Half-year Report
TBC BANK GROUP PLC ("TBC Bank")
1H 2017 AND 2Q 2017 Unaudited Financial Results
The information contained in this announcement and in the appendices is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 or interim financial statements in accordance with International Accounting Standard 34 'Interim Financial Reporting'. Statutory accounts for the year to 31 December 2016 were approved by the Board of Directors on 31 March 2017, published on 3 April 2017, and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.
This statement provides a summary of the unaudited business and financial trends for the six months ended 30 June 2017 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited and also not subject to the interim review. Unless otherwise stated, references to results in previous periods and other general statements regarding past performance refer to the business results for the same period in 2016.
Forward-Looking Statements
This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause actual results, performance or achievements of TBC Bank Group PLC( "the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation has been extracted from the Group's unaudited management accounts and financial statements. The areas in which management accounts might differ from International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant and you should consult your own professional advisors and/or conduct your own due diligence for complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
Second Quarter and First Half of 2017 Unaudited Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") will release its second quarter and first half of 2017 unaudited financial results on Monday, 21 August 2017 at 7am BST (10am GET).
On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Date & time: Monday, 21 August at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT)
Please dial-in approximately 5 minutes before the start of the call quoting the password TBC Bank:
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Password: |
TBC Bank |
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UK Toll Free: |
0808 109 0700 |
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Standard International Access: |
+44 (0) 20 3003 2666 |
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USA Toll Free: |
1 866 966 5335 |
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New York New York: |
+1 212 999 6659 |
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Russia Toll Free: |
8 10 8002 4902044 |
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Moscow: |
+7 (8) 495 249 9843 |
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Replay Numbers |
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Replay Passcode: |
9565892 |
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UK Toll Free: |
0800 633 8453 |
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Standard International Access: |
+44 (0) 20 8196 1998 |
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USA Toll Free: |
1 866 583 1035 |
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Russia Toll Free: |
8 10 8002 4832044 |
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Moscow: |
+7 (8) 495 249 9840 |
Contacts
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Sean Wade Director of International Media and IR
E-mail: SWade@Tbcbank.com.ge Web: www.tbcgroupbank.com Tel: +44 (0) 7464 609025 Address: 68 Lombard St, London EC3V 9LJ, United Kingdom
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Anna Romelashvili Head of Investor Relations
E-mail: ARomelashvili@Tbcbank.com.ge Web: www.tbcgroupbank.com Tel: +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102 |
Investor Relations Department
E-mail: ir@tbcbank.com.ge Web: www.tbcgroupbank.com Tel: +(995 32) 227 27 27 Address: 7 Marjanishvili St. Tbilisi, Georgia 0102
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Table of Contents
2Q and 1H Results Announcement
Letter from the Chief Executive Officer
Results Overview 1H and 2Q 2017
Results by Segments and Subsidiaries
Principal Risks and Uncertainties
Statement of Directors' Responsibilities
Unaudited Condensed Consolidated Interim Financial Information
TBC BANK Group PLC ("TBC Bank")
TBC Bank Announces 1H 2017 and 2Q 2017 Consolidated Results:
Underlying1 Net Profit for 1H 2017 up by 45.6% YoY to GEL 184.4 million
Underlying1 Net Profit for 2Q 2017 up by 37.2% YoY to GEL 86.3 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 unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS") as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing on 10 August 2016.
In 4Q 2016, TBC Bank acquired Bank Republic which has been consolidated into the Group's results.
Results reported below prior to 30 September 2016 relate to the group previously headed by JSC TBC Bank Georgia.
TBC Bank is the largest banking group in Georgia. Following the acquisition of Bank Republic in late 2016, TBC Bank became the country's leading universal bank, accounting for 36.3% market share by total assets, where 99.7% of its business is concentrated. TBC Bank offers retail, corporate, and MSME banking nationwide.
Financial Highlights
2Q 2017 P&L Highlights
§ Underlying[1] net profit amounted to GEL 86.3 million (2Q 2016: GEL62.9 million; 1Q 2017: GEL 98.1 million)
§ Reported net profit amounted to GEL 79.9 million (2Q 2016: GEL 80.5 million; 1Q 2017: GEL 96.6 million)
§ Underlying1 return on equity (ROE) amounted to 20.4% (2Q 2016: 19.9%; 1Q 2017: 24.6%)
§ Reported return on equity (ROE) amounted to 18.9% (2Q 2016: 25.5%; 1Q 2017: 24.2%)
§ Underlying1 return on asset (ROA) amounted to 3.2% (2Q 2016:3.8%; 1Q 2017:3.7%)
§ Reported return on asset (ROA) amounted to 3.0% (2Q 2016:4.9%; 1Q 2017: 3.7%)
§ Total operating income for the period was up by 32.9% YoY (up by 9.1% YoY to GEL 170.1 million without the Bank Republic estimated contribution) and by 1.8% QoQ to GEL 207.1 million
§ Underlying1 cost to income ratio stood at 41.2% (2Q 2016: 41.7%; 1Q 2017: 39.8%)
§ Reported cost to income was 44.9% (2Q 2016: 45.1%; 1Q 2017: 40.8%)
§ Cost of risk on loans stood at 1.3% and increased by 0.2 pp YoY. QoQ cost of risk remained stable at constant currency rate
§ Net interest margin (NIM) stood at 6.8% in 2Q 2017, down by 1.1 pp YoY and up by 0.2 pp QoQ
§ Risk adjusted net interest margin (NIM) stood at 5.3% in 2Q 2017(2Q 2016: 6.7%; 1Q 2017: 5.1%)
1H 2017 P&L Highlights
§ Underlying1 net profit was up by 45.6% YoY to GEL 184.4 million, delivering ROE without one-offs of 22.5% (1H 2016: 20.4%)
§ Reported net profit was up by 26.7% YoY to GEL176.4 million, delivering ROE of 21.5% (1H 2016: 22.5%)
§ Underlying1 ROA was 3.5% (1H 2016: 3.8%)
§ Reported ROA was 3.3% (1H 2016: 4.2%)
§ Total operating income for the period was up by 36.4% YoY to GEL 410.6 million (up by 11.4% YoY to GEL 335.3 million without the Bank Republic estimated contribution effect)
§ Underlying1 cost to income ratio stood at 40.5% (1H 2016: 41.0%)
§ Reported cost to income stood at 42.8% (1H 2016: 44.7%)
§ Cost of risk on loans stood at 1.1% unchanged from 1H 2016
§ Net interest margin (NIM) stood at 6.7% (1H 2016: 7.8%)
§ Risk adjusted net interest margin (NIM) stood at 5.3% (1H 2016: 6.5%)
Balance Sheet Highlights as at 30 June 2017
§ Total assets reached GEL 11,280.8 million as of 30 June 2017, up by 66.6% YoY and 8.9% QoQ
§ Gross loans and advances to customers stood at GEL 7,386.4 million as of 30 June 2017, up by 56.8% YoY (up by 30.8% YoY to 6,160.4 million without the Bank Republic estimated contribution effect) and up by 3.7% QoQ
§ Net loans to deposits + IFI funding stood at 90.6% and Net Stable Funding Ratio (NSFR) stood at 129%
§ NPLs stood at 3.4%, down by 1.3 pp YoY and stable QoQ
§ NPLs coverage stood at 84.3%, (at 219.3% with collateral) (31 March 2017: 84.6%; 30 June 2016: 85.6%)
§ Total customer deposits stood at GEL 6,666.4 million as of 30 June 2017, up by 56.1% YoY (up by 43.3% YoY to 6,116.9 million without the Bank Republic estimated contribution) and up by 9.8% QoQ
§ Regulatory tier I and total capital adequacy ratios stood at 10.8% and 14.6% respectively
Market Shares[2]
§ Market share in total assets stood at 36.3% up by 10.4 pp YoY and down by 0.1 pp QoQ
§ Market share in total loans was 38.0% as of 30 June 2017, up by 9.8 pp YoY and up by 0.3 pp QoQ
§ In terms of individual loans, the Bank had a market share of 40.8% as of 30 June 2017, up by 9.4 pp YoY and down by 1.0% QoQ. The market share for legal entity loans was 34.9% up by 9.7 pp YoY and up by 1.5 pp QoQ
§ Market share of total deposits stood at 39.8% as of 30 June 2017, up by 10.6 pp YoY and up by 2.3 pp QoQ
§ The Bank maintains its longstanding leadership in individual deposits with a market share of 40.2% up by 5.7 pp YoY and up by 0.1 pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 39.4%, up by 16.1 pp YoY and up by 4.9 pp QoQ
Recent Developments
TBC Bank Group PLC is included in FTSE 250 Index
§ TBC Bank Group PLC joined the FTSE 250 Index on 19 June 2017
TBC Bank wins several awards
§ TBC Bank won two country and four regional awards (CEE) in Digital Banking assigned by Global Finance Magazine:
- Best Consumer and Corporate Digital Bank in Georgia
- Best Integrated Consumer and Corporate Bank Site in Central and Eastern Europe (CEE)
- Best in Social Media and Best Mobile Banking App for Corporate in the CEE region
§ TBC Bank was named the Best Bank in Georgia by Euromoney in its Awards for Excellence for 2017. The bank received this prestigious award for the sixth time.
TBC Bank attracted GEL 45 million from Symbiotics
§ TBC Bank Group PLC's subsidiary, JSC TBC Bank and Symbiotics (through its MSME Bond Platform) completed a transaction amounting to GEL 45 million (USD 18.5 million). The 3-year local currency facility will enable TBC Bank to finance micro, small and medium-sized enterprises in Georgia
Additional Information Disclosure
Additional historical information for certain P&L, balance sheet and capital items and on asset quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Financial Highlights section.
Letter from the Chief Executive Officer
I am pleased to report another set of strong financial results and to update you on recent favorable economic developments.
In the second quarter of 2017, we recorded an underlying1 consolidated net profit of GEL 86.3 million (reported net profit amounted to GEL 79.9 million). Our return on equity excluding one-off costs related to the Bank Republic integration was 20.4% (18.9% including one-off costs), while return on assets excluding one-off costs stood at 3.2% (3.0% including one-off costs). Over the same period, the net interest margin reached 6.8%, marking an increase by 0.2 pp quarter-on-quarter driven by a rise in loan yields by 0.5 pp to 12.4%. Our financial performance was further strengthened by a growth in net fee and commission income which increased by 34.4% or 26.2% year-on-year without the Bank Republic's estimated effect. At the same time, our cost to income ratio excluding one-off costs stood at 41.2% (44.9% with one-off costs).
In terms of balance sheet growth, we have achieved strong results in terms of both loans and deposits. Our loan book grew by 30.8% year-on-year without Bank Republic, or by 56.8% with Bank Republic, while our deposit portfolio increased by 43.3% year-on-year without Bank Republic, or by 56.1% with Bank Republic. The growth was recorded across all segments and, as a result, our market share in loans and deposits reached 38.0% and 39.8% respectively.
We continue to maintain sound asset quality and strong capital adequacy and liquidity levels. As of 30 June 2017, our non-performing loan ratio was 3.4%, down by 1.3 pp on a year-on-year basis, while our non-performing coverage ratio stood at 84% or 219% including collateral. At the same time, our total capital adequacy ratio (CAR) per Basel II/III regulation stood at 14.6% compared to the minimum requirement of 10.8%, and our regulatory tier I ratio stood at 10.8% compared to the minimum requirement of 8.5%. Net loans to deposits + IFI funding stood at 90.6% and the net stable funding ratio (NSFR) stood at 129%.
The macroeconomic outlook is encouraging and continues to outperform the government's initial annual GDP growth projection of 4.0% for 2017. It is also supported by an improved economic environment in the region. According to the initial estimates of National Statistics Office of Georgia, GDP growth reached 4.5% for 1H 2017. Export of goods grew steadily in the reporting period, increasing by 30.1% year-on-year, while remittances rose by 19.7% year-on-year. The tourism sector also confirmed a positive trend as the number of tourists recorded an annual growth of 29.1%. As of June 2017, annual inflation stood at 7.1% due to the one-off increase in administered prices related to the introduction of the excise taxes from January 2017 and higher commodity prices. In the same period, the core inflation was 4.5%.
Accelerated economic development and a stable currency rate in 2Q 2017 continue to underpin sound growth in the banking sector. As a result, total banking loans increased by 14.8%[3] YoY as of 30 June 2017. Also, the National Bank of Georgia's de-dollarisation initiatives introduced from the beginning of this year proved to be successful as we continued to see a positive trend in the reduction of the dollarization level in the banking sector.
In terms of operating performance, usage of our digital channels continue to grow, especially mobile banking. In the second quarter of 2017, the number of transactions conducted via mobile banking was 1.5 times higher than those via internet banking and the number of mobile banking-only users reached approximately 100,000, marking a 29% increase quarter-on-quarter. We also continue to actively enhance our Chat Bot capabilities with the recent addition of new feature-P2P transfers.
Finally, I am also pleased to announce that TBC Bank has won two country and four regional awards in Digital Banking assigned by Global Finance in recognition of our continued innovation in our digital capabilities. TBC Bank has been named Best Consumer and Corporate Digital Bank in Georgia; Best Integrated Consumer and Corporate Bank Site in Central and Eastern Europe (CEE). We are also proud to be awarded for the first time Best Bank in Social Media and Best Mobile Banking App for Corporate in the CEE region. Furthermore, Euromoney Magazine assigned to TBC Bank "the Best Bank in Georgia Award for 2017," acknowledging our efforts to provide the best customer experience in Georgia, develop the best multichannel capabilities in the region, and continue to deliver superior financial results.
Outlook
The favorable macroeconomic conditions combined with our leading positions in the market lay a strong foundation for our future growth prospects. Thus, we would like to reiterate our targets: ROE above 20%, cost to income ratio below 40%, dividend pay-out ratio at 25-35% and loan book growth at c.15% and tier 1 capital adequacy ratio around 10.5%. At the same time, we will continue to focus on extracting cost synergies after the successful integration of Bank Republic; and continue to further enhance our multichannel capabilities, superior customer experience, as well as utilising our cross selling opportunities to increase net fee and commission income and product per customer ratio[4].
Economic Overview
Information set out below relating to the broad economic overview in 2Q 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 CEE, CIS as well as immediate Caucasus region are an important factor in the regional business climate, the bank's performance is therefore largely affected by the developments in the Georgian economy.
The economic growth continues to outperform the initial projections for 2017. Initial estimates show that in 1H 2017 GDP growth averaged 4.5%, compared to the forecast for the whole year of 3.5% and 4% by the International Monetary Fund (IMF) and the Georgian government respectively. The improvement in economic growth in the 1Q 2017 was broad-based across almost all sectors of the economy. Construction (+21.6% YoY), manufacturing (+6.2% YoY) and transport and communications sector (+7.3% YoY) were the major drivers of growth in 1Q 2017. Growth remained robust in Hotels and Restaurants (+8.3%), Financial Sector (+6.8% YoY), Real estate (+6.3%) while most of the other sectors of the economy also increased in real terms in 1Q 2017 compared to the same period last year.
The favourable external environment continues to underpin growth in export, tourism and remittances inflows. The regional setting improved markedly since the end of 2016, with the economies of all of major trading partners showing improvements in growth rates compared to the 2016 figures.
The current account deficit showed sizeable improvement, in 1Q 2017 the deficit to GDP ratio stood at 11.8%, down from 13.5% in the same period of the previous year. Sharp growth in export inflows (+4.8% of GDP YoY) almost fully balanced for the increased imports and the trade balance in goods worsened slightly by 0.1% of GDP YoY. The significant growth of tourism inflows boosted the trade balance in services from 8.3% in 1Q 2016 to 10.5% in 1Q 2017. Transfers also went up by 1.2% of GDP YoY in 1Q 2017, largely offsetting the decrease of the income account by 1.4% of GDP. Major positive components of current account balance maintained growth trends, implying that it improved further in 2Q 2017.
Annual growth of exports of goods remained at an impressive 30% in 2Q 2017, with the 1H 2017 export growth figure averaging 30.1% YoY. Export growth has been solid to EU countries, recording a +30.4% YoY in 1H 2017. The sharpest rise in export was registered towards CIS markets (+61.2% YoY), partly to be explained by the low base registered in previous years, as in 2015-2016 exports contracted the most towards this region. Exports to other states increased by a relatively modest 8.7%. However, it is worth highlighting that export to China continues impressive growth, in 1H exports to this market was up by 34% YoY, making China the second largest destination for Georgian exports. Free trade agreement with China is expected to enter into force by the end of 2017 further improving growth potential of Georgian exports to the largest market of the world.
From the goods perspective, traditional export commodities such as ferro-alloys (+106.1% YoY), wines (+53% YoY), other spirits (+27.4% YoY) and mineral waters (+16% YoY) contributed the most to the export growth in 1H 2017. In addition, the increase of copper ores re-export (+46.1% YoY), medications (+37.8% YoY) and cars (+13% YoY) also supported the export figures.
Some setbacks in oil and metal commodities' prices, a sharper reduction in imports of passenger cars, resulted in a slower annual import growth in 2Q 2017 (+3.6% YoY), compared to previous quarter (+15.1% YoY). As a result of the lower growth of imports, the trade balance improved by 6.7% YoY or by about USD 90 mln in 2Q 2017.
Overall in 1H 2017 imports of goods increased by 8.8% YoY, mostly due to the higher imports of petroleum products and medicaments. Growth of imports was fully offset by expanding exports, in 1H 2017 trade balance remained broadly unchanged (-0.2% YoY) on an annual basis.
The tourism industry maintained impressive growth rates, in 1H 2017 the number of tourists increased by 29.1% YoY while money inflows from the tourism grew by an estimated 26.2% YoY to USD 1.1 billion.
The positive trend was confirmed by the remittances inflow which in 2Q increased by 17.6% YoY, following a 22.3% YoY increase in 1Q 2017. This growth was primarily driven by growth of transfers from Israel (+102.2% YoY), Russia (+14.5% YoY), Turkey (+24.8% YoY), USA (+16.6% YoY) and Italy (+11.1% YoY).
The improved external inflows enabled the National Bank of Georgia ("NBG") to start refilling its international reserves. In 2Q 2017 the NBG purchased about USD 90 million on the foreign exchange market to remove excessive appreciating pressure on the GEL exchange rate. In 2Q 2017 USD/GEL exchange rate appreciated by 1.5% QoQ, while in the same period the GEL depreciated by 4.5% against the EUR.
As expected at the beginning of 2017, the headline inflation exceeded the target due to the one-off increase in administered prices related to the introduction of the excise taxes from January 2017 as well as higher commodity prices on the global markets. As of June 2017, annual inflation stood at 7.1% while core[5] inflation remained close to target at 4.5% over the same period. Direct impact of increased excise taxes on tobacco, petroleum and higher oil prices on CPI inflation stood at c. 2.7 pp, which should gradually decrease by the end of 2017. The NBG tightened the policy rate modestly to 7% in early May, from 6.5% of end-2016, and left it unchanged during the following two monetary policy committee meetings, announcing that the current level of policy rate, was enough to ensure that inflation would move to the 3% target starting from next year. Over the medium term the refinancing rate is expected to gradually align closer to its long run neutral rate of 5-6%.
In order to ensure fiscal sustainability after the significant profit tax reform, the government has taken the number of steps, including the increase of excise taxes on petroleum, cars, tobacco and imposing stricter controls to current spending In 1H 2017 fiscal deficit stood at an estimated 1.3% of GDP, 1.8 pp lower compared to the same indicator of the last year. Narrower fiscal deficit reflects better-than-expected economic growth as well as a more prudent management of current and social spending by the government. Approval of IMF's 3 year program in the first half of 2017 is an additional factor ensuring the public finances will remain healthy over the medium term.
To sum up, the improved external environment, coupled with a more active public infrastructure spending and gradual improvement in consumer and business[6] expectations lays the foundations for the economy to outperform the initial expectation for the FY 2017 making Georgia one of the top performers compared to CIS and or CEE region in 2017 in terms of economic growth rates.
Results Overview 1H and 2Q 2017
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Income Statement Highlights |
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in thousands of GEL |
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
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Net Interest Income |
292,074 |
216,538 |
34.9% |
149,742 |
142,333 |
107,654 |
39.1% |
5.2% |
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Net Fee and Commission Income |
55,217 |
39,683 |
39.1% |
28,741 |
26,477 |
21,385 |
34.4% |
8.6% |
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Other Operating Non-Interest Income |
63,283 |
44,771 |
41.3% |
28,611 |
34,672 |
26,840 |
6.6% |
-17.5% |
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Provisioning Charges |
-43,375 |
-28,669 |
51.3% |
-25,717 |
-17,658 |
-14,329 |
79.5% |
45.6% |
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Operating Income after Provisions for Impairment |
367,200 |
272,323 |
34.8% |
181,377 |
185,823 |
141,550 |
28.1% |
-2.4% |
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Operating Expenses |
-175,850 |
-134,668 |
30.6% |
-92,929 |
-82,920 |
-70,369 |
32.1% |
12.1% |
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Profit Before Tax |
191,350 |
137,655 |
39.0% |
88,447 |
102,903 |
71,181 |
24.3% |
-14.0% |
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Income Tax Expense |
-14,936 |
1,582 |
NMF |
-8,590 |
-6,345 |
9,359 |
-191.8% |
35.4% |
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Profit for the Period |
176,415 |
139,237 |
26.7% |
79,857 |
96,558 |
80,540 |
-0.8% |
-17.3% |
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Balance Sheet and Capital Highlights |
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Jun-17 |
Mar-17 |
Change QoQ |
Jun-16 |
Change YoY |
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In Millions |
GEL |
USD |
GEL |
USD |
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GEL |
USD |
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Total Assets |
11,280.8 |
4,686.3 |
10,362.6 |
4,237.9 |
8.9% |
6,772.2 |
2,891.3 |
66.6% |
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Gross Loans |
7,386.4 |
3,068.5 |
7,121.0 |
2,912.3 |
3.7% |
4,711.1 |
2,011.3 |
56.8% |
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Customer Deposits |
6,666.4 |
2,769.4 |
6,070.8 |
2,482.8 |
9.8% |
4,269.8 |
1,822.9 |
56.1% |
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Total Equity |
1,690.5 |
702.3 |
1,680.5 |
687.3 |
0.6% |
1,314.9 |
561.4 |
28.6% |
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Regulatory Tier I Capital |
1,282.9 |
532.9 |
1,115.2 |
456.1 |
15.0% |
999.2 |
426.6 |
28.4% |
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Regulatory Total Capital |
1,732.8 |
719.8 |
1,472.7 |
602.3 |
17.7% |
1,241.5 |
530.0 |
39.6% |
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Regulatory Risk Weighted Assets |
11,866.0 |
4,929.4 |
9,878.1 |
4,039.8 |
20.1% |
7,912.5 |
3,378.1 |
50.0% |
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Key Ratios |
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
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ROE |
21.5% |
22.5% |
-1.0% |
18.9% |
24.2% |
25.5% |
-6.6% |
-5.3% |
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ROA |
3.3% |
4.2% |
-0.9% |
3.0% |
3.7% |
4.9% |
-1.9% |
-0.7% |
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Pre-Provision ROE |
26.9% |
27.1% |
-0.2% |
25.1% |
28.7% |
30.0% |
-4.9% |
-3.6% |
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Cost to Income |
42.8% |
44.7% |
-1.9% |
44.9% |
40.8% |
45.1% |
-0.2% |
4.1% |
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Cost of Risk |
1.1% |
1.1% |
0.0% |
1.3% |
0.9% |
1.1% |
0.2% |
0.4% |
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NPL to Gross Loans |
3.4% |
4.7% |
-1.3% |
3.4% |
3.4% |
4.7% |
-1.3% |
0.0% |
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Regulatory Tier 1 CAR |
10.8% |
12.6% |
-1.8% |
10.8% |
11.3% |
12.6% |
-1.8% |
-0.5% |
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Regulatory Total CAR |
14.6% |
15.7% |
-1.1% |
14.6% |
14.9% |
15.7% |
-1.1% |
-0.3% |
|
Leverage (Times) |
6.7 |
5.2 |
1.5 |
6.7 |
6.2 |
5.2 |
1.5 |
0.5 |
Income Statement Discussion
|
Net Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
|
Loans and Advances to Customers |
438,753 |
302,373 |
45.1% |
223,665 |
215,089 |
147,908 |
51.2% |
4.0% |
|
Investment Securities Available for Sale |
19,088 |
12,181 |
56.7% |
10,286 |
8,801 |
5,127 |
100.6% |
16.9% |
|
Due from Other Banks |
4,908 |
2,536 |
93.6% |
3,157 |
1,752 |
1,281 |
146.5% |
80.2% |
|
Bonds Carried at Amortized Cost |
15,250 |
16,215 |
-6.0% |
7,809 |
7,440 |
8,335 |
-6.3% |
5.0% |
|
Investment in Leases |
9,667 |
7,721 |
25.2% |
4,981 |
4,686 |
3,516 |
41.7% |
6.3% |
|
Interest Income |
487,667 |
341,026 |
43.0% |
249,898 |
237,769 |
166,167 |
50.4% |
5.1% |
|
Customer Accounts |
108,411 |
70,453 |
53.9% |
54,560 |
53,852 |
34,674 |
57.3% |
1.3% |
|
Due to Credit Institutions |
68,952 |
38,465 |
79.3% |
36,589 |
32,363 |
16,266 |
124.9% |
13.1% |
|
Subordinated Debt |
17,187 |
14,716 |
16.8% |
8,502 |
8,685 |
7,206 |
18.0% |
-2.1% |
|
Debt Securities in Issue |
1,042 |
855 |
21.8% |
505 |
536 |
366 |
38.1% |
-5.8% |
|
Interest Expense |
195,592 |
124,488 |
57.1% |
100,157 |
95,436 |
58,512 |
71.2% |
4.9% |
|
Net Interest Income |
292,074 |
216,538 |
34.9% |
149,742 |
142,333 |
107,654 |
39.1% |
5.2% |
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin |
6.7% |
7.8% |
-1.1% |
6.8% |
6.6% |
7.9% |
-1.1% |
0.2% |
1H 2017 to 1H 2016 Comparison
In 1H 2017, net interest income grew by 34.9% YoY to GEL 292.1 million (GEL 234.5 million without the Bank Republic estimated contribution effect), resulting from a 43.0% higher interest income and 57.1% higher interest expense.
Without the Bank Republic estimated contribution effect, interest income increased by GEL 55.8 million, or 16.4% YoY, mainly driven by a higher interest income from loans to customers by GEL 51.5 million, or 17.0%, which is primarily related to the 30.8% gross loan portfolio increase. An increase in interest income from investment securities (comprising both investment securities available for sale and bonds carried at amortized cost) of GEL 1.0 million, or 3.5% also contributed to the overall increase. This resulted primarily from the large rise in the respective portfolio. This effect was magnified by a higher net interest income from due from other banks by GEL 1.4 million or 55.9%, which was caused by the large increase in respective portfolio.
The Bank Republic effect mainly contributed a GEL 84.9 million, or 19.4%, to the interest income from loans and advances to customers, which totaled GEL 438.8 million in 1H 2017, and GEL 4.9 million, or 25.9%, to interest income from investment securities, which totaled GEL 19.1 million in 1H 2017. As a result, the overall Bank Republic estimated contribution effect was GEL 90.8 million, or 18.6%, to the interest income.
Loan yields declined over the same period from 13.5% to 12.1%. The drop was driven by a decrease in rates on FC-denominated loans, from 10.2% to 9.3%, as well as by decline in GEL-denominated loans rates from 19.6% to 16.9%. The decline of yields on investment securities, from 9.2% to 7.9%, over the same period is related to a lower average refinance rate in the country in 1H 2017 compared to 1H 2016. As a result, the yields on average interest earning assets dropped from 12.3% in 1H 2016 to 11.1% in 1H 2017.
In the reporting period, without the Bank Republic estimated contribution effect, interest expense increased by GEL 38.5 million, or 30.9% YoY. The rise was mainly due to a higher interest expense on due to customer accounts by GEL 23.1 million, or 32.8%, and due to credit institutions by GEL 14.1 million or 36.7%. The increase in interest expense on customer accounts primarily resulted from the 56.1% rise in the respective portfolio. The increase in interest expense on due to credit institutions was driven by the large increase in portfolio.
The Bank Republic estimated contribution effect added a GEL 14.8 million, or 13.7%, to the interest expense on customer accounts, which amounted GEL 108.4 million in 1H 2017 and GEL 16.4 million or 23.7% to interest expense on interest expense due to credit institutions, which amounted GEL 69.0 million. As a result, the overall Bank Republic contribution effect was a GEL 32.6 million, or 16.7%, to the interest expense.
The cost of deposits decreased by 0.1 pp to 3.4% in 1H 2017. The cost of borrowing dropped to 6.3% compared to 8.1% in 1H 2016. This was mainly due to the 3.2 pp decrease in rates on Lari-denominated borrowings and the 0.8 pp decrease in rates on FC-denominated borrowings. As a result, the cost of funding ratio declined by 0.3 pp to 4.4% in 1H 2017.
Consequently, NIM was 6.7% in 1H 2017, compared to 7.8% in 1H 2016.
2Q 2017 to 2Q 2016 Comparison
In 2Q 2017, the net interest income increased by GEL 42.1 million, or 39.1% YoY to GEL 149.7 million (GEL 119.5 million without the Bank Republic estimated contribution effect), as a result of a GEL 83.7 million, or 50.4%, increase in interest income and a GEL 41.6 million, or 71.2%, rise in interest expense, compared to 2Q 2016.
Without the Bank Republic estimated contribution effect, the GEL 38.8 million growth, or 23.3% YoY, increase in interest income was mainly due to a GEL 33.3 million, or 22.5%, increase in interest income from loans. This in turn was due to the 30.8% rise in the loan portfolio. The gain in interest income was also driven by the growth in interest income from investment securities (comprising both investment securities available for sale and bonds carried at amortized cost) by GEL 3.3 million, or 20.6%, which resulted from the significant increase in respective portfolio.
The Bank Republic estimated contribution effect added a GEL 42.5 million, or 19.0%, to the interest income from loans and advances to customers, which amounted GEL 223.7 million in 2Q 2017. It is also added GEL 1.9 million, or 10.3%, to interest income from investment securities, which amounted to GEL 18.1 million in 2Q 2017. Consequently, the overall Bank Republic contribution effect was a GEL 45.0 million, or 18.0%, to the interest income. In the reporting period loan yields declined from 13.3% to 12.4% resulting from the decrease in FC rates from 9.9% to 9.5% and decrease in GEL rates from 19.8% to 17.0%. The decrease in yields on investment securities, by 1.3 pp to 7.8%, is in line with the refinance rate decrease. Consequently, these changes led to the decrease in yields on average interest earning assets from 12.2% in 2Q 2016 to 11.3% in 2Q 2017.
Without the Bank Republic estimated contribution effect, interest expense amounted to GEL 86.0 million, marking as increase of GEL 27.5 million, or 47.0% YoY. The growth was primarily attributable to the increased interest expense on due to credit institutions by GEL 14.1 million, or 86.4%, and due customer accounts by GEL 12.9 million, or 37.2%. The former resulted from the expansion in the respective portfolio, while the increase in interest expense on customer accounts was due to a 43.3% rise in respective portfolio.
The Bank Republic estimated contribution added GEL 7.4 million, or 13.5%, to the interest expense on customer accounts, which amounted to GEL 54.6 million in 2Q 2017. It also added GEL 6.3 million, or 17.1%, to the interest expense on due to credit institutions, which totaled GEL 36.6 million in 2Q 2017. Consequently, the Bank Republic contribution effect was GEL 14.1 million or 14.1% to expense.
The rate on credit institutions decreased by 1.5 pp to 6.4%, while the cost of deposits increased by 0.1 pp to 3.5%. As a result, the cost of funds stood at 4.5%, unchanged from 2Q 2016.
Consequently, NIM decreased to 6.8% in 2Q 2017, compared to 7.9% in 2Q 2016.
2Q 2017 to 1Q 2017 Comparison
On a QoQ basis, net interest income increased by GEL 7.4 million, or 5.2% QoQ, to GEL 149.7 million due to a 12.1 million, or 5.1%, higher interest income and GEL 4.7 million, or 4.9%, higher interest expense.
The increase in interest income mainly resulted from the increase in interest income on loans by GEL 8.6 million, or 4.0%, which in turn was due to the 0.5 pp increase in yields on loans to 12.4% and the 3.7% increase in loan portfolio. The increase in loan yields stemmed from 0.2 pp rise in GEL rates to 17.0% and 0.2 pp increase in FC rates to 9.5%. The rise in interest income was also driven by the increase in interest income from investment securities by GEL 1.5 million, or 16.9%, which was mainly driven by a 13.9% increase in respective portfolio. This effect was slightly offset by the reduced yields on such securities by 0.6 pp to 7.8%. Yields on investment securities dropped despite the slight increase in refinance rate due to the increased demand on local securities from the banking sector. As a result, yields on average interest earning assets increased to 11.3%, compared to 11.1% in 1Q 2017.
The increase in interest expense was primarily due to the rise in the interest expense on borrowed funds from financial institutions by GEL 4.2 million, or 13.1%, which resulted from the 9.5% increase in the respective portfolio and 0.3 pp increase in respective rate to 6.4%. It should be noted, that all Bank Republic borrowings have been re-negotiated, resulting in net positive effect on P&L. The GEL 0.7 million, or 1.3% QoQ increase in interest expense on customer deposits was mainly due to the 9.8% increase in respective portfolio and a 0.1 pp rise in the cost of deposits, to 3.5%. As a result, the cost of funds increased to 4.5%, from 4.4% in 1Q 2017.
Consequently, on a QoQ basis, NIM increased by 0.2 pp to 6.8%.
|
Fee and Commission Income |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
In thousands of GEL |
|
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
||
|
Card Operations |
|
40,245 |
26,848 |
49.9% |
19,416 |
20,829 |
13,566 |
43.1% |
-6.8% |
||
|
Settlement Transactions |
|
28,159 |
18,114 |
55.5% |
14,063 |
14,095 |
9,615 |
46.3% |
-0.2% |
||
|
Guarantees Issued |
|
6,072 |
6,132 |
-1.0% |
3,328 |
2,744 |
3,812 |
-12.7% |
21.3% |
||
|
Issuance of Letters of Credit |
|
3,459 |
2,553 |
35.5% |
2,050 |
1,409 |
1,074 |
90.8% |
45.5% |
||
|
Cash Transactions |
|
7,470 |
5,489 |
36.1% |
4,042 |
3,428 |
3,134 |
29.0% |
17.9% |
||
|
Foreign Exchange Operations |
|
582 |
554 |
5.1% |
362 |
220 |
209 |
73.1% |
64.3% |
||
|
Other |
|
3,731 |
2,538 |
47.0% |
1,957 |
1,774 |
1,271 |
54.0% |
10.3% |
||
|
Fee and Commission Income |
|
89,719 |
62,228 |
44.2% |
45,219 |
44,500 |
32,681 |
38.4% |
1.6% |
||
|
Card Operations |
|
24,005 |
14,910 |
61.0% |
11,229 |
12,777 |
7,322 |
53.4% |
-12.1% |
||
|
Settlement Transactions |
|
3,385 |
2,598 |
30.3% |
1,866 |
1,520 |
1,358 |
37.4% |
22.8% |
||
|
Guarantees Issued |
|
561 |
267 |
110.4% |
294 |
267 |
126 |
132.8% |
10.0% |
||
|
Letters of Credit |
|
465 |
904 |
-48.5% |
252 |
213 |
423 |
-40.5% |
18.1% |
||
|
Cash Transactions |
|
2,105 |
1,269 |
65.9% |
1,098 |
1,007 |
710 |
54.6% |
9.0% |
||
|
Foreign Exchange Operations |
|
89 |
67 |
32.3% |
1 |
88 |
-1 |
-183.1% |
-99.0% |
||
|
Other |
|
3,891 |
2,531 |
53.7% |
1,740 |
2,152 |
1,358 |
28.1% |
-19.2% |
||
|
Fee and Commission Expense |
|
34,502 |
22,546 |
53.0% |
16,478 |
18,023 |
11,296 |
45.9% |
-8.6% |
||
|
Card Operations |
|
16,240 |
11,938 |
36.0% |
8,187 |
8,053 |
6,244 |
31.1% |
1.7% |
||
|
Settlement Transactions |
|
24,773 |
15,516 |
59.7% |
12,198 |
12,576 |
8,258 |
47.7% |
-3.0% |
||
|
Guarantees |
|
5,512 |
5,865 |
-6.0% |
3,034 |
2,477 |
3,686 |
-17.7% |
22.5% |
||
|
Letters of Credit |
|
2,994 |
1,649 |
81.5% |
1,798 |
1,195 |
651 |
176.3% |
50.4% |
||
|
Cash Transactions |
|
5,365 |
4,220 |
27.1% |
2,944 |
2,421 |
2,424 |
21.5% |
21.6% |
||
|
Foreign Exchange Operations |
|
493 |
487 |
1.4% |
361 |
132 |
210 |
71.7% |
173.2% |
||
|
Other |
|
-160 |
7 |
NMF |
218 |
-378 |
-87 |
NMF |
-157.7% |
||
|
Net Fee And Commission Income |
|
55,217 |
39,683 |
39.1% |
28,741 |
26,477 |
21,385 |
34.4% |
8.6% |
||
1H 2017 to 1H 2016 Comparison
In 1H 2017, net fee and commission income totaled GEL 55.2 million, up by GEL 15.5 million, or 39.1%, compared to 1H 2016. This increase resulted mainly from a GEL 9.3 million, or 59.7%, rise in net fee and commission income from settlement transactions, a GEL 4.3 million, or 36.0%, increase in net card operations, a GEL 1.3 million, or 81.5%, rise in net letters of credit issued, and a GEL 1.1 million, or 27.1%, increase in net cash transactions. The Bank Republic estimated contribution was GEL 3.7 million, or 6.6%, in the net fee and commission income.
