TIDMTBCG
RNS Number : 5797D
TBC Bank Group PLC
20 February 2020
TBC BANK GROUP PLC ("TBC Bank")
4Q 2019 UNAUDITED CONSOLIDATED FINANCIAL RESULTS AND FY 2019
PRELIMINARY 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.
Fourth Quarter 2019 Unaudited Consolidated Financial Results and
Full Year 2019 Preliminary Unaudited Consolidated Financial Results
Conference Call
TBC Bank Group PLC ("TBC PLC") announces that its consolidated
financial results for the fourth quarter 2019 and preliminary
consolidated financial results for the full year 2019 will be
published on Thursday, 20 February 2020 at 7.00 am GMT (11.00 am
GET).
On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze,
CFO, will host a conference call to discuss the results.
Date & time: Thursday, 20 February 2020 at 14.00 (GMT) /
15.00 (CET) / 9.00 (EST)
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: 8513998
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: IR@tbcbank.com.ge
E-mail: ZSzalai@Tbcbank.com.ge Tel: +(995 32) 227 27 E-mail: IR@tbcbank.com.ge
Tel: +44 (0) 7908 242128 27 Tel: +(995 32) 227 27
Web: www.tbcbankgroup.com Web: www.tbcbankgroup.com 27
Address: 68 Lombard Address: 7 Marjanishvili Web: www.tbcbankgroup.com
St, London EC3V 9LJ, St. Tbilisi, Georgia Address: 7 Marjanishvili
United Kingdom 0102 St. Tbilisi, Georgia
0102
Table of Contents
4Q and FY 2019 Results Announcement
TBC Bank - Background
Performance Highlights
Letter from the Chief Executive Officer
Operating Overview
Recent Developments
International Expansion
Economic Overview
Unaudited Consolidated Financial Results Overview for 4Q
2019
Unaudited Consolidated Financial Results Overview for FY
2019
Additional Disclosures
1) Subsidiaries of TBC Bank Group PLC
2) Update on strategic objectives
3) Reconciliation of reported IFRS consolidated figures with the
underlying numbers
4) Net gains from currency swaps
5) TBC Insurance
6) Azerbaijan
7) ESG ratings and scores
8) Loan book breakdown by stages according IFRS 9
TBC Bank Group PLC ("TBC Bank")
TBC Bank Announces Unaudited Preliminary 4Q and FY 2019 and
Consolidated Financial Results:
Underlying Profit for the period for the FY 2019 up by 19.8% YoY to GEL 545.1 million
Reported Profit for the period for the FY 2019 up by 23.5% YoY to GEL 540.3 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 38.2% 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's 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 (APM)
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 3 section on pages 45-46.
Performance Highlights
4Q 2019 P&L Highlights
o Profit for the period amounted to GEL 160.0 million (4Q 2018:
GEL 130.1 million)
o Return on average equity (ROE) stood at 24.7% (4Q 2018:
24.3%)
o Return on average assets (ROA) stood at 3 .5% (4Q 2018:
3.5%)
o Cost to income of BC Bank standalone [1] was 36.2% (4Q 2018:
37.0%)
o Cost to income of TBC Bank Group PLC 41.8% (4Q 2018:
39.7%)
o Cost of risk stood at -0.2% (4Q 2018: 1.4%)
o Net interest margin (NIM) stood at 5.3% (4Q 2018: 6.7%)
o Risk adjusted net interest margin (NIM) stood at 5.4% (4Q
2018: 5.4%)
o Basic earnings per share stood at 2.92 (4Q 2018: 2.40)
o Diluted earnings per share 2.91 (4Q 2018: 2.37)
FY 2019 P&L Highlights
o Underlying profit for the period amounted to GEL 545.1 million
(FY 2018: GEL 454.9 million)
o Reported profit for the period amounted to GEL 540.3 million
(FY 2018: GEL 437.4 million)
o Underlying return on average equity (ROE) amounted to 22.6%
(FY 2018: 22.8%)
o Reported return on a verage equity (ROE) amounted to 22.4% (FY
2018: 22.0%)
o Underlying return on average assets (ROA) amounted to 3.3% (FY
2018: 3.3%)
o Reported return on a verage assets (ROA) amounted to 3.2% (FY
2018: 3.2%)
o Cost to income of BC Bank standalone [2] was 35.9% (FY 2018:
35.6%)
o Underlying cost to income of TBC Bank Group PLC stood at 39.5% (FY 2018: 37.8%)
o Reported Cost to income of TBC Bank Group PLC stood at 39.9%
(FY 2018: 37.8%)
o Cost of risk on loans stood at 0.7% (FY 2018: 1.6%)
o Net interest margin (NIM) stood at 5.6% (FY 2018: 6.9%)
o Risk adjusted net interest margin (NIM) stood at 4.8% ( FY
2018: 5.4%)
o Basic earnings per share stood at 9.83 (FY 2018: 8.07)
o Diluted earnings per share 9.76 (FY 2018: 8.00)
Balance Sheet Highlights as of 31 December 2019
o Total assets amounted to GEL 18,410.3 million as of 31
December 2019, up by 18.8% YoY
o Gross loans and advances to customers stood at GEL 12,662.0
million as of 31 December 2019, up by 22.1% YoY
o Net loans to deposits + IFI [3] funding stood at 104.8%, up by
14.9 pp YoY, and Regulatory Net Stable Funding Ratio (NSFR),
effective from 30 September 2019, stood at 126.7%
o NPLs were 2.7%, down by 0.4 pp YoY
o NPLs coverage ratios stood at 91.1%, or 194.2% with
collateral, on 31 December 2019 compared to 102.7% or 216.4% with
collateral, as of 31 December 2018
o Total customer deposits amounted to GEL 10,049.3 million as of
31 December 2019, up by 7.5% YoY
o As of 31 December 2019, the Bank's Basel III CET 1, Tier 1 and
Total Capital Adequacy Ratios per NBG methodology stood at 12.0%,
14.6% and 19.1% respectively, while minimum requirements amounted
to 10.4%, 12.5% and 17.5% respectively
Market Share ([4])
o Market share by total assets reached 38.2% as of 31 December
2019, remaining the same YoY
o Market share by total loans was 39.5% as of 31 December 2019,
up by 0.7 pp YoY
o Market share of total deposits reached 39.0% as of 31
December, down by 2.2 pp YoY
4Q 2019 operating highlights
o The number of affluent customers reached 82.5 thousand as of
31 December 2019, up by 102% YoY
o 93% of all transactions were conducted through digital
channels (4Q 2018: 91%)
o The number of digital transactions amounted to 21.6 million up
by 20.0% YoY, while the number of branch transactions stood at 1.7
million, down by 0.2% YoY
o The penetration ratio for internet or mobile banking [5] stood
at 45% for 4Q 2019 (4Q 2018: 40%)
o The penetration ratio for mobile banking [6] stood at 44% for
4Q 2019 (4Q 2018: 40%)
Income Statement Highlights
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
in thousands of GEL 4Q'19 4Q'18 Change YoY FY'19 FY'18 Change YoY
----------------------------------------- ----------- ---------- ----------- ---------- ---------- -----------
Net interest income 209,318 214,803 -2.6% 801,539 778,022 3.0%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Net fee and commission income 54,844 44,064 24.5% 187,290 157,530 18.9%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Other operating non-interest income [7] 40,075 53,395 -24.9% 139,414 151,916 -8.2%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Credit loss allowance 224 (44,036) NMF (91,992) (166,239) -44.7%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Operating income after credit loss
allowance 304,461 268,226 13.5% 1,036,251 921,229 12.5%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Operating expenses (127,124) (123,904) 2.6% (450,726) (411,029) 9.7%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Profit before tax 177,337 144,322 22.9% 585,525 510,200 14.8%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Income tax expense (17,313) (14,235) 21.6% (45,184) (72,765) -37.9%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Profit for the period 160,024 130,087 23.0% 540,341 437,435 23.5%
Underlying profit for the period 160,024 130,087 23.0% 545,105 454,861 19.8%
------------------------------------------ ---------- ---------- ----------- ---------- ---------- -----------
Balance Sheet and Capital Highlights
Dec-19 Dec-18 Change YoY
---------------- -------------- -----------
in thousands of GEL
-------------------------------------- ---------------- -------------- -----------
Total Assets 18,410,274 15,497,993 18.8%
Gross Loans 12,661,955 10,372,582 22.1%
Customer Deposits 10,049,324 9,352,142 7.5%
Total Equity 2,647,655 2,205,968 20.0%
Regulatory Common Equity Tier
I Capital (Basel III) 1,871,892 1,629,594 14.9%
Regulatory Tier I Capital (Basel
III) 2,281,706 1,678,716 35.9%
Regulatory Total Capital (Basel
III) 2,974,029 2,351,269 26.5%
Regulatory Risk Weighted Assets
(Basel III) 15,593,925 13,154,872 18.5%
-------------------------------------- ---------------- -------------- -----------
Key Ratios 4Q'19 4Q'18 Change YoY FY'19 FY'18 Change YoY
--------------------------------------- ------- ------- ----------- ------ ------- -----------
Underlying ROE 24.7% 24.3% 0.4 pp 22.6% 22.8% -0.2 pp
Reported ROE 24.7% 24.3% 0.4 pp 22.4% 22.0% 0.4 pp
Underlying ROA 3.5% 3.5% 0.0 pp 3.3% 3.3% 0.0 pp
Reported ROA 3.5% 3.5% 0.0 pp 3.2% 3.2% 0.0 pp
NIM 5.3% 6.7% -1.4 pp 5.6% 6.9% -1.3 pp
Risk adjusted NIM 5.4% 5.4% 0.0 pp 4.8% 5.4% -0.6 pp
Cost to income of standalone Bank [8] 36.2% 37.0% -0.8 pp 35.9% 35.6% 0.3 pp
Underlying cost to income 41.8% 39.7% 2.1 pp 39.5% 37.8% 1.7 pp
Reported Cost to income 41.8% 39.7% 2.1 pp 39.9% 37.8% 2.1 pp
Cost of risk -0.2% 1.4% -1.6 pp 0.7% 1.6% -0.9 pp
FX adjusted cost of risk -0.1% 1.3% -1.4 pp 0.7% 1.5% -0.8 pp
NPL to gross loans 2.7% 3.1% - 0.4 pp 2.7% 3.1% - 0.4 pp
NPLs coverage ratio exc. collateral 91.1% 102.7% -11.6 pp 91.1% 102.7% -11.6 pp
CET 1 CAR (Basel III) 12.0% 12.4% -0.4 pp 12.0% 12.4% -0.4 pp
Regulatory Tier 1 CAR (Basel III) 14.6% 12.8% 1.8 pp 14.6% 12.8% 1.8 pp
Regulatory Total CAR (Basel III) 19.1% 17.9% 1.2 pp 19.1% 17.9% 1.2 pp
Leverage (Times) 7.0x 7.0x 0.0x 7.0x 7.0x 0.0x
---------------------------------------- ------ ------- ----------- ------ ------- -----------
Letter from the Chief Executive Officer
I am delighted to present our strong financial and operating
results for the full year 2019 and to provide an overview of the
recent macroeconomic developments in Georgia.
Our underlying consolidated net profit [9] for the full year
2019 reached GEL 545.1 million (reported net profit amounted to GEL
540.3 million), up by 19.8% compared to 2018, while our underlying
return on equity was 22.6% and our underlying return on assets
stood at 3.3% (the reported return on equity stood at 22.4% and our
reported return on assets stood at 3.2%).
In 2019, our operating income amounted GEL 1,128.2, up by 3.7%
year-on-year, which was supported by increase in net fee and
commission income and net interest income. The growth in net
interest income was related to re-classification of net gains on
currency swaps in the amount of GEL 28.6 million from other
operating income, which offset by the decline in net interest
income related to introduction of responsible lending regulation
from 1 January 2019, limiting the Bank's ability to lend money to
higher-yield retail customers. Consequently, the net interest
margin decreased by 1.3 pp year-on-year and stood at 5.6% in 2019
and 5.3% in the fourth quarter of 2019. By the end of 2019, the net
interest margin has been fully rebased to the new level and we
expect it to stabilize at the 2019 fourth quarter level.
The growth in net profit was also strongly supported by a
decrease in credit loss allowance, which was driven by improved
performance across all segments and change in the product mix. As a
result, our cost of risk stood at 0.7% in 2019 compared to 1.6% in
2018. We also updated our guidance on cost of risk for 2020 and
expect it to be around 1.0%, given the positive effects of the
responsible lending regulation on loan book quality.
In 2019, our operating expenses increased by 9.7% year-on-year
or 8.3% on an underlying basis, resulting in an underlying
cost-to-income ratio of 39.5% (the reported cost-to-income ratio
stood at 39.9%), up by 1.7 pp year-on-year. The increase in the
cost-to-income ratio was mainly related to investments in our new
ecosystems. Over the same period, the bank's standalone
cost-to-income ratio remained strong and stood at 35.9%. [10]
In terms of balance sheet growth, our loan book expanded by
22.1% year-on-year, or by 17.9% on constant currency basis, mainly
supported by growth in the corporate and MSME segments. Over the
same period, deposits increased by 7.5% year-on-year, or by 2.9% on
constant currency basis, driven by our policy of reducing deposits
due to high liquidity as a result of the recent bond issuance. As a
result, as of 31 December 2019, our loan book market share stood at
39.5%, up by 0.7 pp year-on-year, while our deposit market share
stood at 39.0%, down by 2.2 pp year-on-year.
Our capital position and liquidity levels continue to be strong.
As of 31 December 2019, our regulatory CET 1, tier 1 and total
capital adequacy ratios per Basel III guidelines stood at 12.0%,
14.6% and 19.1% respectively, while minimum requirements amounted
to 10.4%, 12.5% and 17.5% respectively. Our regulatory liquidity
coverage ratio stood at 110% compared to the minimum requirement of
100%, while the regulatory net stable funding ratio (NSFR) per
Basel III guidelines stood at 127%, above the minimum requirement
of 100%.
Regarding macro developments, the Georgian economy demonstrated
continued strong performance in fourth quarter 2019 and expanded by
5.3% [11] year-on-year, following 5.8% growth in Q3 2019, while the
growth for the full year 2019 was estimated to be 5.2%. High GDP
growth was mainly supported by solid external inflows driven by
stronger exports and remittances, which grew by 15.9% and 13.1%
year-on-year in the fourth quarter respectively, as well as by
recovering tourism. The number of tourists went up by 12.0%
year-on-year, while tourism revenue increased by 5.4% over the same
period, mainly driven by strong growth in the number of visitors
from the EU, Turkey and other neighbouring countries. The
expansionary fiscal stance and relatively strong increase in
lending also contributed to GDP growth. The 5.2% growth of the
economy for the full year 2019 is particularly encouraging given
the backdrop of the challenges the economy faced in 2019, the most
important being Russia's flight ban.
Turning to the development of our business, I would like to
start with our progress in Uzbekistan:
o In January 2020, we obtained a preliminary banking licence in
Uzbekistan, which is an essential step in the process of launching
our banking operations in the country in the near future. As
previously announced, our strategy is to develop a greenfield,
next-generation banking ecosystem for retail and MSME customers in
Uzbekistan. The primary focus will be on digital channels,
including our neobank, Space. For our Uzbek venture, we are
planning to join forces with International Financial Institutions
and a local partner. Our plans foresee a minimum 51% shareholding.
