Final Results

RNS Number : 7326X
TBC Bank Group PLC
24 February 2017
 

 

 

TBC BANK GROUP PLC ("TBC Bank")

 

FY 2016 AND 4Q 2016 PRELIMINARY Unaudited Financial Results

 

 

 

 

The information in this announcement relating to full year FY16 preliminary results, which were approved by the Board on 23 February 2017, do not constitute statutory accounts under section 434 of the UK Companies Act 2006. Financial statements for JSC TBC Bank Georgia were filed with the Georgian authorities in respect of FY15. No financial statements were filed in prior years for TBC Bank because the holding company was only incorporated in February 2016. The financial statements of TBC Bank will be included in the Annual Report and Accounts due to be published in March 2017, and filed with the Registrar of Companies in due course.

 

 

Forward-Looking Statements

 

This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause actual results, performance or achievements of TBC Bank Group PLC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.

 

None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.

 

Certain financial information contained in this presentation has been extracted from the Group's unaudited management accounts and financial statements. The areas in which management accounts might differ from International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant and you should consult your own professional advisors and/or conduct your own due diligence for complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this Presentation have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.

 

Fourth Quarter and Full Year 2016 Preliminary Unaudited Financial Results Conference Call

 

TBC Bank Group PLC ("TBC PLC") will release its fourth quarter and full year 2016 preliminary unaudited financial results on Friday, 24 February 2017 at 7am GMT (11am GET).

 

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

 

Date & time:       Friday, 24 February at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST)

                                    

Please dial-in approximately 5 minutes before the start of the call quoting the password TBC Bank:

 

Password:

TBC Bank

UK Toll Free:

0808 109 0700

Standard International Access:

+44 (0) 20 3003 2666

USA Toll Free:

1 866 966 5335

New York New York:                                               

+1 212 999 6659

Russia Toll Free:

8 10 8002 4902044

Moscow:

+7 (8) 495 249 9843

 

Replay Numbers

 

Replay Passcode:

7936347

UK Toll Free:

0800 633 8453

Standard International Access:                               

+44 (0) 20 8196 1998

USA Toll Free:

1 866 583 1035

Russia Toll Free:

8 10 8002 4832044

Moscow:

+7 (8) 495 249 9840

 

 

 

 

 

Contacts

 

 

Sean Wade

Director of International Media and IR

 

E-mail:  SWade@Tbcbank.com.ge  

Web: www.tbcgroupbank.com

Tel:  +44 (0) 7464 609025

Address: 68 Lombard St, London EC3V 9LJ, United Kingdom

Anna Romelashvili

Head of Investor Relations

 

E-mail:  ARomelashvili@Tbcbank.com.ge  

Web: www.tbcgroupbank.com

Tel:  +(995 32) 227 27 27

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

 

Investor Relations Department

 

 

E-mail:  ir@tbcbank.com.ge  

Web: www.tbcgroupbank.com

Tel:  +(995 32) 227 27 27

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

 

Table of Contents

 

TBC Bank - Background

Financial Highlights

Recent Developments

Bank Republic Update

Letter from the Chief Executive Officer

Economic Overview

Results Overview FY 2016 and 4Q 2016

Income Statement Discussion

Balance Sheet Discussion

Results by Segments and Subsidiaries

Annexes

Subsidiaries of TBC Bank

Consolidated Financial Statements of TBC Bank

Key Ratios

Additional Disclosures

Other Selected Data of TBC Bank and Bank Republic

Bank Republic Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TBC BANK Group PLC ("TBC Bank")

 

TBC Bank Announces FY 2016 and 4Q 2016 IFRS Consolidated Preliminary Results;

Net Profit for 2016 up by 36.4% YoY to GEL 298.3 million

 

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

 

TBC Bank - Background

 

These preliminary unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank"), 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 a group restructuring. As this was a common ownership transaction, the results have been presented as if the group existed at the earliest comparative date as allowable under International Financial Reporting Standards ("IFRS") as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange on 10 August 2016.

In Q4 2016, TBC Bank acquired Bank Republic, which is consolidated into these results for the first time.

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

TBC Bank is the largest banking group in Georgia, and is listed on the Premium Segment of the London International Stock Exchange. Following the acquisition of Bank Republic during the year, TBC Bank is the leading universal bank in Georgia, offering retail, corporate, and SME banking across the country. TBC Bank accounts for 36.7% market share of the Georgian banking market by total assets, where 99.6% of its business is concentrated.

 

Financial Highlights

 

Financial Highlights (including effect of Bank Republic acquisition)

 

FY 2016 P&L Highlights                                                         

§ Net Profit for 2016 up by 36.4% YoY to GEL 298.3 million

§ Return on equity (ROE) amounted to 22.4% (20.6% without one-off effects) and Return on assets (ROA) to 3.9% (3.6% without one-off effects)

§ Total operating income for 2016 up by 18.0% YoY to GEL 681.1 million

§ Cost to income ratio stood at 45.8% (42.9% without one-off effects), compared to 43.9% in 2015

§ Cost of risk on loans stood at 1.0%, down by 0.7pp YoY

§ Net interest margin (NIM) stood at 7.8% in 2016, unchanged from 2015

 

Balance Sheet Highlights 31 December 2016

§ Total assets reached GEL 10,769.0 million as of 31 December 2016, up by 55.3% YoY and up by 42.0% QoQ

§ Gross loans and advances to customers increased to GEL 7,358.7 million as of 31 December 2016, up by 58.6% YoY and by 47.1% QoQ

§ Net loans to deposits and IFI funding stood at 93.4% and Net Stable Funding Ratio (NSFR) stood at 108.4%

§ NPLs stood at 3.5%, down by 1.3pp YoY and 1.1pp QoQ

§ NPLs coverage stood at 88.4%, (221.4% with collateral), compared to 84.3% as of 30 September 2016

§ Total customer deposits stood at GEL 6,454.9 million as of 31 December 2016, up by 54.5% YoY and up by 40.5% QoQ

§ Tier I and Total Capital Adequacy Ratios per Basel II/III stood at 10.4% and 14.2% respectively

§ Tier I and Total Capital Adequacy Ratios per Basel I stood at 21.3% and 28.1% respectively

 

 

4Q 2016 P&L Highlights

§ Net Profit for 4Q 2016 up by 31.6% YoY to GEL 88.0 million and up by 24.0% QoQ

§ Return on equity (ROE) amounted to 24.2% (23.5% without one-off effects) and return on assets (ROA) to 3.7% (3.5% without one-off effects)

§ Total operating income in 4Q 2016 up by 39.0% YoY and by 34.9% QoQ to GEL 218.3 million

§ Cost to income ratio stood at 51.2% (47.0% without one-offs), compared to 49.3% in 4Q 2015 and 40.5% in 3Q 2016

§ Cost of risk on loans stood at 0.6%, up by 0.5pp YoY and down by 0.5pp QoQ

§ Net interest margin (NIM) stood at 7.9%in 4Q 2016, compared to 8.3% in 3Q 2016 and 7.4% in 4Q 2015

 

 

Financial Highlights (excluding effect of Bank Republic acquisition)

 

FY 2016 P&L Highlights                                                         

§ Net Profit for 2016 up by 31.5% YoY to GEL 287.6 million

§ Return on equity (ROE) amounted to 21.6% (19.7% without one-off effects) and Return on assets (ROA) to 3.9% (3.6% without one-off effects).

§ Total operating income for 2016 up by 11.4% YoY to GEL 643.0 million

§ Cost to income ratio stood at 46.1% (43.4% without one-off effects), compared to 43.9% in 2015.

§ Cost of risk on loans stood at 0.8%, down by 0.9pp YoY.

§ Net interest margin (NIM) stood at 7.9% in 2016, up by 0.1pp

 

Balance Sheet Highlights 31 December 2016

§ Total assets reached GEL 9,212.5 million as of 31 December 2016, up by 32.8% YoY and up by 21.5% QoQ

§ Gross loans and advances to customers increased to GEL 5,911.2 million as of 31 December 2016, up by 27.4% YoY and by 18.1% QoQ

§ Net loans to deposits and IFI funding stood at 90.7%

§ NPLs stood at 4.0%, down by 0.8pp YoY and down 0.6pp QoQ

§ NPLs coverage stood at 90.5%, (216.8% with collateral), compared to 84.3% as of 30 September 2016.

§ Total customer deposits stood at GEL 5,641.1 million as of 31 December 2016, up by 35.0% YoY and up by 22.8% QoQ

 

4Q 2016 P&L Highlights

§ Net Profit for 4Q 2016 up by 15.6% YoY and up by 9.0% QoQ to GEL 77.4 million

§ Return on equity (ROE) amounted to 21.4% (20.0% without one-off effects) and return on assets (ROA) to 3.7% (3.4% without one-off effects).

§ Total operating income in 4Q 2016 up by 14.8% YoY and up by 11.4% QoQ to GEL 180.2 million

§ Cost to income ratio stood at 53.5% (49.7% without one-offs), compared to 49.3% in 4Q 2015 and 40.5% in 3Q 2016.

§ Cost of risk on loans stood at -0.1%, down by 0.3pp YoY and down by 1.2pp QoQ.

§ Net interest margin (NIM) stood at 7.8%in 4Q 2016, compared to 8.3% in 3Q 2016 and 7.4% in 4Q 2015.

 

 

Description of One-off Incomes and Expenses Incurred during 2016

§ Recovery of previously written off principal and interest (FY '16: GEL35.8 million; Q4: GEL35.8 million)

§ Tax credit (FY '16: GEL17.9 million; Q4: GEL 0 million)

§ Premium Listing costs (FY '16: GEL16.2 million; Q4:  GEL0.3 million)

§ Currency effect on provisions (FY '16: GEL9.6 million; Q4: GEL16.8 million) or w/o BR (FY '16: GEL8.7 million; Q4: GEL16.0 million)

§ Gain on sale of investment securities (FY '16: GEL8.8 million; Q4: GEL 0 million)

§ Bank Republic acquisition related consulting costs (FY'16: GEL8.0 million; Q4: GEL8.0 million)

§ Interest income related to one large corporate customer (FY '16: GEL4.2 million; Q4: GEL 0 million)

§ Interest expense related to prepayment of subordinated loans (FY'16: GEL2.5 million; Q4:GEL2.5 million)

§ Staff redundancy provision (FY '16: GEL2.2 million; Q4: GEL 2.2 million)

§ Impairment of intangible assets of Bank Republic (FY '16: GEL2.0 million; Q4: GEL2.0 million)

 

 

Market Shares[1]

§ TBC Bank's market share in total assets increased by 3.3pp YoY and by 1.6pp QoQ, reaching 30.0% (36.7% with Bank Republic's total assets) as of 31 December 2016.

§ TBC Bank's market share in total loans was 31.1% (38.9% with Bank Republic's total loans) as of 31 December 2016, up by 2.4pp YoY and by 1.4pp QoQ.

§ In terms of individual loans, the Bank had a market share of 32.9% (44.2% with Bank Republic's total individual loans) as of 31 December 2016, up by 1.3pp YoY and 0.6pp QoQ. The market share for legal entity loans was 29.4% (33.6% with Bank Republic's total legal entity loans), up by 3.2pp YoY and by 2.1pp QoQ.

§ TBC Bank's market share of total deposits stood at 33.0% (37.8% with Bank Republic's total deposits) as of 31 December 2016, up by 4.0pp YoY and up by 2.4pp QoQ.

§ The Bank maintains its longstanding leadership in individual deposits with a market share of 37.2% (40.8% with Bank Republic's total individual deposits), up by 2.9pp YoY and up by 1.7pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 28.0% (34.2% with Bank Republic's legal entity deposits), up by 4.6pp YoY and 2.9pp QoQ.

 

 Recent Developments

 

TBC Bank Secures Funds from FMO and EFSE

§ TBC Bank signed new loan agreements with European Fund for Southeast Europe (EFSE) and Netherlands Development Finance Company (FMO), attracting additionally $85 million to further expand its SME and Micro portfolio.

§ FMO facility has a full or partial conversion option into local currency subject to mutual agreement.

 

Changes in Management

§ Following the merger of Bank's Corporate and Investment Banking departments to provide clients with capital markets products and advisory services through a fully integrated franchise, George Tkhelidze, previously Chief Risk Officer, was appointed to lead the new CIB unit.

§ David Chkonia joined the bank in January 2017 and took role of Chief Risk Officer and Deputy CEO. David has an extensive background in risk management and international banking. Previously he was Director at Blackrock advising financial institutions and regulators on enterprise risk management, balance sheet strategy and regulation.

§ For more information about the corporate governance and the board structure see our website at www.tbcbankgroup.com

 

TBC Bank Named Bank of the Year in Georgia 2016 by the Banker

§ TBC Bank was named by the Banker as the Bank of the Year in Georgia 2016. Besides the Banker, in 2016 the bank won the Best Bank of the Year in Georgia awards from Euromoney, Global Finance, and EMEA Finance Magazines.

 

 

 

 

Bank Republic Update

 

Strong Financial Performance

Key Ratios

Y'16

Y'15

4Q'16

3Q'16

ROE

23.0%

21.3%

27.0%

23.4%

ROA

3.5%

3.4%

4.3%

3.8%

NIM

7.6%

8.1%

8.4%

8.3%

Cost of Risk

1.5%

1.5%

3.2%

0.8%

Cost to Income

41.7%

44.6%

40.1%

44.0%

 

Accelerated growth and increased market shares

 

                                  Loans

Deposits

Portfolios

4Q 2016

3Q 2016

Growth

4Q 2016

3Q 2016

Growth

Retail Segment

1,061

893

18.8%

329

383

-14.1%

Business Segment

415

347

19.6%

484

340

42.4%

Total

1,477

1,240

19.1%/9.9%[2]

814

723

12.6%/3.9%2

Market Share

7.8%

7.4%

0.4pp

4.8%

4.8%

0pp

 

Accelerated growth in customer acquisition

§ Total number of customers grew by 7.0% in the last quarter and reached c.366,000 across all segments.

Stable employee turnover after the acquisition

§ Following the acquisition Bank Republic employee turnover in branches stayed stable at 6.0% or up 1pp QoQ.

 

Synergy Potential and one-off integration costs

§ Total expected run-rate synergies post recurring costs are expected to be over GEL 20.5 million, with one-off integration costs of GEL 23.3 million.  Completion of full integration and achievement of run-rate synergies is expected in 3Q 2017.

Governance from 20th October 2016

Following the acquisition, a number of senior appointments were made to strengthen the governance of Bank Republic, including:

§ CEO - Nikoloz Kurdiani (assigned from TBC Bank)

§ CFO - Ketevan Tevzadze (Bank Republic CFO joining TBC group as deputy CFO)

§ CRO - David Chkonia (assigned from TBC Bank)

§ COO - Vano Baliashvili (assigned from TBC Bank)

§ Head of Corporate and Investment Banking - George Tkhelidze (assigned from TBC Bank)

All members of the Supervisory Board are senior executives of TBC Bank

Goodwill

§ As a result of acquisition a goodwill in the amount of GEL 24.2 million was created which is within the previously disclosed range of GEL 20-32 million

Additional Information Disclosure

Additional historical information for certain P&L, Balance Sheet and Capital items and on Asset Quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Financial Highlights section.

Letter from the Chief Executive Officer

 

I am very pleased to report that 2016 has been another extremely successful year for TBC Bank, marked by two major events. Firstly, the successful listing of our shares on the Premium Segment of the London Stock Exchange; and secondly, the acquisition of JSC Bank Republic, Georgia's number three bank by total loans. The acquisition makes TBC Bank the largest bank in the country. In addition, we have achieved another set of strong financial results that were further enhanced by the contribution of Bank Republic from the point of acquisition on 20th October 2016.

Our consolidated net profit reached GEL 298.3 million for full year 2016 with Return on Equity of 22.4%, up by 2.3 pp year-on-year and a Return on Assets of 3.9%, up by 0.5 pp year-on-year. Without the contribution from Bank Republic, our net profit reached GEL 287.6 million for full year 2016 with Return on Equity of 21.6% and Return on Assets of 3.9%. Our increased profitability was supported by strong growth in both net interest income and non-interest income, which grew by 19.0% and 15.5% year-on-year respectively or by 13.2% and 6.9% without Bank Republic. The net interest margin stood at 7.8% or at 7.9% without Bank Republic. In addition, our cost to income ratio stood at 42.9% without one-off effects, down by 1.0 pp year-on-year, or at 45.8% with one-off effects.