2Q 2017 to 2Q 2016 Comparison
In 2Q 2017, net fee and commission income totaled GEL 28.7 million, up by GEL 7.4 million, or 34.4% compared to 2Q 2016. This increase resulted mainly from a GEL 3.9 million, or 47.7%, gain in net fee and commission income from settlement transactions, GEL 1.9 million, or 31.1%, increase in net card operations and GEL 1.1 million, or 176.3%, GEL increase in net letters of credit issued. This increase was partially offset GEL 0.7 million, or 17.7%, decrease in net guarantees issued which was due to one-off income, in the amount of GEL 1.5 million, related to one large customer in 2Q 2016. The Bank Republic estimated contribution effect was a GEL 1.8 million, or 6.1%, in net fee and commission income.
2Q 2017 to 1Q 2017 Comparison
On a QoQ basis, net fee and commission income increased by GEL 2.3 million, or 8.6%, compared to 1Q 2017. This was primarily driven by a GEL 0.6 million, or 50.4%, increase in net fee and commission income from net letters of credit, by a GEL 0.6 million, or 22.5%, increase in guarantees issued, and by a GEL 0.5 million, or 21.6%, increases in the net cash transactions.
|
Other Operating Non-Interest Income and Insurance Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
|
Gains Less Losses from Trading in Foreign Currencies and Foreign Exchange Translations |
45,429 |
28,085 |
61.8% |
23,237 |
22,192 |
13,459 |
72.7% |
4.7% |
|
Share of Profit of Associates |
577 |
- |
NMF |
484 |
93 |
- |
NMF |
NMF |
|
Gains Less Losses/(Losses Less Gains) from Derivative Financial Instruments |
-38 |
-472 |
-91.9% |
-35 |
-3 |
-109 |
-68.0% |
NMF |
|
Gains less Losses from Disposal of Investment Securities Available for Sale |
- |
8,795 |
-100.0% |
- |
- |
8,795 |
-100.0% |
NMF |
|
Revenues from Cash-In Terminal Services |
597 |
509 |
17.3% |
334 |
262 |
276 |
20.9% |
27.4% |
|
Revenues from Operational Leasing |
3,510 |
3,528 |
-0.5% |
1,726 |
1,784 |
1,718 |
0.5% |
-3.3% |
|
Gain from Sale of Investment Properties |
1,174 |
230 |
NMF |
982 |
192 |
15 |
NMF |
NMF |
|
Gain from Sale of Inventories of Repossessed Collateral |
945 |
1,169 |
-19.2% |
591 |
354 |
947 |
-37.6% |
67.1% |
|
Revenues from Non-Credit Related Fines |
96 |
400 |
-76.0% |
46 |
50 |
267 |
-82.8% |
-8.4% |
|
Gain on Disposal of Premises and Equipment |
191 |
96 |
99.4% |
164 |
27 |
30 |
NMF |
NMF |
|
Other |
7,722 |
2,432 |
NMF |
-774 |
8,496 |
1,442 |
NMF |
NMF |
|
Other Operating Income |
14,234 |
8,363 |
70.2% |
3,069 |
11,166 |
4,695 |
-34.6% |
-72.5% |
|
Insurance Profit |
3,081 |
- |
NMF |
1,856 |
1,225 |
- |
NMF |
51.5% |
|
Other Operating Non-Interest Income and Insurance Profit |
63,283 |
44,771 |
41.3% |
28,611 |
34,672 |
26,840 |
6.6% |
-17.5% |
1H 2017 to 1H 2016 Comparison
Total other operating non-interest income and insurance profit increased by GEL 18.5 million, or by 41.3% YoY, to GEL 63.3 million in 1H 2017. This increase was mainly driven by a GEL 17.3 million or 61.8% increase in net gains less losses from trading in foreign currencies and foreign exchange translations mainly driven by increased trade volume. The rise is also due to a GEL 3.1 million increase in insurance profit and a GEL 0.9 million increase in gain from sale of investment properties. The increase across these items, was largely offset by a GEL 8.8 million drop in net gains less losses from disposal of investment securities available for sale due to one-off gain from sale of investment security in 2Q 2016. The Bank Republic's estimated contribution in total other operating non-interest income was GEL 14.1 million or 22.2% , out of which GEL 7.6 million was related to gains less losses from trading in foreign currencies and foreign exchange translations.
2Q 2017 to 2Q 2016 Comparison
Total other operating non-interest income and insurance profit increased by GEL 1.8 million or by 6.6% YoY, to GEL 28.6 million in 2Q 2017. This increase was mainly driven by the GEL 9.8 million or 72.7% increase in gains less losses from trading in foreign currencies and foreign exchange translations mainly driven by increased trade volume, and GEL 1.9 million increase in insurance profit. This effect was largely offset by GEL 8.8 million decrease in gains less losses from disposal of investment securities available for sale due to one-off case mentioned above. The Bank Republic's estimated contribution was GEL 5.0 million or 17.4%, out of which GEL 3.6 million was related to gains less losses from trading in foreign currencies and foreign exchange translations.
2Q 2017 to 1Q 2017 Comparison
On a QoQ basis, total other operating non-interest income and insurance profit contracted by GEL 6.1 million, or by 17.5%, primarily driven by the GEL 7.5 million decrease in other operating income related to the gain on sale of Credit Info shares and fair value adjustments on the Bank Republic loan portfolio in 1Q 2017. This effect was slightly offset by a GEL 1.0 million or 4.7% increase in gains less losses from trading in foreign currencies and foreign exchange translations.
|
Provision for Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
|
Provision for Loan Impairment |
-40,367 |
-25,277 |
59.7% |
-23,444 |
-16,922 |
-12,211 |
92.0% |
38.5% |
|
Provision for Impairment of Investments in Finance Lease |
-129 |
-111 |
16.5% |
-97 |
-31 |
74 |
NMF |
NMF |
|
Provision for/(Recovery of Provision) Performance Guarantees and Credit Related Commitments |
1,546 |
-2,076 |
-174.5% |
1,454 |
92 |
-1,047 |
NMF |
NMF |
|
Provision for Impairment of Other Financial Assets |
-4,425 |
-1,194 |
NMF |
-3,628 |
-797 |
-1,145 |
NMF |
NMF |
|
Impairment of Investment Securities Available for Sale |
- |
-11 |
-100.0% |
- |
- |
- |
-100.0% |
NMF |
|
Total Provision Charges for Impairment |
-43,375 |
-28,669 |
51.3% |
-25,717 |
-17,658 |
-14,329 |
79.5% |
45.6% |
|
Operating Income after Provisions for Impairment |
367,200 |
272,323 |
34.8% |
181,377 |
185,823 |
141,550 |
28.1% |
-2.4% |
|
|
|
|
|
|
|
|
|
|
|
Cost of Risk |
1.1% |
1.1% |
0.0% |
1.3% |
0.9% |
1.1% |
0.2% |
0.4% |
1H 2017 to 1H 2016 Comparison
In 1H 2017, total provision charges increased by GEL 14.7 million to GEL 43.4 million, compared to 1H 2016, mainly driven by the increased charges on loans by GEL 15.1 million, while cost of risk on loans was stable amounting to 1.1%. A GEL 3.2 million increase in provision for impairment of other financial assets, related to one of the debtors of the bank, was offset by a GEL 3.6 million decrease in provision for performance guarantees and credit related commitments, related to the overall improvement in the corporate book performance.
2Q 2017 to 2Q 2016 Comparison
In 2Q 2017, total provision charges increased by GEL 11.4 million to GEL 25.7 million compared to 2Q 2016. The increase is mainly caused by the increase in charges on loans by GEL 11.2 million. A GEL 2.5 million increase in provision for impairment of other financial assets, related to one of the debtors of the bank, was offset by a GEL 2.5 million decrease in provision for performance guarantees and credit related commitments.
In 2Q 2017, the cost of risk on loans was 1.3%, compared to 1.1% in 2Q 2016.
2Q 2017 to 1Q 2017 Comparison
On a QoQ basis, total provision increased by a GEL 8.1 million, amounting to GEL 25.7 million. Provision charges on loans increased by GEL 6.5 million, which was mainly driven by the GEL exchange rate appreciation in 1Q 2017; without currency effect provision charges on loans would have been broadly stable. A GEL 2.8 million increase in provisions for other financial assets also contributed to increase in total provision charges. This increase was partially offset by the GEL 1.4 million decrease in provision charges for performance guarantees and credit related commitments.
The cost of risk on loans amounted to 1.3%, compared to 0.9% in 1Q 2017, without the currency effect cost of risk would have been Bank broadly stable.
Further details on asset quality are available under Balance Sheet Discussion section.
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
1H'17 |
1H'16 |
Change in % |
2Q'17 |
1Q'17 |
2Q'16 |
Change YoY |
Change QoQ |
|
Staff Costs |
102,375 |
69,473 |
47.4% |
54,838 |
47,538 |
35,301 |
55.3% |
15.4% |
|
Provisions for Liabilities and Charges |
-2,495 |
- |
NMF |
-2,400 |
-95 |
- |
NMF |
NMF |
|
Depreciation and Amortization |
17,523 |
13,610 |
28.8% |
8,919 |
8,605 |
7,042 |
26.6% |
3.6% |
|
Professional services |
5,825 |
16,807 |
-65.3% |
2,410 |
3,415 |
10,106 |
-76.2% |
-29.4% |
|
Advertising and marketing services |
6,797 |
4,846 |
40.3% |
3,737 |
3,060 |
2,923 |
27.9% |
22.1% |
|
Rent |
11,589 |
8,397 |
38.0% |
5,753 |
5,836 |
4,056 |
41.8% |
-1.4% |
|
Utility services |
3,020 |
2,422 |
24.7% |
1,302 |
1,717 |
1,102 |
18.2% |
-24.2% |
|
Intangible asset enhancement |
4,781 |
3,700 |
29.2% |
2,567 |
2,214 |
1,821 |
41.0% |
16.0% |
|
Taxes other than on income |
2,812 |
2,492 |
12.9% |
1,301 |
1,511 |
1,329 |
-2.1% |
-13.9% |
|
Communications and supply |
1,801 |
1,505 |
19.7% |
1,015 |
786 |
750 |
35.5% |
29.2% |
|
Stationary and other office expenses |
2,240 |
1,633 |
37.2% |
1,140 |
1,100 |
790 |
44.3% |
3.6% |
|
Insurance |
1,976 |
1,270 |
55.6% |
1,446 |
530 |
665 |
117.4% |
173.0% |
|
Security services |
999 |
881 |
13.5% |
483 |
517 |
481 |
0.3% |
-6.5% |
|
Premises and equipment maintenance |
2,697 |
1,269 |
112.6% |
1,054 |
1,644 |
682 |
54.4% |
-35.9% |
|
Business trip expenses |
907 |
876 |
3.6% |
543 |
365 |
523 |
3.7% |
48.8% |
|
Transportation and vehicles maintenance |
798 |
642 |
24.3% |
381 |
416 |
328 |
16.1% |
-8.4% |
|
Charity |
417 |
486 |
-14.2% |
145 |
271 |
215 |
-32.4% |
-46.4% |
|
Personnel training and recruitment |
727 |
509 |
42.9% |
323 |
404 |
275 |
17.4% |
-20.0% |
|
Write-down of current assets to fair value less costs to sell |
-183 |
52 |
NMF |
-126 |
-57 |
122 |
NMF |
119.6% |
|
Loss on disposal of Inventory |
1,186 |
537 |
121.0% |
231 |
955 |
252 |
-8.4% |
-75.9% |
|
Loss on disposal of investment properties |
385 |
- |
NMF |
385 |
- |
- |
NMF |
NMF |
|
Loss on disposal of premises and equipment |
171 |
74 |
130.9% |
48 |
123 |
34 |
42.4% |
-61.3% |
|
Impairment of intangible assets |
1,850 |
19 |
NMF |
1,850 |
- |
- |
NMF |
NMF |
|
Gains/(losses) on initial recognition of assets at rates above/below market |
- |
- |
NMF |
- |
- |
- |
NMF |
NMF |
|
Acquisition costs |
825 |
- |
NMF |
518 |
307 |
- |
NMF |
68.9% |
|
Gross Change in IBNR |
391 |
- |
NMF |
170 |
221 |
- |
NMF |
-23.1% |
|
Other |
6,435 |
3,171 |
102.9% |
4,897 |
1,537 |
1,571 |
NMF |
NMF |
|
Administrative and Other Operating Expenses |
58,446 |
51,586 |
13.3% |
31,573 |
26,873 |
28,026 |
12.7% |
17.5% |
|
Operating Expenses |
175,850 |
134,668 |
30.6% |
92,929 |
82,920 |
70,369 |
32.1% |
12.1% |
|
Profit before Tax |
191,350 |
137,655 |
39.0% |
88,447 |
102,903 |
71,181 |
24.3% |
-14.0% |
|
Income Tax Expense |
-14,936 |
1,582 |
NMF |
-8,590 |
-6,345 |
9,359 |
-191.8% |
35.4% |
|
Profit for the Period |
176,415 |
139,237 |
26.7% |
79,857 |
96,558 |
80,540 |
-0.8% |
-17.3% |
|
|
|
|
|
|
|
|
|
|
|
Cost to Income |
42.8% |
44.7% |
-1.9% |
44.9% |
40.8% |
45.1% |
-0.2% |
4.1% |
|
ROE |
21.5% |
22.5% |
-1.0% |
18.9% |
24.2% |
25.5% |
-6.6% |
-5.3% |
|
ROA |
3.3% |
4.2% |
-0.8% |
3.0% |
3.7% |
4.9% |
-1.9% |
-0.7% |
1H 2017 to 1H 2016 Comparison
Total operating expenses excluding one-offs and the Bank Republic estimated contribution effect amounted to GEL 138.1 million, up by 15.4%, or GEL 18.4 million, YoY. This increase was driven by a GEL 13.7 million increase in staff costs, mainly related to the expanded business scale and performance associated with the Bank Republic integration, as well as GEL 5.6 million rise in administrative and other operating expenses.
The one-off costs in 1H 2016 were GEL 15.0 million related to Premium Listing, while in 1H 2017 one-off costs of GEL 9.5 million were related to the Bank Republic integration, out of which GEL 6.4 million is attributable to administrative and other operating expenses and GEL 3.1 million - to staff costs.
The Bank Republic estimated contribution amounted to GEL 28.3 million, or 20.5%, of total operating expenses which was mainly related to staff costs in the amount of GEL 16.1 million and to administrative and other operating expenses, in the amount of GEL 9.8 million. Total operating expense including one-offs and the Bank Republic estimated contribution effect was GEL 175.8 million.
As a result, the cost to income ratio stood at 40.5% (42.8% with one-offs) in 1H 2017, compared to 41.0% (44.7% with one-offs) in 1H 2016.
2Q 2017 to 2Q 2016 Comparison
In 2Q 2017 total operating expenses excluding one-offs and the Bank Republic estimated contribution effect were GEL 67.2 million, up by GEL 5.9 million, or 9.6% YoY. This increase was due to a GEL 6.0 million increase in staff costs, mainly related to the expanded business scale and performance, and a GEL 1.7 million increase in administrative and other operating expenses. This increase was partially offset by a GEL 2.4 million reversal of provision related to liabilities and charges.
The one-off costs in amount of GEL 9.1 million in 2Q 2016 were related to Premium Listing, while one-off costs in 2Q 2017 amounted to GEL 7.6 million, out of which GEL 3.1 million is attributable to staff costs and the rest GEL 4.6 million - to administrative and other operating expenses.
Bank Republic estimated contribution to total operating expenses is an addition of GEL 18.1 million, mainly driven by a GEL 10.4 million increase in staff costs and by a GEL 6.4 million increase in administrative and other operating expenses. Total operating expense including one-offs and the Bank Republic estimated contribution effect amounted to GEL 92.9 million.
As a result, the cost to income ratio was 41.2% (or 44.9% with the one-off effect) in 2Q 2017, compared to 41.7% in 2Q 2016 (or 45.1% with one-offs).
2Q 2017 to 1Q 2017 Comparison
On a QoQ basis, total operating expenses excluding one-off increased by GEL 4.2 million, or 5.2%, compared to 1Q 2017, mostly due to a GEL 4.2 million increase in staff costs mainly related to performance of the business. QoQ increase in administrative and other operating expenses, in the amount of GEL 2.0 million, was offset by a reversal of provision related liabilities and charges in the amount of GEL 2.4 million in 2Q 2017.
In 1Q 2017, the Bank Republic integration costs were related to administrative and other operating expense and amounted to GEL 1.9 million, while in 2Q the Bank Republic integration costs were related to staff costs, in the amount of GEL 3.1million, and the administrative and other operating costs, in the amount of GEL 4.6 million.
Total operating expenses including the Bank Republic integration cost were GEL 92.9 million. As a result, the cost to income ratio stood at 41.2% (44.9% with one-offs), up by 4.1 pp to 39.8% in 1Q 2017 (40.8% with one-offs).
|
Balance Sheet Discussion |
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions of GEL |
Jun-17 |
Mar-17 |
Jun-16 |
Change QoQ |
Change YoY |
|
Cash, Due from Banks and Mandatory Cash Balances with NBG |
2,192 |
1,753 |
981 |
25.0% |
123.4% |
|
Loans and Advances to Customers (Net) |
7,174 |
6,918 |
4,521 |
3.7% |
58.7% |
|
Financial Securities |
1,007 |
813 |
636 |
23.9% |
58.4% |
|
Fixed and Intangible Assets & Investment Property |
479 |
481 |
367 |
-0.4% |
30.6% |
|
Other Assets |
429 |
397 |
268 |
7.9% |
60.1% |
|
Total Assets |
11,281 |
10,363 |
6,772 |
8.9% |
66.6% |
|
Due to Credit Institutions |
2,314 |
2,112 |
791 |
9.5% |
192.5% |
|
Customer Accounts |
6,666 |
6,071 |
4,270 |
9.8% |
56.1% |
|
Debt Securities in Issue |
24 |
24 |
16 |
-1.1% |
46.4% |
|
Subordinated Debt |
390 |
345 |
283 |
13.1% |
37.9% |
|
Other Liabilities |
196 |
130 |
97 |
51.3% |
101.7% |
|
Total Liabilities |
9,590 |
8,682 |
5,457 |
10.5% |
75.7% |
|
Total Equity |
1,691 |
1,681 |
1,315 |
0.6% |
28.6% |
Assets
As of 30 June 2017, TBC Bank's total assets amounted to GEL 11,280.8 million, up by GEL 4,508.6 million, or 66.6%, YoY. The rise was mainly due to the increase in gross loans to customers by the GEL 2,675.3 million, or 56.8%, (by GEL 1,449.2 or 30.8% increase without the Bank Republic estimated contribution effect). In addition, the YoY increase in total assets resulted from a GEL 1,210.9 million, or 123.4%, increase in cash due from banks and mandatory cash balances with NBG and a GEL 371.4 million or 58.4% rise in financial securities, largely attributable to the Bank Republic estimated contribution effect.
On a QoQ basis, total assets increased by GEL 918.2 million, or 8.9%, mainly due to increased cash, due from banks and mandatory cash balances with the NBG by GEL 438.5 million, or 25.0% , increased net loans by GEL 256.1 million or 3.7% and increased financial assets by GEL 194.2 million or 23.9% . The liquid assets to liability ratio stood at 33.3%, compared to 28.8% as of 30 June 2016 and 29.5% as of 31 March 2017.
As of 30 June 2017, the gross loan portfolio amounted to GEL 7,386.4 million, up by GEL 2,675.3 million or 56.8% YoY (up by GEL 1,449.2 or 30.8% increase without the Bank Republic estimated contribution effect) and by GEL 265.4 million or 3.7% QoQ. Gross loans denominated in foreign currency accounted for 60.8% of the total, compared to 66.2% as of 30 June 2016 and 61.4% as of 31 March 2017. As of 30 June 2017, NPLs stood at 3.4%, compared to 4.7% and 3.4% as of 30 June 2016 and 31 March 2017, respectively. The NPLs provision coverage ratio stood at 84.3% (219.3% including the collateral), compared to 85.6% as of 30 June 2016 and 84.6% as of 31 March 2017.
Asset Quality
Foreign Currency Income Linked Borrowers
|
|
30-June-17 |
31-Mar-17* |
||
|
Segments |
FC share |
FC linked income borrowers share |
FC share |
FC linked income borrowers share |
|
Retail |
50.4% |
25.6% |
50.1% |
24.1% |
|
Consumer |
21.3% |
21.0% |
20.9% |
19.6% |
|
Mortgage |
83.0% |
27.0% |
85.1% |
25.4% |
|
Corporate |
74.9% |
51.3% |
79.6% |
57.9% |
|
MSME |
66.3% |
17.0% |
67.5% |
16.6% |
|
Total Loan Portfolio |
60.8% |
34.4% |
62.8% |
38.9% |
(Based on internal estimates)
* Figures without Bank Republic
|
1 loans overdue by more than 30 days to gross loans
Total Total PAR 30 stood at 2.4% unchanged on YoY and QoQ basis.
Retail Segment Retail segment PAR 30 decreased by 0.5 pp YoY, which was caused by improved performance of mortgage book and stayed broadly stable on QoQ.
Corporate Corporate segment PAR 30 increased by 0.2 pp YoY, but remained unchanged on QoQ basis.
MSME The MSME segment PAR 30 increased by 0.6 pp YoY due to several borrowers but stayed unchanged QoQ.
Total Total NPLs stood at 3.4% down by 1.3 pp on YoY basis and unchanged QoQ. The YoY decrease was mainly driven by improved performance of the corporate book.
Retail Segment Retail segment NPLs decreased by 0.5 pp YoY, which was caused by improved performance of mortgage loans and increased by 0.2 pp QoQ.
Corporate Corporate segment NPLs decreased by 3.3 pp YoY, which was due to recovery of several NPL borrowers and write off of one large borrower in 1Q 2017 which was almost fully provisioned. On QoQ basis NPLs decreased by 0.3 pp driven by repayment of several NPL borrowers.
MSME The MSME segment NPLs increased by 0.1 pp YoY and QoQ.
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Total
NPL coverage and collateral coverage ratios stayed broadly stable at 84% and 219% respectively.
Liabilities
As of 30 June 2017, TBC Bank's total liabilities amounted to GEL 9,590.3 million, up by 75.7% YoY and by 10.5% QoQ. The YoY growth of GEL 4,133.0 million was primarily due to a GEL 2,396.6 million, or 56.1%, increase in customer deposits (GEL 1,847.1 million or 43.3% increase without the Bank Republic estimated contribution effect). Total liabilities also grew due to the increase in amounts due to credit institutions by GEL 1,522.6 million and following a rise in subordinated debt by GEL 107.3 million. All these increases in liabilities largely resulted from the Bank Republic estimated contribution effect.
On a QoQ basis, total liabilities increased by GEL 908.3 million, or 10.5%, primarily due to the GEL 595.6 million, or 9.8%, increase in customer deposits, due to liquidity needs. This mainly resulted from the growth in corporate deposits. A GEL 201.2 million, or 9.5%, rise in amounts due to credit institutions increased contributed to the growth of total liabilities.
Liquidity
The Bank's liquidity ratio, as defined by the NBG, stood at 34.2% as of 30 June 2017, compared to 33.3% and 29.4% as of 30 June 2016 and 31 March 2017, respectively.
Total Equity
As of 30 June 2017, TBC's total equity amounted to GEL 1,690.5 million, up from GEL 1,314.9 million as of 30 June 2016, and from GEL 1,680.5 million as of 31 March 2017. YoY change in equity was mainly due to net profit contribution of GEL 335.4 million, which was offset by a GEL 74.8 million (consisting of GEL 66.7 million Cash based and GEL 8.1 million Share based) dividend distribution (gross of tax). QoQ change was primarily due to net profit, which increased total equity by GEL 79.9 million, which was largely offset by a GEL 74.8 million dividend distribution.
Regulatory Capital
As of 30 June 2017, the Bank's Basel II/III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 10.8% and 14.6%, respectively, compared to 12.6% and 15.7% as of 30 June 2016, and 11.3% and 14.9% as of 31 March 2017. The minimum capital requirements set by the NBG for Basel II/III Tier 1 and Total Capital Adequacy Ratios are 8.5% and 10.5%, respectively.
The Bank's Basel II/III tier 1 capital amounted to GEL 1,282.9 million, compared to GEL 999.2 million as of 30 June 2016 and GEL 1,115.2 million as of 31 March 2017. The Bank's Basel II/III total capital amounted to GEL 1,732.8 million, compared to GEL 1,241.5 million as of 30 June 2016 and GEL 1,472.7 million as of 31 March 2017. Risk weighted assets were GEL 11,866.0 million as of 30 June 2017, up by GEL 3,953.5 million YoY and up by GEL 1,987.9 million QoQ.
QoQ Tier 1 and total capital increased by GEL 167.7 million mainly due to the Bank Republic integration effect and net profit which was partially reduced due to the disbursement of dividends. Bank Republic integration effect was comprised of a release in regulatory capital deductions from significant investments in the capital of financial subsidiaries, which was partially offset by the increase in goodwill, as well as a decrease in retained earnings related to IFRS vs NBG accounting difference. Additional increase in total capital with the amount of GEL 92.4 million, was related to the increase in subordinated loans, general reserves and Bank Republic merger effect on Tier 2.
QoQ risk weighed assets increased by 1,987.9 million due to addition of Bank Republic's risk weighted assets as well as organic growth of the bank's loan book.
Results by Segments and Subsidiaries
The segment definitions are as per below:
· Corporate - Legal Entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to this segment or transferred to the MSME segment on a discretionary basis.
· MSME (Micro, Small and Medium) - all business customers who are not included in either Corporate and Retail segments; or Legal Entities who have been granted a Pawn shop loan;
· Retail - all non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8.0 thousand. All individual customers are included in retail deposits.
Businesses customers are all legal entities or individuals who have been granted a loan for business purpose.
|
Income Statement by Segments |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
1H'17 |
Retail |
MSME |
Corporate |
Corp.Centre |
Total |
||
|
Interest Income |
256,428 |
89,182 |
93,144 |
48,913 |
487,667 |
||
|
Interest Expense |
-57,945 |
-4,960 |
-45,507 |
-87,181 |
-195,592 |
||
|
Net Transfer Pricing |
-33,850 |
-24,924 |
7,984 |
50,789 |
- |
||
|
Net Interest Income |
164,633 |
59,299 |
55,621 |
12,522 |
292,074 |
||
|
Fee and Commission Income |
67,482 |
9,428 |
12,110 |
699 |
89,719 |
||
|
Fee and Commission Expense |
-26,982 |
-3,841 |
-3,243 |
-436 |
-34,502 |
||
|
Net fee and Commission Income |
40,500 |
5,587 |
8,867 |
263 |
55,217 |
||
|
Insurance Profit |
- |
- |
- |
3,081 |
3,081 |
||
|
Gains Less Losses from Trading in Foreign Currencies |
10,065 |
15,674 |
17,888 |
-236 |
43,392 |
||
|
Foreign Exchange Translation Gains Less Losses/(Losses Less Gains) |
- |
- |
- |
2,037 |
2,037 |
||
|
Net Losses from Derivative Financial Instruments |
- |
- |
- |
-38 |
-38 |
||
|
(Losses Less Gains)/Gains Less Losses from Disposal of Investment Securities Available for Sale |
- |
- |
- |
- |
- |
||
|
Other Operating Income |
6,134 |
617 |
4,045 |
3,438 |
14,234 |
||
|
Share of profit of associates |
- |
- |
- |
577 |
577 |
||
|
Other Operating Non-Interest Income and Insurance Profit |
16,200 |
16,292 |
21,933 |
8,858 |
63,283 |
||
|
Provision for Loan Impairment |
-55,286 |
-7,210 |
22,129 |
- |
-40,367 |
||
|
(Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments |
108 |
552 |
886 |
- |
1,546 |
||
|
Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease |
- |
- |
- |
-129 |
-129 |
||
|
(Provision)/Recovery of Provision for Impairment of other Financial Assets |
14 |
-107 |
-410 |
-3,922 |
-4,425 |
||
|
Recovery of Impairment/(Impairment) of Investment Securities Available for Sale |
- |
- |
- |
- |
- |
||
|
Profit before G&A Expenses and Income Taxes |
166,170 |
74,412 |
109,026 |
17,592 |
367,200 |
||
|
Staff Costs |
-63,933 |
-16,106 |
-12,840 |
-9,496 |
-102,375 |
||
|
Depreciation and Amortization |
-14,010 |
-2,332 |
-712 |
-469 |
-17,523 |
||
|
Provision for Liabilities and Charges |
- |
- |
- |
2,495 |
2,495 |
||
|
Administrative and Other Operating Expenses |
-37,924 |
-7,478 |
-3,639 |
-9,404 |
-58,446 |
||
|
Operating Expenses |
-115,867 |
-25,917 |
-17,191 |
-16,875 |
-175,850 |
||
|
Profit before Tax |
50,303 |
48,495 |
91,834 |
717 |
191,350 |
||
|
Income Tax Expense |
-6,225 |
-6,681 |
-13,909 |
11,879 |
-14,936 |
||
|
Profit for the Year |
44,078 |
41,815 |
77,925 |
12,596 |
176,415 |
||
|
Portfolios by Segments |
|
|
|
|
|||
|
|
|
|
|
|
|||
|
In thousands of GEL |
Jun-17 |
Mar-17 |
Jun-16 |
|
|||
|
Loans and Advances to Customers |
|
|
|
|
|||
|
|
|
|
|
|
|||
|
Consumer |
1,919,788 |
1,859,865 |
1,200,659 |
|
|||
|
Mortgage |
1,744,421 |
1,736,302 |
931,980 |
|
|||
|
Pawn |
35,648 |
33,985 |
35,361 |
|
|||
|
Retail |
3,699,858 |
3,630,152 |
2,168,000 |
|
|||
|
Corporate |
2,057,644 |
1,922,615 |
1,431,937 |
|
|||
|
MSME |
1,628,934 |
1,568,270 |
1,111,192 |
|
|||
|
Total Loans and Advances to Customers (Gross) |
7,386,435 |
7,121,036 |
4,711,130 |
|
|||
|
Less: Provision for Loan Impairment |
-212,129 |
-202,791 |
-190,104 |
|
|||
|
Total Loans and Advances to Customers (Net) |
7,174,305 |
6,918,245 |
4,521,026 |
|
|||
|
|
|
|
|
|
|||
|
Customer Accounts |
|
|
|
|
|||
|
|
|
|
|
|
|||
|
Retail Deposits |
3,707,854 |
3,543,911 |
2,639,960 |
|
|||
|
Corporate Deposits |
2,057,651 |
1,733,114 |
982,282 |
|
|||
|
MSME |
900,908 |
793,808 |
647,536 |
|
|||
|
Total Customer Accounts |
6,666,413 |
6,070,833 |
4,269,778 |
|
|||
Retail Banking
As of 30 June 2017, retail loans stood at GEL 3,699.9 million (or GEL 2,845.8 million without Bank Republic estimated contribution effect), up by GEL 1531.9 million, or 70.7%, YoY (up by GEL 677.8 million or 31.3% excluding Bank Republic estimated contribution effect). Retail loans increased by GEL 69.7 million, or 1.9%, QoQ, mainly related to a temporary focus on integration with the Bank Republic. As of 30 June 2017, TBC Bank's retail loans accounted for 40.8% market share of total individual loans. As of 30 June 2017, foreign currency loans represented 50.4% of the total retail loan portfolio.
In the reporting period, retail deposits increased to GEL 3,707.9 million (or to GEL 3446.5 million without Bank Republic estimated contributed effect), up by GEL 1,067.9 million or 40.5% YoY (or up by GEL 806.6 million or 30.6% without Bank Republic estimated contribution effect). QoQ retail deposits grew by GEL 163.9 million or 4.6%, and accounted for 40.2% market share of total individual deposits. The increase in retail deposits was mainly attributable to the increase in current deposits by 54.1% YoY and 6.0% QoQ. Term deposits accounted for 56.5% of the total retail deposit portfolio as of 30 June 2017, while foreign currency deposits represented 83.8% of the total retail deposit portfolio.
In 1H 2017, retail loan yields and deposit rates stood at 14.0% and 3.2% respectively, and the segment's cost of risk on loans was 3.0%. The retail segment contributed 25.0%, or GEL 44.1 million, to the TBC's total net income in 1H 2017.
Corporate Banking
As of 30 June 2017, corporate loans amounted to GEL 2,057.6 million (or GEL 1,836.2 million excluding Bank Republic estimated effect), up by GEL 625.7 million or 43.7% YoY (GEL 404.3 million or 28.2% without Bank Republic estimated loan portfolio). QoQ growth in corporate loans accounted for GEL 135.0 million or 7.0%. Foreign currency loans accounted for 74.9% of the total corporate loan portfolio. Market share in legal entities increased by 1.5 pp QoQ due to attracting new blue chip customers; Coca-cola, McDonald's and Nikora (the leading food producer in Georgia).
As of the same date, corporate deposits totaled GEL 2,057.7 million (or GEL 1,830.1 million without the Bank Republic effect), up by GEL 1,075.4 million or 109.5% (up by GEL 847.8 million or 86.3% without Bank Republic estimated deposit portfolio) YoY. Corporate deposits grew by GEL 324.5 million or 18.7% QoQ. Foreign currency corporate deposits represented 51.5% of the total corporate deposit portfolio.
In 1H 2017, corporate loan yields and deposit rates stood at 9.4% and 5.0%, respectively. In the same period, the cost of risk on loans was -2.2%. In terms of profitability, the corporate segment's net profit reached GEL 77.9 million, or 44.2% of the Bank's total net income.
MSME Banking
As of 30 June 2017, MSME loans amounted to GEL 1,628.9 million (GEL 1,478.4 million excluding Bank Republic estimated loan portfolio), up by GEL 517.7 million or 46.6% YoY (up by GEL 367.2 million or 33.0% without Bank Republic estimated effect). MSME loan portfolio growth was GEL 60.7 million or 3.9% QoQ. Foreign currency loans accounted for 66.3% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 900.9 million (GEL 840.3 million excluding Bank Republic estimated deposit portfolio), up by GEL 253.4 million or 39.1% (up by GEL 192.8 million or 29.8% without the Bank Republic effect) YoY and by GEL 107.1 million or 13.5% QoQ. Foreign currency MSME deposits represented 53.4% of the total MSME deposit portfolio.
In 1H 2017, MSME loan yields and deposit rates stood at 11.2% and 1.2%, respectively while the cost of risk on loans was 0.9%. In terms of profitability, net profit for the MSME segment amounted to GEL 41.8 million, or 23.7%, of TBC's total net income.