We have already secured interest from the EBRD and IFC and have
reached an agreement on the main terms with the Uzbek-Oman
Investment Company to act as our local partner.
o Last year, we launched several important preparatory
work-streams, including implementation of the core banking system
in co-operation with a local IT company. We also set up a pilot
branch in Tashkent for proof of concept and built a core team for
the bank. Thus, we are well advanced in the process and expect to
obtain the final licence and start banking operations in summer
2020.
o The total amount of the initial investment from all the
shareholders is expected to be US$ 40 million, which we plan to
invest in two stages: US$ 12 million before receiving the licence,
and US$ 28 million after receiving the licence. In terms of our
product offerings, we plan to start with consumer loans, car loans,
savings and current accounts and add mortgages and MSME loans
later.
o In parallel, we are actively developing our payments business
in the country through our recently acquired subsidiary, Payme,
which is the leading payments company in the country, already
serving around 1.8 million customers. The company is growing
rapidly, and in 2019, its revenue went up by 84% and amounted to
GEL 8.6 million, while its EBITDA reached GEL 4.5 million, up by
77% year-on-year.
In December 2019, we also launched our point-of-sale consumer
financing operations in Uzbekistan, which is already available at
15 locations and we plan to expand to 50 locations by the end of
2020.
Another important development during the quarter was signing the
partnership agreement between our neobank, Space, and Visa, a
world's leader in digital payments. This will allow us to jointly
develop innovative, user-centric and secure banking solutions and
expand our digital banking footprint beyond Georgia.
Finally, I would like to give you an update about recent changes
to the composition of the Management Board of JSC TBC Bank. David
Chkonia, our Chief Risk Officer, left the bank at the end of his
contractual term in order to pursue other career opportunities.
Consequently, Nino Masurashvili, deputy CEO, who was previously in
charge of retail banking development, has been appointed as the new
Chief Risk Officer and Tornike Gogichaishvili, Deputy CEO and Chief
Operations Officer (COO) of the Bank has been appointed to lead the
retail banking business. The functions that were previously carried
out by the COO have been re-allocated to be the responsibility of
the CFO and the Deputy CEO, SME & Micro Banking. I would like
to thank David Chkonia for his significant contribution to
enhancing our risk management system and to wish him success in his
future career. Also, I would like to wish Nino Masurashvili and
Tornike Gogichaishvili success in their new roles.
Outlook
In 2019, we recorded strong financial results and made
significant progress against our strategic priorities, including
the development of customer focused ecosystems and international
expansion in Uzbekistan. This lays a solid foundation for further
development of these initiatives and I am very excited about our
ambitious plans for 2020. Our leading digital capabilities,
outstanding customer experience and advanced data analytical
capabilities, coupled with our strong team spirit, make me
confident that we are well positioned to achieve sustainable growth
and to deliver superior results to our shareholders. Therefore, I
would like to reiterate our medium-term targets: ROE of above 20%,
cost to income ratio below 35%, dividend pay-out ratio of 25-35%
and loan book growth of around 10-15%.
Operating Overview
Recent Developments
Preliminary banking licence in Uzbekistan
o TBC PLC has obtained a preliminary banking licence in
Uzbekistan, which is an essential step in the process to launch our
banking operations in the country in the near future.
o As previously announced, TBC PLC's strategy is to develop a
greenfield, next-generation banking ecosystem for retail and MSME
customers in Uzbekistan. The primary focus will be on digital
channels, including our neobank, Space.
For more information about the international strategy in
Uzbekistan please refer pages 11-12.
New borrowings from IFIs
o TBC Bank has signed a loan agreement in the amount of GEL 90
million equivalent with the European Investment Bank (EIB). The
funds are available to draw either in EUR, USD or GEL. The
five-year loan facility will be used primarily to finance micro,
small and medium size businesses in Georgia and support the
development of private enterprise.
o TBC Bank has signed three loan agreements totaling USD 23
million equivalent in Georgian Lari (GEL) with the European Bank
for Reconstruction and Development (EBRD). Funding will be
available for investments in green technology, especially in
climate adaptation and mitigation technologies.
Structural Changes of the Management Board
TBC Bank has appointed a new Chief Risk Officer, following the
departure of the previous Chief Risk Officer at the end of his
contractual term in order to pursue other career opportunities. As
a result, TBC Bank has decided to implement the following
structural changes to the composition of the Management Board:
o Nino Masurashvili, Deputy CEO, who had previously been in
charge of retail banking development of TBC Bank, has been
appointed as the new Chief Risk Officer;
o Tornike Gogichaishvili, Deputy CEO and Chief Operations
Officer of the Bank, has been appointed to lead the Bank's retail
banking business;
o Certain functions that have previously been carried out
directly by the COO have been re-allocated to be the responsibility
of the CFO or the Deputy CEO, SME & Micro Banking.
Digital Channels
Our neobank, Space, has signed a partnership agreement with
Visa, a world's leader in digital payments, to jointly develop
innovative banking services and expand digital banking footprints
in new geographies. Through the partnership, Visa will work with
Space to jointly develop innovative, user-centric and secure
banking solutions and help Space in their ambitions to expand to
other countries focusing on CISSEE.
Awards
TBC Bank has won a number of prestigious awards from leading
industry magazines:
o TBC Bank was named 'Bank of the Year 2019 in Georgia' by The
Banker magazine in its annual country awards. This award is
recognition of the bank's strong financial performance, coupled
with superior customer experience and fully-fledged digital
capabilities. The criteria for choosing country winners for this
award included digital transformation, efficiency and internal
capabilities to move into a new era.
o TBC Bank was named the 'Best Foreign Exchange Provider 2020 in
Georgia' by Global Finance Magazine. The criteria for choosing the
country winners for this award included transaction volume, market
share and scope of global coverage as well as the quality of
customer service, pricing and the use of innovative
technologies.
o The bank received the 'Best Trade Finance Provider in Georgia'
award in 2020 from Global Finance and was also named 'Market
Leader' and 'Best Service Provider' in Georgia in the Trade Finance
Survey 2020 conducted by Euromoney. These awards recognise TBC
Bank's leading position in trade finance and emphasize the Bank's
successful cooperation with international networks.
International Expansion
Uzbekistan
Preliminary Banking Licence
In January 2020, TBC Group PLC obtained a preliminary banking
licence in Uzbekistan, which is an essential step in the process to
launch our banking operations in the country in the near future.
Obtaining a banking licence is a two-step process, wherein the
banks are first granted a preliminary licence, after which they are
expected to meet certain predefined requirements to receive the
final licence.
Milestones completed before preliminary banking licence:
o Core Banking deployment;
o Launch of digital pilot branch;
o Key staff on boarded;
o Agreement of key terms and conditions with international and
local shareholders.
Main targets for 2020:
o Meet technical requirements to obtain licence
o Data center and core banking implementation;
o Security systems;
o Get operations up and running.
o Investments in 2020:
o USD 12 mln to be invested in the share capital before
obtaining licence;
o Further USD 28 mln to be invested into the share capital.
o Branches
o Initially launch 5 branches for friends and families;
o Scale up to 20 branches by the end of the year.
o Space platform
o Serve customers through space platform.
Product launch estimated plan of the greenfield bank:
o Short term
o Consumer loans;
o Auto loans;
o Saving accounts;
o Current accounts.
o Medium term
o Mortgages;
o MSME loans.
Financial targets for greenfield bank:
o 1(st) Year
o Loss around USD 6-8 mln.
o 2(nd) Year
o Break Even.
o Medium target
o ROE in the range of TBC Group's target
o Loan book target up to USD 700 mln
Other initiatives:
o Payments - Payme
o Revenue and EBITDA increased by 84.0% and 76.9% YoY,
respectively for FY 2019;
o Number of transactions increased by 24.5% YoY.
o Consumer Financing - Vendoo
o 55 point of sales by the end of 2020;
o USD 10.2 million outstanding portfolio by the end of 2020;
o 61,700 installments by the end of 2020.
o Online tickets - TKT.uz
o Selling tickets of: cinema, theater, concerts, transport,
sport and etc.;
o First transaction occurred in late December 2019.
Organizational structure:
Expected Supervisory Board Composition:
o Chairman - Giorgi Shagidze, Deputy CEO, CFO of TBC Bank
(Project lead until launch); Former Global Operations Executive at
Barclays Bank PLC
o Board Member - Nikoloz Kurdiani, Deputy CEO of TBC Bank;
Former Head of the Retail Division of ATF Bank, UniCredit Group in
Kazakhstan
o Independent Board Member - Wojciech Sobieraj, CEO of Aion
Bank; Former CEO of Alior Bank
o Independent Board Member - Sharof Sharipov, CFO of Token Group
(US/UK); Former CFO of 10x Future Technologies
o Independent Board Member - Seit Devdariani, Project
Coordinator for EBRD project: PFI Capacity-Building Technical
Cooperation Programme (Azerbaijan), Former CEO of BBMB Bank
(Belarus)
Expected composition of the Management Board:
o CEO - Sandro Rtveladze, Group Head of Retail Banking and a
country director of Bayport Savings and Loans Plc. (Ghana) at
Bayport Financial Services (in a process of exiting current
employment); Former Deputy CEO at Liberty Bank (Georgia)
o CFO - Vano Baliashvili, Former Deputy CEO, COO of TBC Bank;
Also served as CFO at TBC Bank
o COO - Rostom Talakhadze, Former Head of logistics of TBC
Bank
o CTO - Nikoloz Mamulashvili, Former Head of Development of TBC
Bank
o Deputy CEO - Sitora R. Tulyaganova, Former Head of Legal,
InFinBank
Other Key Staff:
o Head of Commercial - Evgeniy Vishnevskiy, Former Commercial
Director at Uzbektelecom
o Head of HR - Hilola Suleymanova, Former Managing Partner of
DaVinci Management Consulting
o Chief Accountant - Aida Nazirova, Former Chief Accountant of
Ipak Yuli Bank
Additional Information Disclosure
The following materials in connection with TBC PLC's financial
results are disclosed on our Investor Relations website at
http://tbcbankgroup.com/ under the Results Announcement section
.
Economic Overview
Economic growth and the external sector
GDP growth came in at 5.3% YoY in 4Q 2019 and averaged 5.2% YoY
in 2019, according to GeoStat's initial estimates. The growth was
broad-based across different sectors of the economy. In the first 9
months of 2019, trade and repairs (+7.4% YoY), real estate (+5.9%
YoY), transport and logistics (+7.5% YoY), information and
communication (+14.5% YoY) and the construction sector (+5.2% YoY)
all significantly contributed to overall GDP growth.
As for the external sector, the overall dynamics of the external
balance remained healthy despite the negative impact stemming from
the Russian flight ban. Reflecting lower tourism inflows, the
balance of trade in services declined slightly from 12.7% of GDP in
2018 to 12.4% of GDP in trailing four quarters as of 3Q 2019.
However, this decline was counteracted by the lower deficit of
trade in goods (down by 1.9% of GDP), as well as by a more moderate
improvement in the income account deficit (down by 0.5% of GDP). As
a result, the Current Account (CA) balance to GDP ratio improved to
4.5% as of the last four quarters ending in 3Q 2019, compared to
6.8% in 2018. The CA deficit continued to be fully financed with
FDI inflows, which posted +13.7% YoY growth in 3Q 2019 after a
declining trend from very high levels. As of the last four quarters
ending in 3Q 2019, net FDI stood at 4.9% of GDP. Despite being
somewhat below the average of the past couple of years, FDI inflows
at current levels are still quite high when compared to peer
countries in the neighbourhood, as well as in Central and Eastern
Europe.
The positive tendency in the major components of the CA balance
continued in 4Q 2019 as well. Following the dip in tourism inflows
in 3Q 2019 (-6.9% YoY in USD terms), it recovered quickly to 5.4%
YoY growth in USD terms in 4Q 2019, on the back of strong growth in
the number of visitors from the EU, Turkey, and other neighbouring
countries, offsetting the negative impact of a falling number of
visitors from Russia. Growth of the exports of goods improved to
15.9% YoY in 4Q, compared to an 11.1% increase in the first 9
months of 2019. Similarly, remittance inflows also accelerated to
13.1% YoY in 4Q 2019. At the same time, imports of goods also
posted a stronger growth towards the end of the year (+5.6% YoY in
4Q 2019). Overall, based on the dynamics of the major components,
the CA balance probably improved further in 4Q 2019 YoY.
Exchange rate, inflation and credit
The GEL exchange rate depreciation since June 2019 has been the
major factor behind the rise in inflation up to 7% as of the end of
2019. In response to higher inflationary pressures, the NBG
tightened the monetary policy rate from 6.5% at the beginning of
September to 9.0% as of the end of 2019. A tighter monetary policy
stance in GEL, coupled with the strong external sector, contributed
to a stronger GEL exchange rate. By the end of 2019, the USD/GEL
exchange rate stood at 2.87, down by 3.0% QoQ. The monthly
inflation dynamics indicate some moderation of inflation by the end
of 2019. According to the latest projections of the central bank,
CPI inflation is projected to gradually decline towards the target,
starting from 2Q 2020, before reaching the target by the end of
2020.
Despite tighter monetary policy in GEL, lending growth remained
solid, mostly on the back of accelerated FX lending by the end of
2019, supported by the lower reserve requirements and ample bank
liquidity in FX. As of the end of 2019, the bank loan portfolio
went up by 16.1% YoY, excluding the exchange rate effect, mostly on
the back of business lending (+23.3% YoY excl. FX effect), strongly
supporting the solid economic growth. At the same time, retail
growth was relatively slow (+6.0% YoY excl. FX effect), owing to
tighter prudential regulations. Despite some acceleration of FX
lending, de-dollarization of the financial sector remains a top
priority for the central bank; however, in future rather more
attention is expected to be devoted to de-dollarization of
liabilities.
Fiscal spending
Fiscal spending significantly supported growth in 2019, with the
budget deficit estimated at 2.7% of GDP in 2019. The actual impact
of the fiscal sector on growth was even higher, taking into
consideration the advance payments made by the end of 2018, which
supported growth in 2019. Taking into account those advance
payments, the fiscal deficit was estimated at around 4.2% of GDP,
almost double the amount the previous year. Going forward,
according to the budget projections for 2020, the fiscal stance is
expected to be less expansionary for 2020 and more oriented towards
social spending. Nevertheless, the share of capital expenditures
remains high and, on a macro level, the budget is balanced.
Going forward
Above 5% economic growth for the full year 2019 once more
underlines the resilience and high growth potential of Georgian
economy. This growth is particularly encouraging on the backdrop of
the challenges that economy faced in 2019, the most important being
Russia's flight ban. According to the TBC research, projection of
external inflows, credit and fiscal stance indicate to 5% growth in
2020, however, considering some possible election related
uncertainties, 4.5% remains a baseline scenario, close to the IMF
4.3% growth projection (5.2% long term projection).
More information on the Georgian economy and financial sector
can be found at www.tbcresearch.ge .
