TIDMTBCG
RNS Number : 3946T
TBC Bank Group PLC
14 November 2019
TBC BANK GROUP PLC ("TBC Bank")
3Q AND 9M 2019 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
Forward-Looking Statements
This document contains forward-looking statements; such
forward-looking statements contain known and unknown risks,
uncertainties and other important factors, which may cause the
actual results, performance or achievements of TBC Bank Group PLC
("the Bank" or the "Group") to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements. Forward-looking statements are
based on numerous assumptions regarding the Bank's present and
future business strategies and the environment in which the Bank
will operate in the future. Important factors that, in the view of
the Bank, could cause actual results to differ materially from
those discussed in the forward-looking statements include, among
others, the achievement of anticipated levels of profitability,
growth, cost and recent acquisitions, the impact of competitive
pricing, the ability to obtain necessary regulatory approvals and
licenses, the impact of developments in the Georgian economic,
political and legal environment, financial risk management and the
impact of general business and global economic conditions.
None of the future projections, expectations, estimates or
prospects in this document should be taken as forecasts or promises
nor should they be taken as implying any indication, assurance or
guarantee that the assumptions on which such future projections,
expectations, estimates or prospects are based are accurate or
exhaustive or, in the case of the assumptions, entirely covered in
the document. These forward-looking statements speak only as of the
date they are made, and subject to compliance with applicable law
and regulation the Bank expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statements contained in the document to reflect
actual results, changes in assumptions or changes in factors
affecting those statements.
Certain financial information contained in this presentation,
which is prepared on the basis of the Group's accounting policies
applied consistently from year to year, has been extracted from the
Group's unaudited management's accounts and financial statements.
The areas in which the management's accounts might differ from the
International Financial Reporting Standards and/or U.S. generally
accepted accounting principles could be significant; you should
consult your own professional advisors and/or conduct your own due
diligence for a complete and detailed understanding of such
differences and any implications they might have on the relevant
financial information contained in this presentation. Some
numerical figures included in this report have been subjected to
rounding adjustments. Accordingly, numerical figures shown as
totals in certain tables might not be an arithmetic aggregation of
the figures that preceded them.
Third Quarter and Nine Months of 2019 Unaudited Consolidated
Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") publishes its unaudited
consolidated financial results for the third quarter and the first
nine months of 2019 on Thursday, 14 November 2019 at 7.00 am GMT
(11.00 am GET).
On the same day at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST),
Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a
conference call to discuss the results.
Please dial-in approximately five minutes before the start of
the call quoting the password TBC:
Password: TBC
UK Toll Free: 0808 109 0700
Standard International Access: +44 (0) 20 3003 2666
USA Toll Free: 1 866 966 5335
New York New York: +1 212 999 6659
Russia Toll Free: 8 10 8002 4902044
Moscow: +7 (8) 495 249 9843
Replay Numbers
Replay Passcode: 0537047
UK Toll Free: 0800 633 8453
Standard International Access: +44 (0) 20 8196 1998
USA Toll Free: 1 866 583 1035
Russia Toll Free: 8 10 8002 4832044
Moscow: +7 (8) 495 249 9840
Contacts
Zoltan Szalai Anna Romelashvili Investor Relations Department
Director of International Head of Investor Relations
Media and Investor Relations
E-mail: ZSzalai@Tbcbank.com.ge E-mail: IR@tbcbank.com.ge E-mail: IR@tbcbank.com.ge
Tel: +44 (0) 7908 242128 Tel: +(995 32) 227 27 Tel: +(995 32) 227 27
Web: www.tbcbankgroup.com 27 27
Address: 68 Lombard Web: www.tbcbankgroup.com Web: www.tbcbankgroup.com
St, London EC3V 9LJ, Address: 7 Marjanishvili Address: 7 Marjanishvili
United Kingdom St. Tbilisi, Georgia St. Tbilisi, Georgia
0102 0102
Table of Contents
3Q and 9M 2019 Results Announcement
TBC Bank - Background
Performance Highlights
Letter from the Chief Executive Officer
Operating Overview
Recent Developments
Establishment of Employee Benefit Trust
Economic Overview
Unaudited Consolidated Financial Results Overview for 3Q
2019
Unaudited Consolidated Financial Results Overview for 9M
2019
Additional Disclosures
TBC Bank Group PLC ("TBC Bank")
TBC Bank Announces Unaudited 3Q and 9M 2019 Consolidated
Financial Results:
Net Profit for 3Q 2019 up by 18.1% YoY to GEL 126.8 million
Net Profit for 9M 2019 up by 23.7% YoY to GEL 380.3 million
European Union Market Abuse Regulation EU 596/2014 requires TBC
Bank Group PLC to disclose that this announcement contains Inside
Information, as defined in that Regulation.
TBC Bank - Background
TBC Bank is the largest banking group in Georgia, where 99.6% of
its business is concentrated, with a 38.7% market share by total
assets. It offers retail, corporate, and MSME banking
nationwide.
These unaudited financial results are presented for TBC Bank
Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26
February 2016 as the ultimate holding company for JSC TBC Bank
Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia
on 10 August 2016, following the Group's restructuring. As this was
a common ownership transaction, the results have been presented as
if the Group existed at the earliest comparative date as allowed
under the International Financial Reporting Standards ("IFRS"), as
adopted by the European Union. TBC Bank successfully listed on the
London Stock Exchange's premium listing segment on 10 August
2016.
TBC Bank Group PLC financial results are prepared in accordance
with International Financial Reporting Standards ("IFRS") as
adopted by the European Union ("EU") and the Companies Act 2006
applicable to companies reporting under IFRS. The Group classifies
and separately discloses certain incomes and expenses, which are
non-recurring by nature and are caused by extraordinary events, as
one-off items in order to provide a consistent view and enable
better analysis of the financial performance of the Group. Adjusted
performance is an alternative performance measure and the
reconciliation of the underlying profit and loss items with the
reported profit and loss items and the underlying ratios are given
under Annex 1 section on pages 44-45.
Performance Highlights
3Q 2019 P&L Highlights
o Net profit amounted to GEL 126.8 million (3Q 2018: GEL 107.4
million)
o Return on equity (ROE) amounted to 20.4% (3Q 2018: 21.2%)
o Return on assets (ROA) amounted to 2.8% or 3.0% without excess
liquidity and a subordinated loan pre-payment fee(1) (3Q 2018:
3.1%)
o Cost to income was 39.9% or 37.9% without contribution of
ecosystems, POS terminals and e-commerce (3Q 2018: 37.4%)
o Cost of risk stood at 0.7% (3Q 2018: 1.9%)
o Net interest margin (NIM) stood at 5.0% or 5.2% without excess
liquidity and a subordinated loan pre-payment fee[1] (3Q 2018:
6.9%)
o Risk adjusted net interest margin (NIM) stood at 4.3% (3Q
2018: 5.4%)
9M 2019 P&L Highlights
o Net profit amounted to GEL 380.3 million (9M 2018: GEL 307.3
million)
o Return on equity (ROE) amounted to 21.6% (9M 2018: 21.2%)
o Return on assets (ROA) amounted to 3.1% (9M 2018: 3.1%)
o Cost to income stood at 39.3% (9M 2018: 37.0%)
o Cost of risk on loans stood at 1.1% (9M 2018: 1.7%)
o Net interest margin (NIM) stood at 5.5% (9M 2018: 7.0%)
o Risk adjusted net interest margin (NIM) stood at 4.5% (9M
2018: 5.3%)
Balance Sheet Highlights as of 30 September 2019
o Total assets amounted to GEL 18,169.8 million as of 30
September 2019, up by 26.0% YoY
o Gross loans and advances to customers stood at GEL 11,680.3
million as of 30 September 2019, up by 21.4% YoY
o Net loans to deposits + IFI[2] funding stood at 96.9%, up by
8.9 pp YoY, and Net Stable Funding Ratio (NSFR) stood at 137.7%, up
by 5.8 pp YoY
o NPLs were 2.9%, down by 0.2 pp YoY
o NPLs coverage ratios stood at 97.7%, or 209.9% with
collateral, on 30 September 2019 compared to 113.2% or 209.0% with
collateral, as of 30 September 2018
o Total customer deposits amounted to GEL 9,897.3 million as of
30 September 2019, up by 13.2% YoY
o As of 30 September 2019, the Bank's Basel III CET 1, Tier 1
and Total Capital Adequacy Ratios per NBG methodology stood at
11.9%, 14.7% and 19.4% respectively, while minimum requirements
amounted to 9.8%, 11.9% and 16.7% respectively
Market Shares([3])
o Market share by total assets reached 38.7% as of 30 September
2019, up by 1.5 pp YoY
o Market share by total loans was 38.7% as of 30 September 2019,
up by 0.3 pp YoY
o Market share of total deposits reached 39.3% as of 30
September 2019, down by 1.0 pp YoY
3Q 2019 operating highlights
o Number of affluent customers reached 68.9 thousand as of 30
September 2019, up by 84.9% YoY
o 92% of all transactions were conducted through digital
channels (3Q 2018: 91%)
o The number of digital transactions amounted to 19.6 million up
by 20.1% YoY, while number of branch transactions stood at 1.6
million, down by 4.7% YoY
o The penetration ratio for internet or mobile banking[4] stood
at 42% for 3Q 2019 (3Q 2018: 40%)
o The penetration ratio for mobile banking[5] stood at 38% for
3Q 2019 (3Q 2018: 34%)
Income Statement
Highlights
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
in thousands of GEL 3Q'19 3Q'18 Change YoY 9M'19 9M'18 Change YoY
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Net interest income 186,225 199,612 -6.7% 573,664 563,219 1.9%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Net fee and
commission income 47,105 39,384 19.6% 132,446 113,466 16.7%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Other operating
non-interest income 46,428 39,093 18.8% 117,896 98,521 19.7%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Credit loss allowance (25,749) (47,650) -46.0% (92,216) (122,203) -24.5%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Operating income
after credit loss
allowance 254,009 230,439 10.2% 731,790 653,003 12.1%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Operating expenses (111,705) (104,103) 7.3% (323,602) (287,125) 12.7%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Profit before tax 142,304 126,336 12.6% 408,188 365,878 11.6%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Income tax expense (15,527) (18,952) -18.1% (27,871) (58,530) -52.4%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Profit for the period 126,777 107,384 18.1% 380,317 307,348 23.7%
---------------------- ------------------ ----------------- ----------- ----------- ---------------- -----------
Balance Sheet and Capital Highlights
Sep-19 Sep-18 Change YoY
---------------- ----------- -----------
in thousands of GEL GEL GEL
-------------------------------------- ---------------- ----------- -----------
Total Assets 18,169,757 14,423,997 26.0%
Gross Loans 11,680,257 9,622,563 21.4%
Customer Deposits 9,897,323 8,740,449 13.2%
Total Equity 2,499,175 2,055,950 21.6%
Regulatory Common Equity Tier
I Capital (Basel III) 1,770,734 1,532,058 15.6%
Regulatory Tier I Capital (Basel
III) 2,191,792 1,580,547 38.7%
Regulatory Total Capital (Basel
III) 2,894,704 2,020,501 43.3%
Regulatory Risk Weighted Assets
(Basel III) 14,889,695 12,305,756 21.0%
-------------------------------------- ---------------- ----------- -----------
Key Ratios 3Q'19 3Q'18 Change YoY 9M'19 9M'18 Change YoY
-------------------------------------- ------ ------- ----------- ------ ------- -----------
Return on equity 20.4% 21.2% -0.8 pp 21.6% 21.2% 0.4 pp
Return on assets 2.8% 3.1% -0.3 pp 3.1% 3.1% 0.0 pp
NIM 5.0% 6.9% -1.9 pp 5.5% 7.0% -1.5 pp
Risk adjusted NIM 4.3% 5.4% -1.1pp 4.5% 5.3% -0.8 pp
Cost to income 39.9% 37.4% 2.5 pp 39.3% 37.0% 2.3 pp
Cost of risk 0.7% 1.9% -1.2 pp 1.1% 1.7% -0.6 pp
FX adjusted cost of risk 0.7% 1.5% -0.8 pp 1.0% 1.7% -0.7 pp
NPL to gross loans 2.9% 3.1% -0.2 pp 2.9% 3.1% -0.2 pp
NPLs coverage ratio exc. collaterals 97.7% 113.2% -15.5 pp 97.7% 113.2% -15.5 pp
CET 1 CAR (Basel III) 11.9% 12.4% -0.5 pp 11.9% 12.4% -0.5 pp
Regulatory Tier 1 CAR (Basel III) 14.7% 12.8% 1.9 pp 14.7% 12.8% 1.9 pp
Regulatory Total CAR (Basel III) 19.4% 16.4% 3.0 pp 19.4% 16.4% 3.0 pp
Leverage (Times) 7.3x 7.0x 0.3x 7.3x 7.0x 0.3x
-------------------------------------- ------ ------- ----------- ------ ------- -----------
Letter from the Chief Executive Officer
I am delighted to present another set of strong financial
results for the third quarter and the first nine months of 2019, as
well as update you on the progress of our strategy and recent
macroeconomic developments in Georgia.
Our consolidated net profit for the third quarter 2019 grew by
18.1% year-on-year and reached GEL 126.8 million. The growth in
revenue was mainly driven by an increase in net fee and commission
income and other operating income, which offset the decrease in net
interest income. As anticipated, net interest margin decreased by
0.4 pp quarter-on-quarter, due to the continued effect of a new
regulation that was introduced in January 2019, limiting the bank's
ability to lend money to higher-yield retail customers, while a
further decrease of 0.2 pp was related to excess liquidity and the
pre-payment fee of a subordinated loan. As a result, our net
interest margin stood at 5.0%, or 5.2% without the above-mentioned
effects. We expect NIM to stabilize at this level. The increase in
net profit was further amplified by a decrease in credit loss
allowance that was driven by the improved performance of the loan
book. As a result, our cost of risk stood at 0.7% in third quarter
2019. Over the same period, our operating expenses increased by
7.3% year-on-year. Our return on equity was 20.4%, while return on
assets stood at 2.8% in third quarter 2019, or 3.0% without the
above-mentioned effects.
In the first nine months of 2019 our consolidated net profit was
GEL 380.3 million, up by 23.7% year-on-year, while our return on
equity was 21.6%, and return on assets stood at 3.1%.
Regarding balance sheet growth, our loan book expanded by 21.4%
year-on-year, or by 14.3% at a constant currency rate. As a result,
our market share increased to 38.7%, up by 0.3 pp year-on-year.
Over the same period, customer accounts grew by 13.2% year-on-year,
or by 5.3% at a constant currency rate leading to a market share of
39.3%, down by 1.0 pp year-on-year. The slight decline in market
share is the result of decreased focus on customer deposits during
the third quarter due to high liquidity following the recent bond
issuance.
We continue to operate with a strong capital base and a robust
liquidity position. As of 30 September 2019, our regulatory CET 1,
tier 1 and total capital adequacy ratios per Basel III guidelines
stood at 11.9%, 14.7% and 19.4% respectively, while minimum
requirements amounted to 9.8%, 11.9% and 16.7% respectively. Our
regulatory liquidity coverage ratio stood at 132% compared to the
minimum requirement of 100%, while the ratio of net loans to
deposits + IFI funding was 97%. Starting from 30 September 2019,
NBG introduced the net stable funding ratio (NSFR) per Basel III
guidelines, which stood at 137.7%, above the minimum requirement of
100%.
According to the initial estimates, the economy expanded by 5.7%
in 3Q 2019, however, mostly reflecting the low base effect. Growth
is expected to be above 4.0% for 2019 and 2020, with a slower
year-on-year increase in the forth quarter 2019 and the first half
of 2020. From the second half of 2020, the economy is expected to
deliver close to 5.0% growth rates. Despite the unfavourable
developments in terms of tourism and FDI, the external sector
remains balanced. While the flight ban had a negative impact on
tourism inflows in the third quarter, the trade balance continued
to improve and remittance inflows were steadily increasing.
Long-term growth is expected to reach 5.2%, once again underlining
strong growth fundamentals and the resilience of the economy.
As presented in June 2019 during our capital markets day, in
line with our new mission statement, "to make life easier", we are
enhancing our value proposition beyond financial services and are
developing customer focused digital ecosystems. This will allow us
to better engage with our customers and become part of their daily
lives by helping them to satisfy their personal and business needs
in the most convenient and seamless way possible. In this regard,
we have already launched payments, housing and e-commerce
ecosystems and are also actively developing an auto ecosystem. I
would like very briefly to touch upon the recent achievements in
each ecosystem:
o Payments[6]: For the first nine months of 2019, the number of
payments transactions went up by 17.0% year-on-year and reached
175.6 mln, while the volume of payment transactions amounted to GEL
8.5 bln, up by 27.0% year-on-year. Also, in the third quarter, we
launched Apple Pay and ATM QR withdrawal as new, innovative payment
options. In addition, we increased our share in our associated
company TKT.ge to 55% from 26%. TKT.ge is a leading online platform
in Georgia, which allows people to buy tickets for various events
such as cinema, theatre or concerts as well as airplane and train
tickets. Furthermore, our Uzbek subsidiary, Payme, continued to
grow rapidly: its number of customers increased by 10.4%
quarter-on-quarter to reach 1.6 million, while its revenue
increased by 12.4% over the same quarter, amounting to around GEL
2.2 million.
o E-commerce: Our newly launched e-commerce platform, Vendoo, is
expanding rapidly by adding new product types and attracting more
visitors. As of 30 September 2019, Vendoo offered more than 20,000
different product items, with the number of unique monthly visitors
reaching around 514,000
o Housing: our housing ecosystem, Livo, which was launched in
May 2019 is gaining popularity quickly: it attracted around 281,000
monthly unique visitors and had 17,000 listings as of 30 September
2019. For the first nine months of 2019, its revenue stood at GEL
1.4 million.