Annexes
Subsidiaries of TBC Bank Group PLC[7]
|
|
Ownership / voting |
|
Country |
Year of incorporation or acquisition |
Industry |
Total Assets |
|
|
Subsidiary |
|
Amount GEL'000 |
% in TBC Group |
||||
|
United Financial Corporation JSC |
98.7% |
|
Georgia |
1997 |
Card processing |
6,633 |
0.06% |
|
TBC Capital LLC |
100.0% |
|
Georgia |
1999 |
Brokerage |
1,934 |
0.02% |
|
TBC Leasing JSC |
99.6% |
|
Georgia |
2003 |
Leasing |
128,549 |
1.14% |
|
TBC Kredit LLC |
75.0% |
|
Azerbaijan |
2008 |
Non-banking credit institution |
35,621 |
0.32% |
|
Banking System Service Company LLC |
100.0% |
|
Georgia |
2009 |
Information services |
623 |
0.01% |
|
TBC Pay LLC |
100.0% |
|
Georgia |
2009 |
Processing |
26,431 |
0.23% |
|
Mali LLC |
100.0% |
|
Georgia |
2011 |
Real estate management |
197 |
0.00% |
|
Real Estate Management Fund JSC |
100.0% |
|
Georgia |
2010 |
Real estate management |
23 |
0.00% |
|
TBC Invest LLC |
100.0% |
|
Israel |
2011 |
PR and marketing |
103 |
0.00% |
|
JSC TBC Bank |
98.7% |
|
Georgia |
2016 |
Financial sector |
11,067,517 |
98.10% |
|
TBC Insurance |
100.0% |
|
Georgia |
2016 |
Insurance |
11,252 |
0.10% |
|
LTD Merckhali Pirveli |
100.0% |
|
Georgia |
2009 |
Operating Leasing |
- |
0.00% |
Consolidated Financial Statements of TBC Bank Group PLC
|
Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
In thousands of GEL |
Jun-17 |
Mar-17 |
Jun-16 |
|
Cash and cash equivalents |
1,219,108 |
697,118 |
344,205 |
|
Due from other banks |
41,096 |
151,780 |
12,256 |
|
Mandatory cash balances with National Bank of Georgia |
931,654 |
904,487 |
624,502 |
|
Loans and advances to customers (Net) |
7,174,305 |
6,918,246 |
4,521,026 |
|
Investment securities available for sale |
608,083 |
428,138 |
242,450 |
|
Investment in subsidiaries |
1021 |
537 |
- |
|
Repurchase receivables |
9,961 |
- |
42,347 |
|
Investment securities held to maturity |
389,036 |
384,756 |
350,885 |
|
Investments in finance leases |
96,329 |
88,627 |
77,043 |
|
Investment properties |
93,501 |
96,064 |
69,984 |
|
Goodwill |
28,657 |
28,658 |
2,726 |
|
Intangible assets |
65,034 |
63,906 |
45,954 |
|
Premises and equipment |
320,139 |
320,659 |
250,654 |
|
Other financial assets |
88,852 |
82,254 |
75,692 |
|
Deferred tax asset |
3,407 |
3,406 |
2,326 |
|
Current income tax prepayment |
7,719 |
10,058 |
10,871 |
|
Insurance and reinsurance receivables |
5,386 |
3,414 |
- |
|
Other assets |
197,533 |
180,479 |
99,304 |
|
TOTAL ASSETS |
11,280,822 |
10,362,587 |
6,772,226 |
|
LIABILITIES |
|
|
|
|
Due to Credit Institutions |
2,313,550 |
2,112,360 |
790,971 |
|
Customer accounts |
6,666,413 |
6,070,833 |
4,269,778 |
|
Current income tax liability |
273 |
2,902 |
406 |
|
Debt Securities in issue |
24,106 |
24,376 |
16,460 |
|
Deferred income tax liability |
2,138 |
3,727 |
7,323 |
|
Provisions for liabilities and charges |
10,733 |
15,528 |
11,537 |
|
Other financial liabilities |
119,948 |
53,690 |
49,272 |
|
Subordinated debt |
390,070 |
344,841 |
282,815 |
|
Insurance contracts liabilities |
1,943 |
342 |
- |
|
Other liabilities |
61,014 |
52,354 |
28,177 |
|
Items in suspense |
128 |
1,090 |
562 |
|
TOTAL LIABILITIES |
9,590,315 |
8,682,043 |
5,457,302 |
|
EQUITY |
|
|
|
|
Share capital |
1,601 |
1,581 |
19,623 |
|
Share premium |
706,580 |
677,211 |
408,649 |
|
Retained earnings |
1,051,974 |
1,055,011 |
798,443 |
|
Group reorganisation reserve |
-162,167 |
-162,167 |
- |
|
Share based payment reserve |
4,753 |
21,303 |
17,469 |
|
Revaluation reserve for premises |
70,045 |
70,460 |
70,038 |
|
Revaluation reserve for available-for-sale securities |
-1,105 |
-5,088 |
1,452 |
|
Cumulative currency translation reserve |
-7,695 |
-7,636 |
-6,916 |
|
TOTAL EQUITY |
1,663,985 |
1,650,677 |
1,308,759 |
|
Non-controlling interest |
26,522 |
29,867 |
6,165 |
|
TOTAL EQUITY |
1,690,506 |
1,680,544 |
1,314,924 |
|
TOTAL LIABILITIES AND EQUITY |
11,280,822 |
10,362,587 |
6,772,226 |
|
Consolidated Statement of Profit or Loss and Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of GEL |
1H'17 |
1H'16 |
2Q'17 |
1Q'17 |
2Q'16 |
|
Interest income |
487,667 |
341,026 |
249,898 |
237,769 |
166,167 |
|
Interest expense |
-195,592 |
-124,488 |
-100,157 |
-95,436 |
-58,512 |
|
Net interest income |
292,074 |
216,538 |
149,742 |
142,333 |
107,654 |
|
Fee and commission income |
89,719 |
62,228 |
45,219 |
44,500 |
32,681 |
|
Fee and commission expense |
-34,502 |
-22,546 |
-16,478 |
-18,023 |
-11,296 |
|
Net Fee and Commission Income |
55,217 |
39,683 |
28,741 |
26,477 |
21,385 |
|
Insurance profit |
3,081 |
- |
1,856 |
1,225 |
- |
|
Gains less losses from trading in foreign currencies |
43,392 |
29,085 |
22,246 |
21,146 |
14,466 |
|
Foreign exchange translation gains less losses |
2,037 |
-999 |
991 |
1,046 |
-1,007 |
|
Gains less losses/(losses less gains) from derivative financial instruments |
-38 |
-472 |
-35 |
-3 |
-109 |
|
(Losses less gains) / Gains less losses from disposal of investment securities available for sale |
- |
8,795 |
- |
- |
8,795 |
|
Share of profit of associates |
577 |
- |
484 |
93 |
- |
|
Other operating income |
14,234 |
8,363 |
3,069 |
11,166 |
4,695 |
|
Other operating non-interest income |
60,202 |
44,771 |
26,755 |
33,447 |
26,840 |
|
Provision for loan impairment |
-40,367 |
-25,277 |
-23,444 |
-16,922 |
-12,211 |
|
Provision for impairment of investments in finance lease |
-129 |
-111 |
-97 |
-31 |
74 |
|
Provision for/ (recovery of provision) performance guarantees and credit related commitments |
1,546 |
-2,076 |
1,454 |
92 |
-1,047 |
|
Provision for impairment of other financial assets |
-4,425 |
-1,194 |
-3,628 |
-797 |
-1,145 |
|
Impairment of investment securities available for sale |
- |
-11 |
- |
- |
- |
|
Operating income after provisions for impairment |
367,200 |
272,323 |
181,377 |
185,823 |
141,550 |
|
Staff costs |
-102,375 |
-69,473 |
-54,838 |
-47,538 |
-35,301 |
|
Depreciation and amortisation |
-17,523 |
-13,610 |
-8,919 |
-8,605 |
-7,042 |
|
Provision for liabilities and charges |
2,495 |
- |
2,400 |
95 |
- |
|
Administrative and other operating expenses |
-58,446 |
-51,586 |
-31,573 |
-26,873 |
-28,026 |
|
Operating expenses |
-175,850 |
-134,668 |
-92,929 |
-82,920 |
-70,369 |
|
Profit before tax |
191,350 |
137,655 |
88,447 |
102,903 |
71,181 |
|
Income tax expense |
-14,936 |
1,582 |
-8,590 |
-6,345 |
9,359 |
|
Profit for the period |
176,415 |
139,237 |
79,857 |
96,558 |
80,540 |
|
Other Comprehensive income: |
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
Revaluation |
2,615 |
3,145 |
-4,022 |
1,407 |
-2,549 |
|
Gains less losses reclassified to profit or loss upon disposal |
- |
-8,853 |
- |
- |
8,853 |
|
Income tax recorded directly in other comprehensive income |
- |
1,401 |
- |
- |
-1,366 |
|
Exchange differences on translation to presentation currency |
-158 |
-325 |
62 |
96 |
302 |
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
Revaluation of premises and equipment |
- |
- |
- |
- |
- |
|
Income tax recorded directly in other comprehensive income |
-422 |
10,506 |
422 |
- |
-10,506 |
|
Other comprehensive income for the year |
2,035 |
5,873 |
3,538 |
-1,503 |
5,265 |
|
Total comprehensive income for the year |
178,450 |
145,110 |
83,395 |
95,055 |
85,806 |
|
Profit attributable to: |
|
|
|
|
|
|
- Owners of the Bank |
173,519 |
140,261 |
78,544 |
94,975 |
80,778 |
|
- Non-controlling interest |
2,895 |
-1,024 |
1,313 |
1,582 |
-237 |
|
Profit for the period |
176,415 |
139,237 |
79,857 |
96,558 |
80,540 |
|
Total comprehensive income is attributable to: |
|
|
|
|
|
|
- Owners of the Bank |
175,523 |
146,133 |
82,082 |
93,473 |
86,043 |
|
- Non-controlling interest |
2,925 |
-1,024 |
1,313 |
1,582 |
-237 |
|
Total comprehensive income for the year |
178,448 |
145,110 |
83,395 |
95,055 |
85,806 |
Consolidated Statements of Cash Flows
|
In thousands of GEL |
As of 30-Jun-2017 |
As of 30-Jun-2016 |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
Interest received |
468,391 |
328,321 |
|
Interest paid |
(195,640) |
(123,338) |
|
Fees and commissions received |
89,329 |
62,899 |
|
Fees and commissions paid |
(34,802) |
(22,739) |
|
Insurance premium received |
7,153 |
|
|
Insurance claims paid |
-3,497 |
|
|
Income received from trading in foreign currencies |
43,392 |
29,085 |
|
Other operating income received |
8,334 |
5,516 |
|
Staff costs paid |
(102,975) |
(72,219) |
|
Administrative and other operating expenses paid |
(53,075) |
(46,369) |
|
Income tax (paid) / refunded |
(21,785) |
(10,873) |
|
Cash flows from operating activities before changes in operating assets and liabilities |
204,825 |
150,283 |
|
Net change in operating assets |
|
|
|
Due from other banks and mandatory cash balances with the National Bank of Georgia |
3,043 |
(143,663) |
|
Loans and advances to customers |
(499,822) |
(173,777) |
|
Investment in finance lease |
(8,531) |
(1,943) |
|
Other financial assets |
1,007 |
(2,071) |
|
Other assets |
1,103 |
1,694 |
|
Net change in operating liabilities |
|
|
|
Due to other banks |
(223,686) |
128,868 |
|
Customer accounts |
610,920 |
156,872 |
|
Other financial liabilities |
(8,600) |
1,967 |
|
Other liabilities and provision for liabilities and charges |
(211) |
(303) |
|
Net cash from operating activities |
80,048 |
117,927 |
|
Cash flows from investing activities |
|
|
|
Acquisition of investment securities available for sale |
(401,304) |
(73,382) |
|
Proceeds from redemption at maturity of investment securities available for sale |
218,981 |
111,500 |
|
Acquisition of bonds carried at amortised cost |
(141,849) |
(171,391) |
|
Proceeds from redemption of bonds carried at amortised cost |
131,693 |
179,799 |
|
Acquisition of premises, equipment and intangible assets |
(32,262) |
(18,437) |
|
Disposal of premises, equipment and intangible assets |
1,506 |
315 |
|
Proceeds from disposal of investment property |
2,570 |
1,119 |
|
Acquisition of subsidiaries, net of cash acquired |
(350) |
|
|
Net cash used in investing activities |
(221,015) |
29,523 |
|
Cash flows from financing activities |
|
|
|
Proceeds from other borrowed funds |
1,019,147 |
18,699 |
|
Redemption of other borrowed funds |
(640,409) |
(459,423) |
|
Proceeds from subordinated debt |
52,990 |
18,131 |
|
Redemption of subordinated debt |
|
(13,644) |
|
Proceeds from debt securities in issue |
2,823 |
|
|
Redemption of debt securities in issue |
|
(4,636) |
|
Dividends paid |
(1,193) |
|
|
Issue of ordinary shares |
31 |
(54,560) |
|
Net cash from / (used in) financing activities |
433,389 |
(495,433) |
|
Effect of exchange rate changes on cash and cash equivalents |
(18,494) |
(28,159) |
|
Net increase / (decrease) in cash and cash equivalents |
273,928 |
(376,142) |
|
Cash and cash equivalents at the beginning of the year |
945,180 |
720,347 |
|
Cash and cash equivalents at the end of the year |
1,219,108 |
344,205 |
2Q 2017 Bank Republic Financial Results Based on Internal Estimates
|
Bank Republic Profit and Loss |
|
|
In thousands of GEL |
2Q 2017 |
|
Interest income |
44,977 |
|
Interest expense |
14,111 |
|
Net interest income |
30,867 |
|
Net F&C income |
1,753 |
|
Card operations |
-364 |
|
Settlement transactions |
1,281 |
|
Guarantees and letters of credit |
735 |
|
Other |
101 |
|
Other non-interest income |
4,984 |
|
FX gain/losses |
3,678 |
|
Other |
1,305 |
|
Operating income |
37,603 |
|
Operating expenses |
18,078 |
|
Staff costs |
10,443 |
|
Depreciation and amortization |
1,253 |
|
Administrative and other operating expenses |
6,382 |
|
Operating profit |
19,525 |
|
Bank Republic Loan Portfolio |
|
|
In thousands of GEL |
as of 30 June 2017 |
|
Total gross loans |
1,226,064 |
|
Retail |
854,104 |
|
Corporate |
221,449 |
|
MSME |
150,511 |
|
Bank Republic Deposit Portfolio |
|
|
In thousands of GEL |
as of 30 June 2017 |
|
Total deposits |
549,553 |
|
Retail |
261,335 |
|
Corporate |
227,596 |
|
MSME |
60,622 |
Key Ratios
Average Balances
Average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records, which were used by the Management for monitoring and control purposes.
|
Key Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios (based on monthly averages, where applicable) |
1H'17 |
1H'16 |
2Q'17 |
1Q'17 |
2Q'16 |
|
ROE |
21.5% |
22.5% |
18.9% |
24.2% |
25.5% |
|
ROA |
3.3% |
4.2% |
3.0% |
3.7% |
4.9% |
|
Pre-provision ROE |
26.9% |
27.1% |
25.1% |
28.7% |
30.0% |
|
Pre-provision ROA |
4.1% |
5.0% |
3.9% |
4.4% |
5.8% |
|
Cost to Income |
42.8% |
44.7% |
44.9% |
40.8% |
45.1% |
|
Cost of Risk |
1.1% |
1.1% |
1.3% |
0.9% |
1.1% |
|
NIM |
6.7% |
7.8% |
6.8% |
6.6% |
7.9% |
|
Risk Adjusted NIM |
5.3% |
6.5% |
5.3% |
5.1% |
6.7% |
|
Loan Yields |
12.1% |
13.5% |
12.4% |
11.9% |
13.3% |
|
Risk Adjusted Loan Yields |
10.7% |
12.1% |
10.9% |
10.5% |
12.1% |
|
Deposit rates |
3.4% |
3.5% |
3.5% |
3.4% |
3.4% |
|
Yields on interest Earning Assets |
11.1% |
12.3% |
11.3% |
11.1% |
12.2% |
|
Cost of Funding |
4.4% |
4.7% |
4.5% |
4.4% |
4.5% |
|
Spread |
6.7% |
7.6% |
6.8% |
6.7% |
7.7% |
|
PAR 90 to Gross Loans |
1.6% |
1.5% |
1.6% |
1.5% |
1.5% |
|
NPLs to Gross Loans |
3.4% |
4.7% |
3.4% |
3.4% |
4.7% |
|
NPLs coverage |
84.3% |
85.6% |
84.3% |
84.6% |
85.6% |
|
Provision Level to Gross Loans |
2.9% |
4.0% |
2.9% |
2.8% |
4.0% |
|
Related Party Loans to Gross Loans |
0.1% |
0.1% |
0.1% |
0.1% |
0.1% |
|
Top 10 Borrowers to Total Portfolio |
9.1% |
9.0% |
9.1% |
8.3% |
9.0% |
|
Top 20 Borrowers to Total Portfolio |
13.0% |
14.4% |
13.0% |
12.2% |
14.4% |
|
Net Loans to Deposits plus IFI Funding |
90.6% |
96.0% |
90.6% |
97.2% |
96.0% |
|
Net Stable Funding Ratio |
128.7% |
112.0% |
128.7% |
106.8% |
112.0% |
|
Leverage |
6.7 |
5.2 |
6.7 |
6.2 |
5.2 |
|
Hypothetical Tier 1 CAR |
14.4% |
17.6% |
14.4% |
15.0% |
17.6% |
|
Hypothetical Total CAR |
19.4% |
21.3% |
19.4% |
19.8% |
21.3% |
|
Regulatory Tier 1 CAR |
10.8% |
12.6% |
10.8% |
11.3% |
12.6% |
|
Regulatory Total CAR |
14.6% |
15.7% |
14.6% |
14.9% |
15.7% |
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period; Pre-provision ROE excludes all provision charges. Annualized where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. Pre-provision ROE excludes all provision charges. Annualised where applicable.
3. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
4. Cost of risk equals provision for loan impairment divided by monthly average gross loans and advances to customers. Annualized where applicable.
5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, amount due from credit institutions. The latter excludes all items from cash & cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks
6. Risk Adjusted Net interest margin is NIM minus Cost of Risk without one -offs and currency effect
7. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers. Annualised where applicable.
8. Risk Adjusted Loan yield is loan yield minus cost of risk without one-offs and currency effect
9. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits. Annualised where applicable.
10. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets. Annualized where applicable.
11. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities. Annualised where applicable.
12. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).
13. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.
14. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.
15. NPLs coverage ratio equals total loan loss provision divided by the NPL loans.
16. NPLs coverage with collateral ratio equals loan loss provision plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
17. Provision level to gross loans equals loan loss provision divided by the gross loan portfolio for the same period.
18. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
19. Top 10 borrowers to total portfolio equals total loan amount of top 10 borrowers divided by the gross loan portfolio.
20. Top 20 borrowers to total portfolio equals total loan amount of top 20 borrowers divided by the gross loan portfolio.
21. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
22. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III. NSFR ratio for 1H'17 and 2Q'17 is calculated per updated internal methodology in line with Basel 2014 guidelines.
23. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined in Basel III (calculated according to NBG standards).
24. Leverage equals total assets to total equity.
25. Hypothetical ratios - hypothetical ratio based on the Basel III guidelines except for calculation of credit equivalent amounts for interest rate and foreign exchange related contracts, which are calculated based on original exposure method being in line with NBG Pillar 1 requirements. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.
27. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the Balance Sheet items' QoQ growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.4452 as of 31 March 2017. For calculations of YoY growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.3423 as of 30 June 2016. The USD/GEL exchange rate as of 30 June 2017 equaled 2.4072. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 2Q 2017 of 2.4187, 1Q 2017 of 2.6029, 2Q 2016 of 2.2127.
Segment Definition & Bank Republic Contribution Assumption
Segment Definitions:
Corporate: legal entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;
MSME: business customers who are not included in either corporate or retail segments; or legal entities who have been granted a Pawn shop loan;
Retail: non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8 thousand; all individual customers are included in retail deposits.
Corporate Centre and Other Operations: comprise the Treasury, other support and back office functions, and non-banking subsidiaries of the Group;
Business customers: legal entities or individuals who have been granted a loan for business purpose.
Bank Republic Contribution Assumptions:
To make YoY analyses more comparable, the bank has segregated Bank Republic contribution after the merger on 8th of May 2017, which is based on direct income and cost attribution calculation and where not practicable, based on established allocation rules, appropriate management assumptions and estimates.
The management has estimated Bank Republic contribution effect within the Group's financial results based on the following rationale:
§ Loan and deposit portfolio as well as the interest income and expense from these portfolios have been calculated for all existing clients of Bank Republic having outstanding exposure for the reporting period, as well as for all new clients attracted through the former branches of Bank Republic
§ For the remaining items of B/S and P&L where the direct attribution is not practical, the management has used the allocation based on Bank Republic loan and deposit books contribution to each operating segment
Additional Disclosures
1) Earnings per Share
|
In GEL |
2Q 2017 |
|
Earnings per share for profit attributable to the owners of the Group: |
|
|
- Basic earnings per share |
3.31 |
|
- Diluted earnings per share |
3.26 |
Source: IFRS Consolidated
2) Sensitivity Scenario
|
Sensitivity Scenario |
30-Jun-17 |
10% Currency Devaluation Effect |
|
NIM* |
|
-0.1% |
|
Technical Cost of Risk |
|
+0.2% |
|
Regulatory Total Capital |
1,733 |
1,768 |
|
Regulatory Capital adequacy ratios tier 1 and total capital decrease by |
|
0.67% - 0.73% |
(*) Linear depreciation is assumed for NIM sensitivity analysis
Source: IFRS statements and Management Figures
3) FC details for Selected P/L Items
|
Selected P&L Items 2Q 2017 |
FC % of Respective Totals |
|
Interest Income |
46% |
|
Interest Expense |
55% |
|
Fee and Commission Income |
37% |
|
Fee and Commission Expense |
57% |
|
Administrative Expenses |
22% |
Source: IFRS statements and Management figures
4) GEL Refinance Rate and Libor Linked B/S Items 30 June 2017
|
GEL Refinance Rate Gap |
GEL -182 m |
|
Libor Gap |
GEL 579 m |
||
|
|
GEL m |
% share in totals |
|
|
GEL m |
% share in totals |
|
Assets |
1,529 |
14% |
|
Assets |
1,880 |
16% |
|
Securities with fixed yield(≤1y)* |
488 |
48% |
|
Nostro** |
195 |
56% |
|
Securities with floating yield |
101 |
10% |
|
NBG Reserves** |
932 |
76% |
|
Loans with Floating yield |
829 |
11% |
|
NBG Deposits |
125 |
10% |
|
Reserves in NBG |
90 |
7% |
|
Libor Loans |
598 |
8% |
|
Interbank loans& Deposits & Repo |
21 |
4% |
|
Interest Rate Options |
32 |
|
|
Liabilities |
1,602 |
18% |
|
|
|
|
|
Current accounts*** |
682 |
10% |
|
Liabilities |
1,301 |
14% |
|
Saving accounts*** |
150 |
3% |
|
Senior Loans |
1,003 |
46% |
|
Refinancing Loan of NBG |
540 |
24% |
|
Subordinated Loans |
3298 |
76% |
|
Interbank Loans &Deposits & Repo |
79 |
67% |
|
|
|
|
|
IFI Borrowings |
152 |
12% |
|
|
|
|
|
|
|
|
|
|
|
|
(*) 61% of the less than 1 year securities are maturing in 6 months
(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. According to NBG regulation from March, 2016 it is possible to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.
(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification)
Source: IFRS Group Data
|
5) Yields and Rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields and Rates |
2Q'17 |
1Q'17 |
4Q'16 |
3Q'16 |
2Q'16 |
1Q'16 |
|
Loan yields |
12.4% |
11.9% |
13.8% |
13.5% |
13.3% |
13.6% |
|
Retail loan yields GEL |
19.7% |
20.0% |
23.3% |
22.8% |
22.7% |
22.5% |
|
Retail loan yields FX |
9.0% |
9.1% |
10.0% |
9.9% |
10.3% |
11.1% |
|
Retail Loan Yields |
14.2% |
13.9% |
15.8% |
16.0% |
16.3% |
16.5% |
|
Corporate loan yields GEL |
10.6% |
10.0% |
9.6% |
12.4% |
13.7% |
13.2% |
|
Corporate loan yields FX |
9.5% |
8.8% |
12.5% |
10.6% |
8.8% |
9.3% |
|
Corporate Loan Yields |
9.8% |
9.1% |
11.8% |
11.0% |
9.7% |
10.1% |
|
MSME loan yields GEL |
13.4% |
13.3% |
14.3% |
14.2% |
14.8% |
15.1% |
|
MSME loan yields FX |
10.4% |
10.1% |
11.1% |
10.6% |
10.8% |
11.6% |
|
MSME Loan Yields |
11.4% |
11.0% |
12.0% |
11.7% |
11.9% |
12.5% |
|
Deposit rates |
3.5% |
3.4% |
3.3% |
3.3% |
3.4% |
3.6% |
|
Retail deposit rates GEL |
3.9% |
3.9% |
3.7% |
4.0% |
4.1% |
3.8% |
|
Retail deposit rates FX |
3.0% |
3.2% |
3.4% |
3.5% |
3.6% |
3.9% |
|
Retail Deposit Yields |
3.1% |
3.3% |
3.4% |
3.6% |
3.7% |
3.9% |
|
Corporate deposit rates GEL |
8.5% |
8.7% |
7.5% |
7.3% |
7.5% |
6.7% |
|
Corporate deposit rates FX |
2.1% |
1.7% |
2.0% |
1.5% |
1.3% |
1.7% |
|
Corporate Deposit Yields |
5.2% |
4.9% |
4.4% |
4.2% |
4.0% |
4.1% |
|
MSME deposit rates GEL |
2.2% |
2.0% |
1.7% |
2.1% |
2.5% |
2.4% |
|
MSME deposit rates FX |
0.6% |
0.5% |
0.6% |
0.4% |
0.4% |
0.7% |
|
MSME Deposit Yields |
1.3% |
1.1% |
1.1% |
1.1% |
1.2% |
1.3% |
|
Yields on Securities |
7.8% |
8.1% |
8.1% |
8.3% |
9.1% |
9.4% |
Source: IFRS Consolidated
|
|
|
|
|
|
|
|
||||
|
6) Risk Adjusted Yields |
|
|
|
|
|
|
||||
|
Risk-adjusted Yields |
2Q'17 |
1Q'17 |
4Q'16 |
3Q'16 |
2Q'16 |
1Q'16 |
||||
|
Loan yields |
10.9% |
10.5% |
12.6% |
12.2% |
12.1% |
12.2% |
||||
|
Retail Loan Yields |
10.9% |
10.6% |
13.0% |
13.3% |
13.5% |
13.4% |
||||
|
Corporate Loan Yields |
11.3% |
11.1% |
14.3% |
12.5% |
11.1% |
12.2% |
||||
|
MSME Loan Yields |
10.5% |
9.4% |
9.6% |
9.9% |
10.7% |
10.2% |
||||
Source: IFRS Consolidated
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||
|
Cost of Risk |
2Q'17 |
1Q'17 |
4Q'16 |
3Q'16 |
2Q'16 |
1Q'16 |
||||
|
Retail |
3.1% |
2.9% |
3.5% |
2.6% |
2.8% |
3.1% |
||||
|
Corporate |
-1.6% |
-2.9% |
-6.4% |
-1.6% |
-1.7% |
-2.3% |
||||
|
MSME |
0.7% |
1.1% |
3.3% |
1.6% |
1.2% |
2.0% |
||||
|
Total |
1.3% |
0.9% |
0.6% |
1.1% |
1.1% |
1.2% |
||||
Source: IFRS Consolidated
7) Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
|
|
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
Jun-16 |
|
SDL Loans as % of Gross Loans |
3.3% |
4.1% |
4.3% |
5.1% |
6.9% |
Source: NBG
8) Cross Sell Ratio[8] and Number Active Products
|
|
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
|
Cross Sell Ratio |
3.67 |
3.57 |
3.68 |
3.55 |
|
Number of Active Products (in millions) |
3.78 |
3.16 |
3.14 |
2.83 |
Source: Management figures
9) 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: >=100,000 USD as well as on discretionary basis
Wealth Management includes UHNW and HNW non-resident clients
|
30 June 2017 |
Volume of Deposits |
Number of Deposits |
|
MASS |
37% |
93.9% |
|
STATUS |
27% |
5.5% |
|
VIP |
23% |
0.4% |
|
Wealth Management for non-resident clients |
13% |
0.2% |
Source: Management figures
10) Loan Concentration
|
|
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
Jun-16 |
|
Top 20 Borrowers as % of total portfolio |
13.0% |
12.2% |
11.3% |
13.4% |
14.4% |
|
Top 10 Borrowers as % of total portfolio |
9.1% |
8.3% |
7.6% |
8.6% |
9.0% |
|
Related Party Loans as % of total portfolio |
0.1% |
0.1% |
0.1% |
0.1% |
0.1% |
Source: IFRS consolidated
11) Sales breakdown (for products offered through Multichannel)
|
|
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
Jun-16 |
Mar-16 |
Dec-15 |
|
Digital Channels |
22% |
24% |
26% |
24% |
23% |
27% |
21% |
|
Call Center |
27% |
28% |
29% |
33% |
32% |
23% |
28% |
|
Branches |
51% |
49% |
45% |
43% |
46% |
50% |
51% |
Source: Management figures
12) Number of Transactions in Digital Channels
|
|
2Q 17 |
1Q 17 |
4Q 16 |
3Q 16 |
2Q 16 |
|
Internet banking number of transactions (in thousands) |
2,166 |
2,098 |
2,280 |
1,828 |
1,797 |
|
Mobile banking number of transactions (in thousands) |
3,163 |
2,622 |
2,532 |
1,814 |
1,485 |
|
POS number of transactions (in thousands) |
11,328 |
9,636 |
8,508 |
7,146 |
6,671 |
|
POS volume of transactions (in mln GEL) |
447 |
394 |
376 |
319 |
276 |
* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches
Source: Management figures
13) Penetration Ratios of Digital Channels
|
|
Jun-17 |
Mar-17 |
Dec-16 |
Sep-16 |
Jun-16 |
Mar-16 |
Dec-15 |
|
IB&MB Penetration Ratio |
33% |
34% |
37% |
34% |
34% |
32% |
32% |
|
Mobile Banking Penetration Ratio |
25% |
25% |
24% |
20% |
19% |
17% |
15% |
Source: Management figures
The mid-term targets for digital channels are to broaden the penetration ratio of internet or mobile banking users to above 45% from the current level of 33% and to increase the mobile banking penetration ratio to above 35% from the current level of 25%.
14) Net outflow of borrowed funds
|
Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million) |
|||||||||
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
|
127 |
480 |
265 |
325 |
241 |
100 |
139 |
27 |
66 |
145 |
Source: Management figures, Revolving non IFI loans from NBG are excluded
|
15) Portfolio Breakdown by Collateral Types as of 30-Jun-17
|
|
|
|
|
|
Cash Cover |
2% |
|
Gold |
4% |
|
Inventory |
7% |
|
Real Estate |
64% |
|
Third Party Guarantees |
6% |
|
Other |
1% |
|
Unsecured |
16% |
Source: IFRS Consolidated
|
16) Loan to Value by Segments as of 30-Jun-17 |
|||
|
|
|
|
|
|
Retail |
Corporate |
MSME |
Total |
|
42% |
45% |
44% |
44% |
|
|
|
|
|
17) IFRS 9 project update
The Bank is in the process of implementing IFRS 9 standard, which will come into effect starting from 1st January 2018.
Relevant Change Areas for the Bank
§ Key areas of IFRS 9 are classification and measurement, impairment and hedge accounting
§ Based on the Bank's Business model no significant changes are expected from classification and measurement and hedge accounting
§ Key changes come from the impairment part, where the standard moved from incurred credit loss to expected credit loss model
IFRS 9 Project
§ The Bank started the IFRS 9 implementation project in June 2016
§ The project is carried out with support from Deloitte
§ In parallel to methodology and model development, the Bank is in the process of respective software implementation
High Level Expected Impact
§ During the project's gap analysis phase, a high level impact assessment was performed, which applied simplified approaches e.g. for macro factors incorporation
§ Based on the results of the impact assessment,, calculated on 31 March 2017 loan portfolio, the provision level for the portfolio is expected to increase in the range of 0.2-0.5% of the loan book (6-18% of provision level). However, the final impact may be different, considering the Bank's finalised models and methodologies and the macro outlook
§ The expected impact is in the lower range of market expectations, due to the fact that the Bank already applies a conservative approach under the IAS 39 provisioning methodology
§ Based on EBA's report from November 2016, which covers sample of 50 financial institutions in Europe, the estimated increase of provisions compared to the current levels of provisions under IAS 39 is on average 18%, with upper limit being 30% for 86% (75th percentile) of respondents. The assessment is done on a high level applying simplified approaches, with one macro scenario being one of the simplifications
§ No impact is expected on capital adequacy ratios, which are calculated based on local standards, and profit and loss statement as the amount will directly affect equity.
18) Income tax guidance
Our effective Income tax guidance for 2017-2018 is in the range of 6-9% due to changes in Georgian Tax Code in relation to corporate income tax. Beginning from 2017, reinvested profit will become tax-free for all companies except for financial services companies, which will benefit from 2019.
19) NBG Loan Larisation Program
The NBG Larisation program consist of two parts:
§ One-time conversion program. On 11 January 2017, in order to ease the increased debt service burden caused by the exchange rate fluctuation, the government of Georgia approved a subsidised, one-time program on the voluntary conversion of US dollar-denominated bank loans of individuals into lari loans. The program started on 17 January and lasted for two months. As a result, loans of up to USD 80 million were converted in GEL through this Program
§ Issue of small loans in local currency only. Based on an amendment to the civil code, from 15 January 2017, individuals will only be able to borrow amounts up to GEL 100,000 in the national currency
Loans of up to USD 80 million were converted in GEL through the Larisation Program:
|
|
% |
Amounts in million GEL |
|
TBC + Bank Republic |
55.1% |
44.1 |
|
Bank of Georgia |
33.1% |
26.5 |
|
VTB |
6.1% |
4.9 |
|
Other |
5.7% |
4.6 |
Around 5,600 loans were converted during this program:
|
|
% |
Number of Loans |
|
TBC + Bank Republic |
55.0% |
3,080 |
|
Bank of Georgia |
29.6% |
1,658 |
|
VTB |
9.6% |
538 |
|
Other |
5.8% |
325 |
Total amount of loans issued below GEL 100,000:
|
In Absolute amounts |
1H 2016 |
1H 2017 |
|
TBC Bank + Bank Republic |
545 |
946 |
|
Share in Retail + MSME portfolio with Bank Republic |
12.4% |
11.6% |
|
Share in total portfolio with Bank Republic |
8.6% |
16.6% |
|
* Data is given for retail and MSME portfolios and excludes credit cards and overdrafts
|
|
|
20) NBG Initiatives
Newly introduced Liquidity Coverage Ratio
NBG has introduced new liquidity requirements (NBG LCR) for short-term liquidity risk management purposes, which is developed under Basel III with additional constraints above Basel requirements. This requirement will come into force starting from September and will slightly increase the effective liquidity requirements.
The Limits are defined for total and as well for both GEL and FC currencies:
Limits Our performance (30 Jun 2017)
§ Total LCR>=100% 106%
§ GEL LCR>=75% 96%
§ FC LCR>=100% 113%
Together with the introduction of LCR, in order to improve management of long-term liquidity, NBG plans to implement Net Stable Funding Ratio (NSFR), which will void existing liquidity requirement.
In 2016, the NBG initiated several measures to promote larization and increase public trust in the domestic currency. Within NBG LCR framework the national currency is treated preferentially.