Unaudited Consolidated Financial Results Overview for 4Q
2019
This statement provides a summary of the unaudited business and
financial trends for 4Q 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 (APM) and the
reconciliation of the underlying profit and loss items with the
reported profit and loss items and the underlying ratios are given
in Annex 3 on pages 45-46.
Please note, that there might be slight differences in previous
periods' figures due to rounding.
Net Interest Income
In 4Q 2019, net interest income amounted to GEL 209.3 million,
down by 2.6% YoY and up by 8.1% on QoQ basis.
The YoY increase in interest income was primarily related to an
increase in interest income from loans, which was related to an
increase in the gross loan portfolio of GEL 2,289.4 million, or
22.1%. This effect was partially offset by a 1.3 pp drop in loan
yields, mainly in the retail and MSME segments. The decrease in
retail loan yields was driven by the continued impact of the NGB's
regulation from January 2019, which limits the banks' ability to
lend money to higher-yield retail customers, while the decrease in
MSME loan yields was in line with the overall market trend.
Over the same period, interest expense increased by GEL 51.2
million, or 36.3%, which was mainly related to interest expense
from bonds issued in summer 2019, as well as increase in an
interest expense from deposits. The latter was related both to the
growth in the respective portfolio by 7.5% YoY, and to an increase
in deposit cost by 0.3 pp over the same period.
The QoQ increase in interest income was mainly due to an
increase in the loan portfolio by GEL 981.7 million, or 8.4%, while
loan yields remained broadly stable. Over the same period, interest
expense increased by GEL 10.7
million, or 5.9%, mainly related to the increase in the NBG loan .
In 4Q 2019, we re-classified net gains on currency swaps from
other operating income to net interest income. More information is
given in annex 4 on page 46.
Thus, our NIM was 5.3% down by 1.4 pp YoY and up by 0.2 pp on a
QoQ basis, while r isk adjusted NIM for the period amounted to
5.4%, remained the same YoY and up by 1.0 pp QoQ.
In thousands of GEL 4Q'19 3Q'19 4Q'18 Change YoY Change QoQ
------------------------------- ---------- ---------- ---------- ----------- -----------
Interest income 392,154 366,472 355,543 10.3% 7.0%
------------------------------- ---------- ---------- ---------- ----------- -----------
Interest expense (191,891) (181,192) (140,740) 36.3% 5.9%
------------------------------- ---------- ---------- ---------- ----------- -----------
Net gains from currency swaps 9,055 8,355 N/A 100% 8.4%
------------------------------- ---------- ---------- ---------- ----------- -----------
Net interest income 209,318 193,635 214,803 -2.6% 8.1%
------------------------------- ---------- ---------- ---------- ----------- -----------
NIM 5.3% 5.1% 6.7% -1.4 pp 0.2 pp
------------------------------- ---------- ---------- ---------- ----------- -----------
Risk adjusted NIM 5.4% 4.4% 5.4% 0.0 pp 1.0 pp
------------------------------- ---------- ---------- ---------- ----------- -----------
Net fee and commission income
In 4Q 2019, net fee and commission income totalled GEL 54.8
million, up by 24.5% YoY and by 16.4% QoQ.
The YoY rise was mainly driven by an increase in net fee and
commission income from plastic card operations, and settlement
transactions. The former increase was mainly related to the
increase in the number of active cards as well as the increase in
the number of POS terminals related to the overall growth of the
business. At the same time, the increase in net fee and commission
income from settlement transactions YoY mainly driven by the
increase in the number of TBC Status's clients (our affluent retail
sub-segment),up by 102% YoY to 82.5 thousands.
On a QoQ basis, the rise was mainly driven by net fee and
commission income from card operations and settlement transactions
as mentioned above as well as seasonality.
In thousands of GEL 4Q'19 3Q'19 4Q'18 Change YoY Change QoQ
----------------------------------------- ------- ------- ------- ----------- -----------
Net fee and commission income
----------------------------------------- ------- ------- ------- ----------- -----------
Card operations 16,649 13,479 13,110 27.0% 23.5%
Settlement transactions 24,887 18,355 16,971 46.6% 35.6%
Guarantees issued and letters of credit 8,831 8,197 7,368 19.9% 7.7%
Other 4,477 7,074 6,615 -32.3% -36.7%
----------------------------------------- ------- ------- ------- ----------- -----------
Total net fee and commission income 54,844 47,105 44,064 24.5% 16.4%
----------------------------------------- ------- ------- ------- ----------- -----------
Other Non-Interest Income
Total other non-interest income decreased by 24.9% YoY and
increased by 2.7% QoQ, amounting to GEL 40.1 million in 4Q
2019.
The YoY decrease was mainly driven by the high base of other
operating income last year due to the gain from sale of investment
properties and the recognition of an option to buy shares in one of
our large corporate clients in 2018. Another driver was the
decrease in net income from foreign currency operations related to
the re-classification of net gains on currency swaps. More
information is given in annex 4 on page 46.
The QoQ increase was mainly driven by other operating income,
due to the gain from the sale of repossessed assets. This rise was
slightly offset by the decrease in net income from foreign currency
operations, mainly due to higher volatility in 3Q 2019.
Net insurance premium earned after claims and acquisition costs
increased by 46.9% on YoY and by 18.3% QoQ, mainly related to the
increased scale of the insurance business. More information about
TBC insurance can be found in Annex 5 on page 47.
In thousands of GEL 4Q'19 3Q'19 4Q'18 Change YoY Change QoQ
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Other non-interest income
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Net income from foreign currency operations 28,006 29,260 33,029 -15.2% -4.3%
Net insurance premium earned after claims and acquisition costs
[12] 5,659 4,784 3,853 46.9% 18.3%
Other operating income 6,410 4,974 16,513 -61.2% 28.9%
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Total other non-interest income 40,075 39,018 53,395 -24.9% 2.7%
----------------------------------------------------------------- ------- ------- ------- ----------- -----------
Credit Loss Allowance
In 4Q 2019, total credit lo ss allowance amounted to GEL 0.2
million.
The YoY decrease was mainly due to decrease in credit loss
allowance on loans to customers, driven by strong performance in
all segments, as well as a portfolio product mix change, related to
the responsible lending regulation effective from 1 January
2019.
QoQ improvement was also related to strong performance across
all segments.
In thousands of GEL 4Q'19 3Q'19 4Q'18 Change Change
YoY QoQ
------------------------------- -------- --------- --------- ------- --------
Credit loss allowance for
loan to customers 5,148 (20,695) (34,398) NMF NMF
Credit loss allowance for
other transactions (4,924) (5,054) (9,638) -48.9% -2.6%
-------- --------- --------- -------
Total credit loss allowance 224 (25,749) (44,036) NMF NMF
------------------------------- -------- --------- --------- ------- --------
Operating income after credit
loss allowance 304,461 254,009 268,226 13.5% 19.9%
------------------------------- -------- --------- --------- ------- --------
-1.6
Cost of risk -0.2% 0.7% 1.4% pp -0.9 pp
------------------------------- -------- --------- --------- ------- --------
NMF - no meaningful figures
Operating Expenses
In 4Q 2019, total operating expenses expanded by 2.6% YoY and by
13.8% QoQ, amounting to GEL 127.1 million.
YoY growth was mainly driven by increase in staff costs, driven
by the overall expansion of business as well as the increase in the
share price [13] 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). This was
partially offset by the decrease in depreciation and amortizations
expenses, which was driven by amendments in the deprecation period
of certain assets in 4Q 2019.
On QoQ basis, the increase was driven by administrative and
other expenses and resulted from seasonally high costs in 4Q. Over
the same period depreciation decreased by 43.1%, as mentioned
above.
In 4Q 2019, cost to income stood at 41.8%, up by 2.1 pp YoY and
1.9 pp QoQ.
In thousands of GEL 4Q'19 3Q'19 4Q'18 Change YoY Change QoQ
------------------------------------------- ---------- ---------- ---------- ----------- -----------
Operating expenses
------------------------------------------- ---------- ---------- ---------- ----------- -----------
Staff costs (68,934) (62,230) (63,213) 9.1% 10.8%
Provisions for liabilities and charges (2,632) (73) - NMF NMF
Depreciation and amortization (9,921) (17,433) (12,333) -19.6% -43.1%
Administrative & other operating expenses (45,637) (31,969) (48,358) -5.6% 42.8%
------------------------------------------- ---------- ---------- ---------- ----------- -----------
Total operating expenses (127,124) (111,705) (123,904) 2.6% 13.8%
------------------------------------------- ---------- ---------- ---------- ----------- -----------
Cost to income 41.8% 39.9% 39.7% 2.1 pp 1.9 pp
------------------------------------------- ---------- ---------- ---------- ----------- -----------
NMF - no meaningful figures
Net Income
Net income for the fourth quarter increased by GEL 29.9 million,
or 23.0%, YoY and increased by GEL 33.2 million, or 26.2%, QoQ,
amounting to GEL 160.0 million.
As a result, ROE stood at 24.7%, up by 0.4 pp YoY and by 4.3 pp
QoQ, while ROA stood at 3.5%, stable on a YoY basis and up by 0.7
pp QoQ
In thousands of GEL 4Q'19 3Q'19 4Q'18 Change YoY Change QoQ
----------------------- --------- --------- --------- ----------- -----------
Profit before tax 177,338 142,303 144,322 22.9% 24.6%
----------------------- --------- --------- --------- ----------- -----------
Income tax expense (17,313) (15,527) (14,235) 21.6% 11.5%
----------------------- --------- --------- --------- ----------- -----------
Profit for the period 160,025 126,776 130,087 23.0% 26.2%
----------------------- --------- --------- --------- ----------- -----------
ROE 24.7% 20.4% 24.3% 0.4 pp 4.3 pp
----------------------- --------- --------- --------- ----------- -----------
ROA 3.5% 2.8% 3.5% 0.0 pp 0.7 pp
----------------------- --------- --------- --------- ----------- -----------
Funding and Liquidity
In September 2019, we had high liquidity due to bond issuance in
summer, which was utilised during 4Q by increasing loan book.
31-Dec-19 30-Sep-19 Change
--------------------------------------------------------------- ---------- ---------- ---------
Minimum net stable funding ratio, as defined by the NBG 100% 100% 0.0 pp
Net stable funding ratio as defined by the NBG 126.7% 137.7% -11.0%
Net loans to deposits + IFI funding 104.8% 97.0% 7.9 pp
Leverage (Times) 7.0x 7.3x -0.3x
Minimum liquidity ratio, as defined by the NBG 30.0% 30.0% 0.0 pp
Liquidity ratio, as defined by the NBG 32.2% 39.2% -7.0 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 110.1% 131.6% -21.5 pp
LCR in GEL, as defined by the NBG 83.7% 87.7% -4.0 pp
LCR in FC, as defined by the NBG 128.4% 162.8% -34.4 pp
--------------------------------------------------------------- ---------- ---------- ---------
Regulatory Capital
As of 31 December 2019, the Bank's CET 1, Tier 1 and Total
Capital adequacy ratios stood at 12.0%, 14.6% and 19.1%,
respectively, above the respective minimum requirements of 10.4%,
12.5% and 17.5%.
CET 1 and Tier 1 capital adequacy ratios were broadly stable on
a QoQ basis, while the total capital adequacy ratio reduced by 0.3
pp, which was mainly driven by the increase in loan portfolio and
was partially offset by net income generation.
In thousands of GEL 31-Dec-19 30-Sep-19 Change
-------------------------------------- ----------- ----------- --------
CET 1 Capital 1,871,892 1,770,734 5.7%
Tier 1 Capital 2,281,706 2,191,792 4.1%
Total Capital 2,974,029 2,894,704 2.7%
Total Risk-weighted Exposures 15,593,925 14,889,695 4.7%
-------------------------------------- ----------- ----------- --------
Minimum CET 1 ratio 10.4% 9.8% 0.6 pp
CET 1 Capital adequacy ratio 12.0% 11.9% 0.1 pp
Minimum Tier 1 ratio 12.5% 11.9% 0.6 pp
Tier 1 Capital adequacy ratio 14.6% 14.7% -0.1 pp
Minimum total capital adequacy ratio 17.5% 16.7% 0.8 pp
Total Capital adequacy ratio 19.1% 19.4% -0.3 pp
-------------------------------------- ----------- ----------- --------
Loan Portfolio
As of 31 December 2019, the gross loan portfolio reached GEL
12,662.0 million, up by 8.4% QoQ, or by 9.8% on a constant currency
basis, which was mainly supported by growth in the corporate
segment due to the acquisition of both large and mid-corporate
clients. Over the same period, the proportion of gross loans
denominated in foreign currency increased by 0.5 pp on a QoQ basis
and accounted for 58.7% of total loans.
At the end of December 2019, our market share in total loans
stood at 39.5% up by 0.8 pp QoQ, while our loan market share in
legal entities was 38.9% up by 1.2 pp QoQ and our loan market share
in individuals stood at 40.0% up by 0.5 pp QoQ.
In thousands of GEL 31-Dec-19 30-Sep-19 Change
--------------------------------------- ----------- ----------- -------
Loans and advances to customers
--------------------------------------- ----------- ----------- -------
Retail 5,053,203 4,903,134 3.1%
Retail loans GEL 2,386,750 2,284,431 4.5%
Retail loans FC 2,666,453 2,618,703 1.8%
Corporate 4,660,473 4,029,321 15.7%
Corporate loans GEL 1,424,309 1,248,851 14.0%
Corporate loans FC 3,236,164 2,780,470 16.4%
MSME 2,948,279 2,747,802 7.3%
MSME loans GEL 1,419,804 1,354,789 4.8%
MSME loans FC 1,528,475 1,393,013 9.7%
--------------------------------------- ----------- ----------- -------
Total loans and advances to customers 12,661,955 11,680,257 8.4%
--------------------------------------- ----------- ----------- -------
4Q'19 3Q'19 4Q'18 Change Change
YoY QoQ
---------------------------- ------ ------ ------ -------- --------
Loan yields 10.9% 10.8% 12.2% -1.3 pp 0.1%
Loan yields GEL 15.7% 15.2% 17.4% -1.7 pp 0.5 pp
Loan yields FC 7.6% 7.7% 8.7% -1.1 pp -0.1 pp
-1.8
Retail Loan Yields 11.8% 11.8% 13.6% pp 0.0 pp
Retail loan yields GEL 17.1% 17.2% 20.7% -3.6 pp -0.1 pp
Retail loan yields FC 7.1% 7.3% 7.8% -0.7 pp -0.2 pp
-0.3
Corporate Loan Yields 9.7% 9.2% 10.0% pp 0.5%
Corporate loan yields
GEL 13.3% 11.7% 10.9% 2.4 pp 1.7 pp
Corporate loan yields
FC 8.2% 8.1% 9.7% -1.5 pp 0.1 pp
-0.9
MSME Loan Yields 11.3% 11.2% 12.2% pp 0.1 pp
MSME loan yields GEL 15.7% 15.0% 16.2% -0.5 pp 0.7 pp
MSME loan yields FC 7.2% 7.7% 8.6% -1.4 pp -0.5 pp
---------------------------- ------ ------ ------ -------- --------
Loan Portfolio Quality
Total PAR 30 decreased by 0.3 pp on QoQ basis and stood at 1.7%.