We have also achieved strong balance sheet growth with both loans and deposit growth outperforming the market. In 2016, the loan book grew 27.4% year-on-year, or 19.5% on a constant currency rate, without Bank Republic. This growth was achieved across all segments, beating the market growth by 9.7% or 9.1% without the exchange rate effect. Including Bank Republic the growth rate reached 58.6% year-on-year and our market share in loans stood at 38.9% as of 31 December 2016. Over the same period, total deposits grew by 35.0% year-on-year or 26.1% on a constant currency basis without Bank Republic, and outstripped the market growth by 11.6% or 15.7% without the exchange rate effect. Including Bank Republic the growth was 54.5% year-on-year and our deposit market share reached 37.8% as of 31 December 2016.

We continue to maintain robust asset quality with a non-performing loan ratio of 3.5% at the year end, down by 1.3% on a year-on-year basis, while our non-performing coverage ratio stood at 88.4% or 221.4% with collateral. Without the Bank Republic effect, the non-performing loan ratio stood at 4.0% at the year end, while our non-performing coverage ratio stood at 90.5% or 216.8% with collateral. In addition, we continue to operate with strong capital and liquidity positions.  Our total capital adequacy ratio (CAR) per Basel II/III regulation stood at 14.2% compared to the minimum requirement of 10.5%, and our Tier I Ratio per Basel II/III stood at 10.4% compared to the minimum requirement of 8.5%. Net loans to deposits + IFI funding stood at 93.4% and the net stable funding ratio (NSFR) stood at 108.4%.

I would also like to mention the standalone performance of Bank Republic. We took control of the Bank on completion of the acquisition on 20th of October 2016 and appointed a new CEO and replaced most of the Board members. The bank's performance has been strengthened further since then. The loan portfolio grew by 19.1% and the deposit portfolio increased by 12.6% over the last quarter in 2016 (or at 9.9% and 3.9% respectively at constant currency). Consequently, the loan market share was up by 0.4pp and reached 7.8% and deposit market share remained flat at 4.8%. During the same period the number of customers grew by 7.0% and reached c.366,000 clients, while employee turnover remained low at 6% in the front office. Bank Republic delivered strong financial results with return on equity standing at 23.0% and return on assets at 3.5% for the full year 2016. At the same time, the cost to income ratio was 41.7% and asset quality remained strong with the non-performing loan ratio standing at 3.1% and non-performing coverage ratio at 112% or 201% with collateral, respectively. The cost of risk stood at 1.3% for the full year 2016.

I would also like to comment briefly on recent economic developments in Georgia and the immediate outlook. Despite the recent economic slowdown in neighboring countries in the region, the Georgian economy has again proved resilient. The expansion in the construction, hotel, restaurant and real estate sectors helped to drive economic growth in 2016, overcoming a contraction in the transportation sector caused by lower trade volumes in the wider region. As a result, Georgia's real GDP expanded by 2.2% in 2016 according to initial estimates. Growth is expected to accelerate in 2017 with the International Monetary Fund (IMF) forecasting 4.0%, the highest in the region. The outlook for 2017 remains positive, with several large infrastructure projects planned and a free trade agreement with China coming into force in the second half of the year. This will further diversify Georgia's trade flows and reduce exposure to regional economic volatility. Following smooth parliamentary elections in late 2016, the political outlook remains stable and the government's liberal reform agenda remains in place. The abolition of tax on reinvested profit, which comes into force at the start of 2017 or from 2019 for financial institutions, is expected to further boost Georgia's profile as an attractive investment destination.

With regard to other recent corporate developments, I would like to highlight changes to our management structure. In November 2016, we merged our Corporate and Investment Banking departments to provide clients with capital markets products and advisory services through a fully integrated franchise. The resulting new CIB unit is headed by George Tkhelidze, who was previously Chief Risk Officer (CRO). I would like to congratulate George on his appointment and wish him the same success in this new role that he enjoyed as CRO. Replacing him is David Chkonia, who was appointed as a new Deputy CEO and CRO in January 2017 and brings extensive financial services and risk management expertise. I am confident that David will contribute a great deal to TBC Bank's future growth and development.

In terms of operational performance, our customer base reached 1.7 million, almost half of the Georgian population, which gives us vast opportunities for cross selling of our traditional core products. Our products per customer ratio for our retail business reached 3.68[3] as of 31 December 2016 and we plan to increase this by more than 15% over the medium-term. We continue to lead the Georgian service industry in terms of customer satisfaction, with the highest net promoter score (NPS)[4] not only in the banking sector, but across all major retail service providers in the country. We also continue to harness our remote channels and as a result by the end of 2016, 84%[5] of all retail transactions were remote and 55%[6] of sales were conducted digitally or through the call center. In addition, we significantly increased the number of transactions carried out via internet and mobile banking with mobile banking penetration jumping from 15% in December 2015 to 24% in December 2016.

Finally, I am also pleased to announce that TBC Bank has been named "Bank of the Year in Georgia 2016" by the Banker magazine. This is the eighth time that TBC Bank has been awarded this prestigious prize since 2002. 2016 has proved to be a very successful year for TBC in terms of external recognition, as we have also won best bank of the year in Georgia awards from Euromoney, Global Finance, and EMEA Finance Magazines. 

 

Outlook

TBC Bank has closed 2016 with the strongest year in our history, and we will continue to maintain our focus in 2017 on delivering on our strategy and objectives. Our focus for 2017 is to further develop our advanced digital channel capabilities and superior customer experience. The successful integration of Bank Republic and the full realization of its synergy potential is also at the top of the agenda. In terms of financial goals, we continue to pursue our medium-term targets and are well on track to achieve them. As a result of strong growth and profitability in 2016, along with the cross-selling and cost-saving opportunities created by the Bank Republic acquisition, we maintain our medium-term ROE forecast of 20% plus. Our medium-term loan book growth target is 15-20% and we will continue to disburse a minimum of 25% of TBC Group's annual consolidated net income in the form of dividends. Finally, we maintain our medium-term cost-to-income guidance at below 40%.

 

 

Economic Overview

 

Information set out below relating to the broad economic overview in 2016, and outlook for 2017, sets the context for TBC Bank's operating activities and financial results. Around 99% of TBC Bank's operations take place in Georgia and, although developments in the immediate Caucasus region are an important factor in the regional business climate, the bank's performance however is largely affected by the developments in the Georgian economy. The domestic economic environment remains stable and the banking sector continues to grow, supported by broader macroeconomic stability and attractive business climate. 

Georgia's GDP growth averaged 2.2% YoY in 2016, according to the initial estimates of Geostat, slowing to an estimated 1.4% y/y in 4Q 2016 amid elevated uncertainties in countries in the region. In the first 9 months of 2016, GDP growth amounted to 2.6% on an annualized basis; the primary drivers of growth were construction (+11.1% YoY), manufacturing (+4.8% YoY), real estate (+6.6% YoY) and hotels and restaurants (+12.0% YoY). Transport and communication declined by 1.5%, affected by lower economic growth in the region, which consequently depressed regional trade volumes.

After close to zero inflation (+0.6% YoY) in 4Q 2016, inflation picked up in January 2017 to 3.9% YoY. This reversal in inflation was driven by increased excise taxes on tobacco, petroleum and cars, which led core inflation[7] to stand at 2.8% YoY. Higher excise taxes fed into higher inflation expectations in the economy. To respond to this unexpected shift in inflation expectations, the National Bank of Georgia (NBG) raised the policy rate by 0.25pps from 6.5% to 6.75% at the end of January 2017 and promised an additional 0.25pp rate hike in the coming quarter. Given that this inflation is primarily driven by one-off factors, the NBG is not expected to over-react even if inflation goes temporarily above its target of 4% in 2017.

The main components of the current account balance show positive trends. Exports of goods started to bottom out after two years of continuous decline. 4Q 2016 exports of goods increased by 7.5% YoY. Traditional export goods, such as Ferro-Alloys (+35.7% YoY), Wines (+29.5% YoY), other spirits (+47.6% YoY), and mineral water (+0.5% YoY) drove growth in 4Q 2016. Re-exports of cars also started to recover (+18% YoY), but remain at about one-fifth of the levels in 2013. From a regional perspective, exports to CIS increased by a solid 16.3% YoY, with the relative stability in Russia and Ukraine allowing Georgian exporters to partially regain their presence in these traditional markets. Exports to EU increased by a modest 4% YoY in 4Q 2016, while exports to other countries remained broadly unchanged. In 2016, exports to less traditional markets such as China (up 35%), Iran (up 30%) and other Gulf countries increased at higher rates, further diversifying Georgia's export profile and reducing its dependence on any particular country or region.

In 4Q 2016, imports of goods[8] increased by 6.3% YoY, driven by an increase in imports of capital and intermediate goods (+7%) and transportation (+17%). The recovery in oil prices negatively affected Georgia's trade balance, with imports of petroleum goods increasing by 15% YoY. Due to the increase in imports, the balance of trade worsened by 5.8% YoY. The deterioration in the balance of trade was partly offset by increasing inflows from tourism and remittances.

Georgia's dynamic tourism industry continued to grow in 4Q 2016, with visitor numbers increasing 5% YoY while the number of tourists[9] increased by a solid 16.8% YoY. Overall in 2016, the number of visitors went up by 7.6% YoY to 6.4 million people, contributing US$2.1 billion to the economy. The first indicators of growth in tourism revenues are very encouraging; as of January 2017, the number of international visitors in Georgia increased by 20% YoY.

Remittances, which represent a significant positive component in Georgia's current account balance, increased by 15.2% YoY, mainly supported by greater money transfers from Israel (+88.6%), the US (+32.8%), Turkey (+62.7%), Italy (+11.4%) and Greece (+20.5%). Money transfers from Russia (+1.6%) also showed the first signs of recovery by the end of 2016.

The sharp depreciation of the Turkish Lira and a stronger dollar were reflected in the USD/GEL exchange rate. By the end of 2016, the USD/GEL exchange rate depreciated by 10.5% YoY and by 12.3% QoQ. The USD reached a maximum of 2.78 GEL before stabilizing at around 2.70 GEL in January 2017. The real and nominal effective exchange rates of GEL remain slightly undervalued relative to their long-term trends, which should become supportive of exports of goods and services over the coming periods.

To cover the temporary gap in revenues that results from the profit tax reform, the government has raised excise taxes on tobacco, petroleum, gas, alcoholic drinks and cars. Reshuffling tax incentives should support growth over the longer term, with investing and re-investing made more attractive, while the consumption of currently very cheap tobacco and alcoholic drinks will be discouraged, which should be positive from the external trade balance perspective as well.

Fiscal policy remained pro-growth in 2016, with the fiscal deficit standing at around 40%, financed mostly by external liabilities. Despite this being over 3%, public debt levels remain at around 45.0% of GDP, below the ceiling of 60% set out in the constitution. In line with the government's debt management strategy, the share of domestic debt in the total public debt is gradually increasing - it stood at 21% at the end of 2016 - which reduces exchange rate risk and strengthens the sustainability profile of public debt.

In 2017, the fiscal deficit is projected to reach 4.2% of GDP. Despite remaining high, this is mostly driven by increased capital expenditures. The government's long-term reform agenda centers on infrastructure development in the country, which should support long-term economic growth by reducing transportation costs and better harnessing the potential of Georgia's regions. In addition, better transport infrastructure should strengthen the country's position as the region's transport and logistics hub. The immediate effect of increased capital spending should be lower unemployment and higher economic growth.

In recognition of its continued progress, Georgia moved up seven steps in the World Bank's 2017 Doing Business ranking, from 23rd in 2016 to 16th out of 190 countries surveyed globally. This placed it third in Eastern Europe and made it one of the top 10 countries in terms of annual improvement.

In 2016 Georgia signed a free trade agreement with the European Free Trade Area states (Iceland, Lichtenstein, Norway, Switzerland), representing a small but symbolic expansion of its free-trade partnerships. Georgia is gradually capitalizing on the free-trade agreement with the EU, while a step-by-step alignment of the Georgian regulatory environment to that of the EU means that a broader range of Georgian produced goods can enter the EU on favorable terms. The European Parliament approved visa free travel to Schengen countries for citizens of Georgia; this decision is expected to become operational in spring 2017, once the remaining technicalities are finalized. Visa free movement will be a valuable addition to the existing free trade deal and will enable Georgia to better utilize the abundant export potential offered by the EU market.

The outlook for 2017 is positive, with large infrastructure projects planned and a free trade agreement with China coming into force in the second half of the year, further diversifying Georgia's trade flows and reducing exposure to regional economic volatility. Following smooth parliamentary elections in late 2016, the political outlook appears stable and the government's liberal reform agenda remains in place. The abolition of tax on reinvested profit, which comes into force at the start of 2017, is expected to further boost Georgia's profile as an attractive investment destination.

 

 Results Overview FY 2016 and 4Q 2016

Income Statement Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in thousands of GEL

Y'16 w/o BR acquisition

Y'16

Y'15

Change in %

4Q'16 w/o BR acquisition

4Q'16

3Q'16

4Q'15

Change YoY %

Change QoQ %

Net Interest Income

466,576

490,453

412,173

19.0%

129,811

153,689

120,227

106,519

44.3%

27.8%

Net Fee and Commission Income

88,076

90,268

72,291

24.9%

26,200

28,392

22,194

19,807

43.3%

27.9%

Other Operating Non-Interest Income

88,358

100,341

92,528

8.4%

24,189

36,172

19,398

30,636

18.1%

86.5%

Provisioning Charges

-41,597

-53,396

-75,991

-29.7%

2,131

-9,668

-15,059

-5,318

81.8%

-35.8%

Operating Income after Provisions for Impairment

601,413

627,667

501,002

25.3%

182,331

208,586

146,759

151,644

37.5%

42.1%

Operating Expenses

-296,686

-311,988

-253,130

23.3%

-96,483

-111,785

-65,536

-77,394

44.4%

70.6%

Profit Before Tax

304,727

315,679

247,872

27.4%

85,849

96,801

81,223

74,251

30.4%

19.2%

Income Tax Expense

-17,146

-17,420

-29,176

-40.3%

-8,492

-8,767

-10,235

-7,331

19.6%

-14.3%

Profit for the Period

287,581

298,258

218,697

36.4%

77,356

88,034

70,988

66,920

31.6%

24.0%
                       

 

 

Balance Sheet and Capital Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dec-16

Sep-16

Change QoQ

Dec-15

Change YoY

In Millions

GEL w/o BR Acquisition

GEL

USD w/o BR Acquisition

USD

GEL

USD

 

GEL

USD

 

Total Assets

9,213

10,769

3,481

4,069

7,584

3,255

42.0%

6,935

2,896

55.3%

Gross Loans

5,911

7,359

2,233

2,780

5,004

2,148

47.1%

4,639

1,937

58.6%

Customer Deposits

5,641

6,455

2,131

2,439

4,593

1,972

40.5%

4,178

1,745

54.5%

Total Equity

1,576

1,583

595

     598

    1,389

596

14.0%

1,218

509

29.9%

Basel I Tier I Capital

-

1,486

-

561

1,322

568

12.4%

1,157

483

28.4%

Basel I Risk Weighted Assets

-

6,974

-

2,635

5,162

2,216

35.1%

4,680

1,954

49.0%

Basel II/III Tier I Capital

-

1,041

-

393

1,125

483

-7.4%

953

398

9.2%

Basel II/III Risk Weighted Assets

-

10,021

-

3,786

8,428

3,618

18.9%

7,476

3,122

34.0%
                       

 

 

Key Ratios

Y'16 w/o BR Acquisition

Y'16

Y'15

Change in %

4Q'16* w/o BR Acquisition

4Q'16

3Q'16

4Q'15

Change YoY

Change QoQ

ROAE

21.6%

22.4%

20.1%

2.3%

21.4%

24.2%

20.6%

23.1%

1.1%

3.6%

ROAA

3.9%

3.9%

3.4%

0.5%

3.7%

3.7%

4.0%

3.9%

-0.2%

-0.3%

Pre-Provision ROAE

24.7%

26.4%

27.1%

-0.7%

20.8%

26.8%

25.1%

24.9%

1.9%

1.7%

Cost to Income

46.1%

45.8%

43.9%

1.9%

53.5%

51.2%

40.5%

49.3%

1.9%

10.7%

Cost of Risk

0.8%

1.0%

1.7%

-0.7%

-0.1%

0.6%

1.1%

0.2%

0.5%

-0.5%

NPL to Gross Loans

4.0%

3.5%

4.8%

-1.3%

4.0%

3.5%

4.6%

4.8%

-1.3%

-1.1%

Basel I Total CAR

-

28.1%

31.0%

-2.9%

-

28.1%

31.5%

31.0%

-2.9%

-3.4%

Basel II/III Total CAR

-

14.2%

16.0%

-1.8%

-

14.2%

16.2%

16.0%

-1.8%

-2.1%

Leverage (Times)