Newly introduced changes to RWA under Capital Adequacy Framework
NBG has also introduced PTI and LTV ratio for retail loans which will affect loans issued after 30 November 2017. The exposures which are out of the defined range will be assigned higher risk weights from normal 75-100% to higher 100-150%. These changes will have negative effect on capital, however are expected to be compensated through higher pricing of such loans. In addition, NBG has also increased the group exposure limit from GEL 350,000 to GEL 2 million for the regulatory retail category.
Required PTI
|
Income range |
Hedged borrowers |
Non-hedged borrowers |
|
<1000 |
30% |
25% |
|
1,000 - 2,000 |
35% |
30% |
|
2,000 - 4,000 |
40% |
35% |
|
4,000 - 8,000 |
45% |
40% |
|
>8,000 |
50% |
45% |
Required LTV
|
Collateral type |
GEL loans |
FX loans |
|
Ordinary liquid asset |
80% |
75% |
|
High liquid asset |
90% |
85% |
Upcoming changes in the Capital Adequacy Framework
The NBG is reviewing the existing capital adequacy regulation and is going to introduce certain changes. Currently these changes are in draft form and are being discussed with the banks and other stakeholders. Estimated introduction date is Q4 2017.
The summary of main changes:
§ Current capital requirement will be divided across Pillar 1 and Pillar 2 buffers to increase clarity and comparability
§ Capital conservation buffer currently incorporated in minimum capital requirements will be separated
§ Systemic risk buffer will be introduced for systematically important banks over 3 year period
§ Countercyclical capital buffer will be introduced and the rate will be 0%
§ Additional loan portfolio concentration buffer will be introduced under Pillar 2
§ Current conservative weighting for CICR will be replaced by appropriate Pillar 2 buffer (Unhedged Currency Induced Credit Risk Buffer)
§ GRAPE buffer defined by the supervisor will be applied based on the bank specific risks
The exact requirements, as well as amount of the buffers and its impact on the capital planning is not yet determined. Based on the initial assessments the changes should not impact the growth and dividend guidelines.
Principal Risks and Uncertainties
Risk management is a critical pillar of the Group's strategy and in order to perform it effectively it is essential to identify emerging risks and uncertainties. The following table presents the principal risks that could adversely impact the Group's performance, financial condition and future prospects. The Group's performance may be affected by additional risks and uncertainties other than the ones listed below and some yet unknown risks that emerge in the future.
|
Principal risk |
Risk description |
Risk mitigation |
|
The Group faces currency induced credit risk due to the high dollarisation of the Group's portfolio. The risk of further depreciation of GEL is one of the most significant risks with negative impact on the portfolio quality. This is due to high dollarisation of the Group's balance sheet. Unhedged borrowers could suffer from increased debt burden when their FX denominated liabilities are amplified. |
A significant share of the Group's loans (and by large of the total banking sector loans in Georgia) is denominated in currencies other than GEL, particularly US Dollar. As of 30 June 2017 the National Bank of Georgia (hereafter NBG) reported that, 57.9% of total banking sector loans were denominated in foreign currencies. As at the same date, 60.8% of the Group's total gross loans and advances to customers (before provision for loan impairment) were denominated in foreign currencies. The income of a number of customers is directly linked to US Dollars via remittances, or exports in case of business borrowers, and some customers hedge their exposure through savings in US Dollars. Nevertheless, customers may not be protected against significant fluctuations of the exchange rates of the GEL against the currency of the loan.
The GEL exchange rate has been mainly consistent with those of Georgia's trading partners. It depreciated against the US Dollar by 10.5% in 2016 and has appreciated by 9.1% in first half of 2017.
The NBG operates effectively under its inflation-targeting framework. However, GEL remains in free float and is exposed to many internal and external factors that in some circumstances could result in devaluation against the US Dollar.
|
Specific attention is paid to currency-induced credit risk due to the portfolio's high dollarisation. The vulnerability towards exchange rate depreciation is monitored on a frequent basis in order to promptly implement the action plan in case of need. Ability to withstand certain FX depreciation is incorporated into the credit underwriting standards which also include applying significant currency devaluation buffers for the unhedged borrowers. In addition, the Group holds significant capital against currency induced credit risk. Given the experience and knowledge built throughout the recent currency volatility, the Group is in a good position to promptly mitigate emerging FX depreciation risks.
Given more stable exchange rate and improved operating environment, the level of the Group's non-performing loan portfolio decreased from 4.7% in June 2016 to 3.4% in June 2017. The Group maintains a reserve coverage of 84% with cash and 219% in cash, plus collateral.
|
|
The Group's performance may be compromised by adverse developments in the economic environment. The slowdown of economic growth in Georgia will have an adverse impact on the repayment capacity of the borrowers and restrain their future investment and expansion plans. These occurrences will be reflected in the Group's portfolio quality and profitability, and also impede the portfolio growth rates. Negative macroeconomic developments can compromise the Group's performance through different parameters such as higher unemployment rates, increasing retail sector default rates, falling property values, worsening loan collateralisation, lower debt service capabilities of companies suffering from decreasing sales. The political and economic instability in the neighbouring and main trading partner countries negatively impacts the economic outlook of Georgia through a worsening current account (e.g. decreasing exports, decreasing tourism inflows, lower remittances and foreign direct investments). |
As the Group operates primarily in, and sources nearly all of its revenue from Georgia, its business, financial condition and results of operations are, and will continue to be, highly dependent on the general economic conditions in the country.
During 2011-2016, the Georgian economy recorded an average real GDP growth of 4.5% per annum. In H1 2017 the growth of Georgian economy accelerated from 2.7% in 2016 and reached 4.5%.
Georgian economy is open, liberal, well diversified, and reasonably reformed. While it showed resilience during international or regional crises, it is still exposed to many internal and external developments. These could result in lower growth or, in some severe circumstances, a contraction of the economy. |
To decrease the vulnerability to the economic cycles and adverse economic developments, the Group identifies and limits its exposure to cyclical industries within its risk appetite framework.
The Group has established a macroeconomic monitoring process. This enables a closely and recurrent observation of the economic developments in Georgia, as well as its neighbouring countries, and to identify early warning signals indicating imminent economic risks. The given system allows the Group to timely assess significant economic and political occurrences and analyse their implications for the loan portfolio. The identified implications are duly translated into specific action plans with regards to reviewing the underwriting standards, risk appetite metrics or limits including limits per each of the most vulnerable industries.
Additionally, the stress testing and scenario analysis applied during the credit review and portfolio monitoring processes enable the Group to have an advance evaluation of the impact of macroeconomic shocks on the business and the portfolio.
Resilience towards a changing macroeconomic environment is also incorporated into credit underwriting standards. As such, borrowers are expected to withstand certain adverse economic developments through prudent financials, debt-servicing capabilities and conservative collateral coverage. |
|
The Group encounters the capital risk of not meeting the minimum regulatory requirements that may compromise growth and strategic targets.
The Bank is regulated by the NBG. The regulations and various terms of its funding and other arrangements require compliance with certain capital adequacy ratio and other ratios. Local regulatory requirements are more conservative than the current Basel standards. In addition, NBG's proposed new capital adequacy framework (discussed in this section) could increase the risk and uncertainties related to the capital management process. |
The NBG sets the minimum regulatory requirement for total capital adequacy ratio at 9.6% (Basel I) and 10.5% (Basel II/III). The Bank's capitalisation stands at 14.7% and 14.6% respectively as of 30 June 2017. In terms of Tier 1 capital, TBC Bank's capital adequacy ratio is 10.8% per Basel II/III and 9.6% per Basel I, versus the minimum requirements of 8.5% and 6.4% respectively. The ratios are above the respective regulatory minimums and additional stress buffers set by the Bank. Basel I requirements will expire by the end of 2017.
The NBG is reviewing the existing capital adequacy regulation and is going to introduce certain changes. Currently these changes are in draft form and are being discussed with the banks and other stakeholders. Estimated introduction date is Q4 2017. The summary of main changes: § Current capital requirement will be divided across Pillar 1 and Pillar 2 buffers to increase clarity and comparability § Capital conservation buffer currently incorporated in minimum capital requirements will be separated § Systemic risk buffer will be introduced for systematically important banks over 3 year period § Countercyclical capital buffer will be introduced and the rate will be 0% § Additional loan portfolio concentration buffer will be introduced under Pillar 2 § Current conservative weighting for CICR will be replaced by appropriate Pillar 2 buffer (Unhedged Currency Induced Credit Risk Buffer) § GRAPE buffer defined by the supervisor will be applied based on the bank specific risks
Finally, NBG has also introduced PTI and LTV ratio for retail loans which will affect loans issued after 30 November 2017. The exposures which are out of the defined range will be assigned higher risk weights from normal 75-100% to higher 100-150%. These changes will have negative effect on capital. In addition, NBG has also increased the group exposure limit from GEL 350,000 to GEL 2 million for the regulatory retail category. |
The Group scrutinises an introduction of the new requirements and is in close discussions with NBG. The exact requirements, as well as amount of the buffers and its impact on the capital planning is not yet determined. Based on the initial assessments the changes should not impact the growth and dividend guidelines.
As part of the ongoing capital management process, the Group undertakes stress-testing and sensitivity analysis to quantify extra capital consumption under different scenarios. Based on such analyses, the Group holds extra capital buffers to steadily meet the existing minimum regulatory requirements. Capital forecasts, as well as the results of the stress tests and what-if scenarios, are actively monitored with the involvement of the Bank's Management Board (the "Management Board") and its risk committee to ensure prudent management and timely actions when needed.
With regards to the changes in PTI and LTV, the Group expects to compensate negative capital impact through appropriate pricing of such loans.
|
|
The Group is exposed to concentration risk. Banks operating in developing markets are typically exposed to both single name and sector concentration risks. The Group has large individual exposures to single name borrowers. Their eventual default will entail increased credit losses and high impairment charges. The Group's portfolio is well diversified across sectors, resulting in only a moderate vulnerability to sector concentration risks. However should exposure to common risk drivers increase, the risks are expected to amplify correspondingly. |
The Group's loan portfolio is diversified, with maximum exposure to a single industry (i.e. energy and utility) standing at 8.6%.. The share of top 20 borrowers' exposure decreased from 14.4% to 13.0% YoY. |
The Group constantly checks its concentrations to single counterparties as well as sectors and common risk drivers, and introduces limits for risk mitigation. As part of the Risk Appetite Framework, the Group limits both name concentration as well as sectorial concentrations. Any considerable change in the economic or political environment, in Georgia or neighboring countries, will trigger the Group's review of the risk appetite criteria in order to mitigate emerging risk concentrations. Stringent monitoring tools are in place to ensure the compliance with the set limits. In addition, the Bank has dedicated restructuring teams to manage weakened borrowers. When it is deemed necessary, clients are transferred to such teams for a more efficient handling and, ultimately, to limit resulting credit risk losses. According to the Basel II Pillar 2 guidelines, the Group has developed a model to estimate unexpected losses from single name borrowers and sector concentration. This model ensures that the Group remains adequately capitalised towards concentration risks. |
|
Liquidity risk is inherent in the Group's operations. While the Board believes that the Group currently has sufficient financial resources available to meet its obligations as they fall due, liquidity risk is inherent in banking operations and can be heightened by a number of factors. These include an
overreliance on, or an inability, to access a particular source of funding, changes in credit ratings or market-wide phenomena, such as, for example, the global financial crisis that commenced in 2007. Access to credit for companies in emerging market is significantly influenced by the level of investor confidence and, as such, any factors affecting investor confidence (for example, a downgrade in credit ratings, central bank or state interventions or debt restructurings in a relevant industry) could influence the price or availability of funding for companies operating in any of these markets.
Although, the Group believes there is adequate liquidity to withstand significant withdrawals of customer deposits, but the unexpected and rapid withdrawal of a substantial amount of deposits could have a material adverse impact on the Group's business, financial condition, and results of operations and/or prospects.
In addition, NBG introduced a new liquidity management framework described in this section, which has increased the effective liquidity requirement for the Group. While the new requirement decreases structural liquidity risk through more adequate framework, it has increased the risk of not meeting minimum liquidity requirement. |
Throughout H1 2017 the Group was in compliance with Risk Appetite limits, as well as the minimum liquidity requirements set by the NBG. As of 30 June 2017, the net loan to deposits plus IFI funding ratio stood
at 90.6%, liquidity coverage ratio[9] was at 352% and net stable funding ratio was at 129%[10].
NBG has introduced new liquidity requirements (NBG liquidity coverage ratio, "LCR") for short-term liquidity risk management purposes, which is developed under Basel III with additional constraints above Basel requirements.
Based on the new framework, the limits are defined for total and as well for both GEL and FC currencies as follows:
§ Total LCR>=100% § GEL LCR>=75% § FC LCR>=100%
This requirement will come into force starting from September and will slightly increase the effective liquidity requirements.
Together with the introduction of LCR, in order to improve management of long-term liquidity, NBG plans to implement Net Stable Funding Ratio (NSFR), which will void existing liquidity requirement. |
The group is already prepared for the new liquidity requirement and as of June 30 2017 the Group is compliant with the newly introduced LCR requirement.
To properly manage liquidity, the group operates with time-tested forecasting and monitoring framework and holds appropriate liquidity buffers. The Group performs an outflow scenario analysis for both normal and stress circumstances to make sure that they can be met by the Group's liquid assets and cash inflows. The Group maintains diversified funding structure to manage respective liquidity risk.
Furthermore, the new framework both increases the effective liquidity requirement and improves the liability structure through appropriate liquidity requirement.
As a part of liquidity risk management framework the Group has a Liquidity Contingency Plan in place outlining risk indicators for different stress scenarios and respective action plans. |
|
Any decline in the Group's net interest income or net interest margin could lead to a reduction in profitability. The net interest income accounts for the majority of the Group's total income. Consequently, fluctuations in its net interest margin affect the results of operations. High competition on the local banking sector could drive interest rates down, compromising the Group's profitability. At the same time, the cost of funding is largely exogenous to the Group and is derived based on both the national and international markets.
Recent decrease in margins have a negative contribution to the Group's profitability. Above mentioned new liquidity requirement could have further negative effect on the margins and profitability of the Group. |
The majority of Group's total income derives from net interest income. Consequently, the Group's results of operations are affected by fluctuations in its net interest margin ("NIM"). In Q2 2017 the NIM stood at 6.8% down by 1.1 pp yoy and up by 0.2 pp QoQ. The reduction in NIM was driven by the Group's proactive decision to strengthen the market position across all segments and products in the anticipation of falling yields on the market.
The Group tries to close a direct exposure to LIBOR and the local refinancing rates or, where this is not feasible, price them appropriately. As of 30 June 2017, GEL 1,880 million in assets (17%) and GEL 1,301 million in liabilities (14%) were floating, related to the LIBOR/ FED/ECB (deposit facility) rates. During the same period GEL 1,529 million of assets (14%) and GEL 1,711 million of liabilities (18%) were floating related to the NBG's refinancing rate. |
Still high level of current margins, continuous increase in fee and commission income and efforts in cost optimisation represents a safeguard against margin declines posing profitability concerns for the Group. Pricing framework and profitability analysis assist the Group in decision making. In cases where loans are extended on fixed terms rather than floating, the interest rate risk is adequately translated into price premiums, safeguarding against increasing interest rates.
The Group expects margins to decrease in the medium term. The decrease has been included in the forecast which provides the basis for the Group's guidance.
In addition, the Group expects that the decreasing effect will be compensated in practice by increased fee and commission income and decreased unit cost spent per transaction. |
|
The threat posed by cyber-attacks has increased in recent years and it continues to grow. The risk of potential cyber-attacks, which have become more sophisticated, may lead to significant security breaches. Such risks change rapidly and require continued focus and investment. |
No major cyber-attack attempts have targeted a Georgian commercial banks in recent years. Nonetheless, the Group's increasing dependency on IT systems increases its exposure to potential cyberattacks. |
The Group actively monitors, detects and prevents risks arising from cyber-attacks. The Group's staff monitors developments on both local and international markets to increase awareness of emerging forms of cyber-attacks. Intrusion Prevention and DDoS protection systems are in place to protect the Group from external cyber-threats. Security incident and event monitoring system in conjunction with respective processes and procedures are in place to handle cyber-incidents effectively. Processes are continuously updated and enhanced in order to respond to new potential threats. The Data Recovery Policy is in place to ensure business continuity in case of serious cyber-attacks. |
|
The Group is exposed to regulatory risk. The Group's activities are highly regulated and thus face regulatory risk. The local regulator, the National Bank of Georgia, can increase the prudential requirements across the whole sector as well as for specific institutions within it. Therefore, the Group's profitability and performance may be compromised by an increased regulatory burden, including higher capital requirements. In this context, recent NBG initiatives are relevant, whereby, while these initiatives improve risk profile of the Group (though mainly higher liquidity, better diversified liability and stronger capital position), they could negatively impact Profitability, growth and dividend plans of the group if the changes are not properly reflected into the pricing.
The group is also subject to certain UK, European or global regulations that increase the regulation risk or the regulatory uncertainty. |
The Bank is regulated by the NBG. In addition to mandatory capital adequacy and liquidity ratios (please see capital and liquidity risks), the NBG sets lending limits and other economic ratios, including, inter alia, lending ratios, and investment ratios. Under the Georgian banking regulations, the Bank is required, among other things, to comply with minimum reserve requirements and mandatory financial ratios and regularly file periodic reports. The Bank is also regulated by respective tax code or other relevant laws in Georgia. Following the Company's listing on the London Stock Exchange's premium segment, the Group became subject to increased regulations from the UK Listing Authority. In addition to its banking operations, the Group also offers other regulated financial services products, including leasing, insurance and brokerage services. The Group's current operations in Azerbaijan (through TBC Kredit) are required to comply with the Azerbaijani regulations. The Group's operations remain in full compliance with all relevant legislation and regulations. The Group is also subject to financial covenants in its debt agreements and is fully compliant with all covenants. . |
The Group has established systems and processes to ensure full regulatory compliance. The dedicated compliance department, reporting directly to the Chief Executive Officer is the primary responsible for the regulatory compliance. However, the compliance is embedded in all levels of the Bank. The Group's Risks, Ethics and Compliance Committee is responsible for the regulatory compliance at the Board level. In terms of banking regulations as well as Georgia's taxation system, the Group is closely engaged with the regulator to ensure that new procedures and requirements are discussed in detail before their implementation. While the decisions made by the regulator are beyond the Group's control, significant regulatory changes are usually preceded by a consultative period that allows all lenders to provide feedback and adjust their business practice. |
Statement of Directors' Responsibilities
Each of the Directors (the names of whom are set out below) confirm that to the best of their knowledge that:
· The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union;
· The interim management report herein includes a fair review of the information required by Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R namely:
o an indication of important events that have occurred during the six months ended 30 June 2017 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
o any related party transactions in the six months ended 30 June 2017 that have materially affected the financial position or performance of TBC Bank during that period and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or performance of TBC Bank in the six months ended 30 June 2017.
Signed on behalf of the Board by:
|
Vakhtang Butskhrikidze |
Giorgi Shagidze |
|
CEO |
Deputy CEO, CFO |
|
21 August 2017 |
21 August 2017 |
|
|
|
|
TBC Bank Group PLC Board of Directors: |
|
|
|
|
|
Chairman |
Deputy Chairman |
|
Mamuka Khazaradze |
Badri Japaridze |
|
|
|
|
Executive Directors |
Non-executive Directors |
|
Vakhtang Butskhrikidze (CEO) |
Nikoloz Enukidze (SID) |
|
Giorgi Shagidze (CFO) |
Stefano Marsaglia |
|
|
Nicholas Dominic Haag |
|
|
Eric J. Rajendra |
|
|
Stephan Wilcke |
Unaudited Condensed Consolidated Interim Financial Information
Contents
Review Report
Unaudited Condensed Consolidated Interim Statement of Financial Position .................................................................... 53
Unaudited Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income......…...........54
Unaudited Condensed Consolidated Interim Statement of Changes in Equity..................................................................... 56
Unaudited Condensed Consolidated Interim Statement of Cash Flows................................................................................ 57
Notes to the Unaudited Condensed Consolidated Financial Statements……...…………………………………….............58
Independent review report to TBC Bank Group plc
Report on the unaudited condensed consolidated interim financial information
Our conclusion
We have reviewed TBC Bank Group plc's unaudited condensed consolidated interim financial information (the "interim financial statements") for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
· the condensed consolidated statement of financial position as at 30 June 2017;
· the condensed consolidated statement of profit or loss and other comprehensive income for the period then ended;
· the condensed consolidated statement of cash flows for the period then ended;
· the condensed consolidated statement of changes in equity for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim financial statements are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the interim financial statements in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 August 2017
|
Unaudited Condensed Consolidated Statements of Financial Position
|
|
||
|
|
|
30 June 2017 |
31 December 2016 |
|
In thousands of GEL |
Note |
(Unaudited) |
(Audited) |
|
|
|
|
|
|
Assets |
|
|
|
|
Cash and cash equivalents |
6 |
1,219,108 |
945,180 |
|
Due from other banks |
7 |
41,096 |
24,725 |
|
Mandatory cash balances with the National Bank of Georgia |
8 |
931,654 |
990,642 |
|
Loans and advances to customers |
9 |
7,174,305 |
7,133,702 |
|
Investment securities available for sale |
|
618,044 |
430,703 |
|
Bonds carried at amortized cost |
|
389,036 |
372,956 |
|
Investments in subsidiaries and associates |
|
1,021 |
- |
|
Investments in finance leases |
|
96,329 |
95,031 |
|
Investment properties |
|
93,502 |
95,615 |
|
Current income tax prepayment |
|
7,719 |
7,430 |
|
Deferred income tax asset |
|
3,407 |
3,511 |
|
Other financial assets |
|
94,238 |
94,627 |
|
Other assets |
|
197,533 |
171,263 |
|
Premises and equipment |
10 |
320,139 |
314,032 |
|
Intangible assets |
10 |
65,034 |
60,957 |
|
Goodwill |
|
28,657 |
28,658 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
11,280,822 |
10,769,032 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Due to credit institutions |
11 |
2,313,550 |
2,197,577 |
|
Customer accounts |
12 |
6,666,413 |
6,454,949 |
|
Other financial liabilities |
|
122,019 |
50,998 |
|
Current income tax liability |
|
272 |
2,577 |
|
Debt securities in issue |
|
24,106 |
23,508 |
|
Deferred income tax liability |
|
2,138 |
5,646 |
|
Provisions for liabilities and charges |
13 |
10,733 |
16,026 |
|
Other liabilities |
|
61,013 |
66,739 |
|
Subordinated debt |
14 |
390,070 |
368,381 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
9,590,314 |
9,186,401 |
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
Share capital |
15 |
1,601 |
1,581 |
|
Share premium |
15 |
706,580 |
677,211 |
|
Retained earnings |
|
1,051,973 |
955,173 |
|
Group reorganisation reserve |
|
(162,166) |
(162,166) |
|
Share based payment reserve |
16 |
4,753 |
23,327 |
|
Revaluation reserve for premises |
|
70,045 |
70,460 |
|
Revaluation reserve for available-for-sale securities |
|
(1,106) |
(3,681) |
|
Cumulative currency translation reserve |
|
(7,694) |
(7,538) |
|
|
|
|
|
|
|
|
|
|
|
Net assets attributable to owners |
|
1,663,986 |
1,554,367 |
|
Non-controlling interest |
|
26,522 |
28,264 |
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
1,690,508 |
1,582,631 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
11,280,822 |
10,769,032 |
|
|
|
|
|
The financial statements on pages 53 to 108 were approved by the Board of Directors on 21 August 2017 and signed on its behalf by:
______________________________ ______________________________
Vakhtang Butskhrikidze Giorgi Shagidze
Chief Executive Officer Chief Financial Officer
|
Unaudited Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income |
|||
|
|
|
Six months ended |
|
|
|
|
30 June 2017 |
30 June 2016 |
|
In thousands of GEL |
Note |
(Unaudited) |
(Unaudited) |
|
|
|
|
|
|
Interest income |
19 |
487,667 |
341,026 |
|
Interest expense |
19 |
(195,593) |
(124,488) |
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
292,074 |
216,538 |
|
|
|
|
|
|
|
|
|
|
|
Fee and commission income |
20 |
89,719 |
62,228 |
|
Fee and commission expense |
20 |
(34,502) |
(22,546) |
|
|
|
|
|
|
|
|
|
|
|
Net fee and commission income |
|
55,217 |
39,682 |
|
|
|
|
|
|
|
|
|
|
|
Net insurance premiums earned |
|
6,382 |
- |
|
Net insurance claims incurred |
|
(3,301) |
- |
|
|
|
|
|
|
|
|
|
|
|
Insurance Profit |
|
3,081 |
- |
|
|
|
|
|
|
|
|
|
|
|
Net gains from trading in foreign currencies |
|
43,392 |
29,085 |
|
Net gain/(losses) from foreign exchange translation |
|
2,037 |
(999) |
|
Net losses from derivative financial instruments |
|
(38) |
(472) |
|
Net gains from disposal of available for sale investment securities |
|
- |
8,795 |
|
Other operating income |
21 |
14,234 |
8,362 |
|
Share of profit of associates |
|
577 |
- |
|
|
|
|
|
|
|
|
|
|
|
Other operating non-interest income |
|
60,202 |
44,771 |
|
|
|
|
|
|
|
|
|
|
|
Provision for loan impairment |
9 |
(40,367) |
(25,277) |
|
Provision for impairment of investments in finance lease |
|
(129) |
(111) |
|
(Provision for)/recovery of provision for performance guarantees and credit related commitments |
13 |
1,547 |
(2,076) |
|
Provision for impairment of other financial assets |
|
(4,425) |
(1,193) |
|
Impairment of investment securities available for sale |
|
- |
(11) |
|
|
|
|
|
|
|
|
|
|
|
Operating income after provisions for impairment |
|
367,200 |
272,323 |
|
|
|
|
|
|
|
|
|
|
|
Staff costs |
|
(102,376) |
(69,473) |
|
Depreciation and amortisation |
10 |
(17,523) |
(13,610) |
|
Provision for liabilities and charges |
|
2,495 |
- |
|
Administrative and other operating expenses |
22 |
(58,446) |
(51,585) |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
(175,850) |
(134,668)
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax |
|
191,350 |
137,655 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
(14,935) |
1,582 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
176,415 |
139,237 |
|
|
|
|
|
|
Other comprehensive income: Items that may be reclassified subsequently to profit or loss |
|
|
|
|
Revaluation of available-for-sale investments |
|
2,613 |
3,144 |
|
Gain less losses reclassified to profit or loss upon disposal of available for-sale investments |
|
- |
(8,853) |
|
Exchange differences on translation to presentation currency |
|
(158) |
(325) |
|
Income tax recorded directly in other comprehensive income |
|
- |
1,401 |
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
Income tax recorded directly in other comprehensive income |
|
(422) |
10,506 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income for the period |
|
2,033 |
5,873 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the PERIOD |
|
178,448 |
145,110 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit is attributable to: |
|
|
|
|
|
- Owners of the Bank |
|
173,519 |
|
140,261 |
|
- Non-controlling interest |
|
2,896 |
|
(1,024) |
|
|
|
|
|
|
|
Profit for the period |
|
176,415 |
|
139,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income is attributable to: |
|
|
|
|
|
- Owners of the Bank |
|
175,523 |
|
146,134 |
|
- Non-controlling interest |
|
2,925 |
|
(1,024) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
178,448 |
|
145,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share for profit attributable to the owners of the Bank: |
|
|
|
|
|
- Basic earnings per share |
17 |
3.31 |
|
2.81 |
|
- Diluted earnings per share |
17 |
3.26 |
|
2.78 |
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of Changes in Equity
|
|
|
||||||||||||
|
In thousands of GEL |
Note |
|
|
Non-control-ling interest |
Total equity |
|||||||||
|
Share capital |
Share pre-mium |
Group reorganisation reserve |
Share based payments reserve |
Revaluation reserve for Premises |
Revaluation reserve for Available for sale securities |
Cumulative currency translation reserve |
Retained earnings |
Total |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Balance as of 1 January 2016 |
|
19,587 |
407,474 |
- |
12,755 |
59,532 |
5,759 |
(6,590) |
712,743 |
1,211,260 |
7,189 |
1,218,449 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Profit for the six months ended 30 June 2016 |
|
- |
- |
- |
- |
- |
- |
- |
140,261 |
140,261 |
(1,024) |
139,237 |
||
|
Other comprehensive income/(loss) for six months ended 30 June 2016 |
|
- |
- |
- |
- |
10,506 |
(4,308) |
(325) |
- |
5,873 |
- |
5,873 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total comprehensive income/(loss) for six months ended 30 June 2016 |
|
- |
- |
- |
- |
10,506 |
(4,308) |
(325) |
140,261 |
146,134 |
(1,024) |
145,110 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Share based payment |
16 |
- |
- |
- |
5,925 |
- |
- |
- |
- |
5,925 |
- |
5,925 |
||
|
Increase in share capital arising from share based payment |
|
36 |
1,175 |
- |
(1,211) |
- |
- |
- |
- |
- |
- |
- |
||
|
Dividends paid |
|
- |
- |
- |
- |
- |
- |
- |
(54,560) |
(54,560) |
- |
(54,560) |
||
|
Balance as of 30 June 2016 |
|
19,623 |
408,649 |
- |
17,469 |
70,038 |
1,451 |
(6,915) |
798,444 |
1,308,759 |
6,165 |
1,314,924 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Balance as of 1 January 2017
|
|
1,581 |
677,211 |
(162,166) |
23,327 |
70,460 |
(3,681) |
(7,538) |
955,173 |
1,554,367 |
28,264 |
1,582,631 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Profit for the six months ended 30 June 2017 |
|
- |
- |
- |
- |
- |
- |
- |
173,519 |
173,519 |
2,896 |
176,415 |
||
|
Other comprehensive income/(loss) for six months ended 30 June 2017 |
|
- |
- |
- |
- |
(415) |
2,575 |
(156) |
- |
2,004 |
29 |
2,033 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total comprehensive income/(loss) for six months ended 30 June 2017 |
|
- |
- |
- |
- |
(415) |
2,575 |
(156) |
173,519 |
175,523 |
2,925 |
178,448 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Share issue |
|
16 |
24,237 |
- |
(24,253) |
- |
- |
- |
- |
- |
- |
- |
||
|
Share based payment accrual |
16 |
- |
- |
- |
5,679 |
- |
- |
- |
- |
5,679 |
(278) |
5,401 |
||
|
Conversion of shares |
|
4 |
5,132 |
- |
- |
- |
- |
- |
(1,909) |
3,227 |
(3,196) |
31 |
||
|
Dividends declared |
|
- |
- |
- |
- |
- |
- |
- |
(74,810) |
(74,810) |
(1,193) |
(76,003) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Balance as of 30 June 2017 |
|
1,601 |
706,580 |
(162,166) |
4,753 |
70,045 |
(1,106) |
(7,694) |
1,051,973 |
1,663,986 |
26,522 |
1,690,508 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Unaudited Condensed Consolidated Statements of Cash Flows
|
|||
|
|
|
Six months ended |
|
|
In thousands of GEL |
Note |
30 June 2017 (Unaudited) |
30 June 2016 (Unaudited) |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Interest received |
|
468,391 |
328,321 |
|
Interest paid |
|
(195,640) |
(123,338) |
|
Fees and commissions received |
|
89,329 |
62,899 |
|
Fees and commissions paid |
|
(34,802) |
(22,739) |
|
Insurance premium received |
|
7,153 |
- |
|
Insurance claims paid |
|
(3,497) |
- |
|
Income received from trading in foreign currencies |
|
43,392 |
29,085 |
|
Other operating income received |
|
8,334 |
5,516 |
|
Staff costs paid |
|
(102,975) |
(72,219) |
|
Administrative and other operating expenses paid |
|
(53,075) |
(46,369) |
|
Income tax paid |
|
(21,785) |
(10,873) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities before changes in operating assets and liabilities |
|
204,825 |
150,283 |
|
|
|
|
|
|
|
|
|
|
|
Net change in operating assets |
|
|
|
|
Due from other banks and mandatory cash balances with the National Bank of Georgia |
|
3,043 |
(143,663) |
|
Loans and advances to customers |
|
(499,822) |
(173,777) |
|
Investment in finance lease |
|
(8,531) |
(1,943) |
|
Other financial assets |
|
1,007 |
(2,071) |
|
Other assets |
|
1,103 |
1,694 |
|
Net change in operating liabilities |
|
|
|
|
Due to other banks |
|
(223,686) |
128,868 |
|
Customer accounts |
|
610,920 |
156,872 |
|
Other financial liabilities |
|
(8,600) |
1,967 |
|
Other liabilities and provision for liabilities and charges |
|
(211) |
(303) |
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities |
|
80,048 |
117,927 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Acquisition of investment securities available for sale |
|
(401,304) |
(73,382) |
|
Proceeds from redemption at maturity of investment securities available for sale |
|
218,981 |
111,500 |
|
Acquisition of bonds carried at amortised cost |
|
(141,849) |
(171,391) |
|
Proceeds from redemption of bonds carried at amortised cost |
|
131,693 |
179,799 |
|
Acquisition of premises, equipment and intangible assets |
|
(32,262) |
(18,437) |
|
Disposal of premises, equipment and intangible assets |
|
1,506 |
315 |
|
Proceeds from disposal of investment property |
|
2,570 |
1,119 |
|
Acquisition of subsidiaries and associates |
|
(350) |
- |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)/ from investing activities |
|
(221,015) |
29,523 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from other borrowed funds |
|
1,019,147 |
18,699 |
|
Redemption of other borrowed funds |
|
(640,409) |
(459,423) |
|
Proceeds from subordinated debt |
|
52,990 |
18,131 |
|
Redemption of subordinated debt |
|
- |
(13,644) |
|
Proceeds from debt securities in issue |
|
2,823 |
- |
|
Redemption of debt securities in issue |
|
- |
(4,636) |
|
Dividends paid |
|
(1,193) |
(54,560) |
|
Issue of ordinary shares |
|
31 |
- |
|
|
|
|
|
|
|
|
|
|
|
Net cash from/(used in) financing activities |
|
433,389 |
(495,433) |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
(18,494) |
(28,159) |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
273,928 |
(376,142) |
|
Cash and cash equivalents at the beginning of the period |
6 |
945,180 |
720,347 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
6 |
1,219,108 |
344,205 |
|
|
|
|
|
|
|
|
|
|
Notes to the Unaudited Condensed Consolidated Financial Statements
1 Introduction
This condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" for the six months ended 30 June 2017 for TBC Bank Group PLC and its subsidiaries (together referred to as the "Group" or "TBC Bank Group PLC").
This condensed consolidated interim financial information has been reviewed, not audited.
The Group has 157 (2016: 167) branches within Georgia and 6,898 employees (2016: 6,292).
On 1 June 2016, TBC Bank Group PLC ("TBCG"), a public limited liability company, incorporated in England and Wales on 26 February 2016, launched the Tender Offer (the "Tender Offer") to exchange its entire ordinary share capital for an equivalent number of the Bank's ordinary shares and thus to acquire the entire issued share capital, including those shares represented by Global Depositary Receipts ("GDRs"), of JSC TBC Bank (hereafter the "Bank"). Following the successful completion of the Tender Offer on 4 August 2016, as of 30 June 2017 TBCG holds 98.67% of the share capital of the Bank, thus representing the Bank's ultimate parent company. Together with the Bank and subsidiaries, TBCG makes up a group of companies. The Bank is a parent of a group of companies incorporated in Georgia and Azerbaijan, their primary business activities include providing banking, leasing, brokerage and card processing services to corporate and individual customers. The Group's list of companies is provided in Note 2.
The shares of TBCG ("TBCG Shares") were admitted to the Premium Listing segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange PLC's Main Market for listed securities effective on 10 August 2016 (the "Admission", Note 15). The Bank is the Group's main operating unit and it accounts for most of the Group's activities.
TBC Bank Group PLC's registered legal address is St. Andrew 6, London, United Kingdom EC4A3AE. Registered number of TBC Bank Group PLC is 10029943.
