.3% QoQ and amounted to 704 thousands. Our sales offloading in consumer loans[1] and deposits[2] stood at 52% and 74%, respectively.
JSC TBC Bank successfully issued $75 million Additional Tier 1 Capital Perpetual Subordinated Notes on 4 November 2021 - The new issue attracted solid demand from investors across the EU, the UK and the US, evidencing strong investor appetite for TBC Bank's credit story. The AT1 issue will allow TBC Bank to maintain an efficient capital structure and strong capital base to fund mid-term growth opportunities.
TBC Bank Group PLC was re-included in the FTSE 250 index from 27 October 2021 on the back of the strong recovery in our share price.
Letter from the Chief Executive Officer
I am delighted to present another strong set of financial results for the third quarter 2021, supported by the continued revival of business activities on the back of a sustained macroeconomic recovery. The quarter was also marked by a significant achievement for our Uzbek banking subsidiary, TBC UZ. After extensive negotiations, we have entered into a partnership with the International Finance Corporation ("IFC") and the European Bank for Reconstruction and Development ("EBRD"), whereby IFC and the EBRD will invest equity into TBC UZ to support its continued growth. Furthermore, I am pleased that our subsidiary, JSC TBC Bank, successfully issued additional Tier 1 Capital Perpetual Subordinated Notes in the amount of USD 75 million. This AT1 issuance will allow us to maintain solid growth while retaining a prudent and optimal capital structure well above regulatory requirements.
I am also delighted that our efforts have been reflected in a strong recovery of our share price, which resulted in our re-inclusion into the FTSE 250 index from 27 October 2021.
Economic recovery continued into the third quarter
The Georgian economy has continued a firm recovery in the third quarter of 2021. According to the preliminary estimates of Geostat[3], after a record-high rebound of 29.9% in the second quarter, the economy posted solid, 9.0% year-on-year real growth. In the first nine months of 2021, real GDP expanded by 11.3% year-on-year, surpassing the 2019 level by 4.8%. Importantly, this growth was broad-based, supported by strong external inflows and increased domestic demand. The exceptional performance in exports, the continued strong flow of remittances, and a gradual recovery in tourism, together with record-low interest rates on US$ deposits, stimulated consumer spending and real estate investments. Banking sector credit displayed a solid rebound in the third quarter with 15.8% year-on-year growth in FX adjusted terms, which is also strongly supportive of economic growth. While COVID-19 related uncertainties pose downside risks to the outlook, real GDP growth for the year is expected to be above 10.0%.
The Bank continued to deliver strong financial results in the third quarter
In the third quarter of 2021, our consolidated net profit amounted to GEL 207.1 million, up by 35.8% year-on-year, while our return on equity and return on assets stood at 24.1% and 3.6%, respectively.
The main driver of our profitability was the strong growth in our net interest income, which resulted in a net interest margin of 5.3%, up by 0.7 pp year-on-year. Our operating income was further supported by an increase in net fee and commission income, which grew by 44.5% year-on-year. This growth was driven by increased business activities combined with various initiatives on the payments side and strong results generated by our retail affluent sub-segment.
In the third quarter, we recorded a strong performance on the asset quality side across all segments. As a result, our cost of risk stood at -0.1% and had a positive contribution to our net profits. Over the same period, our operating expenses increased by 16.8% year-on-year, driven by the expansion of our Uzbek bank and increased business activities. The cost to income for the period stood at 35.4%, down by 3.1 pp year-on-year.
Our loan book increased by 12.6% year-on-year in constant currency terms, mainly driven by the CIB and MSME segments, which translated into a 38.4% market share. Over the same period, our deposits increased by 20.0% in constant currency terms across the board. As a result, our market share in total deposits amounted to 40.1% as of 30 September 2021.
As of 30 September 2021, our CET1, Tier 1 and Total Capital ratios stood at 13.4%, 15.4% and 19.3%, respectively, comfortably above the respective minimum regulatory requirements of 11.3%, 13.5% and 17.9%. The strong capital generation over the quarter fully offset the interim dividends payments, in the amount of GEL 81.8 million, in September 2021. We continue to maintain a robust liquidity position, with net stable funding (NSFR) and liquidity coverage ratios (LCR) standing at 127% and 116%, respectively, as of 30 September 2021.
Further progress towards digitalization
I would like to highlight several important business developments during the quarter. On the retail side, we have launched a digital consumer loan disbursement process in our mobile banking, which is expected to accelerate our sales through remote channels. We have also launched open banking in our mobile banking for our retail and business customers. Open banking brings together all clients' accounts from various Georgian banks and allows them to check their accounts at one place, thus saving a lot of time and effort. I am pleased that our consistent efforts towards innovation and digitalization have been recognized internationally with multiple digital regional awards from Global Finance magazine.
In terms of operating metrics, the number of retail remote transactions during the third quarter of 2021 increased by 24.8% year-on-year and by 6.0% quarter-on-quarter. Retail digital users also demonstrated a growing trend and increased by 10.7% year-on-year and 2.3% quarter-on-quarter, while mobile and internet banking penetration ratio amounted to 56%. Over the same period, the number of digital sales also remained strong. The consumer loan sales offloading ratio[4] amounted to 52%, while the deposit sales offloading ratio[5] continued to remain high at 74%.
Securing strong IFI support for our growing Uzbek bank
In September, we entered into a partnership with IFC and the EBRD, marking another important milestone in our Uzbek expansion. Under the terms of the agreement, by the end of 2021, IFC and EBRD will, subject to certain conditions, each invest USD 9.4 million into TBC UZ in exchange for up to a 20% equity interest each. TBC PLC will retain 60% ownership of TBC UZ. In addition, IFC and the EBRD have agreed, subject to certain conditions, to make additional capital injections of, in aggregate, up to USD 34.3 million in the period up to 2024. This partnership will allow us to accelerate our growth in the country and offer a wide range of innovative and affordable products to the Uzbek population.
This was another successful quarter for our Uzbek bank, which continued its rapid growth across the board. The number of registered and active users of our digital banking app reached 785,000 and 170,000, respectively, as of 31 October 2021. We already cover 25 regions of the country through our 33 customer acquisition points, while we also operate several showrooms for customer relationship purposes. As of end of October, our deposit portfolio growth significantly outpaced the loan book growth and reached GEL 115.0 million, while the loan book stood at GEL 59.8 million.
Over the same period, our Uzbek payments business Payme continued its strong growth, as its number of registered users reached 4 million, while the number and volume of transactions increased by an impressive 47.6% and 58.8% respectively year-on-year. As a result, its revenue for the third quarter amounted to GEL 6.7 million, increasing by 54.6% over the same period.
Outlook
Going forward, we will continue to leverage our strong Georgian franchise to maintain high profitability levels backed by the solid capital levels, while harnessing our Uzbek businesses to accelerate our growth.
To conclude, I would like to re-iterate our medium term guidance: ROE of above 20%, a cost to income ratio below 35%, a dividend pay-out ratio of 25-35% and annual loan growth of 10-15%.
Economic Overview
Economic growth
A remarkable 29.9% surge in the second quarter of 2021 confirmed that, instead of recovery, the economy is experiencing a restart. Furthermore, despite the hindered tourism rebound in August-September and slower than expected vaccination rates, according to Geostat's initial estimates the second quarter was followed by 9.9% year-on-year expansion in July, 10.3% in August, and 6.9% in September, amounting to average year-on-year growth of 9.0% in 3Q 2021. It is expected that the Georgian economy will expand by 10.5% year-on-year, surpassing the 2019 level by 3.6% in 2021.
External sectors
The external sector continued its strong performance in 3Q 2021 with exports growing by 21.9% year-on-year and 15.8% compared with 3Q 2019. Notably, domestic exports lead the recovery with the share of domestic exports in total exports increasing significantly, from 59.4% in 3Q 2019 to 71.9% in 3Q 2021. Despite the still ongoing recovery in tourism related imports and re-exports, imports of goods also went up by 23.8% YoY in 3Q 2021 and by 9.9% when compared with the same period of 2019. Importantly, the rebound in the trade in goods was broad based, reflecting the increased overall external as well as domestic demand.
Remittance inflows have stabilized after a 53.5% YoY surge in the second quarter, amounting to 10.2% YoY in 3Q 2021 or 28.2% compared to 3Q 2019. Although part of the rebound compared with 2019 can be attributed to border closures and more cash remittances being transferred through digital channels, overall growth is still substantial given that the share of cash inflows is only likely to be around 10.0%-15.0%, according to the NBG's estimates.
The recovery in tourism inflows has continued its strong performance, with 1230.6% year-on-year growth in 3Q 2021 on the back of the low base in 3Q 2020 due to the COVID-19 pandemic, equaling a 50.2% recovery compared to the same period of 2019. Notably, the growth is primarily lead by the recovery of high spending countries. While compared to the previous quarter's inflows standing at 28.0% of 2Q 2019, the 3Q 2021 numbers are impressive, the recovery in August-September has somewhat stalled on the back of another wave of COVID-19 pandemic. Overall, even taking into account increased risks due to a higher number of infection cases, TBC Capital's latest projection of tourism inflows to recover by around 37.5% in 2021 compared to 2019 still looks reasonable[6].
Fiscal stimulus
The fiscal deficit is expected to remain sizable in 2021 at an estimated 6.7% of GDP following a deficit of 9.3% of GDP in 2020. According to the Ministry of Finance, further fiscal consolidation is expected in the coming years with deficit-to-GDP ratios of 4.4%, 3.0% and 2.7% in 2022, 2023 and 2024, respectively. Importantly, the major source of deficit financing in 2020-2021 was an external one, largely compensating for the pandemic related drop in net inflows.
Credit growth
By the end of 3Q 2021, bank credit growth increased to 15.8% year-on-year, compared to a 12.6% year-on-year growth by the end of 2Q 2021. In terms of segments, MSME lending growth has increased by 0.4 pp from 1Q 2021 to 2Q 2021 and amounted to 20.1% year-on-year. Corporate lending also increased from 7.4% at the end of 2Q 2021 to 15.4%. Growth in the retail sector increased by 0.6 pp to 13.2% year-on-year on the back of stronger non-mortgage credit. As for housing finance, the year-on-year increase declined from 14.1% to 12.0%, however, on the back of the higher base effect.
Inflation, monetary policy and the exchange rate
After the appreciation of the GEL in the second quarter, the currency has remained broadly stable, even with the depreciating TRY, gaining 1.2% value in the third quarter against the greenback. In contrast to the GEL, inflationary pressures have continued throughout the third quarter, mainly caused by increasing commodity and food prices on the international markets, reaching 12.3% year-on-year in September 2021, up from 9.9% in June 2021. However, monthly seasonally adjusted inflation in September was already below the 3% target. As expected, despite higher commodity prices and the rebound of the economy, the GEL has curbed the price increase, although with some time lag. To curb the aforementioned inflationary pressures the NBG increased its main refinancing rate by 50 bps to 10.0% in August, coupled with 93.7 million USD in FX interventions, 60 million of which was sold in September.
Going forward
As the growth in the third quarter has solidified our projection of restart rather than recovery, TBC Capital holds an unchanged forecast for real GDP growth in 2021 of 10.5%, followed by a slightly downward, revised 6.0% growth forecast in 20222. The IMF projects that the Georgian economy will grow by 7.7% in 2021 and by 5.8% in 2022[7], while the World Bank's October release forecasts 8.0% and 5.5% growth rates in 2021 and 2022, respectively[8].
More information on the Georgian economy and financial sector can be found at www.tbccapital.ge.
Unaudited Consolidated Financial Results Overview for 3Q 2021
This statement provides a summary of the unaudited business and financial trends for 3Q 2021 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.
TBC Bank Group PLC's financial results has been prepared in accordance with UK-adopted International Accounting Standard (IAS) 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority (FCA).
Please note that there might be slight differences in previous periods' figures due to rounding.
