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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tbc Bank Group Plc | LSE:TBCG | London | Ordinary Share | GB00BYT18307 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2,895.00 | 2,870.00 | 2,890.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMTBCG
RNS Number : 7352F
TBC Bank Group PLC
22 May 2017
TBC BANK GROUP PLC ("TBC Bank")
1Q 2017 Unaudited 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 actual results, performance or achievements of TBC Bank Group PLC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation has been extracted from the Group's unaudited management accounts and financial statements. The areas in which management accounts might differ from International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant and you should consult your own professional advisors and/or conduct your own due diligence for complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this Presentation have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
First Quarter 2017 Unaudited Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") will release its first quarter 2017 unaudited financial results on Monday, 22 May 2017 at 7am BST (10am GET).
On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Date & time: Monday, 22 May at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT)
Please dial-in approximately 5 minutes before the start of the call quoting the password TBC Bank:
Hot Features
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Password: TBC Bank
UK Toll Free: 0808 109 0700
+44 (0) 20 3003
Standard International Access: 2666
USA Toll Free: 1 866 966 5335
New York New York: +1 212 999 6659
Russia Toll Free: 8 10 8002 4902044
+7 (8) 495 249
Moscow: 9843
Replay Numbers
Replay Passcode: 7936347
UK Toll Free: 0800 633 8453
+44 (0) 20 8196
Standard International Access: 1998
USA Toll Free: 1 866 583 1035
Russia Toll Free: 8 10 8002 4832044
+7 (8) 495 249
Moscow: 9840
Contacts
Sean Wade Anna Romelashvili Investor Relations Director of International Head of Investor Department Media and IR Relations E-mail: SWade@Tbcbank.com.ge E-mail: ARomelashvili@Tbcbank.com.ge E-mail: ir@tbcbank.com.ge Web: www.tbcgroupbank.com Web: www.tbcgroupbank.com Web: www.tbcgroupbank.com Tel: +44 (0) 7464 Tel: +(995 32) Tel: +(995 32) 609025 227 27 27 227 27 27 Address: 68 Lombard Address: 7 Marjanishvili Address: 7 Marjanishvili St, London EC3V St. Tbilisi, Georgia St. Tbilisi, Georgia 9LJ, United Kingdom 0102 0102
Table of Contents
TBC Bank - Background
Financial Highlights
Recent Developments
Letter from the Chief Executive Officer
Economic Overview
Results Overview 1Q 2017
Income Statement Discussion
Balance Sheet Discussion
Results by Segments and Subsidiaries
Annexes
Subsidiaries of TBC Bank Group PLC
Consolidated Financial Statements of TBC Bank Group PLC
Key Ratios
Additional Disclosures
The Bank Republic Data
TBC BANK Group PLC ("TBC Bank")
TBC Bank Announces 1Q 2017 Consolidated Results:
Net Profit for 1Q 2017 up by 64.5% YoY to GEL 96.6 million (or up by 38.5% YoY to GEL 81.3 million without Bank Republic effect)
The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation
TBC Bank - Background
These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank"), 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 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 International Financial Reporting Standards ("IFRS") as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing on 10 August 2016.
In Q4 2016, TBC Bank acquired Bank Republic and started its consolidating into the results since then.
Results reported below prior to 30 September 2016 relate to the group previously headed by JSC TBC Bank Georgia.
TBC Bank is the largest banking group in Georgia. Following the acquisition of Bank Republic in late 2016, TBC Bank became the country's leading universal bank, accounting for 36.4% market share by total assets, where 99.6% of its business is concentrated. TBC bank offers retail, corporate, and MSME banking nationwide.
Financial Highlights
1Q 2017 P&L Highlights
-- Net Profit for 1Q 2017 up by 64.5% YoY and 9.7% QoQ to GEL 96.6 million (up by 38.5% YoY to GEL 81.3 million without Bank Republic effect)
-- Return on Equity (ROE) amounted to 24.2% (24.6% without one-off) and Return on Asset (ROA) to 3.7%
-- Total operating income for the period up by 40.2% YoY and down by 6.8% QoQ to GEL 203.5 million
-- Cost to income ratio stood at 40.8% (39.8% without one-offs) compared to 44.3% in Q1 2016 and 51.2% in Q4 2016
-- Cost of risk on loans stood at 0.9%, down by 0.2pp YoY and up by 0.3pp QoQ
-- Net interest margin (NIM) stood at 6.6% (without change in accounting rules related to consumer loans NIM would have been 6.8%) in 1Q 2017, down by 1.1pp YoY and down by 1.2pp QoQ
-- Risk adjusted Net interest margin (NIM) stood at 5.1% in 1Q 2017 compared to 6.4% in 1Q 2016 and 6.3% in 4Q 2016
Balance Sheet Highlights 31 March 2017
-- Total assets reached GEL 10,362.6 million as of 31 March 2017, up by 55.7% YoY (up by 36.1% YoY to GEL 9,059.0 million without Bank Republic effect)
-- Gross loans and advances to customers stood at GEL 7,121.0 million as of 31 March 2017, up by 58.5% YoY (up by 27.1% YoY to GEL 5,710.6 million without Bank Republic effect)
-- Net loans to deposits + IFI funding stood at 97.2% and Net Stable Funding Ratio (NSFR) stood at 106.8%
-- NPLs stood at 3.4%, down by 1.4pp YoY and 0.1pp QoQ
-- NPLs coverage stood at 84.6%, (217.4% with collateral), compared to 88.4% as of 31 December 2016
-- Total customer deposits stood at GEL 6,070.8 million as of 31 March 2017, up by 54.4% YoY (up by 37.1% YoY to GEL 5,392.2 million without Bank Republic effect)
-- Regulatory Tier I and Total Capital Adequacy Ratios stood at 11.3% and 14.9% respectively
Market Shares[1]
-- TBC Bank's market share in total assets increased by 4.2pp YoY and decreased by 0.1pp QoQ, reaching 29.9% and 36.4% with Bank Republic's total assets (30.5%, and 37.1% with Bank Republic's total assets not considering Credo Bank's share) as of 31 March 2017.
-- TBC Bank's market share in total loans was 30.3% and 37.8% with Bank Republic's total loans (31.0% and 38.7% with Bank Republic's total loans not considering Credo Bank's share) as of 31 March 2017, up by 2.2pp YoY and down by 0.9pp QoQ.
-- In terms of individual loans, the Bank had a market share of 31.4% and 41.8% with Bank Republic's total individual loans (32.9% and 43.9% with Bank Republic's total individual loans not considering Credo Bank's share) as of 31 March 2017, up by 0.1pp YoY and down by 1.5% QoQ. The market share for legal entity loans was 29.1% and 33.4% with the Bank Republic's total legal loans, up by 4.0pp YoY and down by 0.3pp QoQ.
-- TBC Bank's market share of total deposits stood at 33.4% (37.6% with Bank Republic's total deposits) as of 31 March 2017, up by 6.1pp YoY and up by 0.4pp QoQ.
-- The Bank maintains its longstanding leadership in individual deposits with a market share of 37.0% (40.1% with Bank Republic's total individual deposits), up by 3.0pp YoY and down by 0.2pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 29.0% (34.5% with Bank Republic's legal entity deposits), up by 9.4pp YoY and 1.0pp QoQ.
Recent Developments
TBC Bank has completed merger with Bank Republic
-- TBC Bank has completed the merger with Bank Republic, well ahead of schedule. Bank Republic was acquired in October 2016 and was, at the time, the third largest Georgian bank in terms of gross loans with a strong footprint in the retail segment. The merger was originally anticipated to be completed in the third quarter of 2017.
-- Following the merger, the Bank's market share in total loans increased by 7.6% (or 7.8% not considering Credo Bank's share) and reached 37.8% (or 38.7% not considering Credo Bank's share) as of 31 March 2017. The client base expanded by approximately 380,000 customers and an additional 41 branches and around 160 ATMs added to our distribution network.
-- The one-off integration costs have amounted to GEL 22.9 million, less than the expected GEL 23.3 million. Moreover, the bank has upgraded annualized cost synergies guidance from GEL 20.5 million to GEL 24.0 million.
TBC Bank Group PLC hosts a London Capital Markets Day
-- TBC Bank Group PLC will host a Capital Markets Day on Thursday 1 June 2017 in London
-- TBC Bank's management will present to the investors and analysts the latest developments: the Bank's strategy, goals, and plans from macro to specific banking areas
-- Mr. Koba Gvenetadze, Governor of the National Bank of Georgia, will join the TBC's top management. The Governor will give an overview of the Georgian macro environment and monetary policy
TBC Bank acts as underwriter of EBRD Eurobond issue
-- JSC TBC Bank has acted as lead manager and underwriter for European Bank for Reconstruction and Development ('EBRD') GEL 120 million (EUR46.7 million) Eurobond issue under EBRD's Medium Term Note Programme. The bonds are to be listed on the London Stock Exchange
-- The bonds are issued with a maturity of five years and its coupons are linked to a three-month Certificates of Deposit ('CDs') issued by the National Bank of Georgia ('NBG') and will be made eligible for the repurchase operations carried out by the NBG
TBC Bank wins The Best Bank of the Year
-- In recognition of its outstanding performance TBC Bank was named as "the Best Bank of the Year 2016" in Georgia by the EMEA Finance Magazine
-- TBC Bank won the "Best Bank of the Year 2017" award assigned by the Global Finance Magazine
Additional Information Disclosure
Additional historical information for certain P&L, Balance Sheet and Capital items and on Asset Quality is disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Financial Highlights section.
Letter from the Chief Executive Officer
I am delighted to report that since the start of 2017, we have again delivered a strong performance. First of all, we successfully completed the merger with Bank Republic on May 8th, well ahead of schedule. The merger process went smoothly for all stakeholders and we are looking forward to welcoming our new customers and offering them our best in class services. I would also like to highlight that the one-off integration costs have amounted to GEL 22.9 million, less than the expected GEL 23.3 million and we have upgraded the annualised cost synergies guidance from GEL 20.5 million to GEL 24.0 million.
In terms of financial performance, in the first quarter of 2017, our consolidated net profit reached GEL 96.6 million with a return on equity of 24.2%, up by 4.9 pp year-on-year and a return on assets of 3.7%, up by 0.2 pp year-on-year. In November, anticipating falling loan yields on the market, we decided to accept lower interest rates and increase our loan book, especially to low yield, higher income customer segments. As a result our market share including Bank Republic, increased by 1.5 pp[2] over the last 6 months. In first quarter, the bank also changed accounting rules related to consumer loans, which resulted in 0.2pp decrease in NIM. As a result, NIM declined to 6.6%, or to 5.1% on risk-adjusted basis, however we have benefited from strong growth in fee and commission and other operation income. At the same time, our cost to income ratio decreased to 40.8%, or 39.8% without one offs, and even though it is expected to increase due to seasonal factors, it has decreased below our 40% guidance in the first quarter 2017.
We have also achieved strong balance sheet growth year-on-year with both loans and deposit growth outperforming the market. In the first quarter 2017, the loan book grew by 27.1% year-on-year without Bank Republic, or by 58.5% with Bank Republic. As a result, the aggregate market share in total loans reached 37.8% (or 38.7% excluding the market share of Credo Bank which registered as a bank in the first quarter of 2017), up by 9.8 pp. Over the same period, total deposits grew by 37.1% year-on-year without Bank Republic, or by 54.4% with Bank Republic. Consequently, the aggregate market share in total deposit reached 37.6%, up by 10.3 pp.
We continue to maintain robust asset quality with a non-performing loan ratio of 3.4% at the end of first quarter 2017, down by 1.4 pp on a year-on-year basis, while our non-performing coverage ratio stood at 85% or 217% with collateral. In addition, we continue to operate with strong capital and liquidity positions. Our total capital adequacy ratio (CAR) per Basel II/III regulation stood at 14.9% compared to the minimum requirement of 10.5%, and our Regulatory Tier I Ratio stood at 11.3% compared to the minimum requirement of 8.5%. Net loans to deposits + IFI funding stood at 97% and the net stable funding ratio (NSFR) stood at 107%.
I would also like to mention the standalone performance of Bank Republic. The loan portfolio grew by 15.3% since the acquisition and market share reached 7.6% (or 7.8% excluding the market share of Credo Bank which registered as a bank in the first quarter of 2017) as of 31 March 2017. During the same period the number of customers grew by 11.0% and reached around 380,000 clients, while the employee turnover remained low at 3% in the front office. Bank Republic delivered strong financial results with return on equity standing at 20.1% and return on assets at 3.1% in the first quarter 2017. At the same time, asset quality remained strong with the non-performing loan ratio standing at 2.6% and non-performing coverage ratio at 121% or 214% with collateral, respectively. The cost of risk stood at 1.0% in the first quarter 2017.
On a macro side, I am pleased to report positive economic developments in Georgia. Economic activity gained pace and, according to the initial estimates of Geostat, the GDP growth reached 5.0% in the first quarter of 2017. This was supported by a strong recovery of exports of goods which increased by 30.3% year-on-year. Tourist inflows also demonstrated robust growth with the number of tourists increasing by a solid 26.1% year-on-year. In addition, remittances improved by 22.3% year-on-year, supporting the recovery of private consumption in the country. The future outlook remains positive with most of the market commentators forecasting the growth around 4.0%, one of the highest growth rates among our peers from Central and Eastern Europe.
In terms of operational performance, I am pleased to see the share of remote transactions rising and reaching 85.5%[3] in the first quarter 2017 in line with our strategy of becoming the best digital service company in the region[4]. At the same time the mobile banking penetration ratio increased to 25%. This year, we also launched the first Georgian language Chat Bot, Ti-Bot, which has been welcomed by our customers and is rapidly gaining popularity.
Finally, I am also pleased to announce that TBC Bank has been awarded "the Best Bank in Georgia award for 2016 " by the EMEA Finance Magazine and "The Best Bank in Georgia Award for 2017" by Global Finance Magazine, in recognition of our outstanding performance and continuous commitment to offer the best banking service to our customers.