In addition, in August 2019, we acquired a 65% stake in LLC
My.ge, the leading classified e-commerce player in Georgia, trading
under the My.ge Group ("My Group") name. My Group operates in four
online marketplace verticals: automotive, automotive spare parts,
consumer-to-consumer ("C2C") and housing. The acquisition of My
Group is a big leap in the development of our ecosystem strategy,
as it is estimated to have the largest online traffic in Georgia
with a combined 1.7 million unique monthly visitors across all
platforms. For the first nine months of 2019, its revenue stood at
GEL 4.2 million, while its EBITDA amounted to GEL 1.4 million.
We continue to harness our best-in-class digital channels by
increasing the number of digital transactions and sales. In 3Q
2019, the total number of digital transactions went up by 20.2%
year-on-year, while the share of deposit sold digitally went up to
66% from 63% a year ago. Our fully digital bank, Space, is also
gaining popularity with the number of total registered customers
reaching around 158,000. Total loans outstanding to Space customers
amounted to GEL 22.5 million as of 30 September 2019. Recently, we
have also launched terms deposits in Space.
I am also delighted that Eric Rajendra was re-appointed as an
Independent Non-Executive Director of the Board of Directors of TBC
Bank Group PLC and as an Independent Non-Executive Member of the
Supervisory Board of JSC TBC Bank. Eric has a very good
understanding of TBC Bank's strategy and operations, and his
presence will enhance shareholder value by bringing expertise and
stability to the Group.
I would also like to highlight our strong performance in
affluent sub-segment. The number of TBC Status customers, increased
by 31.5% QoQ and reached around 69 thousands in third quarter 2019.
The sharp increase in number of Status Clients was driven by new
digital service model that was introduced in March 2019. This
service includes fully digital onboarding, self-managing digital
banking operations, financial advising, education tutorials and
personalized digital offers.
Finally, I would like to reiterate our medium term targets: ROE
of above 20%, cost to income ratio below 35%, dividend payout ratio
of 25-35% and loan book growth of 10-15%.
Operating Overview
Recent Developments
Board changes
o TBC Bank strengthened its supervisory board by re-appointing
Eric Rajendra as an independent non-executive director of the TBC
Bank Group PLC Supervisory Board in September 2019.
o TBC Bank also announced changes to the membership of TBC PLC
Board Committees and the equivalent committees of the Supervisory
Board of the Bank:
o Arne Berggren has been appointed as the new chairperson of the
Risks, Ethics and Compliance Committee and as a member of the Audit
Committee;
o Tsira Kemularia has been appointed as the chairperson of the
Corporate Governance and Nomination Committee;
o Nikoloz Enukidze left his position as the chairperson of the
Risk, Ethics and Compliance Committee and as a member of the Audit
Committee;
o Eric Rajendra has been appointed as a member of the
Remuneration Committee and the Corporate, Governance and Nomination
Committee of TBC PLC.
Improved corporate governance score and ESG rating
o Corporate governance score: As of 31.10.2019, we achieved an
excellent ISS corporate governance score, which stood at 2.0. The
ISS scores indicate decile ranking relative to index or region. A
decile score of 1 indicates low governance risk, while a 10
indicates higher governance risk.
o ESG rating: "In 2019, TBC Bank Group received a rating of A
(on a scale of AAA-CCC) in the MSCI ESG Ratings assessment." This
represents an improvement from the previous score of BBB a year
ago.
IFI
TBC Bank and the European Fund for Southeast Europe (EFSE)
signed three loan agreements totaling in excess of EUR 23 million
(c. GEL 77 million). The funds will be lent to TBC Bank customers
spanning micro and small enterprises (MSEs) and private households
to finance their future plans using loans in Georgian Lari, thereby
reducing their dependence upon borrowing in foreign currencies.
Expansion into new ecosystems
TBC Bank Group PLC has entered into an agreement to acquire a
65% stake in LLC My.ge, the leading classified e-commerce player in
Georgia trading under the My.ge Group ("My Group") name. My Group
operates in four online marketplace verticals: automotive,
automotive spare parts, consumer-to-consumer ("C2C") and housing.
With a total of 1.7 million unique monthly visitors, the online
traffic of My Group is one of the largest in Georgia. It is the
market leader in the automotive, spare parts and C2C verticals,
with estimated market shares of approximately 80% in each, while it
is a top two player in housing with an estimated market share of
30%-40%.
World's best in mobile banking 2019 by Global Finance
Best Consumer Digital Banks 2019
Best Online Deposit, Credit and Investment Taipei Fubon Bank
Product Offerings
Best Bill Payment & Presentment Sberbank
--------------------------
Best Web Site Design DBS Bank
--------------------------
Best Integrated Consumer Banking Site Emirates NBD
--------------------------
Best in Mobile Banking TBC Bank
--------------------------
Best Information Security and Fraud Banco Popular Puerto Rico
Management
--------------------------
Best in Social Media Marketing and Services Taishin Bank
--------------------------
Best Mobile Banking App CaixaBank
--------------------------
Most Innovative Digital Bank Tatra banka
--------------------------
Best Mortgage Bank Bidaya Home Finance
--------------------------
Best Open Banking APIs Citi
--------------------------
Awards
o Multiple Digital awards from Global Finance Magazine - TBC
Bank has won a number of prestigious awards from Global Finance,
including World's best in Mobile Banking 2019, The Best Consumer
Digital Bank in Georgia 2019, The Best in Consumer Mobile Banking
and The Best Consumer Mobile Banking App in Central & Eastern
Europe 2019. These awards underline our advanced digital
capabilities, offering customers globally innovative services and
an unrivalled customer experience.
o Trade Finance Award for Excellent Partnership from Commerzbank
- TBC has received a Trade Finance Award for Excellent Partnership
from Commerzbank for the second consecutive year. This award
recognizes our leading position in trade finance and emphasizes our
successful cooperation.
o Safest Bank in Georgia - TBC Bank received the Safest Bank in
Georgia 2019 award from Global Finance magazine. The award series
recognizes the banks that are best positioned to help their clients
maintain effectiveness and stability in the face of rapidly
evolving trends in the global business and political environments.
Among other factors, the judging panel evaluated the long-term
foreign currency ratings from top credit rating agencies, alongside
the total assets of the 1000 largest banks worldwide, when choosing
the winners.
o Best Private Banking in Georgia - TBC Bank has been named the
Best for Private Banking in Georgia by two leading industry
magazines. We have received the country's Best Private Bank 2019
award from The Banker and Professional Wealth Management (PWM)
magazine and have won Global Finance's Best Private Bank Award in
Georgia 2020. These prestigious awards acknowledge our leading
position in delivering exceptional private banking services and the
highest standards of client satisfaction.
Establishment of Employee Benefit Trust
TBC Bank Group PLC established the TBC Bank Group PLC Employee
Benefit Trust (the "EBT") in August 2019. It is intended that the
EBT will be used to satisfy obligations arising from the TBC Bank
Group PLC Deferred Share Plan (the "Deferred Share Plan"), the TBC
Bank Group PLC Long Term Incentive Plan and other shares awards
granted to employees. The EBT will be administered by Sanne
Fiduciary Services Limited.
As of 14 November 2019, the EBT was in possession of 451,000
shares of TBC Bank Group PLC.
Additional Information Disclosure
The following materials in connection with TBC PLC's financial
results are disclosed on our Investor Relations website on
http://tbcbankgroup.com/ under Results Announcement section.
Economic Overview
Economic growth and the external sector
Real GDP growth stood at 4.7% YoY in the first half of 2019.
According to the initial estimates, the economy expanded by 5.7% in
3Q 2019, however, mostly reflecting the low base effect. Growth
continues to be strongly supported by the expansionary fiscal
stance and business credit. At the same time, weakening inflows, an
undervalued exchange rate and weaker business and consumer
sentiments negatively affect economic performance. Overall, growth
is expected to come in at above 4% for 2019 and 2020, with slower
YoY increases in 4Q 2019 and the first half of 2020. From the
second half of 2020, the economy should deliver close to 5% growth
rates.
In terms of sectors, growth in the second quarter of 2019 was
mostly driven by transport and communications (+15.7% YoY), real
estate (+16.9% YoY), hotels and restaurants (+14.1% YoY), and trade
(+7.4% YoY). On the other hand, this was partly offset by weakness
in construction (-4.6% YoY) and manufacturing (-4.5% YoY). The
decline in the construction sector reflected the finalization of
BP's pipeline construction project. At the same time, slower
mortgage growth and tighter construction permit regulations also
affected the construction industry. Public capital expenditures
remained strong, countering the decline.
Despite the unfavourable developments in terms of tourism and
FDI, the external sector remains balanced. In 2Q 2019, the CA
deficit-to-GDP ratio declined sharply to 3.2%, compared to 8.2% a
year ago. The bulk of the improvement reflected a reduction in the
trade deficit, while higher services exports and an improved income
account also contributed positively. On the financing side, even
though FDI inflows were down by 53.7% in 2Q 2019, FDI inflows to
GDP still stood at 4.6%, which is high when compared
internationally, and the CA deficit was fully covered.
Following Russia's flight ban, estimated tourism inflows
declined by 6.9% YoY in 3Q 2019, even though the number of tourists
is still increasing. At the same time, it is important to mention
that the rate of decline has slowed down since the introduction of
the flight ban. According to the central bank estimates, inflows
fell by 8.6% in July, 6.8% in August and 4.9% in September,
indicating that the impact of lower inflows from Russia and Iran
was gradually offset by increasing tourism from the EU, Israel,
Gulf countries, and Central Asia. The trade balance continued to
improve in 3Q 2019, with exports of goods up by 10.6% and imports
down by 0.8%. As a result, the trade deficit improved by 7.6% YoY,
all in USD terms. Over the same period, remittance inflows
increased by 9.5% YoY.
Bank credit growth came in at 14.6% YoY in September 2019, at a
constant exchange rate. In terms of segments, corporate loans were
the main driver with a 21.5% YoY growth rate. MSME lending also
increased by a solid 16.8% YoY. On the other hand, retail credit
continues to moderate with an 8.1% YoY increase. Mortgage lending
growth slowed to 19.4% YoY, while non-mortgage lending declined by
3.6%: this is a smaller drop compared to the previous months, which
suggests that this segment should soon turn into positive growth
rates. At the same time, there are ongoing discussions on a
possible revision of the retail credit regulatory framework.
Inflation and the exchange rate
As of the end of September 2019, the GEL depreciated against USD
by 13.0% YoY, while the EUR/GEL exchange rate depreciated by 6.5%
YoY. The GEL also depreciated compared to the major trading country
currencies, as evidenced by the weaker effective exchange rate. The
estimated real effective exchange rate was around 8-10% below its
medium term average and stayed at approximately this level
throughout the third quarter, consequently creating inflationary
pressures. As a result, annual inflation increased to 6.4% in
September.
Due to the heavily undervalued GEL and inflationary pressures,
the National Bank of Georgia stated that it would pursue a
tightening policy regarding GEL and a loosening stance in FX until
inflationary pressures recede and price stability is ensured.
Therefore, as of October 24th, the monetary policy rate stands at
8.5%, coming from a 200 basis points rate hike in total over this
quarter. The NBG also decreased the reserve requirement ratio for
FX deposits to stimulate FX credit as a tool for a stronger GEL
exchange rate.
Going forward
According to the IMF's recently published World Economic
Outlook[7], the Georgian economy is projected to grow by 4.6% in
2019 and 4.8% in 2020. Long-term growth is expected at 5.2%, once
again underlying strong growth fundamentals and the resilience of
the economy.
More information on the Georgian economy and financial sector
can be found at www.tbcresearch.ge.
Unaudited Consolidated Financial Results Overview for 3Q
2019
This statement provides a summary of the unaudited business and
financial trends for 3Q 2019 for TBC Bank Group plc and its
subsidiaries. The quarterly financial information and trends are
unaudited.
Starting from 1 January 2019, TBC Bank adopted IFRS 16.
Therefore, the comparative information for 2018 is not comparable
to the information presented for 2019.
TBC Bank Group PLC financial results are prepared in accordance
with International Financial Reporting Standards ("IFRS") as
adopted by the European Union ("EU") and the Companies Act 2006
applicable to companies reporting under IFRS. The Group classifies
and separately discloses certain incomes and expenses, which are
non-recurring by nature and are caused by extraordinary events, as
one-off items in order to provide a consistent view and enable
better analysis of the financial performance of the Group. Adjusted
performance is an alternative performance measure and the
reconciliation of the underlying profit and loss items with the
reported profit and loss items and the underlying ratios are given
under Annex 1 section on pages 44-45.
Please note, that there might be slight differences in previous
periods' figures due to rounding.
Net Interest Income
In 3Q 2019, net interest income amounted to GEL 186.2 million,
down by 6.7% YoY and by 2.2% on QoQ.
This YoY decrease in net interest income was primarily related
to the pre-payment fee[8] of a subordinated loan, excess liquidity
and decreasing yields related to the continued effect of the
regulations introduced in January 2019. The loan yields decreased
by 1.6 pp, primarily driven by retail segment. This effect was
partially offset by a 21.4% increase in the loan portfolio.
Without pre-payment fee(8) of the subordinated loan and excess
liquidity mentioned above, net interest income would have increased
by 1.0% on QoQ basis. The rise was mainly driven by an increase in
the loan portfolio by 4.8% on a QoQ basis, which was offset by a
0.2 pp drop in loan yields.
Consequently, NIM was 5.0%, or 5.2% without the above-mentioned
effects in 3Q 2019, compared to 6.9% and 5.6% in 3Q 2018 and 2Q
2019, respectively. Risk adjusted NIM for the period amounted to
4.3%, down by 0.5 pp YoY and by 1.1 pp QoQ.
In thousands of GEL 3Q'19 2Q'19 3Q'18 Change YoY Change QoQ
--------------------- ----------- ----------- ----------- ----------- -----------
Interest income 367,417 340,301 330,691 11.1% 8.0%
--------------------- ----------- ----------- ----------- ----------- -----------
Interest expense (181,192) (149,820) (131,079) 38.2% 20.9%
--------------------- ----------- ----------- ----------- ----------- -----------
Net interest income 186,225 190,481 199,612 -6.7% -2.2%
--------------------- ----------- ----------- ----------- ----------- -----------
NIM 5.0% 5.6% 6.9% -0.6 pp -1.9 pp
--------------------- ----------- ----------- ----------- ----------- -----------
Risk adjusted NIM 4.3% 4.8% 5.4% -0.5 pp -1.1 pp
--------------------- ----------- ----------- ----------- ----------- -----------
Net fee and commission income
In 3Q 2019, net fee and commission income totalled GEL 47.1
million, up by 19.6% on YoY basis and by 8.2% on QoQ basis.
The YoY rise was mainly driven by increase in net fee and
commission income from settlement transactions and other net fee
and commission income. The former increase was mainly related to
the increase in the number of TBC Status's clients (our affluent
retail sub-segment), up by 84.9% to 68.9 thousand and the growth in
the number of money transfer transactions, while the increase in
other fee and commission income was driven by our new digital
ecosystems: Payme, My GE and TKT.
On a QoQ basis, the rise was mainly driven by net fee and
commission income from settlement transactions, which was related
to the increased number and volume of transactions in our
self-service terminals (through our subsidiary TBC Pay) and the
growth in net fee and commission income from our affluent retail
sub-segment, TBC Status as mentioned above.
In thousands of GEL 3Q'19 2Q'19 3Q'18 Change YoY Change QoQ
----------------------------------------- ------- ------- ------- ----------- -----------
Net fee and commission income
----------------------------------------- ------- ------- ------- ----------- -----------
Card operations 13,479 11,773 13,497 -0.1% 14.5%
Settlement transactions 18,355 15,119 15,672 17.1% 21.4%
Guarantees issued and letters of credit 8,197 7,155 5,814 41.0% 14.6%
Other 7,074 9,487 4,401 60.7% -25.4%
----------------------------------------- ------- ------- ------- ----------- -----------
Total net fee and commission income 47,105 43,534 39,384 19.6% 8.2%
----------------------------------------- ------- ------- ------- ----------- -----------
Other Non-Interest Income
Total other non-interest income increased by 18.8% on YoY basis
and by 21.3% on QoQ basis, amounting to GEL 46.4 million in 3Q
2019. This primarily resulted from the rise in net income from
foreign currency operations, mainly related to the increased number
and volume of FX transactions. Net insurance premium earned after
claims and acquisition costs increased by 53.2% on a YoY and by
10.3% on a QoQ basis, mainly related to the increased scale of the
insurance business. More information about TBC insurance can be
found in Annex 2 on page 46.