The decrease was driven by improved performance across all
segments. Moreover, our total NPLs stood at 2.7%, down by 0.2 pp,
which was attributable to the strong performance of the retail and
MSME segments.
Par 30 31-Dec-19 30-Sep-19 Change
------------- ---------- ---------- --------
Retail 2.1% 2.3% -0.2 pp
Corporate 0.5% 0.8% -0.3 pp
MSME 2.8% 3.0% -0.2 pp
------------- ---------- ---------- --------
Total Loans 1.7% 2.0% -0.3 pp
------------- ---------- ---------- --------
Non-performing Loans 31-Dec-19 30-Sep-19 Change
---------------------- ---------- ---------- --------
Retail 3.0% 3.2% -0.2 pp
Corporate 1.8% 1.8% 0.0 pp
MSME 3.8% 4.3% -0.5 pp
---------------------- ---------- ---------- --------
Total Loans 2.7% 2.9% -0.2 pp
---------------------- ---------- ---------- --------
NPL Coverage Dec-19 Sep-19
Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral
-------------- ---------------- ----------------- ---------------- -----------------
Corporate 97.1% 241.4% 118.5% 317.8%
Retail 111.1% 182.9% 113.2% 183.9%
MSME 59.7% 173.7% 64.9% 179.2%
-------------- ---------------- ----------------- ---------------- -----------------
Total 91.1% 194.2% 97.7% 209.9%
-------------- ---------------- ----------------- ---------------- -----------------
Cost of risk
The total cost of risk for 4Q 2019 stood at -0.2% down by 1.6 pp
YoY and by 0.9 pp on a QoQ basis.
The YoY decrease was driven by the product mix change as well as
robust credit quality across all segments, while the decrease on a
QoQ basis was related to the strong performance across all
segments.
In Q4 2019, retail cost of risk decreased by 2.6pp YoY and 1.1pp
QoQ, driven by the strong performance of retail segment, translated
into improved credit risk parameters and change in product mix in
retail portfolio, due to responsible lending regulation.
In Q4 2019, MSME cost of risk decreased by 0.9pp QoQ and YoY,
mainly due to the SME sub segment. Decrease in SME portfolio is
driven by repayment of several impaired borrowers, as well as
overall strong performance of the portfolio, resulting in improved
credit risk parameters. In case of the Micro segment, cost of risk
remained broadly stable.
Cost of Risk 4Q'19 3Q'19 4Q'18 Change Change
YoY QoQ
-------------- ------ ------ ------ -------- --------
Retail 0.3% 1.4% 2.9% -2.6 pp -1.1 pp
Corporate -0.2% 0.4% 0.1% -0.3 pp -0.6 pp
MSME -1.0% -0.1% -0.1% -0.9 pp -0.9 pp
Total -0.2% 0.7% 1.4% -1.6 pp -0.9 pp
-------------- ------ ------ ------ -------- --------
Deposit Portfolio
The total deposits portfolio increased by 1.5% QoQ and amounted
to 10,049.3 million, while on a constant currency basis the total
deposit portfolio was up by 3.3%. The slow growth in deposits is
related to our high liquidity due to the recent bonds issuance in
the summer. The proportion of deposits denominated in foreign
currency increased by 0.4 pp on a QoQ basis and accounted for 65.9%
of total deposits.
By the end December 2019, our market share in deposits amounted
to 39.0% down by 0.3 pp QoQ and our market share in deposits to
legal entities stood at 40.6% up by 0.5 pp QoQ. Our market share in
deposits to individuals stood at 37.9% down by 0.7 pp QoQ.
In thousands of GEL 31-Dec-19 30-Sep-19 Change
---------------------------- ----------- ---------- -------
Customer Accounts
---------------------------- ----------- ---------- -------
Retail 5,673,917 5,550,227 2.2%
Retail deposits GEL 1,098,681 1,057,854 3.9%
Retail deposits FC 4,575,236 4,492,373 1.8%
Corporate 3,187,319 3,242,875 -1.7%
Corporate deposits GEL 1,735,746 1,770,123 -1.9%
Corporate deposits FC 1,451,573 1,472,752 -1.4%
MSME 1,188,088 1,104,221 7.6%
MSME deposits GEL 594,388 586,603 1.3%
MSME deposits FC 593,700 517,618 14.7%
---------------------------- ----------- ---------- -------
Total Customer Accounts 10,049,324 9,897,323 1.5%
---------------------------- ----------- ---------- -------
4Q'19 3Q'19 4Q'18 Change Change
YoY QoQ
------------------------------ ------ ------ ------ -------- --------
Deposit rates 3.4% 3.2% 3.1% 0.3 pp 0.2 pp
Deposit rates GEL 6.0% 5.3% 5.3% 0.7 pp 0.7 pp
Deposit rates FC 2.0% 2.1% 2.0% 0.0 pp -0.1 pp
Retail Deposit Yields 2.9% 2.8% 2.6% 0.3 pp 0.1 pp
Retail deposit rates GEL 5.1% 4.4% 4.6% 0.5 pp 0.7 pp
Retail deposit rates FC 2.3% 2.4% 2.2% 0.1 pp -0.1 pp
Corporate Deposit Yields 5.1% 4.7% 4.5% 0.6 pp 0.4 pp
Corporate deposit rates
GEL 7.9% 6.9% 6.8% 1.1 pp 1.0 pp
Corporate deposit rates
FC 1.5% 1.8% 1.8% -0.3 pp -0.3 pp
MSME Deposit Yields 0.9% 1.0% 1.0% -0.1 pp -0.1 pp
MSME deposit rates GEL 1.5% 1.5% 1.6% -0.1 pp 0.0 pp
MSME deposit rates FC 0.3% 0.3% 0.3% 0.0 pp 0.0 pp
------------------------------ ------ ------ ------ -------- --------
Segment definition and PL
Business Segments
The segment definitions are as follows (updated in 2019):
-- Corporate - a 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
4Q'19 Retail MSME Corporate Corp.Centre Total
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Interest income 147,780 81,014 107,974 55,386 392,154
Interest expense (41,085) (2,757) (41,292) (106,757) (191,891)
Net gains from currency swaps - 9,055 9,055
Net transfer pricing (18,069) (28,729) 869 45,929 -
Net interest income 88,626 49,528 67,551 3,613 209,318
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Fee and commission income 60,488 7,837 12,770 5,656 86,751
Fee and commission expense (26,483) (2,777) (2,133) (515) (31,907)
Net fee and commission income 34,005 5,061 10,637 5,141 54,844
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Net insurance premium earned
after claims and acquisition
costs - - - 5,659 5,659
Net income from foreign currency
operations 8,018 6,304 13,311 (8,607) 19,026
Foreign exchange translation
gains less losses/(losses
less gains) - - - 8,980 8,980
Net gains/(losses) from derivative
financial instruments 2 - - (6) (4)
Gains less Losses from Disposal
of Investment Securities Measured
at Fair Value through Other
Comprehensive Income - - - 20 20
Other operating income 2,032 187 1,211 2,846 6,276
Share of profit of associates - - - 118 118
Other operating non-interest
income and insurance profit 10,052 6,491 14,522 9,010 40,075
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Credit loss allowance for
loans to customers (4,246) 6,797 2,597 - 5,148
Credit loss allowance for
performance guarantees and
credit related commitments (13) (235) (42) - (290)
Credit loss allowance for
investments in finance lease - - - 615 615
Credit loss allowance for
other financial assets (3,683) (11) (228) (1,243) (5,165)
Credit loss allowance for
financial assets measured
at fair value through other
comprehensive income - - (49) (35) (84)
Profit before G&A expenses
and income taxes 124,741 67,631 94,987 17,101 304,461
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Staff costs (34,765) (12,379) (11,059) (10,731) (68,934)
Depreciation and amortization (7,247) (1,253) (280) (1,141) (9,921)
Provision for liabilities
and charges - - - (2,632) (2,632)
Administrative and other operating
expenses (17,448) (4,480) (4,646) (19,063) (45,637)
Operating expenses (59,460) (18,112) (15,985) (33,567) (127,124)
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Profit before tax 65,281 49,519 79,002 (16,466) 177,337
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Income tax expense (6,060) (4,438) (7,256) 441 (17,313)
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Profit for the year 59,221 45,081 71,746 (16,025) 160,024
------------------------------------ --------------- --------------- ------------- ----------------- -----------
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Dec-19 Sep-19
--------------------------------------- --------------------- ---------------------
Cash and cash equivalents 1,003,583 1,349,260
Due from other banks 33,605 30,297
Mandatory cash balances with National
Bank of Georgia 1,591,829 1,954,662
Loans and advances to customers 12,349,399 11,344,779
Investment securities measured at fair
value through other comprehensive
income 985,293 1,177,963
Bonds carried at amortized cost 1,022,684 871,640
Investments in finance leases 256,660 241,840
Investment properties 72,667 78,449
Current income tax prepayment 25,695 29,599
Deferred income tax asset 2,173 2,179
Other financial assets 133,736 243,330
Other assets 255,712 205,066
Premises and equipment 385,736 381,065
Right of use assets 59,693 59,040
Intangible assets 167,597 134,837
Goodwill 61,558 63,215
Investments in associates 2,654 2,536
TOTAL ASSETS 18,410,274 18,169,757
--------------------------------------- --------------------- ---------------------
LIABILITIES
Due to credit institutions 3,593,901 3,613,093
Customer accounts 10,049,324 9,897,323
Lease liabilities 59,898 62,126
Other financial liabilities 113,608 96,781
Current income tax liability 1,634 1,128
Debt Securities in issue 1,213,598 1,251,649
Deferred income tax liability 21,331 21,142
Provisions for liabilities and charges 23,128 22,729
Other liabilities 95,162 88,672
Subordinated debt 591,035 615,939
TOTAL LIABILITIES 15,762,619 15,670,582
--------------------------------------- --------------------- ---------------------
EQUITY
Share capital 1,682 1,682
Shares held by trust (27,516) (15)
Share premium 848,459 828,936
Retained earnings 1,953,364 1,794,060
Group re-organisation reserve (162,167) (162,167)
Share based payment reserve (17,803) (28,104)
Revaluation reserve for premises 56,374 56,606
Fair value reserve (6,476) 7,345
Cumulative currency translation
reserve (6,850) (6,367)
Net assets attributable to owners 2,639,067 2,491,976
--------------------------------------- --------------------- ---------------------
Non-controlling interest 8,588 7,199
--------------------- ---------------------
TOTAL EQUITY 2,647,655 2,499,175
--------------------------------------- --------------------- ---------------------
TOTAL LIABILITIES AND EQUITY 18,410,274 18,169,757
--------------------------------------- --------------------- ---------------------
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
In thousands of GEL 4Q'19 3Q'19 4Q'18
--------------------------------------- --------------------- --------------------- ---------------------
Interest income 392,154 366,472 355,543
Interest expense (191,891) (181,192) (140,740)
Net gains from currency swaps 9,055 8,355 N/A
Net interest income 209,318 193,635 214,803
--------------------------------------- --------------------- --------------------- ---------------------
Fee and commission income 86,751 76,795 67,049
Fee and commission expense (31,907) (29,690) (22,985)
Net fee and commission income 54,844 47,105 44,064
--------------------------------------- --------------------- --------------------- ---------------------
Net insurance premiums earned 12,386 9,821 7,023
Net insurance claims incurred and
agents' commissions (6,727) (5,037) (3,170)
--------------------------------------- --------------------- --------------------- ---------------------
Net insurance premium earned after
claims and acquisition costs 5,659 4,784 3,853
--------------------------------------- --------------------- --------------------- ---------------------
Net income from foreign currency
operations 19,026 25,266 28,258
Net gain/(losses) from foreign
exchange translation 8,980 3,994 4,771
Net gains/(losses) from derivative
financial instruments (4) (32) (184)
Gains less losses from disposal of
investment securities measured at
fair value through other
comprehensive income 20 2 -
Other operating income 6,276 4,831 16,485
Share of profit of associates 118 173 212
Other operating non-interest income 34,416 34,234 49,542
--------------------------------------- --------------------- --------------------- ---------------------
Credit loss allowance for loans to
customers 5,148 (20,695) (34,398)
Credit loss allowance for investments
in finance lease 615 (211) (779)
Credit loss allowance for performance
guarantees and credit related
commitments (290) (1,474) (1,532)
Credit loss allowance for other
financial assets (5,165) (3,513) (7,305)
Credit loss allowance for financial
assets measured at fair value through
other comprehensive
income (84) 144 (22)
Operating income after credit loss
allowance for impairment 304,461 254,009 268,226
--------------------------------------- --------------------- --------------------- ---------------------
Staff costs (68,934) (62,230) (63,213)
Depreciation and amortization (9,921) (17,433) (12,333)
(Provision for)/ recovery of
liabilities and charges (2,632) (73) -
Administrative and other operating
expenses (45,637) (31,969) (48,358)
Operating expenses (127,124) (111,705) (123,904)
--------------------------------------- --------------------- --------------------- ---------------------
Profit before tax 177,337 142,304 144,322
--------------------------------------- --------------------- --------------------- ---------------------
Income tax expense (17,313) (15,527) (14,235)
--------------------- --------------------- ---------------------
Profit for the period 160,024 126,777 130,087
--------------------------------------- --------------------- --------------------- ---------------------
Other comprehensive income:
--------------------------------------- --------------------- --------------------- ---------------------
Items that may be reclassified
subsequently to profit or loss:
--------------------------------------- --------------------- --------------------- ---------------------
Movement in fair value reserve (13,828) (5,327) 3,757
--------------------------------------- --------------------- --------------------- ---------------------
Exchange differences on translation to
presentation currency (483) 111 340
--------------------------------------- --------------------- --------------------- ---------------------
Items that will not be reclassified to
profit or loss:
--------------------------------------- --------------------- --------------------- ---------------------
Revaluation of premises and equipment - - 10,749
--------------------------------------- --------------------- --------------------- ---------------------
Income tax recorded directly in other
comprehensive income - - 2,788
--------------------------------------- --------------------- --------------------- ---------------------
Other comprehensive income for the
period (14,311) (5,216) 17,634
--------------------------------------- --------------------- --------------------- ---------------------
Total comprehensive income for the
period 145,713 121,561 147,721
--------------------------------------- --------------------- --------------------- ---------------------
Profit attributable to:
--------------------------------------- --------------------- --------------------- ---------------------
- Shareholders of TBCG 159,416 125,244 129,952
--------------------------------------- --------------------- --------------------- ---------------------
- Non-controlling interest 608 1,533 135
--------------------------------------- --------------------- --------------------- ---------------------
Profit for the period 160,024 126,777 130,087
--------------------------------------- --------------------- --------------------- ---------------------
Total comprehensive income is
attributable to:
--------------------------------------- --------------------- --------------------- ---------------------
- Shareholders of TBCG 145,122 120,034 147,628
--------------------------------------- --------------------- --------------------- ---------------------
- Non-controlling interest 591 1,527 93
--------------------------------------- --------------------- --------------------- ---------------------
Total comprehensive income for the
period 145,713 121,561 147,721
--------------------------------------- --------------------- --------------------- ---------------------
Key Ratios
Average Balances
The average balances included in this document are calculated as
the average of the relevant monthly balances as of each month-end.