Outlook
One of our main strategic objectives for 2017 is to deepen the relationship with our clients and offer our existing and newly acquired Bank Republic customers the best-in-class products and services, including bancassurance products through our newly acquired insurance company, TBC insurance. Our focus in this regard is to increase the product-per customer-ratio[5] and non-interest income. Our strong cross-selling opportunity combined with the efficient cost control is expected to translate into a robust profit performance. At the same time, we will continue to grow in line with the market and aim to maintain our market share. As a result we have decided to increase our medium term dividend pay-out ratio target to 25-35% and at the same time have updated our loan book growth guidance to c.15% and tier1 capital adequacy ratio to c.10.5%. Finally, we maintain our medium-term cost-to-income guidance at below 40% and ROE forecast of 20% plus.
Economic Overview
Information set out below relating to the broad economic overview in Q1 2017, sets the context for TBC Bank's operating activities and financial results. Around 99% of TBC Bank's operations take place in Georgia and, although developments in the immediate Caucasus region are an important factor in the regional business climate, the bank's performance is therefore largely affected by the developments in the Georgian economy.
The domestic economic environment remains stable and the banking sector continues to grow, supported by broader macroeconomic stability and attractive business climate.
Economic activity gained pace in Q1 2017, according to the initial estimates of Geostat GDP expanded by 5% y/y, highest since Q3 2014. Sharp recovery in exports of goods and tourism inflows was major factor behind the improvement in growth.
Growth of exports accelerated in Q1 2017 with exports of goods increasing by 30.3% YoY compared to the 7.5% y/y growth in Q4 2016. From the goods perspective the exports growth was mostly driven by traditional export goods such as Wines (+63% YoY), other alcoholic drinks (+34% YoY) and Mineral Waters (+17% YoY). Increased prices on Metals in Q1 2017 boosted exports of Ferro-alloys (+201% YoY) which was also among the major drivers of growth.
Exports of goods to EU increased by solid 44% YoY, at the same time, stable exchange rates and recovery in economic activity underpinned increase of Georgian exports to CIS countries (+59.4% YoY). Exports to other countries increased by relatively moderate 4.5% YoY.
In Q1 2017, higher oil prices and resulting increased imports of petroleum products (+39% y/y) was major driver behind 14.9% YoY growth of imports of goods. Growth of imports translated into 8.3% higher trade deficit in Q1 2017 compared to the same figure a year ago. However, the deterioration in the balance of trade was more than offset by increasing inflows from tourism and remittances.
Georgia's dynamic tourism industry continued to grow in 1Q 2017, with number of tourists increasing by a solid 26.1% YoY. More recent indicators of growth in tourism revenues are very encouraging; as of April 2017 the number of tourist in Georgia increased by c. 30% YoY.
Remittances, which represent a significant positive component in Georgia's current account balance, increased by 22.3% YoY, mainly supported by higher money transfers from Russia (+27.0%), Israel (+94.7%), Turkey (+38.4%), The USA (+19.4%), Greece (+14.1%) and Italy (+9.1%), as of 1Q 2017. Continued growth of remittances is expected to positively influence private consumption in the country, which has been broadly flat over the last two years.
Improved external inflows and stable/appreciating currencies in the main trading partners of Georgia positively influenced USD/GEL exchange rate as well. From the beginning of 2017 till end of April, 2017 USD/GEL appreciated by c. 8% to 2.44. Over the same period EUR/GEL exchange rate appreciated by 4.4%.
Higher oil price on global markets, increase in excise taxes on tobacco and petroleum pushed annual Inflation rate to around 4.9% in 1Q 2017 as opposed to 0.6% Inflation in Q4 2016. Core inflation[6] edged up only moderately from 1.2% in Q4 2016 to 2.9% in Q1 2017. Lower core inflation indicates that inflation expectations remained well managed and higher CPI inflation was driven by one-off factor that will gradually dissipate by the end of 2017.
To ensure short-term inflation fluctuations will not translate in rise in inflation expectation, NBG raised refinancing rate from 6.5% by the end of 2016 to 6.75 in Feb. 2017 and to 7% in the beginning of May 2017. According to NBG, inflation will remain above the target in 2017. 0.5 PP increase in policy rate as well as diminishing effect of one-off factors mentioned above and should ensure that inflation goes to 3% target in 2018 and currently there is no need to further tighten monetary policy in 2017.
Supported by higher economic activity in Q1 2017 as well as increased excise tax budget revenues posted solid 19% YoY growth. Higher-than-projected budget revenues kept the budget in surplus of c. 1.8% of GDP([7]) (.) Public debt also fell to c. 41.6% of GDP in Q1 2017, as opposed to 44.5% of GDP by the end of 2017. It is to be noted, that government consumption[8] declined by 3.4% YoY in Q1 2017 reflecting the optimization of public spending. Government actively pursues the strategy to restrain current spending and redirect saved resources towards investment spending, which positively influences economic growth as well as sustainability of fiscal balances.
In March 2017, EU ratified long awaited visa free regime for the citizens of Georgia, which is an important milestone in EU-Georgia relations. This important step improves opportunities for Georgian businesses to better capture the benefits of free trade deal and positively influences consumer sentiments in the country.
Going forward, it is expected that traditional competitive advantages of the economy will continue to support growth. Business friendly environment, transparent and corruption free institutions coupled with free trade agreements with all of the major economic players in the region will support economic growth in the coming years.
Results Overview 1Q 2017
Income Statement Highlights
in thousands of GEL 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
w/o YoY YoY QoQ
BR % % %
-------- -------
Net Interest Income 114,969 142,333 108,883 5.6% 30.7% 153,689 -7.4%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Net Fee and Commission
Income 24,570 26,477 18,297 34.3% 44.7% 28,392 -6.7%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Other Operating Non-Interest
Income 25,517 34,672 17,931 42.3% 93.4% 36,172 -4.2%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Provisioning Charges -6,680 -17,658 -14,340 -53.4% 23.1% -9,668 82.6%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Operating Income after
Provisions for Impairment 158,375 185,823 130,772 21.1% 42.1% 208,586 -10.9%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Operating Expenses -72,727 -82,920 -64,299 13.1% 29.0% -111,785 -25.8%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Profit Before Tax 85,648 102,903 66,474 28.8% 54.8% 96,801 6.3%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Income Tax Expense -4,336 -6,345 -7,777 -44.2% -18.4% -8,767 -27.6%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Profit for the Period 81,312 96,558 58,696 38.5% 64.5% 88,034 9.7%
------------------------------ -------- -------- -------- ------- ------- --------- -------
Balance Sheet and Capital Highlights
Mar-17 Dec-16 Change Change Mar-16 Change
YoY YoY QoQ
% %
---------------------------------------
GEL USD GEL USD GEL USD % % GEL USD
w/o w/o
In Millions BR BR
------------ -------- -------- --------- -------- --------- -------- ------- ------- -------- -------- -------
Total
Assets 9,059.0 3,704.8 10,362.6 4,237.9 10,769.0 4,068.7 36.1% 55.7% 6,654.4 2,810.2 -3.8%
Gross Loans 5,710.6 2,335.4 7,121.0 2,912.3 7,358.7 2,780.2 27.1% 58.5% 4,493.7 1,897.8 -3.2%
Customer
Deposits 5,392.2 2,205.2 6,070.8 2,482.8 6,454.9 2,438.8 37.1% 54.4% 3,931.6 1,660.4 -6.0%
Total
Equity 1,676.2 685.5 1,680.5 687.3 1,582.6 597.9 30.9% 31.2% 1,280.6 540.8 6.2%
Regulatory
Tier I
Capital 1,115.2 456.1 1,115.2 456.1 1,041.3 393.4 12.2% 12.2% 994.1 419.8 7.1%
Regulatory
Risk
Weighted
Assets 9,878.1 4,039.8 9,878.1 4,039.8 10,021.5 3,786.3 32.6% 32.6% 7,450.6 3,146.5 -1.4%
------------ -------- -------- --------- -------- --------- -------- ------- ------- -------- -------- -------
Key Ratios 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
w/o YoY YoY QoQ
BR % % %
ROAE 20.3% 24.2% 19.3% 1.0% 4.9% 24.2% 0.0%
ROAA 3.6% 3.7% 3.5% 0.1% 0.2% 3.7% 0.0%
Pre-Provision ROAE 22.0% 28.7% 23.9% -1.9% 4.7% 26.8% 1.9%
Cost to Income 44.1% 40.8% 44.3% -0.2% -3.6% 51.2% -10.5%
Cost of Risk 0.5% 0.9% 1.2% -0.6% -0.2% 0.6% 0.3%
NPL to Gross Loans 3.9% 3.4% 4.8% -0.9% -1.4% 3.5% -0.1%
Regulatory Total
CAR 14.9% 14.9% 16.8% -1.9% -1.9% 14.2% 0.7%
Leverage (Times) 5.4 6.2 5.2 0.2 1.0 6.8 -0.6
-------------------- ------ ------ ------ ------- ------- ------ -------
Income Statement Discussion
Net Interest Income
In thousands of 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
GEL w/o BR YoY YoY QoQ
% % %
---------------------------- -------- -------- -------- ------- ------- -------- -------
Loans and Advances
to Customers 172,657 215,089 154,465 11.8% 39.2% 222,116 -3.2%
Investment Securities
Available for Sale 5,718 8,801 7,053 -18.9% 24.8% 7,847 12.2%
Due from Other
Banks 2,828 1,752 1,255 125.2% 39.5% 959 82.6%
Bonds Carried at
Amortized Cost 7,440 7,440 7,880 -5.6% -5.6% 7,460 -0.3%
Investment in Leases 4,686 4,686 4,205 11.4% 11.4% 4,895 -4.3%
Other - - - NMF NMF 67 -100%
Interest Income 193,330 237,769 174,859 10.6% 36.0% 243,344 -2.3%
---------------------------- -------- -------- -------- ------- ------- -------- -------
Customer Accounts 46,001 53,852 35,778 28.6% 50.5% 47,886 12.5%
Due to Credit Institutions 23,139 32,363 22,199 4.2% 45.8% 29,526 9.6%
Subordinated Debt 8,685 8,685 7,510 15.6% 15.6% 11,762 -26.2%
Debt Securities
in Issue 536 536 489 9.7% 9.7% 482 11.4%
Interest Expense 78,361 95,436 65,976 18.8% 44.7% 89,655 6.4%
---------------------------- -------- -------- -------- ------- ------- -------- -------
Net Interest Income 114,969 142,333 108,883 5.6% 30.7% 153,689 -7.4%
---------------------------- -------- -------- -------- ------- ------- -------- -------
Net Interest Margin 6.5% 6.6% 7.7% -2.4% -1.1% 7.9% -1.2%
---------------------------- -------- -------- -------- ------- ------- -------- -------
*Not Material Figures
1Q 2017 to 1Q 2016 Comparison
Without the Bank Republic acquisition effect, in 1Q 2017, net interest income grew by 5.6% YoY, resulting from the 10.6% higher interest income and 18.8% higher interest expense. A GEL 18.5 million or 10.6% YoY increase in interest income to GEL 193.3 million was mainly driven by GEL 18.2 million or 11.8% increase in interest income from loans to customers - this was primarily related to the gross loan portfolio increase by 27.1% YoY. Loans yield declined from 13.6% in 1Q 2016 to 11.9% in 1Q 2017, which was caused by the decline in loan yields for both GEL and foreign-currency denominated loans. The increase in interest income was also driven by the increase in interest income from due from other banks by GEL 1.6 million, which was driven by the sharp increase of the respective portfolio. The increase in interest income was partially offset by GEL 1.3 million or 18.9% decline in interest income from investment securities available for sale. The decline was largely explained by the decrease in yields on such securities from 9.4% to 8.0%, mainly due to the lower refinancing rate in 1Q 2017 compared to 1Q 2016.
Without the Bank Republic acquisition effect, a GEL12.4 million or 18.8% YoY increase in interest expense to GEL 78.4 million was mainly driven by GEL 10.2 million or 28.6% hike in interest expense on amounts due to customer accounts, primarily related to the gross customer account's portfolio increase by 37.1% YoY. The cost of deposit declined from 3.6% in 1Q 2016 to 3.3% in 1Q 2017, resulting to the decrease in FC-denominated deposits cost from 3.2% to 2.6%, which more than offset the increase in Lari-denominated deposit cost from 4.7% to 5.6% in the respective periods. The increase in interest expense was also driven by GEL 1.2 million or 15.6% increase in interest expense on subordinated debt, which was mainly driven by 13.7% increase in respective portfolio. The cost of subordinated debt declined from 10.3% to 9.7%.
The Bank Republic acquisition effect increased the net interest income by GEL 27.4 million, resulting from GEL 44.4 million or 18.7% contribution to interest income and a GEL 17.1 million or 17.9% to interest expense.
Consequently, without the Bank Republic acquisition effect NIM was 6.5% (5.3% Risk-adjusted NIM) in 1Q 2017, compared to 7.7% (6.4% Risk-adjusted NIM) in the same quarter of the previous year.
1Q 2017 to 4Q 2016 Comparison
With the Bank Republic acquisition effect in both of the quarters under consideration, net interest income declined by 7.4% QoQ, resulting from 2.3% lower interest income and 6.4% higher interest expense. A GEL 5.6 million or 2.3% QoQ decline in interest income to GEL 237.8 million was mainly driven by GEL 7.0 million drop from interest income from loans to customers, primarily related to the decrease in average portfolio caused by appreciation of domestic currency in March. This effect was further magnified by the decline in loan yield from 13.8% in 4Q 2016 to 11.9% in 1Q 2017 mostly aligned with the market trend. The decline was partially offset by GEL 1.0 million increase in interest income from investment securities available for sale, due to increase in average portfolio of such securities.