5.8

6.8

5.7

1.1

5.8

6.8

5.5

5.7

1.1

1.3

 

 Income Statement Discussion

Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL

Y'16 w/o BR Acquisition*

Y'16

Y'15

Change in %

4Q'16 w/o BR Acquisition

4Q'16

3Q'16

4Q'15

Change YoY

Change QoQ

Loans and Advances to Customers

653,512

688,724

582,327

18.3%

186,904

222,116

164,235

155,292

43.0%

35.2%

Investment Securities Available for Sale

23,101

25,707

20,927

22.8%

5,241

7,847

5,679

5,862

33.9%

38.2%

Due from Other Banks

4,604

4,550

7,639

-40.4%

1,013

959

1,055

1,425

-32.7%

-9.1%

Bonds Carried at Amortized Cost

30,714

30,714

22,950

33.8%

7,460

7,460

7,039

7,803

-4.4%

6.0%

Investment in Leases

16,566

16,566

15,217

8.9%

4,895

4,895

3,950

3,791

29.1%

23.9%

Other

165

165

-

NMF

67

67

98

-

NMF

-31.7%

Interest Income

728,663

766,426

649,059

18.1%

205,581

243,344

182,056

174,172

39.7%

33.7%

Customer Accounts

147,270

154,840

137,489

12.6%

40,316

47,886

36,501

36,156

32.4%

31.2%

Due to Credit Institutions

78,702

85,030

70,834

20.0%

23,198

29,526

17,040

23,482

25.7%

73.3%

Subordinated Debt

34,337

34,325

26,363

30.2%

11,774

11,762

7,847

7,438

58.1%

49.9%

Debt Securities in Issue

1,778

1,778

2,105

-15.5%

482

482

442

550

-12.5%

9.0%

Other

-

-

94

-100.0%

-

-

-

28

-100.0%

NMF

Interest Expense

262,087

275,973

236,885

16.5%

75,769

89,655

61,830

67,654

32.5%

45.0%

Net Interest Income

466,576

490,453

412,173

19.0%

129,811

153,689

120,227

106,519

44.3%

27.8%

 

 

 

 

 

 

 

 

 

 

 

Net Interest Margin

7.9%

7.8%

7.8%

0.0%

7.8%

7.9%

8.3%

7.4%

0.5%

-0.4%

 

NMF - Not Meaningful Figure

 

2016 to 2015 Comparison

Without the Bank Republic acquisition effect, net interest income grew by 13.2% YoY to GEL 466.6 million, resulting from a 12.3% higher interest income and 10.6% higher interest expense. The increase in interest income by GEL 79.6 million was mainly driven by the rise in interest income from loans to customers by GEL 71.2 million, or 12.2%, which is primarily related to the 27.4% gross loan portfolio increase, while loan yield declined from 13.6% to 13.5%, due to a decrease in GEL-denominated loans yield. The rise in interest income from investment securities is GEL 10.0 million, or 22.7%. This was primarily due to the increase in yields on such securities from 7.3% to 8.6% mainly due to the higher average refinancing rate through 2016. The rise in interest income included a one-off interest income gain of a GEL 9.6 million from the recovery of previously written-off loan interest from large borrower in 4Q 2016 as well as one-off interest income related to a corporate customer amounting to GEL 4.2 million in 3Q 2016. The yield on average interest earning assets amounted to 12.3%.

 

Without the Bank Republic acquisition effect, interest expense increased by GEL 25.2 million, or 10.6%, mainly due to a GEL 7.9 million, or 11.1% higher interest expense on amounts due to credit institutions, a GEL 9.8 million, or 7.1% higher expense on amounts due to customer accounts and a GEL 8.0 million, or 30.3% higher interest expense on subordinated debt. The rise in interest expense on amounts due to credit institutions mainly resulted from the increase in the respective portfolio by GEL 365.7 million, or 32.8% and the increase of the cost of borrowing from 7.2% to 7.4%. The increased cost of GEL-denominated borrowings from 8.0% to 9.2% offset the decrease in the cost of Foreign-currency denominated borrowings from 6.5% to 6.0%. The rise in interest expense on amounts due to customer accounts resulted from the increase in the respective average portfolio, despite the decrease in the cost of deposits from 3.5% to 3.3% YoY. The rise in subordinated debt was mainly caused by a GEL 2.5 million one-off expense related to the prepayment of costly subordinated loans.

The Bank Republic acquisition effect increased net interest income by GEL 23.9 million, resulting from a GEL 37.8 million, or 5.8% contribution to interest income and a GEL 13.9 million, or 5.9% contribution to interest expense. Bank Republic's interest income is mainly attributable to a GEL 35.2 million income from loans to customers. Bank Republic's increased interest expense resulted from a GEL 7.6 million, or 5.5% contribution to interest expense on customer accounts and a GEL 6.3 million, or 8.9%, contribution to interest expense on amounts due to credit institutions. While Bank Republic's acquisition had a significant effect on balance sheet items growth, its effect on interest income was relatively limited due to limited number of days of financial results consolidation (72 days in the full year after 20th October 2016).

Consequently, with the Bank Republic acquisition effect, net interest income grew by 19.0% YoY to GEL 490.5 million, resulting from 18.1% higher interest income and 16.5% higher interest expense. As a result, NIM was 7.8% (7.6% without one-offs) in 2016, unchanged from 2015. Without the Bank Republic acquisition effect, NIM was 7.9% (7.7% without one-offs).

4Q 2016 to 4Q 2015 Comparison

Without the Bank Republic acquisition effect, net interest income increased by GEL 23.3 million, or 21.9% to GEL 129.8 million, as a result of a GEL 31.4 million, or 18.0% increase in interest income and a GEL 8.1 million, or 12.0% increase in interest expense, compared to 4Q 2015. Interest income increased due to a GEL 31.7 million, or 20.4% increase from loans including a one-off interest income of GEL 9.6 million from the recovery of previously written-off loan of a large borrower. This effect more than offset the decrease in loan yields which eventually grew from 13.6% to 13.8%. The yields on FC-denominated loan yields grew from 10.5% to 11.1%. However, the yields on GEL-denominated loans decreased from 19.2% to 18.5%.

Without the Bank Republic acquisition effect, interest expense increased by GEL 8.1 million, or 12.0%, which is mainly explained by the increase in interest expense on customer accounts by a GEL 4.2 million, or 11.5%, and by the increase in interest expense on subordinated debt by GEL 4.3 million, or 58.3%. The rise in interest expense on customer deposits resulted from the increase in customer deposit portfolio by 35.0%, despite the decrease in the cost of deposit by 0.3%. The rise in interest expense on Subordinated debt increased due to an increase in the respective portfolio by 29.9% and a GEL 2.5 million one-off expense, which was attributable to the prepayment of costly subordinated loans.

The Bank Republic acquisition effect increased net interest income by GEL 23.9 million in 4Q, resulting from a GEL 37.8 million, or 21.7% contribution to interest income and a GEL 13.9 million, or 20.5% contribution to interest expense. Bank Republic's interest income was primarily due to the interest income from loans to customers in the amount GEL 35.2 million. The Bank Republic acquisition effect increased interest expense by GEL 13.9 million, or 20.5%, resulting from a GEL 7.6 million, or 20.9%, contribution to interest expense on customer accounts and a GEL 6.3 million, or 26.9%, contribution to interest expense on amounts due to credit institutions.

Consequently, with the Bank Republic acquisition effect, net interest income grew by 44.3% to GEL 153.7 million, resulting from 39.7% higher interest income and 32.5% higher interest expense. NIM increased from 7.4% to 7.9% (7.5% without one-offs) on a YoY basis. Without the Bank Republic acquisition effect, NIM stood at 7.8% (7.4% without one-offs).

4Q 2016 to 3Q 2016 Comparison

Without the Bank Republic acquisition effect, net interest income increased by GEL 9.6 million, or 8.0%, as a result of GEL 23.5 million, or 12.9%, in higher interest income and GEL 13.9 million, or 22.5%, in higher interest expense. Interest income from loans increased by GEL 22.7 million, or by 13.8%, due to the 18.1% increase in the respective portfolio and a gain of GEL 9.6 million from the recovery of previously written-off loan interest from one large borrower. Interest income from investment securities remained broadly stable, while yield on securities decreased by 0.9pp to 7.5%, which was explained by the slightly lower average refinancing rate in 4Q 2016 compared to 3Q 2016. Yields on average interest earning assets amounted to 12.3%.

Without Bank Republic's acquisition effect interest expense increased by GEL 13.9 million, or 22.5%, which is mainly explained by a GEL 3.8 million, or 10.5% increased expense on customer accounts, by a GEL 6.2 million, or 36.1%. Increased expense on amounts due to credit institutions and by a GEL 3.9 million, or 50.0% increased expense on subordinated debt. The increase in interest expense on customer accounts was primarily caused by a GEL 1,047.9 million, or 22.8%, increase in respective portfolio. The effect was partially offset by a 0.2% lower deposit cost in 4Q 2016. The increase in interest expense on amounts due to credit institutions was mainly due to an increase in the respective portfolio by GEL 284.2 million, or 23.8%, and by an increase in yields on amounts due to credit institutions from 6.9% to 7.0%. The increase in interest expense on subordinated debt was primarily due to a GEL 2.5 million one-off expense related to a prepayment of a costly subordinated loans and the increase in respective portfolio by a GEL 84.7 million. As a result, the cost of the funding amounted to 4.4%.

 The Bank Republic acquisition effect increased net interest income by GEL 23.9 million in 4Q, resulting from a GEL 37.8 million, or 20.7%, contribution to interest income and a GEL 13.9 million, or 22.5%, contribution to interest expense. Bank Republic interest income was primarily due to the interest income from loans to customers in the amount of GEL 35.2 million. Bank Republic's acquisition effect increased interest expense by a GEL 13.9 million, or 22.5%, which resulted from a GEL 7.6 million, or 20.7%, contribution to interest expense on customer accounts and a GEL 6.3 million, or 37.1% contribution to interest expense on amounts due to credit institutions.

Consequently, with the Bank Republic acquisition effect, net interest income grew by 27.8% to GEL 153.7 million, resulting from 33.7% higher interest income and 45.0% higher interest expense net. As a result, NIM dropped by 0.4pp to 7.9% (7.5% without one-offs). Without the Bank Republic acquisition effect, NIM dropped by 0.5pp to 7.8%.

Fee and Commission Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL

Y'16 w/o BR Acquisition

Y'16

Y'15

Change in %

4Q'16 w/o BR Acquisition

4Q'16

3Q'16

4Q'15

Change YoY

Change QoQ

Card Operations

60,081

61,115

49,424

23.7%

17,799

18,832

15,434

13,964

34.9%

22.0%

Settlement Transactions

41,731

43,434

31,218

39.1%

12,886

14,590

10,730

9,225

58.2%

36.0%

Guarantees Issued

10,982

11,699

8,949

30.7%

2,591

3,308

2,259

2,611

26.7%

46.4%

Issuance of Letters of Credit

5,999

6,215

5,859

6.1%

2,093

2,310

1,353

1,396

65.4%

70.7%

Cash Transactions

12,911

13,013

10,930

19.1%

3,828

3,930

3,594

3,122

25.9%

9.4%

Foreign Exchange Operations

1,227

      1,277

   1,410

-9.4%

434

484

239

306

58.1%

102.5%

Other

5,815

6,046

6,048

0.0%

1,775

2,006

1,502

1,944

3.2%

33.6%

Fee and Commission Income

138,746

142,800

113,837

25.4%

41,406

45,460

35,112

32,567

39.6%

29.5%

Card Operations

33,805

34,906

27,169

28.5%

10,039

11,140

8,856

8,778

26.9%

25.8%

Settlement Transactions

5,667

5,795

3,904

48.4%

1,594

1,722

1,476

1,273

35.2%

16.7%

Guarantees Received

668

796

957

-16.9%

192

320

210

187

71.2%

52.4%

Letters of Credit

1,624

1,624

2,208

-26.4%

297

297

424

532

-44.2%

-30.0%

Cash Transactions

2,462

2,633

2,707

-2.7%

580

751

614

561

33.7%

22.3%

Foreign Exchange Operations

146

190

5

NMF

79

123

-

1

NMF

NMF

Other

6,298

6,587

4,597

43.3%

2,427

2,717

1,339

1,427

90.4%

102.9%

Fee and Commission Expense

50,670

52,532

41,546

26.4%

15,206

17,068

12,918

12,760

33.8%

32.1%

Net Fee And Commission Income

88,076

90,268

72,291

24.9%

26,200

28,392

22,194

19,807

43.3%

27.9%

  NMF - Not Meaningful Figure

2016 to 2015 Comparison

Without the Bank Republic acquisition effect, net fee and commission income amounted to GEL 88.1 million, up by a GEL 15.8 million, or 21.8%, which resulted from a GEL 24.9 million, or 21.9% higher fee and commission income and a GEL 9.1 million, or 22.0%, higher fee and commission expense. This rise resulted from a GEL 8.8 million, or 32.0% increase in net settlement transactions, which mainly resulted from the increased scale of operations in the subsidiary TBC Pay; a GEL 4.0 million, or 18.1%, increase in net card operations, a GEL 2.3 million, or 29.1% increase in net guarantees; and a GEL 2.2 million, or 27.1%, increase in net cash transactions.

The Bank Republic acquisition effect increased net fee and commission income by GEL 2.2 million, or 3.0%, which resulted from a GEL 4.1 million, or 3.6%, contribution to fee and commission income and a GEL 1.9 million, or 4.5% contribution to fee and commission expense.

As a result, net fee and commission income grew by GEL 18.0 million, or 24.9%. The net fee and commission income represented 13.3% of the total operating income.

 4Q 2016 to 4Q 2015 Comparison

Without the Bank Republic acquisition effect, net fee and commission income amounted to GEL 26.2 million, up by GEL 6.4 million, or 32.3%, resulting from a GEL 8.8 million, or 27.1%, higher fee and commission income and a GEL 2.4 million, or 19.2%, higher fee and commission expense. The increase in net fee and commission income resulted from a GEL 3.3 million, or 42.0% rise, in net fee and commission income from settlement transactions, which was mainly driven by the increased scale of operations in the subsidiary TBC Pay from a GEL 2.6 million, or 49.7% increase in net card operations and a GEL 0.7 million, or 26.9% increase in net cash transactions.

Bank Republic's acquisition effect increased net fee and commission income by GEL 2.2 million, or 11.1%, resulting from a GEL 4.1 million, or 12.4%, contribution to fee and commission income and a GEL 1.9 million, or 14.6%, contribution to fee and commission expense.

As a result, net fee and commission income grew by GEL 8.6 million, or 43.3%.

4Q 2016 to 3Q 2016 Comparison

Without the Bank Republic acquisition effect, net fee and commission increased by GEL 4.0 million, or 18.1%, resulting from a GEL 6.3 million, or 17.9% higher fee and commission income and a GEL 2.3 million, or 17.7% higher fee and commission expense. The increase in net fee and commission income was primarily driven by a GEL 2.0 million, or 22.0% increase in net settlement transactions, which resulted from the increased scale of operations in subsidiary TBC Pay, a GEL 1.2 million, or 18.0% increase in net card operations; and a GEL 0.9 million increase in income from letters of credit. This increase was slightly offset by a GEL 0.8 million decrease in net other fee and commission income.

The Bank Republic acquisition effect increased net fee and commission income by a GEL 2.2 million, or 9.9%, resulted from a GEL 4.1 million, or 11.5%, contribution to fee and commission income and a GEL 1.9 million, or 14.4% contribution to fee and commission expense.

As a result, net fee and commission income grew by GEL 6.2 million, or by 27.9%.