Balances have been extracted from TBC's unaudited and consolidated
management accounts, which were prepared from TBC's accounting
records. These were used by the management for monitoring and
control purposes.
Key Ratios
Ratios (based on monthly averages, where applicable) 4Q'19 3Q'19 4Q'18
------------------------------------------------------ ------- ------- --------
Profitability ratios:
ROE(2) 24.7% 20.4% 24.3%
ROA(4) 3.5% 2.8% 3.5%
ROE before credit loss allowance(5) 24.7% 24.6% 32.5%
Cost to Income(7) 41.8% 39.9% 39.7%
NIM(8) 5.3% 5.1% 6.7%
Risk Adjusted NIM(9) 5.4% 4.4% 5.4%
Loan Yields(10) 10.9% 10.8% 12.2%
Risk Adjusted Loan Yields(11) 11.0% 10.1% 10.9%
Deposit rates(12) 3.4% 3.2% 3.1%
Yields on interest Earning Assets(13) 9.9% 9.8% 11.1%
Cost of Funding(14) 4.9% 4.8% 4.4%
Spread(15) 5.2% 5.2% 6.6%
------------------------------------------------------ ------- ------- --------
Asset quality and portfolio concentration:
Cost of Risk(16) -0.2% 0.7% 1.4%
PAR 90 to Gross Loans(17) 1.1% 1.2% 1.2%
NPLs to Gross Loans(18) 2.7% 2.9% 3.1%
NPLs coverage(19) 91.1% 97.7% 102.7%
NPLs coverage with collateral(20) 194.2% 209.9% 216.4%
Credit loss level to Gross Loans(21) 2.5% 2.9% 3.2%
Related Party Loans to Gross Loans(22) 0.1% 0.1% 0.1%
Top 10 Borrowers to Total Portfolio(23) 8.3% 9.0% 10.1%
Top 20 Borrowers to Total Portfolio(24) 12.3% 13.0% 14.2%
------------------------------------------------------ ------- ------- --------
Capital optimisation:
Net Loans to Deposits plus IFI Funding(25) 104.8% 96.9% 89.9%
Net Stable Funding Ratio(26) 126.7% 137.7% 129.3%*
Liquidity Coverage Ratio(27) 110.1% 131.6% 113.9%
Leverage(28) 7.0x 7.3x 7.0x
CET 1 CAR (Basel III)(29) 12.0% 11.9% 12.4%
Regulatory Tier 1 CAR (Basel III)(30) 14.6% 14.7% 12.8%
Regulatory Total 1 CAR (Basel III)(31) 19.1% 19.4% 17.9%
------------------------------------------------------ ------- ------- --------
(*) Based on internal estimates
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 2.9552 as of 30 September 2019. For the calculations of the
YoY growth without the currency exchange rate effect, we used the
USD/GEL exchange rate of 2.6766 as of 31 December 2018. As of 31
December 2019 the USD/GEL exchange rate equaled 2.8677. For P&L
items growth calculations without currency effect, we used the
average USD/GEL exchange rate for the following periods: FY 2019 of
2.8192, FY 2018 of 2.5345, 4Q 2019 of 2.9458, 3Q 2019 of 2.9194, 4Q
2018 of 2.6752.
Unaudited Consolidated Financial Results Overview for FY
2019
This statement provides a summary of the unaudited business and
financial trends for FY 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 (APM) 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 3 section on pages 45-46 .
Please note, that there might be slight differences in previous
periods' figures due to rounding .
Net Interest Income
In FY 2019, net interest income amounted to GEL 801.5 million
down by 3.0% YoY.
The YoY increase in interest income was primarily related to an
increase in interest income from loans, which was related to growth
of gross loan portfolio by GEL 2,289.4 million, or 22.1%. This
effect was partially offset by a 1.3 pp drop in loan yields, mainly
in the retail and MSME segments. The decrease in retail loan yields
was driven by a continued impact of the NGB's regulation from
January 2019, which limits the banks' ability to lend money to
higher-yield retail customers, while the decrease in MSME loan
yields was in line with the overall market trend.
Over the same period, interest expense increased by GEL 157.6
million, or 31.1%, which was mainly related to interest expense
from bonds issued in summer 2019, as well as the increase in
interest expense from deposits. The latter was related both to
growth in the respective portfolio by 7.5% YoY and to an increase
in deposit cost by 0.1 pp over the same period .
In 2019, we re-classified net gains on currency swaps from other
operating income to net interest income. More information is given
in annex 4 on page 46.
Consequently, NIM stood at 5.6% in FY 2019, compared to 6.9% in
FY 2018, while risk adjusted NIM for the same period amounted to
4.8%, down by 0.6 pp YoY.
In thousands of GEL FY'19 FY'18 Change YoY
------------------------------- ---------------- --------------- -----------
Interest income 1,436,843 1,284,235 11.9%
------------------------------- ---------------- --------------- -----------
Interest expense (663,860) (506,213) 31.1%
------------------------------- ---------------- --------------- -----------
Net gains from currency swaps 28,556 N/A 100%
------------------------------- ---------------- --------------- -----------
Net interest income 801,539 778,022 3.0%
------------------------------- ---------------- --------------- -----------
NIM 5.6% 6.9% -1.3 pp
------------------------------- ---------------- --------------- -----------
Risk adjusted NIM 4.8% 5.4% -0.6 pp
------------------------------- ---------------- --------------- -----------
Net fee and commission income
In FY 2019, net fee and commission income totalled GEL 187.3
million, up by 18.9% on a YoY basis.
The increase on a YoY basis was spread across all categories and
was related to overall growth of business.
In thousands of GEL FY'19 FY'18 Change YoY
----------------------------------------- -------- -------- -----------
Net fee and commission income
----------------------------------------- -------- -------- -----------
Card operations 56,037 50,174 11.7%
Settlement transactions 73,228 62,051 18.0%
Guarantees issued and letters of credit 30,289 23,414 29.4%
Other 27,736 21,891 26.7%
----------------------------------------- -------- -------- -----------
Total net fee and commission income 187,290 157,530 18.9%
----------------------------------------- -------- -------- -----------
Other Non-Interest Income
Total other non-interest income decreased by 8.2% on a YoY basis
and amounted to GEL 139.4 million in FY 2019. This primarily
resulted from decrease in other operating income due to high base
last year as mentioned above. Another driver was the decrease in
net income from foreign currency operations related to the
re-classification of net gains on currency swaps. More information
is given in annex 4 on page 46.
This decrease was partially offset by increase in net insurance
premium earned after claims and acquisition costs, which increased
by 50.8% YoY, mainly related to the increased scale of the
insurance business. More information about TBC insurance can be
found in Annex 5 on page 47.
In thousands of GEL FY'19 FY'18 Change YoY
---------------------------------------------------------------------- -------- -------- -----------
Other non-interest income
---------------------------------------------------------------------- -------- -------- -----------
Net income from foreign currency operations 101,467 106,874 -5.1%
Net insurance premium earned after claims and acquisition costs [14] 18,510 12,275 50.8%
Other operating income 19,437 32,767 -40.7%
---------------------------------------------------------------------- -------- -------- -----------
Total other non-interest income 139,414 151,916 -8.2%
---------------------------------------------------------------------- -------- -------- -----------
Credit Loss Allowance
In FY 2 019, total credit loss allowance amounted to GEL 92.0
million, down by 44.7% on a YoY basis.
The decrease was mainly related to 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 responsible lending regulation effective from 1 January
2019.
In thousands of GEL FY'19 FY'18 Change YoY
---------------------------------------------- ----------------- ---------------- -----------
Credit Loss Allowance
---------------------------------------------- ----------------- ---------------- -----------
Credit loss allowance for loan to customers (82,030) (143,723) -42.9%
Credit loss allowance for other transactions (9,962) (22,516) -55.8%
----------------- ---------------- -----------
Total credit loss allowance (91,992) (166,239) -44.7%
---------------------------------------------- ----------------- ---------------- -----------
Operating income after credit loss allowance 1,036,251 921,229 12.5%
---------------------------------------------- ----------------- ---------------- -----------
Cost of risk 0.7% 1.6% -0.9 pp
---------------------------------------------- ----------------- ---------------- -----------
Operating Expenses
In FY 2019, total reported operating expenses expanded 9.7% on a
YoY basis and amounted to GEL 450.8 million, while over the same
period underlying operating expenses increased by 8.3% and stood at
GEL 445.1 million.
The increase was primarily due to an increase in staff costs and
a rise in depreciation and amortization. The increase in staff
costs was due to expansion of business as well as increase in share
price over the three year period for the purpose of top and middle
management share based bonuses accruals . The increase in
depreciation and amortization was mainly due to the adoption of
IFRS 16 from January 2019, which led to the reclassification of
leases from administrating expenses to depreciation .
A s a result, our cost to income ratio increased by 2.1 pp and
stood 39.9% in FY 2019, while underlying cost to income was 39.5%
up by 1.7 pp YoY.
In thousands of GEL FY'19 FY'18 Change YoY
------------------------------------------- ---------- ---------- -----------
Operating expenses
------------------------------------------- ---------- ---------- -----------
Staff costs (247,803) (220,354) 12.5%
Provisions for liabilities and charges (1,264) (4,000) -68.4%
Depreciation and amortization (59,478) (45,740) 30.0%
Administrative & other operating expenses (142,181) (140,935) 0.9%
------------------------------------------- ---------- ---------- -----------
Total Reported operating expenses (450,726) (411,029) 9.7%
------------------------------------------- ---------- ---------- -----------
Total Underlying operating expenses (445,121) (411,029) 8.3%
------------------------------------------- ---------- ---------- -----------
Reported Cost to income 39.9% 37.8% 2.1 pp
------------------------------------------- ---------- ---------- -----------
Underlying Cost to income 39.5% 37.8% 1.7 pp
------------------------------------------- ---------- ---------- -----------
Net Income
Reported net i ncome for the full year 2019 increased by GEL
102.9 million, or 23.5% and stood at GEL 540.3 million. Without
one-off items our net income would have increased by GEL 90.2
million, or 19.8% and amounted to GEL 545.1 million.
As a result, ROE stood at 22.4%, up by 0.4 pp YoY, while ROA
remained unchanged and stood at 3.2%. Our underlying ROE stood at
22.6% down by 0.2 pp YoY, while ROA stood at 3.3% and remained the
same over the same period.
In thousands of GEL FY'19 FY'18 Change YoY
---------------------------------- ---------------- ---------------- -----------
Profit before tax 585,525 510,200 14.8%
---------------------------------- ---------------- ---------------- -----------
Income tax expense (45,184) (72,765) -37.9%
---------------------------------- ---------------- ---------------- -----------
Reported Profit for the period 540,341 437,435 23.5%
---------------------------------- ---------------- ---------------- -----------
Underlying Profit for the period 545,105 454,861 19.8%
---------------------------------- ---------------- ---------------- -----------
Reported ROE 22.4% 22.0% 0.4 pp
---------------------------------- ---------------- ---------------- -----------
Underlying ROE 22.6% 22.8% -0.2 pp
---------------------------------- ---------------- ---------------- -----------
Reported ROA 3.2% 3.2% 0.0 pp
---------------------------------- ---------------- ---------------- -----------
Underlying ROA 3.3% 3.3% 0.0 pp
---------------------------------- ---------------- ---------------- -----------
Funding and Liquidity
31-Dec-19 31-Dec-18 Change
--------------------------------------------------------------- ---------- ------------ -------
Minimum net stable funding ratio, as defined by NBG 100.0% N/A N/A
Net stable funding ratio 126.7% 129.3% [15] -2.6%
Net loans to deposits + IFI funding 104.8% 89.9% 14.9%
Leverage (Times) 7.0x 7.0x 0.0x
Minimum liquidity ratio, as defined by the NBG 30.0% 30.0% 0.0%
Liquidity ratio, as defined by the NBG 32.2% 33.3% -1.1%
Minimum total liquidity coverage ratio, as defined by the NBG 100.0% 100.0% 0.0%
Minimum LCR in GEL, as defined by the NBG 75.0% 75.0% 0.0%
Minimum LCR in FC, as defined by the NBG 100.0% 100.0% 0.0%
Total liquidity coverage ratio, as defined by the NBG 110.1% 113.9% -3.8%
LCR in GEL, as defined by the NBG 83.7% 102.5% -18.8%
LCR in FC, as defined by the NBG 128.4% 121.1% 7.3%
--------------------------------------------------------------- ---------- ------------ -------
Regulatory Capital
As of 31 December 201 9, the Bank's Basel III CET 1 capital
stood at 12.0%, down by 0.4 pp on a YoY basis. The drop was mainly
driven by the increased portfolio and GEL depreciation during 2019.
This effect was partially offset by net income generation over the
same period. Our Tier 1 and Total capital ratios increased by 1.8
pp and 1.2 pp respectively. The increase was mainly driven by
income generation and issuance of AT1 instrument (in the amount of
USD 125 million) in summer 2019.
In thousands of GEL 31-Dec-19 31-Dec-18 Change
-------------------------------------- ----------- ----------- --------
CET 1 Capital 1,871,892 1,629,594 14.9%
Tier 1 Capital 2,281,706 1,678,716 35.9%
Total Capital 2,974,029 2,351,269 26.5%
Total Risk-weighted Exposures 15,593,925 13,154,872 18.5%
-------------------------------------- ----------- ----------- --------
Minimum CET 1 ratio 10.4% 8.3% 2.1 pp
CET 1 Capital adequacy ratio 12.0% 12.4% -0.4 pp
Minimum Tier 1 ratio 12.5% 10.3% 2.2 pp
Tier 1 Capital adequacy ratio 14.6% 12.8% 1.8 pp
Minimum total capital adequacy ratio 17.5% 15.8% 1.7 pp
Total Capital adequacy ratio 19.1% 17.9% 1.2 pp
-------------------------------------- ----------- ----------- --------
Loan Portfolio
As of 31 December 2019, the gross loan portfolio reached GEL
12,662.0 million, up by 22.1% YoY, or by 17.9% on a constant
currency basis. This was mainly supported by growth in the
corporate segments (as well as by the re-segmentation of certain
clients from the MSME segment in 1Q 2019 in the amount of GEL 128.0
mln). Over the same period, the proportion of gross loans
denominated in foreign currency decreased by 1.4 pp on a YoY basis
and accounted for 58.7% of total loans, while on a constant
currency basis the proportion of gross loans denominated in foreign
currency increased by 2.9 pp and stood at 57.2%.
At the end of December 2019, our market share in total loans
stood at 39.5% up by 0.7 pp YoY, while our loan market share in
legal entities was 38.9% up by 1.6 pp YoY, and our loan market
share in individuals stood at 40.0% and remained the same YoY.