Considering the Bank Republic acquisition effect, a GEL 5.8 million or 6.4% QoQ increase in interest expense to GEL 95.4 million was mainly driven by GEL 6.0 million rise in interest expense on amounts due to customer accounts, primarily related the increase in respective average portfolio in real terms more than offsetting currency rate appreciation effect on the portfolio and the increase slight increase in cost of deposit from 3.3% in 4Q 2016 to 3.4% in 1Q 2017. At the same time, interest expense on amounts due to credit institutions grew by GEL 2.8 million related to the increase in the respective average portfolio which was partially offset by the positive effect of declining rates on the portfolio and interest expense on subordinated debt decreased by GEL 3.1 million, which was explained by the decrease in cost of subordinated debt from 13.2% in 4Q 2016 to 9.7% in 1Q 2017 and the decrease in respective portfolio.
In 1Q 2017, the bank changed the accounting rule related to consumer loans, which resulted in 0.2pp decrease in NIM. Consequently, with the Bank Republic acquisition effect NIM was 6.6%, or 6.8% without the above mentioned change, (5.1% Risk-adjusted NIM) in 1Q 2017, compared to 7.9% or 7.5% without one-offs (6.3% Risk-adjusted NIM) in the 4Q 2016.
Fee and Commission
Income
In thousands of 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
GEL w/o YoY % YoY % QoQ %
BR
------------------------- ------- ------- ------- ------- ------- ------- -------
Card Operations 19,734 20,829 13,282 48.6% 56.8% 18,832 10.6%
Settlement Transactions 12,401 14,095 8,499 45.9% 65.8% 14,590 -3.4%
Guarantees Issued 2,028 2,744 2,320 -12.6% 18.3% 3,308 -17.0%
Issuance of Letters
of Credit 1,246 1,409 1,479 -15.8% -4.7% 2,310 -39.0%
Cash Transactions 3,343 3,428 2,355 41.9% 45.6% 3,930 -12.8%
Foreign Exchange
Operations 212 220 345 -38.4% -36.1% 484 -54.4%
Other 1,565 1,774 1,267 23.5% 40.0% 2,006 -11.6%
Fee and Commission
Income 40,529 44,500 29,547 37.2% 50.6% 45,460 -2.1%
------------------------- ------- ------- ------- ------- ------- ------- -------
Card Operations 11,290 12,777 7,588 48.8% 68.4% 11,140 14.7%
Settlement Transactions 1,493 1,520 1,240 20.4% 22.5% 1,722 -11.7%
Guarantees Received 186 267 140 32.3% 90.2% 320 -16.4%
Letters of Credit 213 213 480 -55.6% -55.6% 297 -28.1%
Cash Transactions 643 1,007 559 15.0% 80.2% 751 34.2%
Foreign Exchange
Operations 46 88 68 -32.1% 28.9% 123 -28.3%
Other 2,087 2,152 1,174 77.8% 83.3% 2,717 -20.8%
Fee and Commission
Expense 15,959 18,023 11,250 41.9% 60.2% 17,068 5.6%
------------------------- ------- ------- ------- ------- ------- ------- -------
Net Card Operations 8,444 8,053 5,694 48.3% 41.4% 7,692 4.7%
Net Settlement
Transactions 10,907 12,576 7,258 50.3% 73.3% 12,868 -2.3%
Net Guarantees 1,842 2,477 2,180 -15.5% 13.6% 2,988 -17.1%
Net Letters of
Credit 1,032 1,195 998 3.4% 19.7% 2,013 -40.6%
Net Cash Transactions 2,700 2,421 1,797 50.3% 34.8% 3,180 -23.9%
Net Foreign Exchange
Operations 166 132 276 -40.0% -52.2% 361 -63.4%
Net Other -522 -378 94 NMF NMF -710 -46.8%
Net Fee And Commission
Income 24,570 26,477 18,297 34.3% 44.7% 28,392 -6.7%
------------------------- ------- ------- ------- ------- ------- ------- -------
1Q 2017 to 1Q 2016 Comparison
Without the Bank Republic acquisition effect, in 1Q 2017, net fee and commission income amounted to GEL 24.6 million, up by GEL 6.3 million, or 34.3%, compared to 1Q 2016. This increase resulted mainly from a GEL 3.6 million or 50.3% increase in net fee and commission income from settlement transactions, a GEL 2.8 million or 48.3% increase in net card operations and a GEL 0.9 million or 50.3% increase in net cash transactions, resulting mainly from the increased scale of operations. The increase was slightly offset by GEL 0.6 million decline in net other fee and commission income.
The Bank Republic acquisition effect in net fee and commission income amounts to GEL 1.9 million or 7.2%, with GEL 4.0 million or 8.9% higher fee and commission income and GEL 2.1 million or 11.5% higher fee and commission expense.
1Q 2017 to 4Q 2016 Comparison
With the Bank Republic acquisition effect in both of the quarters under consideration, basis, net fee and commission income in 1Q 2017 decreased by a GEL 1.9 million, or by 6.7%, compared to 4Q 2016, primarily driven by the fact that 1Q is usually the lowest fee generating quarter versus 4Q, which is usually the highest fee generating quarter. The net fee and commission income from letters of credit issues, cash transactions, and guarantees received decreased by GEL 0.8 million, GEL 0.8 million and GEL 0.5 million, respectively. The net fee and commission income from card operations and other fee and commission income, however, increased by GEL 0.4 million and GEL 0.2 million respectively.
Other Operating Non-Interest
Income
In thousands of 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
GEL w/o YoY % YoY % QoQ %
BR
---------------------------- ------- ------- ------- -------- ------- ------- --------
Gains Less Losses
from Trading in
Foreign Currencies
and Foreign Exchange
Translations 18,045 22,192 14,627 23.4% 51.7% 22,952 -3.3%
---------------------------- ------- ------- ------- -------- ------- ------- --------
Share of profit
of associates 93 93 0 NMF NMF 0 NMF
---------------------------- ------- ------- ------- -------- ------- ------- --------
Gains Less Losses/(Losses
Less Gains) from
Derivative Financial
Instruments -3 -3 -363 -99.1% -99.1% 94 NMF
---------------------------- ------- ------- ------- -------- ------- ------- --------
Losses from Disposal
of Investment Securities
Available for Sale - - - NMF NMF 498 -100.0%
---------------------------- ------- ------- ------- -------- ------- ------- --------
Revenues from Cash-In
Terminal Services 262 262 232 12.9% 12.9% 300 -12.5%
Revenues from Operational
Leasing 1,468 1,784 1,810 -18.9% -1.4% 1,158 54.1%
Gain from Sale
of Investment Properties 0 192 215 -100.0% -11.0% 2,393 -92.0%
Gain from Sale
of Inventories
of Repossessed
Collateral 354 354 222 59.1% 59.1% 991 -64.3%
Administrative
Fee Income from
International Financial
Institutions 151 151 212 -28.8% -28.8% 139 8.5%
Revenues from Non-Credit
Related Fines 50 50 133 -62.4% -62.4% 211 -76.2%
Gain on Disposal
of Premises and
Equipment 27 27 65 -58.5% -58.5% 110 -75.2%
Gross Insurance
Profit 1,225 1,225 - NMF NMF 256 NMF
Other 3,844 8,345 777 NMF NMF 7,070 13.9%%
Other Operating
Income 7,382 12,391 3,668 101.3% NMF 12,628 -1.9%
---------------------------- ------- ------- ------- -------- ------- ------- --------
Other Operating
Non-Interest Income 25,517 34,672 17,931 42.3% 93.4% 36,172 -4.1%
---------------------------- ------- ------- ------- -------- ------- ------- --------
1Q 2017 to 1Q 2016 Comparison
Without the Bank Republic acquisition effect, in 1Q 2017, total other operating non-interest income increased by GEL 7.6 million, or 42.3% YoY, to GEL 25.5 million. This increase was mainly driven by GEL 3.4 million, or 23.4% increase in gains from trading in foreign currencies and foreign exchange translations related to relatively higher volatility of the currency exchange rate in 1Q 2017 and higher trade volumes. The rise was resulted from the contribution of gross insurance profit, amounting to GEL 1.2 million and the increase in other income by GEL 3.1 million compared to 1Q 2016. The increase was slightly offset by a GEL 0.3 million decrease in revenues from operational leasing and by GEL 0.2 million decrease in gain from the sale of investment property.
The Bank republic accounted for GEL 9.2 million or 26.4% in other operating non-interest income, mainly due to GEL 4.1 million or 18.7% share in gains less losses from trading in foreign currencies and foreign exchange translations.
1Q 2017 to 4Q 2016 Comparison
With the Bank Republic acquisition effect in both of the quarters under consideration, on a QoQ basis, other operating non-interest income decreased by GEL 0.2 million, or by 1.9%. The decline was mainly explained by a GEL 2.2 million drop in gain from sale of investment properties, by a GEL 0.8 million decrease in gains from trading in foreign currencies and foreign exchange translations, which is due to higher activity in last quarter of the year. The decline was also due to a GEL 0.5 million decrease in gains less losses from disposal of investment securities available for sale. The decline was largely offset by the rise in gross insurance profit by a GEL 1.0 million and an increase in other income by a GEL 1.3 million.
Provision for
Impairment
In thousands of 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
GEL w/o YoY % YoY % QoQ %
BR
------------------------- -------- -------- -------- -------- -------- -------- -------
Provision for
Loan Impairment -7,323 -16,922 -13,067 -44.0% 29.5% -10,405 62.6%
Provision for
Impairment of
Investments in
Finance Lease -31 -31 -185 -83.0% -83.0% -322 -90.2%
Provision for/(Recovery
of Provision)
Performance Guarantees
and Credit Related
Commitments 1,039 92 -1,029 NMF -109.0% 2,787 -96.7%
Provision for
Impairment of
Other Financial
Assets -364 -797 -49 NMF NMF -1,727 -53.9%
Impairment of
Investment Securities
Available for
Sale - - -11 -100.0% -100.0% - NMF
Total Provision
Charges for Impairment -6,680 -17,658 -14,340 -53.4% 23.1% -9,668 82.6%
------------------------- -------- -------- -------- -------- -------- -------- -------
Operating Income
after Provisions
for Impairment 158,375 185,823 130,772 21.1% 42.1% 208,586 -10.9%
------------------------- -------- -------- -------- -------- -------- -------- -------
Cost of Risk 0.5% 0.9% 1.2% -0.6% -0.2% 0.6% 0.3%
------------------------- -------- -------- -------- -------- -------- -------- -------
1Q 2017 to 1Q 2016 Comparison
Without the Bank Republic acquisition effect, in 1Q 2017 total provision charges declined to GEL6.7 million from GEL14.3 million 1Q 2016, mainly driven by the decreased charges on loans by GEL 5.7 million to GEL 7.3 million. This was mainly due to the GEL exchange rate appreciation and without currency effect provision charges on loans would have increased by GEL3.4 million to GEL 16.5 million.
Without Bank Republic provision charges for performance guarantees and credit related commitments decreased on YoY basis due to overall improvement in the corporate book performance.
Without the Bank Republic effect in 1Q 2017, the cost of risk on loans without the Bank Republic acquisition effect was 0.5% compared to 1.2% in the same period of the previous year. Excluding the FX effect the cost of risk would have been 1.2% and 1.4% in 1Q 2017 and 1Q 2016 respectively. The decrease is driven by improved performance of the book.
The Bank Republic accounted for GEL 11.0 million or 62.2% in total provision charges for impairment, mainly due to GEL 9.6 million share in provision for loan impairment.
1Q 2017 to 4Q 2016 Comparison
In 1Q 2017 total provision charges increased by GEL 8.0 million from GEL 9.7 million to GEL 17.7 million, mainly as a result of increased charges on loans by GEL 6.5 million. The increase in charges was mainly due to lower provision expenses in 4Q 2016 resulting from recovery of previously written-off corporate borrower.
Total provision charges for impairment also increased for performance guarantees and credit related commitments, after the recovery of GEL2.8 in 4Q 2016.
In 1Q 2017, the cost of risk on loans was 0.9%, compared to 0.6% in 4Q 2016. The low cost of risk in 4Q 2016 was due to a large recovery in the corporate segment. Without both the one-off and currency effect the cost of risk would be 1.2% and 1.5% in 4Q 2016 and 1Q 2017 respectively.
Further details on asset quality can be found under Balance Sheet Discussion section.