As of 30 June 2017 and 31 December 2016, the following shareholders directly owned more than 5% of the total outstanding shares of the Group. Other shareholders individually owned less than 5% of the outstanding shares. As of 30 June 2017 and 31 December 2016 the Group had no ultimate controlling party. Other includes individual as well as corporate shareholders.
|
Shareholders |
Note
|
30 June 2017 |
31 December 2016 |
|
|
|
|
|
|
TBC Holdings LTD |
|
15% |
15% |
|
European Bank for Reconstruction and Development |
|
8% |
12% |
|
JPMorgan Asset Management |
|
9% |
7% |
|
Schroder Investment Management |
|
8% |
7% |
|
Dunross & Co. |
|
6% |
6% |
|
Liquid Crystal International N.V. LLC |
|
6% |
5% |
|
Societe Generale SA |
|
- |
5% |
|
Other |
|
48% |
43% |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
100% |
100% |
|
|
|
|
|
As a result of the conversion of the Bank's shares into TBCG shares as described above and following the cancellation of GDR Programme in October 2016, the Group has no GDRs outstanding as of 30 June 2017.
The TBC Bank Group PLC holds 98.67% of the Bank as of 30 June 2017. The condensed consolidated financial statements include the following principal subsidiaries:
|
Company Name |
Proportion of voting rights and ordinary share capital |
|
|
|
||
|
30 June 2017 |
31 December 2016 |
|
Principal place of business or incorporation |
Year of incorpo-ration |
Industry |
|
|
|
|
|
|
|
|
|
|
JSC TBC Bank |
98. 67% |
98.48% |
|
Tbilisi, Georgia |
1992 |
Banking |
|
Ltd Merckhali Pirevli |
100% |
100% |
|
Tbilisi, Georgia |
2009 |
Operating leasing |
|
United Financial Corporation JSC |
98.67% |
98.67% |
|
Tbilisi, Georgia |
1997 |
Card processing |
|
TBC Capital LLC |
100% |
100% |
|
Tbilisi, Georgia |
1999 |
Brokerage |
|
TBC Leasing JSC |
99.61% |
99.61% |
|
Tbilisi, Georgia |
2003 |
Leasing |
|
TBC Kredit LLC |
75% |
75% |
|
Baku, Azerbaijan |
2008 |
Non-banking credit institution |
|
Banking System Service Company LLC |
100% |
100% |
|
Tbilisi, Georgia |
2009 |
Information services |
|
TBC Pay LLC |
100% |
100% |
|
Tbilisi, Georgia |
2009 |
Processing |
|
Real Estate Management Fund JSC |
100% |
100% |
|
Tbilisi, Georgia |
2010 |
Real estate management |
|
TBC Invest LLC |
100% |
100% |
|
Ramat Gan, Israel |
2011 |
PR and marketing |
|
Mali LLC |
100% |
100% |
|
Tbilisi, Georgia |
2011 |
Real estate management |
|
Bank Republic Group |
- |
100% |
|
Tbilisi, Georgia |
2016 |
Banking |
|
JSC TBC Insurance |
100% |
100% |
|
Tbilisi, Georgia |
2014 |
Insurance |
|
|
|
|
|
|
|
|
Presentation currency. These consolidated financial statements are presented in thousands of Georgian Lari ("GEL thousands"), unless otherwise indicated.
The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries. On 8 May 2017 the Group completed the legal and operational process of merging JSC Bank Republic with TBC Bank.
The Group's corporate structure consists of a number of related undertakings, comprising subsidiaries and associates, which are not consolidated due to immateriality. A full list of these undertakings, the country of incorporation and the ownership of each share class is set out below.
|
Company Name |
Proportion of voting rights and ordinary share capital |
|
|
|
|
|
30 June 2017 |
31 December 2016 |
Principal place of business or incorporation |
Year of incorpo-ration |
Industry |
|
|
|
|
|
|
|
|
|
UFC International Ltd |
80% |
80% |
British Virgin Islands |
2001 |
Investment Vehicle |
|
TBC Capital B.V. |
90% |
90% |
Amsterdam, Netherlands |
2007 |
Investment Vehicle |
|
TBC Invest International Ltd |
100% |
100% |
Tbilisi, Georgia |
2016 |
Investment Vehicle |
|
University Development Fund |
33.33% |
33.33% |
Tbilisi, Georgia |
2007 |
Education |
|
Ltd Georgian Mill Company |
100% |
100% |
Tbilisi, Georgia |
2010 |
Manufacturing |
2 Summary of Significant Accounting Policies
Basis of preparation. This condensed consolidated interim financial information for the half-year reporting period ended 30 June 2017 has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and IAS 34 Interim Financial Reporting as adopted by the European Union. This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2016, which has been prepared in accordance with IFRSs as adopted by the European Union and any public announcements made by TBC Bank Group PLC during the interim reporting period.
Except as described below, the same accounting policies and methods of computation were followed in the preparation of this condensed consolidated interim financial information as used in the preparation of the annual consolidated financial statements for the year ended 31 December 2016.
Going Concern. The Board of Directors of TBC Bank Group PLC has prepared these financial statements on a going concern basis. In making this judgement the management considered the Group's financial position, current intentions, profitability of operations and access to financial resources, and it analysed the impact of the recent financial crisis on future operations of the Group. The management is not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern.
Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period.
Foreign currency translation. At 30 June 2017 the closing rate of exchange used for translating foreign currency balances was USD 1 = GEL 2.3423 (31 December 2016: USD 1 = GEL 2.6468); EUR 1 = GEL 2.7444 (31 December 2016: EUR 1 = GEL 2.7940); GBP 1 = GEL 3.1192 (31 December 2016: GBP 1 = GEL 3.2579).
3 Critical Accounting Estimates, and Judgements in Applying Accounting Policies
Estimates and judgements that have the most significant effect on the amounts recognised in the interim financial information:
Impairment losses on loans and advances and finance lease receivables. The Group regularly reviews its loan portfolio and finance lease receivables to assess impairment. In determining whether an impairment loss should be recorded in the statement of profit or loss and other comprehensive income, the Group conclude whether there is, or not, any observable data indicating a measurable decrease in the estimated future cash flows from a portfolio of loans or finance lease receivables before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. When scheduling future cash flows the management uses estimates based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. A 5% increase or decrease between actual loss experience and the loss estimates used will result in an additional or lower charge for loan loss impairment of GEL 10,606 thousand (30 June 2016: GEL 9,505 thousand) and additional charge for impairment of finance lease receivables of GEL 58.9 thousand (30 June 2016: GEL 40.7 thousand), respectively.
Impairment provisions for individually significant loans and leases are based on the estimate of discounted future cash flows of the individual loans and leases taking into account repayments and realisation of any assets held as collateral against the loan or the lease. A 5% increase or decrease in the actual future discounted cash flows from individually significant loans which could arise from a mixture of differences in amounts and timing of the cash flows will result in an additional or lower charge for loan loss provision of GEL 876 thousand (30 June 2016: GEL 2,638 thousand), respectively.
A 5% increase or decrease in the actual future discounted cash flows from individually significant leases which could arise from a mixture of differences in amounts and timing of the cash flows will result in an additional or lower charge for provision of GEL 61.4 thousand (30 June 2016: GEL 40.7 thousand), respectively.
Deferred and current income tax. On 13 May 2016 the Government of Georgia enacted the changes in the Tax Code of Georgia effective from 1 January 2019, for commercial banks, credit unions, insurance organizations, microfinance organizations and pawnshops and from 1 January 2017 for other entities. The new code impacts the recognition and measurement principles of the Group's income tax and it also affects the Group's deferred income tax assets/liabilities. Companies do not have to pay income tax on their profit before tax (earned since 1 January 2017 or 1 January 2019 for commercial banks, credit unions, insurance organizations, microfinance organizations and pawnshops) until that profit is distributed in a form of dividend or other forms of profit distributions. Once dividend is paid, 15% income tax is payable at the moment of the dividend payment, regardless of whether in monetary or non-monetary form, to the foreign non-resident legal entities and foreign and domestic individuals. The dividends paid out to the resident legal entities are tax exempted. Apart from dividends' distribution, the tax is still payable on expenses or other payments incurred not related to economic activities, free delivery of goods/services and/or transfer of funds and representation costs that exceed the maximum amount determined by the Income Tax Code of Georgia, in the same month they are incurred.
As of 30 June 2017, deferred tax assets/liabilities are re-measured to the amounts that are estimated to be utilized in the period from 1 January 2017 to 31 December 2018.
4 Adoption of New or Revised Standards and Interpretations
The adopted accounting policies are consistent with those of the previous financial year. There were no new or amended standards or interpretations that resulted in a change of the accounting policy.
5 New Accounting Pronouncements
Minor amendments to IFRSs
The IASB has published a number of minor amendments some of which has not yet been endorsed for use in the EU. The Group has not early adopted any of the amendments effective after 31 December 2016 and it expects they will have an insignificant effect, when adopted, on the consolidated financial statements of the Group and the separate financial statements of TBC Bank Group PLC.
Major new IFRSs
The IASB has published IFRS 9 'Financial Instruments', IFRS 15 'Revenue from Contracts with Customers' and IFRS 16 'Leases'. IFRS 9 and IFRS 15 have been endorsed for use in the EU and IFRS 16 has not yet been endorsed.
IFRS 9 "Financial Instruments: Classification and Measurement" (amended in July 2014 and effective for annual periods beginning on or after 1 January 2018). Key features of the new standard are:
· Financial assets are required to be classified into three measurement categories: (i) those to be measured subsequently at amortised cost, (ii) those to be measured subsequently at fair value through other comprehensive income (FVOCI) and (iii) those to be measured subsequently at fair value through profit or loss (FVPL);
· The classification for debt instruments is driven by the entity's business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments in line with the SPPI requirement that are held in a portfolio where an entity both holds to collect assets' cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition;
Investments in equity instruments are always measured at fair value. However, the management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss;
· Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key difference is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income;
· IFRS 9 introduces a new model for the recognition of impairment losses - the expected credit losses (ECL) model. There is a 'three stage' approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). In case of a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables;
· Hedge accounting requirements were amended to align more closely the accounting with the risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard currently does not address accounting for macro hedging.
IFRS 9 implementation project started in June 2016. In parallel to methodology and model development, the Bank is in the process of respective software implementation. Based on the Bank's Business model, no significant changes are expected from classification and measurement and hedge accounting parts of the standard. During the project's gap analysis phase, a high level impact assessment was performed which applied simplified approaches e.g. for macro factors incorporation. Based on the results of the impact assessment results calculated on 31 March 2017 loan portfolio, the provision level for the portfolio is expected to increase in the range of 0.2-0.5% of the loan book (6-18% of provision level). However the final impact may be different, considering the Bank's finalized models and methodologies and the macro outlook.
No impact is expected on capital adequacy ratios, which are calculated based on local standards, and profit and loss statement as the amount will directly affect equity.
IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018). The new standard introduces the core principle that revenue must be recognized when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognized, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognized if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalized and amortized over the period when the benefits of the contract are consumed. The Group is currently assessing the impact of the new standard on its financial statements.
IFRS 16, Leases (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also to access financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognize: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group is currently assessing the impact of the new standard on its financial statements.
6 Cash and Cash Equivalents
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
Cash on hand |
381,865 |
402,532 |
|
Cash balances with the National Bank of Georgia (other than mandatory reserve deposits) |
289,151 |
135,557 |
|
Correspondent accounts and overnight placements with other banks |
388,329 |
406,319 |
|
Placements with and receivables from other banks with original maturities of less than three months |
159,763 |
772 |
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
1,219,108 |
945,180 |
|
|
|
|
As of 30 June 2017, 96% of the correspondent accounts and overnight placements with other banks are placed with OECD banking institutions (31 December 2016: 96%). As of 30 June 2017, GEL 124,564 thousand included in cash balances with National Bank of Georgia have been pledged to local banks or other financial institutions as collateral with respect to other borrowed funds (31 December 2016: GEL nil).
As of 30 June 2017, GEL 159,763 thousand was placed on interbank term deposits with two OECD banks and one Georgian bank (31 December 2016: GEL 772 thousand with one OECD bank).
7 Due from Other Banks
Amounts due from other banks include placements with original maturities of more than three months that are not collateralised and represent neither past due nor impaired amounts at the 30 June 2017 and 31 December 2016. As of 30 June 2017 GEL 16,229 thousand (31 December 2016: GEL 19,511 thousand) were kept on deposits as restricted cash. Refer to Note 27 for the estimated fair value of amounts due from other banks.
As of 30 June 2017 the Group had loan issued to one bank, with original maturities of more than three months and with aggregated amounts above GEL 5,000 thousand (2016: nil).
8 Mandatory cash balances with the National Bank of Georgia
Mandatory cash balances with the National Bank of Georgia ("NBG") represent amounts deposited with the NBG. Resident financial institutions are required to maintain an interest-earning obligatory reserve with the NBG, the amount of which depends on the level of funds attracted by the financial institutions. The Group earned up to 0.9% annual interest on the mandatory reserve with the NBG in the six months ended 30 June 2017 (30 June 2016: nil).
In September 2016 Fitch Ratings re-affirmed Georgia's long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BB-' with Stable Outlooks. The issue ratings on Georgia's senior unsecured foreign- and local-currency bonds are also affirmed at 'BB-'. The Country Ceiling is affirmed at 'BB' and the Short-term foreign-currency IDR at 'B'.
9 Loans and Advances to Customers
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
Corporate |
2,057,644 |
2,062,229 |
|
Consumer |
1,955,436 |
1,872,142 |
|
Mortgage |
1,744,421 |
1,808,434 |
|
MSME |
1,628,934 |
1,615,920 |
|
|
|
|
|
Total loans and advances to customers (before impairment) |
7,386,435 |
7,358,725 |
|
|
|
|
|
Less: Provision for loan impairment |
(212,130) |
(225,023) |
|
|
|
|
|
|
|
|
|
Total loans and advances to customers |
7,174,305 |
7,133,702 |
|
|
|
|
Following the merger of Bank Republic with TBC Bank, the Group has reassessed its definition of segments as disclosed in note 18. Some of the clients were reallocated to different segments. Relevant changes are applied to all periods presented in this report. As per current presentation, micro and SME loans are combined in one MSME category. Consumer loans include all retail loans, except mortgage loans. Other loans category which represented pawn shop loans as per prior presentation, was split between consumer and MSME category.
As of 30 June 2017 loans and advances to customers carried at GEL 240,001 thousand have been pledged to local banks or other financial institutions as collateral with respect to other borrowed funds (31 December 2016: GEL 120,093 thousand).
Movements in the provision for loan impairment during the six months ended 30 June 2017 are as follows:
|
In thousands of GEL |
Corpo-rate |
Consumer |
Mortgage |
MSME |
Total |
||
|
|
|
|
|
|
|
||
|
Provision for loan impairment as of 1 January 2017 |
90,100 |
73,730 |
23,602 |
37,591 |
225,023 |
||
|
Total provision for impairment during the period: |
|
|
|
|
|
||
|
Provision for impairment (credited)/charged to income statement during the period. |
(22,129) |
56,938 |
(1,650) |
7,208 |
40,367 |
||
|
Recoveries of loans previously written off |
1,306 |
8,940 |
1,876 |
4,108 |
16,230 |
||
|
Amounts written off during the period as uncollectible |
(22,721) |
(34,532) |
(3,248) |
(8,549) |
(69,050) |
||
|
Effect of translation to presentation currency |
- |
(76) |
(90) |
(272) |
(438) |
||
|
|
|
|
|
|
|
||
|
Provision for loan impairment as of 30 June 2017 |
46,556 |
104,998 |
20,490 |
40,086 |
212,130 |
||
|
|
|
|
|
|
|
||
Loans and advances to customers written off in the first half of 2017 included loans to customers in the gross amount of GEL 4,444 thousand issued in 2017 and GEL 64,606 thousand issued in previous years.
At year-end 2016 the Bank updated its methodology for loan loss provisioning purposes to include impairment assessment of acquired portfolios. As per the upgraded methodology, an impairment allowance is not created on the initial recognition of purchased portfolio considering that expected losses are reflected in fair value of the portfolio. For the next reporting periods, the impairment allowance is recognised if the incurred losses at the reporting date have increased compared to the level of incurred losses at the moment of acquisition.
Movements in the provision for loan impairment during 2016 were as follows:
|
In thousands of GEL |
Corpo-rate |
Consumer |
Mortgage |
MSME |
Total |
|
|
|
|
|
|
|
|
Provision for loan impairment as of 1 January 2016 |
108,050 |
52,527 |
13,135 |
20,431 |
194,144 |
|
Total provision for impairment during the period: |
|
|
|
|
|
|
Provision for impairment (credited)/charged to income statement during the period |
(13,905) |
25,172 |
5,502 |
8,508 |
25,277 |
|
Recoveries of loans previously written off |
30 |
4,116 |
1,160 |
1,746 |
7,052 |
|
Amounts written off during the period as uncollectible |
(6,109) |
(22,655) |
(1,882) |
(5,609) |
(36,256) |
|
Effect of translation to presentation currency |
- |
(14) |
(21) |
(78) |
(113) |
|
|
|
|
|
|
|
|
Provision for loan impairment as of 30 June 2016 |
88,066 |
59,146 |
17,894 |
24,998 |
190,104 |
|
|
|
|
|
|
|
Economic sector risk concentrations within the customer loan portfolio are as follows:
|
|
30 June 2017 |
|
31 December 2016 |
|
|||
|
In thousands of GEL |
Amount |
% |
|
Amount |
% |
||
|
|
|
|
|
|
|
|
|
|
Individual |
3,664,210 |
50% |
|
3,721,450 |
51% |
||
|
Energy & Utilities |
637,988 |
9% |
|
540,116 |
7% |
||
|
Food Industry |
428,346 |
6% |
|
301,290 |
4% |
||
|
Trade |
402,403 |
5% |
|
447,541 |
6% |
||
|
Hospitality & Leisure |
360,121 |
5% |
|
319,497 |
4% |
||
|
Pawn Shops |
295,522 |
4% |
|
305,031 |
4% |
||
|
Real Estate |
239,909 |
3% |
|
252,112 |
3% |
||
|
Construction |
226,333 |
3% |
|
210,888 |
3% |
||
|
Agriculture |
216,463 |
3% |
|
212,148 |
3% |
||
|
Healthcare |
167,686 |
2% |
|
182,131 |
3% |
||
|
Automotive |
120,697 |
2% |
|
144,157 |
2% |
||
|
Financial Services |
90,769 |
1% |
|
188,646 |
3% |
||
|
Services |
88,064 |
1% |
|
109,187 |
1% |
||
|
Transportation |
87,644 |
1% |
|
89,467 |
1% |
||
|
Communication |
66,290 |
1% |
|
45,864 |
1% |
||
|
Metals and Mining |
63,031 |
1% |
|
62,464 |
1% |
||
|
Other |
230,959 |
3% |
|
226,736 |
3% |
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Total loans and advances to customers (before impairment) |
7,386,435 |
100% |
|
7,358,725 |
100% |
||
|
|
|
|
|
|
|
||
As of 30 June 2017 the Group had 118 borrowers (31 December 2016: 112 borrowers) with aggregated gross loan amounts above GEL 5,000 thousand. The total aggregated amount of these loans was GEL 1,976,166 thousand (31 December 2016: GEL 1,900,916 thousand) or 26.8% of the gross loan portfolio (31 December 2016: 25.8%).
Following the merger with Bank Republic, economic sector concentration for certain clients was reassessed and loans in the amount of GEL 56,320 thousand presented under the Trade sector as of 31 December 2016, were reclassified into the Food Industry sector as of 30 June 2017.
Analysis by credit quality of loans outstanding as of 30 June 2017 is as follows:
|
In thousands of GEL |
Corpo-rate |
Consumer |
Mortgage |
MSME |
Total |
|
|
|
|
|
|
|
|
Neither past due nor impaired |
|
|
|
|
|
|
- Borrowers with credit history over two years |
1,460,396 |
1,380,594 |
1,419,847 |
978,257 |
5,239,094 |
|
- New borrowers |
532,967 |
445,269 |
274,745 |
553,340 |
1,806,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total neither past due nor impaired |
1,993,363 |
1,825,863 |
1,694,592 |
1,531,597 |
7,045,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due but not impaired |
|
|
|
|
|
|
- 1 to 30 days overdue |
6,546 |
45,685 |
16,384 |
34,726 |
103,341 |
|
- 31 to 90 days overdue |
910 |
28,234 |
6,569 |
13,141 |
48,854 |
|
- 91 to 180 days overdue |
- |
108 |
- |
2,717 |
2,825 |
|
- 181 to 360 days overdue |
- |
71 |
- |
- |
71 |
|
- More than 360 days overdue |
- |
29 |
- |
- |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due but not impaired |
7,456 |
74,127 |
22,953 |
50,584 |
155,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed impaired loans |
|
|
|
|
|
|
- Not overdue |
30,225 |
- |
- |
- |
30,225 |
|
- 1 to 30 days overdue |
- |
- |
- |
- |
- |
|
- 31 to 90 days overdue |
1,489 |
- |
- |
744 |
2,233 |
|
- 91 to 180 days overdue |
4,276 |
- |
- |
2,298 |
6,574 |
|
- 181 to 360 days overdue |
8,636 |
- |
- |
- |
8,636 |
|
- More than 360 days overdue |
3,180 |
- |
- |
- |
3,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually assessed impaired loans |
47,806 |
- |
- |
3,042 |
50,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively assessed impaired loans |
|
|
|
|
|
|
- not overdue |
1,328 |
6,286 |
6,863 |
6,206 |
20,683 |
|
- 1 to 30 days overdue |
- |
1,930 |
4,132 |
1,338 |
7,400 |
|
- 31 to 90 days overdue |
230 |
2,636 |
1,513 |
4,086 |
8,465 |
|
- 91 to 180 days overdue |
3,143 |
29,062 |
4,286 |
8,914 |
45,405 |
|
- 181 to 360 days overdue |
2,367 |
10,809 |
6,916 |
13,010 |
33,102 |
|
- More than 360 days overdue |
1,951 |
4,723 |
3,166 |
10,157 |
19,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collectively assessed impaired loans |
9,019 |
55,446 |
26,876 |
43,711 |
135,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and advances to customers (before impairment) |
2,057,644 |
1,955,436 |
1,744,421 |
1,628,934 |
7,386,435 |
|
|
|
|
|
|
|
|
Total provision |
(46,556) |
(104,999) |
(20,489) |
(40,086) |
(212,130) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and advances to customers |
2,011,088 |
1,850,437 |
1,723,932 |
1,588,848 |
7,174,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by credit quality of loans outstanding as of 31 December 2016 is as follows:
|
In thousands of GEL |
Corpo-rate |
Consumer |
Mortgage |
MSME |
Total |
|
|
|
|
|
|
|
|
Neither past due nor impaired |
|
|
|
|
|
|
- Borrowers with credit history over two years |
1,279,999 |
1,030,204 |
1,203,461 |
836,773 |
4,350,437 |
|
- New borrowers |
647,613 |
738,255 |
557,777 |
689,106 |
2,632,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total neither past due nor impaired |
1,927,612 |
1,768,459 |
1,761,238 |
1,525,879 |
6,983,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due but not impaired |
|
|
|
|
|
|
- 1 to 30 days overdue |
10,369 |
38,214 |
7,565 |
31,904 |
88,052 |
|
- 31 to 90 days overdue |
1,714 |
21,205 |
8,241 |
14,269 |
45,429 |
|
- 91 to 180 days overdue |
- |
146 |
- |
227 |
373 |
|
- 181 to 360 days overdue |
- |
91 |
- |
- |
91 |
|
- More than 360 days overdue |
2,864 |
28 |
- |
- |
2,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due but not impaired |
14,947 |
59,684 |
15,806 |
46,400 |
136,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed impaired loans |
|
|
|
|
|
|
- Not overdue |
101,273 |
- |
195 |
2,832 |
104,300 |
|
- 1 to 30 days overdue |
1,059 |
- |
- |
- |
1,059 |
|
- 31 to 90 days overdue |
7,966 |
- |
- |
- |
7,966 |
|
- 91 to 180 days overdue |
- |
- |
- |
88 |
88 |
|
- 181 to 360 days overdue |
2,455 |
- |
34 |
436 |
2,925 |
|
- More than 360 days overdue |
4,000 |
- |
167 |
- |
4,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total individually assessed impaired loans |
116,753 |
- |
396 |
3,356 |
120,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively assessed impaired loans |
|
|
|
|
|
|
- not overdue |
776 |
5,493 |
7,129 |
5,301 |
18,699 |
|
- 1 to 30 days overdue |
- |
1,488 |
2,316 |
1,316 |
5,120 |
|
- 31 to 90 days overdue |
908 |
2,622 |
2,443 |
5,223 |
11,196 |
|
- 91 to 180 days overdue |
- |
21,779 |
6,569 |
10,074 |
38,422 |
|
- 181 to 360 days overdue |
1,233 |
7,660 |
8,371 |
11,291 |
28,555 |
|
- More than 360 days overdue |
- |
4,957 |
4,166 |
7,080 |
16,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collectively assessed impaired loans |
2,917 |
43,999 |
30,994 |
40,285 |
118,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and advances to customers (before impairment) |
2,062,229 |
1,872,142 |
1,808,434 |
1,615,920 |
7,358,725 |
|
|
|
|
|
|
|
|
Total provision |
(90,100) |
(73,730) |
(23,602) |
(37,591) |
(225,023) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and advances to customers |
1,972,129 |
1,798,412 |
1,784,831 |
1,578,329 |
7,133,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group applied the portfolio provisioning methodology prescribed by IAS 39, Financial Instruments: Recognition and Measurement, and it created portfolio provisions for impairment losses that were incurred but have not been specifically identified with any individual loan by the end of reporting period.
The tables above provide an analysis of the loan portfolio based on credit quality. The Group's policy for credit risk management purposes is to classify each loan as 'neither past due nor impaired', 'past due but not impaired', 'individually assessed impaired loans' and 'collectively assessed impaired loans'. The pool of 'neither past due nor impaired loans' includes exposures that are not overdue and are not classified as impaired. 'Past due but not impaired' loans include overdue performing loans but with no objective evidence of impairment identified. The classification includes as well triggered loans that are not impaired because the current value of the expected cash and collateral recoveries are sufficient for full repayment. 'Individually assessed impaired loans' include exposures which were assessed for impairment on an individual basis, and an ad-hoc impairment allowance was created. 'Collectively assessed impaired loans' include exposures for which objective evidence of impairment was identified and the respective collective impairment allowance was created. The Group conducts collective assessment of the borrowers on a monthly basis. As for the individual assessment, it is performed quarterly.
The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. There are three key types of collateral:
· Real estate;
· Movable property including fixed assets, inventory and precious metals;
· Financial assets including deposits, stocks, and third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where collateral and other credit enhancements are equal to or exceed the assets' carrying value ("over-collateralised assets") and (ii) those assets where collateral and other credit enhancements are less than the assets' carrying value ("under-collateralised assets").
The effect of collateral as of 30 June 2017:
|
|
Over-collateralised assets |
Under-collateralised assets |
|
|||
|
In thousands of GEL |
Carrying value of the assets |
Value of collateral |
Carrying value of the assets |
Value of collateral |
|
|
|
|
|
|
|
|
|
|
|
Corporate |
1,788,525 |
4,162,486 |
269,119 |
94,079 |
|
|
|
Consumer |
942,455 |
2,164,278 |
1,012,981 |
26,710 |
|
|
|
Mortgage |
1,721,500 |
3,783,358 |
22,921 |
13,519 |
|
|
|
MSME |
1,571,188 |
3,627,876 |
57,746 |
54,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
6,023,668 |
13,737,998 |
1,362,767 |
189,267 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of collateral as of 31 December 2016:
|
|
Over-collateralised assets |
Under-collateralised assets |
|||
|
In thousands of GEL |
Carrying value of the assets |
Value of collateral |
Carrying value of the assets |
Value of collateral |
|
|
|
|
|
|
|
|
|
Corporate |
1,849,202 |
5,683,279 |
213,027 |
109,076 |
|
|
Consumer |
1,040,644 |
2,761,580 |
831,498 |
28,102 |
|
|
Mortgage |
1,780,553 |
4,694,003 |
27,881 |
16,360 |
|
|
MSME |
1,479,200 |
4,959,947 |
136,720 |
131,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
6,149,599 |
18,098,809 |
1,209,126 |
285,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of collateral is determined by comparing the fair value of collateral to outstanding gross loans and advances in the reporting date.
At the central level a specific unit manages collateral to ensure that they serve as an adequate mitigation for credit risk management purposes. In line with the Group's internal policies, collateral provided to loans are evaluated by the Internal Appraisal Group (external reviewers are used in case of loans to related parties or specific cases when complex objects are appraised). The Internal Appraisal Group is part of the collateral management unit and, in order to ensure adequate and objective appraisal procedures, it is independent from the loan granting process. Real estate collateral of significant value is re-evaluated annually by internal appraisers. Statistical methods are used to monitor the value of real estate collateral that are of non-significant value and other types of collaterals such as movable assets and precious metals.
Collateral values include the contractual price of third-party guarantees, which, due to their nature, are capped at the loan's carrying value. The values of third-party guarantees in the tables above amounted to GEL 463,957 thousand and GEL 608,058 thousand as of 30 June 2017 and 31 December 2016, respectively. These third-party guarantees are not taken into consideration when assessing the impairment allowance. Refer to Note 27 for the estimated fair value of each class of loans and advances to customers. Interest rate analysis of loans and advances to customers is disclosed in Note 24. Information on related party balances is disclosed in Note 28.
10 Premises, Equipment and Intangible Assets
|
In thousands of GEL |
Premises and leasehold improve-ments |
Office and computer |
Construction in |
Total premises and equipment |
Computer
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at 1 January 2016 |
132,581 |
65,153 |
50,033 |
247,767 |
44,344 |
292,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
2,104 |
8,946 |
2,669 |
13,719 |
4,717 |
18,436 |
|
Disposals |
(1,024) |
(1,224) |
- |
(2,248) |
- |
(2,248) |
|
Transfer |
1,304 |
- |
(1,304) |
- |
- |
- |
|
Effect of translation to presentation currency (cost) |
(14) |
(24) |
- |
(38) |
(5) |
(43) |
|
(Impairment charge)/reversal of impairment to profit or loss |
(265) |
(206) |
- |
(471) |
(19) |
(490) |
|
Depreciation/amortisation charge |
(2,052) |
(8,005) |
- |
(10,057) |
(3,085) |
(13,142) |
|
Elimination of accumulated depreciation/amortisation on disposals |
945 |
1,010 |
- |
1,955 |
- |
1,955 |
|
Effect of translation to presentation currency (accumulated depreciation) |
13 |
14 |
- |
27 |
2 |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at 30 June 2016 |
133,592 |
65,664 |
51,398 |
250,654 |
45,954 |
296,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation at 30 June 2016 |
164,231 |
160,154 |
51,398 |
375,783 |
72,037 |
447,820 |
|
Accumulated depreciation/amortisation including accumulated impairment loss |
(30,639) |
(94,490) |
- |
(125,129) |
(26,083) |
(151,212) |
|
Carrying amount at 1 January 2017 |
186,950 |
73,918 |
53,164 |
314,032 |
60,957 |
374,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
2,718 |
11,403 |
6,664 |
20,785 |
10,823 |
31,608 |
|
Disposals |
(1,133) |
(2,210) |
- |
(3,343) |
- |
(3,343) |
|
Transfer |
1,634 |
5 |
(1,639) |
- |
- |
- |
|
Effect of translation to presentation currency (cost) |
(19) |
(20) |
- |
(39) |
(8) |
(47) |
|
(Impairment charge)/reversal of impairment to profit or loss |
(1,120) |
(562) |
(47) |
(1,729) |
(1,850) |
(3,579) |
|
Depreciation/amortisation charge |
(2,705) |
(9,407) |
- |
(12,112) |
(4,892) |
(17,004) |
|
Elimination of accumulated depreciation/amortisation on disposals |
546 |
1,968 |
- |
2,514 |
- |
2,514 |
|
Effect of translation to presentation currency (accumulated depreciation) |
19 |
12 |
- |
31 |
4 |
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at 30 June 2017 |
186,890 |
75,107 |
58,142 |
320,139 |
65,034 |
385,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation at 30 June 2017 |
219,379 |
184,253 |
58,142 |
461,774 |
99,914 |
561,688 |
|
Accumulated depreciation/amortisation including accumulated impairment loss |
(32,489) |
(109,146) |
- |
(141,635) |
(34,880) |
(176,515) |
|
|
|
|
|
|
|
|
*Office and other equipment include furniture and fixtures, computer and office equipment, motor vehicles as well as other equipment.
Depreciation and amortisation charge presented on the face of the statement of profit or loss and other comprehensive income include depreciation and amortisation charge of premises and equipment, investment properties and intangible assets.
Construction in progress consists of construction and refurbishment of branch premises and the Bank's new headquarters. Upon completion, assets are to be transferred to premises.
Premises were revalued to market value on 30 September 2015. The valuation was carried out by an independent firm of valuators which holds a recognised and relevant professional qualification and who have recent experience in valuation of assets of similar location and category. In the process of comparison, they have used three comparative analogues (registered sale and/or offer for sale), in which prices were applied adjustments based on the difference between subject assets and analogues. Most of the assets have been estimated by using the market approach/method due to the market situation, namely by existence of a sufficient number of registered sales and proposals by the date of valuation. At Bank Republic acquisition date of 20 October 2016, valuation of assets was performed. Fair value of respective assets is disclosed below.
The management considers that the fair value has not changed significantly between 30 September 2015 (or 20 October 2016 in case of JSC Bank Republic's assets) and 30 June 2017.
|
In thousands of GEL (except for range of inputs) |
Fair value as of 20 October 2016 (acquisition date) |
Fair value as of 30 September 2015 (valuation date) |
Valuation technique |
Other key informa-tion |
Unobser-vable inputs |
Range of unobser-vable inputs (weighted average) |
|
Office buildings |
30,753 |
51,115 |
Sales comparison approach |
Land |
Price per square meter |
472 - 3,432 (797) |
|
Buildings |
601 - 6,598 (1,781) |
|||||
|
Branches |
18,645 |
124,069 |
Sales comparison approach |
Land |
Price per square meter |
2 - 3,427 (280) |
|
Buildings |
452 - 11,514 (2,360) |
11 Due to Credit Institutions
|
In thousands of GEL |
|
30 June 2017 |
31 December 2016 |
|
Due to other banks |
|
|
|
|
Correspondent accounts and overnight placements |
|
77,341 |
22,872 |
|
Deposits from banks |
|
30,790 |
176,443 |
|
Short-term loans from banks |
|
9,502 |
117,592 |
|
Total due to other banks |
|
117,633 |
316,907 |
|
|
|
|
|
|
Other borrowed funds |
|
|
|
|
Borrowings from foreign banks and financial institutions |
|
1,499,438 |
1,412,095 |
|
Borrowings from local banks and financial institutions |
|
666,544 |
439,234 |
|
Borrowings from Ministry of Finance |
|
3,346 |
4,203 |
|
Borrowings from other financial institutions |
|
26,589 |
25,138 |
|
Total other borrowed funds |
|
2,195,917 |
1,880,670 |
|
|
|
|
|
|
|
|
|
|
|
Total amounts due to credit institutions |
|
2,313,550 |
2,197,577 |
|
|
|
|
|
As of 30 June 2017, the Group was in compliance with all covenants. As of 31 December 2016 TBC Kredit had breached certain covenants under the loan agreement with OPIC. The carrying amount of the affected loan was GEL 14,816 thousands. As of 31 December 2016 for the purposes of maturity analysis of financial liabilities (Note 24) the above-mentioned loans are included within the amounts for which repayment is expected within 3 months.
12 Customer Accounts
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
State and public organisations |
|
|
|
- Current/settlement accounts |
523,723 |
240,743 |
|
- Term deposits |
73,983 |
78,990 |
|
|
|
|
|
Other legal entities |
|
|
|
- Current/settlement accounts |
2,174,610 |
2,143,483 |
|
- Term deposits |
186,243 |
243,582 |
|
|
|
|
|
Individuals |
|
|
|
- Current/demand accounts |
1,611,889 |
1,618,434 |
|
- Term deposits |
2,095,965 |
2,129,717 |
|
|
|
|
|
|
|
|
|
Total customer accounts |
6,666,413 |
6,454,949 |
|
|
|
|
State and public organisations include government owned profit orientated businesses.