Financial Highlights
Income Statement Highlights |
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in thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ | ||||
Net interest income | 259,390 | 242,767 | 211,784 | 22.5% | 6.8% | ||||
Net fee and commission income | 68,631 | 63,008 | 47,499 | 44.5% | 8.9% | ||||
Other operating non-interest income[9] | 43,952 | 74,512 | 33,913 | 29.6% | -41.0% | ||||
Total credit loss allowance | (5,106) | 45,291 | (14,146) | -63.9% | NMF | ||||
Operating profit after expected credit losses | 366,867 | 425,578 | 279,050 | 31.5% | -13.8% | ||||
Losses from modifications of financial instrument | (104) | (104) | (1,763) | -94.1% | 0.0% | ||||
Operating expenses | (131,695) | (134,688) | (112,793) | 16.8% | -2.2% | ||||
Profit before tax | 235,068 | 290,786 | 164,494 | 42.9% | -19.2% | ||||
Income tax expense | (27,921) | (40,394) | (11,906) | NMF | -30.9% | ||||
Profit for the period | 207,147 | 250,392 | 152,588 | 35.8% | -17.3% | ||||
Balance Sheet and Capital Highlights |
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in thousands of GEL | Sep-21 | Jun-21 | Sep-20 | Change YoY | Change QoQ | |||||
Total Assets | 23,701,241 | 22,091,541 | 21,866,972 | 8.4% | 7.3% | |||||
Gross Loans | 15,963,520 | 15,274,926 | 14,590,777 | 9.4% | 4.5% | |||||
Customer Deposits | 14,338,537 | 12,870,418 | 12,343,414 | 16.2% | 11.4% | |||||
Total Equity | 3,448,193 | 3,336,825 | 2,826,387 | 22.0% | 3.3% | |||||
CET 1 Capital (Basel III) | 2,565,560 | 2,382,595 | 1,738,739 | 47.6% | 7.7% | |||||
Tier 1 Capital (Basel III) | 2,955,910 | 2,837,805 | 2,211,178 | 33.7% | 4.2% | |||||
Total Capital (Basel III) | 3,693,637 | 3,573,282 | 2,984,109 | 23.8% | 3.4% | |||||
Risk Weighted Assets (Basel III) | 19,143,450 | 18,275,845 | 17,478,610 | 9.5% | 4.7% | |||||
Key Ratios | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
ROE | 24.1% | 31.0% | 22.0% | 2.1 pp | -6.9 pp |
Bank's standalone ROE[10] | 30.9% | 34.7% | 23.3% | 7.6 pp | -3.8 pp |
ROA | 3.6% | 4.4% | 2.9% | 0.7 pp | -0.8 pp |
Bank's standalone ROA[10] | 4.5% | 4.7% | 2.9% | 1.6 pp | -0.2 pp |
NIM | 5.3% | 5.0% | 4.6% | 0.7 pp | 0.3 pp |
Cost to income | 35.4% | 35.4% | 38.5% | -3.1 pp | 0.0 pp |
Bank's standalone cost to income[10] | 25.8% | 28.6% | 33.2% | -7.4 pp | -2.8 pp |
Cost of risk | -0.1% | -1.3% | 0.2% | -0.3 pp | 1.2 pp |
NPL to gross loans | 3.1% | 3.4% | 3.5% | -0.4 pp | -0.3 pp |
NPL provision coverage ratio | 94.3% | 91.3% | 104.6% | -10.3 pp | 3.0 pp |
Total NPL coverage ratio | 169.3% | 169.6% | 180.0% | -10.7 pp | -0.3 pp |
CET 1 CAR (Basel III) | 13.4% | 13.0% | 9.9% | 3.5 pp | 0.4 pp |
Tier 1 CAR (Basel III) | 15.4% | 15.5% | 12.7% | 2.7 pp | -0.1 pp |
Total CAR (Basel III) | 19.3% | 19.6% | 17.1% | 2.2 pp | -0.3 pp |
Leverage (Times) | 6.9x | 6.6x | 7.7x | -0.8x | 0.3x |
Net Interest Income
In 3Q 2021, net interest income amounted to GEL 259.4 million, up by 22.5% YoY and 6.8% on a QoQ basis.
The YoY rise in interest income by GEL 50.4 million, or 11.8%, was mostly attributable to an increase in interest income from loans related to a growth in the respective portfolio of GEL 1,372.7 million, or 9.4%, together with an increase in the respective yield by 0.5 pp due to a rise in the refinance rate. In addition, the shift of the portfolio composition towards GEL loans had a positive effect on loan yields.
In 3Q 2021, interest expense increased only by GEL 9.4 million, or 4.3%, mainly driven by an increase in interest expense from deposits. This increase was related to a growth in the respective portfolio of GEL 1,995.1 million, or 16.2% YoY, which was partially offset by the decrease in the cost of deposits by 0.2 pp. Over the same period, interest expense from other borrowed funds decreased by GEL 6.6 million, or 9.8%, on the back of a decline in the respective portfolio by GEL 777.4 million, or 19.9%, which more than offset the increase in the respective yield by 0.7 pp that was driven by the higher refinance rate. In addition, the change in liability structure towards deposits had a positive effect on our cost of funding, which dropped by 0.2 pp on a YoY basis.
The increase in interest income on a QoQ basis of GEL 18.1 million, or 3.9%, was mainly driven by an increase in interest income from loans to customers on the back of an increase in the loan portfolio by GEL 688.6 million, or 4.5%, and a 0.3 pp increase in loan effective rates. This increase was mainly attributable to GEL loan yields, on the back of an increase in the refinance rate, as well as a shift of the portfolio composition towards high-yield GEL loans.
The increase in interest expense of GEL 3.5 million, or 1.6% on a QoQ basis, was mainly driven by an increase in customer account by GEL 1,468.1 million or 11.4%, as well as a 0.1 pp increase in the cost of deposits.
In 3Q 2021, our NIM stood at 5.3%, up by 0.7 pp YoY and 0.3 pp on a QoQ basis.
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Interest income | 476,636 | 458,572 | 426,232 | 11.8% | 3.9% |
Interest expense | (226,991) | (223,456) | (217,639) | 4.3% | 1.6% |
Net gains from currency swaps | 9,745 | 7,651 | 3,191 | NMF | 27.4% |
Net interest income | 259,390 | 242,767 | 211,784 | 22.5% | 6.8% |
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NIM | 5.3% | 5.0% | 4.6% | 0.7 pp | 0.3 pp |
Net fee and commission income
In 3Q 2021, net fee and commission income totaled GEL 68.6 million, up by 44.5% YoY and 8.9% QoQ.
The YoY increase was spread across all categories and was mainly driven by increased business activities combined with our various initiatives including: a review of the pricing model of our merchants together with the acquisition of several large merchants, the popularization of our subscription model for mass retail customers, and the fine-tuning of our offerings for affluent customers. This growth was further supported by our fast growing Uzbek subsidiary, Payme.
The increase on a QoQ basis was mainly driven by an increase in structuring fees for loans and guarantees in the corporate segment, as well as fine-tuning our offerings for affluent customers.
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Net fee and commission income |
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Card operations | 21,275 | 22,627 | 11,318 | 88.0% | -6.0% |
Settlement transactions | 31,386 | 28,435 | 22,535 | 39.3% | 10.4% |
Guarantees issued and letters of credit | 10,188 | 9,561 | 9,624 | 5.9% | 6.6% |
Other | 5,782 | 2,385 | 4,022 | 43.8% | NMF |
Total net fee and commission income | 68,631 | 63,008 | 47,499 | 44.5% | 8.9% |
Other Non-Interest Income
Total other non-interest income increased by 29.6% YoY and decreased by 41.0% QoQ and amounted to GEL 44.0 million in 3Q 2021.
The increase on a YoY basis was mainly attributable to business revival, further supported by net income from foreign currency operations due to an increase in the scale of FX transactions.
The decrease on a QoQ basis was mainly driven by other operating income due to an exceptionally high base in the previous quarter related to the gain from the disposal of one of our investment properties, in the amount of GEL 26.3 million.
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Other non-interest income |
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Net income from foreign currency operations | 29,114 | 31,372 | 22,131 | 31.6% | -7.2% |
Net insurance premium earned after claims and acquisition costs[11] | 6,019 | 5,470 | 5,941 | 1.3% | 10.0% |
Other operating income | 8,819 | 37,670 | 5,841 | 51.0% | -76.6% |
Total other non-interest income | 43,952 | 74,512 | 33,913 | 29.6% | -41.0% |
Credit Loss Allowance
In 3Q cost of risk amounted to -0.1%, attributable to strong performance across all segments.
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Recovery of/(charges to) credit loss allowance for loan to customers | 4,389 | 50,112 | (5,884) | -174.6% | -91.2% |
Credit loss allowance for other transactions | (9,495) | (4,821) | (8,262) | 14.9% | 97.0% |
Total credit loss allowance | (5,106) | 45,291 | (14,146) | -63.9% | NMF |
Operating profit after expected credit losses | 366,867 | 425,578 | 279,050 | 31.5% | -13.8% |
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Cost of risk | -0.1% | -1.3% | 0.2% | -0.3 pp | 1.2 pp |
Operating Expenses
In 3Q 2021, our operating expenses expanded by 16.8% YoY and slightly decreased on a QoQ basis.
The YoY increase was mainly attributable to an expansion of our Uzbek business, which resulted in an increase in the number of employees, as well as higher marketing expenses.
Overall, our cost to income ratio improved both on a YoY basis and amounted to 35.4%.
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Operating expenses |
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|
Staff costs | (74,643) | (77,757) | (62,255) | 19.9% | -4.0% |
Provisions for liabilities and charges | (54) | (54) | (2,059) | -97.4% | 0.0% |
Depreciation and amortization | (19,988) | (19,337) | (17,339) | 15.3% | 3.4% |
Administrative & other operating expenses | (37,010) | (37,540) | (31,140) | 18.9% | -1.4% |
Total operating expenses | (131,695) | (134,688) | (112,793) | 16.8% | -2.2% |
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Cost to income | 35.4% | 35.4% | 38.5% | -3.1 pp | 0.0 pp |
Bank's standalone cost to income* | 25.8% | 28.6% | 33.2% | -7.4 pp | -2.8 pp |
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* For the ratio calculation all relevant group recurring costs are allocated to the bank
Net Income
In 3Q, we continued to deliver strong profitability and generated GEL 207.1 million in net profit. The growth on a YoY basis was mainly due to increased operating income, spread across all revenue categories, further supported by recoveries in loan credit loss allowance expenses. The decline on a QoQ basis was mostly attributable to an exceptionally high base in the previous quarter (mainly due to gain from the disposal of one of our investment properties and recoveries in credit loss allowances).
As a result, our ROE and ROA for the third quarter reached 24.1% and 3.6%, accordingly.
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Losses from modifications of financial instruments | (104) | (104) | (1,763) | -94.1% | 0.0% |
Profit before tax | 235,068 | 290,786 | 164,494 | 42.9% | -19.2% |
Income tax expense | (27,921) | (40,394) | (11,906) | NMF | -30.9% |
Profit for the period | 207,147 | 250,392 | 152,588 | 35.8% | -17.3% |
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ROE | 24.1% | 31.0% | 22.0% | 2.1 pp | -6.9 pp |
Bank's standalone ROE[12] | 30.9% | 34.7% | 23.3% | 7.6 pp | -3.8 pp |
ROE before expected credit loss allowances | 24.6% | 26.0% | 23.8% | 0.8 pp | -1.4 pp |
ROA | 3.6% | 4.4% | 2.9% | 0.7 pp | -0.8 pp |
Bank's standalone ROA[12] | 4.5% | 4.7% | 2.9% | 1.6 pp | -0.2 pp |
Funding and Liquidity
As of 30 September 2021, the total liquidity coverage ratio (LCR), as defined by the NBG, was 116.5%, above the 100% limit, while the LCR in GEL and FC stood at 98.0% and 125.5% respectively, above the respective limits of 75% and 100%. Over the same period, NSFR stood at 127.1%, compared to the regulatory limit of 100%.
| 30-Sep-21 | 30-Jun-21 | Change QoQ |
Minimum net stable funding ratio, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
Net stable funding ratio as defined by the NBG | 127.1% | 130.6% | -3.5 pp |
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Net loans to deposits + IFI funding | 97.5% | 102.8% | -5.3 pp |
Leverage (Times) | 6.9x | 6.6x | 0.3x |
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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% | 75% | 0.0 pp |
Minimum LCR in FC, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
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Total liquidity coverage ratio, as defined by the NBG | 116.5% | 127.1% | -10.6 pp |
LCR in GEL, as defined by the NBG | 98.0% | 122.9% | -24.9 pp |
LCR in FC, as defined by the NBG | 125.5% | 129.2% | -3.7 pp |
Regulatory Capital
As of 30 September 2021, our capital adequacy ratios were comfortably above the minimum regulatory requirements.
The strong capital generation over the quarter fully offset the interim dividend payments in the amount of GEL 81.8 million in September.
On November 4, our subsidiary JSC TBC Bank successfully issued additional Tier 1 Capital Perpetual Subordinated Notes, in the amount of US$ 75 million, with a coupon of 8.9%. This AT1 issuance will allow us to maintain solid growth while keeping a prudent capital structure well above regulatory requirements.