Other Operating Non-Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL

Y'16 w/o BR acquisition effect

Y'16

Y'15

Change in %

4Q'16 w/o BR Acquisition effect

4Q'16

3Q'16

4Q'15

Change YoY

Change QoQ

Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations

60,413

67,762

67,221

0.8%

15,604

22,952

16,724

18,447

24.4%

37.2%

Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments

-206

-206

-575

-64.2%

94

94

173

276

-66.1%

-45.8%

Gain less Losses from Disposal of Investment Securities Available for Sale

8,795

9,293

-

NMF

-

498

-

-

NMF

NMF

Revenues from Cash-In Terminal Services

1,100

1,100

777

41.5%

300

300

292

237

26.3%

2.8%

Revenues from Operational Leasing

5,772

5,772

8,539

-32.4%

1,158

1,158

1,086

1,590

-27.1%

6.6%

Gain from Sale of Investment Properties

2,470

3,685

4,896

-24.7%

2,239

2,393

0

4,516

-47.0%

NMF

Gain from Sale of Inventories of Repossessed Collateral

2,382

2,382

1,836

29.8%

991

991

222

371

167.5%

NMF

Administrative Fee Income from International Financial Institutions

644

644

708

-9.0%

139

139

147

158

-11.8%

-5.1%

Revenues from Non-Credit Related Fines

635

658

286

129.9%

188

211

46

218

-3.3%

NMF

Gain on Disposal of Premises and Equipment

208

208

118

77.0%

110

110

3

19

NMF

NMF

Gross Insurance Profit

256

256

-

NMF

256

256

-

-

NMF

NMF

Gain from sale of financial option

-

-

4,692

NMF

-

-

-

4,692

NMF

NMF

Other

5,888

8,787

4,031

118.0%

3,110

7,070

706

112

NMF

NMF

Other Operating Income

19,355

23,492

25,883

-9.2%

8,492

12,628

2,501

11,912

6.0%

NMF

Other Operating Non-Interest Income

88,358

100,341

92,528

8.4%

24,189

36,172

19,398

30,636

18.1%

86.5%

   NMF - Not Meaningful Figure

2016 to 2015 Comparison

Without the Bank Republic acquisition effect, other operating non-interest income decreased by GEL 4.2 million, or by 4.5%, to GEL 88.4 million. The decline was mainly driven by a GEL 6.8 million, or 10.1%, decline in gains less losses from trading in foreign currencies and foreign exchange translations. This was mainly caused by elevated income from FX operations in 2015, broadly related to the currency depreciation, volatility and related increased margins of the currency rate during 2015, as well as due to a one-off FX gain in 1Q 2015 with an estimated amount of a GEL 6.7 million.  The decline in other operating income was a GEL 6.5 million, or 25.2%. It was partially due to the two one-off incomes in 4Q 2015: one from the sale of financial option related to one corporate client in the amount of GEL 4.7 million and the other one from the sale of an earlier foreclosed asset classified as an investment property in the amount of GEL 4.3 million. The further decrease was due to a GEL 2.8 decline in income from operational leasing. The decrease was largely offset by a one-off gain of a GEL 8.8 million in gains from the disposal of investment securities available for sale.

The Bank Republic acquisition effect increased other operating non-interest income by a GEL 12.0 million, or 13.0%, resulting from a GEL 7.3 million, or 10.9% contribution to gains less losses from trading in foreign currencies and foreign exchange translations and a GEL 4.1 million, or 16.0% increase in other operating income.

As a result, net other operating income grew by GEL 7.8 million or 8.4%.

 4Q 2016 to 4Q 2015 Comparison

Without the Bank Republic acquisition effect, other non-interest operating income decreased by GEL 6.5 million, or 21.0%, to GEL 24.2 million. The decline was driven by a Gel 2.8 million, or 15.4% decrease in gain less loss from trading in foreign currencies and foreign exchange translations, which was driven by the decreased margins for foreign currency translation. The decline in other operating income was a GEL 3.4 million, or 28.7 % which was mainly related to the one-off incomes mentioned above.

Bank Republic's acquisition effect increased other operating non-interest income by a GEL 12.0 million, or 39.1%, resulting from a GEL 7.3 million, or 39.8% contribution to Gains less losses from trading in foreign currencies and foreign exchange translations and a GEL 4.1 million, or 34.7% increase in Other operating income.

As a result, other operating non-interest income increased by GEL 5.5 million, or 18.1%.

4Q 2016 to 3Q 2016 Comparison

Without the Bank Republic acquisition effect, other operating non-interest income increased by GEL 4.8 million, or 24.7%. The increase was primarily driven by a GEL 2.2 million increase in gains from the sale of investment properties and a GEL 0.8 million increase in gains from the sale of inventories of repossessed collateral. This increase was partially offset by a GEL 1.1 million, or 6.7% decrease in gains less losses from trading in foreign currencies and foreign exchange translations, resulting from a lower FX margin compared to 3Q 2016.

The Bank Republic acquisition effect increased other operating non-interest income by a GEL 12.0 million, or 61.8%, resulting from a GEL 7.3 million, or 43.9% contribution to gains less losses from trading in foreign currencies and foreign exchange translations and a GEL 4.1 million increase in other operating income.

As a result, other operating non-interest income increased by GEL 16.8 million, or 86.5%.

  

 

Provision for Impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL

Y'16 w/o BR Acquisition

Y'16

Y'15

Change in %

4Q'16 w/o BR Acquisition

4Q'16

3Q'16

4Q'15

Change YoY

Change QoQ

Provision for Loan Impairment

-36,997

-49,201

-72,791

-32.4%

1,799

-10,405

-13,518

-2,055

NMF

-23.0%

Provision for Impairment of Investments in Finance Lease

-558

-558

-967

-42.3%

2,341

-322

-126

-344

-6.4%

156.3%

Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments

-1,217

-771

1,117

-169.0%

-322

2,787

-1,481

-1,945

NMF

NMF

Provision for Impairment of Other Financial Assets

-2,814

-2,855

-3,351

-14.8%

-1,686

-1,727

66

-974

77.4%

NMF

Impairment of Investment Securities Available for Sale

-11

-11

-

NMF

-

-

-

-

NMF

NMF

Total Provision Charges for Impairment

-41,597

-53,396

-75,991

-29.7%

2,131

-9,668

-15,059

-5,318

81.8%

-35.8%

Operating Income after Provisions for Impairment

601,413

627,667

501,002

25.3%

182,331

208,586

146,759

151,644

37.5%

42.1%

 

 

 

 

 

 

 

 

 

 

 

Cost of Risk

0.8%

1.0%

1.7%

-0.7%

-0.1%

0.6%

1.1%

0.2%

0.5%

-0.5%

   NMF - Not Meaningful Figure

 

2016 to 2015 Comparison

Without the Bank Republic acquisition effect, total provision charges declined by GEL 34.4 million to a GEL 41.6 million. This decrease was driven by the decreased charges on loans by a GEL 35.8 million. Decreased charges on loans were mainly driven by the recovery of a provision expense in the amount of GEL 26.2 million in 4Q 2016 on a previously written off corporate exposure and the overall improved performance of the corporate book, which more than offset the negative effect of currency devaluation GEL 8.7 million.  The effect was magnified by a GEL 0.4 million decrease in the provision for impairment of investments in financial leases, more than offsetting a GEL 2.3 million increase in provision charges on performance guarantees and credit related commitments as a result of the increase in the respective portfolios.

The Bank Republic acquisition effect increased total provision charges for impairment by GEL 11.8 million, which was mainly caused by the increase in provision for loan impairment. Consequently, in 2016, total provision charges declined by GEL 22.6 million to GEL 53.4 million, compared to FY 2015.

As a result, in 2016, the cost of risk stood at 1.0%, compared to 1.7% in 2015. Without the Bank Republic acquisition effect, the cost of risk stood at 0.8% down by 0.9 pp compared to FY in 2015. The cost of risk without one-off effect and currency effect stood at 1.1% in 2016 or 1.3% without Bank Republic acquisition effect. With Bank Republic but without fair value adjustment required by the IFRS consolidation rules, the cost of risk without both one-offs would amount to 1.0% in Q4 and 1.2% in FY 2016

4Q 2016 to 4Q 2015 Comparison

Without the Bank Republic acquisition effect, total provision charges decreased by GEL 7.4 million. This decrease was caused by a GEL 3.9 million decrease in provision for loan impairment and GEL 4.3 million decrease in provision for performance guarantees and credit related commitments. The decrease in loan provision expenses was driven by a large recovery in the corporate segment, which more than offset a technical rise in provisions related to the local currency depreciation in the amount of GEL 16.0million.

With the Bank Republic acquisition effect, in 4Q 2016 total provision charges increased by GEL 4.4 million to a GEL 9.7 million. This increase is explained by a GEL 8.4 million increase in provision for loan impairment. This effect was partially offset by a GEL 4.8 million decrease in provision for performance guarantees and credit related commitments.

In 4Q 2016, the cost of risk stood at 0.6%, compared to 0.2% in 4Q 2015. Without the Bank Republic acquisition effect, the cost of risk stood at -0.1%, down by 0.3 pp compared to 4Q 2015. The cost of risk without one-off effect and currency effect stood at 1.2% in 4Q 2016 or 0.6% without Bank Republic acquisition effect.

4Q 2016 to 3Q 2016 Comparison

Without the Bank Republic acquisition effect, total provision charges decreased by GEL 17.2 million. This decrease was caused by a GEL 15.3 million decrease in provision for loan impairment, and GEL 3.8 million decrease in provision for performance guarantees and credit related commitments. Decrease in loan provision expenses was driven by a large recovery in the corporate segment, which more than offset by technical rise in provisions related to the local currency depreciation as explained above.

With the Bank Republic acquisition effect, on a QoQ basis, total provision charges decreased by a GEL 5.4 million, or 35.8%. This decrease was explained by a GEL 4.3 million decrease in provision for performance guarantees and credit related commitments and a GEL 3.1 million decrease in provision for loan impairment. This effect was partially offset by a GEL 1.8 million increase in provision for impairment of other financial assets.

The cost of risk on loans stood at 0.6%, compared to 1.1% in 3Q 2016. Without Bank Republic's acquisition effect, the cost of risk stood at -0.1% down by 1.2 pp compared to 3Q 2016.

Further details on asset quality can be found under Balance Sheet Discussion section.

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL

Y'16 w/o BR Acquisition effect

 

Y'16

Y'15

Change in %

4Q'16 w/o BR Acquisition effect

4Q'16

3Q'16

4Q'15

Change YoY

Change QoQ

Staff Costs

164,604

 

172,221

142,777

20.6%

54,927

62,544

40,205

42,445

47.4%

55.6%

Depreciation and Amortization

28,141

 

28,082

26,286

6.8%

7,494

7,435

7,037

7,347

1.2%

5.7%

Provision for liabilities and charges

2,210

 

2,210

1,102

100.6%

2,210

2,210

-

1,102

100.6%

NMF

Professional services

29,178

 

29,926

8,418

NMF

10,227

10,976

2,143

3,464

NMF

NMF

Advertising and marketing services

13,352

 

13,796

11,451

20.5%

5,824

6,268

2,682

3,627

72.8%

133.7%

Rent

17,308

 

18,294

16,468

11.1%

4,654

5,639

4,257

4,319

30.6%

32.5%

Utility services

4,896

 

5,108

4,501

13.5%

1,261

1,474

1,212

1,262

16.8%

21.6%

Intangible asset enhancement

7,446

 

7,446

6,062

22.8%

1,840

1,840

1,905

1,886

-2.5%

-3.4%

Taxes other than on income

4,440

 

4,699

4,598

2.2%

763

1,022

1,185

1,204

-15.1%

-13.8%

Communications and supply

3,127

 

4,183

3,433

21.9%

880

1,937

742

839

130.9%

161.1%

Stationary and other office expenses

3,262

 

3,448

3,471

-0.7%

856

1,041

773

1,176

-11.4%

34.7%

Insurance

2,635

 

2,687

2,301

16.8%

681

733

684

382

91.8%

7.1%

Security services

1,814

 

1,883

1,622

16.1%

491

560

442

414

35.1%

26.5%

Premises and equipment maintenance

2,799

 

3,889

2,959

31.4%

860

1,949

671

973

100.2%

190.6%

Business trip expenses

1,823

 

1,880

1,589

18.3%

597

654

350

417

56.9%

86.7%

Transportation and vehicles maintenance

1,320

 

1,386

1,328

4.3%

359

425

319

359

18.3%

33.0%

Charity

884

 

884

928

-4.7%

185

185

214

139

32.9%

-13.5%

Personnel training and recruitment

1,207

 

1,272

1,230

3.4%

439

504

259

462

9.0%

94.2%

Write-down of current assets to fair value less costs to sell

-4,424

 

-4,424

-178

NMF

-2,779

-2,779

-1,697

297

NMF

63.8%

Loss on disposal of Inventory

1,690

 

1,690

86

NMF

1,038

1,038

115

22

NMF

NMF

Loss on disposal of investment properties

-

 

61

3

NMF

-

61

-

-

NMF

NMF

Loss on disposal of premises and equipment

423

 

423

34

NMF

90

90

259

34

167.3%

-65.1%

Impairment of intangible assets

19

 

19

4,982

-99.6%

-

-

-

2,862

-100.0%

NMF

Gains/(losses) on initial recognition of assets at rates above/below market

-

 

-

-

NMF

-

-

-

-

NMF

NMF

Acquisition costs

207

 

207

-

NMF

207

207

-

-

NMF

NMF

Gross Change in IBNR

-

 

-

-

NMF

-

-

-

-

NMF

NMF

Other

8,324

 

10,718

7,679

39.6%

3,377

5,771

1,776

2,361

144.4%

NMF

Administrative and Other Operating Expenses

101,731

 

109,474

82,964

32.0%

31,851

39,595

18,294

26,500

49.4%

116.4%

Operating Expenses

296,686

 

311,988

253,130

23.3%

96,483

111,785

65,536

77,394

44.4%

70.6%

Profit before Tax

304,727

 

315,679

247,872

27.4%

85,849

96,801

81,223

74,251

30.4%

19.2%

Income Tax Expense

-17,146

 

-17,420

-29,176

-40.3%

-8,492

-8,767

-10,235

-7,331

19.6%

-14.3%

Profit for the Period

287,581

 

298,258

218,697

36.4%

77,356

88,034

70,988

66,920

31.6%

24.0%

 

 

 

 

 

 

 

 

 

 

 

 

Cost to Income

46.1%

 

45.8%

43.9%

1.9%

53.5%

51.2%

40.5%

49.3%

1.9%

10.7%

ROAE

21.6%

 

22.4%

20.1%

2.3%

21.4%

24.2%

20.6%

23.1%

1.1%

3.6%

ROAA

3.9%

 

3.9%

3.4%

0.5%

3.7%

3.7%

4.0%

3.9%

-0.2%

-0.3%

   NMF - Not Meaningful Figure

2016 to 2015 Comparison

Without the Bank Republic acquisition effect, total operating expenses increased to GEL 296.7 million, or 17.2% compared to FY 2015. This increase primarily resulted from a GEL 21.8 million, or 15.3% increase in staff costs, related to the increased scale, performance of the business and the changing environment, and GEL 18.8 million or 22.6% increase in administrate expenses. The administrate expensive increased due to one-off expenses related to professional services out of which a GEL 16.2 million is attributable to Premium Listing expenses (GEL 0.3 million in 4Q 2016) and a GEL 8.0 million related to consulting and investment banks fees in connection with the Bank Republic acquisition. The increase in provision for liabilities and charges included one-off expense mainly related to staff redundancy provision related to Bank Republic's acquisition in the amount of GEL 2.2 million above due to upcoming merger. Without one-off expenses mentioned above, administrative and other operating expense decreased by 7.8% due to GEL 5.0 million higher impairment of intangible assets in 2015 and overall increased efficiency across various units.

The Bank Republic acquisition effect increased total operating expenses by GEL 15.3 million, or 6.0%, out of which staff costs accounted for was GEL 7.6 million, or 5.3%. Consequently, total operating expenses, grew by a GEL 58.9 million, or 23.3%.  Bank Republic administrate expenses included one-off effect of impairment of intangible asset in the amount of GEL 2.0 million related to the upcoming merger.

As a result, the cost to income ratio was 45.8% (42.9% without one-off effects) in 2016, compared to 43.9% in 2015. Without the Bank Republic acquisition effect, the cost to income ratio was 46.1% in 2016 (43.4% without one-off effects).

4Q 2016 to 4Q 2015 Comparison

Without the Bank Republic acquisition effect, total operating expenses increased to GEL 96.5 million, up by a GEL 19.1 million, or 24.7%. The increase resulted primarily from a GEL 12.5 million, or 29.4%, increase in staff costs related to the increased scale and performance of the business and the changing environment as well as GEL 5.4 million or 20.2% increase in administrative expenses mainly due to one-off expenses mentioned above. The increase in provision for liabilities and charges included one-off expense mainly related to staff redundancy provision related to the Bank Republic acquisition in the amount of GEL 2.2 million mentioned above due to upcoming merger.

The Bank Republic acquisition effect increased total operating expenses by GEL 15.3 million, or 19.8%. The contribution to staff cost was GEL 7.6 million, or 17.9%. Consequently, total operating expenses grew by a GEL 34.4 million, or 44.4%. Bank Republic administrate expenses included one-off effect of impairment of intangible asset in the amount of GEL 2.0 million mentioned above.