In thousands of GEL 3Q'19 2Q'19 3Q'18 Change YoY Change QoQ
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Other non-interest income
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Net income from foreign currency operations 35,858 30,119 31,040 15.5% 19.1%
Net insurance premium earned after claims and acquisition
costs[9] 4,784 4,338 3,123 53.2% 10.3%
Other operating income 5,786 3,830 4,930 17.4% 51.1%
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Total other non-interest income 46,428 38,287 39,093 18.8% 21.3%
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Credit Loss Allowance
In 3Q 2019, total credit loss allowance amounted to GEL 25.7
million, down by 46.0% on a YoY basis and by 22.8% on a QoQ
basis.
The YoY decrease was mainly due to a decrease in credit loss
allowance on loans to customers, driven by strong performance in
all segments, as well as to a portfolio product mix change, related
to the continued impact of the regulations introduced in January
2019.
The main contributor to the QoQ decrease was credit loss
allowance for loans. If negative effect of local currency
depreciation was excluded from 2Q 2019, credit loss allowance on
loans to customers would have been broadly stable.
In thousands of GEL 3Q'19 2Q'19 3Q'18 Change YoY Change QoQ
-------------------------------------------------- ---------- ---------- ---------- ----------- -----------
Credit Loss Allowance
-------------------------------------------------- ---------- ---------- ---------- ----------- -----------
Credit loss allowance for loan to customers (20,695) (30,067) (43,345) -52.3% -31.2%
Credit loss allowance for other financial assets (5,054) (3,305) (4,305) 17.4% 52.9%
---------- ---------- ---------- -----------
Total credit loss allowance (25,749) (33,372) (47,650) -46.0% -22.8%
-------------------------------------------------- ---------- ---------- ---------- ----------- -----------
Operating income after credit loss allowance 254,009 238,930 230,439 10.2% 6.3%
-------------------------------------------------- ---------- ---------- ---------- ----------- -----------
Cost of risk 0.7% 1.1% 1.9% -1.2 pp -0.4 pp
-------------------------------------------------- ---------- ---------- ---------- ----------- -----------
Operating Expenses
In 3Q 2019, total operating expenses expanded 7.3% on YoY basis
and by 2.1% on QoQ basis and amounted to GEL 111.7 million. Cost to
income stood at 39.9%, up by 2.5 pp on YoY and down by 0.3 pp on
QoQ. Without contribution of ecosystems, POS terminals and
e-commerce cost to income would have stood at 37.9% in 3Q 2019.
The YoY growth was primarily due to an increase in staff costs
and a rise in depreciation and amortization. The growth in staff
cost was mainly driven by the increase in the share price[10] over
a three-year period for the purpose of top and middle management
share based bonuses accruals (while there was no material change in
expected total share compensation) as well as by the increase in
business scale. The increase in depreciation and amortization was
mainly due to IFRS 16.
On a QoQ basis, without one-off consulting fees paid in the
amount of GEL 5.6 million in 2Q 2019 (for further details, please
see the following press release) total operating expenses would
have increased by 7.6%. The increase was mainly due to an uneven
distribution of expenses across the quarters, local currency
depreciation and about GEL 1.0 million expenses related to the
recent events regarding historic matters surrounding TBC Bank as
mentioned above.
In thousands of GEL 3Q'19 2Q'19 3Q'18 Change YoY Change QoQ
------------------------------------------- ----------- ----------- ----------- ----------- -----------
Operating expenses
------------------------------------------- ----------- ----------- ----------- ----------- -----------
Staff costs (62,230) (58,886) (54,294) 14.6% 5.7%
Provisions for liabilities and charges (73) 1,241 (4,000) -98.2% NMF
Depreciation and amortization (17,433) (15,955) (11,944) 46.0% 9.3%
Administrative & other operating expenses (31,969) (35,783) (33,865) -5.6% -10.7%
------------------------------------------- ----------- ----------- ----------- ----------- -----------
Total operating expenses (111,705) (109,383) (104,103) 7.3% 2.1%
------------------------------------------- ----------- ----------- ----------- ----------- -----------
Cost to income 39.9% 40.2% 37.4% 2.5pp -0.3pp
------------------------------------------- ----------- ----------- ----------- ----------- -----------
NMF - no meaningful figures
Net Income
Net income for the third quarter increased by GEL 19.4 million,
or 18.1%, YoY and increased by GEL 6.6 million, or 5.5%, QoQ,
amounting to GEL 126.8 million.
As a result, ROE stood at 20.4%, down by 0.8 pp on a YoY basis
and by 0.3 pp QoQ, while ROA stood at 2.8%, down by 0.3 pp YoY and
by 0.2 pp on a QoQ basis.
In thousands of GEL 3Q'19 2Q'19 3Q'18 Change YoY Change QoQ
----------------------- ---------- ------------- ---------- ----------- -----------
Profit before tax 142,304 129,547 126,336 12.6% 9.8%
----------------------- ---------- ------------- ---------- ----------- -----------
Income tax expense (15,527) (9,329) (18,952) -18.1% 66.4%
----------------------- ---------- ------------- ---------- ----------- -----------
Profit for the period 126,777 120,218 107,384 18.1% 5.5%
----------------------- ---------- ------------- ---------- ----------- -----------
Return on equity 20.4% 20.7% 21.2% -0.8 pp -0.3 pp
----------------------- ---------- ------------- ---------- ----------- -----------
Return on assets 2.8% 3.0% 3.1% -0.3 pp -0.2 pp
----------------------- ---------- ------------- ---------- ----------- -----------
Funding and Liquidity
In September 2019, the National Bank of Georgia introduced net
stable funding ratio (NSFR) per Basel III standards. NSFR for 30
September 2019 per NBG's new methodology stood at 137.7%, compared
to 100% limit. Issuance of USD 125.0 million AT1 bonds in July 2019
has increased our liquidity position and as a result liquidity
ratio and total liquidity coverage ratios, were up by 3.3 pp and
5.3 pp respectively. The drop in LCR in GEL by 12.8 pp was due to
the growth of loan book in local currency.
30-Sep-19 30-Jun-19 Change
--------------------------------------------------------------- ---------- ----------- ---------
Minimum net stable funding ratio, as defined by the NBG 100.0% N/A N/A
Net stable funding ratio 137.7% 138.1%[11] -0.4 pp
Net loans to deposits + IFI funding 97.0% 91.4% 5.6 pp
Leverage (Times) 7.3x 7.3x 0.0x
Minimum liquidity ratio, as defined by the NBG 30.0% 30.0% 0.0 pp
Liquidity ratio, as defined by the NBG 39.2% 35.9% 3.3 pp
Minimum total liquidity coverage ratio, as defined by the NBG 100.0% 100.0% 0.0 pp
Minimum LCR in GEL, as defined by the NBG 75.0% 75.0% 0.0 pp
Minimum LCR in FC, as defined by the NBG 100.0% 100.0% 0.0 pp
Total liquidity coverage ratio, as defined by the NBG 131.6% 126.3% 5.3 pp
LCR in GEL, as defined by the NBG 87.7% 100.4% -12.8 pp
LCR in FC, as defined by the NBG 162.8% 143.8% 19.0 pp
--------------------------------------------------------------- ---------- ----------- ---------
Regulatory Capital
As of 30 September 2019, the Bank's Basel III CET 1 capital
stood at 11.9%, broadly stable on a QoQ basis. The proceeds from
the issuance of the AT1 bonds in amount of USD 125 million were
reflected in the capital in July 2019 and was the main factor in
increasing our tier 1 and total capital ratios on a QoQ basis by
2.3 pp and 2.0 pp respectively.
In thousands of GEL 30-Sep-19 30-Jun-19 Change
-------------------------------------- ----------- ----------- --------
CET 1 Capital 1,770,734 1,678,050 5.5%
Tier 1 Capital 2,191,792 1,730,302 26.7%
Total Capital 2,894,704 2,430,135 19.1%
Total Risk-weighted Exposures 14,889,695 13,986,201 6.5%
-------------------------------------- ----------- ----------- --------
Minimum CET 1 ratio 9.8% 9.8% 0.0 pp
CET 1 Capital adequacy ratio 11.9% 12.0% -0.1 pp
Minimum Tier 1 ratio 11.9% 11.9% 0.0 pp
Tier 1 Capital adequacy ratio 14.7% 12.4% 2.3 pp
Minimum total capital adequacy ratio 16.7% 16.7% 0.0 pp
Total Capital adequacy ratio 19.4% 17.4% 2.0 pp
-------------------------------------- ----------- ----------- --------
Loan Portfolio
As of 30 September 2019, the gross loan portfolio reached GEL
11,680.3 million, up by 4.8% QoQ, or by 3.7% on constant currency
basis, mainly supported by growth in the corporate segment. Over
the same period, the proportion of gross loans denominated in
foreign currency decreased by 1.7 pp on a QoQ basis and accounted
for 58.2% of total loans, while on constant currency basis the
proportion of gross loans denominated in foreign currency decreased
by 2.2 pp and stood at 57.7%.
At the end of 3Q 2019, our market share in total loans stood at
38.7% up by 0.2 pp QoQ, while our loan market share in legal
entities was 37.7% up by 0.4 pp QoQ and our loan market share in
individuals stood at 39.5% down by 0.1 pp QoQ.
In thousands of GEL 30-Sep-19 30-Jun-19 Change
--------------------------------------- ----------- ----------- -------
Loans and advances to customers
--------------------------------------- ----------- ----------- -------
Retail 4,903,134 4,835,320 1.4%
Retail loans GEL 2,284,431 2,170,941 5.2%
Retail loans FC 2,618,703 2,664,379 -1.7%
Corporate 4,029,321 3,658,340 10.1%
Corporate loans GEL 1,248,851 1,045,076 19.5%
Corporate loans FC 2,780,470 2,613,264 6.4%
MSME 2,747,802 2,647,700 3.8%
MSME loans GEL 1,354,789 1,251,812 8.2%
MSME loans FC 1,393,013 1,395,888 -0.2%
--------------------------------------- ----------- ----------- -------
Total loans and advances to customers 11,680,257 11,141,360 4.8%
--------------------------------------- ----------- ----------- -------
3Q'19 2Q'19 3Q'18 Change Change
YoY QoQ
---------------------------- ------ ------ ------ -------- --------
Loan yields 10.8% 11.0% 12.4% -1.6 pp -0.2 pp
Loan yields GEL 15.3% 15.6% 17.9% -2.6 pp -0.3 pp
Loan yields FC 7.7% 7.8% 8.5% -0.8 pp -0.1 pp
Retail Loan Yields 11.8% 12.2% 14.1% -2.3 pp -0.4 pp
Retail loan yields GEL 17.2% 18.4% 20.8% -3.6 pp -1.2 pp
Retail loan yields FC 7.3% 7.3% 7.9% -0.6 pp 0.0 pp
Corporate Loan Yields 9.2% 8.8% 9.6% -0.4 pp 0.4 pp
Corporate loan yields
GEL 11.7% 9.9% 11.0% 0.7 pp 1.8 pp
Corporate loan yields
FC 8.1% 8.4% 9.1% -1.0 pp -0.3 pp
MSME Loan Yields 11.2% 11.5% 12.6% -1.4 pp -0.3 pp
MSME loan yields GEL 15.0% 15.5% 16.6% -1.6 pp -0.5 pp
MSME loan yields FC 7.7% 7.8% 8.9% -1.2 pp -0.1 pp
---------------------------- ------ ------ ------ -------- --------
Loan Portfolio Quality
Total PAR 30 was broadly stable on QoQ basis, while total NPLs
stood at 2.9%, down by 0.2 pp, primarily attributable the strong
performance of the corporate loan book. The NPL coverage ratio
remained broadly stable.
Par 30 30-Sep-19 30-Jun-19 Change
------------- ---------- ---------- --------
Retail 2.3% 2.7% -0.4 pp
Corporate 0.8% 1.0% -0.2 pp
MSME 3.0% 2.8% 0.2 pp
------------- ---------- ---------- --------
Total Loans 2.0% 2.1% -0.1 pp
------------- ---------- ---------- --------
Non-performing Loans 30-Sep-19 30-Jun-19 Change
---------------------- ---------- ---------- --------
Retail 3.2% 3.3% -0.1 pp
Corporate 1.8% 2.1% -0.3 pp
MSME 4.3% 4.2% 0.1 pp
---------------------- ---------- ---------- --------
Total Loans 2.9% 3.1% -0.2 pp
---------------------- ---------- ---------- --------
NPL Coverage Sep-19 Jun-19
Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral
-------------- ---------------- ----------------- ---------------- -----------------
Corporate 118.5% 317.8% 103.3% 299.1%
Retail 113.2% 183.9% 113.8% 180.4%
MSME 64.9% 179.2% 71.5% 179.0%
-------------- ---------------- ----------------- ---------------- -----------------
Total 97.7% 209.9% 97.9% 206.0%
-------------- ---------------- ----------------- ---------------- -----------------
Cost of risk
The total cost of risk for 3Q 2019 stood at 0.7% down by 0.4 pp
QoQ and by 1.2 pp YoY.
The decrease on a YoY basis was related to the strong
performance across all segments, as well as the portfolio product
mix change driven by the continued impact of the regulations
introduced in January 2019.
If negative effect of GEL depreciation was excluded from 2Q
2019, on a QoQ basis the cost of risk would have been broadly
stable.
Cost of Risk 3Q'19 2Q'19 3Q'18 Change Change
YoY QoQ
-------------- ------ ------ ------ -------- --------
Retail 1.4% 2.4% 2.7% -1.3 pp -1.0 pp
Corporate 0.4% -0.5% 1.1% -0.7 pp 0.9 pp
MSME -0.1% 0.9% 1.2% -1.3 pp -1.0 pp
Total 0.7% 1.1% 1.9% -1.2 pp -0.4 pp
-------------- ------ ------ ------ -------- --------
Deposit Portfolio
Total deposit portfolio increased by 0.2% QoQ and amounted to
GEL 9,897.3 million, while on a constant currency basis the total
deposit portfolio was down by 1.9%. The decrease was mainly related
to the banks policy of decreasing deposits after having high
liquidity from the recent bonds issuance. The proportion of
deposits denominated in foreign currency increased by 2.7 pp on a
QoQ basis and accounted for 65.5% of total deposits, while on a
constant currency basis the proportion of deposits denominated in
foreign currency increased by 2.0 pp and stood at 64.8%.
By the end September 2019, our market share in deposits amounted
to 39.3% down by 1.7 pp QoQ and our market share in deposits to
legal entities stood at 40.1% down by 2.7 pp. Our market share in
deposits to individuals stood at 38.6% down by 0.9 pp QoQ.
In thousands of GEL 30-Sep-19 30-Jun-19 Change
---------------------------- ---------- ---------- -------
Customer Accounts
---------------------------- ---------- ---------- -------
Retail 5,550,227 5,360,114 3.5%
Retail deposits GEL 1,057,854 1,044,181 1.3%
Retail deposits FC 4,492,373 4,315,933 4.1%
Corporate 3,242,875 3,510,179 -7.6%
Corporate deposits GEL 1,770,123 2,069,230 -14.5%
Corporate deposits FC 1,472,752 1,440,949 2.2%
MSME 1,104,221 1,006,520 9.7%
MSME deposits GEL 586,603 557,163 5.3%
MSME deposits FC 517,618 449,357 15.2%
---------------------------- ---------- ---------- -------
Total Customer Accounts 9,897,323 9,876,813 0.2%
---------------------------- ---------- ---------- -------
3Q'19 2Q'19 3Q'18 Change Change
YoY QoQ
------------------------------ ------ ------ ------ -------- --------
Deposit rates 3.2% 3.4% 3.3% -0.1 pp -0.2 pp
Deposit rates GEL 5.3% 5.8% 5.6% -0.3 pp -0.5 pp
Deposit rates FC 2.1% 2.1% 2.1% 0.0 pp 0.0 pp
Retail Deposit Yields 2.8% 3.0% 2.7% 0.1 pp -0.2 pp
Retail deposit rates GEL 4.4% 5.3% 4.4% 0.0 pp -0.9 pp
Retail deposit rates FC 2.4% 2.4% 2.3% 0.1 pp 0.0 pp
Corporate Deposit Yields 4.7% 4.9% 4.9% -0.2 pp -0.2 pp
Corporate deposit rates
GEL 6.9% 7.2% 7.5% -0.6 pp -0.3 pp
Corporate deposit rates
FC 1.8% 1.8% 2.0% -0.2 pp 0.0 pp
MSME Deposit Yields 1.0% 1.0% 1.0% 0.0 pp 0.0 pp
MSME deposit rates GEL 1.5% 1.5% 1.7% -0.2 pp 0.0 pp
MSME deposit rates FC 0.3% 0.3% 0.4% -0.1 pp 0.0 pp
------------------------------ ------ ------ ------ -------- --------
Segment definition and PL
Business Segments
The segment definitions are as follows (updated in 2019):
-- Corporate - legal entity/group of affiliated entities with an
annual revenue exceeding GEL 12.0 million or which have been
granted facilities with more than GEL 5.0 million. Some other
business customers may also be assigned to the corporate segment or
transferred to the MSME segment on a discretionary basis;
-- Retail - non-business individual customers; all individual
customers are included in retail deposits;
-- MSME - business customers who are not included in the
corporate segment; or legal entities which have been granted a pawn
shop loan; or individual customers of the fully-digital bank,
Space; and
-- Corporate centre and other operations - comprises the
Treasury, other support and back office functions, and non-banking
subsidiaries of the Group.