In thousands of GEL | 30-Sep-21 | 30-Jun-21 | Change QoQ |
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CET 1 Capital | 2,565,560 | 2,382,595 | 7.7% |
Tier 1 Capital | 2,955,910 | 2,837,805 | 4.2% |
Total Capital | 3,693,637 | 3,573,282 | 3.4% |
Total Risk-weighted Exposures | 19,143,450 | 18,275,845 | 4.7% |
Minimum CET 1 ratio | 11.3% | 11.2%* | 0.1 pp | ||
CET 1 Capital adequacy ratio | 13.4% | 13.0% | 0.4 pp | ||
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Minimum Tier 1 ratio | 13.5% | 13.5%* | 0.0 pp | ||
Tier 1 Capital adequacy ratio | 15.4% | 15.5% | -0.1 pp | ||
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Minimum total capital adequacy ratio | 17.9% | 17.8%* | 0.1 pp | ||
Total Capital adequacy ratio | 19.3% | 19.6% | -0.3 pp | ||
* Minimum requirements with restored buffers
Loan Portfolio
As of 30 September 2021, the gross loan portfolio reached GEL 15,963.5 million, up by 4.5% QoQ, or up by 5.7% on a constant currency basis.
The proportion of gross loans denominated in foreign currency decreased by 1.4pp QoQ and accounted for 54.9% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency decreased by 0.8pp QoQ and stood at 55.5%.
As of 30 September 2021, our market share in total loans stood at 38.4%, up by 0.3pp QoQ. Our loan market share in legal entities was 38.6%, up by 0.6pp QoQ, and our loan market share in individuals stood at 38.2%, down by 0.1pp QoQ.
In thousands of GEL | 30-Sep-21 | 30-Jun-21 | Change QoQ |
Loans and advances to customers |
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Retail | 5,950,915 | 5,719,393 | 4.0% |
Retail loans GEL | 3,313,791 | 3,131,032 | 5.8% |
Retail loans FC | 2,637,124 | 2,588,361 | 1.9% |
CIB | 6,136,232 | 5,851,634 | 4.9% |
CIB loans GEL | 1,941,958 | 1,746,149 | 11.2% |
CIB loans FC | 4,194,274 | 4,105,485 | 2.2% |
MSME | 3,876,373 | 3,703,899 | 4.7% |
MSME loans GEL | 1,936,230 | 1,797,390 | 7.7% |
MSME loans FC | 1,940,143 | 1,906,509 | 1.8% |
Total loans and advances to customers | 15,963,520 | 15,274,926 | 4.5% |
| 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Loan yields | 10.5% | 10.2% | 10.0% | 0.5 pp | 0.3 pp |
Loan yields GEL | 15.4% | 15.1% | 15.3% | 0.1 pp | 0.3 pp |
Loan yields FC | 6.6% | 6.7% | 6.6% | 0.0 pp | -0.1 pp |
Retail Loan Yields | 12.0% | 11.4% | 11.5% | 0.5 pp | 0.6 pp |
Retail loan yields GEL | 16.3% | 15.9% | 16.6% | -0.3 pp | 0.4 pp |
Retail loan yields FC | 6.6% | 6.4% | 6.5% | 0.1 pp | 0.2 pp |
CIB Loan Yields | 9.1% | 9.0% | 8.5% | 0.6 pp | 0.1 pp |
CIB loan yields GEL | 14.1% | 13.8% | 13.3% | 0.8 pp | 0.3 pp |
CIB loan yields FC | 6.8% | 7.1% | 7.0% | -0.2 pp | -0.3 pp |
MSME Loan Yields | 10.5% | 10.2% | 9.9% | 0.6 pp | 0.3 pp |
MSME loan yields GEL | 15.0% | 15.0% | 14.6% | 0.4 pp | 0.0 pp |
MSME loan yields FC | 6.0% | 6.1% | 6.1% | -0.1 pp | -0.1 pp |
Loan Portfolio Quality
Total PAR 30 ratio stood at 2.3% and remained broadly stable on a QoQ basis. The decrease in the retail segment on the back of mortgage loans was offset by the MSME and CIB segments. The slight worsening in the CIB segment was due to several borrowers with overdue payments, which are expected to be repaid during the following month, while the increase in the MSME segment was driven by the SME sub-segment.
In 3Q, NPLs improved across all segments, mainly driven by resumed repayments from restructured retail and MSME.
Our NPLs had a 94% provision coverage as of 30 September 2021 and an additional 75% collateral coverage. Only 15% of NPLs were unsecured loans with strong provision coverage of 281%.
Par 30 | 30-Sep-21 | 30-Jun-21 | Change QoQ |
Retail | 2.7% | 3.0% | -0.3 pp |
CIB | 0.5% | 0.3% | 0.2 pp |
MSME | 4.6% | 3.9% | 0.7 pp |
Total Loans | 2.3% | 2.2% | 0.1 pp |
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Non-performing Loans | 30-Sep-21 | 30-Jun-21 | Change QoQ |
Retail | 3.6% | 4.0% | -0.4 pp |
CIB | 1.5% | 1.6% | -0.1 pp |
MSME | 4.7% | 5.4% | -0.7 pp |
Total Loans | 3.1% | 3.4% | -0.3 pp |
NPL Coverage[13] | 30-Sep-21 | 30-Jun-21 | ||
| Provision Coverage | Total Coverage | Provision Coverage | Total Coverage |
Retail | 120.7% | 189.3% | 118.9% | 190.3% |
CIB | 82.5% | 151.2% | 82.9% | 157.0% |
MSME | 68.7% | 154.5% | 63.3% | 151.8% |
Total | 94.3% | 169.3% | 91.3% | 169.6% |
Cost of risk
The recoveries in credit loss allowances were due to a strong performance across all segments and translated into a - 0.1% cost of risk for 3Q 2021. In the retail segment, the main driver was mortgage loans, as well as recoveries in the written-off unsecured portfolio, while the improvement in the MSME cost of risk was driven by both the Micro and SME sub-segments. The recoveries in CIB were due to a strong loan book performance.
Cost of risk | 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
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Retail | -0.2% | -0.2% | 0.2% | -0.4 pp | 0.0 pp |
CIB | -0.2% | -2.0% | 0.0% | -0.2 pp | 1.8 pp |
MSME | 0.1% | -1.8% | 0.4% | -0.3 pp | 1.9 pp |
Total | -0.1% | -1.3% | 0.0% | -0.1 pp | 1.2 pp |
Deposit Portfolio
The total deposits portfolio increased by 11.4% QoQ, or 12.5% on a constant currency basis, and amounted to GEL 14,338.5 million.
This QoQ growth was mainly driven by the CIB segment, which was focused on attracting GEL deposits in line with our liquidity needs. The proportion of deposits denominated in a foreign currency increased by 2.0 pp QoQ and accounted for 63.7% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency decreased by 1.6 pp QoQ and stood at 64.1%.
As of 30 September 2021, our market share in deposits amounted to 40.1%, up by 2.3 pp QoQ, while our market share in deposits to legal entities stood at 40.0%, up by 4.3 pp QoQ. Our market share in deposits to individuals stood at 40.2%, up by 0.6 pp QoQ.
In thousands of GEL | 30-Sep-21 | 30-Jun-21 | Change QoQ |
Customer Accounts |
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Retail | 5,593,535 | 5,301,114 | 5.5% |
Retail deposits GEL | 1,353,608 | 1,282,793 | 5.5% |
Retail deposits FC | 4,239,927 | 4,018,321 | 5.5% |
CIB | 6,834,386 | 5,939,188 | 15.1% |
CIB deposits GEL | 2,681,148 | 2,218,972 | 20.8% |
CIB deposits FC | 4,153,238 | 3,720,216 | 11.6% |
MSME | 1,433,603 | 1,384,189 | 3.6% |
MSME deposits GEL | 688,598 | 662,605 | 3.9% |
MSME deposits FC | 745,005 | 721,584 | 3.2% |
Total Customer Accounts* | 14,338,537 | 12,870,418 | 11.4% |
* Total deposit portfolio includes Ministry of Finacne deposits in the amount of, GEL 246 million and GEL 477 million as of 30 June 2021 and 30 September 2021, respectively.
| 3Q'21 | 2Q'21 | 3Q'20 | Change YoY | Change QoQ |
Deposit rates | 3.5% | 3.4% | 3.7% | -0.2 pp | 0.1 pp |
Deposit rates GEL | 6.9% | 6.6% | 6.7% | 0.2 pp | 0.3 pp |
Deposit rates FC | 1.6% | 1.7% | 2.0% | -0.4 pp | -0.1 pp |
Retail Deposit Yields | 2.3% | 2.2% | 2.7% | -0.4 pp | 0.1 pp |
Retail deposit rates GEL | 4.8% | 4.7% | 5.5% | -0.7 pp | 0.1 pp |
Retail deposit rates FC | 1.5% | 1.5% | 1.8% | -0.3 pp | 0.0 pp |
CIB Deposit Yields | 4.5% | 4.0% | 4.4% | 0.1 pp | 0.5 pp |
CIB deposit rates GEL | 8.5% | 8.3% | 7.8% | 0.7 pp | 0.2 pp |
CIB deposit rates FC | 1.9% | 2.1% | 2.5% | -0.6 pp | -0.2 pp |
MSME Deposit Yields | 0.9% | 0.8% | 1.0% | -0.1 pp | 0.1 pp |
MSME deposit rates GEL | 1.6% | 1.4% | 1.6% | 0.0 pp | 0.2 pp |
MSME deposit rates FC | 0.2% | 0.3% | 0.4% | -0.2 pp | -0.1 pp |
Segment definition and PL
Business Segments
The segment definitions are as follows:
· Corporate and Investment Banking (CIB) - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which has been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the CIB segment or transferred to the MSME segment on a discretionary basis. In addition, CIB includes Wealth Management private banking services to high-net-worth individuals with a threshold of US$ 250,000 on assets under management (AUM), as well as on a discretionary basis;
· Retail - non-business individual customers; or individual customers of the fully digital bank, Space.