Operating Expenses
In thousands of 1Q'17 1Q'17 1Q'16 Change Change Q4'16 Change
GEL w/o YoY % YoY % QoQ %
BR
---------------------------- ------- -------- ------- -------- -------- -------- --------
Staff Costs 41,868 47,538 34,172 22.5% 39.1% 62,544 -24.0%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Provisions for
liabilities and
charges (95) (95) - NMF NMF 2,210 NMF
---------------------------- ------- -------- ------- -------- -------- -------- --------
Depreciation and
Amortization 7,515 8,605 6,567 14.4% 31.0% 7,435 15.7%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Professional services 2,983 3,415 6,701 -55.5% -49.0% 10,976 -68.9%
Advertising and
marketing services 3,007 3,060 1,923 56.3% 59.1% 6,268 -51.2%
Rent 4,688 5,836 4,341 8.0% 34.4% 5,639 3.5%
Utility services 1,399 1,717 1,320 6.0% 30.1% 1,474 16.5%
Intangible asset
enhancement 2,214 2,214 1,880 17.8% 17.8% 1,840 20.3%
Taxes other than
on income 1,250 1,511 1,162 7.6% 30.0% 1,022 47.9%
Communications
and supply 776 786 755 2.7% 4.1% 1,937 -59.4%
Stationary and
other office expenses 933 1,100 843 10.7% 30.5% 1,041 5.6%
Insurance 487 530 605 -19.5% -12.4% 733 -27.7%
Security services 458 517 399 14.6% 29.3% 560 -7.7%
Premises and equipment
maintenance 799 1,644 587 36.3% 180.2% 1,949 -15.7%
Business trip expenses 342 365 352 -3.0% 3.5% 654 -44.2%
Transportation
and vehicles maintenance 370 416 313 18.1% 33.0% 425 -2.0%
Charity 271 271 270 0.3% 0.3% 185 46.7%
Personnel training
and recruitment 210 404 234 -10.0% 72.9% 504 -19.8%
Write-down of current
assets to fair
value less costs
to sell -57 -57 -70 -18.2% -18.2% -2,779 -97.9%
Loss on disposal
of Inventory 955 955 285 235.3% 235.3% 1,038 -8.0%
Loss on disposal
of investment properties - - - NMF NMF 61 -100.0%
Loss on disposal
of premises and
equipment 123 123 41 204.1% 204.1% 90 36.6%
Impairment of intangible
assets - - 19 -100.0% -100.0% 2,025 -100.0%
Acquisition costs 319 307 - NMF NMF 207 48.4%
Gross Change in
IBNR 221 221 - NMF NMF - NMF
Other 1,690 1,537 1,599 5.7% -3.9% 3,746 -59.0%
Administrative
and Other Operating
Expenses 23,439 26,873 23,560 -0.5% 14.1% 39,595 -32.1%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Operating Expenses 72,727 82,920 64,299 13.1% 29.0% 111,785 -25.8%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Profit before Tax 85,648 102,903 66,474 28.8% 54.8% 96,801 6.3%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Income Tax Expense -4,336 -6,345 -7,777 -44.2% -18.4% -8,767 -27.6%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Profit for the
Period 81,312 96,558 58,696 38.5% 64.5% 88,034 9.7%
---------------------------- ------- -------- ------- -------- -------- -------- --------
Cost to Income 44.1% 40.8% 44.3% -0.2% -3.6% 51.2% -10.5%
---------------------------- ------- -------- ------- -------- -------- -------- --------
ROAE 20.3% 24.2% 19.3% 1.0% 4.9% 24.2% 0.0%
---------------------------- ------- -------- ------- -------- -------- -------- --------
ROAA 3.6% 3.7% 3.5% 0.1% 0.2% 3.7% 0.0%
---------------------------- ------- -------- ------- -------- -------- -------- --------
1Q 2017 to 1Q 2016 Comparison
Without the Bank Republic acquisition effect, in 1Q 2017, total operating expenses amounted to GEL 72.7 million, up by GEL 8.4 million, or by 13.1% YoY. The increase was largely explained by GEL 7.7 million increase in staff cost expenses related to the extended scale, performance of the business and the changing environment and by GEL 1.1 million increase in advertising and marketing services. The gain was partially offset by a GEL 3.7 million drop in professional services, which was due to GEL 5.9 million one-off expense related to Premium Listing in 1Q 2016. In 1Q 2017, TBC Bank incurred GEL 1.9 million one-off expense related to Bank Republic integration costs.
The Bank Republic's share in the total operating expenses amounted to a GEL 10.2 million or 12.3%. This effect is largely explained by a GEL 5.7 million or 11.9% contribution to staff expenses and a GEL 1.1 million or 12.7% contribution to depreciation and amortization expenses.
As a result, without the Bank Republic acquisition effect the cost to income ratio was 44.1% (42.9% without one-off) in 1Q 2017, compared to 44.3% in 1Q 2016.
1Q 2017 to 4Q 2016 Comparison
With the Bank Republic acquisition effect in both of the quarters under consideration, on a QoQ basis, operating expenses amounted to GEL 83.0 million, down by GEL 28.9 million, or 25.8%. The decrease was largely explained by GEL 7.6 million decrease in professional services related to consulting and investment banks fees in connection with the Bank Republic acquisition in 4Q 2016, by GEL 15.0 million decrease in staff cost, by GEL 2.3 million drop in provision for liabilities and charges related to staff redundancy provision related to Bank Republic's acquisition and by GEL 3.2 million decrease in advertising and marketing services expenses. As mentioned above, TBC Bank incurred GEL 1.9 million one-off expense related to Bank Republic integration costs.
As a result, with the Bank Republic acquisition effect the cost to income ratio was 40.8% (39.8% without one-offs) in 1Q 2017, compared to 51.2% in 4Q 2016.
Balance Sheet Discussion
In millions of Mar-17 Mar-17 Mar-16 Change Change Dec-16 Change GEL w/o BR YoY % YoY % QoQ ---------------------------- -------- ------- ------- ------- ------- ------- ------- Cash, Due from Banks and Mandatory Cash Balances with NBG 1,747 1,753 1,153 51.5% 52.1% 1,961 -10.6% Loans and Advances to Customers (Net) 5,526 6,918 4,298 28.6% 61.0% 7,134 -3.0% Financial Securities 682 813 592 15.2% 37.4% 804 1.1% Fixed and Intangible Assets & Investment Property 390 481 364 6.9% 31.9% 471 2.1% Other Assets 715 397 247 189.4% 60.9% 401 -0.8% Total Assets 9,059 10,363 6,654 36.1% 55.7% 10,769 -3.8% ---------------------------- -------- ------- ------- ------- ------- ------- ------- Due to Credit Institutions 1,503 2,112 1,002 49.9% 110.8% 2,198 -3.9% Customer Accounts 5,392 6,071 3,932 37.1% 54.4% 6,455 -6.0% Debt Securities in Issue 24 24 21 13.8% 13.8% 24 3.7% Subordinated Debt 345 345 303 13.7% 13.7% 368 -6.4% Other Liabilities 119 130 115 3.2% 12.7% 142 -8.7% Total Liabilities 7,383 8,682 5,374 37.4% 61.6% 9,186 -5.5% ---------------------------- -------- ------- ------- ------- ------- ------- ------- Total Equity 1,676 1,681 1,281 30.9% 31.2% 1,583 6.2% ---------------------------- -------- ------- ------- ------- ------- ------- -------
Assets
As of March 2017, without the Bank Republic acquisition effect, TBC Bank's total assets amounted to GEL 9,059.0 million, up by GEL 2,404.6 million, or by 36.1% YoY. The increment was mainly due to the increase in net loans and advances to customers by GEL 1,227.6 million, or by 28.6% as well as the rise in cash, due from banks and mandatory cash balances with NBG by GEL 593.8 million, compared to 31 March 2016. The liquid assets to liability ratio stood at 32.9%, compared to 32.2% as of 31 March 2016.
With the Bank Republic acquisition effect, total assets amounted to GEL 10,362.6 million, down by GEL 406.4 million, or by 3.8% QoQ. The contraction resulted from the the decrease in net loans and advances to customers by GEL 215.5 million, or by 3.0% and due to the GEL 197.8 million, or by 7.2% decrease in liquid assets (comprising cash and cash equivalents, amounts due from other banks, mandatory cash balances and investment securities, less corporate shares). The liquid assets to liability ratio stood at 29.5%, compared to 30.1% as of 31 December 2016.
With the Bank Republic acquisition effect, as of 31 March 2017, gross loan portfolio amounted to GEL 7,121.0 million, down by GEL 237.7 million, or by 3.2% QoQ. Gross Loans denominated in foreign currency accounted for 61.4% of total gross loans, compared to 65.9% as of 31 December 2016. As of 31 March 2016, NPLs stood at 3.4% compared to 3.5% as of 31 December 2016. The NPLs coverage ratio stood at 84.6% (217.4% including collateral), compared to 88.4% (222.5% including collateral) compared to previous quarter result.
Asset Quality
Foreign Currency Income Linked Borrowers without Bank Republic effect[9]
31-Mar-17 31-Dec-16
---------------------- ---------------------- ----------------------
Segments FC share FC linked FC share FC linked
income income
borrowers borrowers
share share
---------------------- --------- ----------- --------- -----------
Retail 50.1% 24.1% 55.7% 24.1%
Consumer 20.9% 19.6% 25.2% 21.7%
Mortgage 85.1% 25.4% 89.8% 24.9%
Corporate 79.6% 57.9%[10] 78.1% 58.4%[11]
MSME 67.5% 16.6%[12] 71.5% 33.7%
Total Loan Portfolio 62.8% 34.4% 66.3% 38.9%
---------------------- --------- ----------- --------- -----------
PAR 30 by Segments
and Currencies
Par 30 Mar-17 Dec-16 Mar-16
----------- ------------------------------------------ -------------------- --------------------
GEL FC Total GEL FC Total GEL FC Total GEL FC Total
w/o w/o w/o
BR BR BR
Corporate 0.4% 1.5% 1.3% 0.3% 1.6% 1.2% 0.0% 1.4% 1.0% 0.4% 1.5% 1.3%
Retail 3.0% 2.9% 3.0% 2.7% 2.4% 2.6% 2.5% 2.3% 2.4% 2.9% 3.5% 3.2%
MSME 2.0% 3.9% 3.3% 1.9% 4.0% 3.3% 1.8% 3.5% 3.0% 3.0% 5.8% 5.0%
Total 2.4% 2.7% 2.5% 2.1% 2.5% 2.4% 1.9% 2.3% 2.2% 2.5% 3.4% 3.1%
----------- ----- ----- ------ ----- ----- ------ ----- ----- ------ ----- ----- ------
Total
Without the Bank Republic acquisition effect, PAR 30 decreased
by 0.6pp YoY, from 3.1% to 2.5%. This was due to improved
performance of the book. With the Bank Republic acquisition
effect,PAR 30 remained broadly stable with 0.2pp increase
on a QoQ basis.
Retail Segment
Without the Bank Republic acquisition effect, PAR 30 decreased
by 0.3pp YoY, from 3.2% to 3.0%. With the Bank Republic
acquisition effect, PAR 30 increased by 0.2pp QoQ, from
2.4% to 2.6%.
Corporate Segment
Without the Bank Republic acquisition effect, PAR 30 remained
unchanged and stood at 1.3%. With the Bank Republic acquisition
effect,PAR 30 increased by 0.2pp QoQ, from 1.0% to 1.2%,
staying still at low level.
MSME Segment
Without the Bank Republic acquisition effect, PAR 30 decreased
by 1.8pp YoY, from 5.0% to 3.3%. This was due to improved
performance of the segment. With the Bank Republic acquisition
effect, PAR 30 increased by 0.3pp QoQ, from 3.0% to 3.3%. NPLs per new segmentation applied retrospectively
NPLs Mar-17 Dec-16 Mar-16
----------- ------------------------------------------ -------------------- ----------------------
GEL FC Total GEL FC Total GEL FC Total GEL FC Total
w/o w/o w/o
BR BR BR
Corporate 1.1% 5.4% 4.6% 0.7% 5.2% 4.1% 0.7% 6.1% 4.8% 1.5% 8.7% 7.4%
Retail 2.3% 3.7% 3.0% 2.1% 2.9% 2.5% 1.8% 3.0% 2.5% 2.1% 4.2% 3.2%
MSME 2.7% 5.8% 4.8% 2.5% 5.4% 4.5% 1.8% 4.9% 4.0% 1.8% 5.7% 4.7%
Total 2.2% 4.9% 3.9% 1.9% 4.3% 3.4% 1.6% 4.4% 3.5% 2.0% 6.3% 4.8%
----------- ----- ----- ------ ----- ----- ------ ----- ----- ------ ----- ----- ------
Total
Without the Bank Republic acquisition effect, NPLs decreased
by 0.9pp YoY, from 4.8% to 3.9%. This was due to the improved
performance of the corporate book. With the Bank Republic
acquisition effect, NPLs stayed broadly stable and decreased
by 0.1pp on QoQ, from 3.5% to 3.4%.
Retail Segment
Without the Bank Republic acquisition effect, NPLs decreased
by 0.2pp YoY, from 3.2% to 3.0%. With the Bank Republic
acquisition effect, NPLs remained stable QoQ and stood
at 2.5%.
Corporate Segment
Without the Bank Republic acquisition effect, NPLs decreased
by 2.8pp, from 7.4% to 4.6%. This was due to recovery
of several NPL borrowers and write-off of one borrowers
in 1Q 2017, which was almost fully provisioned. With the
Bank Republic acquisition effect, NPLs decreased by 0.7pp
QoQ, from 4.8% to 4.1%. This was caused by write-off mentioned
above.
MSME Segment
Without the Bank Republic acquisition effect, segment
NPLs increased by 0.1pp YoY, from 4.7% to 4.8%. With the
BR acquisition effect, NPLs increased by 0.5pp QoQ, from
4.0% to 4.5%. This was caused by the seasonal factors,
mainly related to micro loans repayment schedule.
NPLs Coverage
NPLs Mar-17 Dec-16 Mar-16
Coverage
------------------------------------------ ------------------------ ------------------------
Exc. Incl. Exc. Incl. Exc. Incl. Exc. Incl.
Col. Col. Collateral Collateral Collateral Collateral Collateral Collateral
w/o w/o
BR BR
----------- ------- ------- ----------- ----------- ----------- ----------- ----------- -----------
Corporate 69.9% 256.7% 69.2% 271.0% 91.8% 262.2% 100.2% 241.5%
Retail 119.6% 207.7% 121.4% 207.6% 106.6% 205.6% 108.7% 196.9%
MSME 53.3% 163.8% 54.4% 170.9% 57.7% 186.4% 47.3% 178.8%
Total 83.0% 210.8% 84.6% 217.4% 88.4% 222.5% 90.6% 213.3%
----------- ------- ------- ----------- ----------- ----------- ----------- ----------- -----------
With Bank Republic acquisition effect, the NPLs coverage ratio stood at 84.6% (217.4% including collateral), compared to 88.4% (222.5%) as of 31 December 2016. Without the Bank Republic acquisition effect in 1Q 2017 NPLs coverage ratio stood at 83.0% (210.8% including collateral), compared to 90.6% (213.3% including collateral) as of 31 March 2016.
With Bank Republic acquisition effect, NPL coverage ratio for corporate segment decreased due to write-off of one corporate exposure, which was almost fully provisioned and overall improved performance of the book. As for the retail segment in 1Q 2017 - the NPL coverage ratio increased in 1Q 2017, while it remained stable for the MSME segment.
Liabilities
Without the Bank Republic acquisition effect, as of 31 March 2017 TBC Bank's total liabilities amounted to GEL 7,382.8 million, up by GEL 2,009.0 million, or by 37.4% YoY. This was driven by a GEL 1,460.5 million or 37.1% increase in customer accounts portfolio, by GEL 500.3 million, or 49.9% increase in amounts due to credit institutions and by GEL 41.6 million, or 13.7% increase in subordinated debt portfolio, compared to 31 March 2016.