As a result, the cost to income ratio stood at 51.2% (47.0% without one-offs) in 4Q 2016, compared to 49.3% in 4Q 2015. Without Bank Republic's acquisition effect, the cost to income ratios was 53.5% (49.7% without one-offs) in 4Q 2016

 

4Q 2016 to 3Q 2016 Comparison

Without the Bank Republic acquisition effect, operating expenses increased by GEL 30.9 million, or 47.2%, to GEL 96.5 million. The increase primarily resulted from a GEL 14.7 million, or 36.6% increase in staff expenses related to the increased scale, performance of the business and the changing environment and GEL 13.6 million or 74.1% increase in administrative expenses mainly due to one-off expenses mentioned above. Further increases in administrative cost is mostly seasonal. The increase in provision for liabilities and charges included one-off expense related to staff redundancy provision related to the Bank Republic acquisition in the amount of GEL 2.2 million as mentioned above.

The Bank Republic acquisition effect increased operating expenses by GEL 15.3 million, or 23.3%. The increase mainly stemmed from a GEL 7.6 million, or 18.9% increase in staff cost expenses. Consequently, total operating expenses grew by a GEL 46.2 million, or 70.6%.

As a result, the cost to income ratio stood at 51.2% (47.0% without one-offs) in 4Q 2016, compared to a 40.5% in 3Q 2016. Without Bank Republic's acquisition effect, the cost to income ratios was 53.5% (49.7% without one-offs) in 4Q 2016.

 Net Income

In 2Q 2016 the bank re-measured its deferred tax assets/liability per IFRS in order to reflect the change in Georgian Tax Code in relation to corporate income tax. The deferred tax assets/liabilities were re-measured to the amount that will be estimated to be utilized in the period from 1 July 2016 to 31 December 2016/31 December 2018. The effect of re-measurement on P&L was GEL 17.9 million.

 

As a result, in 4Q net income grew by 31.6% to GEL 88.0 million YoY and up by 24.0% QoQ . ROE stood at 24.2% (23.5% without one-offs), up by 1.1pp YoY and up by 3.6pp QoQ. ROA stood at 3.7% (3.5% without one-offs), down by 0.2pp YoY and 0.3pp QoQ. Without the Bank Republic acquisition effect net income in 4Q increased by 15.6% to a GEL 77.4 million YoY and up by 9.0% QoQ. ROE stood at 21.4% (20.0% without one-offs), down by 1.7pp YoY and up by 0.8pp QoQ.

 

Net income for 2016 stood at GEL 298.3 million, up by 36.4% YoY. ROE stood at 22.4% (20.6% without one-offs), up by 2.3pp YoY. ROA stood at 3.9% (3.6%without one-offs), up by 0.5pp YoY. Without the Bank Republic acquisition effect, net income for 2016 stood at GEL 287.6 million, up by 31.5% YoY and ROA stood at 3.9% up by 0.5pp YoY

 Balance Sheet Discussion

 

 

 

 

 

 

In millions of GEL

Dec-16 w/o BR Acquisition

Dec-16

Sep-16

Dec-15

Change QoQ

Change YoY

Cash, Due from Banks and Mandatory Cash Balances with NBG

1,767

1,961

1,532

1,203

27.9%

63.0%

Loans and Advances to Customers (Net)

5,697

7,134

4,810

4,445

48.3%

60.5%

Financial Securities

652

803

606

679

32.5%

18.2%

Fixed and Intangible Assets & Investment Property

379

471

375

350

25.5%

34.6%

Other Assets

717

401

261

258

53.9%

55.5%

Total Assets

9,213

10,769

7,584

6,935

42.0%

55.3%

Due to Credit Institutions

1,479

2,198

1,195

1,114

83.9%

97.3%

Customer Accounts

5,641

6,455

4,593

4,178

40.5%

54.5%

Debt Securities in Issue

24

24

24

22

-3.0%

8.3%

Subordinated Debt

368

368

284

284

29.9%

29.9%

Other Liabilities

125

142

99

120

43.5%

18.6%

Total Liabilities

7,637

9,186

6,195

5,717

48.3%

60.7%

Total Equity

1,576

1,583

1,389

1,218

14.0%

29.9%

 

Assets

Without the Bank Republic acquisition effect, the Bank's total assets amounted GEL 9,215.5 million, up by GEL 2,277.5 million, or 32.8%, YoY. This hike primarily resulted from a GEL 1,252.4 million, or 28.2%, rise in net loans to customers and a GEL 564.3 million or 46.9% increase in Liquid Assets (cash, due from banks and mandatory and mandatory cash balances with NBG).

The Bank Republic acquisition effect increased total assets by GEL 1,556.5 million, or 22.4%. The increase primarily resulted from a GEL 1,436 million, or 32.3% increase in net loans to customers. Consequently, with the Bank Republic acquisition effect, as of 31 December 2016, TBC Bank's total assets amounted a GEL 10,769.0 million, up by GEL 3,834.0 million, or 55.3%, YoY.

Without the Bank Republic acquisition effect, the Bank's total assets increased by a GEL 1,628.8 million, or 21.5%, on a QoQ basis. The increase was primarily due to a GEL 887.8 million, or 18.5% increase in net Loans and advances to customers.

The Bank Republic acquisition effect increased total assets by 20.5%, which was explained by a 29.9% increase in net loans to customers. Consequently, with the Bank Republic's acquisition effect on a QoQ basis, total assets expanded by GEL 3,185.3 million, or 42.0%. The rise was mainly due to a GEL 2,324.2 million, or 48.3%, hike in net loans to customers and a GEL 428.1 million, or 27.9% increase in liquid assets (cash, due from banks and mandatory cash balances with NBG).

 

The liquid assets to liability ratio stood at 30.1%, compared to 32.7% as of 31 December 2015 and 33.5% as of 31 September 2016. Without the Bank Republic acquisition effect, the liquid assets to liability ratio stood at 31.7%.

                                                                                                                             

As of 31 December 2016, the gross loan portfolio amounted to GEL 7,358.7 million, up by 58.6% YoY and by 47.1% QoQ. Gross loans denominated in foreign currency accounted for 65.9% of total gross loans, compared to 64.9% as of 31 December 2015 and 63.4% as of 30 September 2016. Without the Bank Republic's acquisition effect, the gross loan portfolio amounted to GEL 5,911.2 million, up by 27.4% YoY and by 18.1% QoQ. Gross loans denominated in foreign currency accounted for 66.3% of total gross loans.

 

As of 31 December 2016, NPLs stood at 3.5%, compared to 4.8% and 4.6% as of 31 December 2015 and 30 September 2016, respectively. The NPLs provision coverage ratio stood at 88.4% (221.4% including collateral), compared to 87.4% as of 31 December 2015 and 84.3% as of 30 September 2016. Without the Bank Republic acquisition effect, NPLs stood at 4.0%. The NPLs provision coverage ratio stood at 90.5% (216.8% including collateral).

 

Asset Quality

Foreign Currency Income Linked Borrowers without Bank Republic effect[10]

 

31-Dec-16

30-Sep-16

Segments

FC share

FC linked income borrowers share

FC share

FC linked income borrowers share

Retail

60.5%

32.6%

58.2%

32.9%

Consumer

26.2%

21.8%

25.1%

21.1%

Mortgage

89.8%

24.9%

89.5%

24.4%

Pawn

68.4%

95.5%

66.5%

93.7%

Corporate

78.1%

58.4%[11]

75.2%

60.6%[12]

SME

80.6%

23.9%

80.8%

25.3%

Micro

38.6%

4.0%

33.1%

4.0%

Total Loan Portfolio

66.3%

38.9%

63.4%

39.6%

 

PAR 30 by Segments and Currencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par 30

Dec-16

Sep-16

Dec-15

 

GEL wo BR

GEL

FC w/o BR

FC

Total w/o BR

Total

GEL

FC

Total

GEL

FC

Total

Corporate

0.0%

0.0%

1.2%

1.2%

0.9%

0.9%

0.1%

1.0%

0.8%

0.1%

1.1%

0.9%

Retail

2.1%

1.9%

2.6%

2.3%

2.4%

2.2%

2.3%

2.8%

2.6%

2.1%

2.5%

2.3%

SME

0.6%

0.6%

4.0%

4.2%

3.3%

3.5%

1.2%

3.9%

3.4%

1.8%

3.8%

3.5%

Micro

4.8%

4.6%

3.7%

3.7%

4.4%

4.2%

3.7%

4.3%

3.9%

2.7%

5.6%

3.5%

Total

2.1%

1.9%

2.4%

2.3%

2.3%

2.2%

2.1%

2.4%

2.3%

1.8%

2.3%

2.1%

 

Total

Without Bank Republic's acquisition effect, PAR 30 stood at 2.3% and remained broadly stable both YoY and QoQ basis. With Bank Republic's acquisition effect, PAR 30 stood at 2.2%.  

 

Retail Segment

Without Bank Republic's acquisition effect, PAR 30 stood at 2.4% down by 0.2pp QoQ. The decrease was driven by both GEL and FC denominated loans. On YoY basis PAR30 remained broadly stable. With Bank Republic's acquisition effect, PAR 30 stood at 2.2%, down by 0.4pp QoQ and 0.2pp YoY.

 

Corporate

Without Bank Republic's acquisition effect, PAR 30 stood at 0.9% increased by 0.2pp QoQ and remained unchanged YoY. With Bank Republic's acquisition effect, PAR 30 stood at 0.9% increased by 0.1pp QoQ and remained unchanged YoY.

 

SME

Without Bank Republic's acquisition effect, PAR 30 stood at 3.3% down by 0.1pp QoQ and 0.2pp YoY driven by improved performance of SME standalone portfolio. With Bank Republic's acquisition effect, PAR 30 stood at 3.5% up by 0.1pp QoQ and remained unchanged YoY.

 

 

Micro

 

Without Bank Republic's acquisition effect, PAR 30 stood at 4.4% up by 0.5pp QoQ and 0.8 YoY. The increase was mainly due to particular sub-segment of agro loans for which overdue loans have increased due to one-off event related to animal farming. With Bank Republic's acquisition effect, PAR 30 stood at 4.2% increased by 0.3pp QoQ and 0.7pp YoY.

 

NPLs by Segments and Currencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPLs

Dec-16

Sep-16

Dec-15

 

GEL*

GEL

FC*

FC

Total*

Total

GEL

FC

Total

GEL

FC

Total

Corporate

1.0%

0.7%

6.4%

6.0%

5.2%

4.6%

1.1%

9.1%

7.1%

0.6%

10.2%

7.9%

Retail

1.5%

1.4%

3.5%

2.8%

2.7%

2.3%

1.7%

3.6%

2.8%

1.8%

3.3%

2.7%

SME

1.8%

1.7%

6.5%

6.5%

5.6%

5.6%

1.7%

6.7%

5.7%

5.0%

4.4%

4.5%

Micro

3.5%

3.4%

5.0%

4.3%

3.5%

3.8%

3.0%

6.2%

4.1%

2.5%

8.5%

4.2%

Total

1.8%

1.6%

5.1%

4.4%

4.0%

3.5%

1.9%

6.2%

4.6%

1.9%

6.4%

4.8%

 

Total

Without Bank Republic's acquisition effect, NPL decreased by 0.6pp QoQ and 0.8pp YoY to 4.0%. Decrease in NPLs is mainly driven by improved performance of the corporate loan book. With Bank Republic's acquisition effect, NPL stood at 3.5%, down by 1.1pp QoQ and 1.3pp YoY.

 

Retail Segment

Without Bank Republic's acquisition effect, NPL decreased by 0.1pp QoQ to 2.7% and remained unchanged YoY. With Bank Republic's acquisition effect, NPL stood at 2.3%, down by 0.5pp QoQ and 0.4pp YoY.

 

Corporate

Without Bank Republic's acquisition effect, NPL stood at 5.2% decreased by 1.9pp QoQ and 2.7pp YoY. Decrease in NPLs is driven by recovery of several corporate borrowers. With Bank Republic's acquisition effect NPL stood at 4.6% decreased by 2.5pp QoQ and 3.2pp YoY.

 

SME

Without Bank Republic's acquisition effect, NPL decreased by 0.1pp QoQ and increased by 1.1pp YoY. NPLs in GEL denominated loans remain low at 1.8%, while FC denominated NPL increased by 2.1pp YoY due to local currency depreciation in 2015 and macro developments in Azerbaijan. With Bank Republic's acquisition effect, NPL stood at 5.6% decreased by 0.1pp QoQ and increased by 1.1 YoY.

 

Micro

Without Bank Republic's acquisition effect, NPL stood at 4.1% unchanged from QoQ and down by 0.1 YoY. With Bank Republic's acquisition effect, NPL stood at 3.8% decreased by 0.3pp QoQ and 0.4pp YoY.

 

NPLs Coverage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPLs Coverage

Dec-16

Sep-16

Dec-15

 

Exc. Collateral*

Exc. Collateral

Incl. Collateral*

Incl. Collateral

Exc. Collateral

Incl. Collateral

Exc. Collateral

Incl. Collateral

Corporate

94.5%

93.5%

252.5%

257.5%

79.6%

223.5%

91.3%

222.3%

Retail

103.5%

98.4%

200.2%

202.6%

106.2%

200.9%

101.5%

199.5%

SME

49.1%

48.1%

169.7%

184.7%

47.5%

164.3%

44.1%

193.7%

Micro

111.7%

111.5%

216.5%

217.7%

106.0%

200.3%

87.5%

188.8%

Total

90.5%

88.4%

216.8%

221.4%

84.3%

205.0%

87.4%

209.9%

 

As of December 2016 the NPLs provision coverage ratio stood at 88.4% (221.4% with collateral), compared to 84.3% as of 30 September 2016 and 87.4% as of 31 December 2015. Without Bank Republic's acquisition effect NPLs provision coverage ratio stood at 90.5% (216.8% with collateral).  

 

Liabilities

Without the Republic acquisition effect, the Bank's total liabilities amounted to GEL 7,636.9 million, up by 33.6% YoY and 23.3% QoQ. The YoY growth of GEL 1,920.3 million was primarily due to increase in customer accounts in the amount of a GEL 1,463.2 million, or 35.0%. The QoQ growth of GEL 1,441.8 million, or 23.3% mainly resulted from a GEL 1,047.9, million, or 22.8%, increase in customer deposits.

 

The Bank Republic acquisition effect increased the Bank's total liabilities by GEL 1,550 million, or 25.0% QoQ. The increase resulted from a GEL 718.3 million, or 60.1% rise in amounts due to credit institutions and by a GEL 813.8 million, or 17.7% rise in customer accounts. Consequently, with the Bank Republic acquisition effect, TBC Bank's total liabilities amounted to GEL 9,186.4 million, up by 60.7% YoY and by 48.3% QoQ.

 

Without the Bank Republic acquisition effect, liabilities grew by GEL 1,441.8 million, or 23.3% QoQ. This mainly resulted from a GEL 1,047.9 million or 22.8% increase in customer deposits.

 

Bank Republic's acquisition effect increased the Bank's total liabilities by a 27.1% YoY, which resulted from an increase in the amounts due to credit institutions by 64.5% and the increase in customer accounts by 19.5%. Consequently, with the Bank Republic acquisition effect liabilities grew by GEL 2,991.3 million, or 48.3%.

 

Liquidity

The Bank's average liquidity ratio, as defined by the central bank, stood at 30.8% as of 31 December 2016, compared to 34.4% and 34.9% as of 31 December 2015 and 30 September 2016 respectively.

 

Total Equity

Without the Bank Republic's acquisition effect, total equity amounted to GEL 1,575.6 million, up by GEL 357.2 million, or 29.3% YoY as of 31 December 2015 and by GEL 187.0 million, or 13.5%, increase as of 30 September 2016, mainly due to the increase in net profits.

As a result, with the Bank Republic's acquisition effect, TBC's total equity amounted to GEL 1,582.6 million, up by a GEL 364.2 million, or 29.9% as of 31 December 2015 and GEL 194.0 million, or 14.0% QoQ, as of 30 September 2016.

 

Regulatory Capital

As of 31 December 2016, the Bank's Basel II/III[13] Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 10.4% and 14.2%, respectively, compared to 12.8% and 16.0% as of 31 December 2015, and 13.3% and 16.2% as of 30 September 2016. The minimum capital requirements set by the NBG for Basel II/III Tier 1 and Total Capital Adequacy Ratios are 8.5% and 10.5%, respectively.

Tier 1 Capital decreased by GEL 83.3 million or by 7.4% QoQ mainly due to investment in Republic Bank, which despite a total investment of GEL 351.0 million decreases the tier 1 capital only by GEL 266.2 million until the full merger. This decrease was partially offset by increase in net profit per local accounting standard in the amount of GEL 72.5 million (out of which GEL 27.0 million was related to the dividend income from subsidiaries), and the increase in the share capital of JSC TBC Bank in the amount of GEL 100.0 million by TBC Bank Group PLC for the purpose of optimization of the group's capital structure.