· MSME - business customers who are not included in the CIB segment;
· 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'21 | Retail | MSME | CIB | Corp. Centre | Total |
Interest income | 176,551 | 100,263 | 140,501 | 59,321 | 476,636 |
Interest expense | (32,230) | (3,244) | (72,311) | (119,206) | (226,991) |
Net gains from currency swaps | - | - | - | 9,745 | 9,745 |
Net transfer pricing | (44,594) | (41,080) | 22,192 | 63,482 | - |
Net interest income | 99,727 | 55,939 | 90,382 | 13,342 | 259,390 |
Fee and commission income | 68,712 | 14,615 | 31,588 | 7,775 | 122,690 |
Fee and commission expense | (18,529) | (9,542) | (22,971) | (3,017) | (54,059) |
Net fee and commission income | 50,183 | 5,073 | 8,617 | 4,758 | 68,631 |
Net insurance premium earned after claims and acquisition costs | - | - | - | 6,019 | 6,019 |
Net gains/(losses) from currency derivatives, foreign currency operations and translation | 10,643 | 6,867 | 15,604 | (4,012) | 29,102 |
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income | - | - | 9 | 3,854 | 3,863 |
Other operating income | 1,845 | 264 | 485 | 2,204 | 4,798 |
Share of profit of associates | - | - | - | 170 | 170 |
Other operating non-interest income and insurance profit | 12,488 | 7,131 | 16,098 | 8,235 | 43,952 |
Recovery of/(charges to) credit loss allowance for loans to customers | 2,297 | (852) | 2,944 | - | 4,389 |
Recovery of/(charges to) credit loss allowance for performance guarantees and credit related commitments | 33 | 196 | (6,926) | - | (6,697) |
Recovery of/(charges to) credit loss allowance for net investments in leases | - | - | - | 142 | 142 |
Credit loss allowance for other financial assets | 17 | - | 533 | (3,587) | (3,037) |
Recovery of/(charges to) credit loss allowance for financial assets measured at fair value through other comprehensive income | - | - | 192 | 232 | 424 |
Net impairment of non-financial assets | 125 | 47 | 15 | (514) | (327) |
Profit/(loss) before G&A expenses and income taxes | 164,870 | 67,534 | 111,855 | 22,608 | 366,867 |
Losses from modifications of financial instruments | (46) | - | (58) | - | (104) |
Staff costs | (33,089) | (14,090) | (11,570) | (15,894) | (74,643) |
Depreciation and amortization | (12,895) | (2,921) | (1,344) | (2,828) | (19,988) |
Provision for liabilities and charges | - | - | - | (54) | (54) |
Administrative and other operating expenses | (18,049) | (4,924) | (4,092) | (9,945) | (37,010) |
Operating expenses | (64,033) | (21,935) | (17,006) | (28,721) | (131,695) |
Profit before tax | 100,791 | 45,599 | 94,791 | (6,113) | 235,068 |
Income tax expense | (8,158) | (3,713) | (7,941) | (8,109) | (27,921) |
Profit | 92,633 | 41,886 | 86,850 | (14,222) | 207,147 |
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance sheet
In thousands of GEL | Sep-21 | Jun-21 |
Cash and cash equivalents | 1,960,441 | 1,414,414 |
Due from other banks | 64,894 | 59,314 |
Mandatory cash balances with National Bank of Georgia | 2,095,848 | 2,117,157 |
Loans and advances to customers | 15,504,311 | 14,796,968 |
Investment securities measured at fair value through other comprehensive income | 2,253,510 | 2,022,385 |
Bonds carried at amortized cost | 1,118 | 10,069 |
Net investments in leases | 237,557 | 245,261 |
Investment properties | 32,444 | 33,407 |
Current income tax prepayment | 4,856 | 14,966 |
Deferred income tax asset | 9,216 | 6,747 |
Other financial assets[14] | 383,890 | 287,761 |
Other assets | 352,191 | 311,218 |
Premises and equipment | 378,514 | 371,909 |
Right of use assets | 52,944 | 51,160 |
Intangible assets | 305,088 | 284,555 |
Goodwill | 59,964 | 59,964 |
Investments in associates | 4,455 | 4,286 |
TOTAL ASSETS | 23,701,241 | 22,091,541 |
LIABILITIES |
|
|
Due to credit institutions | 3,361,515 | 3,482,830 |
Customer accounts | 14,338,537 | 12,870,418 |
Lease liabilities | 53,627 | 53,755 |
Other financial liabilities14 | 165,710 | 124,308 |
Current income tax liability | 16,559 | 653 |
Debt Securities in issue | 1,507,969 | 1,445,614 |
Deferred income tax liability | 7,684 | 18,457 |
Provisions for liabilities and charges | 28,275 | 21,435 |
Other liabilities | 137,086 | 101,265 |
Subordinated debt | 636,086 | 635,981 |
TOTAL LIABILITIES | 20,253,048 | 18,754,716 |
EQUITY |
|
|
Share capital | 1,682 | 1,682 |
Shares held by trust | (25,489) | (25,489) |
Share premium | 848,459 | 848,459 |
Retained earnings | 2,790,447 | 2,680,951 |
Group re-organisation reserve | (162,167) | (162,167) |
Share based payment reserve | (8,811) | (15,348) |
Fair value reserve | (1,207) | 170 |
Cumulative currency translation reserve | (7,065) | (5,199) |
Net assets attributable to owners | 3,435,849 | 3,323,059 |
Non-controlling interest | 12,344 | 13,766 |
TOTAL EQUITY | 3,448,193 | 3,336,825 |
TOTAL LIABILITIES AND EQUITY | 23,701,241 | 22,091,541 |
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 |
Interest income | 476,636 | 458,572 | 426,232 |
Interest expense | (226,991) | (223,456) | (217,639) |
Net gains from currency swaps | 9,745 | 7,651 | 3,191 |
Net interest income | 259,390 | 242,767 | 211,784 |
Fee and commission income | 122,690 | 105,045 | 87,677 |
Fee and commission expense | (54,059) | (42,037) | (40,178) |
Net fee and commission income | 68,631 | 63,008 | 47,499 |
Net insurance premiums earned | 16,818 | 16,146 | 14,199 |
Net insurance claims incurred and agents' commissions | (10,799) | (10,676) | (8,258) |
Net insurance premium earned after claims and acquisition costs | 6,019 | 5,470 | 5,941 |
Net gains/(losses) from currency derivatives, foreign currency operations and translation | 29,102 | 31,688 | 22,174 |
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income | 3,863 | 4,653 | - |
Other operating income | 4,798 | 32,491 | 5,645 |
Share of profit of associates | 170 | 210 | 153 |
Other operating non-interest income | 37,933 | 69,042 | 27,972 |
Recovery of/(charges to) credit loss allowance for loans to customers | 4,389 | 50,112 | (5,884) |
Recovery of/(charges to) credit loss allowance for net investments in leases | 142 | (1,204) | (2,661) |
Recovery of/(charges to) credit loss allowance for performance guarantees and credit related commitments | (6,697) | 1,284 | 1,968 |
Credit loss allowance for other financial assets | (3,037) | (5,689) | (6,481) |
Recovery of/(charges to) credit loss allowance for financial assets measured at fair value through other comprehensive income | 424 | 1,248 | (368) |
Net impairment of non-financial assets | (327) | (460) | (720) |
Operating profit after expected credit losses | 366,867 | 425,578 | 279,050 |
Losses from modifications of financial instruments | (104) | (104) | (1,763) |
Staff costs | (74,643) | (77,757) | (62,255) |
Depreciation and amortization | (19,988) | (19,337) | (17,339) |
(Provision for)/ recovery of liabilities and charges | (54) | (54) | (2,059) |
Administrative and other operating expenses | (37,010) | (37,540) | (31,140) |
Operating expenses | (131,695) | (134,688) | (112,793) |
Profit before tax | 235,068 | 290,786 | 164,494 |
Income tax expense | (27,921) | (40,394) | (11,906) |
Profit | 207,147 | 250,392 | 152,588 |
Other comprehensive income: |
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
Movement in fair value reserve | (1,375) | (36,758) | 9,486 |
Exchange differences on translation to presentation currency | (1,866) | (5,976) | 4,753 |
Other comprehensive income for the period | (3,241) | (42,734) | 14,239 |
Total comprehensive income for the period | 203,906 | 207,658 | 166,827 |
Profitattributable to: |
|
|
|
- Shareholders of TBCG | 204,892 | 247,945 | 150,756 |
- Non-controlling interest | 2,255 | 2,447 | 1,832 |
Profit | 207,147 | 250,392 | 152,588 |
Total comprehensive income is attributable to: |
|
|
|
- Shareholders of TBCG | 201,662 | 205,195 | 165,002 |
- Non-controlling interest | 2,244 | 2,463 | 1,825 |
Totalcomprehensive income for the period | 203,906 | 207,658 | 166,827 |
Consolidated Statement of Cash Flows
In thousands of GEL | 30-Sep-2021 | 30-Jun-2021 |
Cash flows from (used in) operating activities |
|
|
Interest received | 1,393,345 | 906,444 |
Interest received on currency swaps | 22,894 | 13,149 |
Interest paid | (658,355) | (452,751) |
Fees and commissions received | 284,273 | 170,658 |
Fees and commissions paid | (133,149) | (78,793) |
Insurance and reinsurance received | 68,437 | 43,358 |
Insurance claims paid | (26,354) | (16,239) |
Income received from trading in foreign currencies | 58,592 | 32,659 |
Other operating income received | 53,477 | 28,880 |
Staff costs paid | (227,775) | (134,594) |
Administrative and other operating expenses paid | (114,125) | (79,430) |
Income tax paid | (11,893) | (4,446) |
Cash flows from operating activities before changes in operating assets and liabilities | 709,367 | 428,895 |
Net change in operating assets |
|
|
Due from other banks and mandatory cash balances with the National Bank of Georgia | 57,244 | 23,326 |
Loans and advances to customers | (1,650,871) | (711,980) |
Net investments in lease | 28,358 | 24,158 |
Other financial assets | (159,404) | (38,835) |
Other assets | 5,740 | 14,151 |
Net change in operating liabilities |
|
|
Due to credit institutions | 91,328 | 11,940 |
Customer accounts | 2,287,018 | 667,190 |
Other financial liabilities | (115,735) | (137,291) |
Other liabilities and provision for liabilities and charges | 23,992 | 16,659 |
Net cash flows (used in)/from operating activities | 1,277,037 | 298,213 |
Cash flows from (used in) investing activities |
|
|
Acquisition of investment securities measured at fair value through other comprehensive income | (598,141) | (196,871) |
Proceeds from redemption at maturity/disposal of investmentsecurities measured at fair value through other comprehensiveincome | 929,431 | 757,583 |
Proceeds from redemption of bonds carried at amortised cost | 28,351 | 19,633 |
Acquisition of premises, equipment and intangible assets | (111,148) | (91,993) |
Proceeds from disposal of premises, equipment and intangible assets | 13,833 | 6,334 |
Proceeds from disposal of investment property | 44,464 | 20,210 |
Net cash used in investing activities | 306,790 | 514,896 |
Cash flows from (used in) financing activities |
|
|
Proceeds from other borrowed funds | 1,755,171 | 1,757,879 |
Redemption of other borrowed funds | (2,914,700) | (2,736,476) |
Repayment of principal of lease liabilities | (8,417) | (5,591) |
Redemption of subordinated debt | (12,562) | (12,562) |
Proceeds from debt securities in issue | 49,346 | - |
Dividends paid | (84,159) | (1,741) |
Net cash flows from financing activities | (1,215,321) | (998,491) |
Effect of exchange rate changes on cash and cash equivalents | (43,470) | (35,609) |
Net (decrease)/ increase in cash and cash equivalents | 325,036 | (220,991) |
Cash and cash equivalents at the beginning of the year | 1,635,404 | 1,635,405 |
Cash and cash equivalents at the end of the year | 1,960,440 | 1,414,414 |
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, which were prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.
Key Ratios |
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Ratios (based on monthly averages, where applicable) | 3Q'21 | 2Q'21 | 3Q'20 |
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Profitability ratios: |
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ROE1 | 24.1% | 31.0% | 22.0% |
ROA2 | 3.6% | 4.4% | 2.9% |
ROE before expected credit loss allowances3 | 24.6% | 26.0% | 23.8% |
Cost to income4 | 35.4% | 35.4% | 38.5% |
NIM5 | 5.3% | 5.0% | 4.6% |
Loan yields6 | 10.5% | 10.2% | 10.0% |
Deposit rates7 | 3.5% | 3.4% | 3.7% |
Yields on interest earning assets8 | 9.9% | 9.5% | 9.4% |
Cost of funding9 | 4.7% | 4.6% | 4.9% |
Spread10 | 5.2% | 4.9% | 4.5% |
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Asset quality & portfolio concentration: |
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Cost of risk11 | -0.1% | -1.3% | 0.2% |
PAR 90 to Gross Loans12 | 1.3% | 1.2% | 1.3% |
NPLs to Gross Loans13 | 3.1% | 3.4% | 3.5% |
NPL provision coverage14 | 94.3% | 91.3% | 104.6% |
Total NPL coverage15 | 169.3% | 169.6% | 180.0% |
Credit loss level to Gross Loans16 | 2.9% | 3.1% | 3.7% |
Related Party Loans to Gross Loans17 | 0.0% | 0.1% | 0.1% |
Top 10 Borrowers to Total Portfolio18 | 7.7% | 7.8% | 7.9% |
Top 20 Borrowers to Total Portfolio19 | 11.4% | 11.9% | 12.0% |
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Capital & liquidity positions: |
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Net Loans to Deposits plus IFI* Funding20 | 97.5% | 102.8% | 97.5% |
Net Stable Funding Ratio21 | 127.1% | 130.6% | 127.0% |
Liquidity Coverage Ratio22 | 116.5% | 127.1% | 123.6% |
Leverage23 | 6.9x | 6.6x | 7.7x |
CET 1 CAR (Basel III)24 | 13.4% | 13.0% | 9.9% |
Tier 1 CAR (Basel III)25 | 15.4% | 15.5% | 12.7% |
Total 1 CAR (Basel III)26 | 19.3% | 19.6% | 17.1% |
* International Financial Institutions
Ratio definitions
1. 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.
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. Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all credit loss allowance with respective tax effects, but after net modification losses divided by the 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. 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 CIB shares), net investment in finance lease, net loans, and amounts due from credit institutions.
6. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
7. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
8. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
9. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
10. 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).
11. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
12. 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.
13. 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.
14. NPL provision coverage equals total credit loss allowance for loans to customers divided by the NPL loans.
15. Total NPL coverage equals total credit loss allowance plus the minimum of collateral amount of the respective NPL loan (after applying haircuts in the range of 0%-50% for cash, gold, real estate and PPE) and its gross loan exposure divided by the gross exposure of total NPL loans.
16. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
17. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
18. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
19. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
20. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
21. 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. Calculations are made for TBC Bank stand-alone, based on local standards.
22. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG. Calculations are made for TBC Bank stand-alone, based on local standards.
23. Leverage equals total assets to total equity.
24. CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with requirements of the NBG Basel III standards. Calculations are made for TBC Bank stand-alone, based on local standards.
25. Tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. 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 3.1603 as of 30 June 2021. As of 30 September 2021 the USD/GEL exchange rate equaled 3.1228. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 3Q 2021 of 3.1204, 2Q 2021 of 3.3271, 3Q 2020 of 3.1021.
Unaudited Consolidated Financial Results Overview for 9M 2021
This statement provides a summary of the unaudited business and financial trends for 9M 2021 for TBC Bank Group plc and its subsidiaries. The financial information and trends are unaudited.
TBC Bank Group PLC's financial results has been prepared in accordance with UK-adopted International Accounting Standard (IAS) 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority (FCA).