Economic sector concentrations within customer accounts are as follows:
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
||
|
Amount |
% |
Amount |
% |
|
|
|
|
|
|
|
|
Individual |
3,707,854 |
56% |
3,748,151 |
58% |
|
Financial Services |
431,623 |
6% |
501,591 |
8% |
|
Government Sector |
372,409 |
6% |
140,852 |
2% |
|
Energy and Utilities |
357,951 |
5% |
283,497 |
4% |
|
Transportation |
274,864 |
4% |
188,388 |
3% |
|
Construction |
245,501 |
4% |
222,372 |
4% |
|
Services |
184,863 |
3% |
269,824 |
4% |
|
Trade |
153,848 |
2% |
305,022 |
5% |
|
Hotels and Leisure |
138,273 |
2% |
104,066 |
2% |
|
Food Industry |
113,024 |
2% |
82,983 |
1% |
|
Communication |
110,330 |
2% |
56,787 |
1% |
|
Real Estate |
94,009 |
1% |
82,893 |
1% |
|
Automotive |
82,463 |
1% |
53,865 |
1% |
|
Healthcare |
80,850 |
1% |
64,493 |
1% |
|
Agriculture |
35,942 |
1% |
37,850 |
1% |
|
Metals and Mining |
30,828 |
0% |
22,817 |
0% |
|
Other |
251,781 |
4% |
289,498 |
4% |
|
Total customer accounts |
6,666,413 |
100% |
6,454,949 |
100% |
|
|
|
|
|
|
As of 30 June 2017 the Group had 227 customers (31 December 2016: 222 customers) with balances above GEL 3,000 thousand. Their aggregate balance was GEL 2,890,864 thousand (2016: GEL 2,539,513 thousand) or 43.4% of total customer accounts (31 December 2016: 39%).
As of 30 June 2017 included in customer accounts are deposits of GEL 8,343 thousand and GEL 117,259 thousand (31 December 2016: GEL 13,355 thousand and GEL 119,146 thousand) held as collateral for irrevocable commitments under letters of credit and guarantees issued, respectively. Refer to Note 26. As of 30 June 2017, deposits held as collateral for loans to customers amounted to GEL 172,698 thousand (31 December 2016: GEL 342,365 thousand).
Refer to Note 27 for the disclosure of the fair value of customer accounts. Information on related party balances is disclosed in Note 28.
13 Provisions for Performance Guarantees, Credit Related Commitments and Liabilities and Charges
Movements in provisions for performance guarantees, credit related commitment and liabilities and charges are as follows:
|
In thousands of GEL |
Perfor-mance guarantees |
Credit related commitments |
Other |
Total |
|
Carrying amount at 1 January 2016 |
1,472 |
5,589 |
2,400 |
9,461 |
|
|
|
|
|
|
|
Additions less releases recorded in profit or loss |
1,033 |
1,043 |
- |
2,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at 30 June 2016 |
2,505 |
6,632 |
2,400 |
11,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at 1 January 2017 |
2,635 |
8,049 |
5,342 |
16,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges less releases recorded in profit or loss |
(649) |
(898) |
(1,814) |
(3,361) |
|
Utilization of provision |
- |
- |
(1,932) |
(1,932) |
|
Carrying amount as of 30 June 2017 |
1,986 |
7,151 |
1,596 |
10,733 |
|
|
|
|
|
|
Credit related commitments and performance guarantees: Provision was created against losses incurred on financial and performance guarantees and commitments to extend credit to borrowers whose financial conditions deteriorated.
Impairment allowance estimation methods differ for (i) letter of credits and guarantees and (ii) undrawn credit lines.
For letter of credits and guarantees allowance estimation purposes the Bank classifies borrowers as significant and non-significant ones. Triggered significant guarantees and letter of credits are assessed for impairment on an individual basis, whereas for not triggered significant and all non-significant ones the Bank estimates allowances applying statistical risk parameters, such as credit conversion factor and loss given default.
Undrawn credit lines are classified as committed and uncommitted exposures, with impairment allowance created for committed ones. The undrawn part of the credit lines is multiplied by the respective credit conversion factor and provisioned in the similar manner as corresponding on balance sheet exposures.
Provisions for liabilities, charges, performance guarantees and credit related commitments are primarily expected to be utilised within twelve months after the period-end.
Additions less releases recorded in profit and loss for "Other" provisions does not include gross change in total reserves for insurance claims in amount of GEL 680 thousands that are included in net claims incurred and administrative expenses.
14 Subordinated Debt
As of 30 June 2017, subordinated debt comprised of:
|
In thousands of GEL |
Grant Date |
Maturity Date |
Currency |
Outstanding amount in original currency |
Outstanding amount in GEL |
|
Deutsche Investitions und Entwicklungsgesellschaft MBH |
19-Feb-08 |
15-Jul-18 |
USD |
10,448 |
25,150 |
|
Deutsche Investitions und Entwicklungsgesellschaft MBH |
26-Jun-13 |
15-Jun-20 |
USD |
7,483 |
18,013 |
|
Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. |
19-Dec-13 |
15-Apr-23 |
USD |
35,498 |
85,452 |
|
Kreditanstalt für Wiederaufbau Bankengruppe |
10-Jun-14 |
8-May-21 |
GEL |
6,400 |
6,400 |
|
Kreditanstalt für Wiederaufbau Bankengruppe |
4-May-15 |
8-May-21 |
GEL |
6,999 |
6,999 |
|
Green for Growth Fund |
18-Dec-15 |
18-Dec-25 |
USD |
15,252 |
36,716 |
|
European Fund for Southeast Europe |
18-Dec-15 |
18-Dec-25 |
USD |
7,637 |
18,384 |
|
European Fund for Southeast Europe |
15-Mar-16 |
15-Mar-26 |
USD |
7,636 |
18,381 |
|
Asian Developement Bank (ADB) |
18-Oct-16 |
18-Oct-26 |
USD |
50,425 |
121,384 |
|
Private lenders |
30-Jun-17 |
30-Jun-23 |
USD |
22,096 |
53,191 |
|
Total subordinated debt |
|
|
|
|
390,070 |
|
|
|
|
|
|
|
As of 31 December 2016, subordinated debt comprised of:
|
In thousands of GEL |
Grant Date |
Maturity Date |
Currency |
Outstanding amount in original currency |
Outstanding amount in GEL |
|
|
|
|
|
|
|
|
Deutsche Investitions und Entwicklungsgesellschaft MBH |
19-Feb-08 |
15-Jul-18 |
USD |
10,446 |
27,649 |
|
Deutsche Investitions und Entwicklungsgesellschaft MBH |
26-Jun-13 |
15-Jun-20 |
USD |
7,480 |
19,799 |
|
Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. |
19-Dec-13 |
15-Apr-23 |
USD |
35,474 |
93,891 |
|
Kreditanstalt für Wiederaufbau Bankengruppe |
10-Jun-14 |
8-May-21 |
GEL |
6,162 |
6,162 |
|
Kreditanstalt für Wiederaufbau Bankengruppe |
4-May-15 |
8-May-21 |
GEL |
6,737 |
6,737 |
|
Green for Growth Fund |
18-Dec-15 |
18-Dec-25 |
USD |
15,239 |
40,335 |
|
European Fund for Southeast Europe |
18-Dec-15 |
18-Dec-25 |
USD |
7,631 |
20,197 |
|
European Fund for Southeast Europe |
15-Mar-16 |
15-Mar-26 |
USD |
7,629 |
20,194 |
|
Asian Developement Bank (ADB) |
18-Oct-16 |
18-Oct-26 |
USD |
50,407 |
133,417 |
|
|
|
|
|
|
|
|
Total subordinated debt |
|
|
|
|
368,381 |
|
|
|
|
|
|
|
The debt ranks after all other creditors in case of liquidation.
Refer to Note 27 for the disclosure of the fair value of subordinated debt.
15 Share Capital
|
In thousands of GEL except for number of shares |
Number of ordinary shares |
Share capital |
|
|
|
|
|
As of 1 January 2016 |
49,529,463 |
19,811 |
|
Increase in share capital arising from share based payment |
525,456 |
210 |
|
Conversion of shares following the Tender Offer* |
(895,039) |
(358) |
|
Share capital adjustment for new nominal value** |
- |
(18,169) |
|
Shares issued |
3,006,823 |
87 |
|
|
|
|
|
|
|
|
|
As of 31 December 2016 |
52,166,703 |
1,581 |
|
|
|
|
|
|
|
|
|
Shares issued |
516,140 |
16 |
|
Conversion of shares |
102,121 |
4 |
|
|
|
|
|
|
|
|
|
As of 30 June 2017 |
52,784,964 |
1,601 |
|
|
|
|
*895,039 is the number of JSC TBC Bank shares that were not converted into the TBC Bank Group PLC shares
** Negative GEL 18,169 thousand is effect of nominal value adjustment whereby the nominal value of 49,159,880 TBC Bank Group PLC shares was changed from GEL 0.4 to one British Penny translated I n GEL with the official exchange rate on share conversion date
On 4 August 2016, the Group completed the Tender Offer under which 49,159,880 of the Bank's shares then outstanding or 98.21%, were converted into 49,159,880 shares of TBC Bank Group PLC (Note 1)
As of 30 June 2017 the total authorised number of ordinary shares was 52,784,964 shares (31 December 2016: 52,166,703 shares). Each share has a nominal value of one British Penny (31 December 2016: GEL one per share). All issued ordinary shares are fully paid and entitled to dividends.
Following the Admission (Note 15), TBCG's Directors undertook a reduction of capital in order to create distributable reserves for TBCG. The original difference between the fair value of the Bank's shares and the nominal value of TBCG's shares was credited to the merger reserve created in connection with the Tender Offer. Each TBCG share had an original (Tender Offer) nominal value of GBP 5.00 and the minimum premium amount required by the Company Act 2006 of GEL 565,030 thousand was transferred to share premium. Following the capital cut the nominal value of TBCG shares was reduced to GBP 0.01. The capital cut created a new reserve on the statement of TBCG's financial position (comprising of the reduction of the original nominal value from GBP 5.00 to GBP 0.01 per share) amounting to GEL 745,638 thousand. The reduction represents a legal and accounting adjustment and did not, in itself, have any direct impact on TBCG shares' market value. As a result of the reduction, the Group's total additional paid-in capital outstanding at the time became distributable to the shareholders and was fully reclassified to retained earnings.
These transactions were treated as a reorganisation of an existing entity that has not changed the substance of the reporting entity. The consolidated financial statements of TBCG are presented using the values from the consolidated financial statements of JSC TBC Bank. On the date that TBCG became the new parent of the Group, the statutory amounts of share capital and share premium of the Company have been recognised through an adjustment in the Statement of Changes in Equity under the heading 'Change of parent company to TBCG'. The resulting difference has been recognised as a component of equity under the heading ''Group reorganisation reserve''.
On 5 June 2017, at the Annual General Meeting, TBC Bank Group PLC's shareholders agreed on a dividend of GEL 1.42 per share, based on the 2016 audited financial statements. The dividend was recorded on 9 June 2017 at the amount of GEL 74,910 thousand. Cash dividend in the amount of GEL 66,733 thousand was paid in July 2017. Scrip dividend shares amounted to 146,703 and were issued on 14th of July.
On 23 June 2017 102,121 new ordinary shares of TBC PLC were admitted to the premium segment of the London Stock Exchange. The Offer Shares were issued pursuant to the terms of a private offer to the holders of the ordinary shares of JSC TBC Bank who have tendered Bank Shares pursuant to the Offer. The holders of Bank Shares are individuals that did not participate in the tender offer to holders made in 2016 by TBC PLC prior to TBC PLC's admission to the premium segment of the London Stock Exchange. Holders of Bank Shares received one Offer Share for each Bank Share tendered pursuant to the Offer.
16 Share Based Payments
June 2013 arrangement:
In June 2013, the Bank's Supervisory Board approved a new management compensation scheme for the years 2013 - 2015 and authorised a maximum of 4,150 new shares to be issued in accordance with the scheme. The authorized number of new shares has increased to 1,037,500 in order to reflect the share split 250-for-1 approved by the shareholders on 4 March 2014. According to the scheme, each year, (subject to predefined performance conditions) a certain number of shares will be awarded to the top management and some of the middle managers of the Group.
The performance evaluation is divided into (i) team goals and (ii) individual performance indicators. The total number of the shares to be awarded (legally transferred) depends on meeting the team goals and the book value per share according to the audited IFRS consolidated financial statements of the Group for the year preceding the award date. The team goals primarily focus on meeting the target for growth, profitability and portfolio quality metrics set by the Supervisory Board as well as compliance with certain regulatory requirements. The total number of shares in the bonus pool depends on achieving the team goals. Individual performance indicators are defined on an individual basis and are used to calculate the number of shares to be awarded to each employee out of the total bonus pool. Once awarded, these shares carry service conditions and, before those conditions are met, are eligible to dividends. However, they do not carry voting rights and cannot be sold or transferred to third parties. Service conditions foresee continuous employment until the gradual transfer of the full title to the scheme participants is complete. Shares for each of the 2013, 2014 and 2015 tranche gradually ran over on the second, third, and fourth year following the performance appraisal. Eighty percent of the shares were vested in the fourth year after being awarded. Under this compensation system the total vesting period extends to June 2019.
Under the management compensation scheme, both shareholders and Supervisory Board held put options on the shares to be awarded. In addition, they both held put options on all bonus shares awarded under the previous share-based payment arrangements. All the put-options became null and void upon the listing on the LSE in June 2014. At no point of the operation of the share-based payment scheme did the management expect the put-options to be exercised. Consequently, the scheme was accounted for as equity-settled scheme and no obligation was recognized for the put-options.
In 2013 the Group considered 20 June as the grant date. Based on the management's expectation of performance and service conditions, 732,000 shares have been granted and will be gradually awarded to the members of the described scheme. An external evaluator assessed the fair value per share at the grant date at GEL 13.93 adjusted for the effect of 250-for-1 share split Income and market approaches were applied for the evaluation. The market approach involved an estimate of the market capitalization to book value of equity multiple and deal price to book value of equity multiple for comparable banks. When selecting comparable banks, the appraiser chose lenders operating in the Black Sea region and Central and Eastern Europe with a portfolio mix and growth priorities similar to TBC Bank. The income approach involved discounting free cash flows to equity estimated over a 10-year horizon. When developing the projections, the following major assumptions were made:
· Over the 2013-2023 periods, the compound annual growth rate was assumed at 15.2% for loans and at 15.1% for customer accounts;
· The spread on the Bank's customer business was assumed to gradually decline from an estimated 10.2% in 2013 to stabilize at 5.8% by 2021;
· Over 2013-2023 period, non-interest income was forecast to average 1.8% of customer volume (i.e. gross loans and deposits);
· Year-on-year growth in various components of employee's compensation was assumed at 37.6%-56.0% in 2014, 2.4%-9.8% in 2015 and was then assumed to gradually decline to 2.1%-3.6% in 2023. Year-on-year growth in administrative expenses was assumed at 38.3% in 2014, 10.4% in 2015 and to gradually decline to 3.3% in 2023;
· The Bank's terminal value was estimated using the Gordon growth model, applying US long-term inflation forecast (2.1%) as the Bank's terminal cash flows growth rate;
· Bank's cost of equity was estimated at 15.10%.
The final valuation was based on the income approach and the market one was used to check the results obtained by the former. The calculated value of Bank's equity was then divided by the number of ordinary shares issued as of date and further reduced with the discount for lack of control.
June 2015 arrangement:
In June 2015, the Bank's Supervisory Board approved new management compensation scheme for the top and middle management and it accordingly authorised the issue of a maximum 3,115,890 new shares. The new system will be enforced from 2015 through 2018, replacing the system introduced in June 2013 -- the performance evaluation as well as the respective compensation for 2015 year-end results will be paid under the new system. According to the scheme, each year, subject to predefined performance conditions, a certain number of shares will be awarded to the Group's top managers and most of the middle ones. The performance features key performance indicators (KPIs) divided into (i) corporate and (ii) individual. The corporate KPIs are mainly related to achieving profitability, efficiency, and portfolio quality metrics set by the Board as well as non-financial indicators with regards to customers' experience and employees' engagement. The individual performance indicators are set on an individual basis and are used to calculate the number of shares to be awarded to each employee. According to the scheme, members of top management will also receive the fixed number of shares. Once awarded, all shares carry service conditions and, before those conditions are met, are eligible to dividends; however they cannot be sold or transferred to third parties.
Service conditions foresee continuous employment until the gradual transfer of the full title to the scheme participants is complete. Shares for each of the 2015, 2016, 2017 and 2018 tranche gradually ran over on the second, third and fourth year following the performance appraisal. Eighty percent of the shares were vested in the fourth year after being awarded. Under this compensation system the total vesting period extends to March 2022.
In 2015 the Group considered 17 June as the grant date. Based on the management's estimate of reached targets, as of 31 December 2015 1,908,960 shares were granted. The shares will be gradually awarded to the members as per the described scheme. At the grant date the fair value amounted to GEL 24.64 per share, as quoted on the London Stock Exchange.
Following the listing on the Premium segment of the London Stock Exchange, the share-based payment scheme remained conceptually the same and was only updated to reflect the Group's new structure, whereby TBC Bank Group PLC distributes its shares to the scheme's participants, instead of JSC TBC Bank. The respective shares' value is recharged to the JSC TBC Bank. As a result, the accounting of the scheme did not change in the consolidated financial statements.
The Bank also pays personal income tax on behalf of equity settled scheme beneficiaries, which is accounted as cash settled part. Tabular information on both of the schemes is given below:
|
In GEL except for number of shares |
30 June 2017 |
30 June 2016 |
|
|
|
|
|
Number of unvested shares at the beginning of the period |
2,622,707 |
2,756,605 |
|
Change in estimate of number of shares expected to vest based on performance conditions |
(13,100) |
(8,497) |
|
Number of shares forfeited during the period |
- |
(35,146) |
|
Number of shares vested |
(324,834) |
(90,255) |
|
|
|
|
|
Number of unvested shares at the end of the period |
2,284,773 |
2,622,707 |
|
|
|
|
|
Value at grant date per share according to June 2013 scheme (GEL) |
13.93 |
13.93 |
|
Value at grant date per share according to June 2015 scheme (GEL) |
24.64 |
24.64 |
|
|
|
|
|
|
|
|
|
Expense on equity-settled part (GEL thousand) |
5,401 |
6,742 |
|
Decrease in equity due to utilisation of cash compensation alternative (GEL thousand) |
- |
(817) |
|
Expense on cash-settled part (GEL thousand) |
2,578 |
1,981 |
|
|
|
|
|
|
|
|
|
Expense recognised as staff cost during the period (GEL thousand) |
7,979 |
7,906 |
|
|
|
|
Liability in respect of the cash-settled part of the award amounted to GEL 10,535 thousand as of 30 June 2017 (31 December 2016: GEL 13,725 thousand).
Staff costs related to equity settled part of the share based payment schemes are recognised in the income statement on a straight line basis over the vesting period of each relevant tranche and corresponding entry is credited to share based payment reserve in equity.
On 30 June 2017 based on level of achievement of key performance indicators the management has reassessed the number of shares that will have to be issued to the participants of the share based payment system and decreased estimated number of shares to vest by 13,098 (30 June 2016: 8,497).
17 Earnings per Share
Basic earnings per share are calculated by dividing the profit or loss attributable to the owners of the Bank by the weighted average number of ordinary shares in issue during the period.
|
|
In thousands of GEL except for number of shares |
30 June 2017 |
30 June 2016 |
|
|
|
|
|
|
|
|
|
Profit for the period attributable to the owners of the Bank (excluding the profit attributable to the shares encumbered under the share based payment scheme |
173,519 |
138,856 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue |
52,438,704 |
49,368,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share attributable to the owners of the Bank (expressed in GEL per share) |
3.31 |
2.81 |
||
|
|
|
|
|
|
Diluted earnings per share are calculated by dividing the profit or loss attributable to owners of the Bank by the weighted average number of ordinary shares adjusted for the effects of all dilutive potential ordinary shares during the period:
|
In thousands of GEL except for number of shares |
30 June 2017 |
30 June 2016 |
|
|
|
|
|
Profit for the period attributable to the owners of the Bank (excluding the profit attributable to the shares encumbered under the share based payment scheme - |
173,519 |
140,034 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue adjusted for the effects of all dilutive potential ordinary shares during the period |
53,169,508 |
50,350,409 |
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary share attributable to the owners of the Bank (expressed in GEL per share) |
3.26 |
2.78 |
|
|
|
|
18 Segment Analysis
The Management Board (the "Board) is the chief operating decision maker and it reviews the Group's internal reporting in order to assess the performance and to allocate resources.
In 2017, the Group has combined its micro and SME segments into one MSME category, as well as reclassified certain loans and clients among segments.
The operating segments according to the new definition are now determined as follows:
· Corporate - Legal entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;
· Retail - Non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8.0 thousand. All individual customers are included in retail deposits;
· MSME - Business customers who are not included in either corporate and retail segments; or legal entities who have been granted a Pawn shop loan;
· Corporate centre and other operations - comprises of the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted profit before income tax.
The reportable segments are the same as the operating segments.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group's total revenue in as of 30 June 2017 and 31 December 2016.
The vast majority of the entity's revenues are attributable to Georgia. A geographic analysis of origination of the Group's assets and liabilities is given in Note 24.
A summary of the Group's reportable segments as of 30 June 2017 and 31 December 2016 is provided below:
|
In thousands of GEL |
Corporate |
Retail |
MSME |
Corporate centre and other operations |
Total |
||||
|
|
|
|
|
|
|
||||
|
30 June 2017 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Interest income |
93,144 |
256,428 |
89,182 |
48,913 |
487,667 |
||||
|
- interest expense |
(45,509) |
(57,944) |
(4,960) |
(87,180) |
(195,593) |
||||
|
- Inter-segment interest income/(expense) |
7,985 |
(33,851) |
(24,923) |
50,789 |
- |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Net interest income |
55,620 |
164,633 |
59,299 |
12,522 |
292,074 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Fee and commission income |
12,110 |
67,482 |
9,428 |
699 |
89,719 |
||||
|
- Fee and commission expense |
(3,243) |
(26,982) |
(3,841) |
(436) |
(34,502) |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Net Fee and commission income |
8,867 |
40,500 |
5,587 |
263 |
55,217 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Net insurance premiums earned |
- |
- |
- |
6,382 |
6,382 |
||||
|
- Net insurance claims incurred |
- |
- |
- |
(3,301) |
(3,301) |
||||
|
- Insurance Profit |
- |
- |
- |
3,081 |
3,081 |
||||
|
- Net gains from trading in foreign currencies |
17,888 |
10,065 |
15,675 |
(236) |
43,392 |
||||
|
- Net losses from foreign exchange translation |
- |
- |
- |
2,037 |
2,037 |
||||
|
- Net losses from derivative financial instruments |
- |
- |
- |
(38) |
(38) |
||||
|
- Net gains from disposal of available for sale investment securities |
- |
- |
- |
- |
- |
||||
|
- Other operating income - Share of profit of associates |
4,045 - |
6,135 - |
617 - |
3,437 577 |
14,234 577 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Other operating non-interest income |
21,933 |
16,200 |
16,292 |
5,777 |
60,202 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Provision for loan impairment |
22,129 |
(55,288) |
(7,208) |
- |
(40,367) |
||||
|
- Provision for performance guarantees and credit related commitments |
887 |
108 |
552 |
- |
1,547 |
||||
|
- Provision for impairment of investments in finance lease |
- |
- |
- |
(129) |
(129) |
||||
|
- Provision for impairment of other financial assets |
(409) |
14 |
(108) |
(3,922) |
(4,425) |
||||
|
- Impairment of investment securities available for sale |
- |
- |
- |
- |
- |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Profit before administrative and other expenses and income taxes |
109,027 |
166,167 |
74,414 |
17,592 |
367,200 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Staff costs |
(12,840) |
(63,933) |
(16,106) |
(9,497) |
(102,376) |
||||
|
- Depreciation and amortisation |
(712) |
(14,010) |
(2,332) |
(469) |
(17,523) |
||||
|
- Provision for liabilities and charges |
- |
- |
- |
2,495 |
2,495 |
||||
|
- Administrative and other operating expenses |
(3,640) |
(37,922) |
(7,479) |
(9,405) |
(58,446) |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
- Operating expenses |
(17,192) |
(115,865) |
(25,917) |
(16,876) |
(175,850) |
||||
|
|
|
|
|
|
|
||||
|
- Profit before tax |
91,835 |
50,302 |
48,497 |
716 |
191,350 |
||||
|
- Income tax expense |
(13,909) |
(6,225) |
(6,681) |
11,880 |
(14,935) |
||||
|
- Profit for the period |
77,926 |
44,077 |
41,816 |
12,596 |
176,415 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
30 June 2017 |
|
|
|
|
|
||||
|
Total gross loans and advances to customers reported |
2,057,644 |
3,699,857 |
1,628,934 |
- |
7,386,435 |
||||
|
Total customer accounts reported |
2,057,651 |
3,707,854 |
900,908 |
- |
6,666,413 |
||||
|
Total credit related commitments and performance guarantees |
863,933 |
189,459 |
148,720 |
- |
1,202,112 |
||||
|
|
|
|
|
|
|
||||
|
In thousands of GEL |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
30 June 2016 |
Corporate |
Retail |
MSME
|
Corporate centre and other operations |
Total |
|
|||
|
|
|
|
|
|
|
|
|||
|
- Interest income |
67,370 |
170,312 |
64,691 |
38,653 |
341,026 |
|
|||
|
- interest expense |
(17,910) |
(48,658) |
(3,885) |
(54,035) |
(124,488) |
|
|||
|
- Inter-segment interest income/(expense) |
(14,958) |
(15,673) |
(17,383) |
48,014 |
- |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Net interest income |
34,502 |
105,981 |
43,423 |
32,632 |
216,538 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Fee and commission income |
10,330 |
43,448 |
6,927 |
1,523 |
62,228 |
|
|||
|
- Fee and commission expense |
(1,542) |
(18,624) |
(2,127) |
(253) |
(22,546) |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Net Fee and commission income |
8,788 |
24,824 |
4,800 |
1,270 |
39,682 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Net gains from trading in foreign currencies |
9,364 |
7,193 |
10,842 |
1,686 |
29,085 |
|
|||
|
- Net losses from foreign exchange translation |
- |
- |
- |
(999) |
(999) |
|
|||
|
- Net losses from derivative financial instruments |
- |
- |
- |
(472) |
(472) |
|
|||
|
- Net gains from disposal of available for sale investment securities |
- |
- |
- |
8,795 |
8,795 |
|
|||
|
- Other operating income |
4,812 |
1,117 |
352 |
2,081 |
8,362 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Other operating non-interest income |
14,176 |
8,310 |
11,194 |
11,091 |
44,771 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Provision for loan impairment |
13,905 |
(30,676) |
(8,506) |
- |
(25,277) |
|
|||
|
- Provision for performance guarantees and credit related commitments |
(2,022) |
(68) |
14 |
- |
(2,076) |
|
|||
|
- Provision for impairment of investments in finance lease |
- |
- |
- |
(111) |
(111) |
|
|||
|
- Provision for impairment of other financial assets |
(620) |
(251) |
(28) |
(294) |
(1,193) |
|
|||
|
- Impairment of investment securities available for sale |
- |
- |
(11) |
- |
(11) |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Profit before administrative and other expenses and income taxes |
68,729 |
108,120 |
50,886 |
44,588 |
272,323 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Staff costs |
(9,024) |
(43,640) |
(11,827) |
(4,982) |
(69,473) |
|
|||
|
- Depreciation and amortisation |
(521) |
(10,523) |
(1,619) |
(947) |
(13,610) |
|
|||
|
- Provision for liabilities and charges |
- |
- |
- |
- |
- |
|
|||
|
- Administrative and other operating expenses |
(6,429) |
(30,379) |
(6,904) |
(7,873) |
(51,585) |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
- Operating expenses |
(15,974) |
(84,542) |
(20,351) |
(13,801) |
(134,668) |
|
|||
|
|
|
|
|
|
|
|
|||
|
- Profit before tax |
52,755 |
23,578 |
30,536 |
30,786 |
137,655 |
|
|||
|
- Income tax expense |
(8,055) |
(2,003) |
(4,853) |
16,493 |
1,582 |
|
|||
|
- Profit for the period |
44,700 |
21,575 |
25,683 |
47,279 |
139,237 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
31 December 2016 |
|
|
|
|
|
|
|||
|
Total gross loans and advances to customers reported |
2,060,172 |
3,763,255 |
1,535,298 |
- |
7,358,725 |
|
|||
|
Total customer accounts reported |
1,795,503 |
3,666,385 |
993,061 |
- |
6,454,949 |
|
|||
|
Total credit related commitments and performance guarantees |
724,402 |
189,604 |
232,814 |
- |
1,146,820 |
|
|||
|
|
|
|
|
|
|
|
|||
Reportable segments' assets were reconciled to total assets as follows:
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
Total segment assets (gross loans and advances to customers) |
7,386,435 |
7,358,725 |
|
Provision for loan impairment |
(212,130) |
(225,023) |
|
Cash and cash equivalents |
1,219,108 |
945,180 |
|
Mandatory cash balances with National Bank of Georgia |
931,654 |
990,642 |
|
Due from other banks |
41,096 |
24,725 |
|
Investment securities available for sale |
618,044 |
430,703 |
|
Bonds carried at amortized cost |
389,036 |
372,956 |
|
Investments in subsidiaries and associates |
1,021 |
- |
|
Current income tax prepayment |
7,719 |
7,430 |
|
Deferred income tax asset |
3,407 |
3,511 |
|
Other financial assets |
94,238 |
94,627 |
|
Investments in finance leases |
96,329 |
95,031 |
|
Other assets |
197,533 |
171,263 |
|
Premises and equipment |
320,139 |
314,032 |
|
Intangible assets |
65,034 |
60,957 |
|
Investment properties |
93,502 |
95,615 |
|
Goodwill |
28,657 |
28,658 |
|
|
|
|
|
|
|
|
|
Total assets per statement of financial position |
11,280,822 |
10,769,032 |
|
|
|
|
Reportable segments' liabilities are reconciled to total liabilities as follows:
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
Total segment liabilities (customer accounts) |
6,666,413 |
6,454,949 |
|
Due to Credit institutions |
2,313,550 |
2,197,577 |
|
Debt securities in issue |
24,106 |
23,508 |
|
Current income tax liability |
272 |
2,577 |
|
Deferred income tax liability |
2138 |
5,646 |
|
Provisions for liabilities and charges |
10,733 |
16,026 |
|
Other financial liabilities |
122,019 |
50,998 |
|
Other liabilities |
61,013 |
66,739 |
|
Subordinated debt |
390,070 |
368,381 |
|
|
|
|
|
|
|
|
|
Total liabilities per statement of financial position |
9,590,314 |
9,186,401 |
|
|
|
|
19 Interest Income and Expense
|
In thousands of GEL |
30 June 2017 |
30 June 2016 |
|
|
|
|
|
Interest income |
|
|
|
Loans and advances to customers |
438,753 |
302,373 |
|
Investment securities available for sale |
19,088 |
12,181 |
|
Bonds carried at amortised cost |
15,250 |
16,215 |
|
Investments in leases |
9,667 |
7,721 |
|
Due from other banks |
4,909 |
2,536 |
|
|
|
|
|
|
|
|
|
Total interest income |
487,667 |
341,026 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
Customer accounts |
108,412 |
70,453 |
|
Due to credit institutions |
68,952 |
38,465 |
|
Subordinated debt |
17,187 |
14,716 |
|
Debt Securities in issue |
1,042 |
854 |
|
|
|
|
|
|
|
|
|
Total interest expense |
195,593 |
124,488 |
|
|
|
|
|
|
|
|
|
Net interest income |
292,074 |
216,538 |
|
|
|
|
During the six months ended 30 June 2017 the interest accrued on impaired loans amounted to GEL 10,192 thousand (30 June 2016: GEL 10,105 thousand).
20 Fee and Commission Income and Expense
|
In thousands of GEL |
30 June 2017 |
30 June 2016 |
|
|
|
|
|
Fee and commission income |
|
|
|
Fee and commission income in respect of financial instruments not at fair value through profit or loss: |
|
|
|
- Card operations |
40,245 |
26,848 |
|
- Settlement transactions |
28,159 |
18,114 |
|
- Cash transactions |
7,470 |
5,489 |
|
- Guarantees issued |
6,073 |
6,132 |
|
- Issuance of letters of credit |
3,459 |
2,553 |
|
- Foreign exchange operations |
582 |
554 |
|
- Other |
3,731 |
2,538 |
|
|
|
|
|
|
|
|
|
Total fee and commission income |
89,719 |
62,228 |
|
|
|
|
|
|
|
|
|
Fee and commission expense |
|
|
|
Fee and commission expense in respect of financial instruments not at fair value through profit or loss: |
|
|
|
- Card operations |
24,005 |
14,910 |
|
- Settlement transactions |
3,385 |
2,598 |
|
- Cash transactions |
2,105 |
1,269 |
|
- Letters of credit |
465 |
904 |
|
- Guarantees received |
561 |
267 |
|
- Foreign exchange operations |
89 |
67 |
|
- Other |
3,892 |
2,531 |
|
|
|
|
|
|
|
|
|
Total fee and commission expense |
34,502 |
22,546 |
|
|
|
|
|
|
|
|
|
Net fee and commission income |
55,217 |
39,682 |
|
|
|
|
21 Other Operating Income
|
In thousands of GEL |
|
30 June 2017
|
30 June 2016
|
|
|
|
|
|
|
Revenues from operational leasing |
|
3,510 |
3,528 |
|
Gain from sale of investment properties |
|
1,174 |
230 |
|
Gain from sale of inventories of repossessed collateral |
|
945 |
1,169 |
|
Revenues from sale of cash-in terminals |
|
597 |
509 |
|
Gain on disposal of premises and equipment |
|
191 |
96 |
|
Revenues from non-credit related fines |
|
96 |
400 |
|
Reimbursed taxes |
|
13 |
- |
|
Administrative fee income from international financial institutions |
|
- |
359 |
|
Other |
|
7,708 |
2,071 |
|
|
|
|
|
|
|
|
|
|
|
Total other operating income |
|
14,234 |
8,362 |
|
|
|
|
|
Revenue from operational leasing is wholly attributable to investment properties. The carrying value of the
inventories of repossessed collateral disposed of in the period ended 30 June 2017 was GEL 10,284 thousand (30 June 2016: GEL 10,281 thousand).
22 Administrative and Other Operating Expenses
|
In thousands of GEL |
|
30 June 2017 |
30 June 2016 |
|
|
|
|
|
|
Rent |
|
11,589 |
8,397 |
|
Advertising and marketing services |
|
6,797 |
4,846 |
|
Professional services |
|
5,825 |
16,807 |
|
Intangible asset enhancement |
|
4,781 |
3,700 |
|
Utility services |
|
3,020 |
2,422 |
|
Taxes other than on income |
|
2,812 |
2,492 |
|
Premises and equipment maintenance |
|
2,697 |
1,269 |
|
Stationery and other office expenses |
|
2,240 |
1,633 |
|
Insurance |
|
1,976 |
1,270 |
|
Impairment of intangible assets |
|
1,850 |
19 |
|
Communications and supply |
|
1,802 |
1,505 |
|
Impairment of Premises & Equipment |
|
1,729 |
- |
|
Loss on disposal of inventories |
|
1,186 |
537 |
|
Security services |
|
999 |
881 |
|
Business trip expenses |
|
907 |
876 |
|
Insurance contract acquisition costs |
|
825 |
- |
|
Transportation and vehicle maintenance |
|
798 |
642 |
|
Personnel training and recruitment |
|
727 |
509 |
|
Charity |
|
417 |
486 |
|
Gross Change in IBNR |
|
391 |
- |
|
Loss on disposal of investment properties |
|
385 |
- |
|
Loss on disposal of premises and equipment |
|
171 |
74 |
|
Write-down of current assets to fair value less costs to sell |
|
(183) |
52 |
|
Other |
|
4,705 |
3,168 |
|
|
|
|
|
|
|
|
|
|
|
Total administrative and other operating expenses |
|
58,446 |
51,585 |
|
|
|
|
|
23 Income Taxes
As at 30 June 2017, the statutory income tax rate applicable to the majority of the Group's income is 15% (six months ended 30 June 2016: 15%). Interim period income tax expense is recognised based on the income tax rate expected for the full financial year which equaled 7.8% (six months ended 30 June 2016: minus 1.1%). Income tax credit in the six months period ended 30 June 2016 is due to re-measurement of deferred tax liability as at 30 June 2016 to reflect the change in the Georgian tax code. Refer to note 3.