In thousands of GEL 31-Dec-19 31-Dec-18 Change
--------------------------------------- ----------- ----------- -------
Loans and advances to customers
--------------------------------------- ----------- ----------- -------
Retail 5,053,203 4,698,699 7.5%
Retail loans GEL 2,386,750 2,063,283 15.7%
Retail loans FC 2,666,453 2,635,416 1.2%
Corporate 4,660,473 3,177,289 46.7%
Corporate loans GEL 1,424,309 905,372 57.3%
Corporate loans FC 3,236,164 2,271,917 42.4%
MSME 2,948,279 2,496,594 18.1%
MSME loans GEL 1,419,804 1,170,343 21.3%
MSME loans FC 1,528,475 1,326,251 15.2%
--------------------------------------- ----------- ----------- -------
Total loans and advances to customers 12,661,955 10,372,582 22.1%
--------------------------------------- ----------- ----------- -------
FY'19 FY'18 Change
YoY
------------------------------- ------ ------ --------
Loan yields 11.0% 12.3% -1.3 pp
Loan yields GEL 15.7% 17.8% -2.1 pp
Loan yields FC 7.8% 8.5% -0.7 pp
Retail Loan Yields 12.1% 14.2% -2.1 pp
Retail loan yields GEL 18.0% 20.8% -2.8 pp
Retail loan yields FC 7.3% 7.9% -0.6 pp
Corporate Loan Yields 9.3% 9.5% -0.2 pp
Corporate loan yields GEL 11.6% 11.0% 0.6 pp
Corporate loan yields FC 8.4% 9.0% -0.6 pp
MSME Loan Yields 11.4% 12.1% -0.7 pp
MSME loan yields GEL 15.4% 16.2% -0.8 pp
MSME loan yields FC 7.7% 8.7% -1.0 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 2.7%, down by 0.4 pp,
which was primarily attributable to the strong performance of the
corporate and MSME segments.
Par 30 31-Dec-19 31-Dec-18 Change
------------- ---------- ---------- --------
Retail 2.1% 2.6% -0.5 pp
Corporate 0.5% 0.4% 0.1 pp
MSME 2.8% 2.8% 0.0 pp
------------- ---------- ---------- --------
Total Loans 1.7% 2.0% -0.3 pp
------------- ---------- ---------- --------
Non-performing Loans 31-Dec-19 31-Dec-18 Change
---------------------- ---------- ---------- --------
Retail 3.0% 2.9% 0.1 pp
Corporate 1.8% 2.7% -0.9 pp
MSME 3.8% 4.2% -0.4 pp
---------------------- ---------- ---------- --------
Total Loans 2.7% 3.1% -0.4 pp
---------------------- ---------- ---------- --------
NPLs Coverage Dec-19 Dec-18
Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral
--------------- ---------------- ----------------- ---------------- -----------------
Corporate 97.1% 241.4% 96.2% 286.9%
Retail 111.1% 182.9% 132.4% 204.4%
MSME 59.7% 173.7% 68.4% 174.0%
--------------- ---------------- ----------------- ---------------- -----------------
Total 91.1% 194.2% 102.7% 216.4%
--------------- ---------------- ----------------- ---------------- -----------------
Cost of risk
The total cost of risk for FY 2019 stood at 0.7%, down by 0.9 pp
YoY, driven by the change of product mix, as well as by robust
credit quality across all segments, related to the responsible
lending regulation effective from 1 January 2019.
Cost of Risk FY'19 FY'18 Change
YoY
-------------- ------ ------ --------
Retail 1.6% 2.7% -1.1 pp
Corporate -0.1% 0.4% -0.5 pp
MSME 0.3% 0.7% -0.4 pp
Total 0.7% 1.6% -0.9 pp
-------------- ------ ------ --------
Deposit Portfolio
The total deposit portfolio increased by 7.5% YoY and amounted
to GEL 10,049.3 million, while on a constant currency basis the
total deposit portfolio was up by 2.9%. The proportion of deposits
denominated in foreign currency increased by 0.2 pp on a YoY basis
and accounted for 65.9% of total deposits, while on a constant
currency basis the proportion of deposits denominated in foreign
currency increased by 1.3 pp and stood at 64.4%.
By the end December 2019, our market share in deposits amounted
to 39.0% down by 2.2 pp YoY, and our market share in deposits to
legal entities stood at 40.6% down by 0.7 pp. Our market share in
deposits to individuals stood at 37.9%, down by 3.3 pp YoY.
In thousands of GEL 31-Dec-19 31-Dec-18 Change
---------------------------- ----------- ---------- -------
Customer Accounts
---------------------------- ----------- ---------- -------
Retail 5,673,917 5,103,971 11.2%
Retail deposits GEL 1,098,681 935,339 17.5%
Retail deposits FC 4,575,236 4,168,632 9.8%
Corporate 3,187,319 3,230,653 -1.3%
Corporate deposits GEL 1,735,746 1,754,282 -1.1%
Corporate deposits FC 1,451,573 1,476,371 -1.7%
MSME 1,188,088 1,017,518 16.8%
MSME deposits GEL 594,388 515,827 15.2%
MSME deposits FC 593,700 501,691 18.3%
---------------------------- ----------- ---------- -------
Total Customer Accounts 10,049,324 9,352,142 7.5%
---------------------------- ----------- ---------- -------
FY'19 FY'18 Change
YoY
--------------------------------- ------ ------ --------
Deposit rates 3.3% 3.2% 0.1 pp
Deposit rates GEL 5.8% 5.6% 0.2 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% 4.9% 0.0 pp
Corporate deposit rates GEL 7.4% 7.5% -0.1 pp
Corporate deposit rates FC 1.7% 1.9% -0.2 pp
MSME Deposit Yields 0.9% 1.0% -0.1 pp
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 - a legal entity/group of affiliated entities with
an annual revenue exceeding GEL 12.0 million or which have been
granted facilities of 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
FY'19 Retail MSME Corporate Corp.Centre Total
------------------------------------ ---------- ---------- ---------- ------------ ----------
Interest income 582,788 299,451 356,652 197,952 1,436,843
Interest expense (152,751) (10,202) (160,064) (340,843) (663,860)
Net gains on currency swaps - - - 28,556 28,556
Net transfer pricing (66,951) (101,424) 31,352 137,023 -
Net interest income 363,086 187,825 227,940 22,688 801,539
------------------------------------ ---------- ---------- ---------- ------------ ----------
Fee and commission income 207,258 26,271 49,338 10,564 293,431
Fee and commission expense (88,679) (9,081) (7,069) (1,312) (106,141)
Net fee and commission income 118,579 17,190 42,269 9,252 187,290
------------------------------------ ---------- ---------- ---------- ------------ ----------
Net insurance premium earned
after claims and acquisition
costs - - - 18,510 18,510
Net income from foreign currency
operations 30,990 24,220 49,851 (25,782) 79,279
Foreign exchange translation
gains less losses/(losses
less gains) - - - 22,188 22,188
Net gains/(losses) from derivative
financial instruments (264) - - (16) (280)
Gains less Losses from Disposal
of Investment Securities Measured
at Fair Value through Other
Comprehensive Income - - - 169 169
Other operating income 9,563 1,093 2,953 5,307 18,916
Share of profit of associates - - - 632 632
Other operating non-interest
income and insurance profit 40,289 25,313 52,804 21,008 139,414
------------------------------------ ---------- ---------- ---------- ------------ ----------
Credit loss allowance for
loans to customers (77,323) (7,968) 3,261 - (82,030)
Credit loss allowance for
performance guarantees and
credit related commitments 411 124 (2,691) - (2,156)
Credit loss allowance for
investments in finance lease - - - 582 582
Credit loss allowance for
other financial assets (3,545) (11) 2,211 (6,753) (8,098)
Credit loss allowance for
financial assets measured
at fair value through other
comprehensive income - - (141) (149) (290)
Profit before G&A expenses
and income taxes 441,497 222,473 325,653 46,628 1,036,251
------------------------------------ ---------- ---------- ---------- ------------ ----------
Staff costs (134,143) (48,018) (38,360) (27,282) (247,803)
Depreciation and amortization (45,522) (7,210) (2,571) (4,175) (59,478)
Provision for liabilities
and charges - - - (1,264) (1,264)
Administrative and other operating
expenses (77,563) (21,094) (17,127) (26,397) (142,181)
Operating expenses (257,228) (76,322) (58,058) (59,118) (450,726)
------------------------------------ ---------- ---------- ---------- ------------ ----------
Profit before tax 184,269 146,151 267,595 (12,490) 585,525
------------------------------------ ---------- ---------- ---------- ------------ ----------
Income tax expense (18,101) (14,825) (29,048) 16,790 (45,184)
------------------------------------ ---------- ---------- ---------- ------------ ----------
Profit for the year 166,168 131,326 238,547 4,300 540,341
------------------------------------ ---------- ---------- ---------- ------------ ----------
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Dec-19 Dec-18
------------------------------------------------------------------------- -------------------- -------------------
Cash and cash equivalents 1,003,583 1,166,911
Due from other banks 33,605 47,316
Mandatory cash balances with National Bank of Georgia 1,591,829 1,422,809
Loans and advances to customers 12,349,399 10,038,452
Investment securities measured at fair value through other comprehensive
income 985,293 1,005,239
Bonds carried at amortized cost 1,022,684 654,203
Investments in finance leases 256,660 203,802
Investment properties 72,667 84,296
Current income tax prepayment 25,695 2,116
Deferred income tax asset 2,173 2,097
Other financial assets 133,736 167,518
Other assets 255,712 192,792
Premises and equipment 385,736 367,504
Right of use assets 59,693 -
Intangible assets 167,597 109,220
Goodwill 61,558 31,286
Investments in associates 2,654 2,432
TOTAL ASSETS 18,410,274 15,497,993
------------------------------------------------------------------------- -------------------- -------------------
LIABILITIES
Due to credit institutions 3,593,901 3,031,503
Customer accounts 10,049,324 9,352,142
Lease liabilities 59,898 -
Other financial liabilities 113,608 98,714
Current income tax liability 1,634 63
Debt Securities in issue 1,213,598 13,343
Deferred income tax liability 21,331 22,237
Provisions for liabilities and charges 23,128 18,767
Other liabilities 95,162 104,337
Subordinated debt 591,035 650,919
TOTAL LIABILITIES 15,762,619 13,292,025
------------------------------------------------------------------------- -------------------- -------------------
EQUITY
Share capital 1,682 1,650
Shares held by trust (27,516) -
Share premium 848,459 796,854
Retained earnings 1,953,364 1,523,879
Group re-organisation reserve (162,167.00) (162,168)
Share based payment reserve (17,803) (16,294)
Revaluation reserve for premises 56,374 57,240
Fair value reserve (6,476) 8,680
Cumulative currency translation reserve (6,850) (6,935)
Net assets attributable to owners 2,639,067 2,202,906
------------------------------------------------------------------------- -------------------- -------------------
Non-controlling interest 8,588 3,062
-------------------- -------------------
TOTAL EQUITY 2,647,655 2,205,968
------------------------------------------------------------------------- -------------------- -------------------
TOTAL LIABILITIES AND EQUITY 18,410,274 15,497,993
------------------------------------------------------------------------- -------------------- -------------------
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL FY'19 FY'18
------------------------------------------------------------------------- -------------------- -------------------
Interest income 1,436,843 1,284,235
Interest expense (663,860) (506,213)
Net gains from currency swaps 28,556 N/A
Net interest income 801,539 778,022
------------------------------------------------------------------------- -------------------- -------------------
Fee and commission income 293,431 235,701
Fee and commission expense (106,141) (78,171)
Net fee and commission income 187,290 157,530
------------------------------------------------------------------------- -------------------- -------------------
Net insurance premiums earned 38,199 23,601
Net insurance claims incurred and agents' commissions (19,689) (11,326)
------------------------------------------------------------------------- -------------------- -------------------
Net insurance premium earned after claims and acquisition costs 18,510 12,275
------------------------------------------------------------------------- -------------------- -------------------
Net income from foreign currency operations 79,279 91,678
Net gain/(losses) from foreign exchange translation 22,188 15,196
Net gains/(losses) from derivative financial instruments (280) 173
Gains less losses from disposal of investment securities measured at
fair value through other
comprehensive income 169 2
Other operating income 18,916 31,438
Share of profit of associates 632 1,154
Other operating non-interest income 120,904 139,641
------------------------------------------------------------------------- -------------------- -------------------
Credit loss allowance for loans to customers (82,030) (143,723)
Credit loss allowance for investments in finance lease 582 (1,765)
Credit loss allowance for performance guarantees and credit related
commitments (2,156) (4,056)
Credit loss allowance for other financial assets (8,098) (16,609)
Credit loss allowance for financial assets measured at fair value
through other comprehensive
income (290) (86)
Operating income after credit loss allowance for impairment 1,036,251 921,229
------------------------------------------------------------------------- -------------------- -------------------
Staff costs (247,803) (220,354)
Depreciation and amortization (59,478) (45,740)
(Provision for)/ recovery of liabilities and charges (1,264) (4,000)
Administrative and other operating expenses (142,181) (140,935)
Operating expenses (450,726) (411,029)
------------------------------------------------------------------------- -------------------- -------------------
Profit before tax 585,525 510,200
------------------------------------------------------------------------- -------------------- -------------------
Income tax expense (45,184) (72,765)
-------------------- -------------------
Profit for the period 540,341 437,435
------------------------------------------------------------------------- -------------------- -------------------
Other comprehensive income:
------------------------------------------------------------------------- -------------------- -------------------
Items that may be reclassified subsequently to profit or loss:
------------------------------------------------------------------------- -------------------- -------------------
Movement in fair value reserve (15,156) 6,949
------------------------------------------------------------------------- -------------------- -------------------
Exchange differences on translation to presentation currency 85 425
------------------------------------------------------------------------- -------------------- -------------------
Items that will not be reclassified to profit or loss:
------------------------------------------------------------------------- -------------------- -------------------
Revaluation of premises and equipment - 10,749
------------------------------------------------------------------------- -------------------- -------------------
Income tax recorded directly in other comprehensive income - (2,363)
------------------------------------------------------------------------- -------------------- -------------------
Other comprehensive income for the period (15,071) 15,760
------------------------------------------------------------------------- -------------------- -------------------
Total comprehensive income for the period 525,270 453,195
------------------------------------------------------------------------- -------------------- -------------------
Profit attributable to:
------------------------------------------------------------------------- -------------------- -------------------
- Shareholders of TBCG 537,895 435,078
------------------------------------------------------------------------- -------------------- -------------------
- Non-controlling interest 2,446 2,357
------------------------------------------------------------------------- -------------------- -------------------
Profit for the period 540,341 437,435
------------------------------------------------------------------------- -------------------- -------------------
Total comprehensive income is attributable to:
------------------------------------------------------------------------- -------------------- -------------------
- Shareholders of TBCG 522,843 450,901
------------------------------------------------------------------------- -------------------- -------------------
- Non-controlling interest 2,427 2,294
------------------------------------------------------------------------- -------------------- -------------------
Total comprehensive income for the period 525,270 453,195
------------------------------------------------------------------------- -------------------- -------------------
Consolidated Statements of Cash Flows
In thousands of GEL 31-Dec-19 31-Dec-18
------------------------------------------------------------------------------------------ ------------ ------------
Cash flows from/(used in) operating activities
Interest received 1,388,852 1,224,606
Interest paid (647,427) (501,984)
Fees and commissions received 282,715 235,508
Fees and commissions paid (106,526) (78,140)
Insurance premium received 76,101 54,682
Insurance claims paid (21,787) (15,174)
Income received from trading in foreign currencies 79,287 91,678
Other operating income received 44,248 11,407
Staff costs paid (216,465) (202,897)
Administrative and other operating expenses paid (169,582) (136,670)
Income tax paid (70,413) (34,918)
Cash flows from operating activities before changes in operating assets and liabilities 639,003 648,098
------------------------------------------------------------------------------------------ ------------ ------------
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia (22,009) (343,772)
Loans and advances to customers (2,013,577) (1,718,446)
Investment in finance lease (43,719) (54,784)
Other financial assets 19,612 (35,570)
Other assets 1,577 (4,486)
Net change in operating liabilities
Due to other banks (1,938) 69,755
Customer accounts 272,023 1,371,675
Other financial liabilities (8,267) (12,136)
Change in finance lease liabilities (6,453)
Other liabilities and provision for liabilities and charges 5,816 3,618
Net cash flows (used in)/from operating activities (1,157,932) (76,048)
------------------------------------------------------------------------------------------ ------------ ------------
Cash flows from /(used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive
income (1,781,816) (717,729)
Proceeds from disposal of i nvestment securities measured at fair value through other
comprehensive
income 240,603 14,781
Proceeds from redemption at maturity of i nvestment securities measured at fair value
through
other comprehensive income 1,598,536 370,571
Acquisition of subsidiaries, net of cash acquired (39,297) 809
Acquisition of b onds carried at amortised cost (613,383) (395,717)
Proceeds from redemption of bonds carried at amortised cost 216,871 200,658
Acquisition of premises, equipment and i ntangible assets (120,333) (89,263)
Proceeds from disposal of premises, equipment and i ntangible assets 13,225 813
Cash acquired 2,996 -
Proceeds from disposal of investment property 13,338 42,515
Net cash used in investing activities (469,260) (572,562)
------------------------------------------------------------------------------------------ ------------ ------------
Cash flows from /(used in) financing activities
Proceeds from other borrowed funds 1,819,899 1,776,489
Redemption of other borrowed funds (1,392,897) (1,515,562)
Proceeds from subordinated debt - 255,900
Redemption of subordinated debt (104,079) (60,910)
Proceeds from debt securities in issue 1,176,049 (7,596)
Redemption of debt securities in issue (14,296) -
Dividends paid (91,928) (85,484)
Acquisition of non-controlling interest in subsidiary - -
Net cash flows from financing activities 1,392,748 362,837
------------------------------------------------------------------------------------------ ------------ ------------
Effect of exchange rate changes on cash and cash equivalents 71,116 21,207
------------------------------------------------------------------------------------------ ------------ ------------
Net increase in cash and cash equivalents (163,328) (264,566)
------------------------------------------------------------------------------------------ ------------ ------------
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 1,003,583 1,166,911
------------------------------------------------------------------------------------------ ------------ ------------
Key Ratios
Average Balances
The average balances included in this document are calculated as
the average of the relevant monthly balances as of each month-end.