With the Bank Republic acquisition effect, as of 31 March 2017 TBC Bank's total liabilities amounted to GEL 8,682.0 million, down by GEL 504.4 million, or by 5.5% QoQ. The decrease was driven by a GEL 384.1 million, or 6.0% decrease in customer accounts portfolio, by GEL 85.2 million, or 3.9% decrease in amounts due to credit institutions and by GEL 23.5 million, or 6.4% decrease in subordinated debt portfolio, compared to 31 December 2016.
Liquidity
The Bank's liquidity ratio, as defined by the central bank, stood at 29.4% as of 31 March 2017, compared to 33.1% and 30.8% as of 31 March 2016 and 31 December 2016, respectively.
Total Equity
Without the Bank Republic acquisition effect, as of 31 March 2017, TBC's total equity amounted to GEL 1,676.2 million, up from GEL 1,280.6 million as of 31 March 2016. With the acquisition, as of 31 March 2017, TBC's total equity amounted to GEL and from GEL 1,680.5 million, up from GEL 1582.6 million as of 31 December 2016. In both cases, the growth was primarily driven by the net income attributable to the Bank's owners.
Regulatory Capital
As of 31 March 2017, the Bank's Basel II/III([13]) Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 11.3% and 14.9%, respectively, compared to 13.3% and 16.8% as of 31 March 2016, and 10.4% and 14.2% as of 31 December 2016. The minimum capital requirements set by the NBG for Basel II/III Tier 1 and Total Capital Adequacy Ratios are 8.5% and 10.5%, respectively. The Bank's Basel II/III tier 1 capital amounted to GEL 1,115.2 million, compared to GEL 994.1 million as of 31 March 2016 and GEL 1,041.3 million as of 31 December 2016. Risk weighted assets were GEL 9,878.1 million as of 31 March 2017, up by GEL 2,427.6 million YoY and down by GEL 143.3 million QoQ.
GEL Million Standalone Standalone Merger Merger Impact QoQ Change
31- Dec-2016 31-Mar-2017 Impact if Applied to Standalone
March 2017*
----------------- -------------- ------------- -------- --------------- ------------
Tier 1 Capital 1,041 1,115 248 1,363 74
----------------- -------------- ------------- -------- --------------- ------------
Total Capital 1,422 1,473 1,721 51
----------------- -------------- ------------- -------- --------------- ------------
Risk Weighted
Assets 10,021 9,878 2,060 11,938 -143
----------------- -------------- ------------- -------- --------------- ------------
Tier 1 Capital
Adequacy Ratio 10.4% 11.3% 0.1% 11.4% 0.9%
----------------- -------------- ------------- -------- --------------- ------------
Total Capital
Adequacy Ratio 14.2% 14.9% -0.5% 14.4% 0.7%
----------------- -------------- ------------- -------- --------------- ------------
* This is calculation of the theoretical impact on the CARs if the merger had happened in March 2017 to give the reader indication of CAR. In reality, the merger occurred in Q2 of 2017.
Results by Segments and Subsidiaries
The segment definitions are as per below:
-- Corporate - Legal Entities with an annual revenue of GEL 8.0 million or more or who have been granted a loan in an amount equivalent to USD 1.5 million or more. Some other business customers may also be assigned to the corporate segment or transferred to MSME segment on a discretionary basis.
-- MSME (Micro, Small and Medium) - all business customers who are not included in either Corporate and Retail segments; or Legal Entities who have been granted a Pawn shop loan;
-- Retail - all non-business individual customers or individual business customers who have been granted a loan in an amount equivalent below USD 8 thousand. All individual customers are included in retail deposits.
Businesses customers are all legal entities or individuals who have been granted a loan for business purpose.
Income Statement by Segments 1Q'17 Retail MSME Corporate Corp.Centre Total ------------------------------------- -------- -------- ---------- ------------ -------- Interest Income 126,422 43,619 45,048 22,680 237,769 Interest Expense -29,871 -2,302 -21,678 -41,584 -95,436 Net Transfer Pricing -15,641 -12,102 3,438 24,305 0 Net Interest Income 80,910 29,214 26,808 5,401 142,333 ------------------------------------- -------- -------- ---------- ------------ -------- Fee and Commission Income 34,337 4,617 5,287 259 44,500 Fee and Commission Expense -14,560 -1,697 -1,578 -188 -18,023 Net fee and Commission Income 19,776 2,920 3,709 70 26,477 ------------------------------------- -------- -------- ---------- ------------ -------- Gross Insurance Profit 0 0 0 1,225 1,225 Gains Less Losses from Trading in Foreign Currencies 5,837 8,226 7,476 -150 21,388 Foreign Exchange Translation Gains Less Losses/(Losses Less Gains) 0 0 0 804 804 Net Losses from Derivative Financial Instruments 0 0 0 -3 -3 Other Operating Income 3,409 741 2,001 5,015 11,166 Share of profit of associates 0 0 0 93 93 Other Operating Non-Interest Income 9,245 8,966 9,477 5,758 33,447 ------------------------------------- -------- -------- ---------- ------------ -------- Provision for Loan Impairment -26,720 -4,540 14,338 0 -16,922 (Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments 574 -4 -478 0 92 Recovey of Provision/(Provision) for Impairment of Investments in Finance Lease 0 0 0 -31 -31 (Provision)/Recovery of Provision for Impairment of other Financial Assets -298 -126 -115 -258 -797 Recovery of Impairment/(Impairment) of Investment Securities Available for Sale 0 0 0 0 0 Profit before G&A Expenses and Income Taxes 83,488 36,431 53,739 12,166 185,823 ------------------------------------- -------- -------- ---------- ------------ -------- Staff Costs -29,252 -7,632 -6,485 -4,168 -47,538 Depreciation and Amortization -6,860 -1,138 -365 -241 -8,605 Provisions for Liabilities and Charges - - - 95 95 Administrative and Other Operating Expenses -16,863 -3,758 -1,661 -4,591 -26,873 Operating Expenses -52,974 -12,529 -8,512 -8,905 -82,920 ------------------------------------- -------- -------- ---------- ------------ -------- Profit before Tax 30,513 23,902 45,227 3,260 102,903 ------------------------------------- -------- -------- ---------- ------------ -------- Income Tax Expense -4,905 -3,436 -6,314 8,310 -6,345 Profit for the Year 25,608 20,466 38,914 11,570 96,558 ------------------------------------- -------- -------- ---------- ------------ -------- Income Statement by Segments without the Bank Republic acquisition effect 1Q'17 Retail MSME Corporate Corp.Centre Total --------------------------------------- -------- -------- ---------- ------------ -------- Interest Income 95,314 38,381 38,963 20,673 193,330 Interest Expense -28,161 -2,119 -15,721 -32,360 -78,361 Net Transfer Pricing -6,484 -11,044 20 17,507 - Net Interest Income 60,669 25,218 23,262 5,820 114,969 --------------------------------------- -------- -------- ---------- ------------ -------- Fee and Commission Income 32,208 4,061 4,001 259 40,529 Fee and Commission Expense -13,111 -1,627 -1,111 -110 -15,959 Net fee and Commission Income 19,097 2,434 2,890 148 24,570 --------------------------------------- -------- -------- ---------- ------------ -------- Gross Insurance Profit - - - 1,225 1,225 Gains Less Losses from Trading in Foreign Currencies 4,286 7,218 5,197 363 17,064 Foreign Exchange Translation Gains Less Losses/(Losses Less Gains) - - - 982 982 Net Losses from Derivative Financial Instruments - - - -3 -3 Other Operating Income 1,813 390 1,704 2,249 6,157 Share of profit of associates - - - 93 93 Other Operating Non-Interest Income 6,099 7,607 6,901 3,684 24,292 --------------------------------------- -------- -------- ---------- ------------ -------- Provision for Loan Impairment -18,463 -3,158 14,298 - -7,323 (Provision)/Recovery of Provision for Liabilities, Charges and Credit Related Commitments 521 164 354 - 1,039 Recovery of Provision/(Provision) for Impairment of Investments in Finance Lease - - - -31 -31 (Provision)/Recovery of Provision for Impairment of other Financial Assets 1 - -108 -258 -364 Recovery of Impairment/(Impairment) of Investment Securities Available for Sale - - - 93 93 Profit before G&A Expenses and Income Taxes 67,925 32,265 47,598 10,588 158,375 --------------------------------------- -------- -------- ---------- ------------ --------
Staff Costs -24,917 -6,757 -5,774 -4,421 -41,868
Depreciation and Amortization -6,047 -977 -272 -219 -7,515
Provision for liabilities and charges - - - 95 95
Administrative and Other Operating
Expenses -14,302 -3,301 -1,291 -4,545 -23,439
Operating Expenses -45,266 -11,034 -7,336 -9,090 -72,727
--------------------------------------- -------- -------- ---------- ------------ --------
Profit before Tax 22,659 21,230 40,261 1,497 85,648
--------------------------------------- -------- -------- ---------- ------------ --------
Income Tax Expense -2,885 -2,993 -6,129 7,672 -4,336
Profit for the Year 19,774 18,237 34,132 9,169 81,312
--------------------------------------- -------- -------- ---------- ------------ --------
Portfolios by Segments
In thousands of GEL Mar-17 Mar-17 Dec-16 Mar-16
wo BR
--------------------------------------- ---------- ---------- ---------- ----------
Loans and Advances to Customers
Consumer 1,433,646 1,859,865 1,838,895 1,149,980
Mortgage 1,218,690 1,736,302 1,808,433 894,240
Pawn 33,985 33,985 33,247 35,895
Retail 2,686,321 3,630,152 3,680,575 2,080,115
Corporate 1,628,207 1,922,615 2,062,229 1,347,213
MSME 1,396,068 1,568,270 1,615,919 1,066,391
Total Loans and Advances to Customers
(Gross) 5,710,597 7,121,036 7,358,723 4,493,719
Less: Provision for Loan Impairment -184,730 -202,791 -225,022 -195,428
Total Loans and Advances to Customers
(Net) 5,525,867 6,918,246 7,133,702 4,298,291
--------------------------------------- ---------- ---------- ---------- ----------
Customer Accounts
Retail 3,267,452 3,543,911 3,748,151 2,593,415
Corporate 1,399,525 1,733,114 1,875,200 760,438
MSME 725,180 793,808 831,598 577,771
Total Customer Accounts 5,392,157 6,070,833 6,454,949 3,931,623
--------------------------------------- ---------- ---------- ---------- ----------
Retail Banking
Without the Bank Republic acquisition effect, retail loans stood at GEL 2,686.3 million, up by 29.1% YoY. The hike mainly resulted from a GEL 324.4 million increase in mortgage loans and a GEL 283.7 million increase in consumer loans. TBC Bank's retail loans accounted for 31.4% market share of total individual loans. As of 31 March 2017, foreign currency loans represented 50.1% of the total retail loan portfolio.
With the acquisition effect, as of 31 March 2016, retail loans stood at GEL 3,630.2 million, down by 1.4% QoQ. The QoQ decrease was mainly related to a GEL 72.1 million decrease in mortgage loans. TBC Bank's and Bank Republic's combined retail loans accounted for a 41.8% market share of total individual loans. As of 31 March 2017, foreign currency loans represented 51.9% of the total retail loan portfolio.
Without the acquisition effect, retail deposits stood at GEL 3,267.5 million, up by 26.0% YoY and accounted for a 37.0% market share of total individual deposits. The increment in retail deposits was mainly attributable to the increase in current deposits by 40.3% YoY. Term deposits accounted for 57.9% of the total retail deposit portfolio as of 31 March 2017. Foreign deposits accounted for 85.9% of the total retail deposit portfolio.
With the acquisition effect, retail deposits decreased to GEL 3,543.9 million down by 5.4% QoQ and accounted for a 40.1% market share of total individual deposits. The decrease in retail deposits was mainly attributable to the decrease in term deposits by 5.0% QoQ. Term deposits accounted for 57.1% of the total retail deposit portfolio as of 31 March 2017. Foreign currency deposits accounted for 85.0% of the total retail deposit portfolio.
Without the acquisition effect, retail loan yields and deposit rates stood at 14.2% and 3.4% respectively, and the segment's cost of risk on loans was 2.8%. The retail segment contributed 24.3%, or GEL 19.8 million, to TBC's total net income in 1Q 2017. With the acquisition effect, retail loan yields and deposit rates stood at 13.9% and 3.3% respectively, and the segment's cost of risk on loans was 2.9%. The retail segment contributed 26.5%, or GEL 25.6 million, to TBC's total net income in 1Q 2017.
Corporate Banking
Without the Bank Republic acquisition effect, corporate loans amounted GEL 1,628.2 million, up by 20.9% YoY. Foreign currency loans accounted for 79.6% of the total corporate loan portfolio. With the acquisition effect, corporate loans amounted to GEL 1,922.6 million, down by 6.8% QoQ. Foreign currency loans accounted for 73.5% of the total corporate loan portfolio.
Without the acquisition effect, corporate deposits totaled GEL 1,399.5 million, up by 84.0% YoY. Foreign currency corporate deposits represented 53.9% of the total corporate deposit portfolio. With the acquisition effect, corporate deposits totaled GEL 1,733.1 million, down by 7.6% QoQ. Foreign currency corporate deposits represented 51.4% of the total corporate deposit portfolio.
Without the Bank Republic acquisition effect loan yield and deposit rates stood at 9.1% and 4.4%, respectively. In the same period, the cost of risk on loans was -3.3%. In terms of profitability, the corporate segment's net profit reached GEL 34.1 million, or 42.0% of the Bank's total net income. With the acquisition effect, corporate loan yields and deposit rates stood at 9.1% and 4.9%, respectively. In the same period, the cost of risk on loans was -2.9%. In terms of profitability, the corporate segment's net profit reached GEL 38.9 million, accounting for 40.3% of the Bank's total net income.
MSME Banking
Without Bank Republic's acquisition effect, MSME loans amounted to GEL 1,396.1 million, up by 30.9% YoY. Foreign currency loans accounted for 67.5% of the total MSME portfolio. With the acquisition effect, MSME loans amounted to GEL 1,568.3 million, down by 2.9% QoQ. Foreign currency loans accounted for 68.6% of the total MSME portfolio.