Business customers are all legal entities or individuals who
have been granted a loan for business purposes.
Income Statement by Segments
3Q'19 Retail MSME Corporate Corp.Centre Total
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Interest income 146,098 76,640 91,323 53,356 367,417
Interest expense (38,823) (2,763) (39,354) (100,252) (181,192)
Net transfer
pricing (15,273) (25,129) 5,900 34,502 -
Net interest
income 92,002 48,748 57,869 (12,394) 186,225
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Fee and commission
income 54,762 7,069 12,566 2,398 76,795
Fee and commission
expense (24,940) (2,515) (1,686) (549) (29,690)
Net fee and
commission income 29,822 4,554 10,880 1,849 47,105
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Net insurance
premium earned
after claims and
acquisition
costs - - - 4,784 4,784
Net income from
foreign currency
operations 9,601 7,797 14,252 214 31,864
Foreign exchange
translation
gains less
losses/(losses
less gains) - - - 3,994 3,994
Gains less Losses
from Disposal
of Investment
Securities
Measured
at Fair Value
through Other
Comprehensive
Income (47) - - 827 780
Net losses from
derivative
financial
instruments - - - 2 2
Other operating
income 3,028 206 702 895 4,831
Share of profit of
associates - - - 173 173
Other operating
non-interest
income and
insurance profit 12,582 8,003 14,954 10,889 46,428
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Credit loss
allowance for
loans to
customers (17,560) 460 (3,595) - (20,695)
Credit loss
allowance for
performance
guarantees and
credit related
commitments 4 365 (1,843) - (1,474)
Credit loss
allowance for
investments in
finance lease - - - (211) (211)
Credit loss
allowance for
other financial
assets 44 - (570) (2,987) (3,513)
Credit loss
allowance for
financial assets
measured
at fair value
through other
comprehensive
income - - 228 (84) 144
Profit before G&A
expenses
and income taxes 116,894 62,130 77,923 (2,938) 254,009
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Staff costs (33,305) (12,441) (9,627) (6,857) (62,230)
Depreciation and
amortization (13,421) (2,033) (797) (1,182) (17,433)
Provision for
liabilities
and charges - - - (73) (73)
Administrative and
other operating
expenses (20,270) (5,691) (4,916) (1,092) (31,969)
Operating expenses (66,996) (20,165) (15,340) (9,204) (111,705)
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Profit before tax 49,898 41,965 62,583 (12,142) 142,304
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Income tax expense (5,056) (4,959) (7,237) 1,725 (15,527)
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Profit for the
year 44,842 37,006 55,346 (10,417) 126,777
------------------- ------------------- ------------------ ---------------- -------------------- ----------------
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Sep-19 Jun-19
----------------------------------------- --------------------- -------------------
Cash and cash equivalents 1,349,260 1,628,344
Due from other banks 30,297 27,860
Mandatory cash balances with National
Bank of Georgia 1,954,662 1,841,237
Loans and advances to customers 11,344,779 10,801,264
Investment securities measured at fair
value through other comprehensive
income 1,177,963 908,158
Bonds carried at amortized cost 871,640 766,663
Investments in finance leases 241,840 220,871
Investment properties 78,449 79,114
Current income tax prepayment 29,599 19,417
Deferred income tax asset 2,179 1,753
Other financial assets 243,330 165,382
Other assets 205,066 211,850
Premises and equipment 381,065 373,322
Right of use assets 59,040 61,555
Intangible assets 134,837 123,910
Goodwill 63,215 45,301
Investments in associates 2,536 2,363
TOTAL ASSETS 18,169,757 17,278,364
----------------------------------------- --------------------- -------------------
LIABILITIES
Due to credit institutions 3,613,093 3,052,742
Customer accounts 9,897,323 9,876,813
Lease liabilities 62,126 62,598
Other financial liabilities 96,781 252,280
Current income tax liability 1,128 727
Debt Securities in issue 1,251,649 848,838
Deferred income tax liability 21,142 21,361
Provisions for liabilities and charges 22,729 20,116
Other liabilities 88,672 85,882
Subordinated debt 615,939 688,002
TOTAL LIABILITIES 15,670,582 14,909,359
----------------------------------------- --------------------- -------------------
EQUITY
Share capital 1,682 1,672
Shares held by trust (15) N/A
Share premium 828,936 831,773
Retained earnings 1,794,054 1,668,810
Group re-organisation reserve (162,166) (162,166)
Share based payment reserve (28,104) (37,968)
Revaluation reserve for premises 56,606 56,606
Fair value reserve 7,351 12,680
Cumulative currency translation reserve (6,368) (6,478)
Net assets attributable to owners 2,491,976 2,364,929
----------------------------------------- --------------------- -------------------
Non-controlling interest 7,199 4,076
--------------------- -------------------
TOTAL EQUITY 2,499,175 2,369,005
----------------------------------------- --------------------- -------------------
TOTAL LIABILITIES AND EQUITY 18,169,757 17,278,364
----------------------------------------- --------------------- -------------------
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
In thousands of GEL 3Q'19 2Q'19 3Q'18
----------------------------------------- --------------------- ------------------- ---------------------
Interest income 367,417 340,301 330,691
Interest expense (181,192) (149,820) (131,079)
Net interest income 186,225 190,481 199,612
----------------------------------------- --------------------- ------------------- ---------------------
Fee and commission income 76,795 68,983 59,553
Fee and commission expense (29,690) (25,449) (20,169)
Net fee and commission income 47,105 43,534 39,384
----------------------------------------- --------------------- ------------------- ---------------------
Net insurance premiums earned 9,821 8,663 5,976
Net insurance claims incurred and
agents' commissions (5,037) (4,325) (2,853)
----------------------------------------- --------------------- ------------------- ---------------------
Net insurance premium earned after
claims and acquisition costs 4,784 4,338 3,123
----------------------------------------- --------------------- ------------------- ---------------------
Net income from foreign currency
operations 31,864 24,532 24,638
Net gain/(losses) from foreign exchange
translation 3,994 5,587 6,402
Net gains/(losses) from derivative
financial instruments 780 (71) (56)
Gains less losses from disposal of
investment securities measured at fair
value through other
comprehensive income 2 79 2
Other operating income 4,831 3,650 4,690
Share of profit of associates 173 172 294
Other operating non-interest income 41,644 33,949 35,970
----------------------------------------- --------------------- ------------------- ---------------------
Credit loss allowance for loans to
customers (20,695) (30,067) (43,345)
Credit loss allowance for investments in
finance lease (211) 219 (493)
Credit loss allowance for performance
guarantees and credit related
commitments (1,474) (824) (24)
Credit loss allowance for other
financial assets (3,513) (2,389) (3,759)
Credit loss allowance for financial
assets measured at fair value through
other comprehensive
income 144 (311) (29)
Operating income after credit loss
allowance for impairment 254,009 238,930 230,439
----------------------------------------- --------------------- ------------------- ---------------------
Staff costs (62,230) (58,886) (54,294)
Depreciation and amortization (17,433) (15,955) (11,944)
(Provision for)/ recovery of liabilities
and charges (73) 1,241 (4,000)
Administrative and other operating
expenses (31,969) (35,783) (33,865)
Operating expenses (111,705) (109,383) (104,103)
----------------------------------------- --------------------- ------------------- ---------------------
Profit before tax 142,304 129,547 126,336
----------------------------------------- --------------------- ------------------- ---------------------
Income tax expense (15,527) (9,329) (18,952)
--------------------- ------------------- ---------------------
Profit for the period 126,777 120,218 107,384
----------------------------------------- --------------------- ------------------- ---------------------
Other comprehensive income:
----------------------------------------- --------------------- ------------------- ---------------------
Items that may be reclassified
subsequently to profit or loss:
----------------------------------------- --------------------- ------------------- ---------------------
Movement in fair value reserve (5,327) 2,976 2,365
----------------------------------------- --------------------- ------------------- ---------------------
Exchange differences on translation to
presentation currency 111 815 71
----------------------------------------- --------------------- ------------------- ---------------------
Items that will not be reclassified to
profit or loss:
----------------------------------------- --------------------- ------------------- ---------------------
Other comprehensive income for the
period (5,216) 3,791 2,436
----------------------------------------- --------------------- ------------------- ---------------------
Total comprehensive income for the
period 121,561 124,009 109,820
----------------------------------------- --------------------- ------------------- ---------------------
Profit attributable to:
----------------------------------------- --------------------- ------------------- ---------------------
- Shareholders of TBCG 125,244 119,998 106,779
----------------------------------------- --------------------- ------------------- ---------------------
- Non-controlling interest 1,533 220 605
----------------------------------------- --------------------- ------------------- ---------------------
Profit for the period 126,777 120,218 107,384
----------------------------------------- --------------------- ------------------- ---------------------
Total comprehensive income is
attributable to:
----------------------------------------- --------------------- ------------------- ---------------------
- Shareholders of TBCG 120,034 123,785 109,183
----------------------------------------- --------------------- ------------------- ---------------------
- Non-controlling interest 1,527 224 637
----------------------------------------- --------------------- ------------------- ---------------------
Total comprehensive income for the
period 121,561 124,009 109,820
----------------------------------------- --------------------- ------------------- ---------------------
Key Ratios
Average Balances
The average balances included in this document are calculated as
the average of the relevant monthly balances as of each month-end.
Balances have been extracted from TBC's unaudited and consolidated
management accounts prepared from TBC's accounting records. These
were used by the management for monitoring and control
purposes.
Key Ratios
Ratios (based on monthly averages, where applicable) 3Q'19 2Q'19 3Q'18
------------------------------------------------------ ------- ----------- -----------
Profitability ratios:
Underlying ROE(1) 20.4% 21.5% 21.2%
Reported ROE(2) 20.4% 20.7% 21.2%
Underlying ROA(3) 2.8% 3.1% 3.1%
Reported ROA(4) 2.8% 3.0% 3.1%
ROE before credit loss allowance(5) 24.6% 26.4% 30.7%
Underlying Cost to Income(6) 39.9% 38.1% 37.4%
Reported Cost to Income(7) 39.9% 40.2% 37.4%
NIM(8) 5.0% 5.6% 6.9%
Risk Adjusted NIM(9) 4.3% 4.8% 5.4%
Loan Yields(10) 10.8% 11.0% 12.4%
Risk Adjusted Loan Yields(11) 10.1% 10.2% 10.9%
Deposit rates(12) 3.2% 3.4% 3.3%
Yields on interest Earning Assets(13) 9.8% 10.0% 11.4%
Cost of Funding(14) 4.8% 4.5% 4.4%
Spread(15) 5.0% 5.5% 7.0%
------------------------------------------------------ ------- ----------- -----------
Asset quality and portfolio concentration:
Cost of Risk(16) 0.7% 1.1% 1.9%
PAR 90 to Gross Loans(17) 1.2% 1.3% 1.3%
NPLs to Gross Loans(18) 2.9% 3.1% 3.1%
NPLs coverage(19) 97.7% 97.9% 113.2%
NPLs coverage with collateral(20) 209.9% 206.0% 209.0%
Credit loss level to Gross Loans(21) 2.9% 3.1% 3.6%
Related Party Loans to Gross Loans(22) 0.1% 0.1% 0.1%
Top 10 Borrowers to Total Portfolio(23) 9.0% 8.6% 10.3%
Top 20 Borrowers to Total Portfolio(24) 13.0% 12.6% 14.1%
------------------------------------------------------ ------- ----------- -----------
Capital optimisation:
Net Loans to Deposits plus IFI Funding(25) 96.9% 91.4% 88.0%
Net Stable Funding Ratio(26) 137.7% 138.1%(12) 131.9%[12]
Liquidity Coverage Ratio(27) 131.6% 126.3% 111.6%
Leverage(28) 7.3x 7.3x 7.0x
CET 1 CAR (Basel III)(29) 11.9% 12.0% 12.4%
Regulatory Tier 1 CAR (Basel III)(30) 14.7% 12.4% 12.8%
Regulatory Total 1 CAR (Basel III)(31) 19.4% 17.4% 16.4%
------------------------------------------------------ ------- ----------- -----------
Ratio definitions
1. Underlying return on average total equity (ROE) equals
underlying net income attributable to owners divided by the monthly
average of total shareholders' equity attributable to the PLC's
equity holders for the same period adjusted for the respective
one-off items; Annualised where applicable.
2. Reported return on average total equity (ROE) equals net
income attributable to owners divided by the monthly average of
total shareholders' equity attributable to the PLC's equity holders
for the same period; annualised where applicable.
3. Underlying return on average total assets (ROA) equals
underlying net income of the period divided by monthly average
total assets for the same period. Annualised where applicable.
4. Reported return on average total assets (ROA) equals net
income of the period divided by monthly average total assets for
the same period. Annualised where applicable.
5. Return on average total equity (ROE) before credit loss
allowance equals net income attributable to owners excluding all
credit loss allowance divided by the monthly average of total
shareholders 'equity attributable to the PLC's equity holders for
the same period.
6. Underlying cost to income ratio equals total underlying
operating expenses for the period divided by the total revenue for
the same period. (Revenue represents the sum of net interest
income, net fee and commission income and other non-interest
income).
7. Reported cost to income ratio equals total operating expenses
for the period divided by the total revenue for the same period.
(Revenue represents the sum of net interest income, net fee and
commission income and other non-interest income).
8. Net interest margin (NIM) is net interest income divided by
monthly average interest-earning assets; annualised where
applicable. Interest-earning assets include investment securities
excluding corporate shares, net investment in finance lease, net
loans, and amounts due from credit institutions. The latter
excludes all items from cash and cash equivalents, excludes EUR
mandatory reserves with NBG that currently have negative interest,
and includes other earning items from due from banks.
9. Risk Adjusted Net Interest Margin is NIM minus the cost of
risk without one-offs and the currency effect.
10. Loan yields equal interest income on loans and advances to
customers divided by monthly average gross loans and advances to
customers; annualised where applicable.
11. Risk Adjusted Loan yield is loan yield minus the cost of
risk without one-offs and currency effect.
12. Deposit rates equal interest expense on customer accounts
divided by monthly average total customer deposits; annualised
where applicable.
13. Yields on interest earning assets equal total interest
income divided by monthly average interest earning assets;
annualised where applicable.
14. Cost of funding equals total interest expense divided by
monthly average interest bearing liabilities; annualised where
applicable.
15. Spread equals difference between yields on interest earning
assets (including but not limited to yields on loans, securities
and due from banks) and cost of funding (including but not limited
to cost of deposits, cost on borrowings and due to banks).
16. Cost of risk equals credit loss allowance for loans to
customers divided by monthly average gross loans and advances to
customers; annualised where applicable.
17. PAR 90 to gross loans ratio equals loans for which principal
or interest repayment is overdue for more than 90 days divided by
the gross loan portfolio for the same period.
18. NPLs to gross loans equals loans with 90 days past due on
principal or interest payments, and loans with a well-defined
weakness, regardless of the existence of any past-due amount or of
the number of days past due divided by the gross loan portfolio for
the same period.
19. NPLs coverage ratio equals total credit loss allowance for
loans to customers calculated per IFRS 9 divided by the NPL
loans.
20. NPLs coverage with collateral ratio equals credit loss
allowance for loans to customers per IFRS 9 plus the total
collateral amount of NPL loans (excluding third party guarantees)
discounted at 30-50% depending on segment type divided by the NPL
loans.
21. Credit loss level to gross loans equals credit loss
allowance for loans to customers divided by the gross loan
portfolio for the same period.
22. Related party loans to total loans equals related party
loans divided by the gross loan portfolio.
23. Top 10 borrowers to total portfolio equals the total loan
amount of the top 10 borrowers divided by the gross loan
portfolio.
24. Top 20 borrowers to total portfolio equals the total loan
amount of the top 20 borrowers divided by the gross loan
portfolio.
25. Net loans to deposits plus IFI funding ratio equals net
loans divided by total deposits plus borrowings received from
international financial institutions.
26. Net stable funding ratio equals the available amount of
stable funding divided by the required amount of stable funding as
defined by NBG in line with Basel III guidelines.
27. Liquidity coverage ratio equals high-quality liquid assets
divided by the total net cash outflow amount as defined by the
NBG.
28. Leverage equals total assets to total equity.
29. Regulatory CET 1 CAR equals CET 1 capital divided by total
risk weighted assets, both calculated in accordance with the Pillar
1 requirements of the NBG Basel III standards. The reporting
started from the end of 2017. Calculations are made for TBC Bank
stand-alone, based on local standards.
30. Regulatory tier 1 CAR equals tier I capital divided by total
risk weighted assets, both calculated in accordance with the Pillar
1 requirements of the NBG Basel III standards. The reporting
started from the end of 2017. Calculations are made for TBC Bank
stand-alone, based on local standards.
31. Regulatory total CAR equals total capital divided by total
risk weighted assets, both calculated in accordance with the Pillar
1 requirements of the NBG Basel III standards. The reporting
started from the end of 2017. Calculations are made for TBC Bank
stand-alone, based on local standards.