Balances have been extracted from TBC's unaudited and consolidated
management accounts, which were prepared from TBC's accounting
records. These were used by the management for monitoring and
control purposes.
Key Ratios
Ratios (based on monthly averages, where applicable) FY'19 FY'18
------------------------------------------------------ ------- --------
Profitability ratios:
Underlying ROE(1) 22.6% 22.8%
Reported ROE(2) 22.4% 22.0%
Underlying ROA(3) 3.3% 3.3%
Reported ROA(4) 3.2% 3.2%
ROE before credit loss allowance(5) 26.3% 30.4%
Underlying Cost to Income(6) 39.5% 37.8%
Reported Cost to Income(7) 39.9% 37.8%
NIM(8) 5.6% 6.9%
Risk Adjusted NIM(9) 4.8% 5.4%
Loan Yields(10) 11.0% 12.3%
Risk Adjusted Loan Yields(11) 10.3% 10.8%
Deposit rates(12) 3.3% 3.2%
Yields on interest Earning Assets(13) 10.0% 11.4%
Cost of Funding(14) 4.7% 4.4%
Spread(15) 5.5% 7.0%
------------------------------------------------------ ------- --------
Asset quality and portfolio concentration:
Cost of Risk(16) 0.7% 1.6%
PAR 90 to Gross Loans(17) 1.1% 1.2%
NPLs to Gross Loans(18) 2.7% 3.1%
NPLs coverage(19) 91.1% 102.7%
NPLs coverage with collateral(20) 194.2% 216.4%
Credit loss level to Gross Loans(21) 2.5% 3.2%
Related Party Loans to Gross Loans(22) 0.1% 0.1%
Top 10 Borrowers to Total Portfolio(23) 8.3% 10.1%
Top 20 Borrowers to Total Portfolio(24) 12.3% 14.2%
------------------------------------------------------ ------- --------
Capital optimisation:
Net Loans to Deposits plus IFI Funding(25) 104.8% 89.9%
Net Stable Funding Ratio(26) 126.7% 129.3%*
Liquidity Coverage Ratio(27) 110.1% 113.9%
Leverage(28) 7.0x 7.0x
CET 1 CAR (Basel III)(29) 12.0% 12.4%
Regulatory Tier 1 CAR (Basel III)(30) 14.6% 12.8%
Regulatory Total 1 CAR (Basel III)(31) 19.1% 17.9%
------------------------------------------------------ ------- --------
(*) Based on internal estimates
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 2.6766 as of 31 December 2018. As of 31 December 2019, the
USD/GEL exchange rate equalled 2.8677. For P&L items growth
calculations without currency effect, we used the average USD/GEL
exchange rate for the following periods: FY 2019 of 2.8192, FY 2018
of 2.5345.
Additional Disclosures
1) Subsidiaries of TBC Bank Group PLC [16]
Ownership Country Year of Industry Total Assets
/ voting incorporation (after elimination)
% as
of 31
December
2019
---------- ----------- --------------- -------------------- -----------------------
Subsidiary Amount % in TBC
GEL'000 Group
--------------------------- ---------- ----------- --------------- -------------------- ------------ ---------
JSC TBC Bank 99.9% Georgia 1992 Banking 17,892,883 97.21%
United Financial
Corporation JSC 98.7% Georgia 1997 Card processing 10,015 0.05%
TBC Capital LLC 100.0% Georgia 1999 Brokerage 4,471 0.02%
TBC Leasing JSC 100.0% Georgia 2003 Leasing 322,188 1.75%
Non-banking
TBC Kredit LLC 100.0% Azerbaijan 1999 credit institution 24,700 0.14%
TBC Pay LLC 100.0% Georgia 2009 Processing 33,793 0.18%
Real estate
Index LLC 100.0% Georgia 2011 management 925 0.01%
TBC Invest LLC 100.0% Israel 2011 PR and marketing 341 0.00%
JSC TBC Insurance 100.0% Georgia 2014 Insurance 62,965 0.33%
Redmed LLC 100.0% Georgia 2019 E-commerce 370 0.00%
TBC International
LLC 100.0% Georgia 2019 Asset management 367 0.00%
Swoop JSC 100.0% Georgia 2010 Retail Trade 409 0.00%
LLC Online Tickets 55.0% Georgia 2015 Software Services 2,434 0.01%
TKT UZ 75.00% Uzbekistan 2019 Retail Trade 236 0.00%
E-commerce,
Housing and
My.ge LLC 65.0% Georgia 2008 Auto 5,637 0.03%
LLC Vendoo (Geo) 100.0% Georgia 2019 Retail Leasing 4,117 0.02%
LLC Mypost 100.0% Georgia 2019 Postal Service 96 0.00%
LLC Billing Solutions 51.00% Georgia 2019 Software Services 344 0.00%
All property.ge Real estate
LLC 90.0% Georgia 2013 management 1,179 0.01%
LLC F Solutions 100.00% Georgia 2019 Software Services 10 0.00%
Inspired LLC 51.0% Uzbekistan 2011 Processing 3,973 0.02%
LLC Vendoo (UZ Leasing) 100.00% Uzbekistan 2019 Consumer financing 1,059 0.01%
2) Update on strategic objectives
Our mission: Make life easier
Financial services with a strong focus on digital:
o Book value as of 31 December 2019 - GEL 2.5 billion
o Total assets as of 31 December 2019 - GEL 18.4 billion
o Number of customers as of 31 December 2019 - 2.6 million
Ecosystems:
o Revenue [17] - GEL 81.2 million for FY 2019, up by 79% YoY
o Net profit [18] - GEL 37.9 million for FY 2019, up by 101%
YoY
o Number of visitors [19] in September 2019 -5.4 million
o TBC Bank drives 22% 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; and
o Collect more valuable customer data.
Payments ecosystem [20]
FY 19 FY 18 Change
Number of payments (million) 332.6 253.6 31.2%
------ ------ -------
Payments ecosystem 236.4 172.7 36.9%
------ ------ -------
Other payments business 96.2 80.9 18.9%
------ ------ -------
Volume of payments (GEL
billion) 154.1 126.6 21.7%
------ ------ -------
Payments ecosystem 11.8 8.8 34.1%
------ ------ -------
Other payments business 142.3 117.8 20.8%
------ ------ -------
o We are Number 1 in E-com & POS transactions volume, with a
market share of above 53%; [21]
o We are among the world's best with over 86% of payments being
contactless; [22] 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 and
TBC Bracelets.
Our aspirations
o Annual growth rate for payments commission income of 20%;
o Increase annual net revenue from GEL 109 million (with 42%
contribution from ecosystems) in 2018 to GEL 218 million 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; the 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.
FY 19 FY 20 F
[23]
Revenue (GEL million) 33.7 34.2
------ --------
Number of transactions
(million) 53.0 55.8
------ --------
EBITDA (GEL million) 16.9
------ --------
Update for 4Q 2019:
In 4Q 2019, the volume and number of transactions increased by
7.9% and 4.2% QoQ, respectively.
Payme
Payme is a leading digital payment service provider in
Uzbekistan, which supplies high-quality payment solutions to its
1.8 million users. [24]
Services:
o Traditional services: Utility payments, P2P transfers, Loan
repayments, mPOS for QR-based payments, E-commerce purchases;
o New services: a new application, Payme 2.0, was created and
the beta version was launched in July with an upgraded interface
design and new capabilities.
Financials:
o Investment in 2019 - USD 5.5 million for a 51%
shareholding;
o The business is self-sustainable and generating a positive
cashflow.
FY 19 FY 20 F
[25]
Revenue (GEL million) 8.6 12.3
------ --------
Number of registered users
(thousand) 1,772 2,800
------ --------
Number of transactions
(million) 40.1 52.5
------ --------
EBITDA (GEL million) 4.5
------ --------
Update for 4Q 2019:
For FY 2019, revenue and EBITDA increased by 84.0% and 76.9%,
respectively.
Housing ecosystem
Livo
Livo is the first housing digital ecosystem in Georgia, offering
the full range of services needed when buying or renting a home,
with an estimated share of the total digital traffic of 20% [26]
.
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 980,000 (USD 225,000 for 90%
shareholding plus USD 755,000 for future development);
o Planned investment in 2020 is GEL 2.0 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.
Key financial data FY 19 FY 20 F
Revenue (GEL million) 2.5/2.2 [27] 5.2
------------- --------
EBITDA (GEL million) -0.6
------------- --------
Key operating data Dec - 19 Dec - 20
F
Number of unique visitors
(thousand) [28] 274 350
--------- ---------
Number of listings (thousand) 24 50
--------- ---------
Update for 4Q 2019:
o In 4Q 2019, the following services were added: mortgage
insurance, a special service package for developers, and lead
generation for developers and information about air pollution;
o The number of listings increased by 41.2% in December compared
to September;
MyHome.ge
MyHome.ge is the leading classified digital platform in Georgia
for real-estate purchase and renting, with an
estimated share of the total digital traffic of 35%. [29]
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
streams.
Financials:
o Allocated initial investment in August 2019, based on revenue
contribution (35%), was GEL 6.7 million; [30]
o The business is self-sustainable.
Key financial data FY 19 FY 20 F
Revenue (GEL million) 1.4 2.2
------ --------
EBITDA (GEL million) 0.4
------ --------
Key operating data Dec - 19 Dec - 20
F
Number of unique visitors
(thousand) [31] 360 430
--------- ---------
Number of listings (thousand) 140 145
--------- ---------
Update for 4Q 2019
o A dedicated module was added for developers, which allows them
to manage their offerings easily;
o The number of listings increased by 7.7% in December, compared
to September.
E-commerce ecosystem
Vendoo
Vendoo is an asset light platform that acts a key intermediary
between buyers and sellers, modelled on industry peers such as
Alibaba and Rakuten.
The estimated total addressable market was around GEL 200
million in 2019, and is expected to grow by 30% in 2020.
Offerings:
o Delivery within 24 hours;
o Over 230 large merchants and following offerings: Electronics,
personal care products, gardening & housing, toys, household
chemistry, books & stationary and beverages; and
o Synergies with our banking operations: installment loans,
participation in a loyalty program called "Ertguli".
Financials:
o Investment in 2018-2019 was GEL 7.2 million. In 2020, TBC
plans to invest a further GEL 1.7 million;
o Break-even is planned in 4Q 2021;
o GMV [32] was GEL 2.9 mln in 2019 and is forecasted to reach
GEL 14.0 million in 2020.
Key financial data [33] FY 19 FY 20 F
[34]
Revenue (GEL million) 2.4 12.0
------ --------
EBITDA (GEL million) (4.4)
------ --------
Key operating data Dec - 19 Dec - 20
F
Number of unique visitors
(thousand) 337 500
--------- ---------
SKUs [35] (thousand) 27 50
--------- ---------
Update for 4Q 2019
o GMV more than tripled QoQ and reached GEL 2.1 million in 4Q as
a result of our wide-scale seasonal campaigns, while the number of
SKUs increased by 35%;
o Significantly strengthened its operations to meet the high
demand.
MyMarket.ge & MyShop.ge
These platforms are the number one players in C2C and B2C
e-commerce in Georgia , with an estimated share of the
total digital traffic of 80%. [36]
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 [37] ;
o The business is self-sustainable.
Key financial data FY 19 FY 20 F
Revenue (GEL million) 1.2 1.6
------ --------
EBITDA (GEL million) 0.3
------ --------
Key operating data Dec - 19 Dec - 20
F
Number of unique visitors
(thousand) 900 1,000
--------- ---------
Number of sellers (thousand) 45 50
--------- ---------
Update for 4Q 2019
o Completely redesigned interface of Mymarket.ge webpage;
o The number of unique visitors increased by 7.5% in December
compared to September;
o The number of sellers increased by 28.6% in December compared
to September.
Auto ecosystem
MyAuto.ge & MyParts.ge
MyAuto.ge and MyParts.ge are the market leader in automotive and
spare parts, with an estimated share of the total digital traffic
of 80% [38] in each.
Offerings:
o Purchase and renting of secondary cars;
o Purchase of auto parts;
o MyAuto.ge has 50 dealers and 33,000 sellers;
o MyParts.ge 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 [39] ;
o The business is self-sustainable.