Without the acquisition effect, MSME deposits stood at GEL 725.2 million, up by 21.5% YoY QoQ. Foreign currency MSME deposits accounted for 60.6% of the total MSME deposit portfolio. Consequently, with the acquisition effect MSME deposits stood at GEL 793.8 million, down by 4.5% QoQ. Foreign currency MSME deposits accounted for 59.8% of the total MSME deposit portfolio.
Without the acquisition effect MSME loan yields and deposit rates stood at 11.0% and 1.1%, respectively, while the cost of risk on loans was 0.9%. In terms of profitability, net profit for the MSME segment amounted to GEL 18.2 million, or 22.4%, of TBC's total net income. Consequently, with the Bank Republic acquisition effect, MSME loan yields and deposit rates stood at 11.0% and 1.1%, respectively, while the cost of risk on loans was 1.1%. In terms of profitability, net profit for the MSME segment amounted to GEL 20.5million, or 21.2 % of TBC's total net income.
Annexes
Subsidiaries of TBC Bank Group PLC[14]
Ownership Country Year Industry Total Assets
/ voting of incorporation (after elimination)
% or acquisition
as
of
31
March
2017
---------- ----------- ------------------ ------------- -----------------------
Subsidiary Amount % in
GEL'000 TBC
Group
------------------ ---------- ----------- ------------------ ------------- ------------- --------
United Financial
Corporation Card
JSC 98.7% Georgia 1997 processing 7,875 0.08%
TBC Capital
LLC 100.0% Georgia 1999 Brokerage 1,457 0.01%
TBC Leasing
JSC 99.6% Georgia 2003 Leasing 112,427 1.08%
Non-banking
TBC Kredit credit
LLC 75.0% Azerbaijan 2008 institution 38,452 0.37%
Banking System
Service Company Information
LLC 100.0% Georgia 2009 services 637 0.01%
TBC Pay LLC 100.0% Georgia 2009 Processing 25,561 0.25%
Real
estate
Mali LLC 100.0% Georgia 2011 management 202 0.00%
Real Estate Real
Management estate
Fund JSC 100.0% Georgia 2010 management 23 0.00%
TBC Invest PR and
LLC 100.0% Israel 2011 marketing 173 0.00%
Financial
Bank republic 100.0% Georgia 2016 sector 1,844,445 17.8%
Financial
JSC TBC Bank 98.5% Georgia 2016 sector 8,322,315 80.31%
TBC Insurance 100.0% Georgia 2016 Insurance 7,093 0.1%
------------------ ---------- ----------- ------------------ ------------- ------------- --------
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Mar-17 Mar-17 Dec-16 Mar-16
w/o
BR
-------------------------------------------- ---------- ----------- ----------- ----------
Cash and cash equivalents 830,484 697,118 945,180 688,118
Due from other banks 119,707 151,780 24,725 12,591
Mandatory cash balances with
National Bank of Georgia 796,751 904,487 990,642 452,398
Loans and advances to customers
(Net) 5,525,867 6,918,246 7,133,702 4,298,291
Investment securities available
for sale 297,055 428,138 430,703 224,614
Investments in Subsidiaries and
Associates 351,578 537 0 0
Investment securities held to
maturity 384,756 384,756 372,956 367,045
Investments in finance leases 88,627 88,627 95,031 78,950
Investment properties 67,019 96,064 95,615 69,461
Goodwill 4,491 28,658 28,658 2,726
Intangible assets 59,527 63,906 60,957 45,129
Premises and equipment 263,121 320,659 314,032 249,756
Other financial assets 78,660 82,254 92,377 55,380
Deferred tax asset 3,406 3,406 3,511 2,301
Current income tax prepayment 10,058 10,058 7,431 10,671
Insurance and Reinsurance Receivables 3,584 3,414 2,249 0
Other assets 174,270 180,479 171,263 96,921
TOTAL ASSETS 9,058,963 10,362,587 10,769,032 6,654,351
-------------------------------------------- ---------- ----------- ----------- ----------
LIABILITIES
Due to Credit Institutions 1,502,649 2,112,360 2,197,577 1,002,300
Customer accounts 5,392,157 6,070,833 6,454,949 3,931,623
Current income tax liability 44 2,902 2,578 468
Debt Securities in issue 24,376 24,376 23,508 21,424
Deferred income tax liability 768 3,727 5,646 35,838
Provisions for liabilities and
charges 13,448 15,528 16,026 10,491
Other financial liabilities 51,913 54,780 50,511 38,563
Subordinated debt 344,841 344,841 368,381 303,381
Insurance Contracts Liabilities 342 342 486 0
Other liabilities 52,236 52,354 66,739 29,686
TOTAL LIABILITIES 7,382,773 8,682,043 9,186,401 5,373,774
-------------------------------------------- ---------- ----------- ----------- ----------
EQUITY
Share capital 1,581 1,581 1,581 19,612
Share premium 677,211 677,211 677,211 408,274
Retained earnings 1,046,100 1,055,011 955,174 772,225
Group reorganisation reserve -162,167 -162,167 -162,167 0
Share based payment reserve 21,303 21,303 23,327 14,753
Revaluation reserve for premises 70,038 70,460 70,460 59,532
Revaluation reserve for available-for-sale
securities -108 -5,088 -3,680 6,391
Cumulative currency translation
reserve -7,636 -7,636 -7,539 -6,615
TOTAL EQUITY 1,646,323 1,650,677 1,554,366 1,274,174
-------------------------------------------- ---------- ----------- ----------- ----------
Non-controlling interest 29,867 29,867 28,264 6,403
TOTAL EQUITY 1,676,190 1,680,544 1,582,631 1,280,577
-------------------------------------------- ---------- ----------- ----------- ----------
TOTAL LIABILITIES AND EQUITY 9,058,963 10,362,587 10,769,032 6,654,351
-------------------------------------------- ---------- ----------- ----------- ----------
Consolidated Statement of Profit
or Loss and Other Comprehensive
Income
In thousands of GEL 1Q'17 1Q'17 1Q'16 Q4'16
w/o BR
--------------------------------------------- -------- -------- -------- ---------
Interest income 193,330 237,769 174,859 243,344
Interest expense -78,361 -95,436 -65,976 -89,655
Net interest income 114,969 142,333 108,883 153,689
--------------------------------------------- -------- -------- -------- ---------
Fee and commission income 40,529 44,500 29,547 45,460
Fee and commission expense -15,959 -18,023 -11,250 -17,068
Net Fee and Commission Income 24,570 26,477 18,297 28,392
--------------------------------------------- -------- -------- -------- ---------
Gains less losses from trading in
foreign currencies 17,064 21,146 14,619 25,472
Foreign exchange translation gains
less losses 982 1,046 8 -2,519
Gains less losses/(losses less gains)
from derivative financial instruments -3 -3 -363 94
(Losses less gains) / gains less
losses from disposal of investment
securities available for sale 0 0 0 498
Other operating income 6,250 11,259 3,668 12,372
Other operating non-interest income 24,292 33,447 17,931 35,419
--------------------------------------------- -------- -------- -------- ---------
Gross insurance profit 1,225 1,225 0 256
--------------------------------------------- -------- -------- -------- ---------
Provision for loan impairment -7,323 -16,922 -13,067 -10,405
Provision for impairment of investments
in finance lease -31 -31 -185 -322
Provision for/ (recovery of provision)
performance guarantees and credit
related commitments 1,039 92 -1,029 2,787
Provision for impairment of other
financial assets -364 -797 -49 -1,727
Impairment of investment securities
available for sale 0 0 -11 0
Operating income after provisions
for impairment 158,375 185,823 130,772 208,586
--------------------------------------------- -------- -------- -------- ---------
Staff costs -41,868 -47,538 -34,172 -62,544
Depreciation and amortisation -7,515 -8,605 -6,567 -7,435
Provision for liabilities and charges 95 95 0 -2,210
Administrative and other operating
expenses -23,439 -26,873 -23,560 -39,595
Operating expenses -72,727 -82,920 -64,299 -111,785
--------------------------------------------- -------- -------- -------- ---------
Profit before tax 85,648 102,903 66,474 96,801
--------------------------------------------- -------- -------- -------- ---------
Income tax expense -4,336 -6,345 -7,777 -8,767
Profit for the period 81,312 96,558 58,696 88,034
--------------------------------------------- -------- -------- -------- ---------
Other Comprehensive income:
--------------------------------------------- -------- -------- -------- ---------
Items that may be reclassified subsequently
to profit or loss:
--------------------------------------------- -------- -------- -------- ---------
Revaluation -527 -1,407 -596 3,196
--------------------------------------------- -------- -------- -------- ---------
Gains less losses reclassified to
profit or loss upon disposal 0 0 0 2,757 --------------------------------------------- -------- -------- -------- --------- Income tax recorded directly in other comprehensive income 0 0 -35 -248 --------------------------------------------- -------- -------- -------- --------- Exchange differences on translation to presentation currency -96 -96 24 -147 --------------------------------------------- -------- -------- -------- --------- Items that will not be reclassified to profit or loss: --------------------------------------------- -------- -------- -------- --------- Income tax recorded directly in other comprehensive income 0 0 0 -422 --------------------------------------------- -------- -------- -------- --------- Other comprehensive income for the year -623 -1,503 608 -5,136 --------------------------------------------- -------- -------- -------- --------- Total comprehensive income for the year 80,689 95,055 59,304 82,898 --------------------------------------------- -------- -------- -------- --------- Profit attributable to: --------------------------------------------- -------- -------- -------- --------- - Owners of the Bank 79,730 94,975 59,483 89,359 --------------------------------------------- -------- -------- -------- --------- - Non-controlling interest 1,582 1,582 -786 -1,326 --------------------------------------------- -------- -------- -------- --------- Profit for the period 81,312 96,558 58,696 88,034 --------------------------------------------- -------- -------- -------- --------- Total comprehensive income is attributable to: --------------------------------------------- -------- -------- -------- --------- - Owners of the Bank 79,106 93,473 60,091 84,224 --------------------------------------------- -------- -------- -------- --------- - Non-controlling interest 1,582 1,582 -786 -1,326 --------------------------------------------- -------- -------- -------- --------- Total comprehensive income for the year 80,689 95,055 59,304 82,898 --------------------------------------------- -------- -------- -------- --------- Consolidated Statements of Cash Flows In thousands of GEL As of 31-Mar-2017 --------------------------------------------------- --------------------- Cash flows from operating activities Interest received 236,723 Interest paid (93,871) Fees and commissions received 43,697 Fees and commissions paid (18,193) Insurance premium received 2,472 Insurance claims paid (1,407) Income received from trading in foreign currencies 21,303 Other operating income received 7,493 Staff costs paid (51,305) Administrative and other operating expenses paid (32,771) Income tax (paid) / refunded (10,379) Cash flows from operating activities before changes in operating assets and liabilities 103,764 --------------------------------------------------- --------------------- Changes in operating assets and liabilities Net (increase) / decrease in due from other banks (214,398) Net (increase) / decrease in loans and advances to customers (190,209) Net decrease in investment in finance lease 363 Net decrease / (increase) in other financial assets 24,090 Net decrease / (increase) in other assets (17,175) Net increase in due to other banks (49,578) Net increase in customer accounts (53,309) Net (decrease) / increase in other financial liabilities 6,351 Net (decrease) / increase in other liabilities & provisions for liabilities and charges (1,669) Net cash from operating activities (391,770) --------------------------------------------------- --------------------- Cash flows from investing activities Acquisition of investment securities available for sale (37,753) Proceeds from disposal of investment securities available for sale (2,250) Proceeds from redemption at maturity of investment securities available for sale 41,583 Acquisition of investment securities held to maturity (129,956) Proceeds from redemption of investment securities held to maturity 119,285 Acquisition of premises, equipment and intangible assets (19,573) Disposal of premises, equipment and intangible assets 1,458 Proceeds from disposal of investment property 872 Acquisition of subsidiaries, net of cash acquired (350) Net cash used in investing activities (26,684) --------------------------------------------------- --------------------- Cash flows from financing activities Proceeds from other borrowed funds 497,714 Redemption of other borrowed funds (473,650) Proceeds from debt securities in issue 2,805 Issue of ordinary shares 29 Net cash from / (used in) financing activities 26,899 --------------------------------------------------- --------------------- Effect of exchange rate changes on cash and cash equivalents (25,003) --------------------------------------------------- --------------------- Net increase / (decrease) in cash and cash equivalents (416,558) --------------------------------------------------- --------------------- Cash and cash equivalents at the beginning of the year 1,113,676 --------------------------------------------------- --------------------- Cash and cash equivalents at the end of the year 697,118 --------------------------------------------------- ---------------------
Key Ratios
Average Balances
Average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records and used by the Management for monitoring and control purposes.
Key Ratios Ratios (based on monthly averages, 1Q'17 1Q'17 1Q'16 Q4'16 where applicable) w/o BR ---------------------------------------- -------- ------- ------- -------- ROAE 20.3% 24.2% 19.3% 24.2% ROAA 3.6% 3.7% 3.5% 3.7% Pre-provision ROAE 22.0% 28.6% 23.9% 26.8% Pre-provision ROAA 3.9% 4.4% 4.3% 4.1% Cost to Income 44.1% 40.8% 44.3% 51.2% Cost of Risk 0.5% 0.9% 1.2% 0.6% NIM 6.5% 6.6% 7.7% 7.9% Risk adjusted NIM 5.3% 5.1% 6.4% 6.3% Loan yields 11.9% 11.9% 13.6% 13.8% Risk adjusted loan yields 10.8% 10.5% 12.2% 12.0% Deposit rates 3.3% 3.4% 3.6% 3.3% Yields on interest earning assets 10.9% 11.1% 12.4% 12.5% Cost of Funding 4.3% 4.4% 4.8% 4.5% Spread 6.6% 6.7% 7.6% 8.0% PAR 90 to gross loans 1.7% 1.5% 1.7% 1.3% NPLs to gross loans 3.9% 3.4% 4.8% 3.5% NPLs coverage 83.0% 84.6% 90.6% 88.4% Provision Level to Gross Loans 3.2% 2.8% 4.3% 3.1% Related party loans to gross loans 0.1% 0.1% 0.2% 0.1% Top 10 borrowers to total portfolio N/A 8.3% 9.2% 7.6% Top 20 borrowers to total portfolio N/A 12.2% 14.6% 11.3% Net loans to deposits plus IFI funding 92.4% 97.2% 97.7% 93.4% Net stable funding ratio N/A 106.8% 117.3% 108.4%
Leverage 5.4 6.2 5.2 6.8 Hypothetical Tier 1 CAR 15.0% 15.0% 18.7% 14.2% Hypothetical Total CAR 19.8% 19.8% 22.8% 19.3% Regulatory Tier 1 CAR 11.3% 11.3% 13.3% 10.4% Regulatory Total CAR 14.9% 14.9% 16.8% 14.2% ---------------------------------------- -------- ------- ------- --------
Ratio definitions
1. Return on average total equity (ROAE) equals net income attributable to owners divided by monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period; Pre-provision ROAE excludes all provision charges. Annualized where applicable.