In terms of total capital, in addition to the above, the Bank has drowned down the ADB subordinated loan with the amount of USD 50.0 million. As a result, the increase in tier 2 capital more than offset the decrease in Tier 1 Capital and eventually Total Capital grew by GEL 53.3 million or 3.9%.

Risk Weighted Assets stood at GEL 10,021.5 million as of 31 December 2016, up by GEL 2,545.0 million YoY and up by GEL 1,593.7 million QoQ. The increase in Risk Weighted Assets was mainly related to the increase in loan portfolio and devaluation of the local currency against US dollar.

 

As a result, Tier 1 and Total Capital Adequacy Ratios (CAR) decreased by 2.9 pp and 2.1 pp respectively, out of which -2.3pp change in Tier 1 and -1.2pp change in Total Capital is directly attributable to The Bank Republic acquisition.

 

The table below shows the theoretical impact of Bank Republic merger on capital ratios if applied to December figures (the actual merger is planned in 3Q 2017). As a result, Tier 1 Capital Adequacy Ratio increased by 0.1 pp and Total Capital adequacy ratio decreases by 0.5. pp.

 

GEL Million

31-Dec-16

Merger Impact if Applied to December

Tier 1 Capital

1,041

1,283

Total Capital

1,422

1,664

Risk Weighted Assets

10,021

12,193

Tier 1 Capital Adequacy Ratio

10.4%

10.5%

Total Capital Adequacy Ratio

14.2%

13.7%

 

As of 31 December 2016 the Bank's Basel I consolidated Tier 1 Capital Ratio stood at 21.4% and Total consolidated Capital Ratio stood at 28.2% compared to 25.6% and 31.5% as of 30 September 2016 and 24.7% and 30.9% as of 31 December 2015.

 

Results by Segments and Subsidiaries

The segment definitions are as per below:

·      The Corporate segment includes business customers that have annual revenues of GEL 8.0 million or more, or have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to the Corporate segment on a discretionary basis;

·      The Micro segment business customers with loans below USD 70,000, as well as pawn loans, credit cards and cash cover loans granted in TBC Bank Constanta branches, and deposits up to USD 20,000 in urban areas and up to USD 100,000 in rural areas of the customers of TBC Bank Constanta branches. Some other customers may also be assigned to the Micro segment on a discretionary basis;

·      The SME segment includes business customers that are not included in either the Corporate or Micro segments. Some other legal entity customers may also be assigned to the SME segment on a discretionary basis;

·      The Retail segment includes individuals that are not included in the other categories.

·      Corporate Centre and Other Operations comprise the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.

 

The following table sets out the information on the financial results of TBC Bank's segments for 2016

Y'16

Retail

SME

Corporate

Micro

Corp. Centre

Total

Interest Income

341,577

68,693

162,277

116,177

77,703

766,426

Interest Expense

-99,664

-7,796

-45,586

-1,794

-121,133

-275,973

Net Transfer Pricing

-29,236

-2,480

-22,186

-39,092

92,994

-

Net Interest Income

212,676

58,418

94,505

75,291

49,563

490,453

Fee and Commission Income

92,989

15,506

23,050

7,264

3,992

142,800

Fee and Commission Expense

-40,467

-3,908

-3,395

-3,763

-999

-52,532

Net fee and Commission Income

52,522

11,598

19,654

3,500

2,993

90,268

Gains Less Losses from Trading in Foreign Currencies

16,367

25,845

23,945

1,876

2,236

70,269

Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)

-

-

-

-

-2,507

-2,507

Net Losses from Derivative Financial Instruments

-

-

-

-

-206

-206

(Losses Less Gains)/Gains Less Losses from Disposal of Investment Securities Available for Sale

-

-

-

-

9,293

9,293

Other Operating Income

5,714

783

9,837

351

6,807

23,492

Other Operating Non-Interest Income

22,082

26,628

33,782

2,227

15,623

100,341

Provision for Loan Impairment

-56,835

-15,774

49,548

-26,141

-

-49,201

(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments

-833

455

-388

-5

-

-771

Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease

-

-

-

-

-558

-558

(Provision)/Recovery of Provision for Impairment of other Financial Assets

-91

-92

-863

-62

-1,747

-2,855

Recovery of Impairment/(Impairment) of Investment Securities Available for Sale

-

-

-

-

-11

-11

Profit before G&A Expenses and Income Taxes

229,521

81,233

196,239

54,810

65,864

627,667

Staff Costs

-87,918

-17,591

-23,995

-30,116

-12,601

-172,221

Depreciation and Amortization

-16,941

-2,126

-1,067

-6,053

-1,896

-28,082

Administrative and Other Operating Expenses

-54,329

-8,673

-6,763

-15,977

-25,942

-111,684

Operating Expenses

-159,188

-28,390

-31,824

-52,146

-40,439

-311,988

Profit before Tax

70,334

52,843

164,414

2,664

25,425

315,679

Income Tax Expense

-8,562

-8,707

-25,010

-459

25,317

-17,420

Profit for the Year

61,771

44,137

139,405

2,205

50,741

298,258

The following table sets out the information on the financial results of TBC Bank's segments for 2016 without Bank Republic's acquisition effect.

 

Y'16

Retail

SME

Corporate

Micro

Corp. Centre

Total

Interest Income

315,158

67,839

157,098

113,417

75,151

728,663

Interest Expense

-97,889

-7,795

-39,793

-1,792

-114,817

-262,087

Net Transfer Pricing

-29,236

-2,480

-22,186

-39,092

92,994

-

Net Interest Income

188,033

57,564

95,119

72,533

53,328

466,576

Fee and Commission Income

92,006

15,011

20,520

7,260

3,949

138,746

Fee and Commission Expense

-38,984

-3,853

-3,155

-3,755

-922

-50,670

Net fee and Commission Income

53,021

11,158

17,364

3,505

3,027

88,076

Gains Less Losses from Trading in Foreign Currencies

15,650

24,702

21,726

1,876

2,236

66,190

Foreign Exchange Translation Gains Less Losses/(Losses Less Gains)

-

-

-

-

-5,777

-5,777

Net Losses from Derivative Financial Instruments

-

-

-

-

-206

-206

(Losses Less Gains)/Gains Less Losses from Disposal of Investment Securities Available for Sale

-

-

-

-

8,795

8,795

Other Operating Income

2,771

602

9,043

146

6,793

19,355

Other Operating Non-Interest Income

18,421

25,304

30,769

2,022

11,842

88,358

Provision for Loan Impairment

-47,895

-14,708

50,910

-25,304

-

-36,997

(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments

-833

10

-388

-5

-

-1,217

Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease

-

-

-

-

-558

-558

(Provision)/Recovery of Provision for Impairment of other Financial Assets

-91

-92

-863

-62

-1,706

-2,814

Recovery of Impairment/(Impairment) of Investment Securities Available for Sale

-

-

-

-

-11

-11

Profit before G&A Expenses and Income Taxes

210,656

79,236

192,911

52,688

65,922

601,413

Staff Costs

-83,530

-17,381

-23,063

-28,184

-12,446

-164,604

Depreciation and Amortization

-16,905

-2,125

-1,062

-6,037

-2,012

-28,141

Administrative and Other Operating Expenses

-48,917

-8,487

-5,943

-14,755

-25,839

-103,941

Operating Expenses

-149,353

-27,992

-30,069

-48,976

-40,297

-296,686

Profit before Tax

61,303

51,243

162,842

3,712

25,625

304,727

Income Tax Expense

-6,839

-8,438

-24,733

-548

23,413

-17,146

Profit for the Year

54,464

42,805

138,109

3,165

49,038

287,581

 

The following table sets out the loans and customer deposits portfolios of TBC Bank's business segments as of 31 December 2016, 31 September 2016 and 31 December 2015.

Portfolios by Segments

 

 

 

 

 

 

 

 

 

In thousands of GEL

Dec-16 w/o BR Acquisition effect

Sep-16

Dec-15

Loans and Advances to Customers

 

 

 

 

 

 

 

 

 

Consumer

1,152,700

1,663,550

1,025,120

871,997

Mortgage

1,272,057

1,811,695

1,015,550

905,274

Pawn

288,010

288,010

266,889

242,698

Retail

2,712,767

3,763,254

2,307,559

2,019,969

Corporate

1,789,309

2,060,171

1,471,931

1,500,104

SME

799,714

857,552

670,248

625,628

Micro

609,363

677,746

553,827

493,327

Total Loans and Advances to Customers (Gross)

5,911,153

7,358,724

5,003,564

4,639,029

Less: Provision for Loan Impairment

-213,856

-225,022

-194,035

-194,143

Total Loans and Advances to Customers (Net)

5,697,296

7,133,702

4,809,530

4,444,886

 

Customer Accounts

 

 

 

 

 

 

 

 

 

Retail Deposits

3,336,914

3,666,384

2,734,133

2,469,878

Corporate Deposits

1,468,771

1,795,503

1,006,739

1,001,341

SME Deposits

747,203

888,475

769,968

633,211

Micro Deposits

88,235

104,586

82,397

73,501

Total Customer Accounts

5,641,123

6,454,949

4,593,237

4,177,931

 

Retail Banking

Without the Bank Republic acquisition effect, retail loans stood at GEL 2,712.8 million, up by 34.3% YoY and 17.6% QoQ. The YoY increase was mainly explained by a GEL 366.8 million increase in mortgage loans and a GEL 280.7 million increase in consumer loans. TBC Bank's retail loans accounted for 32.9% market share of total individual loans. As of 31 December 2016, foreign currency loans represented 60.5% of the total retail loan portfolio.

With the Bank Republic acquisition effect, as of 31 December 2016, retail loans stood at GEL 3,763.3 million, up by 86.3% YoY and by 63.1% QoQ. The YoY increase was mainly related to a GEL 791.6 million increase in consumer loans and a GEL 906.4 million increase in mortgage loans. TBC Bank's and Bank Republic's combined retail loans accounted for a 44.2% market share of total individual loans. As of 31 December 2016, foreign currency loans represented 62.0% of the total retail loan portfolio.

Without the Bank Republic acquisition effect, retail deposits stood at GEL 3,336.9 million, up by 35.1% YoY and 22.0% QoQ and accounted for a 37.2% market share of total individual deposits. The increase in retail deposits was mainly attributable to the increase in current deposits by 52.3%% YoY and 27.5% QoQ. Term deposits accounted for 58.5% of the total retail deposit portfolio as of 31 December 2016. Foreign deposits accounted for 87.8% of the total retail deposit portfolio.

With the Bank Republic acquisition effect, in the same period, retail deposits increased to GEL 3,666.4 million, up 48.4% YoY and 34.1% QoQ and accounted for a 40.8% market share of total individual deposits. The increase in retail deposits was mainly attributable to the increase in current deposits by 72.2% YoY and 44.2% QoQ. Term deposits accounted for 57.3% of the total retail deposit portfolio as of 31 December 2016. Foreign currency deposits accounted for 86.9% of the total retail deposit portfolio.

Without the Bank Republic acquisition effect, retail loan yields and deposit rates stood at 14.3% and 3.7% respectively, and the segment's cost of risk on loans was 2.2%. The retail segment contributed 18.9%, or GEL 54.5 million, to TBC's total net income in 2016. With the Bank Republic acquisition effect, retail loan yields and deposit rates stood at 14.1% and 3.6% respectively, and the segment's cost of risk on loans was 2.3%. The retail segment contributed 20.7%, or GEL 62.0 million, to TBC's total net income in 2016.

Corporate Banking

Without Bank Republic's acquisition effect, corporate loans amounted GEL 1,789.3 million, up by 19.3% YoY and 21.6% QoQ. Foreign currency loans accounted for 78.1% of the total corporate loan portfolio. With the Bank Republic acquisition effect, corporate loans amounted to GEL 2,060.2 million, up by 37.3% YoY and up by 40.0% QoQ. Foreign currency loans accounted for 74.3% of the total corporate loan portfolio.

Without Bank Republic's acquisition effect, corporate deposits totaled GEL 1,468.8 million, up by 46.7% YoY and 45.9% QoQ. Foreign currency corporate deposits represented 60.6% of the total corporate deposit portfolio. With the Bank Republic acquisition effect corporate deposits totaled GEL 1,795.5 million, up by 79.3% YoY and up by 78.3% QoQ. Foreign currency corporate deposits represented 57.9% of the total corporate deposit portfolio.

 

Without the Bank Republic acquisition effect loan yield and deposit rates stood at 10.8% and 3.9%, respectively. In the same period, the cost of risk on loans was -3.5%. In terms of profitability, the corporate segment's net profit reached GEL 138.1 million, or 48.0% of the Bank's total net income. With the Bank Republic acquisition effect, corporate loan yields and deposit rates stood at 10.7% and 4.2%, respectively. In the same period, the cost of risk on loans was -3.3%. In terms of profitability, the corporate segment's net profit reached GEL 139.5 million, or 46.8% of the Bank's total net income.

 

SME Banking

 

Without Bank Republic's acquisition effect, SME loans amounted to GEL 799.7 million, up by 27.8% YoY and 19.3% QoQ. Foreign currency loans accounted for 80.6% of the total SME portfolio. With the Bank Republic acquisition effect, SME loans amounted to GEL 857.6 million, up by 37.1% YoY and up by 27.9% QoQ. Foreign currency loans accounted for 81.3% of the total SME portfolio.

 

Without the Bank Republic acquisition effect, SME deposits stood at GEL 747.2 million, up by 18.0% YoY and down by 3.0% QoQ. Foreign currency SME deposits accounted for 61.2% of the total SME deposit portfolio. Consequently, with the Bank Republic's acquisition effect SME deposits stood at GEL 888.5 million, up by 40.3% YoY and 15.4% QoQ. Foreign currency SME deposits accounted for 58.6% of the total SME deposit portfolio.

 

Without the Bank Republic acquisition effect SME loan yields and deposit rates stood at 10.5% and 1.2%, respectively, while the cost of risk on loans was 2.3%. In terms of profitability, net profit for the SME segment amounted to GEL 42.8 million, or 14.9%, of TBC's total net income. Consequently, SME loan yields and deposit rates stood at 10.5% and 1.1%, respectively, while the cost of risk on loans was 2.4%. In terms of profitability, net profit for the SME segment amounted to GEL 44.1 million, or 14.8% of TBC's total net income.

 

Micro Banking

 

Without the Bank Republic acquisition effect micro loans totaled GEL 609.4 million, up by 23.5% YoY and 10.0% QoQ. Foreign currency loans represented 38.6% of the total micro loan portfolio. Consequently, with the Bank Republic's acquisition effect micro loans totaled GEL 677.7 million, up by 37.4% YoY and 22.4% QoQ. Foreign currency loans represented 42.5% of the total micro loan portfolio.

 

Without Bank Republic's acquisition effect micro deposits totaled GEL 88.2 million, up by 20.0% YoY and 7.1% QoQ. Foreign currency loans represented 60.7% of the total micro loan portfolio. Consequently, with the Bank Republic's acquisition effect micro customer deposits amounted to GEL 104.6 million, up by 42.3% YoY and 26.9% QoQ. Foreign currency micro deposits represented 59.2% of the total micro deposit portfolio.

 

Without the Bank Republic acquisition effect micro loan yields and deposit rates stood at 21.4% and 2.4%, respectively. In the same period, the cost of risk on loans was 4.8%. In terms of profitability, the micro segment's net profit reached GEL 3.2 million, or 1.1% of TBC's total net income. Consequently, with the Bank Republic acquisition effect micro loan yields and deposit rates stood at 21.4% and 2.3%, respectively. In the same period, the cost of risk on loans was 4.8%. In terms of profitability, the micro segment's net profit reached GEL 2.2 million, or 0.7% of TBC's total net income.