24 Financial and Other Risk Management
TBC Bank Group's strong risk governance reflects the importance placed by the Board and the Group's Risks, Ethics and Compliance Committee on shaping the risk strategy and managing credit, financial and non-financial risks. All components necessary for comprehensive risk governance are embedded into risk organization structure: enterprise risk management; credit, financial and non-financial risks management; risk reporting & supporting IT infrastructure; cross-risk analytical tools and techniques such as capital adequacy management and stress-testing. Comprehensive, transparent and prudent risk governance facilitates understanding and trust from multiple stakeholders, ensures sustainability and resiliency of the business model and positioning of risk management as Group's competitive advantage and strategic enabler.
The TBC Bank Group's governance structure ensures adequate oversight and accountabilities as well as clear segregation of duties. The Risks, Ethics and Compliance Committee is responsible for taking all the day-to-day decisions relating to the Group apart from those that are reserved for the Board. Namely, the committee carries out following duties: 1) Review and assessment of the Group's risk management strategy, risk appetite and tolerance, risk management system and risk policies; 2) Review and monitoring of the processes for compliance with laws, regulations and ethical codes of practice; 3) monitoring of the remediation of internal control deficiencies identified by internal and external auditors around compliance, ethics and risk management functions; 4) Annual self-assessment of the committee's performance and reporting of the results to the Board; 5) Review of the key risk management framework and other policy documents and make recommendations to the Board for their approval.
On the Bank level, risk management is the duty of the Supervisory Board, which has the overall responsibility to set the tone at the top and monitor compliance with established objectives. At the same time, Management Board governs and directs Groups' daily activities.
Both the Supervisory Board and the Management Board have established dedicated risk committees. Risk, Ethics and Compliance Committee of Supervisory Board approves Bank's Risk Appetite, supervises risk profile and risk governance practice within the Bank while Audit Committee is responsible for implementation of key accounting policies and facilitation of activities of internal and external auditors. Management Board Risk Committee is established to guide group-wide risk management activities and monitor major risk trends to make sure risk profile complies with the established Risk Appetite of the Group. Operational Risk Committee makes decisions related to operational risk governance while Asset-Liability Management Committee ("ALCO") is responsible for implementation of ALM policies.
The Management Board of the Group and, the Supervisory Board and Senior Management of the Bank govern risk objectives through Risk Appetite Statement ("RAS") which sets desired risk profile and respective risk limits for different economic environments. Risk Appetite ("RA") establishes monitoring and reporting responsibilities as well as escalation paths for different trigger events and limit breaches which as well prompt risk teams to establish and implement agreed mitigation actions. In order to effectively implement Risk Appetite in the Group's day-to-day operations, the RA metrics are cascaded into more granular business unit level limits. That way risk allocation is established across different segments and activities. The Board level oversight coupled with the permanent involvement of the Senior Management in TBC Group risk management ensures the clarity regarding risk objectives, intense monitoring of risk profile against risk appetite, prompt escalation of risk-related concerns and establishment of remediation actions.
The daily management of individual risks is based on the principle of the three lines of defense. While business lines are primary risk owners, risk teams assume the function of the second line defense. This role is performed through sanctioning transactions as well as tools and techniques for risk identification, analysis, measurement, monitoring and reporting. The committees are established at operational levels in charge of making transaction-level decisions that comprise of component of clear and sophisticated delegations of the authority framework based on "four-eye principle". All new products/projects go through the risk teams to assure risks are analyzed comprehensively.
Such control arrangements guarantee that the Bank takes informed risk-taking decisions that are adequately priced, avoiding taking risks that are beyond the Group's established threshold. Within the Risk Organization the below teams manage the credit, liquidity, market, operational and other non-financial risks:
· Enterprise Risk Management (ERM);
· Credit Risk Management;
· Underwriting (Credit sanctioning);
· Restructuring and Collections;
· Financial Risk Management;
· Operational Risk Management.
The strong and independent structure enables fulfilment of all the required risk management functions within the second line of defense by highly skilled professionals with a balanced mix of credentials in banking and real sectors both on the local and international markets.
In addition to the above-mentioned risk teams, the Compliance Department (reporting directly to CEO) is specifically in charge of AML and compliance risk management. As the third line of defense, the Internal Audit Department provides an independent and objective assurance and recommendations to Group that facilitates further improvement of operations and risk management.
For the management of each significant risk, the Bank puts in place specific policies and procedures, governance tools and techniques, methodologies for risk identification, assessment and quantification. Sound risk reporting systems and IT infrastructure are important tools for efficient risk management of TBC Bank. Thus, significant emphasis and investments are made by the Bank to constantly drive the development of required solutions. Comprehensive reporting framework is in place for the Management Board of the Group and the Supervisory Board and the Senior Management of the Bank that enables intense oversight over risk developments and taking early remedial actions upon necessity.
Beyond the described risk governance components, compensation system features one of the most significant tools for introducing incentives for staff, aligned with the Bank's long term interests to generate sustainable risk-adjusted returns. The risk Key Performance Indicators ("KPIs") are incorporated into both the business line and the risk staff remunerations. The performance management framework differentiates risk staff incentives to safeguard the independence from business areas that they supervise and at the same time enable attraction and maintenance of qualified professionals. For that purpose, the Bank overweighs risk KPIs for risk and control staff and caps the share of variable remuneration.
Credit risk. The Group is exposed to credit risk, which is the risk that a customer or counterparty will be unable to meet its obligation to settle outstanding amounts. The Group's exposure to credit risk arises as a result of its lending operations and other transactions with counterparties giving rise to financial assets. Maximum exposure to credit risk of on-balance sheet items equals their carrying values. For maximum exposure on off-balance sheet commitments refer to Note 26.
Credit risks include: risks arising from transactions with individual counterparties, concentration risk, currency-induced credit risks and residual risks.
- Risks arising from transactions with individual counterparties are the loss risk related to default or non-fulfillment of contracts due to deterioration in the counterparty's credit quality;
- Concentration risk is the risk related to the quality deterioration due to large exposures provided to single borrowers or a group of connected borrowers, or loan concentration in certain economic industries;
- Currency-induced credit risks relate to risks arising from foreign currency-denominated loans in the Group's portfolio;
- Residual risks result from applying credit risk-mitigation techniques, which could not satisfy expectation in relation to received collateral.
Comprehensive risk management methods and processes are established as part of the Group's risk management framework to manage credit risk effectively. The main principles for Group's credit risk management are: establish a prudent credit risk environment; operate under a sound credit-granting process; and maintain efficient processes for credit risk identification, measurement, control and monitoring. Respective policies and procedures establish a framework for lending decisions reflecting the Group's tolerance for credit risk. This framework includes detailed and formalised credit evaluation and collateral appraisal processes, administration and documentation, credit approval authorities at various levels, counterparty and industry concentration limits, and clearly defined roles and responsibilities of entities and staff involved in the origination, monitoring and management of credit.
Comprehensive risk management methods and processes are established as part of the Group's risk management framework to manage credit risk effectively. The main principles for Group's credit risk management are: establish a prudent credit risk environment; operate under a sound credit-granting process; and maintain efficient processes for credit risk identification, measurement, control and monitoring. Respective policies and procedures establish a framework for lending decisions reflecting the Group's tolerance for credit risk. This framework includes detailed and formalised credit evaluation and collateral appraisal processes, administration and documentation, credit approval authorities at various levels, counterparty and industry concentration limits, and clearly defined roles and responsibilities of entities and staff involved in the origination, monitoring and management of credit.
Credit Approval: The Group strives to ensure a sound credit-granting process by establishing well-defined credit granting criteria and building up an efficient process for the comprehensive assessment of a borrower's risk profile. The concept of three lines of defense is embedded in the credit risk assessment framework, with a clear segregation of duties among the parties involved in the credit assessment process.
The credit assessment process differs across segments, being further differentiated across various product types reflecting the different natures of these asset classes. Corporate, SME and larger retail and micro loans are assessed on an individual basis with thorough analysis of the borrower's creditworthiness and structure of the loan; whereas smaller retail and micro loans are mostly assessed in an automated way applying respective scoring models for the loan approval. Lending guidelines for business borrowers have been tailored to individual economic sectors, outlining key lending criteria and target ratios within each industry.
The Loan Approval Committees are responsible to review the credit applications and approve the credit products. Different Loan Approval Committees with clearly defined delegation authority are in place for the approval of credit exposures to Corporate, SME, Retail and Micro customers (except those products which are assessed applying scorecards). The composition of a Loan Approval Committee depends on aggregated liabilities of the borrower and the borrower's risk profile. Credit risk managers (as members of respective Loan Approval Committees) ensure that the borrower and the proposed credit exposure risks are thoroughly analysed. 1. A loan to the Bank's top 20 borrowers or exceeding 5% of the Bank's regulatory capital requires the review and the approval of the Supervisory Board's Risk, Ethics and Compliance Committee. This committee also approves transactions with related parties resulting in exposures to individuals and legal entities exceeding GEL 150 and 200 thousand, respectively.
Credit Risk Monitoring: The Group's risk management policies and processes are designed to identify and analyse risk in a timely manner, and monitor adherence to predefined limits by means of reliable and timely data. The Group dedicates considerable resources to gain a clear and accurate understanding of the credit risk faced across various business segments. The Group uses a robust monitoring system to react timely to macro and micro developments, identify weaknesses in the credit portfolio and outline solutions to make informed risk management decisions. Monitoring processes are tailored to the specifics of individual segments, as well as they encompass individual credit exposures, overall portfolio performance and external trends that may impact the portfolio's risk profile. Early warning signals serve as an important early alert system for the detection of credit deteriorations, leading to mitigating actions.
Reports relating to the credit quality of the credit portfolio are presented to the Board's Risk, Ethics and Compliance Committees on a quarterly basis. By comparing current data with historical figures and analysing forecasts, the management believes that it is capable identifying risks and responding to them by amending its policies in a timely manner.
Credit Risk Mitigation: Credit decisions are based primarily on the borrower's repayment capacity and creditworthiness; in addition, the Group uses credit risk mitigation tools such as collateral and guarantees to reduce the credit risk. The reliance that can be placed on these mitigants is carefully assessed for legal certainty and enforceability, market valuation of collateral and counterparty risk of the guarantor.
A centralised unit for collateral management governs the Group's view and strategy in relation to collateral management and ensures that collateral serves as an adequate mitigating factor for credit risk management purposes. The collateral management framework consists of a sound independent appraisal process, haircut system throughout the underwriting process, monitoring and revaluations.
Credit Risk Restructuring and Collection: A comprehensive portfolio supervision system is in place to identify weakened or problem credit exposures in a timely manner and to take prompt remedial actions. Dedicated restructuring units manage weakened borrowers across all business segments. The primary goal of the restructuring units is to rehabilitate the borrower and return to the performing category. The sophistication and complexity of rehabilitation process differs based on the type and size of exposure.
A centralised monitoring team monitors retail borrowers in delinquency, which coupled with branches' efforts, are aimed at maximizing collection. The specialised software is applied for early collection processes management. Specific strategies are tailored to different sub-groups of customers, reflecting respective risk levels, so that greater effort is dedicated to customers with a higher risk profile.
Dedicated recovery units manage loans with higher risk profile. Corporate and SME borrowers are transferred to a recovery unit in case of a strong probability that a material portion of the principal amount will not be paid and the main stream of recovery is no longer the borrower's cash flow. Retail and micro loans are generally transferred to the recovery unit or external collection agencies (in the case of unsecured loans) at 90 days overdue, although they may be transferred earlier if it is evident that the borrower is unable to repay the loan.
Geographical risk concentrations. Assets, liabilities, credit related commitments and performance guarantees have generally been attributed to geographic regions based on the country in which the counterparty is located. Balances legally outstanding to/from off-shore companies which are closely related to Georgian counterparties are allocated to the caption "Georgia". Cash on hand and premises and equipment have been allocated based on the country in which they are physically held.
The geographical concentration of the Group's assets and liabilities as of 30 June 2017 is set out below:
|
In thousands of GEL |
Georgia |
OECD |
Non-OECD |
Total |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
685,299 |
527,939 |
5,870 |
1,219,108 |
|
|
Due from other banks |
30,561 |
8,109 |
2,426 |
41,096 |
|
|
Mandatory cash balances with National Bank of Georgia |
931,654 |
- |
- |
931,654 |
|
|
Loans and advances to customers |
6,957,168 |
46,756 |
170,381 |
7,174,305 |
|
|
Investment securities available for sale |
607,346 |
- |
737 |
608,083 |
|
|
Bonds carried at amortised cost |
389,036 |
- |
- |
389,036 |
|
|
Repurchase receivables |
9,961 |
- |
- |
9,961 |
|
|
Investments in leases |
96,329 |
- |
- |
96,329 |
|
|
Other financial assets |
94,049 |
60 |
129 |
94,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
9,801,403 |
582,864 |
179,543 |
10,563,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-financial assets |
712,543 |
25 |
4,444 |
717,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
10,513,946 |
582,889 |
183,987 |
11,280,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Due to credit institutions |
808,822 |
1,488,388 |
16,340 |
2,313,550 |
|
|
Customer accounts |
5,589,458 |
550,059 |
526,896 |
6,666,413 |
|
|
Debt securities in issue |
12,085 |
- |
12,021 |
24,106 |
|
|
Other financial liabilities |
97,865 |
23,539 |
615 |
122,019 |
|
|
Subordinated debt |
53,191 |
214,344 |
122,535 |
390,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities |
6,561,421 |
2,276,330 |
678,407 |
9,516,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-financial liabilities |
72,372 |
1,069 |
715 |
74,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
6,633,793 |
2,277,399 |
679,122 |
9,590,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance sheet position |
3,880,153 |
(1,694,510) |
(495,135) |
1,690,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance guarantees |
340,197 |
47,354 |
85,197 |
472,748 |
|
|
Credit related commitments |
717,038 |
9,646 |
2,680 |
729,364 |
|
|
|
|
|
|
|
|
The geographical concentration of the Group's assets and liabilities as of 31 December 2016 is set out below:
|
In thousands of GEL |
Georgia |
OECD |
Non-OECD |
Total |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
549,279 |
389,223 |
6,678 |
945,180 |
|
|
Due from other banks |
5,874 |
18,851 |
- |
24,725 |
|
|
Mandatory cash balances with National Bank of Georgia |
990,642 |
- |
- |
990,642 |
|
|
Loans and advances to customers |
6,923,037 |
88,616 |
122,049 |
7,133,702 |
|
|
Investment securities available for sale |
429,985 |
- |
718 |
430,703 |
|
|
Bonds carried at amortised cost |
372,956 |
- |
- |
372,956 |
|
|
Investments in leases |
95,031 |
- |
- |
95,031 |
|
|
Other financial assets |
94,398 |
229 |
- |
94,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
9,461,202 |
496,919 |
129,445 |
10,087,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-financial assets |
676,665 |
29 |
4,772 |
681,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
10,137,867 |
496,948 |
134,217 |
10,769,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Due to credit institutions |
718,699 |
1,408,693 |
70,185 |
2,197,577 |
|
|
Customer accounts |
5,421,782 |
530,370 |
502,797 |
6,454,949 |
|
|
Debt securities in issue |
13,261 |
- |
10,247 |
23,508 |
|
|
Other financial liabilities |
49,092 |
1,286 |
620 |
50,998 |
|
|
Subordinated debt |
- |
233,657 |
134,724 |
368,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities |
6,202,834 |
2,174,006 |
718,573 |
9,095,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-financial liabilities |
89,298 |
1,098 |
592 |
90,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
6,292,132 |
2,175,104 |
719,165 |
9,186,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance sheet position |
3,845,735 |
(1,678,156) |
(584,948) |
1,582,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance guarantees |
274,614 |
56,406 |
95,588 |
426,608 |
|
|
Credit related commitments |
706,646 |
10,175 |
3,391 |
720,212 |
|
|
|
|
|
|
|
|
Market risk. The Bank follows the Basel Committee's definition of market risk as the risk of losses in on- and off-balance sheet positions arising from movements in market prices. This risk is principally made up of (a) risks pertaining to interest rate instruments and equities in the trading book and (b) foreign exchange rate risk (or currency risk) and commodities risk throughout the Bank. The Bank's strategy is not to be involved in trading book activity or investments in commodities. Accordingly, the Bank's exposure to market risk is primarily limited to foreign exchange rate risk in the structural book.
Currency risk. Foreign exchange rate risk arises from the potential change in foreign currency exchange rates, which can affect the value of a financial instrument. This risk stems from the open currency positions created due to mismatches in foreign currency assets and liabilities. The NBG requires the Bank to monitor both balance-sheet and total aggregate (including off-balance sheet) open currency positions and to maintain the later one within 20% of the Bank's regulatory capital. As of 30 June 2017, the Bank maintained an aggregate open currency position of 1.6% of regulatory capital (2016: 3.2%). The Asset-Liability Management Committee ("ALCO") has set limits on the level of exposure by currency as well as on aggregate exposure positions which are more conservative than those set by the NBG. The Bank's compliance with such limits is monitored daily by the heads of the Treasury and Financial Risk Management Departments.
Currency risk management framework is governed through the Market Risk Management Policy, market risk management procedure and relevant methodologies. In 2016 within the ICAAP framework the Bank developed methodology for allocating capital charges for FX risk following Basel guidelines. The table below summarises the Group's exposure to foreign currency exchange rate risk at the balance sheet date. While managing open currency position the Group considers all provisions to be denominated in the local currency. Gross amount of currency swap deposits is included in Derivatives. Therefore total financial assets and liabilities below are not traceable with either balance sheet or liquidity risk management tables, where net amount of gross currency swaps is presented:
|
|
As of 30 June 2017 |
|
As of 31 December 2016 |
|||||||
|
In thousands of GEL |
Monetary financial assets |
Monetary financial liabilities |
Deri-vatives |
Net balance sheet position |
|
Monetary financial assets |
Monetary financial liabilities |
Deri-vatives |
Net balance sheet position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgian Lari |
4,099,396 |
3,199,058 |
65,522 |
965,860 |
|
3,484,840 |
2,478,715 |
9,394 |
1,015,519 |
|
|
US Dollars |
5,658,187 |
5,597,328 |
(65,059) |
(4,200) |
|
5,821,734 |
5,848,266 |
(8,905) |
(35,437) |
|
|
Euros |
621,346 |
618,714 |
(0) |
2,632 |
|
690,728 |
697,568 |
(13) |
(6,853) |
|
|
Other |
184,881 |
101,058 |
(407) |
83,416 |
|
90,264 |
70,864 |
(288) |
19,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
10,563,810 |
9,516,158 |
56 |
1,047,708 |
|
10,087,566 |
9,095,413 |
188 |
992,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
To assess the currency risk the Bank performs a value-at-risk ("VAR") sensitivity analysis on a quarterly basis. The analysis calculates the effect on the Group's income determined by possible worst movement of currency rates against the Georgian Lari, with all other variables held constant. To identify the maximum expected losses resulting from currency fluctuations, a 99% confidence level is defined based on the monthly variations in exchange rates over 3 year look-back period. During the six months ended 30 June 2017 and the year ended 31 December 2016 the sensitivity analysis did not reveal any significant potential effect on the Group's equity:
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
Maximum loss (VAR, 99% confidence level) |
(767) |
(1,184) |
|
Maximum loss (VAR,95% confidence level) |
(550) |
(868) |
|
|
|
|
Interest rate risk. Interest rate risk arises from potential changes in the market interest rates that can adversely affect the fair value or future cash flows of the financial instrument. This risk can arise from maturity mismatches of assets and liabilities, as well as from the re-pricing characteristics of such assets and liabilities.
The Bank's deposits and the most loans are at fixed interest rates, while a portion of the Bank's borrowings is at a floating interest rate. The Bank's floating rate borrowings are, to a certain extent, hedged by the NBG paying a floating rate on the minimum reserves that the Bank holds with the NBG. The Bank has also entered into interest rate swap agreements in order to mitigate interest rate risk. Furthermore, many of the Bank's loans to customers contain a clause allowing it to adjust the interest rate on the loan in case of adverse interest rate movements, thereby limiting the Bank's exposure to interest rate risk. The management also believes that the Bank's interest rate margins provide a reasonable buffer to mitigate the effect of possible adverse interest rate movements.
The table below summarises the Group's exposure to interest rate risks. It illustrates the aggregated amounts of the Group's financial assets and liabilities at the amounts monitored by the management and categorised by the earlier of contractual interest re-pricing or maturity dates. Currency and interest rate swaps are not netted when assessing the Group's exposure to interest rate risks. Therefore, total financial assets and liabilities below are not traceable with either balance sheet or other financial risk management tables. The tables consider both reserves placed with NBG and Interest bearing Nostro accounts. Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby for benchmark Federal funds rate and ECB rates are considered in case of USD and EUR respectively. Therefore, they have impact on the TBC's Net interest income in case of both upward and downward shift of interest rates.
|
In thousands of GEL |
Less than 1 year |
More than 1 year |
Total |
|
|
|
|
|
|
30 June 2017 |
|
|
|
|
Total financial assets |
6,058,192 |
4,532,338 |
10,590,530 |
|
Total financial liabilities |
6,773,064 |
2,769,813 |
9,542,877 |
|
|
|
|
|
|
|
|
|
|
|
Net interest sensitivity gap as of 30 June 2017 |
(714,872) |
1,762,525 |
1,047,653 |
|
|
|
|
|
|
|
|
|
|
|
31 December 2016 |
|
|
|
|
Total financial assets |
5,519,746 |
4,606,991 |
10,126,737 |
|
Total financial liabilities |
6,633,005 |
2,501,580 |
9,134,585 |
|
|
|
|
|
|
|
|
|
|
|
Net interest sensitivity gap as of 31 December 2016 |
(1,113,259) |
2,105,411 |
992,152 |
|
|
|
|
|
|
|
|
|
|
As of 30 June 2017, if interest rates had been 100 basis points lower with all other variables held constant, profit for the period would have been GEL 6,417 thousands higher (30 June 2016: GEL 800 thousand), mainly as a result of lower interest expense on variable interest liabilities. Other comprehensive income would have been GEL 4,935 thousand higher (30 June 2016: GEL 1,116 thousand), as a result of an increase in the fair value of fixed rate financial assets classified as available for sale and repurchase receivables.
If interest rates had been 100 basis points higher, with all other variables held constant, profit would have been GEL 6,417 thousands lower (30 June 2016: GEL 800 thousand), mainly as a result of higher interest expense on variable interest liabilities. Other comprehensive income would have been GEL4,760 thousand lower (30 June 2016: GEL 1,093 thousand), as a result of decrease in the fair value of fixed rate financial assets classified as available for sale.
With the assistance of Ernst & Young LLC the Bank has developed an advanced model to manage the interest rate risk on a standalone basis. The interest rate risk analysis is performed monthly by the Financial Risk Management Department.
The Bank calculates the impact of changes in interest rates using both Net Interest Income and Economic Value sensitivity. Net Interest Income sensitivity measures the impact of a change of interest rates along the various maturities on the yield curve on the net interest revenue for the nearest year. Economic Value measures the impact of a change of interest rates along the various maturities on the yield curve on the present value of the Group's assets, liabilities and off-balance sheet instruments. When performing Net Interest Income and Economic Value sensitivity analysis, the Bank uses parallel shifts in interest rates as well as number of different scenarios. Under the ICAAP framework, TBC Bank reserves capital in the amount of the adverse effect of possible parallel yield curve shift scenarios on net interest income over a one-year period for Basel II Pillar 2 capital calculation purposes.
In order to manage Interest Rate risk the Bank establishes appropriate limits. The Bank monitors compliance with the limits and prepares forecasts. ALCO decides on actions that are necessary for effective interest rate risk management and follows up on the implementation. Periodic reporting is done to Management Board and the Board's Risk, Ethics and Compliance Committee.
Liquidity Risk. The liquidity risk is the risk that TBC Bank either does not have sufficient financial resources available to meet all of its obligations and commitments as they fall due, or can access those resources only at a high cost. The risk is managed by the Financial Risk Management and Treasury Departments and is monitored by the ALCO.
The principal objectives of the TBC Bank's liquidity risk management policy are to: (i) ensure the availability of funds in order to meet claims arising from total liabilities and off-balance sheet commitments, both actual and contingent, at an economic price; (ii) recognise any structural mismatch existing within TBC Bank's statement of financial position and set monitoring ratios to manage funding in line with well-balanced growth; and (iii) monitor liquidity and funding on an ongoing basis to ensure that approved business targets are met without compromising the risk profile of the Bank.
The liquidity risk is categorised into two risk types: the funding liquidity risk and the market liquidity risk.
Funding liquidity risk is the risk that TBC will not be able to efficiently meet both expected and unexpected current and future cash flow and collateral needs without affecting either its daily operations or its financial condition. To manage funding liquidity risk TBC Bank uses the Liquidity Coverage ratio and the Net Stable Funding ratio set forth under Basel III, as well as minimum liquidity ratio defined by the NBG. In addition the Bank performs stress tests, what if and scenarios analysis.
The Liquidity Coverage ratio is used to help manage short-term liquidity risks. The Bank's liquidity risk management framework is designed to comprehensively project cash flows arising from assets, liabilities and off-balance sheet items over certain time bands and ensure that liquidity coverage ratio limits are put in place. TBC Bank also stress tests the results of liquidity through large shock scenarios set by the NBG. Internal liquidity coverage ratio and stress tests are carried out on a weekly basis.
The Net Stable Funding ratio is used for long-term liquidity risk management to promote resilience over a longer time horizon by creating additional incentives for TBC Bank to rely on more stable sources of funding on a continuous basis. The Bank also sets deposit concentration limits for large deposits and deposits of non-Georgian residents in its deposit portfolio.
Net Stable Funding ratio is calculated based on the IFRS consolidated financial statements. In addition, for internal purposes TBC Bank calculates NSFR ratio on the basis of standalone financial statements prepared in accordance with NBG's accounting rules.
The management believes that a strong and diversified funding structure is one of TBC Bank's differentiators. The Bank relies on relatively stable deposits from Georgia as the main source of funding. In order to maintain and further enhance the liability structure TBC Bank sets the targets for retail deposits in its strategy and sets the loan to deposit ratio limits.
The loan to deposit ratio (defined as total value of net loans divided by total value of deposits) stood at 107.6% and 110.5%, at the 30 June 2017 and 31 December 2016, respectively.
Market liquidity risk is the risk that the Bank cannot easily offset or eliminate a position at the then-current market price because of inadequate market depth or market disruption. To manage it, TBC Bank follows Basel III guidelines on high-quality liquidity asset eligibility in order to ensure that the Bank's high-quality liquid assets can be sold without causing a significant movement in the price and with minimum loss of value.
In addition, TBC Bank has a liquidity contingency plan, which is part of the Bank's overall prudential liquidity policy and is designed to ensure that TBC Bank is able to meet its funding and liquidity requirements and maintain its core business operations in deteriorating liquidity conditions that could arise outside the ordinary course of its business.
The Bank calculates its liquidity ratio on a daily basis in accordance with the NBG's requirements. The limit is set by the NBG for average liquidity ratio, which is calculated as the ratio of average liquid assets to average liabilities for the respective month, including borrowings from financial institutions and part of off-balance sheet liabilities with residual maturity up to 6 months. As of 30 June the ratios were well above the prudential limit set by the NBG as follows:
|
|
30 June 2017 |
31 December 2016 |
|
Average Liquidity Ratio |
34.2% |
30.8% |
|
|
|
|
According to daily cash flow forecasts and the surplus in liquidity standing, the Treasury Department places funds in short-term liquid assets , largely made up of short-term risk-free securities, interbank deposits and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Group as a whole.
Maturity analysis. The table below summarizes the maturity analysis of the Group's financial liabilities, based on remaining undiscounted contractual obligations as of 30 June 2017 Subject-to-notice repayments are treated as if notice were to be given immediately. However, the Group expects that many customers will not request repayment on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows indicated by the Group's deposit retention history.
The maturity analysis of financial liabilities as of 30 June 2017 is as follows:
|
In thousands of GEL |
Less than 3 months |
From 3 to 12 months |
From 12 months to 5 years |
Over 5 years |
Total |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Due to Credit institutions |
838,513 |
382,218 |
1,140,321 |
174,918 |
2,535,970 |
|
Customer accounts - individuals |
2,168,834 |
1,129,771 |
451,946 |
37,582 |
3,788,133 |
|
Customer accounts - other |
2,738,042 |
160,777 |
114,348 |
45,733 |
3,058,900 |
|
Other financial liabilities |
117,761 |
3,736 |
522 |
- |
122,019 |
|
Subordinated debt |
5,521 |
33,856 |
214,428 |
333,531 |
587,336 |
|
Debt securities in issue |
5,491 |
1,059 |
20,511 |
- |
27,061 |
|
Gross settled forwards |
64,860 |
7,685 |
- |
- |
72,545 |
|
Performance guarantees |
80,272 |
202,411 |
189,258 |
807 |
472,748 |
|
Financial guarantees |
33,609 |
99,903 |
39,000 |
137 |
172,649 |
|
Other credit related commitments |
556,715 |
- |
- |
- |
556,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potential future payments for financial obligations |
6,609,618 |
2,021,416 |
2,170,334 |
592,708 |
11,394,076 |
|
|
|
|
|
|
|
The maturity analysis of financial liabilities as of 31 December 2016 is as follows:
|
In thousands of GEL |
Less than 3 months |
From 3 to 12 months |
From 12 months to 5 years |
Over 5 years |
Total |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Due to Credit institutions |
837,188 |
310,447 |
1,103,959 |
168,271 |
2,419,865 |
|
Customer accounts - individuals |
2,147,015 |
1,284,067 |
360,609 |
39,578 |
3,831,269 |
|
Customer accounts - other |
2,287,043 |
238,551 |
134,293 |
74,180 |
2,734,067 |
|
Other financial liabilities |
46,971 |
2,883 |
1,144 |
- |
50,998 |
|
Subordinated debt |
4,853 |
29,510 |
238,224 |
360,551 |
633,138 |
|
Debt securities in issue |
616 |
6,584 |
22,745 |
- |
29,945 |
|
Gross settled forwards |
16,084 |
3,641 |
369 |
- |
20,094 |
|
Performance guarantees |
60,552 |
154,616 |
210,595 |
845 |
426,608 |
|
Financial guarantees |
117,994 |
102,311 |
50,657 |
140 |
271,102 |
|
Other credit related commitments |
449,110 |
- |
- |
- |
449,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potential future payments for financial obligations |
5,967,426 |
2,132,610 |
2,122,595 |
643,565 |
10,866,196 |
|
|
|
|
|
|
|
The undiscounted financial liability analysis gap does not reflect the historical stability of the current accounts. Their liquidation has historically taken place over a longer period than the one indicated in the tables above. These balances are included in amounts due in less than three months in the tables above.
Term Deposits included in the customer accounts are classified based on remaining contractual maturities, according to the Georgian Civil Code, however, individuals have the right to withdraw their deposits prior to maturity if they partially or fully forfeit their right to accrued interest and the Group is obliged to repay such deposits upon the depositor's demand. Based on the Bank's deposit retention history, the management does not expect that many customers will require repayment on the earliest possible date; accordingly, the table does not reflect the management's expectations as to actual cash outflows.
The Group does not use the above undiscounted maturity analysis to manage liquidity. Instead, the Group monitors the liquidity gap analysis based on the expected maturities. In particular, the customers' deposits are distributed in the given maturity gaps following their behavioural analysis.
As of 30 June 2017 the analysis by expected maturities may be as follows:
|
In thousands of GEL |
Less than 3 months |
From 3 to 12 months |
From 1 to 5 Years |
Over 5 years |
Total |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
1,219,108 |
- |
- |
- |
1,219,108 |
|
Due from other banks |
24,888 |
- |
2,426 |
13,782 |
41,096 |
|
Mandatory cash balances with National Bank of Georgia |
931,654 |
- |
- |
- |
931,654 |
|
Loans and advances to customers |
1,181,092 |
1,378,195 |
2,896,679 |
1,718,339 |
7,174,305 |
|
Investment securities available for sale |
608,083 |
- |
- |
- |
608,083 |
|
Bonds carried at amortised cost |
42,130 |
127,244 |
180,717 |
38,945 |
389,036 |
|
Finance lease receivables |
17,739 |
30,445 |
48,145 |
- |
96,329 |
|
Repurchase receivables |
9,961 |
- |
- |
- |
9,961 |
|
Other financial assets |
62,168 |
14,578 |
17,492 |
- |
94,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
4,096,823 |
1,550,462 |
3,145,459 |
1,771,066 |
10,563,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Due to Credit institutions |
829,532 |
321,767 |
1,000,732 |
161,519 |
2,313,550 |
|
Customer accounts |
784,846 |
162,811 |
- |
5,718,756 |
6,666,413 |
|
Debt securities in issue |
4,979 |
- |
19,127 |
- |
24,106 |
|
Other financial liabilities |
117,761 |
3,736 |
522 |
- |
122,019 |
|
Subordinated debt |
3,889 |
11,720 |
115,167 |
259,294 |
390,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities |
1,741,007 |
500,034 |
1,135,548 |
6,139,569 |
9,516,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit related commitments and performance guarantees |
|
|
|
|
|
|
Performance guarantees |
2,708 |
- |
- |
- |
2,708 |
|
Financial guarantees |
6,429 |
- |
- |
- |
6,429 |
|
Other credit related commitments |
60,333 |
- |
- |
- |
60,333 |
|
|
|
- |
- |
- |
|
|
Credit related commitments and performance guarantees |
69,470 |
- |
- |
- |
69,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liquidity gap as of 30 June 2017 |
2,286,346 |
1,050,428 |
2,009,911 |
(4,368,503) |
978,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative gap as of 30 June 2017 |
2,286,346 |
3,336,774 |
5,346,685 |
978,182 |
|
|
|
|
|
|
|
|
The management believes that the Group has sufficient liquidity to meet its current on- and off-balance sheet obligations. As of 31 December 2016 the analysis by expected maturities may be as follows:
|
In thousands of GEL |
Less than 3 months |
From 3 to 12 months |
From 1 to 5 Years |
Over 5 years |
Total |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
945,180 |
- |
- |
- |
945,180 |
|
Due from other banks |
4,417 |
5,210 |
5,544 |
9,554 |
24,725 |
|
Mandatory cash balances with National Bank of Georgia |
990,642 |
- |
- |
- |
990,642 |
|
Loans and advances to customers |
1,119,128 |
1,481,095 |
2,949,227 |
1,584,252 |
7,133,702 |
|
Investment securities available for sale |
430,703 |
- |
- |
- |
430,703 |
|
Bonds carried at amortised cost |
123,763 |
94,250 |
128,201 |
26,742 |
372,956 |
|
Finance lease receivables |
18,770 |
30,600 |
45,661 |
- |
95,031 |
|
Other financial assets |
64,328 |
10,595 |
19,704 |
- |
94,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
3,696,931 |
1,621,750 |
3,148,337 |
1,620,548 |
10,087,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Due to Credit institutions |
796,148 |
260,046 |
986,857 |
154,526 |
2,197,577 |
|
Customer accounts |
723,340 |
154,513 |
- |
5,577,096 |
6,454,949 |
|
Debt securities in issue |
145 |
5,277 |
18,086 |
- |
23,508 |
|
Other financial liabilities |
46,971 |
2,883 |
1,144 |
|
50,998 |
|
Subordinated debt |
3,333 |
4,893 |
125,174 |
234,981 |
368,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities |
1,569,937 |
427,612 |
1,131,261 |
5,966,603 |
9,095,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit related commitments and performance guarantees |
|
|
|
|
|
|
Performance guarantees |
2,635 |
- |
- |
- |
2,635 |
|
Financial guarantees |
8,049 |
- |
- |
- |
8,049 |
|
Other credit related commitments |
45,854 |
- |
- |
- |
45,854 |
|
|
|
|
|
|
|
|
Credit related commitments and performance guarantees |
56,538 |
- |
- |
- |
56,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liquidity gap as of 31 December 2016 |
2,070,456 |
1,194,138 |
2,017,076 |
(4,346,055) |
935,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative gap as of 31 December 2016 |
2,070,456 |
3,264,594 |
5,281,670 |
935,615 |
|
|
|
|
|
|
|
|
The management believes that the Group has sufficient liquidity to meet its current on- and off-balance sheet obligations.