Key financial data FY 19 FY 20 F
Revenue (GEL million) 2.5 3.6
------ --------
EBITDA (GEL million) 0.9
------ --------
Key operating data Dec - 19 Dec - 20
F
Number of unique visitors
(thousand) 1,550 1,600
--------- ---------
Number of listings (thousand) 400 450
--------- ---------
Update for 4Q 2019:
o The number of unique visitors increased by 11.4% in December
compared to September;
o The number of listings increased by 15.9% in December compared
to September.
Space - Fully digital bank
Space was developed over the course of just 8 months [40] by a
dedicated team of 35 professionals. Development costs before the
launch of Beta version in May 2019 amounted to GEL 1.4 million.
Key metrics as of 31 December 2019
Number of downloads 508 thousand
---------------------------------- -----------------------------------------------------------
Total registered 181 thousand, out of whom 46% are TBC's dormant
customers customers
---------------------------------- -----------------------------------------------------------
Number of transactions 1.2 mln, out of which 8% was conducted by TBC
(4Q'19) cards and 8% by other Georgian banks' cards
---------------------------------- -----------------------------------------------------------
Transaction amount GEL 62 million, out of which 12% was conducted
(4Q'19) by TBC cards and 11% by other Georgian banks'
cards
---------------------------------- -----------------------------------------------------------
Loan portfolio GEL 27 million
---------------------------------- -----------------------------------------------------------
Number of borrowers 10 thousand
---------------------------------- -----------------------------------------------------------
Number of total cards 121 thousand, out of which 27% was TBC cards
and 18% other Georgian banks' cards
---------------------------------- -----------------------------------------------------------
Number of space cards 65 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;
o QR instalments; and
o Deposits.
Transformation into a data driven organization
The goal is to 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, which have been 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 5
underway;
o GEL 8.9 million extra profit in 2019.
Aspirations:
o 23 Data analytics projects already finished across the Bank;
and
o GEL 100 million annual extra profit by 2023.
3) Reconciliation of reported IFRS consolidated figures with the underlying numbers
Item ( in FY 2019 FY 2018 Description Reason for exclusion
thousands of from the Group's
GEL ) current reported
performance
Consulting (5,605) Consulting fees incurred These costs are
fees in 2Q 2019, in relation significant and
to the recent events non-recurring in
regarding historic nature, and therefore
matters surrounding are not indicative
TBC Bank. For further of the Group's current
details, please see underlying performance.
the following press
release dated 21.02.2019.
Reversal of - (17,426) In 2018, TBC Bank reversed These costs are
deferred tax the one-off deferred significant and
gain tax gain recognized non-recurring in
in 2016 due to the nature, and therefore
recent amendment to are not indicative
the Georgian Tax Code of the Group's current
in relation to corporate underlying performance.
income 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 FY 2019 FY 2018
Reported net interest income 801,539 778,022
Reported net fee and commission income 187,290 157,530
Reported net insurance premium earned after
claims and acquisition costs 18,510 12,275
Reported other operating income 120,904 139,641
--------------------------------------------- ---------- ----------
Reported operating income 1,128,243 1,087,468
Reported total credit loss allowance (91,992) (166,239)
--------------------------------------------- ---------- ----------
Reported operating income after provisions 1,036,251 921,229
Reported operating expenses (450,726) (411,029)
One-off consulting fees 5,605 -
Underlying operating expenses (445,121) (411,029)
--------------------------------------------- ---------- ----------
Reported profit before tax 585,525 510,200
Underlying profit before tax 591,129 510,200
--------------------------------------------- ---------- ----------
Reported income tax (45,184) (72,765)
Effect on tax of one-off items (841)
Reversal of the one-off deferred tax gain 17,426
Underlying income tax (46,024) (55,339)
--------------------------------------------- ---------- ----------
Reported profit for the period 540,341 437,435
Underlying profit for the period 545,105 454,861
--------------------------------------------- ---------- ----------
Reported non-controlling interest (NCI) 2,446 2,357
Underlying NCI 2,446 2,357
Reported profit for the period less NCI 537,895 435,078
Underlying profit for the period less NCI 542,659 452,504
in thousands of GEL FY 2019 FY 2018
Average reported equity attributable to the
PLC's equity holders 2,397,141 1,977,359
Adjustment for one-off items on monthly average
basis 6,079 10,088
Average underlying equity attributable to
the PLC's equity holders 2,403,220 1,987,447
Average reported total assets 16,792,320 13,623,594
Adjustment for one-off items on monthly average - -
basis
Average underlying total assets 16,792,320 13,623,594
------------------------------------------------- ----------- -----------
FY 2019 FY 2018
Reported cost to income 39.9% 37.8%
Underlying cost to income (APM) 39.5% 37.8%
Reported ROE 22.4% 22.0%
Underlying ROE (APM) 22.6% 22.8%
Reported ROA 3.2% 3.2%
Underlying ROA (APM) 3.3% 3.3%
--------------------------------- -------- --------
4) Net gains from currency swaps
In 2019, the Group entered into swap agreements denominated in
foreign currencies in order to decrease its cost of funding. As the
contracts reached significant volume, the Group revisited the
presentation of effects in the Statement of profit or loss.
Reclassifications from other non-interest operating income to net
interest income have been recorded for the first three quarters in
2019. 2018 information has not been restated due to immateriality
of amounts.
In thousands of GEL 4Q'19 3Q'19 2Q'19 1Q'19
Net gains from currency swaps 9,054 8,355 6,967 4,179
------ ------ ------ ------
5) TBC Insurance
TBC Insurance is a rapidly growing, wholly owned subsidiary of
TBC Bank and is the Bank's main bancassurance partner. The company
was acquired by the Group in October 2016 and has since grown
significantly, becoming the second largest player on the P&C
and life insurance market and the largest player in the retail
segment, holding 21.3% and 36.4% market shares, ([41]) without
border motor third party liability (MTPL) insurance, respectively
in 2019, based on internal estimates.
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 B-Bot, a Georgian-speaking chat-bot that 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 2019, TBC Insurance achieved strong growth results in
non-health business lines. The gross written premium grew by 31.5%
YoY and amounted to GEL 79.0 million. Over the same period, the net
combined ratio ([42]) increased by 3.5 pp and stood at 82.8%,
driven by increased operating expenses in health insurance, without
health insurance business, net combined ratio would have been
79.1%. As a result, net profit for 2019 increased by 12.5 % YoY and
reached to GEL 8.5 million or GEL 9,792 million without health
insurance.
Information excluding health 4Q'19 3Q'19 4Q'18 12M'19 12M'18
insurance
------------------------------ ------- ------- ------- ------- -------
In thousands of GEL
------------------------------ ------- ------- ------- ------- -------
Gross written premium 19,496 18,999 17,075 75,523 60,079
Net earned premium ([43]) 15,603 13,412 10,554 51,910 35,657
Net profit 2,973 2,567 2,556 9,792 7,584
Net combined ratio 81.9% 77.8% 80.7% 79.1% 79.3%
Information including health 4Q'19 3Q'19 4Q'18 12M'19 12M'18
insurance
------------------------------ ------- ------- ------- ------- -------
In thousands of GEL
------------------------------ ------- ------- ------- ------- -------
Gross written premium 21,808 19,760 17,075 79,031 60,079
Net earned premium 16,367 13,579 10,554 52,882 35,657
Net profit 2,499 2,227 2,556 8,533 7,584
Net combined ratio 86.5% 81.6% 80.7% 82.8% 79.3%
1Q and 2Q 2019 figures are provided without subsidiaries of TBC
Insurance: Swoop JSC, GE Commerce LTD, All Property LTD and 3Q and
4Q 2019 figures are given without Redmed LTD;
All figures in the above table are presented before
consolidation eliminations.
6) 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 concluded a shareholders agreement in
late December 2018 and signed it in early January 2019. According
to this agreement, TBC's shareholding in the joint entity will be
8.34%. The transaction is subject to regulatory approval;
o Currently, the bank is in the process of significant
reorganization, which includes re-branding and shifting to
digitalization.
Achievements
o Over the course of 2019, Nikoil Bank significantly enhanced
its operations:
o In late 2019, Nikoil Bank officially started rebranding and
introduced a new name, logo and slogan. Nikoil Bank is now called
Yelo Bank. The introduction of a new banking service model will
take place in parallel with the process of updating the network of
branches and transforming them to a completely new design;
o New management team was recruited including: CDM, CRO, CFO and
CIO, as well as Head of retail and MSME;
o Core banking was revised and improved, including the data
warehouse;
o Risk management was improved in terms of operational risks,
credit risks, and compliance.
Mid-term vision
In millions of USD FY 19 results of Mid-term targets
Nikoil Bank ([44]) of joint entity
Gross loan portfolio c. 228 c. 1,400
--------------------- -----------------
Equity c. 34 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.
7) ESG ratings and scores
MSCI - ESG Rating
In 2019, TBC Bank Group received a rating of A (on a scale of
AAA-CCC) in the MSCI ESG Ratings assessment.
ISS - ESG
TBC Bank Group PLC attained the above mentioned ESG scores from
ISS as of 1 February 2020
Governance 2
Environment 3
Social 2
Lower Governance Risk = 1 - Higher Governance Risk = 10
Higher E&S Disclosure = 1 - Lower E&S Disclosure =
10
Sustainalytics
TBC Bank Group PLC holds 20.6 ESG rating as of 17 December
2019
Negligible Low Medium High Severe
0-10 10-20 20-30 30-40 40+
------ ------- ------ -------
Relative performance
Rank (1 (st) = lowest Percentile (1 (st)
risk) = lowest risk)
Banks (Industry Group) 83 out of 934 10th
---------------------- -------------------
Regional Banks (Subindustry) 11 out of 386 4th
---------------------- -------------------
8) Loan book breakdown by stages according IFRS 9
Total (in million GEL)
Stage Gross % of total Allowance LLP rate
1 11,552 91.2% 96 0.8%
------- ----------- ---------- ---------
2 757 6.0% 83 11.0%
------- ----------- ---------- ---------
3 353 2.8% 134 38.0%
------- ----------- ---------- ---------
Total 12,662 100.0% 313 2.5%
------- ----------- ---------- ---------
Corporate in million GEL
Stage Gross % of total Allowance LLP rate
1 4,435 95.2% 39 0.9%
------ ----------- ---------- ---------
2 104 2.2% 2 1.9%
------ ----------- ---------- ---------
3 122 2.6% 40 32.8%
------ ----------- ---------- ---------
Total 4,661 100.0% 81 1.7%
------ ----------- ---------- ---------
MSME (in million GEL)
Stage Gross % of total Allowance LLP rate
1 2,650 89.9% 18 0.7%
------ ----------- ---------- ---------
2 205 6.9% 19 9.3%
------ ----------- ---------- ---------
3 93 3.2% 29 31.2%
------ ----------- ---------- ---------
Total 2,948 100.0% 66 2.2%
------ ----------- ---------- ---------
Consumer (in million GEL)
Stage Gross % of total Allowance LLP rate
1 1,593 84.6% 37 2.3%
------ ----------- ---------- ---------
2 217 11.5% 52 24.0%
------ ----------- ---------- ---------
3 74 3.9% 45 60.8%
------ ----------- ---------- ---------
Total 1,884 100.0% 134 7.1%
------ ----------- ---------- ---------
Mortgage (in million GEL)
Stage Gross % of total Allowance LLP rate
1 2,874 90.7% 2 0.1%
------ ----------- ---------- ---------
2 231 7.3% 10 4.3%
------ ----------- ---------- ---------
3 64 2.0% 20 32.8%
------ ----------- ---------- ---------
Total 3,169 100.0% 32 1.0%
------ ----------- ---------- ---------
[1] For the ratio calculation all relevant group recurring costs are allocated to the bank.
[2] For the ratio calculation all relevant group recurring costs
are allocated to the bank.
[3] International Financial Institutions
[4] 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.
[5] Internet or Mobile Banking penetration equals the number of
active clients of Internet or Mobile Banking divided by the total
number of active clients.
[6] Mobile Banking penetration equals the number of active
clients of Mobile Banking divided by the number of total active
clients. Data includes Space figures
[7] Other operating non-interest income includes Net insurance
premium earned after claims and acquisition costs
[8] For the ratio calculation all relevant group recurring costs are allocated to the bank.
([9]) In 2019, the non-recurring costs included consulting fees
in the amount of GEL 5.6 million paid in relation to historic
matters surrounding TBC Bank. In 2018, one-off costs included the
reversal of deferred tax gains due to a change in legislation in
the amount of GEL 17.4 million.
[10] For the ratio calculation all relevant group recurring
costs are allocated to the bank
([11]) Based on initial estimates of the National Statistics
Office of Georgia.
[12] Net insurance premium earned after claims and acquisition
costs can be reconciled to the standalone net insurance profit (as
shown in Annex 5 on page 47) 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.
[13] 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.
[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 5 on page 47) 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] Based on internal estimates
[16] TBC Bank Group PLC became the parent company of JSC TBC
Bank on 10 August 2016.
[17] Total ecosystems revenue also includes net fee and
commission income from POS terminals and e-commerce.
[18] Total ecosystems net profit also includes net fee and
commission income and related operating costs from POS terminals
and e-commerce.
[19] Total number of visitors across all systems; some
individuals may be visitors of multiple systems. For Payme, the
number of registered customers is used.
[20] Includes both retail & business payments. Payments
ecosystem includes: Payme, TKT, TBC Pay, E-commerce and POS, while
other payments business includes: ATM-TBC Cards, branch, internet
and mobile banking.
[21] Source: NBG
[22] The data from Business Insider Intelligence was used for
comparison purposes.
[23] Forecasted figures are given without the effects of new
regulations effective from March 2020.
[24] Number of registered users
[25] Updated forecasts
[26] Based on the number of visitors
[27] TBC Contribution from real estate evaluation
[28] December is characterized by low demand in housing
business. As a result, forecasted numbers of unique visitors for
Dec-2020 are decreased compared to September for both for Livo and
Myhome
[29] Based on number of visitors
[30] In August 2019 we acquired 65% of My.ge for GEL 19.45
million.
[31] December is characterized by low demand in housing
business. As a result, forecasted numbers of unique visitors for
Dec-2020 are decreased compared to September for both for Livo and
Myhome.
[32] Gross merchandise Volume
[33] The revenue and EBITDA include Swoop figures.
[34] Per updated forecast for both financial and operating
data
[35] Stock Keeping Units
[36] Based on number of visitors
[37] In August 2019 we acquired 65% of My.ge for GEL 19.45
million.
[38] Based on number of visitors
[39] In August 2019 we acquired 65% of My.ge for GEL 19.45 million
[40] From launching the App's 1st prototype in Jan 2018 to the
end of the beta version of Space in Sep 2018
([41]) Market shares are based on internal estimates and are
given without border MTPL, which was introduced starting from March
2018 and GWP was divided evenly between 17 insurance companies.
Total non-health market share in 2019 including Border MTPL stood
at 19.7% and 29.9% respectively
([42]) Net insurance claims plus acquisition costs and
administrative expenses divided by net earned premium.
([43]) Net earned premium equals earned premium minus
reinsurer's share of earned premium.
[44] Based on management accounts
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
FR URANRRUUUURR
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February 20, 2020 02:00 ET (07:00 GMT)
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