2. Return on average total assets (ROAA) equals net income of the period divided by monthly average total assets for the same period. Pre-provision ROAE excludes all provision charges. Annualised where applicable.
3. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
4. Cost of risk equals provision for loan impairment divided by monthly average gross loans and advances to customers. Annualized where applicable.
5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets. Annualised where applicable.
6. Risk Adjusted Net interest margin is NIM minus Cost of Risk without one -offs and currency effect
7. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers. Annualised where applicable.
8. Risk Adjusted Loan yield is Loan yield minus Cost of Risk without one-offs and currency effect
9. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits. Annualised where applicable.
10. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets. Annualized where applicable.
11. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities. Annualised where applicable.
12. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).
13. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.
14. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.
15. NPLs coverage ratio equals total loan loss provision divided by the NPL loans.
16. NPLs coverage with collateral ratio equals loan loss provision plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
17. Provision level to gross loans equals loan loss provision divided by the gross loan portfolio for the same period.
18. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
19. Top 10 borrowers to total portfolio equals total loan amount of top 10 borrowers divided by the gross loan portfolio.
20. Top 20 borrowers to total portfolio equals total loan amount of top 20 borrowers divided by the gross loan portfolio.
21. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
22. Net stable funding ratio equals available amount of stable funding divided by required amount of stable funding as defined in Basel III.
23. Liquidity coverage ratio equals high-quality liquid assets divided by total net cash outflow amount as defined in Basel III (calculated according to NBG standards).
24. Leverage equals total assets to total equity.
25. Hypothetical ratios - hypothetical ratio based on the Basel III guidelines except for calculation of credit equivalent amounts for interest rate and foreign exchange related contracts, which are calculated based on original exposure method being in line with NBG Pillar 1 requirements. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.
27. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the pillar 1 requirements of NBG Basel II/III standards. The reporting started from the end of 2012. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the Balance Sheet items' QoQ growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.6468 as of 31 December 2016. For calculations of YoY growth without currency exchange rate effect, we used USD/GEL exchange rate of 2.3679 as of 31 March 2016. The USD/GEL exchange rate as of 31 March2017 equaled 2.4452. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2016 of 2.4351, FY, 1Q 2017 of 2.6029, 4Q 2016 of 2.4958.
Additional Disclosures
Earnings per Share
In GEL 1Q 2017 Earnings per share for profit attributable to the owners of the Group: 1.80 -------------------------------------------- -------- - Basic earnings per share - Diluted earnings per share 1.75 -------------------------------------------- --------
Source: IFRS Consolidated
Sensitivity Scenario
10% Currency
Sensitivity Scenario 31-Mar-17 Devaluation Effect
----------------------------- ---------- --------------------
NIM* -0.1%
Technical Cost of Risk +0.2%
----------------------------- ---------- --------------------
Regulatory Total Capital 1,473 1,501
Regulatory Capital adequacy 0.73% - .79%
ratios tier 1 and total
capital decrease by
----------------------------- ---------- --------------------
(*) Linear depreciation is assumed for NIM sensitivity analysis
Source: IFRS statements and Management Figures
FC details for Selected P/L Items
Selected P&L Items 1Q 2017 FC % of Respective Totals ---------------------------- -------------------------- Interest Income 48% Interest Expense 59% Fee and Commission Income 36% Fee and Commission Expense 58% Administrative Expenses 24% ---------------------------- --------------------------
Source: IFRS statements and Management figures
GEL Refinance Rate and Libor Linked B/S Items 31 March 2017
GEL Refinance GEL -310 GEL 544
Rate Gap m Libor Gap m
---------------------------- ---------------- ---------------------- ----------------
GEL % share GEL % share
m in m in
totals totals
---------------------------- ------ -------- ---------------------- ------ --------
Assets 1,292 13% Assets 1,700 16%
---------------------------- ------ -------- ---------------------- ------ --------
Securities with
fixed yield(<=1y)* 362 45% Nostro** 234 56%
---------------------- ------ --------
Securities with
floating yield 150 19% NBG Reserves** 904 92%
---------------------- ------ --------
Loans with Floating
yield 688 10% Libor Loans 517 7%
---------------------- ------ --------
Interest
Reserves in NBG 72 7% Rate Options 43
---------------------------- ------ -------- ---------------------- ------ --------
Interbank loans&
Deposits & Repo 19 5%
---------------------------- ------ -------- ---------------------- ------ --------
Liabilities 1,602 18% Liabilities 1,155 13%
---------------------------- ------ -------- ---------------------- ------ --------
Current accounts*** 682 11% Senior Loans 848 46%
---------------------------- ------ --------
Subordinated
Saving accounts*** 150 3% Loans 307 89%
---------------------------- ------ --------
Refinancing Loan
of NBG 540 29%
---------------------------- ------ --------
Interbank Loans
&Deposits & Repo 79 26%
---------------------------- ------ --------
IFI Borrowings 152 8%
---------------------------- ------ -------- ---------------------- ------ --------
(*) 61% of the less than 1 year securities are maturing in 6 months
(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. From March, 2016 according to NBG regulation is it possible to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.
(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification)
Source: IFRS Group Data
Yields and
Rates
Yields and 1Q'17 1Q'17 4Q'16 4Q'16 3Q'16 2Q'16 1Q'16
Rates w/o w/o
BR BR
----------------------- ---------- ---------- ------ ---------- ------ ------ ------
Loan yields 11.9%[15] 11.9% 13.8% 13.8%[16] 13.5% 13.3% 13.6%
Retail loan
yields GEL 20.4% 20.0% 22.9% 23.3% 22.8% 22.7% 22.5%
Retail loan
yields FX 8.9% 9.1% 9.8% 10.0% 9.9% 10.3% 11.1%
Retail Loan
Yields 14.2% 13.9%[17] 15.8% 15.8% 16.0% 16.3% 16.5%
Corporate loan
yields GEL 10.0% 10.0% 10.0% 9.6% 12.4% 13.7% 13.2%
Corporate loan
yields FX 8.9% 8.8% 12.9% 12.5% 10.6% 8.8% 9.3%
Corporate Loan
Yields 9.1% 9.1% 12.2% 11.8%[18] 11.0% 9.7% 10.1%
MSME loan yields
GEL 13.2% 13.3% 14.0% 14.3% 14.2% 14.8% 15.1%
MSME loan yields
FX 10.1% 10.1% 10.8% 11.0% 10.6% 10.8% 11.6%
MSME Loan Yields 11.0% 11.0% 11.7% 11.9% 11.7% 11.9% 12.5%
Deposit rates 3.3% 3.4% 3.1% 3.3% 3.3% 3.4% 3.6%
Retail deposit
rates GEL 4.1% 3.9% 3.7% 3.7% 4.0% 4.1% 3.8%
Retail deposit
rates FX 3.3% 3.2% 3.4% 3.4% 3.5% 3.6% 3.9%
Retail Deposit
Yields 3.4% 3.3% 3.4% 3.4% 3.6% 3.7% 3.9%
Corporate deposit
rates GEL 8.5% 8.7% 6.7% 7.5% 7.3% 7.5% 6.7%
Corporate deposit
rates FX 1.5% 1.7% 1.5% 2.0% 1.5% 1.3% 1.7%
Corporate Deposit
Yields 4.4% 4.9% 3.7% 4.4% 4.2% 4.0% 4.1%
MSME deposit
rates GEL 2.0% 2.0% 1.7% 1.7% 2.1% 2.5% 2.4%
MSME deposit
rates FX 0.5% 0.5% 0.6% 0.6% 0.4% 0.4% 0.7%
MSME Deposit
Yields 1.1% 1.1% 1.0% 1.1% 1.1% 1.2% 1.3%
Yields on Securities 8.0% 8.1% 8.0% 8.1% 8.3% 9.1% 9.4%
----------------------- ---------- ---------- ------ ---------- ------ ------ ------
Source: IFRS Consolidated
Risk Adjusted Yields
Risk-adjusted 1Q'17 1Q'17 4Q'16 4Q'16 3Q'16 2Q'16 1Q'16
Yields w/o w/o
BR BR
------------------- ------ ---------- ------ ---------- ------ ------ ------
Loan yields 10.8% 10.5%[19] 12.4% 12.6%[20] 12.2% 12.1% 12.2%
Retail Loan
Yields 11.0% 10.6%[21] 13.3% 13.0% 13.3% 13.5% 13.4%
Corporate Loan
Yields 11.5% 11.1% 13.3% 14.4%[22] 12.5% 11.1% 12.2%
MSME Loan Yields 9.5% 9.4% 9.6% 9.6% 9.9% 10.7% 10.2%
------------------- ------ ---------- ------ ---------- ------ ------ ------
Source: IFRS Consolidated
Cost of Risk by Segments
Cost of 1Q'17 1Q'17 4Q'16 3Q'16 2Q'16 1Q'16
Risk w/o BR
----------- -------- ------ ------ ------ ------ ------
Retail 2.8% 2.9% 3.5% 2.6% 2.8% 3.1%
Corporate -3.3% -2.9% -6.4% -1.6% -1.7% -2.3%
MSME 0.9% 1.1% 3.3% 1.6% 1.2% 2.0%
Total 0.5% 0.9% 0.6% 1.1% 1.1% 1.2%
--------
Source: IFRS Consolidated
Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
------------------------- ------- ------- ------- ------------ -------
SDL Loans as % of Gross
Loans 4.1% 4.3% 5.1% 6.9% 7.2%
------------------------- ------- ------- ------- ------------ -------
Source: NBG
Cross Sell Ratio[23] and Number Active Products
Mar-17 Dec-16 Sep-16 Aug-16
--------------------------- ------- ------- ------- -------
Cross Sell Ratio 3.57 3.68 3.55 3.45
Number of Active Products
(in millions) 3.16 3.14 2.83 2.74
--------------------------- ------- ------- ------- -------
Source: Management figures
Diversified Deposit Base
Status: monthly income >=2,000 GEL or loans/deposits >=20,000 GEL
VIP: deposit >=100,000 USD as well as on discretionary basis; WM: >=10,000 USD as well as on discretionary basis
Wealth Management includes UHNW and HNW non-resident clients
31 March 2017 Volume of Deposits Number of Deposits ------------------- ------------------- ------------------- MASS 35% 94.7% STATUS 25% 4.7% VIP 25% 0.4% Wealth Management 14% 0.2% ------------------- ------------------- -------------------
Source: Management figures
Loan Concentration
Mar-17 Dec-16 Sep-16 Jun-16 Mar-15
------------------ ------- ------- ------- ------- -------
Top 20 Borrowers
as % of total
portfolio 12.2% 11.3% 13.4% 14.4% 14.6%
Top 10 Borrowers
as % of total
portfolio 8.3% 7.6% 8.6% 9.0% 9.2%
Related Party
Loans as % of
total portfolio 0.1% 0.1% 0.1% 0.1% 0.2%
------------------ ------- ------- ------- ------- -------
Source: IFRS consolidated
Sales Breakdown (for products offered through Multichannel)
Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15
------------------ ------- ------- ------- ------- ------- ------- -------
Digital Channels 24% 26% 24% 23% 27% 21% 25%
------------------ ------- ------- ------- ------- ------- ------- -------
Call Center 28% 29% 33% 32% 23% 28% 15%
------------------ ------- ------- ------- ------- ------- ------- -------
Branches 49% 45% 43% 46% 50% 51% 60%
------------------ ------- ------- ------- ------- ------- ------- -------
Source: Management figures
Number of Transactions in Digital Channels ('000)
1Q17 4Q-16 3Q-16 2Q-16 1Q-16
------------------------- ------ ------ ------ ------ ------
Internet Banking
Number of Transactions 2,098 2,280 1,828 1,797 1,669
------------------------- ------ ------ ------ ------ ------
Mobile Banking
Number of Transactions 2,622 2,532 1,814 1,485 1,151
------------------------- ------ ------ ------ ------ ------
Source: Management figures
Penetration Ratios of Digital Channels
Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15
-------------------- ------- ------- ------- ------- ------- ------- -------
IB&MB Penetration
Ratio 34% 37% 34% 34% 32% 32% 26%
-------------------- ------- ------- ------- ------- ------- ------- -------
Internet Banking
Penetration Ratio 27% 32% 29% 30% 28% 30% 24%
-------------------- ------- ------- ------- ------- ------- ------- -------
Mobile Banking
Penetration Ratio 25% 24% 20% 19% 17% 15% 12%
-------------------- ------- ------- ------- ------- ------- ------- -------
Source: Management figures
Mid-term targets for digital channels is to increase the penetration ratio of internet or mobile banking users to above 45% from the current level of 37% and to increase mobile banking penetration ratio to above 35% from the current level of 24%
Net outflow of borrowed funds
Subordinated and Senior Loans' Principal Amount Outflow by Year (GEL million) -------------------------------------------------------------------------- 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 ------ ------ ------ ------ ------ ----- ----- ----- ----- ------ 269.5 416.1 210.4 213.3 209.6 77.1 50.6 15.1 63.3 145.6 ------ ------ ------ ------ ------ ----- ----- ----- ----- ------
Source: Management figures, Revolving non IFI loans from NBG are excluded
NPL Build
Up
NPLs NPLs in Real Growth FX Effect Write-Offs Repossessed NPLs in
millions Millions
as of as of
Dec-16 Mar-17
----------- ---------- ------------ ---------- ----------- ------------ ----------
Retail 91 24 -4 -19 -2 91
Corporate 98 9[24] -6 -23 -1 78
MSME 65 17 -5 -5 -2 71
Total 255 50 -15 -46 -4 240
------------ ---------- ------------ ---------- ----------- ------------ ----------
Source: IFRS Consolidated
Net Write-Offs, 1Q 2017 In GEL Write-Offs Recoveries Net Write-Offs millions -------------------- ---------------- ----------- --------------- Retail 19 5 14 Corporate 23 1 22 MSME 5 2 3 Total 46 8 39 --------------------- ---------------- ----------- --------------- Source: IFRS Consolidated Portfolio Breakdown by Collateral Types as of 31-Mar-17 Cash Cover 1% --------------------------------------- ----------- Gold 4% --------------------------------------- ----------- Inventory 5% --------------------------------------- ----------- Real Estate 66% --------------------------------------- ----------- Third Party Guarantees 7% --------------------------------------- ----------- Other 1% --------------------------------------- ----------- Unsecured 15% --------------------------------------- -----------
Source: IFRS Consolidated
Loan to Value by Segments as of 31-Mar-17
Retail Corporate MSME Total
------------------------------------------ ------------ ------------------- --------
37% 34% 33% 35%
Source: IFRS Consolidated
TBC Gross Loan Portfolio Breakdown
as of 31-Dec-16
Old Segmentation New Segmentation
---------------------------------------------------------- -----------------------------
Corporate 28.0% Corporate 28.0%
-------------------------------------------- ------------ ------------------- --------
Retail 51.1% Retail 50.0%
-------------------------------------------- ------------ ------------------- --------
SME 11.7% MSME 22.0%
-------------------------------------------- ------------ ------------------- --------
Micro 9.2%
-------------------------------------------- ------------ ----------------- ------
Source: IFRS Consolidated
TBC Deposit Portfolio Breakdown as of 31-Dec-16
---------------------------------------------------------
Old Segmentation New Segmentation
----------------------------- --------------------------
Corporate 27.8% Corporate 29.1%
------------------ --------- --------------- ---------
Retail 56.8% Retail 58.1%
------------------ --------- --------------- ---------
SME 13.8% MSME 12.9%
------------------ --------- --------------- ---------
Micro 1.6%
------------------ --------- --------------- ---------
Source: IFRS Consolidated
Loan Movement from Old to New Segmentation as of 31-Dec-16
IN GEL thousands Retail Corporate MSME Corporate 2,060,171 2,058 - - 2,062,229 Corporate ------------------ ---------- --------- ---------- --------- ---------- ------------- Retail 3,763,254 189,104 - -271,784 3,680,575 Retail ------------------ ---------- --------- ---------- --------- ---------- ------------- Consumer 1,663,550 175,345 - - 1,838,895 Consumer ------------------ ---------- --------- ---------- --------- ---------- ------------- Mortgage 1,811,695 -3,262 - - 1,808,433 Mortgage ------------------ ---------- --------- ---------- --------- ---------- ------------- Pawn shop Pawn shop Retail 288,010 17,021 - -271,784 33,247 Retail ------------------ ---------- --------- ---------- --------- ---------- ------------- SME 857,552 5,969 - - 863,521 SME (MSME) ------------------ ---------- --------- ---------- --------- ---------- ------------- Pawn shop Pawn shop Micro 17,021 -17,021 - 271,784 271,784 MSME ------------------ ---------- --------- ---------- --------- ---------- ------------- Micro 660,725 -180,110 - - 480,615 Micro (MSME) ------------------ ---------- --------- ---------- --------- ---------- -------------
Source: IFRS Consolidated
IFRS 9 update
The Bank is in the process of implementation IFRS 9 standard, which will come into effect starting from 1(st) January 2018.