In order to assess the possible outflow of the bank's customer accounts management applied value-at-risk analysis. The statistical data was used on the basis of a holding period of one month for a look-back period of five years with a confidence level of 99%. The value at risk analysis was performed for the following maturity gaps: (0-1 months), (0-3 months), (0-6 months) and (0-12 months), based on which the maximum percentage of deposits' outflow was calculated.
Management believes that in spite of a substantial portion of customers' accounts being on demand, diversification of these deposits by number and type of depositors, and the past experience of the Group would indicate that these customer accounts provide a long-term and stable source of funding for the Group. Moreover, the Group's liquidity risk management includes estimation of maturities for its current deposits. The estimate is based on statistical methods applied to historic information on the fluctuations of customer account balances.
Operating environment. Most of the Group's business is based in Georgia. Over the last few years the Georgian government has embarked in a number of civil, criminal, tax, administrative and commercial reforms that have positively affected the overall investment climate of the country. Today Georgia has an international reputation as a country with a favourable investment environment. Georgia continued to progress in the report "Doing Business 2017" by the World Bank (WB) and International Financing Corporation (IFC), ranking as the 16th easiest country in the world to do business (out of 190), up by 7 steps compared to the previous year rankings. The country improved its ranking in almost all categories, confirming its position as regional leader and outperforming most of the EU economies. Georgia also boasts low corruption levels, a low tax burden, and high transparency of its institutions according to the number of surveys by international institutions.
The domestic economic environment remains stable and the banking sector continues to grow, supported by broader macroeconomic stability and attractive business climate. Economic growth continues to outperform the initial projections of growth for 2017. In H1 2017 GDP growth averaged 4.5%, per initial estimates, above the IMF's 3.5% and government's 4% growth forecast for FY 2017. Improvement in economic growth in Q1 2017 was broad-based on almost all sectors of the economy. Construction (+21.6% YoY), manufacturing (+6.2% YoY) and transport and communications sector (+7.3% YoY) represented major drivers of growth in Q1 2017, while all other sectors of the economy posted positive annual growth rates. Agriculture was the only sector of the economy to decline moderately by 1.5% YoY in Q1 2017.
Favourable external environment continues to underpin growth in export, tourism and remittances inflows. Regional environment improved markedly since the end of 2016, with all of the major trading partner economies showing improvements in growth rates compared to 2016 figures.
Current Account deficit showed sizeable improvement, in spite of the increasing imports of goods driven mostly by higher commodity prices. In Q1 2017 CA deficit to GDP ratio stood at 11.8%, down from 13.5% in the same period previous year. Balance of trade in goods worsened slightly by 0.1% of GDP YoY, sharp improvement in export inflows (+4.8% of GDP YoY) almost fully offset increasing imports in Q1 2017. Sharp growth of tourism inflows boosted the balance of trade in services from 8.3% in Q1 2016 to 10.5% in Q1 2017. Transfers also went up by 1.2% of GDP YoY in Q1 2017, this largely offsets 1.4% of GDP deterioration of income account. Major positive components of CA balance maintained growth trends, implying that CA balance improved further in Q2 2017 as well.
Improved external inflows enabled NBG to start refilling its international reserves. In Q2 2017 NBG purchased c. USD 90 mln on FX market to remove excessive appreciating pressure on GEL exchange rate. In Q2 2017 USD/GEL exchange rate appreciated by 1.5% QoQ, while GEL depreciated by 4.5% against EUR over the same period.
As expected in the beginning of 2017, headline inflation exceeded the target due to the one-off increase in administered prices as well as higher commodity prices on global markets. As of June, 2017 annual inflation stood at 7.1% while core[11] inflation remained close to target at 4.5%, over the same period. NBG tightened policy rate modestly from 6.5% as of the end of 2016 to 7% as of the beginning of May. During the following 2 meetings of monetary policy committee policy rate was left unchanged at 7% as NBG judged the current tightening was enough to ensure inflation goes to 3% target starting from the next year, as one-off factors start to dissipate. Over the medium term refinancing rate is expected to gradually align closer to its long run neutral rate of 5-6%
Fiscal deficit narrowed to an estimated 1.3% of GDP in H1 2017[12] , down from 3.1% of GDP in H1 2016. Negative impact on government tax revenues from the profit tax reform was fully offset by increased revenues from excise taxes. In addition, better than expected economic growth as well as more prudent approach towards the current spending of the government contributed positively to the reduction of budget deficit. Government debt retreated from its historical high of 44.5% in Q4 2016 to 42% of GDP as of the end of Q2 2017, partially helped by the 9% appreciation of GEL against USD in first 6 months of 2017.
To sum up, improved external environment, coupled with the more active public infrastructure spending and gradual improvement in consumer as well as business[13] expectations lays ground for the economic growth to outperform the initial expectation for the FY 2017 making Georgia one of the top performer in CIS and CEE region in 2017 in terms of economic growth rates.
25 Management of Capital
The Group's objectives in terms of capital management are to maintain appropriate levels of capital to support the business strategy, meet regulatory and stress testing-related requirements and safeguard the Group's ability to continue as a going concern. Additionally, the Group's capital management objectives entail ensuring that the Bank complies with the capital requirements set by the Basel Capital Accord 1988 capital adequacy ratios as stipulated by borrowing agreements. The compliance with capital adequacy ratios set by the NBG is monitored monthly with the reports outlining their calculation and are reviewed and signed by the Bank's CFO and Deputy CFO.
The NBG is reviewing the existing capital adequacy regulation and is going to introduce certain changes. Currently these changes are in draft form and are being discussed with the banks and other stakeholders. Estimated introduction date is quarter 4 2017.
The summary of main changes is as follows:
· Current capital requirement will be divided across Pillar 1 and Pillar 2 buffers to increase clarity and comparability;
· Capital conservation buffer currently incorporated in minimum capital requirements will be separated;
· Systemic risk buffer will be introduced for systematically important banks;
· Countercyclical capital buffer will be introduced and the rate will be 0%;
· Additional loan portfolio concentration buffer will be introduced under Pillar 2;
· Current conservative weighting for CICR will be replaced by appropriate Pillar 2 buffer (Unhedged Currency Induced Credit Risk Buffer);
· GRAPE buffer defined by the supervisor will be applied based on the bank specific risks;
· PTI and LTV ratio thresholds will be introduced for the retail loans. The exposures which are out of the defined range will be assigned higher risk weights from normal 75-100% to higher 100-150%.
The exact requirements, as well as amount of the buffers and its impact on the capital planning is not yet determined. Based on the initial assessments the changes should not impact the growth and dividend guidelines.
The Bank and the Group complied with all its internally and externally imposed capital requirements throughout the six months periods ended 30 June 2017 and the year 2016.
NBG Basel I Capital adequacy ratio
Under the Basel I capital requirements set by the NBG in 2017 banks have to maintain a ratio of regulatory capital to risk weighted assets ("statutory capital ratio") above the minimum level of 9.6% and a ratio of Tier 1 capital to risk weighted assets above the minimum level of 6.4%. No additional add-ons are in place. In mid-2015, the NBG removed previously established 3% capital add-on. The regulatory capital is based on the Bank's standalone reports prepared in accordance with the NBG accounting rules:
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
Share capital |
555,488 |
567,089 |
|
Retained earnings and other disclosed reserves |
790,856 |
770,345 |
|
General loan loss provisions (up to 1.25 % of risk - weighted assets) |
146,421 |
115,559 |
|
Less intangible assets |
(86,280) |
(53,074) |
|
Less Investments into subsidiary companies and capital of other banks |
(55,683) |
(61,855) |
|
Less Investments in the capital of the resident banks |
- |
(351,040) |
|
Subordinated debt (included in regulatory capital) |
354,974 |
342,653 |
|
|
|
|
|
|
|
|
|
Total regulatory capital |
1,705,776 |
1,329,677 |
|
|
|
|
|
|
|
|
|
Risk-weighted Exposures |
|
|
|
Credit risk weighted assets (including off-balance obligations) |
8,560,636 |
6,750,917 |
|
Currency Induced Credit Risk |
3,262,371 |
2,855,296 |
|
minus general and special reserves |
(215,291) |
(205,968) |
|
Risk-weighted assets |
11,607,716 |
9,400,245 |
|
Tier 1 Capital adequacy ratio |
9.6% |
10.9% |
|
Total Capital adequacy ratio |
14.7% |
14.1% |
|
|
|
|
|
In thousands of GEL |
|
|
30 June 2017 |
|||
|
Risk weighted Exposures |
|
|
Carrying Value |
|
RW amount |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, Interbank Deposits and Securities |
|
3,137,505 |
|
170,516 |
||
|
Gross Loans and accrued interests |
|
7,465,507 |
|
10,480,628 |
||
|
Repossessed Assets |
|
|
59,181 |
|
59,181 |
|
|
Fixed Assets and intangible assets |
|
432,567 |
|
346,287 |
||
|
Other assets |
|
|
253,906 |
|
204,715 |
|
|
Total |
|
|
11,348,666 |
|
11,261,327 |
|
|
Total Off-balance sheet |
|
|
1,363,192 |
|
561,680 |
|
|
minus general and special reserves |
|
(215,291) |
|
(215,291) |
||
|
|
|
|
|
|
||
|
Total Amount |
|
|
12,496,567 |
|
11,607,716 |
|
|
In thousands of GEL |
|
|
31 December 2016 |
|||
|
Risk weighted Exposures |
|
|
Carrying Value |
|
RW amount |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, Interbank Deposits and Securities |
|
2,372,263 |
|
163,294 |
||
|
Gross Loans and accrued interests |
|
5,979,125 |
|
8,427,081 |
||
|
Repossessed Assets |
|
|
46,441 |
|
46,441 |
|
|
Fixed Assets and intangible assets |
|
328,184 |
|
275,110 |
||
|
Other assets |
|
|
620,428 |
|
278,394 |
|
|
Total |
|
|
9,346,441 |
|
9,190,320 |
|
|
Total Off-balance sheet |
|
|
875,585 |
|
415,893 |
|
|
minus general and special reserves |
|
(205,968) |
|
(205,968) |
||
|
|
|
|
|
|
||
|
Total Amount |
|
|
10,016,058 |
|
9,400,245 |
|
NBG Basel II Capital adequacy ratio
After adopting the NBG Basel II/III requirements, the Bank, in addition to above capital ratios calculates its capital requirements and risk weighted assets separately for Pillar 1. The NBG provides detailed instructions of Pillar 1 calculations. The reporting started at the end of 2013. The composition of the Bank's capital calculated in accordance with Basel II (Pillar I) is as follows:
|
In thousands of GEL |
|
30 June 2017 |
|
31 December 2016 |
|
|
|
|
|
|
|
Tier 1 Capital |
|
1,282,880 |
|
1,041,270 |
|
Tier 2 Capital |
|
449,881 |
|
380,751 |
|
Regulatory capital |
|
1,732,761 |
|
1,422,021 |
|
|
|
|
|
|
|
Risk-weighted Exposures |
|
|
|
|
|
Credit Risk Weighted Exposures |
|
11,105,383 |
|
9,399,140 |
|
Risk Weighted Exposures for Market Risk |
|
21,387 |
|
45,689 |
|
Risk Weighted Exposures for Operational Risk |
|
739,231 |
|
576,628 |
|
Total Risk-weighted Exposures |
|
11,866,001 |
|
10,021,457 |
|
|
|
|
|
|
|
Minimum Tier 1 ratio |
|
8.5% |
|
8.5% |
|
Tier 1 Capital adequacy ratio |
|
10.8% |
|
10.4% |
|
|
|
|
|
|
|
Minimum total capital adequacy ratio |
|
10.5% |
|
10.5% |
|
Total Capital adequacy ratio |
|
14.6% |
|
14.2% |
The breakdown of the Bank's assets into the carrying amounts based on NBG accounting rules and relevant risk-weighted exposures as of 30 June 2017 and 31 December 2016 are given in the tables below:
|
|
|
30 June 2017 |
||
|
In thousands of GEL |
|
Carrying Value |
|
RW amount |
|
|
|
|
|
|
|
Cash, cash equivalents, Interbank Exposures and Securities |
3,175,561 |
|
1,127,287 |
|
|
Gross loans and accrued interests, |
|
7,241,023 |
|
8,814,400 |
|
Repossessed Assets |
|
59,181 |
|
59,181 |
|
Fixed Assets and intangible assets |
|
432,567 |
|
355,304 |
|
Other assets |
|
275,800 |
|
334,671 |
|
minus general provision, penalty and interest provision |
|
(46,853) |
|
(46,853) |
|
Total |
|
11,137,279 |
|
10,643,990 |
|
Total Off-balance |
|
1,456,491 |
|
461,393 |
|
Market Risk |
|
21,387 |
|
21,387 |
|
Operational Risk |
|
517,462 |
|
739,231 |
|
Total Amount |
|
13,132,619 |
|
11,866,001 |
|
|
|
31 December 2016 |
||
|
In thousands of GEL |
|
Carrying Value |
|
RW amount |
|
|
|
|
|
|
|
Cash, cash equivalents, Interbank Exposures and Securities |
2,397,259 |
|
1,086,262 |
|
|
Gross loans and accrued interests, |
|
5,771,369 |
|
7,149,145 |
|
Repossessed Assets |
|
46,441 |
|
46,441 |
|
Fixed Assets and intangible assets |
|
328,184 |
|
273,176 |
|
Other assets |
|
647,261 |
|
536,747 |
|
minus general provision, penalty and interest provision |
|
(45,534) |
|
(45,534) |
|
Total |
|
9,144,980 |
|
9,046,237 |
|
Total Off-balance |
|
978,221 |
|
352,903 |
|
Market Risk |
|
45,689 |
|
45,689 |
|
Operational Risk |
|
403,640 |
|
576,628 |
|
Total Amount |
|
10,572,530 |
|
10,021,457 |
Capital adequacy ratio under Basel Capital Accord 1988
The Group and the Bank are also subject to minimum capital requirements established by covenants stated in loan agreements. These requirements include capital adequacy levels calculated in accordance with the requirements of the Basel Accord, as defined in the International Convergence of Capital Measurement and Capital Standards (updated April 1998) and Amendment to the Capital Accord to incorporate market risks (updated November 2005), commonly known as Basel I. The composition of the Group's capital calculated in accordance with Basel Accord is as follows:
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
Tier 1 capital |
|
|
|
Share capital |
524,807 |
524,778 |
|
Retained earnings and disclosed reserves |
1,065,358 |
983,387 |
|
Less: Goodwill |
(26,892) |
(26,892) |
|
Non-controlling interest |
4,558 |
4,383 |
|
Total tier 1 capital |
1,567,831 |
1,485,656 |
|
|
|
|
|
Tier 2 capital |
|
|
|
Revaluation reserves |
61,275 |
59,240 |
|
General Reserve |
93,316 |
88,300 |
|
Subordinated debt (included in tier 2 capital) |
258,105 |
323,087 |
|
Subordinated bond (included in tier 2 capital) |
26,577 |
- |
|
Total tier 2 capital |
439,273 |
470,627 |
|
|
|
|
|
|
|
|
|
Total capital |
2,007,104 |
1,956,283 |
|
|
|
|
|
|
|
|
|
Credit risk weighted assets (including off-balance obligations) |
7,465,318 |
7,064,035 |
|
Less: General Reserve |
(118,812) |
(136,721) |
|
Market Risk |
18,005 |
46,484 |
|
Total Risk-weighted assets |
7,364,511 |
6,973,798 |
|
|
|
|
|
Minimum Tier 1 ratio |
6.4% |
4.0% |
|
Tier 1 Capital adequacy ratio |
21.3% |
21.3% |
|
|
|
|
|
Minimum total capital adequacy ratio |
9.6% |
8.0% |
|
Total Capital adequacy ratio |
27.25% |
28.1% |
|
|
|
|
Following the Basel I guidelines the General Reserve is defined by the management as the minimum among the following:
a) IFRS provisions created on loans without impairment trigger event;
b) 2% of loans without impairment trigger event;
c) 1.25% of total RWA (Risk Weighted Assets).
The breakdown of the Group's assets into the carrying amounts and relevant risk-weighted exposures as of 30 June 2017 and 31 December 2016 provided in the tables below:
|
In thousands of GEL |
|
30 June 2017 |
||
|
Risk weighted Exposures |
|
Carrying Value |
|
RW amount |
|
|
|
|
|
|
|
Cash and other cash equivalents, mandatory cash balances with the NBG, due from other banks, investment securities available for sale |
|
3,197,492 |
|
182,752 |
|
Gross loans and accrued interests |
|
7,386,435 |
|
5,954,322 |
|
Repossessed assets |
|
106,506 |
|
106,506 |
|
Fixed assets and intangible assets |
|
410,875 |
|
383,985 |
|
Other assets |
|
379,556 |
|
379,556 |
|
Total |
|
11,480,864 |
|
7,007,121 |
|
Total Off-balance |
|
1,434,973 |
|
458,197 |
|
Less: Loan loss provision minus General Reserve |
|
(118,812) |
|
(118,812) |
|
Market Risk |
|
18,005 |
|
18,005 |
|
Total Amount |
|
12,815,030 |
|
7,364,511 |
|
In thousands of GEL |
|
31 December 2016 |
||
|
Risk weighted Exposures |
|
Carrying Value |
|
RW amount |
|
|
|
|
|
|
|
Cash and other cash equivalents, mandatory cash balances with the NBG, due from other banks, investment securities available for sale |
|
2,762,892 |
|
133,527 |
|
Gross loans and accrued interests |
|
7,358,725 |
|
5,609,312 |
|
Repossessed assets |
|
90,873 |
|
90,873 |
|
Fixed assets and intangible assets |
|
401,174 |
|
374,282 |
|
Other assets |
|
373,118 |
|
373,118 |
|
Total |
|
10,986,782 |
|
6,581,112 |
|
Total Off-balance |
|
1,290,813 |
|
482,923 |
|
Less: Loan loss provision minus General Reserve |
|
(136,721) |
|
(136,721) |
|
Market Risk |
|
46,484 |
|
46,484 |
|
Total Amount |
|
12,187,358 |
|
6,973,798 |
26 Contingencies and Commitments
Legal proceedings. The Bank is a defendant in a number of legal claims. When determining the level of provision to be set up with regards to such claims, the management seeks both internal and external professional advice. The management believes that the provision recorded in these financial statements is adequate.
Tax legislation. Georgian and Azerbaijani tax and customs legislation is subject to varying interpretations, and changes, which can occur frequently. The management's interpretation of the legislation as applied to the Group's transactions and activity may be challenged by the relevant authorities. Fiscal periods remain open to review by the authorities in respect of taxes for five calendar years preceding the review period. To respond to the risks, the Group has engaged external tax specialists to carry out periodic reviews of Group's taxation policies and tax filings. The Group's management believes that its interpretation of the relevant legislation is appropriate and the Group's tax and customs positions will be sustained. Accordingly, as of 30 June 2017 and 31 December 2016 no provision for potential tax liabilities has been recorded.
Operating lease commitments. Where the Group is the lessee, as of 30 June 2017, the future minimum lease payments under non-cancellable operating leases over the next year amounted to GEL 5,421 thousand (31 December 2016: 5,016 thousand).
Compliance with covenants. The Group is subject to certain covenants primarily related to its borrowings. Non-compliance with such covenants may result in negative consequences for the Group including growth in the cost of borrowings and declaration of default. As disclosed in Note 11, as of 31 December 2016, TBC Kredit had breached certain borrowing covenants agreed with foreign financial institution lenders. The major reason for the breach was drastic devaluation of Azerbaijani Manat in February and December 2015. Apart from this, the Group was in compliance with
all other covenants as of 31 December 2016. In 2017, TBC Kredit was no longer in breach. As of 30 June 2017 the Group was in compliance with all covenants.
Credit related commitments and financial guarantees. The primary purpose of these instruments is to ensure that funds are available to a customer as required. Financial guarantees and standby letters of credit, which represent the irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, that are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate or cash deposits and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to prolong credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to a loss in an amount equal to the total unused commitments. However, the likely amount of loss is lower than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit related commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term ones.
Performance guarantees. Performance guarantees are contracts that provide compensation in case of another party fails to perform a contractual obligation. Such contracts do not transfer credit risk. The risk under the performance guarantee contracts is the possibility that the insured event occurs (i.e.: the failure to perform the contractual obligation by another party). The key risks the Group faces are significant fluctuations in the frequency and severity of payments incurred on such contracts, relative to expectations.
Outstanding credit related commitments and performance guarantees are as follows:
|
In thousands of GEL |
|
30 June 2017 |
31 December2016 |
|
|
|
|
|
|
Performance guarantees issued |
|
472,748 |
426,608 |
|
Financial guarantees issued |
|
92,037 |
116,260 |
|
Undrawn credit lines |
|
556,715 |
449,110 |
|
Letters of credit issued |
|
80,612 |
154,842 |
|
Total credit related commitments and performance guarantees (before provision) |
|
1,202,112 |
1,146,820 |
|
|
|
|
|
|
Provision for performance guarantees |
|
(1,986) |
(2,635) |
|
Provision for credit related commitments and financial guarantees |
|
(7,151) |
(8,049) |
|
|
|
|
|
|
|
|
|
|
|
Total credit related commitments and performance guarantees |
|
1,192,975 |
1,136,136 |
|
|
|
|
|
The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees does not necessarily represent future cash requirements, as these financial instruments may expire or terminate without being funded. Non-cancellable commitments as of 30 June 2017 were GEL 208,053 thousand (31 December 2016: GEL 169,831 thousand).
Fair value of credit related commitments and financial guarantees were GEL 7,151 thousand as of 30 June 2017 (31 December 2016: GEL 8,049 thousand). Total credit related commitments and performance guarantees are denominated in currencies as follows:
|
In thousands of GEL |
|
30 June 2017 |
31 December 2016 |
|
Georgian Lari |
|
489,812 |
409,498 |
|
US Dollars |
|
559,851 |
545,621 |
|
Euro |
|
74,960 |
101,892 |
|
Other |
|
77,489 |
89,809 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
1,202,112 |
1,146,820 |
|
|
|
|
|
Capital expenditure commitments. As of 30 June 2017, the Group has contractual capital expenditure commitments amounting to GEL 1,977 thousand (31 December 2016: GEL 5,665 thousand).
27 Fair Value Disclosures
(a) Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards require or permit in the statement of financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair value measurements are categorised as follows:
|
|
30 June 2017 |
31 December 2016 |
||||||
|
In thousands of GEL |
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Assets AT FAIR VALUE |
|
|
|
|
|
|
|
|
|
FINANCIAL Assets |
|
|
|
|
|
|
|
|
|
Investment securities available for sale |
|
|
|
|
|
|
|
|
|
- Government notes |
- |
- |
- |
- |
- |
1,016 |
- |
1,016 |
|
- Certificates of Deposits of National Bank of Georgia |
- |
29,037 |
- |
29,037 |
- |
36,002 |
- |
36,002 |
|
- Corporate bonds |
- |
271,544 |
- |
271,544 |
- |
150,073 |
- |
150,073 |
|
- Ministry of Finance Treasury Bills |
- |
305,795 |
- |
305,795 |
- |
241,810 |
- |
241,810 |
|
Repurchase receivables
- Certificates of Deposits of National Bank of Georgia |
- |
9,961 |
- |
9,961 |
- |
- |
- |
- |
|
Foreign exchange forwards and gross settled currency swaps, included in other financial assets or due from banks |
- |
774 |
- |
774 |
- |
508 |
- |
508 |
|
NON-FINANCIAL Assets |
|
|
|
|
|
|
|
|
|
- Premises and leasehold improvements |
- |
- |
267,216 |
267,216 |
- |
- |
229,549 |
229,549 |
|
|
|
|
|
|
|
|
|
|
|
Total ASSETS RECURRING FAIR VALUE MEASUREMENTS |
- |
617,111 |
267,216 |
884,327 |
- |
429,409 |
229,549 |
658,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Carried AT FAIR VALUE |
|
|
|
|
|
|
|
|
|
FINANCIAL liabilities |
|
|
|
|
|
|
|
|
|
- Interest rate swaps included in other financial liabilities |
- |
560 |
- |
560 |
- |
1,055 |
- |
1,055 |
|
Foreign exchange forwards and gross settled currency swaps, included in other financial liabilities |
- |
719 |
- |
719 |
- |
320 |
- |
320 |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities RECURRING FAIR VALUE MEASUREMENTS |
- |
1,279 |
- |
1,279 |
- |
1,375 |
- |
1,375 |
|
|
|
|
|
|
|
|
|
|
There were no transfers between levels 1 and 2 during the six months ended 30 June 2017 (2016: none).
(a) Recurring fair value measurements (continued)
The description of the valuation technique and the description of inputs used in the fair value measurement for level 2 measurements:
|
|
Fair value |
|
|
||
|
In thousands of GEL |
30 June 2017 |
31 December 2016 |
|
Valuation technique |
Inputs used |
|
|
|
|
|
|
|
|
Assets AT FAIR VALUE |
|
|
|
|
|
|
FINANCIAL Assets |
|
|
|
|
|
|
Certificates of Deposits of NBG, Ministry of Finance Treasury Bills, Government notes, Corporate bonds |
616,337 |
428,901 |
|
Discounted cash flows ("DCF") |
Government bonds yield curve |
|
Foreign exchange forwards and gross settled currency swaps, included in due from banks |
774 |
508 |
|
Forward pricing using present value calculations |
Official exchange rate, risk-free rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ASSETS RECURRING FAIR VALUE MEASUREMENTS |
617,111 |
429,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES CARRIED AT FAIR VALUE |
|
|
|
|
|
|
FINANCIAL LIABILITIES |
|
|
|
|
|
|
Other financial liabilities |
|
|
|
|
|
|
- Interest rate swaps included in other financial liabilities |
560 |
1,055 |
|
Swap model using present value calculations |
Observable yield curves |
|
- Foreign exchange forwards included in other financial liabilities |
719 |
320 |
|
Forward pricing using present value calculations |
Official exchange rate, risk-free rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RECURRING FAIR VALUE MEASUREMENTS at level 2 |
1,279 |
1,375 |
|
|
|
|
|
|
|
|
|
|
There were no changes in the valuation technique for the level 2 and level 3 recurring fair value measurements during the six month period ended 30 June 2017 (2016: none).
For details the techniques and inputs used for Level 3 recurring fair value measurement of (as well as reconciliation of movements in) premises refer to Note 10. The unobservable input to which the fair value estimate for premises is most sensitive is price per square meter: the higher the price per square meter,
the higher the fair value.
(b) Assets and liabilities not measured at fair value but for which fair value is disclosed
Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value are as follows:
|
|
30 June 2017 |
31 December 2016 |
||||||
|
In thousands of GEL |
Level 1 |
Level 2 |
Level 3 |
Carrying Value |
Level 1 |
Level 2 |
Level 3 |
Carrying Value |
|
|
|
|
|
|
|
|
|
|
|
Financial Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
1,219,108 |
- |
- |
1,219,108 |
945,180 |
- |
- |
945,180 |
|
Due from other banks |
- |
41,096 |
- |
41,096 |
- |
24,725 |
- |
24,725 |
|
Mandatory cash balances with the NBG |
- |
931,654 |
- |
931,654 |
- |
990,642 |
- |
990,642 |
|
Loans and advances to customers: |
|
|
|
|
|
|
|
|
|
- Corporate loans |
- |
- |
2,092,585 |
2,011,088 |
- |
- |
2,085,249 |
1,972,129 |
|
- Consumer loans |
- |
- |
1,952,509 |
1,850,437 |
- |
- |
1,877,490 |
1,798,412 |
|
- Mortgage loans |
- |
- |
1,740,781 |
1,723,932 |
- |
- |
1,840,981 |
1,784,832 |
|
- MSME |
- |
- |
1,609,065 |
1,588,848 |
- |
- |
1,606,448 |
1,578,329 |
|
Bonds carried at amortised cost |
- |
395,593 |
- |
389,036 |
- |
377,749 |
- |
372,956 |
|
Investments in leases |
- |
- |
94,774 |
96,329 |
- |
- |
95,907 |
95,031 |
|
Other financial assets |
- |
- |
88,077 |
88,077 |
- |
- |
94,119 |
94,119 |
|
NON-FINANCIAL Assets |
|
|
|
|
|
|
|
|
|
Investment properties, at cost |
|
- |
123,864 |
93,502 |
- |
- |
123,852 |
95,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ASSETS |
1,219,108 |
1,368,343 |
7,701,655 |
10,033,107 |
945,180 |
1,393,116 |
7,724,046 |
9,751,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL liabilities |
|
|
|
|
|
|
|
|
|
Due to credit institutions |
- |
2,309,040 |
- |
2,313,550 |
- |
2,197,016 |
- |
2,197,577 |
|
Customer accounts |
- |
4,310,222 |
2,367,626 |
6,666,413 |
- |
4,002,659 |
2,463,392 |
6,454,949 |
|
Debt securities in issue |
- |
24,106 |
- |
24,106 |
- |
23,508 |
- |
23,508 |
|
Other financial liabilities |
- |
118,798 |
- |
118,798 |
- |
49,623 |
- |
49,623 |
|
Subordinated debt |
- |
388,642 |
- |
390,070 |
- |
369,320 |
- |
368,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
- |
7,150,808 |
2,367,626 |
9,512,937 |
- |
6,642,126 |
2,463,392 |
9,094,038 |
|
|
|
|
|
|
|
|
|
|
The fair values in the level 2 and level 3 of fair value hierarchy were estimated using the discounted cash flows valuation technique. The fair value of unquoted fixed interest rate instruments was calculated based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity. The fair value of investment properties was estimated using market comparatives.
Amounts due to credit institutions were discounted at the Group's own incremental borrowing rate. Liabilities due on demand were discounted from the first date that the Group could be required to pay the amount.
There were no changes in the valuation technique for the level 2 and level 3 measurements of assets and liabilities not measured at fair values in the six months ended 30 June 2017 (2016: none).
28 Related Party Transactions
Pursuant to IAS 24 "Related Party Disclosures", parties are generally considered to be related if the parties are under common control or one party has the ability to control the other or it can exercise significant influence over the other party in taking financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Parties with more than 10% of ownership stake in the TBCG or with representatives in the Board of Directors are considered as Significant Shareholders. The key management personnel include members of TBCG's Board of Directors, the Management Board of the Bank and their close family members.
Transactions between TBC Bank Group PLC and its subsidiaries also meet the definition of related party transactions. Where these are eliminated on consolidation, they are not disclosed in the Group Financial Statements.
As of 30 June 2017, the outstanding balances with related parties were as follows:
|
In thousands of GEL |
|
Significant shareholders |
Key management personnel |
|
|
|
|
|
|
Gross amount of loans and advances to customers (contractual interest rate: 7.5 - 23%) |
|
193 |
6,676 |
|
Impairment provisions for loans and advances to customers |
|
- |
20 |
|
Derivative financial liability |
|
1,263 |
- |
|
Customer accounts (contractual interest rate: 0 - 11.8 %) |
|
47,296 |
13,039 |
|
Guarantees |
|
17,628 |
1,157 |
|
Provision on guarantees |
|
66 |
5 |
|
|
|
|
|
The income and expense items with related parties except from key management compensation during 30 June 2017 were as follows:
|
In thousands of GEL |
|
Significant shareholders |
Key management personnel |
|
|
|
|
|
|
Interest income |
|
9 |
199 |
|
Interest expense |
|
128 |
228 |
|
Gains less losses from trading in foreign currencies |
|
91 |
18 |
|
Foreign exchange translation gains less losses |
|
(48) |
(459) |
|
Fee and commission income |
|
75 |
44 |
|
Fee and commission expense |
|
- |
- |
|
Administrative and other operating expenses (excluding staff costs) |
|
47 |
171 |
|
Net loss on derivative financial instruments |
|
38 |
- |
|
|
|
|
|
The aggregate loan amounts advanced to, and repaid, by related parties during 30 June 2017 were as follows:
|
In thousands of GEL |
Significant shareholders |
Key management personnel |
|
|
|
|
|
Amounts advanced to related parties during the period |
232 |
970 |
|
Amounts repaid by related parties during the period |
(899) |
(1,647) |
|
|
|
|
As of 31 December 2016, the outstanding balances with related parties were as follows:
|
In thousands of GEL |
|
Significant shareholders |
Key management personnel |
|
|
|
|
|
|
Gross amount of loans and advances to customers (contractual interest rate: 6.3 - 20%) |
|
900 |
7,612 |
|
Impairment provisions for loans and advances to customers |
|
2 |
26 |
|
Derivative financial liability |
|
1,055 |
- |
|
Due to credit institutions (contractual interest rate: 5.7 - 9.7 %) |
|
257,403 |
- |
|
Customer accounts (contractual interest rate: 0 - 13.5 %) |
|
38,982 |
14,548 |
|
Guarantees |
|
28,509 |
- |
|
Provision on guarantees |
|
192 |
- |
|
|
|
|
|
The income and expense items with related parties except from key management compensation during 30 June 2016 were as follows:
|
In thousands of GEL |
|
Significant shareholders |
Key management personnel |
|
|
|
|
|
|
Interest income |
|
143 |
160 |
|
Interest expense |
|
9,332 |
249 |
|
Gains less losses from trading in foreign currencies |
|
65 |
(3) |
|
Foreign exchange translation gains less losses |
|
(445) |
(68) |
|
Fee and commission income |
|
16 |
9 |
|
Fee and commission expense |
|
287 |
- |
|
Administrative and other operating expenses (excluding staff costs) |
|
- |
167 |
|
Net loss on derivative financial instruments |
|
472 |
- |
|
|
|
|
|
Aggregate amounts of loans advanced to and repaid by related parties during the six months ended 30 June 2016 were as follows:
|
In thousands of GEL |
Significant shareholders |
Key management personnel |
|
|
|
|
|
Amounts advanced to related parties during the period |
2,033 |
6,059 |
|
Amounts repaid by related parties during the period |
(4,900) |
(2,730) |
|
|
|
|
The compensation of the TBCG Board of Directors and the Bank's Management Board is presented below:
|
|
Expense over the six months ended |
Accrued liability as of |
||
|
In thousands of GEL |
30 June 2017 |
30 June 2016 |
30 June 2017 |
31 December 2016 |
|
|
|
|
|
|
|
Salaries and bonuses |
6,709 |
6,002 |
186 |
- |
|
Cash settled bonuses related to share-based compensation |
1,953 |
1,696 |
7,884 |
10,715 |
|
Equity-settled share-based compensation |
4,338 |
4,946 |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
13,000 |
12,644 |
8,070 |
10,715 |
|
|
|
|
|
|
Included in salaries and bonuses for six months ended 30 June 2017 GEL 937 thousand relates to compensation for directors of TBCG paid by TBC Bank Group PLC (six months ended 30 June 2016: nil).
[1]Excluding one-off items
1 Excluding one-off items
[2] Market share figures are based on data from the National Bank of Georgia (NBG). NBG includes interbank loans for calculating market share in loans
1 Excluding one-off items
[3] Or by 13.0% at a constant currency rate. The growth rates are calculated without the Credo Bank effect
[4] Number of active products divided by number of active customers.
[5] Inflation excluding prices of energy, food and administered prices
[6] Based on the consumer and business confidence indices of ISET-PI
[7] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016
[8] Cross-sell ratio is defined as the number of active products divided by the number of active customers
[9] based on internal methodology per local accounting standards
[10] Per updated internal methodology in line with Basel 2014 guidelines
[11] Inflation excluding prices of energy, food and administered prices
[12] Estimated growth figures for Q2 2017 nominal GDP
[13] Based on the consumer and business confidence indices of ISET-PI
This information is provided by RNS
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