Exchange Rates
To calculate the QoQ growth of the Balance Sheet items without
the currency exchange rate effect, we used the USD/GEL exchange
rate of 2.8687 as of 30 June 2019. For the calculations of the YoY
growth without the currency exchange rate effect, we used the
USD/GEL exchange rate of 2.6151 as of 30 September 2018. As of 30
September 2019 the USD/GEL exchange rate equalled 2.9552. For
P&L items growth calculations without currency effect, we used
the average USD/GEL exchange rate for the following periods: 3Q
2019 of 2.9194, 2Q 2019 of 2.7393, 3Q 2018 of 2.5295.
Unaudited Consolidated Financial Results Overview for 9M
2019
This statement provides a summary of the unaudited business and
financial trends for 9M 2019 for TBC Bank Group plc and its
subsidiaries. The financial information and trends are
unaudited.
Starting from 1 January 2019, TBC Bank adopted IFRS 16.
Therefore, the comparative information for 2018 is not comparable
to the information presented for 2019.
TBC Bank Group PLC financial results are prepared in accordance
with International Financial Reporting Standards ("IFRS") as
adopted by the European Union ("EU") and the Companies Act 2006
applicable to companies reporting under IFRS. The Group classifies
and separately discloses certain incomes and expenses, which are
non-recurring by nature and are caused by extraordinary events, as
one-off items in order to provide a consistent view and enable
better analysis of the financial performance of the Group. Adjusted
performance is an alternative performance measure and the
reconciliation of the underlying profit and loss items with the
reported profit and loss items and the underlying ratios are given
under Annex 1 section on pages 44-45.
Please note, that there might be slight differences in previous
periods' figures due to rounding.
Net Interest Income
In 9M 2019, net interest income amounted to GEL 573.7 million,
up by 1.9% YoY, or by 3.0% without the pre-payment fee[13] of a
subordinated loan and excess liquidity in 3Q 2019.
The YoY increase in interest income was primarily related to a
21.4% increase in the gross loan portfolio, offset mainly by a drop
in yields on retail loans, which was driven by the continued impact
of the NBG's regulation effective from January 2019, which limits
the banks' ability to lend money to higher-yield retail customers.
Over the same period, the rise in interest expense, without one-off
reasons mentioned above, was related to the increased cost of
deposits driven by the increase in the deposit portfolio by the
higher share of LC denominated deposits in the total deposit
portfolio.
Consequently, NIM stood at 5.5% in 9M 2019, compared to 7.0% in
9M 2018. Risk adjusted NIM for the period amounted to 4.5%, down by
0.8 pp YoY.
In thousands of GEL 9M'19 9M'18 Change
--------------------- --------------- ------------ --------
Interest income 1,045,633 928,692 12.6%
--------------------- --------------- ------------ --------
Interest expense (471,969) (365,473) 29.1%
--------------------- --------------- ------------ --------
Net interest income 573,664 563,219 1.9%
--------------------- --------------- ------------ --------
NIM 5.5% 7.0% -1.5 pp
--------------------- --------------- ------------ --------
Risk adjusted NIM 4.5% 5.3% -0.8 pp
--------------------- --------------- ------------ --------
Net fee and commission income
In 9M 2019, net fee and commission income totalled GEL 132.4
million, up by 16.7% on a YoY basis.
The increase on a YoY basis was mainly related to the rise in
net fee and commission income on guarantees and letters of credit,
as well as in other net fee and commission income. The increase in
net fee and commission income on guarantees and letters of credit
was due to a 53.8% YoY increase in the respective portfolios. The
rise in other net fee and commission income was related to our new
digital ecosystems (Payme, My GE and TKT) and the reclassification
of certain fee expenses from this category to settlement
transactions.
In thousands of GEL 9M'19 9M'18 Change
----------------------------------------- ---------------- ------------ -------
Net fee and commission income
----------------------------------------- ---------------- ------------ -------
Card operations 39,388 37,064 6.3%
Settlement transactions 48,341 45,080 7.2%
Guarantees issued and letters of credit 21,459 16,048 33.7%
Other 23,258 15,274 52.3%
----------------------------------------- ---------------- ------------ -------
Total net fee and commission income 132,446 113,466 16.7%
----------------------------------------- ---------------- ------------ -------
Other Non-Interest Income
Total other non-interest income increased by 19.7% on a YoY
basis and amounted to GEL 117.9 million in 9M 2019. This primarily
resulted from the rise in net income from foreign currency
operations, mainly related to the increased number and volume of FX
transactions, as well as the significantly higher volatility of the
local currency during 9M 2019, compared to 9M 2018.
Net insurance premium earned after claims and acquisition costs
increased by 52.6% YoY, mainly related to the increased scale of
the insurance business. More information about TBC insurance can be
found in Annex 2 on page 46.
In thousands of GEL 9M'19 9M'18 Change
--------------------------------------------------------------------- ---------------- ------------- -------
Other non-interest income
--------------------------------------------------------------------- ---------------- ------------- -------
Net income from foreign currency operations 91,191 73,845 23.5%
Net insurance premium earned after claims and acquisition costs[14] 12,851 8,422 52.6%
Other operating income 13,854 16,254 -14.8%
--------------------------------------------------------------------- ---------------- ------------- -------
Total other non-interest income 117,896 98,521 19.7%
--------------------------------------------------------------------- ---------------- ------------- -------
Credit Loss Allowance
In 9M 2019, total credit loss allowance amounted to GEL 92.2
million, down by 24.5% on a YoY basis.
The decrease was mainly due to a decrease in the credit loss
allowance on loans to customers, which was driven by strong
performance in all segments, as well as the portfolio product mix
change, related to the continued impact of the regulations
introduced in January 2019.
In thousands of GEL 9M'19 9M'18 Change
-------------------------------------------------- ----------------- ------------- --------
Credit Loss Allowance
-------------------------------------------------- ----------------- ------------- --------
Credit loss allowance for loan to customers (87,178) (109,325) -20.3%
Credit loss allowance for other financial assets (5,038) (12,878) -60.9%
----------------- ------------- --------
Total credit loss allowance (92,216) (122,203) -24.5%
-------------------------------------------------- ----------------- ------------- --------
Operating income after credit loss allowance 731,790 653,003 12.1%
-------------------------------------------------- ----------------- ------------- --------
Cost of risk 1.1% 1.7% -0.6 pp
-------------------------------------------------- ----------------- ------------- --------
Operating Expenses
In 9M 2019, total operating expenses expanded 12.7% on a YoY
basis and amounted to GEL 323.6 million.
The increase was primarily due to an increase in staff costs and
a rise in depreciation and amortization. The growth in staff cost
was mainly driven by the increase of the scale of business and the
rise in the share price[15] over the three-year period for the
purpose of top and middle management share based bonuses (while the
change in the number of shares did not have material effect). The
increase in depreciation and amortization was mainly due to IFRS
16.
In thousands of GEL 9M'19 9M'18 Change
------------------------------------------- ----------------- -------------- -------
Operating expenses
------------------------------------------- ----------------- -------------- -------
Staff costs (178,869) (157,141) 13.8%
Provisions for liabilities and charges 1,368 (4,000) NMF
Depreciation and amortization (49,557) (33,407) 48.3%
Administrative & other operating expenses (96,544) (92,577) 4.3%
------------------------------------------- ----------------- -------------- -------
Total operating expenses (323,602) (287,125) 12.7%
------------------------------------------- ----------------- -------------- -------
Cost to income 39.3% 37.0% 2.3 pp
------------------------------------------- ----------------- -------------- -------
NMF - no meaningful figures
Net Income
Net income for the first nine months of 2019 increased by GEL
73.0 million, or 23.7% and stood at GEL 380.3 million.
As a result, ROE stood at 21.6%, up by 0.4 pp, while ROA
remained unchanged and stood at 3.1%.
In thousands of GEL 9M'19 9M'18 Change
----------------------- ---------------- ------------- -------
Profit before tax 408,188 365,878 11.6%
----------------------- ---------------- ------------- -------
Income tax expense (27,871) (58,530) -52.4%
----------------------- ---------------- ------------- -------
Profit for the period 380,317 307,348 23.7%
----------------------- ---------------- ------------- -------
Return on equity 21.6% 21.2% 0.4 pp
----------------------- ---------------- ------------- -------
Return on assets 3.1% 3.1% 0.0 pp
----------------------- ---------------- ------------- -------
Funding and Liquidity
In September 2019, the National Bank of Georgia introduced net
stable funding ratio (NSFR) per Basel III standards. NSFR for 30
September 2019 per NBG's new methodology stood at 132.6%, compared
to 100% limit. The issuance of USD 300 million Eurob ond in June
2019 and USD 125 million AT1 bonds in July 2019 increased our
liquidity positions, as a result, our liquidity ratio and total
liquidity coverage ratio were up by 7.3 pp and 19.9 pp on a YoY
basis, respectively.
30-Sep-19 30-Sep-18 Change
--------------------------------------------------------------- ---------- ----------- --------
Minimum net stable funding ratio, as defined by NBG 100.0% N/A N/A
Net stable funding ratio 137.7% 131.9%[16] 5.8 pp
Net loans to deposits + IFI funding 96.9% 88.0% 8.9 pp
Leverage (Times) 7.3x 7.0x 0.3x
Minimum liquidity ratio, as defined by the NBG 30.0% 30.0% 0.0 pp
Liquidity ratio, as defined by the NBG 39.2% 31.9% 7.3 pp
Minimum total liquidity coverage ratio, as defined by the NBG 100.0% 100.0% 0.0 pp
Minimum LCR in GEL, as defined by the NBG 75.0% 75.0% 0.0 pp
Minimum LCR in FC, as defined by the NBG 100.0% 100.0% 0.0 pp
Total liquidity coverage ratio, as defined by the NBG 131.6% 111.6% 19.9 pp
LCR in GEL, as defined by the NBG 87.7% 86.5% 1.2 pp
LCR in FC, as defined by the NBG 162.8% 128.1% 34.7 pp
--------------------------------------------------------------- ---------- ----------- --------
Regulatory Capital
As of 30 September 2019, the Bank's Basel III CET 1 capital
stood at 11.9%, down by 0.5 pp on a YoY basis. The drop was mainly
driven by the portfolio increase and GEL depreciation during 2019.
The effect was partially offset by net income generation over the
same period. Despite the above mentioned factors, the Bank's total
and tier 1 capital ratios increased by 1.9 pp and 3.0 pp on a YoY
basis, respectively. The increase was mainly driven by the issuance
of the AT1 bonds in the amount of USD 125 million, that were
reflected in the capital in July 2019.
In thousands of GEL 30-Sep-19 30-Sep-18 Change
-------------------------------------- ----------- ----------- --------
CET 1 Capital 1,770,734 1,532,058 15.6%
Tier 1 Capital 2,191,792 1,580,547 38.7%
Total Capital 2,894,704 2,020,501 43.3%
Total Risk-weighted Exposures 14,889,695 12,305,756 21.0%
-------------------------------------- ----------- ----------- --------
Minimum CET 1 ratio 9.8% 8.3% 1.5 pp
CET 1 Capital adequacy ratio 11.9% 12.4% -0.5 pp
Minimum Tier 1 ratio 11.9% 10.3% 1.6 pp
Tier 1 Capital adequacy ratio 14.7% 12.8% 1.9 pp
Minimum total capital adequacy ratio 16.7% 15.8% 0.9 pp
Total Capital adequacy ratio 19.4% 16.4% 3.0 pp
-------------------------------------- ----------- ----------- --------
Loan Portfolio
As of 30 September 2019, the gross loan portfolio reached GEL
11,680.3 million, up by 21.4% YoY, or by 14.3% on a constant
currency basis, mainly supported by growth in the corporate and
MSME segments. Over the same period, the proportion of gross loans
denominated in foreign currency decreased by 1.0 pp on a YoY basis
and accounted for 58.2% of total loans, while on a constant
currency basis the proportion of gross loans denominated in foreign
currency decreased by 3.6 pp and stood at 55.6%.
At the end of September 2019, our market share in total loans
stood at 38.7% up by 0.3 pp YoY, while our loan market share in
legal entities was 37.7% up by 1.1 pp YoY, and our loan market
share in individuals stood at 39.5%, down by 0.4 pp YoY.
In thousands of GEL 30-Sep-19 30-Sep-18 Change
--------------------------------------- ----------- ---------- -------
Loans and advances to customers
--------------------------------------- ----------- ---------- -------
Retail 4,903,134 4,446,397 10.3%
Retail loans GEL 2,284,431 2,059,297 10.9%
Retail loans FC 2,618,703 2,387,100 9.7%
Corporate 4,029,321 2,891,628 39.3%
Corporate loans GEL 1,248,851 771,611 61.8%
Corporate loans FC 2,780,470 2,120,017 31.2%
MSME 2,747,802 2,284,538 20.3%
MSME loans GEL 1,354,789 1,093,199 23.9%
MSME loans FC 1,393,013 1,191,339 16.9%
--------------------------------------- ----------- ---------- -------
Total loans and advances to customers 11,680,257 9,622,563 21.4%
--------------------------------------- ----------- ---------- -------
9M'19 9M'18 Change
------------------------------- ------ ------ --------
Loan yields 11.1% 12.4% -1.3 pp
Loan yields GEL 15.7% 18.0% -2.3 pp
Loan yields FC 7.9% 8.5% -0.6 pp
Retail Loan Yields 12.3% 14.4% -2.1 pp
Retail loan yields GEL 18.3% 20.8% -2.5 pp
Retail loan yields FC 7.3% 8.0% -0.7 pp
Corporate Loan Yields 9.2% 9.4% -0.2 pp
Corporate loan yields GEL 10.8% 11.1% -0.3 pp
Corporate loan yields FC 8.5% 8.8% -0.3 pp
MSME Loan Yields 11.4% 12.1% -0.7 pp
MSME loan yields GEL 15.3% 16.1% -0.8 pp
MSME loan yields FC 7.9% 8.7% -0.8 pp
------------------------------- ------ ------ --------
Loan Portfolio Quality
The total PAR 30 improved by 0.3 pp on a YoY basis, driven by
the retail segment, while total NPLs stood at 2.9%, down by 0.2 pp,
which was primarily attributable to the strong performance of the
corporate segment. NPLs coverage ratio excluding collaterals stood
at 97.7%, down by 15.5 pp, which was mainly driven by the retail
and MSME segment.
Par 30 30-Sep-19 30-Sep-18 Change
------------- ---------- ---------- --------
Retail 2.3% 3.0% -0.7 pp
Corporate 0.8% 0.8% 0.0 pp
MSME 3.0% 2.7% 0.3 pp
------------- ---------- ---------- --------
Total Loans 2.0% 2.3% -0.3 pp
------------- ---------- ---------- --------
Non-performing Loans 30-Sep-19 30-Sep-18 Change
---------------------- ---------- ---------- --------
Retail 3.2% 3.0% 0.2 pp
Corporate 1.8% 2.6% -0.8 pp
MSME 4.3% 4.1% 0.2 pp
---------------------- ---------- ---------- --------
Total Loans 2.9% 3.1% -0.2 pp
---------------------- ---------- ---------- --------
NPLs Coverage Sep-19 Sep-18
Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral
--------------- ---------------- ----------------- ---------------- -----------------
Corporate 118.5% 317.8% 104.3% 242.5%
Retail 113.2% 183.9% 140.8% 206.4%
MSME 64.9% 179.2% 80.8% 184.8%
--------------- ---------------- ----------------- ---------------- -----------------
Total 97.7% 209.9% 113.2% 209.0%
--------------- ---------------- ----------------- ---------------- -----------------
Cost of risk
The total cost of risk for 9M 2019 stood at 1.1%, down by 0.6 pp
YoY, driven by strong performance in all segments, as well as the
portfolio product mix change, related to the continued impact of
the regulations introduced in January 2019.
Cost of Risk 9M'19 9M'18 Change
-------------- ------ ------ --------
Retail 2.1% 2.7% -0.6 pp
Corporate 0.0% 0.5% -0.5 pp
MSME 0.8% 1.1% -0.3 pp
Total 1.1% 1.7% -0.6 pp
-------------- ------ ------ --------
Deposit Portfolio
The total deposit portfolio increased by 13.2% YoY and amounted
to GEL 9,897.3 million, while on a constant currency basis the
total deposit portfolio was up by 5.3%. The proportion of deposits
denominated in foreign currency decreased by 1.1 pp on a YoY basis
and accounted for 65.5% of total deposits, while on a constant
currency basis the proportion of deposits denominated in foreign
currency decreased by 3.7 pp and stood at 62.9%.
By the end September 2019, our market share in deposits amounted
to 39.3%, down by 1.0 pp YoY, and our market share in deposits to
legal entities stood at 40.1% up by 0.7 pp. Our market share in
deposits to individuals stood at 38.6%, down by 2.5 pp YoY.