Financial Highlights
Income Statement Highlights |
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in thousands of GEL | 9M'21 | 9M'20 | Change YoY | |
Net interest income | 727,288 | 604,108 | 20.4% | |
Net fee and commission income | 176,932 | 130,568 | 35.5% | |
Other operating non-interest income[15] | 159,129 | 98,818 | 61.0% | |
Total credit loss allowance | 22,941 | (273,822) | NMF | |
Operating profit after expected credit losses | 1,086,290 | 559,672 | 94.1% | |
Losses from modifications of financial instrument | (1,695) | (35,933) | NMF | |
Operating expenses | (388,623) | (314,328) | 23.6% | |
Profit before tax | 695,972 | 209,411 | NMF | |
Income tax expense/(credit) | (85,446) | 12,377 | NMF | |
Profit for the period | 610,526 | 221,788 | NMF | |
Balance Sheet and Capital Highlights |
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| |
in thousands of GEL | Sep-21 | Sep-20 | Change YoY | |
Total Assets | 23,701,241 | 21,866,972 | 8.4% | |
Gross Loans | 15,963,520 | 14,590,777 | 9.4% | |
Customer Deposits | 14,338,537 | 12,343,414 | 16.2% | |
Total Equity | 3,448,193 | 2,826,387 | 22.0% | |
CET 1 Capital (Basel III) | 2,565,560 | 1,738,739 | 47.6% | |
Tier 1 Capital (Basel III) | 2,955,910 | 2,211,178 | 33.7% | |
Total Capital (Basel III) | 3,693,637 | 2,984,109 | 23.8% | |
Risk Weighted Assets (Basel III) | 19,143,450 | 17,478,610 | 9.5% | |
Key Ratios | 9M'21 | 9M'20 | Change YoY |
ROE | 25.3% | 11.0% | 14.3 pp |
Bank's standalone ROE[16] | 32.2% | 21.50% | 10.7 pp |
ROA | 3.5% | 1.5% | 2.0 pp |
Bank's standalone ROA[16] | 4.6% | 2.7% | 1.9 pp |
NIM | 5.0% | 4.7% | 0.3 pp |
Cost to income | 36.5% | 37.7% | -1.2 pp |
Bank's standalone cost to income[16] | 28.8% | 32.4% | -3.7 pp |
Cost of risk | -0.3% | 2.0% | -2.3 pp |
NPL to gross loans | 3.1% | 3.5% | -0.5 pp |
NPL provision coverage ratio | 94.3% | 104.6% | -10.4 pp |
Total NPL coverage ratio | 169.3% | 180.0% | -10.7 pp |
CET 1 CAR (Basel III) | 13.4% | 9.9% | 3.5 pp |
Tier 1 CAR (Basel III) | 15.4% | 12.7% | 2.7 pp |
Total CAR (Basel III) | 19.3% | 17.1% | 2.2 pp |
Leverage (Times) | 6.9x | 7.7x | -0.8x |
Net Interest Income
In 9M 2021, net interest income amounted to GEL 727.3 million, up by 20.4% YoY, whereby interest income and interest expense increased by 13.3% and 7.3%, respectively.
The YoY increase in interest income was primarily related to an increase in interest income from loans, which was driven by an increase in the gross loan portfolio of GEL 1,372.7 million, or 9.4% and an increase in loan yield of 0.2pp due to a higher refinance rate, as well as s shift of the portfolio composition towards GEL loans.
The increase in interest expense was primarily related to an increase in interest expense from deposits due to an increase in the respective portfolio of GEL 1,995.1 million, or 16.2%. Over the same period, the cost of deposits declined by 0.1 pp. In addition, the change in the liability structure towards deposits had a positive effect on the cost of funding. As a result, the cost of funding decreased by 0.4 pp YoY and stood at 4.6% in 9M 2021.
In 9M 2021, our NIM stood at 5.0%, up by 0.3 pp YoY.
In thousands of GEL | 9M'21 | 9M'20 | Change YoY |
Interest income | 1,375,821 | 1,214,125 | 13.3% |
Interest expense | (671,427) | (625,730) | 7.3% |
Net gains from currency swaps | 22,894 | 15,713 | 45.7% |
Net interest income | 727,288 | 604,108 | 20.4% |
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NIM | 5.0% | 4.7% | 0.3 pp |
Net fee and commission income
In 9M 2021, net fee and commission income totalled GEL 176.9 million, up by 35.5% YoY. The increase was spread across all major sub-categories and was mainly driven by increased business activities combined with our various initiatives including: a review of the pricing model of our merchants together with the acquisition of several large merchants, the popularization of our subscription model for mass retail customers, as well as the fine-tuning of our offerings for affluent customers. This growth was further supported by our fast growing Uzbek subsidiary, Payme.
In thousands of GEL | 9M'21 | 9M'20 | Change YoY |
Net fee and commission income |
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Card operations | 54,226 | 34,820 | 55.7% |
Settlement transactions | 84,388 | 60,547 | 39.4% |
Guarantees issued and letters of credit | 29,151 | 27,543 | 5.8% |
Other | 9,167 | 7,658 | 19.7% |
Total net fee and commission income | 176,932 | 130,568 | 35.5% |
Other Non-Interest Income
Total other non-interest income increased by 61.0% YoY and amounted to GEL 159.1 million in 9M 2021. The YoY increase was driven by growth in net income from foreign currency operations and growth in other operating income. The former increase was driven by an increase in the scale of FX transactions, while the later increase was driven by a gain from the disposal of one of our investment properties, in the amount of GEL 26.3 million.
In thousands of GEL | 9M'21 | 9M'20 | Change YoY |
Other non-interest income |
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Net income from foreign currency operations | 88,994 | 69,910 | 27.3% |
Net insurance premium earned after claims and acquisition costs[17] | 15,892 | 16,222 | -2.0% |
Other operating income | 54,243 | 12,686 | NMF |
Total other non-interest income | 159,129 | 98,818 | 61.0% |
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Credit Loss Allowance
Total credit loss allowance in 9M 2021 amounted to GEL 22.9 million. This significant decrease on a year-on-year basis was driven by recoveries in 2Q and 3Q 2021 across all segments and by a high base in 9M 2020 due to the creation of COVID-19 related provisions.
In thousands of GEL | 9M'21 | 9M'20 | Change YoY |
Recovery of/(charges to) credit loss allowance for loans to customers | 36,952 | (255,100) | NMF |
Credit loss allowance for other transactions | (14,011) | (18,722) | -25.2% |
Total credit loss allowance | 22,941 | (273,822) | NMF |
Operating income after credit loss allowance | 1,086,290 | 559,672 | 94.1% |
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Cost of risk | -0.3% | 2.0% | -2.3 pp |
NMF - no meaningful figures
Operating Expenses
In 9M 2021, our total operating expenses expanded by 23.6% YoY.
The YoY growth in staff costs was mainly attributable to the low base of share-based payments in 9M 2020, as a result of the reversal of management's bonuses and an increase in staff bonuses related to revival of business activities in 9M 2021. Another driver was the expansion of our Uzbek business, which resulted in an increase in the number of employees.
The increase in administrative and other operating expenses was mainly related to our Uzbek business, as well as the revival of business activities in Georgia.
The cost to income ratio stood at 36.5%, down by 1.2 pp YoY, while the Bank's standalone cost to income was 28.8%, down by 3.7 pp over the same period.
In thousands of GEL | 9M'21 | 9M'20 | Change YoY |
Operating expenses |
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Staff costs | (222,714) | (176,261) | 26.4% |
Provisions for liabilities and charges | (63) | (1,982) | -96.8% |
Depreciation and amortization | (56,689) | (49,554) | 14.4% |
Administrative & other operating expenses | (109,157) | (86,531) | 26.1% |
Total operating expenses | (388,623) | (314,328) | 23.6% |
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Cost to income | 36.5% | 37.7% | -1.2 pp |
Bank's standalone cost to income* | 28.8% | 32.4% | -3.7 pp |
* For the ratio calculation all relevant group recurring costs are allocated to the bank
NMF - no meaningful figures
Net Income
In 9M 2021, our solid profitability was related to a strong performance in operating profit across all categories, as well as recoveries in credit loss allowances across all segments.
As a result, our ROE stood at 25.3%, ROE before expected credit loss allowances stood at 24.4% and ROA stood at 3.5%.
In thousands of GEL | 9M'21 | 9M'20 | Change YoY |
Losses from modifications of financial instruments | (1,695) | (35,933) | -95.3% |
Profit before tax | 695,972 | 209,411 | NMF |
Income tax expense/(credit) | (85,446) | 12,377 | NMF |
Profit for the period | 610,526 | 221,788 | NMF |
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ROE | 25.3% | 11.0% | 14.3 pp |
Bank's standalone ROE[18] | 32.2% | 21.5% | 10.7 pp |
ROE before expected credit loss allowances | 24.4% | 23.6% | 0.8 pp |
ROA | 3.5% | 1.5% | 2.0 pp |
Bank's standalone ROA[18] | 4.6% | 2.7% | 1.9 pp |
Funding and Liquidity
As of 30 September 2021, the total liquidity coverage ratio, as defined by the NBG, was 116.5%, above the 100% limit, while the LCR in GEL and FC stood at 98.0% and 125.5% respectively, above the respective limits of 75% and 100%.
As of 30 September 2021, NSFR stood at 127.1%, compared to the regulatory limit of 100%.
| 30-Sep-21 | 30-Sep-20 | Change YoY |
Minimum net stable funding ratio, as defined by the NBG | 100% | 100% | 0.0 pp |
Net stable funding ratio as defined by the NBG | 127.1% | 127.5% | 3.1 pp |
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Net loans to deposits + IFI funding | 97.5% | 105.3% | -7.8 pp |
Leverage (Times) | 6.9x | 7.7x | -0.8x |
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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%* | n/a | NMF |
Minimum LCR in FC, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
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Total liquidity coverage ratio, as defined by the NBG | 116.5% | 124.8% | -8.3 pp |
LCR in GEL, as defined by the NBG | 98.0% | 141.0% | -43.0 pp |
LCR in FC, as defined by the NBG | 125.5% | 117.3% | 8.2 pp |
* In May 2021, NBG restored the NBG GEL LCR limit, which was temporarily removed for one year
Regulatory Capital
On a YoY basis, the Bank's CET1, Tier 1 and Total capital adequacy ratios increased by 3.5 pp, 2.7 pp and 2.2 pp, respectively. The increase was mainly driven by strong net income generation and local currency appreciation, which was partially offset by an increase in the loan book, and other changes in capital and RWA.
In thousands of GEL | 30-Sep-21 | 30-Sep-20 | Change YoY |
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CET 1 Capital | 2,565,560 | 1,738,739 | 47.6% |
Tier 1 Capital | 2,955,910 | 2,211,178 | 33.7% |
Total Capital | 3,693,637 | 2,984,109 | 23.8% |
Total Risk-weighted Exposures | 19,143,450 | 17,478,610 | 9.5% |
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Minimum CET 1 ratio | 11.3% | 6.9% | 4.4 pp |
CET 1 Capital adequacy ratio | 13.4% | 9.9% | 3.5 pp |
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Minimum Tier 1 ratio | 13.5% | 8.7% | 4.8 pp |
Tier 1 Capital adequacy ratio | 15.4% | 12.7% | 2.7 pp |
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Minimum total capital adequacy ratio | 17.9% | 13.2% | 4.7 pp |
Total Capital adequacy ratio | 19.3% | 17.1% | 2.2 pp |
Loan Portfolio
As of 30 September 2021, the gross loan portfolio reached GEL 15,963.5 million, up by 9.4% YoY or up by 12.6% on a constant currency basis, with CIB and MSME segments showing the highest growth rates of 16.5% and 15.8% respectively, followed by retail with 7.0%, on a constant currency basis. The proportion of gross loans denominated in foreign currency decreased by 6.5 pp YoY and accounted for 54.9% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency was down by 5.2 pp YoY and stood at 56.2%.
As of 30 September 2021, our market share in total loans stood at 38.4%, down by 0.9 pp YoY, while our loan market share in legal entities was 38.6%, down by 0.2 pp over the same period, and our loan market share in individuals stood at 38.2%, down by 1.6 pp QoQ.