 

 

Annexes

 

Subsidiaries of TBC Bank Group PLC[14]

 

 

Ownership / voting
% as of 30 December 2016

 

Country

Year of incorporation or acquisition

Industry

Total Assets 
(after elimination)

Subsidiary

 

Amount

GEL'000

% in TBC Group

United Financial Corporation JSC

98.7%

 

Georgia

1997

Card processing

11,840

0.11%

TBC Capital LLC

100.0%

 

Georgia

1999

Brokerage

1,497

0.01%

TBC Leasing JSC

99.6%

 

Georgia

2003

Leasing

116,321

1.08%

TBC Kredit LLC

75.0%

 

Azerbaijan

2008

Non-banking credit institution

39,951

0.37%

Banking System Service Company LLC

100.0%

 

Georgia

2009

Information services

285

0.00%

TBC Pay LLC

100.0%

 

Georgia

2009

Processing

24,775

0.23%

Mali LLC

100.0%

 

Georgia

2011

Real estate management

189

0.00%

Real Estate Management Fund JSC

100.0%

 

Georgia

2010

Real estate management

52

0.00%

TBC Invest LLC

100.0%

 

Israel

2011

PR and marketing

193

0.00%

Bank republic

100.0%

 

Georgia

2016

Financial sector

2,033,279

18.9%

JSC TBC Bank

98.4%

 

Georgia

2016

Financial sector

8,553,379

79.51%

TBC Insurance

100.0%

 

Georgia

2016

Insurance

5,199

0.05%

 

 Consolidated Financial Statements of TBC Bank Group PLC

 

Consolidated Balance Sheet

 

 

 

 

 

 

 

 

 

In thousands of GEL 

Dec-16 w/o BR Acquisition effect

Dec-16

Sep-16

Dec-15

Cash and cash equivalents

875,862

945,180

843,431

720,347

Due from other banks

31,818

24,725

12,284

11,041

Mandatory cash balances with National Bank of Georgia

859,508

990,642

676,780

471,490

Loans and advances to customers (Net)

5,697,296

7,133,702

4,809,530

4,444,886

Investment securities available for sale

280,200

430,703

252,736

307,310

Repurchase receivables

-

-

57,232

-

Investment securities held to maturity

372,956

372,956

295,901

372,092

Investments in Subsidiaries and Associates

351,041

-

-

-

Investments in finance leases

95,031

95,031

77,496

75,760

Investment properties

67,245

95,615

71,122

57,600

Goodwill

4,491

28,658

2,726

2,726

Intangible assets

56,283

60,957

49,663

44,344

Premises and equipment

255,650

314,032

254,214

247,767

Other financial assets

90,765

94,627

62,799

64,317

Deferred tax asset

3,511

3,511

2,181

1,546

Current income tax prepayment

7,431

7,431

9,515

9,856

Other assets

163,443

171,263

106,103

103,914

TOTAL ASSETS    

9,212,532

10,769,032

7,583,712

6,934,995

LIABILITIES     

 

 

 

 

Due to Credit Institutions

1,479,270

2,197,577

1,195,031

1,113,574

Customer accounts    

5,641,123

6,454,949

4,593,237

4,177,931

Current income tax liability  

479

2,578

551

912

Debt Securities in issue

23,508

23,508

24,227

21,714

Deferred income tax liability  

1,716

5,646

1,822

29,244

Provisions for liabilities and charges 

14,529

16,026

13,908

9,461

Other financial liabilities   

43,900

50,998

42,732

39,435

Subordinated debt    

368,381

368,381

283,637

283,648

Other liabilities    

63,984

66,739

39,917

40,627

TOTAL LIABILITIES    

7,636,889

9,186,401

6,195,063

5,716,546

EQUITY     

 

 

 

 

Share capital

1,581

1,581

1,494

19,587

Share premium

677,211

677,211

572,780

407,474

Retained earnings

782,330

793,007

781,463

712,743

Share based payment reserve

23,327

23,327

20,398

12,755

Other reserves

62,918

59,241

-18,328

58,701

TOTAL EQUITY

1,547,367

1,554,366

1,357,808

1,211,260

Non-controlling interest    

28,275

28,264

30,842

7,189

TOTAL EQUITY    

1,575,643

1,582,631

1,388,649

1,218,449

TOTAL LIABILITIES AND EQUITY  

9,212,532

10,769,032

7,583,712

6,934,995

 

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

In thousands of GEL 

Y'16 w/o BR Acquisition effect

Y'16

Y'15

4Q'16 w/o BR Acquisition effect

4Q'16

3Q'16

4Q'15

Interest income 

728,663

766,426

649,059

205,581

243,344

182,056

174,172

Interest expense

-262,087

-275,973

-236,885

-75,769

-89,655

-61,830

-67,654

Net interest income

466,576

490,453

412,173

129,811

153,689

120,227

106,519

Fee and commission income

138,746

142,800

 113,837

41,406

45,460

35,112

32,567

Fee and commission expense

-50,670

-52,532

-41,546

-15,206

-17,068

-12,918

-12,760

Net Fee and Commission Income

88,076

90,268

72,291

26,200

28,392

22,194

19,807

Net insurance premium earned

Net insurance claims incurred

1,222

1,222

-

1,222

1,222

-

-

-966

-966

-

-966

-966

-

-

Gross Insurance profit

256

256

-

256

256

-

-

Gains less losses from trading in foreign currencies

66,190

70,269

64,642

21,392

25,472

15,713

17,536

Foreign exchange translation gains less losses

-5,777

-2,507

2,579

-5,789

-2,519

1,012

912

Gains less losses/(losses less gains) from derivative financial instruments

-206

-206

-575

94

94

173

276

(Losses less gains) / gains less losses from disposal of investment securities available for sale

8,795

9,293

-

-

498

-

-

Other operating income

19,099

23,236

25,883

8,236

12,372

2,501

11,912

Other operating non-interest income

88,102

100,085

92,528

23,933

35,916

19,398

30,636

Provision for loan impairment

-36,997

-49,201

-72,791

1,799

-10,405

-13,518

-2,055

Provision for  impairment of investments in finance lease

-558

-558

-967

-322

-322

-126

-344

Provision for/ (recovery of provision)  performance guarantees and credit related commitments

-1,217

-771

1,117

2,341

2,787

-1,481

-1,945

Provision for  impairment of other financial assets

-2,814

-2,855

-3,351

-1,686

-1,727

66

-974

Impairment of investment securities available for sale

-11

-11

-

-

-

-

-

Operating income after provisions for impairment

601,413

627,667

501,002

182,331

208,586

146,759

151,644

Staff costs

-164,604

-172,221

-142,777

-54,927

-62,544

-40,205

-42,445

Depreciation and amortisation

-28,141

-28,082

-26,286

-7,494

-7,435

-7,037

-7,347

Provision for liabilities and charges

-2,210

-2,210

-1,102

-2,210

-2,210

-

-1,102

Administrative and other operating expenses

-101,731

-109,474

-82,964

-31,851

-39,595

-18,294

-26,500

Operating expenses

-296,686

-311,988

-253,130

-96,483

-111,785

-65,536

-77,394

Profit before tax

304,727

315,679

247,872

85,849

96,801

81,223

74,251

Income tax expense

-17,146

-17,420

-29,176

-8,492

-8,767

-10,235

-7,331

Profit for the period

287,581

298,258

218,697

77,356

88,034

70,988

66,920

Other Comprehensive income:

 

Items that may be reclassified subsequently to profit or loss:

Revaluation

2,122

522

-2,436

-1,605

-3,196

573

1,252

Gains less losses reclassified  to profit or loss upon disposal

-8,853

-11,611

-

-

-2,757

-

-

Income tax recorded directly in other comprehensive income

1,401

1,649

-479

-

247

-

-149

Exchange differences on translation to presentation currency

-948

-948

-12,075

147

147

-770

-10,864

Items that will not be reclassified to profit or loss:

Revaluation of premises and equipment

-

-

28,755

-

-

-

28,755

Income tax recorded directly in other comprehensive income

10,506

10,928

-4,319

-

422

-

-4,319

Other comprehensive income for the year

4,217

540

9,446

-1,458

-5,136

-197

14,674

Total comprehensive income for the year

291,798

298,798

228,142

75,898

82,898

70,791

81,594

Profit attributable to:

-  Owners of the Bank

288,631

299,146

218,879

78,845

89,359

69,526

67,563

- Non-controlling interest

-1,050

-887

-182

-1,489

-1,326

1,462

-643

Profit for the period

287,581

298,258

218,697

77,356

88,034

70,988

66,920

Total comprehensive income is attributable to:

- Owners of the Bank

292,848

299,686

228,324

77,387

84,223

69,238

82,237

- Non-controlling interest

-1,050

-887

-182

-1,489

-1,326

1,462

-643

Total comprehensive income for the year

291,798

298,798

228,142

75,898

82,898

70,791

81,594

 

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

In thousands of GEL

Y'16

Y'15

 

Cash flows from operating activities

 

 

 

Interest received

745,273

633,093

 

Interest paid

-273,795

-235,157

 

Fees and commissions received

144,247

111,922

 

Fees and commissions paid

-52,154

-41,569

 

Insurance premium received

1,591

-

 

Insurance claims paid

-703

-

 

Income received from trading in foreign currencies

70,411

64,642

 

Other operating income received

8,411

18,006

 

Staff costs paid

-148,656

-133,354

 

Administrative and other operating expenses paid

-104,077

-79,669

 

Income tax paid

-34,279

-48,678

 

Cash flows from operating activities before changes in operating assets and liabilities

356,270

289,236

 

Net (increase) / decrease in operating assets

 

 

 

Due from other banks and mandatory cash balances with the National Bank of Georgia

-448,582

-72,453

 

Loans and advances to customers

-1,195,187

-364,896

 

Investment in finance lease

-11,687

-12,994

 

Other financial assets

-22,965

-13,198

 

Other assets

-36,628

7,159

 

Net increase / (decrease) in operating liabilities

 

-

 

Due to other banks

265,679

-17,351

 

Customer accounts

1,150,146

249,598

 

Other financial liabilities

5,724

-415

 

Other liabilities and provision for liabilities and charges

332

1,341

 

Net cash (used in)/from operating activities

63,101

66,027

 

Cash flows from investing activities

 

 

 

Acquisition of investment securities available for sale

-143,980

-475,417

 

Proceeds from disposal of investment securities available for sale

11,868

-

 

Proceeds from redemption at maturity of investment securities available for sale

166,871

265,107

 

Acquisition of subsidiaries

-242,195

-

 

Acquisition of bonds carried at amortised cost

-304,109

-183,084

 

Proceeds from redemption of bonds carried at amortised cost

314,231

193,416

 

Acquisition of premises, equipment and intangible assets

-50,689

-47,815

 

Disposal of premises, equipment and intangible assets

1,273

1,306

 

Proceeds from disposal of investment property

7,822

22,166

 

Cash acquired

150,791

 

 

Net cash (used in)/ from investing activities

-88,118

-224,321

 

Cash flows from financing activities

 

 

 

Proceeds from other borrowed funds

903,502

582,198

 

Redemption of other borrowed funds

-666,160

-310,267

 

Proceeds from subordinated debt

136,817

60,510

 

Redemption of subordinated debt

-90,416

-16,763

 

Proceeds from debt securities in issue

6,257

-

 

Redemption of debt securities in issue

-4,636

-

 

Dividends paid

-54,560

-39,128

 

Equity contribution of owners of non-controlling shareholders

-

-

 

Issue of ordinary shares

-3,495

-

 

Transaction costs recognized directly in equity

-

-

 

Purchase of additional shares in subsidiaries

-

-

 

Net cash from /(used in) financing activities

227,309

276,550

 

Effect of exchange rate changes on cash and cash equivalents

22,536

69,973

 

Net increase / (decrease) in cash and cash equivalents

224,829

188,229

 

Cash and cash equivalents at the beginning of the year

720,351

532,118

 

Cash and cash equivalents at the end of the year

945,180

720,347

 
                     

 

Key Ratios

 

Average Balances

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

Key Ratios*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios (based on monthly averages, where applicable)

Y'16 w/o BR Acquisition effect

Y'16

Y'15

4Q'16* w/o BR Acquisition effect

4Q'16

3Q'16

4Q'15

ROAE

21.6%

22.4%

20.1%

21.4%

24.2%

20.6%

23.1%

ROAA

3.9%

3.9%

3.4%

3.7%

3.7%

4.0%

3.9%

Pre-provision ROAE

24.7%

26.4%

27.1%

20.8%

26.8%

25.3%

24.9%

Pre-provision ROAA

4.5%

4.6%

4.6%

3.6%

4.1%

4.8%

4.2%

Cost to Income

46.1%

45.8%

43.9%

53.5%

51.2%

40.5%

49.3%

Cost of Risk

0.8%

1.0%

1.7%

-0.1%

0.6%

1.1%

0.2%

NIM

7.9%

7.8%

7.8%

7.8%

7.9%

8.3%

7.4%

Loan yields

13.5%

13.4%

13.6%

13.8%

13.8%

13.5%

13.6%

Deposit rates

3.3%

3.3%

3.5%

3.1%

3.3%

3.3%

3.4%

Yields on interest earning assets

12.3%

12.2%

12.3%

12.3%

12.5%

12.5%

12.1%

Cost of Funding

4.5%

4.5%

4.6%

4.4%

4.5%

4.3%

4.8%

Spread

7.8%

7.8%

7.7%

7.9%

8.0%

8.2%

7.3%

PAR 90 to gross loans

1.3%

1.3%

1.0%

1.3%

1.3%

1.5%

1.0%

NPLs to gross loans

4.0%

3.5%

4.8%

4.0%

3.5%

4.6%

4.8%

NPLs coverage

90.5%

88.4%

87.4%

90.5%

88.4%

84.3%

87.4%

NPLs coverage with collateral

216.8%

221.4%

209.9%

216.8%

221.4%

205.0%

209.9%

Provision Level to Gross Loans

3.6%

3.1%

4.2%

3.6%

3.1%

3.9%

4.2%

Net loans to deposits  plus IFI funding

90.7%

93.4%

94.8%

90.7%

93.4%

93.8%

94.8%

Leverage

5.8

6.8

5.7

5.8

6.8

5.5

5.7

BIS Tier 1

25.7%

21.3%

24.7%

25.7%

21.3%

25.6%

24.7%

Total BIS CAR

32.0%

28.1%

31.0%

32.0%

28.1%

31.5%

31.0%

NBG Basel II/III Tier 1 CAR

10.4%

10.4%

12.8%

10.4%

10.4%

13.3%

12.8%

NBG Basel II/III Total CAR

14.2%

14.2%

16.0%

14.2%

14.2%

16.2%

16.0%

 

  

 

Ratio definitions

1.     Return on average total equity (ROAE) equals net income attributable to owners divided by monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; Pre-provision ROAE excludes all provision charges. annualized where applicable.

2.     Return on average total assets (ROAA) equals net income of the period divided by monthly average total assets for the same period. Pre-provision ROAE excludes all provision charges. Annualized where applicable.

3.     Cost to Income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

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

5.     Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualized where applicable.

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

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

8.     Yields on interest earning assets equals total interest income divided by monthly average interest earning assets. Annualized where applicable.

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

10.   Spread equals difference between yields on interest earning assets (including but 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.   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.

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

13.   NPLs coverage ratio equal loan loss provision divided by the NPL loans

14.   NPLs coverage with collateral ratio is equal to loan loss provision plus total collateral amount (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans

15.   Provision Level to Gross Loans equal loan loss provision divided by the gross loan portfolio for the same period.

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

17.   Leverage equals total assets to total equity

18.   BIS Tier 1 capital adequacy ratio Tier 1 capital over total risk weighted assets, both calculated in accordance with Basel I requirements.

19.   Total BIS CAR equals total capital over total risk weighted assets, both calculated in accordance with Basel I requirements.

20.   NBG Basel II Tier 1 CAR equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the NBG Basel II requirements. After adoption of NBG Basel II/III requirements, the Bank also calculates its capital requirements and risk weighted assets separately for Pillar 1. Detailed instructions of Pillar 1 calculations are given by NBG. The reporting started from the end of 2012.

21.   NBG Basel II Total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the NBG Basel II requirements. After adoption of NBG Basel II/III requirements, the Bank also calculates its capital requirements and risk weighted assets separately for Pillar 1. Detailed instructions of Pillar 1 calculations are given by NBG. The reporting started from the end of 2012.

 

 

 

 

Exchange Rates

To calculate the Balance Sheet items' QoQ growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.3297 as of 30 September 2016. For calculations of YoY growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.3949 as of 31 December 2015. The USD/GEL exchange rate as of 31 December 2016 equaled 2.6468. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: FY 2016 of 2.3667, FY 2015 of 2.2702, 4Q 2016 of 2.4958, 3Q 2016 of 2.3224, 4Q 2015 of 2.3979.