In thousands of GEL 30-Sep-19 30-Sep-18 Change
---------------------------- ---------- ---------- -------
Customer Accounts
---------------------------- ---------- ---------- -------
Retail 5,550,227 4,850,586 14.4%
Retail deposits GEL 1,057,854 825,879 28.1%
Retail deposits FC 4,492,373 4,024,707 11.6%
Corporate 3,242,875 2,920,526 11.0%
Corporate deposits GEL 1,770,123 1,585,126 11.7%
Corporate deposits FC 1,472,752 1,335,400 10.3%
MSME 1,104,221 969,337 13.9%
MSME deposits GEL 586,603 509,021 15.2%
MSME deposits FC 517,618 460,316 12.4%
---------------------------- ---------- ---------- -------
Total Customer Accounts 9,897,323 8,740,449 13.2%
---------------------------- ---------- ---------- -------
9M'19 9M'18 Change
--------------------------------- ------ ------ --------
Deposit rates 3.3% 3.3% 0.0 pp
Deposit rates GEL 5.7% 5.7% 0.0 pp
Deposit rates FC 2.0% 2.1% -0.1 pp
Retail Deposit Yields 2.8% 2.7% 0.1 pp
Retail deposit rates GEL 5.0% 4.4% 0.6 pp
Retail deposit rates FC 2.3% 2.4% -0.1 pp
Corporate Deposit Yields 4.9% 5.1% -0.2 pp
Corporate deposit rates GEL 7.3% 7.8% -0.5 pp
Corporate deposit rates FC 1.7% 1.9% -0.2 pp
MSME Deposit Yields 0.9% 1.0% -0.1%
MSME deposit rates GEL 1.5% 1.7% -0.2 pp
MSME deposit rates FC 0.3% 0.4% -0.1 pp
--------------------------------- ------ ------ --------
Segment definition and PL
Business Segments
The segment definitions are as follows (updated in 2019):
-- Corporate - legal entity/group of affiliated entities with an
annual revenue exceeding GEL 12.0 million or which have been
granted facilities with more than GEL 5.0 million. Some other
business customers may also be assigned to the corporate segment or
transferred to the MSME segment on a discretionary basis;
-- Retail - non-business individual customers; all individual
customers are included in retail deposits;
-- MSME - business customers who are not included in the
corporate segment; or legal entities which have been granted a pawn
shop loan; or individual customers of the fully-digital bank,
Space; and
-- Corporate centre and other operations - comprises the
Treasury, other support and back office functions, and non-banking
subsidiaries of the Group.
Business customers are all legal entities or individuals who
have been granted a loan for business purposes.
Income Statement by Segments
9M'19 Retail MSME Corporate Corp.Centre Total
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Interest income 435,007 218,437 248,678 143,511 1,045,633
Interest expense (111,665) (7,445) (118,772) (234,087) (471,969)
Net transfer
pricing (48,882) (72,695) 30,483 91,094 -
Net interest
income 274,460 138,297 160,389 518 573,664
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Fee and
commission
income 146,770 18,434 36,568 4,908 206,680
Fee and
commission
expense (62,196) (6,304) (4,936) (798) (74,234)
Net fee and
commission
income 84,574 12,130 31,632 4,110 132,446
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Net insurance
premium earned
after claims
and acquisition
costs - - - 12,851 12,851
Net income from
foreign
currency
operations 22,971 17,916 36,540 556 77,983
Foreign exchange
translation
gains less
losses/(losses
less gains) - - - 13,208 13,208
Gains less
Losses from
Disposal
of Investment
Securities
Measured
at Fair Value
through Other
Comprehensive
Income (266) - - 817 551
Net losses from
derivative
financial
instruments - - - 149 149
Other operating
income 7,531 907 1,742 2,460 12,640
Share of profit
of associates - - - 514 514
Other operating
non-interest
income and
insurance
profit 30,236 18,823 38,282 30,555 117,896
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Credit loss
allowance for
loans to
customers (73,077) (14,765) 664 - (87,178)
Credit loss
allowance for
performance
guarantees and
credit related
commitments 425 359 (2,650) - (1,866)
Credit loss
allowance for
investments in
finance lease - - - (33) (33)
Credit loss
allowance for
other financial
assets 137 - 2,440 (5,510) (2,933)
Credit loss
allowance for
financial
assets measured
at fair value
through other
comprehensive
income - - (92) (114) (206)
Profit before
G&A expenses
and income
taxes 316,755 154,844 230,665 29,526 731,790
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Staff costs (99,378) (35,640) (27,301) (16,550) (178,869)
Depreciation and
amortization (38,275) (5,957) (2,291) (3,034) (49,557)
Provision for
liabilities
and charges - - - 1,368 1,368
Administrative
and other
operating
expenses (60,115) (16,614) (12,481) (7,334) (96,544)
Operating
expenses (197,768) (58,211) (42,073) (25,550) (323,602)
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Profit before
tax 118,987 96,633 188,592 3,976 408,188
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Income tax
expense (12,041) (10,388) (21,792) 16,350 (27,871)
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Profit for the
year 106,946 86,245 166,800 20,326 380,317
----------------- --------------------- -------------------- ------------------- ------------ -------------------
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL 30-Sep-19 30-Sep-18
------------------------------------------------------------------------ --------------------- -------------------
Cash and cash equivalents 1,349,260 1,114,672
Due from other banks 30,297 152,010
Mandatory cash balances with National Bank of Georgia 1,954,662 1,426,773
Loans and advances to customers 11,344,779 9,279,982
Investment securities measured at fair value through other
comprehensive income 1,177,963 868,060
Bonds carried at amortized cost 871,640 518,179
Investments in finance leases 241,840 183,715
Investment properties 78,449 78,274
Current income tax prepayment 29,599 7,650
Deferred income tax asset 2,179 2,499
Other financial assets 243,330 103,520
Other assets 205,066 186,061
Premises and equipment 381,065 375,002
Right of use assets 59,040 -
Intangible assets 134,837 96,662
Goodwill 63,215 28,718
Investments in associates 2,536 2,220
TOTAL ASSETS 18,169,757 14,423,997
------------------------------------------------------------------------ --------------------- -------------------
LIABILITIES
Due to credit institutions 3,613,093 2,981,269
Customer accounts 9,897,323 8,740,449
Lease liabilities 62,126 -
Other financial liabilities 96,781 90,966
Current income tax liability 1,128 30
Debt Securities in issue 1,251,649 13,027
Deferred income tax liability 21,142 27,202
Provisions for liabilities and charges 22,729 16,329
Other liabilities 88,672 85,972
Subordinated debt 615,939 412,803
TOTAL LIABILITIES 15,670,582 12,368,047
------------------------------------------------------------------------ --------------------- -------------------
EQUITY
Share capital 1,682 1,650
Shares held by trust (15) N/A
Share premium 828,936 796,854
Retained earnings 1,794,054 1,372,798
Group re-organisation reserve (162,166) (162,166)
Share based payment reserve (28,104) (18,689)
Revaluation reserve for premises 56,606 64,962
Fair value reserve 7,351 4,875
Cumulative currency translation reserve (6,368) (7,277)
Net assets attributable to owners 2,491,976 2,053,007
------------------------------------------------------------------------ --------------------- -------------------
Non-controlling interest 7,199 2,943
--------------------- -------------------
TOTAL EQUITY 2,499,175 2,055,950
------------------------------------------------------------------------ --------------------- -------------------
TOTAL LIABILITIES AND EQUITY 18,169,757 14,423,997
------------------------------------------------------------------------ --------------------- -------------------
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
In thousands of GEL 9M'19 9M'18
------------------------------------------------------------------------ --------------------- -------------------
Interest income 1,045,633 928,692
Interest expense (471,969) (365,473)
Net interest income 573,664 563,219
------------------------------------------------------------------------ --------------------- -------------------
Fee and commission income 206,680 168,652
Fee and commission expense (74,234) (55,186)
Net fee and commission income 132,446 113,466
------------------------------------------------------------------------ --------------------- -------------------
Net insurance premiums earned 25,813 16,578
Net insurance claims incurred and agents' commissions (12,962) (8,156)
------------------------------------------------------------------------ --------------------- -------------------
Net insurance premium earned after claims and acquisition costs 12,851 8,422
------------------------------------------------------------------------ --------------------- -------------------
Net income from foreign currency operations 77,983 63,420
Net gain/(losses) from foreign exchange translation 13,208 10,425
Net gains/(losses) from derivative financial instruments 551 357
Gains less losses from disposal of investment securities measured at
fair value through other
comprehensive income 149 2
Other operating income 12,640 14,953
Share of profit of associates 514 942
Other operating non-interest income 105,045 90,099
------------------------------------------------------------------------ --------------------- -------------------
Credit loss allowance for loans to customers (87,178) (109,325)
Credit loss allowance for investments in finance lease (33) (986)
Credit loss allowance for performance guarantees and credit related
commitments (1,866) (2,524)
Credit loss allowance for other financial assets (2,933) (9,304)
Credit loss allowance for financial assets measured at fair value
through other comprehensive
income (206) (64)
Operating income after credit loss allowance for impairment 731,790 653,003
------------------------------------------------------------------------ --------------------- -------------------
Staff costs (178,869) (157,141)
Depreciation and amortization (49,557) (33,407)
(Provision for)/ recovery of liabilities and charges 1,368 (4,000)
Administrative and other operating expenses (96,544) (92,577)
Operating expenses (323,602) (287,125)
------------------------------------------------------------------------ --------------------- -------------------
Profit before tax 408,188 365,878
------------------------------------------------------------------------ --------------------- -------------------
Income tax expense (27,871) (58,530)
--------------------- -------------------
Profit for the period 380,317 307,348
------------------------------------------------------------------------ --------------------- -------------------
Other comprehensive income:
------------------------------------------------------------------------ --------------------- -------------------
Items that may be reclassified subsequently to profit or loss:
------------------------------------------------------------------------ --------------------- -------------------
Movement in fair value reserve (1,328) 3,192
------------------------------------------------------------------------ --------------------- -------------------
Exchange differences on translation to presentation currency 568 85
------------------------------------------------------------------------ --------------------- -------------------
Items that will not be reclassified to profit or loss:
------------------------------------------------------------------------ --------------------- -------------------
Income tax recorded directly in other comprehensive income - (5,151)
------------------------------------------------------------------------ --------------------- -------------------
Other comprehensive income for the period (760) (1,874)
------------------------------------------------------------------------ --------------------- -------------------
Total comprehensive income for the period 379,557 305,474
------------------------------------------------------------------------ --------------------- -------------------
Profit attributable to:
------------------------------------------------------------------------ --------------------- -------------------
- Shareholders of TBCG 378,479 305,126
------------------------------------------------------------------------ --------------------- -------------------
- Non-controlling interest 1,838 2,222
------------------------------------------------------------------------ --------------------- -------------------
Profit for the period 380,317 307,348
------------------------------------------------------------------------ --------------------- -------------------
Total comprehensive income is attributable to:
------------------------------------------------------------------------ --------------------- -------------------
- Shareholders of TBCG 377,721 303,273
------------------------------------------------------------------------ --------------------- -------------------
- Non-controlling interest 1,836 2,201
------------------------------------------------------------------------ --------------------- -------------------
Total comprehensive income for the period 379,557 305,474
------------------------------------------------------------------------ --------------------- -------------------
Consolidated Statements of Cash Flows
In thousands of GEL 30-Sep-19 30-Sep-18
--------------------------------------------------------------------------------- -------------------- -------------
Cash flows from/(used in) operating activities
Interest received 993,757 898,534
Interest paid (452,461) (357,224)
Fees and commissions received 200,884 180,489
Fees and commissions paid (74,179) (55,190)
Insurance premium received 30,108 18,045
Insurance claims paid (15,821) (7,803)
Income received from trading in foreign currencies 77,983 63,420
Other operating income received 28,589 4,379
Staff costs paid (167,557) (153,876)
Administrative and other operating expenses paid (124,244) (97,685)
Income tax paid (57,330) (24,758)
Cash flows from operating activities before changes in operating assets and
liabilities 439,729 468,331
--------------------------------------------------------------------------------- -------------------- -------------
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of
Georgia (507,948) (479,208)
Loans and advances to customers (818,366) (1,064,695)
Investment in finance lease (25,113) (37,065)
Other financial assets (70,535) 38,446
Other assets 20,757 (9,900)
Net change in operating liabilities
Due to other banks 56,845 116,376
Customer accounts 208,271 887,193
Other financial liabilities (81,840) (9,738)
Other liabilities and provision for liabilities and charges 7,683 6,484
Net cash from operating activities (770,517) (83,776)
--------------------------------------------------------------------------------- -------------------- -------------
Cash flows from/(used in) investing activities
Acquisition of investment securities measured at fair value through other
comprehensive income (1,212,044) (479,092)
Proceeds from redemption at maturity of investment securities measured at fair
value through
other comprehensive income 1,061,708 272,477
Acquisition of bonds carried at amortized cost (441,715) (235,480)
Proceeds from redemption of bonds carried at amortized cost 209,683 167,258
Acquisition of premises, equipment and intangible assets (83,494) (55,321)
Disposal of premises, equipment and intangible assets 13,030 1,140
Proceeds from disposal of investment property 10,040 8,448
Acquisition of subsidiaries, net of cash acquired (33,741) -
Net cash used in investing activities (476,533) (320,570)
--------------------------------------------------------------------------------- -------------------- -------------
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds 1,479,407 1,456,759
Redemption of other borrowed funds (1,121,017) (1,250,372)
Redemption of subordinated debt (104,079) (32,166)
Proceeds from debt securities in issue 1,182,844 (7,446)
Redemption of debt securities in issue (5,980) -
Dividends paid (91,926) (85,483)
Net cash flows from financing activities 1,339,249 81,292
--------------------------------------------------------------------------------- -------------------- -------------
Effect of exchange rate changes on cash and cash equivalents 90,150 6,249
--------------------------------------------------------------------------------- -------------------- -------------
Net increase in cash and cash equivalents 182,349 (316,805)
--------------------------------------------------------------------------------- -------------------- -------------
Cash and cash equivalents at the beginning of the year 1,166,911 1,431,477
--------------------------------------------------------------------------------- -------------------- -------------
Cash and cash equivalents at the end of the year 1,349,260 1,114,672
--------------------------------------------------------------------------------- -------------------- -------------
Key Ratios
Average Balances
The average balances included in this document are calculated as
the average of the relevant monthly balances as of each month-end.
Balances have been extracted from TBC's unaudited and consolidated
management accounts prepared from TBC's accounting records. These
were used by the management for monitoring and control
purposes.
Key Ratios
Ratios (based on monthly averages, where applicable) 9M'19 9M'18
------------------------------------------------------ ------- -----------
Profitability ratios:
Underlying ROE(1) 21.8% 22.3%
Reported ROE(2) 21.6% 21.2%
Underlying ROA(3) 3.2% 3.3%
Reported ROA(4) 3.1% 3.1%
ROE before credit loss allowance(5) 26.9% 29.6%
Underlying Cost to Income(6) 38.6% 37.0%
Reported Cost to Income(7) 39.3% 37.0%
NIM(8) 5.5% 7.0%
Risk Adjusted NIM(9) 4.5% 5.3%
Loan Yields(10) 11.1% 12.4%
Risk Adjusted Loan Yields(11) 10.1% 10.7%
Deposit rates(12) 3.3% 3.3%
Yields on interest Earning Assets(13) 10.1% 11.5%
Cost of Funding(14) 4.6% 4.4%
Spread(15) 5.5% 7.1%
------------------------------------------------------ ------- -----------
Asset quality and portfolio concentration:
Cost of Risk(16) 1.1% 1.7%
PAR 90 to Gross Loans(17) 1.2% 1.3%
NPLs to Gross Loans(18) 2.9% 3.1%
NPLs coverage(19) 97.7% 113.2%
NPLs coverage with collateral(20) 209.9% 209.0%
Credit loss level to Gross Loans(21) 2.9% 3.6%
Related Party Loans to Gross Loans(22) 0.1% 0.1%
Top 10 Borrowers to Total Portfolio(23) 9.0% 10.3%
Top 20 Borrowers to Total Portfolio(24) 13.0% 14.1%
------------------------------------------------------ ------- -----------
Capital optimisation:
Net Loans to Deposits plus IFI Funding(25) 96.9% 88.0%
Net Stable Funding Ratio(26) 137.7% 131.9%[17]
Liquidity Coverage Ratio(27) 131.6% 111.6%
Leverage(28) 7.3x 7.0x
CET 1 CAR (Basel III)(29) 11.9% 12.4%
Regulatory Tier 1 CAR (Basel III)(30) 14.7% 12.8%
Regulatory Total 1 CAR (Basel III)(31) 19.4% 16.4%
------------------------------------------------------ ------- -----------
Ratio definitions
1. Underlying return on average total equity (ROE) equals
underlying net income attributable to owners divided by the monthly
average of total shareholders' equity attributable to the PLC's
equity holders for the same period adjusted for the respective
one-off items; Annualised where applicable.
2. Reported return on average total equity (ROE) equals net
income attributable to owners divided by the monthly average of
total shareholders' equity attributable to the PLC's equity holders
for the same period; annualised where applicable.
3. Underlying return on average total assets (ROA) equals
underlying net income of the period divided by monthly average
total assets for the same period. Annualised where applicable.
4. Reported return on average total assets (ROA) equals net
income of the period divided by monthly average total assets for
the same period. Annualised where applicable.
5. Return on average total equity (ROE) before credit loss
allowance equals net income attributable to owners excluding all
credit loss allowance divided by the monthly average of total
shareholders 'equity attributable to the PLC's equity holders for
the same period.