In thousands of GEL | 30-Sep-21 | 30-Sep-20 | Change YoY |
Loans and advances to customers |
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Retail | 5,950,915 | 5,696,529 | 4.5% |
Retail loans GEL | 3,313,791 | 2,811,912 | 17.8% |
Retail loans FC | 2,637,124 | 2,884,617 | -8.6% |
CIB | 6,136,232 | 5,457,119 | 12.4% |
CIB loans GEL | 1,941,958 | 1,308,998 | 48.4% |
CIB loans FC | 4,194,274 | 4,148,121 | 1.1% |
MSME | 3,876,373 | 3,437,129 | 12.8% |
MSME loans GEL | 1,936,230 | 1,506,741 | 28.5% |
MSME loans FC | 1,940,143 | 1,930,388 | 0.5% |
Total loans and advances to customers | 15,963,520 | 14,590,777 | 9.4% |
| 9M'21 | 9M'20 | Change YoY |
Loan yields | 10.2% | 10.0% | 0.2 pp |
Loan yields GEL | 15.0% | 15.2% | -0.2 pp |
Loan yields FC | 6.6% | 6.7% | -0.1 pp |
Retail Loan Yields | 11.5% | 11.3% | 0.2 pp |
Retail loan yields GEL | 16.0% | 16.4% | -0.4 pp |
Retail loan yields FC | 6.4% | 6.4% | 0.0 pp |
CIB Loan Yields | 8.9% | 8.7% | 0.2 pp |
CIB loan yields GEL | 13.6% | 13.3% | 0.3 pp |
CIB loan yields FC | 7.0% | 7.0% | 0.0 pp |
MSME Loan Yields | 10.1% | 10.2% | -0.1 pp |
MSME loan yields GEL | 14.8% | 15.0% | -0.2 pp |
MSME loan yields FC | 6.0% | 6.2% | -0.2 pp |
Loan Portfolio Quality
On a YoY basis, total par 30 increased by 0.6 pp. The increase was mainly driven by the low base in September 2020, which in turn was caused by the payment holidays offered to Retail and MSME borrowers affected by the COVID-19 pandemic.
Our NPL ratio improved by 0.4 pp YoY and amounted to 3.1%. The main driver was the CIB segment on the back of the recoveries of several borrowers during the previous 12 months due to the improved portfolio quality.
Par 30 | 30-Sep-21 | 30-Sep-20 | Change YoY |
Retail | 2.7% | 1.6% | 1.1 pp |
CIB | 0.5% | 1.2% | -0.7 pp |
MSME | 4.6% | 2.9% | 1.7 pp |
Total Loans | 2.3% | 1.7% | 0.6 pp |
Non-performing Loans | 30-Sep-21 | 30-Sep-20 | Change YoY |
Retail | 3.6% | 3.4% | 0.2 pp |
CIB | 1.5% | 2.6% | -1.1 pp |
MSME | 4.7% | 5.2% | -0.5 pp |
Total Loans | 3.1% | 3.5% | -0.4 pp |
NPL Coverage | 30-Sep-21 | 30-Sep-20 | |||||
| Provision Coverage | Total Coverage | Provision Coverage | Total Coverage |
| ||
Retail | 120.7% | 189.3% | 158.9% | 227.9% |
| ||
CIB | 82.5% | 151.2% | 114.4% | 191.8% |
| ||
MSME | 68.7% | 154.5% | 68.6% | 154.5% |
| ||
Total | 94.3% | 169.3% | 104.6% | 215.8% |
| ||
Cost of risk
The total cost of risk for 9M 2021 stood at -0.3%, down by 2.8 pp YoY. The recoveries in credit loss allowances were related to the improved macro outlook on the back of the better than expected economic performance, as well as repayment from a single large CIB borrower.
Cost of Risk | 9M'21 | 9M'20 | Change YoY | ||
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|
|
| ||
Retail | 0.2% | 4.3% | -4.1 pp | ||
CIB | -0.8% | 0.7% | -1.5 pp | ||
MSME | -0.3% | 2.6% | -2.9 pp | ||
Total | -0.3% | 2.5% | -2.8 pp | ||
Deposit Portfolio
The total deposits portfolio increased by 16.2% YoY across all segments and amounted to GEL 14,338.5 million, while on a constant currency basis the total deposit portfolio increased by 20.0% over the same period. The proportion of deposits denominated in foreign currency was up by 0.1 pp YoY and accounted for 63.7% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency increased by 1.3 pp YoY and stood at 64.9%.
As of 30 September 2021, our market share in deposits amounted to 40.1%, up by 1.8 pp YoY, and our market share in deposits to legal entities stood at 40.0%, up by 1.7 pp over the same period. Our market share in deposits to individuals stood at 40.2%, up by 1.9 pp QoQ.
In thousands of GEL | 30-Sep-21 | 30-Sep-20 | Change YoY |
Customer Accounts |
|
|
|
Retail | 5,593,535 | 4,705,769 | 18.9% |
Retail deposits GEL | 1,353,608 | 1,158,361 | 16.9% |
Retail deposits FC | 4,239,927 | 3,547,408 | 19.5% |
CIB | 6,834,386 | 5,494,408 | 24.4% |
CIB deposits GEL | 2,681,148 | 1,876,576 | 42.9% |
CIB deposits FC | 4,153,238 | 3,617,832 | 14.8% |
MSME | 1,433,603 | 1,304,952 | 9.9% |
MSME deposits GEL | 688,598 | 604,798 | 13.9% |
MSME deposits FC | 745,005 | 700,154 | 6.4% |
Total Customer Accounts* | 14,338,537 | 12,343,414 | 16.2% |
* Total deposit portfolio includes Ministry of Finance deposits in the amount of GEL 856 million and GEL 477 million as of 30 September 2020 and 30 September 2021, respectively.
| 9M'21 | 9M'20 | Change YoY |
Deposit rates | 3.4% | 3.5% | -0.1 pp |
Deposit rates GEL | 6.6% | 6.4% | 0.2 pp |
Deposit rates FC | 1.7% | 1.9% | -0.2 pp |
Retail Deposit Yields | 2.3% | 2.6% | -0.3 pp |
Retail deposit rates GEL | 4.8% | 5.4% | -0.6 pp |
Retail deposit rates FC | 1.5% | 1.7% | -0.2 pp |
CIB Deposit Yields | 4.2% | 4.5% | -0.3 pp |
CIB deposit rates GEL | 8.2% | 8.1% | 0.1 pp |
CIB deposit rates FC | 2.1% | 2.5% | -0.4 pp |
MSME Deposit Yields | 0.8% | 0.9% | -0.1 pp |
MSME deposit rates GEL | 1.5% | 1.6% | -0.1 pp |
MSME deposit rates FC | 0.3% | 0.3% | 0.0 pp |
Segment definition and PL
Business Segments
The segment definitions are as follows:
· Corporate and Investment Banking (CIB) - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which has been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the CIB segment or transferred to the MSME segment on a discretionary basis. In addition, CIB includes Wealth Management private banking services to high-net-worth individuals with a threshold of US$ 250,000 on assets under management (AUM), as well as on discretionary basis;
· Retail - non-business individual customers; or individual customers of the fully digital bank, Space.
· MSME - business customers who are not included in the CIB segment;
· 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'21 | Retail | MSME | CIB | Corp. Centre | Total |
Interest income | 501,802 | 277,497 | 411,903 | 184,619 | 1,375,821 |
Interest expense | (95,617) | (8,849) | (193,512) | (373,449) | (671,427) |
Net gains from currency swaps |
|
|
| 22,894 | 22,894 |
Net transfer pricing | (118,403) | (108,731) | 47,057 | 180,077 | - |
Net interest income | 287,782 | 159,917 | 265,448 | 14,141 | 727,288 |
Fee and commission income | 171,665 | 36,836 | 78,449 | 21,893 | 308,843 |
Fee and commission expense | (42,956) | (24,177) | (57,725) | (7,053) | (131,911) |
Net fee and commission income | 128,709 | 12,659 | 20,724 | 14,840 | 176,932 |
Net insurance premium earned after claims and acquisition costs | - | - | - | 15,892 | 15,892 |
Net gains/(losses) from currency derivatives, foreign currency operations and translation | 24,844 | 18,597 | 38,180 | 7,665 | 89,286 |
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income | - | - | 524 | 10,380 | 10,904 |
Other operating income | 5,639 | 707 | 2,127 | 33,808 | 42,281 |
Share of profit of associates | - | - | - | 766 | 766 |
Other operating non-interest income and insurance profit | 30,483 | 19,304 | 40,831 | 68,511 | 159,129 |
Recovery of/(charges to) credit loss allowance for loans to customers | (7,860) | 8,648 | 36,164 | - | 36,952 |
Recovery of/(charges to) credit loss allowance for performance guarantees and credit related commitments | 438 | 122 | (5,327) | - | (4,767) |
Credit loss allowance for net investments in leases | - | - | - | (2,373) | (2,373) |
Credit loss allowance for other financial assets | (3,292) | - | (92) | (4,979) | (8,363) |
Recovery of/(charges to) credit loss allowance for financial assets measured at fair value through other comprehensive income | - | - | 930 | 1,336 | 2,266 |
Net impairment of non-financial assets | 235 | 68 | 22 | (1,099) | (774) |
Profit/(loss) before G&A expenses and income taxes | 436,495 | 200,718 | 358,700 | 90,377 | 1,086,290 |
Losses from modifications of financial instruments | (688) | (93) | (914) | - | (1,695) |
Staff costs | (100,644) | (40,369) | (33,710) | (47,991) | (222,714) |
Depreciation and amortization | (36,954) | (8,330) | (3,798) | (7,607) | (56,689) |
Provision for liabilities and charges | - | - | - | (63) | (63) |
Administrative and other operating expenses | (56,064) | (15,073) | (11,710) | (26,310) | (109,157) |
Operating expenses | (193,662) | (63,772) | (49,218) | (81,971) | (388,623) |
Profit before tax | 242,145 | 136,853 | 308,568 | 8,406 | 695,972 |
Income tax expense | (23,506) | (15,096) | (32,787) | (14,057) | (85,446) |
Profit | 218,639 | 121,757 | 275,781 | (5,651) | 610,526 |
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance sheet
In thousands of GEL | Sep-21 | Sep-20 |
Cash and cash equivalents | 1,960,441 | 1,454,973 |
Due from other banks | 64,894 | 39,941 |
Mandatory cash balances with National Bank of Georgia | 2,095,848 | 2,024,080 |
Loans and advances to customers | 15,504,311 | 14,055,807 |
Investment securities measured at fair value through other comprehensive income | 2,253,510 | 1,346,770 |
Bonds carried at amortized cost* | 1,118 | 1,322,203 |
Net investments in leases | 237,557 | 268,430 |
Investment properties | 32,444 | 83,458 |
Current income tax prepayment | 4,856 | 58,721 |
Deferred income tax asset | 9,216 | 602 |
Other financial assets[19] | 383,890 | 263,979 |
Other assets | 352,191 | 259,736 |
Premises and equipment | 378,514 | 359,001 |
Right of use assets | 52,944 | 59,040 |
Intangible assets | 305,088 | 207,670 |
Goodwill | 59,964 | 60,296 |
Investments in associates | 4,455 | 2,265 |
TOTAL ASSETS | 23,701,241 | 21,866,972 |
LIABILITIES |
|
|
Due to credit institutions | 3,361,515 | 4,127,175 |
Customer accounts | 14,338,537 | 12,343,414 |
Lease liabilities | 53,627 | 67,131 |
Other financial liabilities14 | 165,710 | 183,376 |
Current income tax liability | 16,559 | 565 |
Debt Securities in issue | 1,507,969 | 1,527,318 |
Deferred income tax liability | 7,684 | 4,370 |
Provisions for liabilities and charges | 28,275 | 25,417 |
Other liabilities | 137,086 | 79,171 |
Subordinated debt | 636,086 | 682,648 |
TOTAL LIABILITIES | 20,253,048 | 19,040,585 |
EQUITY |
|
|
Share capital | 1,682 | 1,682 |
Shares held by trust | (25,489) | (34,451) |
Share premium | 848,459 | 848,459 |
Retained earnings | 2,790,447 | 2,180,291 |
Group re-organisation reserve | (162,167) | (162,167) |
Share based payment reserve | (8,811) | (25,222) |
Fair value reserve | (1,207) | 7,994 |
Cumulative currency translation reserve | (7,065) | (931) |
Net assets attributable to owners | 3,435,849 | 2,815,655 |
Non-controlling interest | 12,344 | 10,732 |
TOTAL EQUITY | 3,448,193 | 2,826,387 |
TOTAL LIABILITIES AND EQUITY | 23,701,241 | 21,866,972 |
* In 2020, the Group changed its business model in relation to certain portfolio of bonds carried at amortized cost (Ministry of Finance Treasury Bills). The respective reclassifications have been applied prospectively from 1 January 2021, as required by IFRS. As a result of reclassification, Bonds carried at amortized cost in the amount of GEL 1,059,946 thousand has been transferred to Investment securities measured at fair value through other comprehensive income with the fair value of GEL 1,086,008 thousand. The difference has been recognized in other comprehensive income as required by IFRS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL | 9M'21 | 9M'20 |
Interest income | 1,375,821 | 1,214,125 |
Interest expense | (671,427) | (625,730) |
Net gains from currency swaps | 22,894 | 15,713 |
Net interest income | 727,288 | 604,108 |
Fee and commission income | 308,843 | 226,429 |
Fee and commission expense | (131,911) | (95,861) |
Net fee and commission income | 176,932 | 130,568 |
Net insurance premiums earned | 47,107 | 40,817 |
Net insurance claims incurred and agents' commissions | (31,215) | (24,595) |
Net insurance premium earned after claims and acquisition costs | 15,892 | 16,222 |
Net gains/(losses) from currency derivatives, foreign currency operations and translation | 89,286 | 69,933 |
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income | 10,904 | (1,202) |
Other operating income | 42,281 | 13,622 |
Share of profit of associates | 766 | 243 |
Other operating non-interest income | 143,237 | 82,596 |
Recovery of/(charges to) credit loss allowance for loans to customers | 36,952 | (255,100) |
Credit loss allowance for net investments in leases | (2,373) | (6,939) |