 

 

  

Additional Disclosures

 

Earnings per Share

In GEL

2015

2016

Earnings per share for profit attributable to the owners of the Group:

 

 

- Basic earnings per share

4.4

        6.0

- Diluted earnings per share

4.4

        5.9

Source: IFRS Consolidated

 

Sensitivity Scenario

Sensitivity Scenario

31-Dec-16

10% Currency Devaluation Effect

NIM*

 

-0.1%

Technical Cost of Risk

 

+0.2%

Total Capital per Basel II/III

1,422

1,446

Capital adequacy ratios per both tier 1 and total Basel II/III and NBG regulation decrease by

 

0.71% - .84%

 

(*) Linear depreciation is assumed for NIM sensitivity analysis

Source: IFRS statements and Management Figures

 

 

FC details for Selected P/L Items

Selected P&L Items 4Q 2016

FC % of Respective Totals

Interest Income

49%

Interest Expense

63%

Fee and Commission Income

41%

Fee and Commission Expense

61%

Administrative Expenses

26%

 

Source: IFRS statements and Management figures

 

GEL Refinance Rate and Libor Linked B/S Items 31 December 2016

 

GEL Refinance Rate Gap

GEL     -306 m

 

Libor Gap

GEL 640 m

 

GEL m

% share in totals

 

 

GEL m

% share in totals

Assets

1,114

10%

 

Assets

1,916

18%

Securities with fixed yield(≤1y)*

376

47%

 

Nostro**

251

58%

Securities with floating yield

150

19%

 

NBG Reserves**

991

88%

Loans with Floating yield

519

7%

 

Libor Loans

628

9%

Reserves in NBG

63

6%

 

Interest Rate Options

47

N/A

Interbank loans& Deposits & Repo

7

2%

 

 

 

 

Liabilities

1,420

15%

 

Liabilities

1,276

14%

Current accounts***

629

10%

 

 Senior Loans

949

50%

Saving accounts***

165

3%

 

 Subordinated Loans

328

89%

Refinancing Loan of NBG

397

21%

 

 

 

 

Interbank Loans &Deposits & Repo

75

24%

 

 

 

 

IFI Borrowings

154

8%

 

 

 

 

 

(*) 73% of the less than 1 year securities are maturing in 6 months

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

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

 Source: IFRS Group Data

 

Yields and Rates

 

Yields and Rates

FY 2016 w/o BR Acquisition effect

4Q'16 w/o BR Acquisition effect

FY 2016

4Q'16

3Q'16

2Q'16

1Q'16

4Q'15

Loan yields

13.5%

13.8%

13.4%

13.8%

13.5%

13.3%

13.6%

13.6%

Retail loan yields  GEL

20.3%

20.5%

20.2%

21.2%

20.3%

20.2%

20.2%

20.4%

Retail loan yields FX

10.1%

9.8%

9.9%

9.8%

9.9%

10.2%

10.9%

11.3%

Retail Loan Yields

14.3%

14.2%

14.1%

14.3%

14.2%

14.3%

14.6%

14.9%

Corporate loan yields  GEL

12.0%

10.0%

11.1%

8.6%

12.4%

13.7%

13.2%

12.5%

Corporate loan yields FX

10.4%

12.9%

10.6%

13.3%

10.6%

8.8%

9.3%

8.7%

Corporate Loan Yields

10.8%

12.2%

10.7%

12.0%

11.0%

9.7%

10.1%

9.6%

SME loan yields  GEL

12.6%

11.8%

12.8%

12.6%

12.2%

13.2%

14.2%

13.0%

SME loan yields FX

10.1%

10.1%

10.0%

9.8%

9.7%

10.0%

10.7%

10.9%

SME Loan Yields

10.5%

10.4%

10.5%

10.3%

10.1%

10.5%

11.3%

11.3%

Micro loan yields  GEL

24.7%

24.5%

25.1%

26.2%

24.6%

24.9%

24.6%

25.1%

Micro loan yields FX

14.5%

13.5%

14.0%

12.7%

13.8%

14.9%

16.6%

17.9%

Micro Loan Yields

21.4%

20.6%

21.4%

20.9%

21.1%

22.0%

22.3%

23.0%

Deposit rates

3.3%

3.1%

3.3%

3.3%

3.3%

3.4%

3.6%

3.4%

Retail deposit rates GEL

4.0%

3.8%

3.9%

3.9%

4.1%

4.1%

3.9%

3.6%

Retail deposit rates FX

3.6%

3.4%

3.6%

3.4%

3.5%

3.7%

3.9%

4.0%

Retail Deposit Yields

3.7%

3.5%

3.6%

3.5%

3.6%

3.7%

3.9%

4.0%

Corporate deposit rates GEL

7.0%

6.7%

7.5%

8.7%

7.3%

7.5%

6.7%

5.3%

Corporate deposit rates FX

1.5%

1.5%

1.5%

1.7%

1.5%

1.3%

1.7%

1.8%

Corporate Deposit Yields

3.9%

3.7%

4.2%

4.7%

4.2%

4.0%

4.1%

3.4%

SME deposit rates GEL

2.2%

1.7%

1.7%

0.4%

2.1%

2.5%

2.4%

2.0%

SME deposit rates FX

0.5%

0.6%

0.7%

1.1%

0.4%

0.4%

0.7%

1.4%

SME Deposit Yields

1.2%

1.0%

1.1%

0.8%

1.1%

1.3%

1.3%

1.6%

Micro deposit rates GEL

2.8%

2.4%

2.5%

1.6%

2.7%

3.2%

3.2%

2.7%

Micro deposit rates FX

2.1%

1.8%

2.1%

1.9%

1.9%

2.1%

2.5%

2.7%

Micro Deposit Yields

2.4%

2.0%

2.3%

1.8%

2.2%

2.6%

2.8%

2.7%

Yields on Securities

8.6%

8.0%

8.6%

8.1%

8.3%

9.1%

9.4%

8.5%

 

Source: IFRS Consolidated

 

 

 

Loan Quality per NBG

 

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

 

Dec-16

Sep-16

      Jun-16

Mar-16

Dec-15

SDL Loans as % of Gross Loans

4.3%

5.1%

6.9%

7.2%

6.8%

 Source: NBG

 

Cross Sell Ratio[15] and Number Active Products

 

Dec-16

Sep-16

Aug-16

Jul-16

Cross Sell Ratio

3.68

3.55

3.45

3.35

Number of Active Products (in millions)

3.14

2.83

2.74

2.61

 Source: Management figures

 

Diversified Deposit Base

 

Status: monthly income >=2,000 GEL or loans/deposits >=20,000 GEL

VIP: deposit >=100,000 USD as well as on discretionary basis; WM: >=50,000 USD

Wealth Management includes UHNW and HNW non-resident clients

 

 

31 December 2016

Volume of Deposits

Number of Deposits

MASS

35%

95%

STATUS

25%

4.2%

VIP

26%

0.4%

Wealth Management

14%

0.2%

 Source: Management figures

 

Loan Concentration

 

Dec-16

Sep-16

Jun-16

Mar-15

Dec-15

Top 20 Borrowers as % of total portfolio

14.3%

13.4%

14.4%

14.6%

15.6%

Top 10 Borrowers as % of total portfolio

9.0%

8.6%

9.0%

9.2%

9.9%

Related Party Loans as % of total portfolio

0.1%

0.1%

0.1%

0.2%

0.1%

 Source: IFRS consolidated

 

Sales Breakdown (for products offered through Multichannel)

 

Dec-16

Sep-16

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Digital Channels

26%

24%

23%

27%

21%

25%

12%

Call Center

29%

33%

32%

23%

28%

15%

11%

Branches

45%

43%

46%

50%

51%

60%

77%

 Source: Management figures

 

Number of Transactions in Digital Channels ('000)

 

 

4Q-16

3Q-16

2Q-16

1Q-16

4Q-15

Internet Banking Number of Transactions

2,280

1,828

1,797

1,669

1,729

Mobile Banking Number of Transactions

2,532

1,814

1,485

1,151

1,008

 Source: Management figures

 

Penetration Ratios of Digital Channels

 

 

Dec-16

Sep-16

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

IB&MB Penetration Ratio

37%

34%

34%

32%

32%

26%

23%

Internet Banking Penetration Ratio

32%

29%

30%

28%

30%

24%

21%

Mobile Banking Penetration Ratio

24%

20%

19%

17%

15%

12%

11%

 Source: Management figures

 

Mid-term targets for digital channels is to increase the penetration ratio of internet or mobile banking users to above 45% from the current level of 37% and to increase mobile banking penetration ratio to above 35% from the current level of 24%

 

Net outflow of borrowed funds

 

Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million)

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

417.8

430.3

243.7

224.3

225.1

85.6

61.8

16.4

72.2

159.8

Source: Management figures

 

 

De-dollarization initiative by National Bank of Georgia

Starting form 17 January 2017 up today the Bank has converted loans in the total amount of GEL 18.6 million under National Bank of Georgia's de- dollarization program which envisages conversion of certain loans to individuals secured by real estate. Remaining total loans eligible for conversion as of 22 February 2017 equals around GEL 371.0 million.

 

Other Selected Data of TBC Bank and Bank Republic

 

Gross Loan Segmentation as of Dec-16

 

 

TBC Bank

Bank Republic

TBC + Republic

Corporate

30%

19%

28%

Mortgage

22%

37%

25%

Consumer Lending

24%

35%

26%

Micro

10%

5%

9%

SME

14%

4%

12%

Total

5,991 million

1,447 million

7,359 million

 Source: IFRS figures

 

Customer Deposits Segmentation as of Dec-16

 

 

TBC Bank

Bank Republic

TBC + Republic

Corporate

26%

40%

28%

Retail

59%

40%

57%

Micro

2%

2%

2%

SME

13%

17%

14%

Total

5,641 million

813 million

6,455 million

 Source: IFRS figure

 

 

NPLs: Total Portfolio as of 31-Dec-16

 

Bank Republic NPLs

Book Value

Total

Retail

Corporate

SME

Micro

Provision Coverage

112%

127%

106%

80%

180%

Collateral Coverage

89%

82%

76%

118%

101%

Total Coverage

201%

209%

182%

198%

281%

NPL

3.1%

2.0%

4.4%

15.2%

1.5%

Cost of Risk 4Q'16

3.2%

4.6%

3.6%

-20.9%

3.6%

Fair Value Adjusted

Total

Retail

Corporate

SME

Micro

Provision Coverage

61%

67%

56%

35%

106%

Collateral Coverage

219%

150%

392%

351%

157%

Total Coverage

280%

217%

448%

386%

263%

NPL

1.3%

1.1%

0.9%

5.8%

0.9%

Cost of Risk 4Q'16

4.7%

4.7%

2.7%

10.0%

7.2%

TBC Bank NPLs

 

Total

Retail

Corporate

SME

Micro

Provision Coverage

90%

103%

94%

49%

112%

Collateral Coverage

126%

97%

158%

121%

105%

Total Coverage

217%

200%

252%

170%

217%

NPL

4.0%

2.7%

5.2%

5.6%

4.1%

Cost of Risk 4Q'16

-0.1%

2.6%

-7.7%

3.1%

4.9%

TBC + BR NPLs

 

Total

Retail

Corporate

SME

Micro

Provision Coverage

88%

98%

94%

48%

112%

Collateral Coverage

133%

104%

164%

137%

106%

Total Coverage

221%

203%

257%

185%

218%

NPL

3.5%

2.3%

4.6%

5.6%

3.8%

Cost of Risk 4Q'16

0.6%

3.1%

-6.5%

3.5%

5.1%

Source: IFRS figures

 

Bank Republic Financial Statements [16]

Balance Sheet

 

 

 

 

 

In thousands of GEL

Full Year

31.Dec.2016 (FV Adjusted)

Cash and cash equivalents

235,865

235,865

Due from other banks

9,937

9,937

Mandatory cash balances with National Bank of Georgia

131,133

131,133

Loans and advances to customers (Net)

1,426,416

1,436,406

Investment securities available for sale

150,504

150,504

Repurchase receivables

-

-

Bonds carried at amortized cost

-

-

Investments in finance leases  

-

-

Investment properties

28,558

28,370

Goodwill     

-

-

Intangible assets    

4,855

4,674

Premises and equipment   

57,275

58,382

Other financial assets   

6,470

3,862

Deferred income tax asset

-

-

Current income tax prepayment

-

-

Other assets    

7,664

7,819

TOTAL ASSETS    

2,058,677

2,066,951

Due to Credit Institutions

884,854

884,854

Customer accounts    

813,826

813,826

Current income tax liability  

2,099

2,099

Debt Securities in issue

-

-

Deferred income tax liability  

3,730

3,931

Provisions for liabilities and charges 

1,497

1,497

Other financial liabilities   

24,539

24,098

Subordinated debt    

17,029

17,029

Other liabilities    

2,600

2,755

TOTAL LIABILITIES    

1,750,174

1,750,088

Share capital

76,031

76,031

Share premium

39,914

39,914

Retained earnings

168,058

176,417

Share based payment reserve

-

-

Other reserves

24,500

24,500

TOTAL EQUITY

308,503

316,863

Non-controlling interest    

-

-

TOTAL LIABILITY AND EQUITY    

2,058,677

2,066,951

 

Income Statement

Standalone

FV Adjusted

 

 

 

 

In thousands of GEL

Full Year

4Q'16

20.Oct. - 31.Dec

Interest income

175,923

48,254

37,764

Interest expense

(63,499)

(16,435)

(13,886)

Net interest income

112,424

31,819

23,878

Fee and commission income

17,982

4,039

4,054

Fee and commission expense

(7,818)

(2,305)

(1,861)

Net Fee and Commission Income

10,164

1,743

2,193

Gains less losses from trading in foreign currencies

17,050

5,543

4,079

Foreign exchange translation gains less losses

3,094

3,213

3,269

Gains less losses/(losses less gains) from derivative financial instruments

-

-

-

Losses less gains / (gains less losses) from disposal of investment securities available for sale

5,000

3,252

498

Other operating income

3,439

1,711

4,137

Other operating non-interest income

28,583

13,719

11,983

Provision for loan impairment

(19,866)

(10,606)

(12,204)

Provision for  impairment of investments in finance lease

-

-

-

Provision for/ (recovery of provision)  performance guarantees and credit related commitments

(9)

408

446

Provision for  impairment of other financial assets

(50)

(50)

(41)

Impairment of investment securities available for sale

-

-

-

Operating income after provisions for impairment

131,246

37,024

26,254

Staff costs

(34,563)

(9,956)

(7,617)

Depreciation and amortization

(4,997)

(319)

59

Administrative and other operating expenses

(23,435)

(8,678)

(7,744)

Operating expenses

(62,995)

(18,954)

(15,302)

Profit before tax

68,251

18,070

10,952

Income tax expense

(3,210)

2,547

(275)

Profit for the period

65,041

20,618

10,677

Profit attributable to owners of the bank

-

-

-

 

Key Ratios

 

 

 

 

Standalone

FV Adjusted

Ratios (Based on quarterly averages, where applicable)

Full Year

Q4'2016

20.Oct. - 31.Dec

ROAE

23.0%

27.0%

16.9%

ROAA

3.5%

4.3%

2.8%

Pre-provision ROAE

30.0%

40.4%

35.5%

Pre-provision ROAA

4.6%

6.4%

6.0%

Cost: Income

41.7%

40.1%

40.2%

Cost of Risk

1.5%

3.2%

4.7%

NIM

7.6%

8.4%

8.2%

Loan yields

12.0%

13.1%

13.5%

Deposit rates

4.0%

4.0%

5.0%

Yields on interest earning assets

11.8%

12.7%

13.0%

Cost of Funding

4.1%

4.1%

4.5%

Spread

7.7%

8.6%

8.5%

PAR 90 to gross loans

2.9%

2.9%

2.9%

NPLs to gross loans

3.1%

3.1%

1.3%

NPLs coverage

112.0%

112.0%

61.2%

NPLs coverage with collateral

200.7%

200.7%

280.3%

Provision Level to Gross Loans

3.4%

3.9%

0.8%

Leverage

6.7

6.7

6.5

BIS Tier 1

7.8%

7.8%

7.8%

Total BIS CAR

12.3%

12.3%

12.3%

Basel II/III Tier 1 CAR

10.4%

10.4%

10.4%

Basel II/III Total CAR

12.2%

12.2%

12.2%

 

 

[1] Market share figures are based on data from the National Bank of Georgia (NBG) 

[2] Growth at constant currency rate QoQ

[3] Active products divided by active customers

[4] According to the latest IPM research conducted in November 2016

[5] Excluding POS terminal transactions

[6] For products that are offered through remote channels

[7] Excluding prices of food and energy.

[8] Import figures exclude imports of hepatitis C medicaments donated to Georgia for free.

[9] Visitors staying more than 24h in the country.

[10] Based on internal estimates

[11] Pure exports account for 12.1% of total Corporate USD denominated loans

[12] Pure exports account for 11.0% of total Corporate USD denominated loans

[13] The National Bank of Georgia enforced Basel II/III regulation in June 2014.

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

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

[16] Based on IFRS figures


This information is provided by RNS
The company news service from the London Stock Exchange
 
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