6. Underlying cost to income ratio equals total underlying
operating expenses for the period divided by the total revenue for
the same period. (Revenue represents the sum of net interest
income, net fee and commission income and other non-interest
income).
7. Reported cost to income ratio equals total operating expenses
for the period divided by the total revenue for the same period.
(Revenue represents the sum of net interest income, net fee and
commission income and other non-interest income).
8. Net interest margin (NIM) is net interest income divided by
monthly average interest-earning assets; annualised where
applicable. Interest-earning assets include investment securities
excluding corporate shares, net investment in finance lease, net
loans, and amounts due from credit institutions. The latter
excludes all items from cash and cash equivalents, excludes EUR
mandatory reserves with NBG that currently have negative interest,
and includes other earning items from due from banks.
9. Risk Adjusted Net Interest Margin is NIM minus the cost of
risk without one-offs and the currency effect.
10. Loan yields equal interest income on loans and advances to
customers divided by monthly average gross loans and advances to
customers; annualised where applicable.
11. Risk Adjusted Loan yield is loan yield minus the cost of
risk without one-offs and currency effect.
12. Deposit rates equal interest expense on customer accounts
divided by monthly average total customer deposits; annualised
where applicable.
13. Yields on interest earning assets equal total interest
income divided by monthly average interest earning assets;
annualised where applicable.
14. Cost of funding equals total interest expense divided by
monthly average interest bearing liabilities; annualised where
applicable.
15. Spread equals difference between yields on interest earning
assets (including but not limited to yields on loans, securities
and due from banks) and cost of funding (including but not limited
to cost of deposits, cost on borrowings and due to banks).
16. Cost of risk equals credit loss allowance for loans to
customers divided by monthly average gross loans and advances to
customers; annualised where applicable.
17. PAR 90 to gross loans ratio equals loans for which principal
or interest repayment is overdue for more than 90 days divided by
the gross loan portfolio for the same period.
18. NPLs to gross loans equals loans with 90 days past due on
principal or interest payments, and loans with a well-defined
weakness, regardless of the existence of any past-due amount or of
the number of days past due divided by the gross loan portfolio for
the same period.
19. NPLs coverage ratio equals total credit loss allowance for
loans to customers calculated per IFRS 9 divided by the NPL
loans.
20. NPLs coverage with collateral ratio equals credit loss
allowance for loans to customers per IFRS 9 plus the total
collateral amount of NPL loans (excluding third party guarantees)
discounted at 30-50% depending on segment type divided by the NPL
loans.
21. Credit loss level to gross loans equals credit loss
allowance for loans to customers divided by the gross loan
portfolio for the same period.
22. Related party loans to total loans equals related party
loans divided by the gross loan portfolio.
23. Top 10 borrowers to total portfolio equals the total loan
amount of the top 10 borrowers divided by the gross loan
portfolio.
24. Top 20 borrowers to total portfolio equals the total loan
amount of the top 20 borrowers divided by the gross loan
portfolio.
25. Net loans to deposits plus IFI funding ratio equals net
loans divided by total deposits plus borrowings received from
international financial institutions.
26. Net stable funding ratio equals the available amount of
stable funding divided by the required amount of stable funding as
defined by NBG in line with Basel III guidelines.
27. Liquidity coverage ratio equals high-quality liquid assets
divided by the total net cash outflow amount as defined by the
NBG.
28. Leverage equals total assets to total equity.
29. Regulatory CET 1 CAR equals CET 1 capital divided by total
risk weighted assets, both calculated in accordance with the Pillar
1 requirements of the NBG Basel III standards. The reporting
started from the end of 2017. Calculations are made for TBC Bank
stand-alone, based on local standards.
30. Regulatory tier 1 CAR equals tier I capital divided by total
risk weighted assets, both calculated in accordance with the Pillar
1 requirements of the NBG Basel III standards. The reporting
started from the end of 2017. Calculations are made for TBC Bank
stand-alone, based on local standards.
31. Regulatory total CAR equals total capital divided by total
risk weighted assets, both calculated in accordance with the Pillar
1 requirements of the NBG Basel III standards. The reporting
started from the end of 2017. Calculations are made for TBC Bank
stand-alone, based on local standards.
Exchange Rates
To calculate the YoY growth of the Balance Sheet items without
the currency exchange rate effect, we used the USD/GEL exchange
rate of 2.6151 as of 30 September 2018. As of 30 September 2019,
the USD/GEL exchange rate equalled 2.9552. For P&L items growth
calculations without currency effect, we used the average USD/GEL
exchange rate for the following periods: 9M 2019 of 2.7765, 9M 2018
of 2.4871.
Additional Disclosures
Subsidiaries of TBC Bank Group PLC[18]
Ownership Country Year of Industry Total Assets
/ voting incorporation (after elimination)
% as
of 30
September
2019
----------- ----------- --------------- -------------------- -----------------------
Subsidiary Amount % in TBC
GEL'000 Group
--------------------------- ----------- ----------- --------------- -------------------- ------------ ---------
JSC TBC Bank 99.9% Georgia 1992 Banking 17,662,713 97.21%
United Financial
Corporation JSC 98.7% Georgia 1997 Card processing 9,108 0.05%
TBC Capital LLC 100.0% Georgia 1999 Brokerage 3,027 0.02%
TBC Leasing JSC 100.0% Georgia 2003 Leasing 306,941 1.69%
Non-banking
TBC Kredit LLC 100.0% Azerbaijan 1999 credit institution 26,119 0.14%
Banking System Service Information
Company LLC 100.0% Georgia 2009 services 1,064 0.01%
TBC Pay LLC 100.0% Georgia 2009 Processing 33,856 0.19%
Real estate
Index LLC 100.0% Georgia 2011 management 873 0.00%
TBC Invest LLC 100.0% Israel 2011 PR and marketing 211 0.00%
BG LLC* 0.0% Georgia 2018 Asset management 16,854 0.09%
JSC TBC Insurance 100.0% Georgia 2014 Insurance 60,272 0.33%
Redmed LTD 100.0% Georgia 2019 E-commerce 221 0.00%
TBC International
LLC 100.0% Georgia 2019 Asset management 217 0.00%
Swoop JSC 100.0% Georgia 2010 Retail Trade 513 0.00%
GE Commerce LTD 100.0% Georgia 2018 Retail Trade 3,361 0.02%
LLC Online Tickets 55.0% Georgia 2015 Software Services 1,563 0.01%
All property ge Real estate
LLC 90.0% Georgia 2013 management 1,022 0.01%
E-commerce,
Housing and
My.ge LLC 65.0% Georgia 2008 Auto 3,253 0.02%
Inspired LLC 51.0% Uzbekistan 2011 Processing 2,011 0.01%
(*)The Group has de facto control over the subsidiaries (control without
legal form of ownership)
Update on strategic objectives
Our mission: Make life easier
Financial services with strong focus on digital:
o Book value as of 30 September 2019 - GEL 2.3 billion
o Total assets as of 30 September 2019 - GEL 18.0 billion
o Number of customers as of 30 September 2019 - 2.6 million
Ecosystems:
o Revenue[19] - GEL 56.6 million for 9M 2019, up by 76% YoY
o Net profit[20] - GEL 25.1 million for 9M 2019, up by 75%
YoY
o Number of visitors[21] in September 2019 - 3.0-5.5 million
TBC Bank drives 25% of the ecosystems' revenue
Our customer centric ecosystems
We are increasing our touchpoints with customers by creating
secure customer-centric digital ecosystems that help our customers
to satisfy their needs in the most convenient and seamless way
possible.
Our ambitions are to:
o Establish new standards of customer experience;
o Facilitate digital sales and engagement;
o Create new revenue streams;
o Collect more valuable customer data.
Payments ecosystem
9M'19 9M'18 Change
Number of payments[22]
(million) 245.5 208.4 17.8%
------ ------ -------
Payments ecosystem[23] 175.6 150.1 17.0%
------ ------ -------
Other payments business[24] 69.9 58.3 19.9%
------ ------ -------
Volume of payments(22)
(GEL billion) 107.3 89.2 20.3%
------ ------ -------
Payments ecosystem(23) 8.5 6.7 26.9%
------ ------ -------
Other payments business(24) 98.8 82.5 19.8%
------ ------ -------
o We are Number 1 in E-com & POS transactions volume, with a
market share of above 53%[25];
o We are among the world's best with a number of contactless
payments above 86%[26]; and
o We have a great innovation record with a lot of "first in the
region" payment innovations such as stickers, P2P, contactless cash
withdrawal, Voice payments, Apple Pay, ATM QR withdrawal etc.
Our aspirations
o Annual growth rate for payments commission income of 20%;
o Increase annual net revenue from GEL 109 mln (with 42%
contribution from ecosystems) in 2018 to GEL 218 mln by 2022.
TBC Pay
TBC Pay is one of Georgia's leading payment companies. TBC Pay
operates a wide network of self-service terminals all over
Georgia.
Services:
o Traditional services: self-service terminals and an online
platform (www.tbcpay.ge) that enable individuals to perform
payments for various daily services instantly in an interactive way
on a 24-hour basis;
o New services: mobile application, easiest instant money
transfer services between Georgian cards, template management and
e-wallet.
Financials:
o The business is self-sustainable;
o TBC Bank drives 25% of TBC Pay's revenue.
9M'19 9M'20 F
Revenue (GEL million) 24.4 25.0[27]
------ ---------
Number of transactions
(million) 39.0 41.5(27)
------ ---------
EBITDA (GEL million) 12.1
------ ---------
Payme
Payme is a leading digital payment service provider in
Uzbekistan that supplies high-quality payment solutions to its 1.6
million users[28].
Services:
o Traditional services: Utility payments, P2P transfers, Loan
repayments, mPOS for QR-based payments, E-commerce purchases;
o New services: New application, Payme 2.0, was created and beta
version was launched in July with upgraded interface design and new
capabilities.
Financials:
o Investment in 2019 - USD 5.5 million for 51% shareholding;
o The business is self-sustainable.
9M'19 9M'20 F
Revenue (GEL million) 5.6 15.2[29]
------ ---------
Number of registered users
(thousand) 1,577 2,517
------ ---------
Number of transactions
(million) 26.7 45.7
------ ---------
EBITDA (GEL million) 3.7
------ ---------
Housing ecosystem
Livo
Livo is the first housing digital ecosystem in Georgia, offering
a full range of services needed when buying or renting a home, with
an estimated market share of 20%[30].
Services:
o Traditional services: personal profiles, advertisements and 3D
tours & photographers;
o Innovative services: mortgage loans (TBC and VTB Bank) the
first real-estate valuation service in Georgia within 24 hours,
premier agent service for brokers.
Financials:
o Investment in 2019 - USD 725 thousand (USD 225 thousand for
90% shareholding plus USD 500 thousand for future development);
o Planned investment in 2020 is - GEL 2.5 million from TBC;
o Break-even is planned in 3Q 2020;
o TBC Bank drives 85% of Livo's revenue, which we plan to reduce
to 65% in 2020.
9M'19 9M'20 F
Revenue (GEL million) 1.4 3.9
------ --------
Number of unique visitors
(thousand) 281 450
------ --------
Number of listings (thousand) 17 48
------ --------
EBITDA (GEL million) (0.4)
------ --------
MyHome.ge
The leading classified digital platform in Georgia for
real-estate purchase and renting, with an estimated market share of
35%(30) .
Services:
o Traditional services: personal profiles, advertisements, drone
& photographers;
o Given the large number of current visitors, the strategy for
2020 is to diversify service offerings and increase revenue
stream.
Financials:
o Allocated initial investment in August 2019 based on revenue
contribution (35%) - GEL 6.7 million[31];
o The business is self-sustainable.
9M'19 9M'20 F
Revenue (GEL million) 1.2 1.6
------ --------
Number of unique visitors
(thousand) 467 500
------ --------
Number of listings (thousand) 130 139
------ --------
EBITDA (GEL million) 0.4
------ --------
E-commerce ecosystem
Vendoo
An asset light platform, which is a key intermediary between
buyers and sellers, modelled on industry peers such as Alibaba and
Rakuten.
The estimated total addressable market is around GEL 200 million
in 2019 and is expected to growth by 30% in 2020.
Offerings:
o Delivery within 24 hours;
o Offerings: Electronics, personal care products, gardening
& housing, toys, household chemistry, books & stationary
and beverages;
o Over 200 large merchants; and
o Synergies with our banking operations: installment loans,
participation in the loyalty program - Ertguli.
Financials:
o Investment in 2018 and 2019 was GEL 1.5 million and GEL 3.9
million respectively;
o Planned investment in 2019-2020 is GEL 3.4 million from
TBC;
o Break-even is planned in 4Q 2020;
o GMV (Gross Merchandise Volume) amounted to GEL 0.8 million in
9M 2019 and is forecasted to reach GEL 26.8 million in 9M 2020.
9M'19 9M'20 F
Revenue (GEL million)[32] 1.1 22.7
------ --------
Number of unique visitors
(thousand) 514 600
------ --------
SKUs[33] (thousand) 20 60
------ --------
EBITDA (GEL million)(32) (2.5)
------ --------
MyMarket.ge & MyShop.ge
These platforms are the number one players in C2C and B2C
e-commerce in Georgia, with an estimate market share of
80%[34].
Offerings:
o Myshop is an online outlet platform offering a wide range of
products;
o Mymarket offers both brand new and secondary products as well
as various household services.
Financials:
o Allocated initial investment in August 2019 based on revenue
contribution (22%) was GEL 4.2 million[35];
o The business is self-sustainable.
9M'19 9M'20 F
Revenue (GEL million) 1.0 1.4
------ --------
Number of unique visitors
(thousand) 837 917
------ --------
Number of sellers (thousand) 35 44
------ --------
EBITDA (GEL million) 0.3
------ --------
Auto ecosystem
MyAuto.ge & MyParts.ge
Market leader in the automotive and spare parts with an
estimated market share of 80%[36] in each.
Offerings:
o Purchase and renting of secondary cars;
o Purchase of auto parts;
o Myauto has 50 dealers and 33,000 sellers; and
o Myparts has 44 Merchants and 8,440 sellers.
Financials:
o Allocated initial investment in August 2019 based on revenue
contribution (43%) was GEL 8.5 million[37];
o The business is self-sustainable.
9M'19 9M'20 F
Revenue (GEL million) 2.0 2.5
------ --------
Number of unique visitors
(thousand) 1,391 1,530
------ --------
Number of listings (thousand) 345 404
------ --------
EBITDA (GEL million) 0.7
------ --------
Space - Fully digital bank
Space was developed over the course of just 8 months[38] by a
dedicated team of 35 professionals. The development costs before
launch of Beta version in May 2019 amounted to GEL 1.4 million.
Key metrics as of 30 September 2019
Number of downloads 428 thousand
---------------------------------- -----------------------------------------------------------
Total registered 158 thousand, out of whom 47% are TBC's dormant
customers customers
---------------------------------- -----------------------------------------------------------
Number of transactions 700 thousand, out of which 8% was conducted
(3Q'19) by TBC cards and 8% by other Georgian banks'
cards
---------------------------------- -----------------------------------------------------------
Transaction amount GEL 38 million, out of which 12% was conducted
(3Q'19) by TBC cards and 12% by other Georgian banks'
cards
---------------------------------- -----------------------------------------------------------
Loan portfolio GEL 23 million
---------------------------------- -----------------------------------------------------------
Number of borrowers 9 thousand
---------------------------------- -----------------------------------------------------------
Number of total cards 101 thousand, out of which 26% was TBC cards
and 17% other Georgian banks' cards
---------------------------------- -----------------------------------------------------------
Number of space cards 58 thousand
---------------------------------- -----------------------------------------------------------
Our Products
o Instant Consumer Loan 24/7;
o Instant Money Transfer to any bank 24/7;
o Use app with other bank cards;
o Mobile top and bill payments; and
o QR instalments.
Transformation into a data driven organization
Strengthen TBC's market leading position by becoming a data
driven organization.
Why?
In order to become customer centric company and reach a
non-replicable competitive advantage on the market, which will:
o Have a significant impact on our profitability;
o Bring our superior customer experience to the next level;
and
o Reveal hidden opportunities.
How?
o Implementing best-in-class data analytical projects across the
bank designed with the help of world's leading consultants;
o Building modern IT infrastructure; and
o Developing strong in-house data analytical capabilities by
recruiting and training the best talent.
Current Progress:
o 4 Data analytics projects have already been finished; and
o GEL 5 million extra profit in the first nine months of
2019.
Aspirations:
o 23 Data analytics projects already finished; and
o GEL 100 million annual extra profit by 2023.
International Expansion
Azerbaijan
No investment has been made in relation to this project during
2019 and no material expenses were incurred
Main highlights:
o TBC Bank and Nikoil Bank agreed on shareholders agreement in
late December 2018 and signed it in early January 2019. According
to which our shareholding in the joint entity will be 8.34%. The
transaction is subject to regulatory approval.
o Currently bank is in the process of significant reorganization
which includes re-branding and shift to digitalization.