Recovery of/(charges to) credit loss allowance for performance guarantees and credit related commitments | (4,767) | 1,171 |
Credit loss allowance for other financial assets | (8,363) | (10,703) |
Recovery of/(charges to) credit loss allowance for financial assets measured at fair value through other comprehensive income | 2,266 | (906) |
Net impairment of non-financial assets | (774) | (1,345) |
Operating profit after expected credit losses | 1,086,290 | 559,672 |
Losses from modifications of financial instruments | (1,695) | (35,933) |
Staff costs | (222,714) | (176,261) |
Depreciation and amortization | (56,689) | (49,554) |
(Provision for)/ recovery of liabilities and charges | (63) | (1,982) |
Administrative and other operating expenses | (109,157) | (86,531) |
Operating expenses | (388,623) | (314,328) |
Profit before tax | 695,972 | 209,411 |
Income tax expense/credit | (85,446) | 12,377 |
Profit | 610,526 | 221,788 |
Other comprehensive income: |
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
Movement in fair value reserve | (12,361) | 14,470 |
Exchange differences on translation to presentation currency | (4,940) | 5,918 |
Other comprehensive income for the period | (17,301) | 20,388 |
Total comprehensive income for the period | 593,225 | 242,176 |
Profit attributable to: |
|
|
- Shareholders of TBCG | 604,061 | 218,381 |
- Non-controlling interest | 6,465 | 3,407 |
Profit | 610,526 | 221,788 |
Total comprehensive income is attributable to: |
|
|
- Shareholders of TBCG | 586,780 | 238,795 |
- Non-controlling interest | 6,445 | 3,381 |
Totalcomprehensive income for the period | 593,225 | 242,176 |
Consolidated Statements of Cash Flows
In thousands of GEL | 30-Sep-21 | 30-Sep-20 |
Cash flows from/(used in) operating activities |
|
|
Interest received | 1,393,345 | 969,382 |
Interest received on currency swaps | 22,894 | 15,713 |
Interest paid | (658,355) | (584,266) |
Fees and commissions received | 284,273 | 215,013 |
Fees and commissions paid | (133,149) | (96,408) |
Insurance and reinsurance received | 68,437 | 63,044 |
Insurance claims paid | (26,354) | (19,761) |
Income received from trading in foreign currencies | 58,592 | (90,487) |
Other operating income received | 53,477 | 13,709 |
Staff costs paid | (227,775) | (179,576) |
Administrative and other operating expenses paid | (114,125) | (96,610) |
Income tax paid | (11,893) | (34,797) |
Cash flows from operating activities before changes in operating assets and liabilities | 709,367 | 174,956 |
Net change in operating assets |
|
|
Due from other banks and mandatory cash balances with the National Bank of Georgia | 57,244 | (1,162,590) |
Loans and advances to customers | (1,650,871) | (512,478) |
Net investments in lease | 28,358 | 10,159 |
Other financial assets | (159,404) | (149,733) |
Other assets | 5,740 | 12,146 |
Net change in operating liabilities |
|
|
Due to credit institutions | 91,328 | 102,451 |
Customer accounts | 2,287,018 | 1,248,989 |
Other financial liabilities | (115,735) | 49,203 |
Other liabilities and provision for liabilities and charges | 23,992 | 3,726 |
Net cash flows from operating activities | 1,277,037 | (223,171) |
Cash flows from/(used in) investing activities |
|
|
Acquisition of investment securities measured at fair value through other comprehensive income | (598,141) | (535,542) |
Proceeds from redemption at maturity/disposal of investmentsecurities measured at fair value through other comprehensiveincome | 929,431 | 223,059 |
Acquisition of bonds carried at amortised cost | - | (630,009) |
Proceeds from redemption of bonds carried at amortised cost | 28,351 | 333,486 |
Acquisition of premises, equipment and intangible assets | (111,148) | (136,184) |
Proceeds from disposal of premises, equipment and intangible assets | 13,833 | 36,860 |
Proceeds from disposal of investment property | 44,464 | 3,162 |
Acquisition of subsidiaries and associates | - | 695 |
Net cash used in investing activities | 306,790 | (704,473) |
Cash flows from/(used in) financing activities |
|
|
Proceeds from other borrowed funds | 1,755,171 | 1,972,144 |
Redemption of other borrowed funds | (2,914,700) | (1,703,260) |
Repayment of principal of lease liabilities | (8,417) | (3,773) |
Redemption of subordinated debt | (12,562) | - |
Proceeds from debt securities in issue | 49,346 | 114,030 |
Redemption of debt securities in issue |
| (2) |
Dividends paid | (84,159) | (1,992) |
Net cash flows from financing activities | (1,215,321) | 377,147 |
Effect of exchange rate changes on cash and cash equivalents | (43,470) | 1,001,885 |
Net increase in cash and cash equivalents | 325,036 | 451,388 |
Cash and cash equivalents at the beginning of the period | 1,635,404 | 1,003,585 |
Cash and cash equivalents at the end of the period | 1,960,440 | 1,454,973 |
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, which were 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'21 | 9M'20 |
Profitability ratios: |
|
|
ROE1 | 25.3% | 11.0% |
ROA2 | 3.5% | 1.5% |
ROE before expected credit loss allowances3 | 24.4% | 23.6% |
Cost to income4 | 36.5% | 37.7% |
NIM5 | 5.0% | 4.7% |
Loan yields6 | 10.2% | 10.0% |
Deposit rates7 | 3.4% | 3.5% |
Yields on interest earning assets8 | 9.5% | 9.5% |
Cost of funding9 | 4.6% | 5.0% |
Spread10 | 4.9% | 4.5% |
|
|
|
Asset quality & portfolio concentration: |
|
|
Cost of risk11 | -0.3% | 2.0% |
PAR 90 to Gross Loans12 | 1.3% | 1.3% |
NPLs to Gross Loans13 | 3.1% | 3.5% |
NPL provision coverage14 | 94.3% | 104.6% |
Total NPL coverage15 | 169.3% | 180.0% |
Credit loss level to Gross Loans16 | 2.9% | 3.7% |
Related Party Loans to Gross Loans17 | 0.0% | 0.1% |
Top 10 Borrowers to Total Portfolio18 | 7.7% | 7.9% |
Top 20 Borrowers to Total Portfolio19 | 11.4% | 12.0% |
|
|
|
Capital & liquidity positions: |
|
|
Net Loans to Deposits plus IFI* Funding20 | 97.5% | 97.5% |
Net Stable Funding Ratio21 | 127.1% | 127.0% |
Liquidity Coverage Ratio22 | 116.5% | 123.6% |
Leverage23 | 6.9x | 7.7x |
CET 1 CAR (Basel III)24 | 13.4% | 9.9% |
Tier 1 CAR (Basel III)25 | 15.4% | 12.7% |
Total 1 CAR (Basel III)26 | 19.3% | 17.1% |
* International Financial Institutions
Ratio definitions
1. 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.
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. Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all credit loss allowance with respective tax effects, but after net modification losses divided by the 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. 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 CIB shares), net investment in finance lease, net loans, and amounts due from credit institutions.
6. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
7. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
8. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
9. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
10. 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).
11. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
12. 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.
13. 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.
14. NPL provision coverage equals total credit loss allowance for loans to customers divided by the NPL loans.
15. Total NPL coverage equals total credit loss allowance plus the minimum of collateral amount of the respective NPL loan (after applying haircuts in the range of 0%-50% for cash, gold, real estate and PPE) and its gross loan exposure divided by the gross exposure of total NPL loans.
16. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
17. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
18. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
19. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
20. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
21. 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.
22. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
23. Leverage equals total assets to total equity.
24. CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. Calculations are made for TBC Bank stand-alone, based on local standards.
25. Tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. 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 3.2878 as of 30 September 2020. As of 30 September 2021 the USD/GEL exchange rate equaled 3.1228. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 9M 2021 of 3.2532, 9M 2020 of 3.0557.
Additional Disclosures
1) TBC Bank - Background
TBC Bank is the largest banking group in Georgia, where 99.5% of its business is concentrated, with a 39.2% market share by total assets. It offers retail, CIB, 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 United Kingdom. TBC PLC is listed on the London Stock Exchange under the symbol TBCG and is a constituent of the FTSE 250 index. It is also a member of the FTSE4Good Index Series and the MSCI United Kingdom Small Cap Index.
TBC Bank Group PLC's financial results has been prepared in accordance with UK-adopted International Accounting Standard (IAS) 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority (FCA).
2) Subsidiaries of TBC Bank Group PLC[20]
| Ownership / voting | Country | Year of incorporation | Industry | Total Assets | |
Subsidiary | Amount GEL'000 | % in TBC Group | ||||
JSC TBC Bank | 97.0% | Georgia | 1992 | Banking | 23,033,409 | 97.00% |
United Financial Corporation JSC | 99.5% | Georgia | 1997 | Card processing | 18,308 | 0.08% |
TBC Capital LLC | 100.0% | Georgia | 1999 | Brokerage | 4,134 | 0.02% |
TBC Leasing JSC | 100.0% | Georgia | 2003 | Leasing | 324,831 | 1.37% |
TBC Kredit LLC | 100.0% | Azerbaijan | 1999 | Non-banking credit institution | 17,593 | 0.07% |
TBC Pay LLC | 100.0% | Georgia | 2009 | Processing | 42,359 | 0.18% |
Index LLC | 100.0% | Georgia | 2011 | Real estate management | 1,513 | 0.01% |
TBC Invest LLC | 100.0% | Israel | 2011 | PR and marketing | 419 | 0.00% |
JSC TBC Insurance | 100.0% | Georgia | 2014 | Insurance | 76,129 | 0.33% |
Redmed LLC | 100.0% | Georgia | 2019 | E-commerce | 1,373 | 0.00% |
TBC Ecosystem Companies | 100.0% | Georgia | 2019 | Asset Management | 37,435 | 0.16% |
Swoop JSC | 100.0% | Georgia | 2010 | Retail Trade | 733 | 0.00% |
LLC Online Tickets | 55.0% | Georgia | 2015 | Software Services | 3,079 | 0.01% |
TKT UZ | 75.00% | Uzbekistan | 2019 | Retail Trade | 111 | 0.00% |
My.ge LLC | 100.0% | Georgia | 2008 | E-commerce, Housing and Auto | 24,123 | 0.10% |
LLC Vendoo (Geo) | 100.0% | Georgia | 2019 | Retail Leasing | 3,401 | 0.01% |
LLC Mypost | 100.0% | Georgia | 2019 | Postal Service | 108 | 0.00% |
LLC Billing Solutions | 51.00% | Georgia | 2019 | Software Services | 423 | 0.00% |
All property.ge LLC | 90.0% | Georgia | 2013 | Real estate management | 4,521 | 0.02% |
LLC F Solutions | 100.0% | Georgia | 2019 | Software Services | 11 | 0.00% |
TBC Connect LLC | 100.0% | Georgia | 2020 | Software Services | 3 | 0.00% |
JSC Space | 100.0% | Georgia | 2021 | Software Services | 29,603 | 0.12% |
TBC Concept | 100.0% | Georgia | 2020 | Food Industry | 867 | 0.00% |
Artarea.ge LLC | 100.0% | Georgia | 2021 | PR and marketing | 62 | 0.00% |
Saba | 85.0% | Georgia | 2012 | Education | 62 | 0.00% |
Art Gallery | 100.0% | Georgia | 2012 | PR and marketing | 0 | 0.00% |
Space International JSC | 100.0% | Georgia | 2021 | Software Services | 32,998 | 0.14% |
TBC Group Support LLC | 100.0% | Georgia | 2020 | Risk Management | 1 | 0.00% |
Inspired LLC | 51.0% | Uzbekistan | 2011 | Processing | 29,761 | 0.13% |
TBC Bank UZ JSCB | 100.0% | Uzbekistan | 2020 | Banking | 65,836 | 0.28% |
LLC Vendoo (UZ Leasing) | 100.00% | Uzbekistan | 2019 | Consumer financing | 2,638 | 0.01% |
3) TBC Insurance
TBC Insurance, a wholly owned subsidiary of TBC Bank, is one of the leading players on the Georgian non-health insurance market. The company was acquired by the Group in October 2016 and has since grown significantly, becoming the second largest player on the property and casualty insurance and life insurance (non-health) market and the largest player in the retail segment, holding 25.6% and 39.6% market shares[21] without border motor third party liability (MTPL) insurance, respectively, in 3Q 2021.
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, agro, and health 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 B-Bot, a Georgian-speaking chat-bot that is available through Facebook messenger.
In 2019, we entered the health insurance market, with a strategy to target the premium segment by providing a superior customer experience coupled with the most innovative approach to products and services. In 2021, as we have accumulated sufficient market knowledge and claims statistics, we expanded our value proposition to the mid-premium segment.
In 3Q 2021, net profit including the health insurance business amounted to GEL 3,598 thousand. The QoQ 26.4% increase in net profit, including the health insurance business, was mainly driven by strong business growth. On a YoY basis, the net profit increased moderately and was affected by a high base in 3Q 2020, due to reduced level of claims related to COVID-19.
Information excluding health insurance | 3Q'21 | 2Q'21 | 3Q'20 | 9M'21 | 9M'20 |
In thousands of GEL |
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Gross written premium | 26,125 | 22,831 | 19,186 | 70,220 | 56,329 |
Net earned premium[22] | 19,238 | 18,595 | 15,821 | 54,486 | 47,359 |
Net profit | 3,951 | 3,512 | 3,868 | 10,358 | 8,960 |
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Net combined ratio | 80.2% | 81.6% | 77.0% | 81.7% | 80.9% |
Information including health insurance | 3Q'21 | 2Q'21 | 3Q'20 | 9M'21 | 9M'20 |
In thousands of GEL |
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Gross written premium | 28,851 | 26,414 | 21,557 | 80,780 | 63,292 |
Net earned premium | 22,268 | 21,539 | 18,015 | 62,938 | 52,662 |
Net profit | 3,598 | 2,846 | 3,378 | 8,638 | 7,742 |
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Net combined ratio | 85.0% | 88.0% | 83.0% | 87.6% | 85.6% |
Note: IFRS standalone data
4) Fast growing digital bank in Uzbekistan
in thousands | Jan'21 | Feb'21 | Mar'21 | Apr'21 | May'21 | Jun'21 | Jul'21 | Aug'21 | Sep'21 | Oct'21 |
# of total registered users | 28 | 68 | 98 | 157 | 230 | 302 | 403 | 547 | 667 | 785 |
# of downloads | 29 | 71 | 103 | 189 | 284 | 391 | 555 | 747 | 897 | 1,040 |
Loan portfolio* (GEL) | 153 | 413 | 953 | 6,144 | 14,997 | 25,239 | 31,797 | 45,771 | 52,493 | 59,805 |
Deposit portfolio** (GEL) | 1,108 | 2,227 | 2,839 | 6,543 | 11,567 | 15,543 | 49,585 | 81,055 | 91,979 | 114,969 |
# of total cards issued (cumulative figures) | 8 | 18 | 31 | 42 | 54 | 66 | 78 | 96 | 117 | 139 |
# of other cards attached (cumulative figures) | 4 | 15 | 29 | 49 | 81 | 126 | 187 | 264 | 328 | 443 |
Total monthly number of transactions | 27 | 87 | 203 | 323 | 407 | 563 | 626 | 817 | 906 | 1,098 |
* Unsecured consumer loan with the average ticket size of GEL 2,100
** Current and savings accounts
5) Reclassification of certain balance sheet profit and loss items and changes in methodology
In 1Q 2021, we reclassified certain BS and PL items for all quarters of 2020 and 1Q 2021, as outlined below.
Wealth Management and Space business reclassification
Following structural changes in the Management Board, starting from January 2021, Deputy CEO George Tkhelidze, head of Corporate and Investment Banking, assumed responsibility for the Wealth Management business. As a result, we reclassified all relevant BS and PL items of the Wealth Management business from Retail Banking to Corporate and Investment Banking.
Following the demerger of the Space segment into a separate entity, the management has re-considered the classification of Space from the MSME to the retail segment. The underlying rationale was the composition of product base, offered by Space to its customers. The majority of such products are consumer, fast consumer and installment loans, which by their nature represent the retail segment. As a result, the management believes that analyzing Space as a part of the retail segment would be more meaningful for users of the financial statements.
The amounts of the Wealth Management and Space loan and deposit portfolios are given in a table below:
| Wealth Management | Space | ||
| Loan book (million GEL) | Deposit portfolio (million GEL) | Loan book (million GEL) | Deposit portfolio (million GEL) |
September 2021 | 151.1 | 2,451.1 | 31.3 | 13.7 |
June 2021 | 142.8 | 2,193.7 | 30.9 | 13.3 |
September 2020 | 133.1 | 2,002.3 | 33.8 | 8.2 |
Reclassification of other non-financial assets impairment
In 2021, the Group reclassified the impairment/recovery of non-financial assets from "Administrative and other operating expenses" to "Impairment of other non-financial assets". A significant part of any impairment/recoveries recorded is related to repossessed assets and investment properties. The management believes that those type of assets are not actively used in daily operations, but are primarily targeted for sale in the future. Considering the nature of those expenses/recovery, such a presentation is more appropriate and would increase the understandability and clarity of the Group's financial statements. The presentation of comparative figures has been adjusted to conform to the presentation of the current period amounts:
| As originally presented at 30 September 2020 | Reclassification | As reclassified at 30 September 2020 |
Impairment of other non-financial assets | - | (720) | 720 |
Administrative and other operating expenses | (31,860) | 720 | (31,140) |
Changes in methodology - NPL collaterals coverage
In 1Q 2021, in order to further increase the focus on collateral coverage, the Bank reviewed its methodology and applied a more conservative approach: namely, under the updated methodology, the collateral amount is capped at the respective loan amount. The NPL coverages for all four quarters of 2020 have been recalculated as per the updated methodology.
The table below outlines the NPL coverage ratios as of 30 September 2020, calculated as per the previous and the updated methodologies.
| Collateral coverage | Total NPL coverage (provisions plus collateral) | ||
Per previous methodology | Per updated methodology | Per previous methodology | Per updated methodology | |
Retail | 156% | 121% | 237% | 189% |
CIB | 75% | 83% | 225% | 151% |
MSME | 72% | 69% | 186% | 155% |
Total | 105% | 94% | 216% | 169% |
6) Loan book breakdown by stages according IFRS 9
Total (in million GEL)
| 30-Sep-21 | 30-Jun-21 | 30-Sep-20 | |||
Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
1 | 13,557 | 0.9% | 12,709 | 0.9% | 11,814 | 1.5% |
2 | 1,737 | 5.7% | 1,803 | 5.6% | 2,303 | 8.2% |
3 | 670 | 34.9% | 763 | 34.4% | 474 | 34.7% |
Total | 15,964 | 2.9% | 15,275 | 3.1% | 14,591 | 3.7% |
CIB (in million GEL)
| 30-Sep-21 | 30-Jun-21 | 30-Sep-20 | |||
Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
1 | 5,285 | 0.9% | 4,899 | 0.9% | 4,430 | 1.1% |
2 | 728 | 0.5% | 826 | 1.0% | 866 | 1.1% |
3 | 124 | 20.1% | 127 | 18.8% | 161 | 30.6% |
Total | 6,137 | 1.2% | 5,852 | 1.3% | 5,457 | 1.9% |
MSME (in million GEL)
| 30-Sep-21 | 30-Jun-21 | 30-Sep-20 | |||
Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
1 | 3,206 | 0.7% | 2,997 | 0.6% | 2,808 | 1.2% |
2 | 445 | 6.6% | 458 | 6.3% | 479 | 9.1% |
3 | 225 | 32.3% | 249 | 31.5% | 150 | 30.6% |
Total | 3,876 | 3.2% | 3,704 | 3.4% | 3,437 | 3.6% |
Retail (in million GEL)
| 30-Sep-21 | 30-Jun-21 | 30-Sep-20 | |||
Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
1 | 5,066 | 1.1% | 4,813 | 1.0% | 4,576 | 2.2% |
2 | 564 | 11.8% | 519 | 12.3% | 958 | 14.2% |
3 | 321 | 42.5% | 387 | 41.4% | 163 | 42.5% |
Total | 5,951 | 4.4% | 5,719 | 4.8% | 5,697 | 5.4% |
* LLP rate is defined as credit loss allowances divided by gross loans
7) Reconciliation of Return on Equity (ROE) with ROE before expected credit loss allowances
| Income Statement Highlights |
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# | in thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | 9M'21 | 9M'20 | ||||
1. | Net interest income | 259,390 | 242,767 | 211,784 | 727,288 | 604,108 | ||||
2. | Net fee and commission income | 68,631 | 63,008 | 47,499 | 176,932 | 130,568 | ||||
3. | Other operating non-interest income | 43,952 | 74,512 | 33,913 | 159,129 | 98,818 | ||||
4. | Credit loss allowance | -5,106 | 45,291 | -14,146 | 22,941 | -273,822 | ||||
5. | Operating profit after expected credit losses | 366,867 | 425,578 | 279,050 | 1,086,290 | 559,672 | ||||
6. | Losses from modifications of financial instrument | -104 | -104 | -1,763 | -1,695 | -35,933 | ||||
7. | Operating expenses | -131,695 | -134,688 | -112,793 | -388,623 | -314,328 | ||||
8. | Profit before tax | 235,068 | 290,786 | 164,494 | 695,972 | 209,411 | ||||
9. | Income tax expense | -27,921 | -40,394 | -11,906 | -85,446 | 12,377 | ||||
10. | Profit for the period | 207,147 | 250,392 | 152,588 | 610,526 | 221,788 | ||||
12. | Profit for the period less Non-controlling interest | 204,892 | 247,946 | 150,755 | 604,062 | 218,381 | ||||
13. | Income tax expense of credit loss allowance | -562 | 4,684 | -1,255 | 2,525 | -24,286 | ||||
14. | Profit before Credit loss allowances less Non-controlling interest and respective tax effect (12 - 4 + 13) | 209,436 | 207,339 | 163,646 | 583,646 | 467,917 | ||||
# | in thousands of GEL | 3Q'21 | 2Q'21 | 3Q'20 | 9M'21 | 9M'20 |
15. | Average equity attributable to the PLC's equity holders | 3,377,931 | 3,203,351 | 2,731,868 | 3,195,731 | 2,653,246 |
16. | Return on equity (ROE) (12÷15)* | 24.1% | 31.0% | 22.0% | 25.3% | 11.0% |
17. | Return on equity (ROE) before expected credit loss allowances (14÷15)* | 24.6% | 26.0% | 23.8% | 24.4% | 23.6% |
*annualised where applicable |
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[1] Consumer loans offloading ratios equals the number of consumer loans issued via remote channels divided by total number of such loans issued;
[2] Deposit offloading ratio equals the number of time and savings deposits opened via remote channels divided by total number of such deposits opened.
[3] National Statistics Office of Georgia
[4] Is calculated as the number consumer loans issued via remote channels divided by total number of such loans issued.
[5] Is calculated as the number of time and savings deposits opened through remote channels divided by total number of such deposits opened.
[9] Other operating non-interest income includes net insurance premium earned after claims and acquisition costs.
[10] For the ratio calculation, all relevant group recurring costs are allocated to the bank.
[11] Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit (as shown in Annex 3) 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.
[12] For the ratio calculation, all relevant group recurring costs are allocated to the bank.
[13] In 1Q 2021, we updated the calculation methodology of NPL collateral coverage; please refer to annex 5 for more details.
[14] Other financial assets and liabilities do not contain offset amounts of omnibus accounts for TBC Capital (nominee accounts, where TBC Capital acts as a fiduciary on a client's behalf).
[15] Other operating non-interest income includes net insurance premium earned after claims and acquisition costs.
[16] For the ratio calculation, all relevant group recurring costs are allocated to the bank.
[17] Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit (as shown in Annex 3) 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.
[18] For the ratio calculation, all relevant group recurring costs are allocated to the bank.
[19] Other financial assets and liabilities do not contain offset amounts of omnibus accounts for TBC Capital (nominee accounts, where TBC Capital acts as a fiduciary on client's behalf).
[20] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016.
[21] Market shares are based on internal estimates. Source is Insurance State Supervision Service of Georgia. Total non-health and retail market share in 3Q 2021 including MTPL stood at 24 . 5 % and 35 . 4 % respectively.
[22] Net earned premium equals earned premium minus the reinsurer's share of earned premium.
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