Achievements
o During 2019, Nikoil Bank implemented significant developments
across business and operating directions:
o New management team was recruited including: CDM, CRO, CFO and
CIO;
o Core banking was revised and improved, including data
warehouse;
o Risk management was improved in terms of operational risks,
credit risks, and compliance;
o Concept for rebranding, new branches and head office was
developed and is awaiting regulatory approval.
Current Development
3Q 2019 2Q 2019 3Q 2018
Loan disbursements in thousand
USD[39] 40,567 32,912 22,312
-------- -------- --------
Number of customers[40] 85,605 78,422 64,608
-------- -------- --------
Mid-term vision
In million USD 3Q'19 results of Mid-term targets
Nikoil Bank[41] of joint entity
Gross loan portfolio c. 219 c. 1,400
------------------ -----------------
Equity c. 32 c. 200
------------------ -----------------
Return on equity NMF 20% +
------------------ -----------------
o Core segments: Retail and MSME (not large SMEs and
Corporates)
o Product offerings: A mix of Nikoil Bank and TBC Bank products
adapted to the local needs and offered primarily through digital
channels, including Space Bank
Uzbekistan
This is still in the concept stage and subject to approval
(including approval from the authorities), therefore it could
change as we progress. The pre-license is expected in 2019
Why Uzbekistan?
o Large underpenetrated market:
o with a population of more than 33.45 million
o Retail loans to GDP stood at 7.2% at the end of 2018
o Similar history as part of the Soviet Union and good cultural
links.
o Right time given implementation of reforms, many of which were
designed by former Georgian government officials.
o Both Uzbekistan and Georgia are included into China's One Belt
One Road initiative.
o No digital bank operates in Uzbekistan currently
Strategic Positioning
o Build a next generation bank for retail and MSME;
o Focus on digital channels and SPACE;
o Operate asset light, smart branches;
o Establishing the highest standards of corporate
governance;
o Simple and intuitive products and processes;
o A transparent and straightforward commissions structure;
o Best customer experience; and
o An automated decision-making system.
Main Highlights
o Initial investments from TBC Bank around USD 20-30 mln,
resulting in 51% shareholding;
o Medium term financial targets after license is granted:
o Achieve sustainable ROE up to 25%; and
o Cost to income ratio below 35%.
o Our Uzbek and Azerbaijan subsidiaries together will contribute
c. 30% to the Group's loan book in medium to long term;
o We started working on developing new ecosystems in
Uzbekistan.
Upcoming Events
o Opening pilot branch in 2019 for proof of concept;
o Core banking implementation with local IT company;
o Multichannel development including Space:
o Define user experience;
o Testing of main processes among 100 clients including:
onboarding, account opening and card ordering.
o Documents submitted to Central Bank of Uzbekistan in October
2019;
o Client contact center development;
o Our international partners, EBRD and IFC have expressed their
interest to participate in this project subject to completion of
their internal procedures and approvals; and
o We have reached an agreement on main terms with Uzbek-Oman
Investment Company (UOIC) to act as our local partner.
ESG
Corporate responsibility is deeply embedded in our culture. We
are dedicated to delivering value to our shareholders, employees,
customers and business partners whilst preserving the environment
and making positive contribution to the community.
Environmental matters
The main principles of our Environmental Policy are as
following:
o Defining the environmental aspects and impacts of our business
activity
o Elaborating and developing measures to minimize negative
impact on the environment
o Take efficiency and responsible resource management into
account
o Be in compliance with applicable environmental, health, safety
and labour regulations
o Awareness raising among our staff
o Do not finance businesses that have negative effect on
environment and society
o Promoting sustainability finance among our clients
Social matters
o Supporting Georgian's business and entrepreneurs by providing
access to finance and full-scale business support program.
o Supporting young generation through varies projects including
online charity platform www.statusdonotes.ge, partnership with
Tbilisi State University and Young Researchers and Innovators
Completion, Leonard da Vinci and many more.
o Supporting Georgian culture through many inanities including
establishment of leading literary award in Georgia, Saba and the
country's first online channel dedicated to art and culture,
Artarea as well hosting various cultural events in TBC's art
galleries.
o Supporting professional development of our employees through
providing various in-house training opportunities as well as
providing financial support to attend external courses.
Governance matters
o Listed on the premium segment of London Stock Exchange, full
compliance with UK Corporate Governance Code
o The most experienced board in the region, drawing on the
diverse and eminent backgrounds of its members
In 2019, TBC Bank Group received a rating of A (on a scale of
AAA-CCC) in the MSCI ESG Ratings assessment.
1) Reconciliation of reported IFRS consolidated figures with the underlying numbers
Reason for exclusion
from the Group's
Item (in thousands current reported
of GEL ) 2Q 2019 2Q 2018 Description performance
Consulting (5,605) - Consulting fees, in These costs are
fees relation to the recent significant and
events regarding historic non-recurring in
matters surrounding nature, and therefore
TBC Bank. For further are not indicative
details, please see of the Group's current
the following press underlying performance.
release.
Reversal of - (17,426) TBC Bank reversed the These costs are
deferred tax one-off deferred tax significant and
gain gain recognized in non-recurring in
2016 due to the recent nature, and therefore
amendment to the Georgian are not indicative
Tax Code in relation of the Group's current
to corporate income underlying performance.
tax. The amendment,
which came into force
on 12 June 2018, postponed
tax relief for re-invested
profit from 1 January
2019 to 1 January 2023
for financial institutions.
-------------------- -------- --------- ----------------------------- -------------------------
in thousands of GEL 2Q 2019 3Q 2019 9M 2019
Reported net interest income 190,481 186,225 573,664
Reported net fee and commission income 43,534 47,105 132,446
Reported net insurance premium earned
after claims and acquisition costs 4,338 4,784 12,851
Reported other operating income 33,949 41,644 105,045
------------------------------------------- ----------------------- ----------------------- -----------------------
Reported operating income 272,302 279,758 824,006
Reported total credit loss allowance (33,372) (25,749) (92,216)
------------------------------------------- ----------------------- ----------------------- -----------------------
Reported operating income after provisions 238,930 254,009 731,790
Reported operating expenses (109,383) (111,705) (323,602)
One-off consulting fees (5,605) - (5,605)
Underlying operating expenses (103,778) (111,705) (317,997)
------------------------------------------- ----------------------- ----------------------- -----------------------
Reported profit before tax 129,547 142,304 408,188
Underlying profit before tax 135,152 142,304 413,793
------------------------------------------- ----------------------- ----------------------- -----------------------
Reported income tax (9,329) (15,527) (27,871)
Effect on tax of one-off items 841 - 841
Underlying income tax (10,170) (15,527) (28,712)
------------------------------------------- ----------------------- ----------------------- -----------------------
Reported net profit 120,218 126,777 380,317
Underlying net profit 124,982 126,777 385,081
------------------------------------------- ----------------------- ----------------------- -----------------------
Reported non-controlling interest (NCI) 220 1,533 1,838
Effect on NCI of one-off items - - -
Underlying NCI 220 1,533 1,838
Reported net profit less NCI 119,998 125,244 378,479
Underlying net profit less NCI 124,762 125,244 383,243
------------------------------------------- ----------------------- ----------------------- -----------------------
in thousands of GEL 2Q 2019 3Q 2019 9M 2019
Average reported equity attributable
to the PLC's equity holders 2,325,788 2,435,216 2,342,805
Adjustment for one-off items on monthly
average basis 2,306 - 5,046
Average underlying equity attributable
to the PLC's equity holders 2,328,094 2,435,216 2,347,851
Average reported total assets 15,988,280 17,814,079 16,341,986
Adjustment for one-off items on monthly - - -
average basis
Average underlying total assets 15,988,280 17,814,079 16,341,986
----------------------------------------- ----------------------- ----------------------- -----------------------
2Q 2019 3Q 2019 9M 2019
Reported cost to income 40.2% 39.9% 39.3%
Underlying cost to income (APM) 38.1% 39.9% 38.6%
Reported return on equity 20.7% 20.4% 21.6%
Underlying return on equity (APM) 21.5% 20.4% 21.8%
Reported return on assets 3.0% 2.8% 3.1%
Underlying return on assets (APM) 3.1% 2.8% 3.2%
----------------------------------- -------- -------- --------
in thousands of GEL 3Q 2018 9M 2018
Reported net interest income 199,612 563,219
Reported net fee and commission income 39,384 113,466
Reported net insurance premium earned after
claims and acquisition costs 3,123 8,422
Reported other operating income 35,970 90,099
--------------------------------------------- ----------------------- -----------------------
Reported operating income 278,089 775,206
Reported total provision expenses (47,650) (122,203)
Reported operating income after provisions 230,439 653,003
Reported operating expenses (104,103) (287,125)
Reported profit before tax 126,336 365,878
Reported income tax (18,952) (58,530)
Reversal of the one-off deferred tax gain - (17,426)
Underlying income tax (18,952) (41,104)
--------------------------------------------- ----------------------- -----------------------
Reported net profit 107,384 307,348
Underlying net profit 107,384 324,774
--------------------------------------------- ----------------------- -----------------------
Reported non-controlling interest (NCI) 605 2,222
Effect on NCI of one-off items - -
Underlying NCI 605 2,222
Reported net profit less NCI 106,779 305,126
Underlying net profit less NCI 106,779 322,552
--------------------------------------------- ----------------------- -----------------------
in thousands of GEL 3Q 2018 9M 2018
Average reported equity attributable to the
PLC's equity holders 1,998,099 1,927,113
Adjustment for one-off items on monthly average
basis 17,426 7,887
Average underlying equity attributable to the
PLC's equity holders 2,015,525 1,935,000
Average reported total assets 13,929,421 13,181,811
Adjustment for one-off items on monthly average - -
basis
Average underlying total assets 13,929,421 13,181,811
------------------------------------------------- ----------------------- -----------------------
3Q 2018 9M 2018
Reported Return on Equity 21.2% 21.2%
Underlying Return on Equity (APM) 21.2% 22.3%
Reported Return on Assets 3.1% 3.1%
Underlying Return on Assets (APM) 3.1% 3.3%
----------------------------------- -------- --------
2) TBC Insurance
TBC Insurance is a rapidly growing, wholly owned subsidiary of
TBC Bank and it is the Bank's main bancassurance partner. The
company was acquired by the Group in October 2016 and it has since
grown significantly. In 3Q 2019[42], TBC Insurance held a total
market share of 21.1%[43] without border motor third party
liability (MTPL) insurance, while it was number one player on
market in the retail segment.
TBC Insurance serves both individual and legal entities and
provides a broad range of insurance products covering motor,
travel, personal accident, credit life and property, business
property, liability, cargo and agro insurance products. The company
differentiates itself through its advanced digital channels, which
include TBC bank's award-winning internet and mobile banking
applications, a wide network of self-service terminals, a web
channel, and a Georgian-speaking chat-bot B-Bot, which is available
through Facebook messenger.
In 2Q 2019, TBC Insurance entered the health insurance market
with a focus on the premium segment. Our strategy is to focus on
affluent individuals and capture the affluent market by leveraging
our strong brand name, leading digital capabilities and cross
selling opportunities with payroll customers. Our medium term
target is to reach 25% market share in the premium health insurance
business.
In 3Q 2019, TBC Insurance achieved strong growth results in
non-health business lines. The gross written premium grew by 20.0%
YoY and amounted to GEL 19.0 million. Over the same period, the net
combined ratio([44]) decreased by 1.0 pp and stood at 77.8%. As a
result, net profit for 3Q 2019 stood at GEL 2.6 million.
Information excluding health 3Q'19 2Q'19 3Q'18 9M'19 9M'18
insurance
------------------------------ ------- ------- ------- ------- -------
In thousands of GEL
------------------------------ ------- ------- ------- ------- -------
Gross written premium 18,999 19,557 15,833 56,026 43,004
Net earned premium[45] 13,412 12,218 9,841 36,307 25,103
Net profit 2,567 2,210 2,271 6,819 5,028
Net combined ratio 77.8% 76.6% 78.8% 77.9% 78.6%
Market share 21.1% 19.0% 20.7% 20.8% 19.5%
Information including health 3Q'19 2Q'19 3Q'18 9M'19 9M'18
insurance
------------------------------ ------- ------- ------- ------- -------
In thousands of GEL
------------------------------ ------- ------- ------- ------- -------
Gross written premium 19,760 19,991 15,833 57,223 43,003
Net earned premium(45) 13,579 12,259 9,841 36,515 25,103
Net profit 2,227 1,803 2,271 6,034 5,028
Net combined ratio 81.6% 81.3% 78.8% 81.5% 78.6%
2Q 2019 figures are provided without subsidiaries of TBC
Insurance: Swoop JSC, GE Commerce LTD, All Property LTD and 3Q 2019
figures are given without Redmed LTD;
3) Earnings per share
Earnings per share 3Q'19 2Q'19 3Q'18 9M'19 9M'18
for profit attributable
to the owners of the
Group:
-------------------------- ------ ------ ------ ------ ------
In GEL
-------------------------- ------ ------ ------ ------ ------
- Basic earnings per
share 2.28 2.19 1.97 6.91 5.67
- Diluted earnings
per share 2.27 2.17 1.95 6.81 5.62
Source: IFRS Consolidated
[1] Given high liquidity and high capital adequacy, the bank
pre-paid subordinated loan from the Netherlands Development Finance
Company (FMO).
[2] International financial institutions
[3] Market share figures are based on data from the National
Bank of Georgia (NBG). The NBG includes interbank loans for
calculating market share in loans.
[4] Internet or Mobile Banking penetration equals active clients
of Internet or Mobile Banking divided by total active clients.
[5] Mobile Banking penetration equals active clients of Mobile
Banking divided by total active clients.
([6]) Payments ecosystem includes: Payme, TKT.ge, TBC Pay,
E-commerce and POS
[7] IMF WEO October 2019 update
[8] Given high liquidity and high capital adequacy, the bank
pre-paid subordinated loan from the Netherlands Development Finance
Company (FMO).
[9] Net insurance premium earned after claims and acquisition
costs can be reconciled to the standalone net insurance profit (as
shown in Annex 2 on page 46) as follows: net insurance premium
earned after claims and acquisition costs less credit loss
allowance, administrative expenses and taxes, plus fee and
commission income and net interest income.
[10] The new share based payments compensation scheme was
approved in December 2018. Expense is accrued based on grant date
share price, which was fixed at GBP 14.88 whilst grant date share
price of old scheme was USD 11.00. GEL/USD exchange rate at grant
date was fixed at 2.2399 in old scheme, while in new schemes
currency exchange rate is not fixed.
[11] Based on internal estimates
[12] Based on internal estimates
[13] Given high liquidity and high capital adequacy, the bank
pre-paid subordinated loan from the Netherlands Development Finance
Company (FMO).
[14] Net insurance premium earned after claims and acquisition
costs income after claims can be reconciled to the standalone net
insurance profit (as shown in Annex 2 on page 46) as follows: net
insurance premium earned after claims and acquisition costs less
credit loss allowance, administrative expenses and taxes, plus fee
and commission income and net interest income.
[15] New share based payments compensation scheme was approved
in December 2018. Expense is accrued based on grant date share
price which was fixed at GBP 14.88 whilst grant date share price of
old scheme was USD 11.00. GEL/USD exchange rate at grant date was
fixed at 2.2399 in old scheme, while in new schemes currency
exchange rate is not fixed.
[16] Based on internal estimate
[17] Based on internal estimates
[18] TBC Bank Group PLC became the parent company of JSC TBC
Bank on 10 August 2016
[19] Total ecosystems' revenue also includes net fee and
commission income from POS terminals and e-commerce
[20] Total ecosystems' net profit also includes net fee and
commission income and related operating costs from POS terminals
and e-commerce
[21] Total number of visitors across all systems, some
individuals may be visitors of multiple systems. For Payme, the
number of registered customers is used
[22] Includes both retail & business payments
[23] Payments ecosystem includes: Payme, TKT, TBC Pay,
E-commerce and POS
[24] Other payments business includes: ATM_TBC Cards, branch,
internet and mobile banking
[25] Source: NBG
[26] The data from Business Insider Intelligence was used for
comparison purposes.
[27] Forecasted figures are given without effects of new
regulations effective from March 2020
[28] Number of registered users
[29] Including revenue from new services (GEL 6.4 million),
which will be launched in 2020 and will have positive impact on
EBITDA from 2021.
[30] Based on number of visitors
[31] In August 2019 we acquired 65% of My.ge for GEL 19.45
million.
[32] The revenue and EBITDA include Swoop figures.
[33] Stock Keeping Units
[34] Based on number of visitors
[35] In August 2019 we acquired 65% of My.ge for GEL 19.45
million.
[36] Based on number of visitors
[37] In August 2019 we acquired 65% of My.ge for GEL 19.45
million.
[38] From launching the App's first prototype in January 2018 to
the end of the beta version of Space in September 2018.
[39] Based on management accounts
[40] Number of customers with loan or deposit above 1 AZN
[41] Based on management accounts
[42] Based on internal estimates
[43] Or 19.2% with MTPL insurance. Starting from March 1, 2018
border MTPL was introduced and GWP was divided evenly between 17
insurance companies, which therefore decreased our market
share.
([44]) Net insurance claims plus acquisition costs and
administrative expenses divided by net earned premium.
([45]) Net earned premium equals earned premium minus
reinsurer's share of earned premium.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRTKMMMMKDZGLZG
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