Relevant Change Areas for the Bank
-- Key areas of IFRS 9 are classification and measurement, impairment and hedge accounting
-- Based on the Bank's Business model no significant changes are expected from classification and measurement and hedge accounting
-- Key changes comes from impairment part, where the standard moved from incurred credit loss to expected credit loss model
IFRS 9 Project
-- The Bank started IFRS 9 implementation project in June 2016
-- The project is undertaken with support from Deloitte
-- In parallel to methodology and model development, the Bank is in the process of respective software implementation
High Level Expected Impact
-- During the project gap analysis phase, high level impact assessment was performed, applying simplified approaches e.g. for macro factors incorporation
-- Based on the impact assessment results provision level for the portfolio is expected to increase in the range of 0.2-0.5% of the loan book (6-18% of provision level). However the final impact may be different, considering the finalized models and methodologies of the Bank and macro outlook
-- The expected impact is in the lower range of market expectations, due to the fact the under IAS 39 provisioning methodology the Bank already applies conservative approach
-- Based on EBA's report from Nov 2016, which covers sample of 50 financial institutions in Europe, estimated increase of provisions compared to the current levels of provisions under IAS 39 is on average 18% with upper limit being 30% for 86% (75th percentile) of respondents. The assessment is done on a high level applying simplified approaches, with one macro scenario being one of the simplifications
-- No impact is expected on capital adequacy ratios, which are calculated based on local standards, and Profit and loss statement as the amount will directly affect equity.
NBG Loan Larization Program
The NBG Larization program consist of two parts:
-- One-time conversion program: on 11 January 2017, in order to ease the increased debt service burden caused by the exchange rate fluctuation, the government of Georgia approved a subsidized, one-time program on the voluntary conversion of US dollar-denominated bank loans of individuals into lari loans. The program started on 17 January and lasted for two months. As a result Loans of up to 80 million USD were converted in GEL through the Larization Program
-- Issuing small loans in local currency only: based on an amendment to the civil code, starting from 15 January 2017, individuals will only be able to borrow amounts up to 100,000 GEL in the national currency
Loans of up to 80 million USD were converted in GEL through the Larization Program:
In millions of % Absolute Amount GEL --------------------- ------ ---------------- TBC + Bank Republic 55.1% 44.1 BOG 33.1% 26.5 VTB 6.1% 4.9 Other 5.7% 4.6
Around 5'600 loans were converted during this program:
In absolute % Number of amounts loans ------------- ------ ---------- TBC + Bank Republic 55.0% 3,080 BOG 29.6% 1,658 VTB 9.6% 5,38 Other 5.8% 325
Total amount of loans issued below GEL 100,000:
In GEL millions 1Q'2016 1Q'2017 % Change -------------------------- -------- -------- --------- TBC Bank 179 372 107.8% Bank Republic 62 142 129.0% Share in retail portfolio with Bank Republic 8.1% 14.2% 75.3% Share in total Portfolio with Bank Republic 4.2% 7.2% 71.4%
Other Selected Data of TBC Bank and Bank Republic
NPLs: Total Portfolio as of 31-Mar-17
Bank Book Value Total Retail Corporate MSME
Republic
NPLs
----------- ---------------- ------ ------- ---------- -----
Provision
Coverage 121% 167% 97% 103%
Collateral
Coverage 92% 57% 93% 179%
Total Coverage 214% 224% 190% 282%
NPL 2.6% 1.3% 6.3% 2.8%
Cost of
Risk 1Q'17 1.0% 1.7% -1.3% 1.2%
Fair Value Total Retail Corporate MSME
Adjusted
---------------- ------ ------- ---------- -----
Provision
Coverage 105% 136% 54% 74%
Collateral
Coverage 197% 71% 518% 219%
Total Coverage 302% 207% 572% 293%
NPL 1.2% 1.0% 1.2% 2.3%
Cost of
Risk 1Q'17 2.7% 3.4% -0.1% 3.0%
TBC Total Retail Corporate MSME
Bank
NPLs
----------- ---------------- ------ ------- ---------- -----
Provision
Coverage 83% 120% 70% 53%
Collateral
Coverage 128% 88% 187% 111%
Total Coverage 211% 208% 257% 164%
NPL 3.9% 3.0% 4.6% 4.8%
Cost of
Risk 1Q'17 0.5% 2.8% -3.3% 0.9%
TBC Total Retail Corporate SME
+
BR
NPLs
----------- ---------------- ------ ------- ---------- -----
Provision
Coverage 85% 121% 69% 54%
Collateral
Coverage 133% 86% 202% 117%
Total Coverage 217% 208% 271% 171%
NPL 3.4% 2.5% 4.1% 4.5%
Cost of
Risk 1Q'17 0.9% 2.9% -2.9% 1.1%
---------------------------- ------ ------- ---------- -----
Source: IFRS figures
Gross Loan Segmentation as of 31-Mar-17
TBC Bank[25] Bank Republic[26] TBC + Republic
------------- ------------------ ---------------
Corporate 29% 21% 27%
Mortgage 21% 37% 24%
Consumer Lending 26% 30% 27%
MSME 24% 12% 22%
Total 5,711million 1,410 million 7,121 million
------------------ ------------- ------------------ ---------------
Source: IFRS figures
Customer Deposits Segmentation as of 31-Mar-17
TBC Bank[27] Bank Republic[28] TBC + Republic
-------------- ------------------ ---------------
Corporate 26% 49% 29%
Retail 61% 41% 58%
MSME 13% 10% 13%
Total 5,392 million 679 million 6,071 million
----------- -------------- ------------------ ---------------
Source: IFRS figure
Balance Sheet
In thousands of GEL 31-Mar-17 31-Dec-16
(standalone) (standalone)
audited
---------------------------------- -------------- --------------
Cash and cash equivalents 192,632 235,865
Mandatory cash balance with
the National Bank of Georgia 107,736 131,133
Due from other banks 48,621 9,937
Investment securities available
for sale 54 54
Loans and advances to customers
(Net) 1,515,205 1,574,395
Premises and Equipment 56,415 57,275
Intangible assets 4,392 4,855
Investment properties 29,250 28,558
Prepayments and accrued interest 835 1,358
Repossessed Assets 1,535 2,585
Other assets 8,474 10,191
Total assets 1,965,149 2,056,208
---------------------------------- -------------- --------------
Customer accounts 1,078,688 1,087,268
Provisions 2,442 1,489
Deferred income tax liabilities 3,137 3,812
Current income tax liabilities 2,858 2,099
Due to Credit Institutions 536,005 612,506
Other liabilities 4,550 26,093
Subordinated debt 16,236 17,029
Total liabilities 1,643,917 1,750,295
---------------------------------- -------------- --------------
Share capital 76,031 76,031
Share premium 39,914 39,914
Other reserves 21,717 21,902
Retained earnings 183,570 168,066
Total Equity 321,232 305,913
---------------------------------- -------------- --------------
Total equity and liabilities 1,965,149 2,056,208
---------------------------------- -------------- --------------
The Bank Republic Data
Income Statement
In thousands of GEL Q1 2017 Q4 2016
------------------------------------------ --------------------------- --------
Interest income 45,108 48,254
Interest expense -18,473 -16,435
Net interest income 26,635 31,819
------------------------------------------ --------------------------- --------
Fee and commission income 4,033 4,039
Fee and commission expense -2,113 -2,305
Net Fee and Commission Income 1,920 1,743
------------------------------------------ --------------------------- --------
Gains less losses from trading in
foreign currencies 4,082 5,543
Foreign exchange translation gains
less losses 64 3,213
Losses less gains / (gains less losses)
from disposal of investment securities
available for sale - 3,252
Other operating income 805 1,711
Other operating non-interest income 4,951 13,719
------------------------------------------ --------------------------- --------
Provision for loan impairment -3,836 -10,606
Provision for/ (recovery of provision)
performance guarantees and credit
related commitments -1,500 408
Provision for impairment of other
financial assets - -50
Operating income after provisions
for impairment 28,170 37,024
------------------------------------------ --------------------------- --------
Staff costs -6,028 -9,956
Depreciation and amortization -1,258 -319
Administrative and other operating
expenses -3,260 -8,678
Operating expenses -10,546 -18,954
------------------------------------------ --------------------------- --------
Profit before tax 17,624 18,070
------------------------------------------ --------------------------- --------
Income tax expense -2,120 2,547
Profit for the period 15,504 20,618
------------------------------------------ --------------------------- --------
Profit attributable to owners of
the bank 15,504 20,618
------------------------------------------ --------------------------- --------
Key Ratios
Ratios (based on quarterly 1Q'17 4Q '16
averages, where applicable)
------------------------------ -------- -------
ROAE 20.1% 27.1%
ROAA 3.1% 4.3%
Pre-provision ROAE 27.0% 40.5%
Pre-provision ROAA 4.2% 6.4%
Cost: Income 31.5% 40.1%
Cost of Risk 1.0% 3.2%
NIM 6.8% 8.4%
Loan yields 11.6% 13.1%
Deposit rates 4.3% 4.0%
Yields on interest earning
assets 11.5% 12.7%
Cost of Funding 2.2% 4.1%
Leverage 6.1x 6.7x Spread 9.3% 8.6% PAR 90 to gross loans 2.3% 2.9% NPLs to gross loans 2.6% 3.1% NPLs coverage 121.3% 112.0% NPL coverage with collateral 213.5% 207.4% Provision Level to Gross Loans 3.1% 3.4% Regulatory Tier 1 CAR 11.8% 10.4% Regulatory Total CAR 13.7% 12.2% ------------------------------ -------- ------- Strong Financial Performance Key Ratios 1Q'17 4Q'16 1Q'16[29] ------------ ------------- ------------- ------------- ROE 20.1% 27.1% 22.9% Net Profit 15.5 million 20.6 million 14.4 million Accelerated growth and increased market shares Portfolios 1Q'17 4Q'16 1Q'16[30] ------------------- ----------- ------- ----------- Retail Segment 947 986 887 Business Segment 484 491 345 Total 1430 1477 1231 Market Share 7.6%[31] 7.8% 7.4%
Synergy Potential and one-off integration costs
The one-off integration costs have amounted to GEL 22.9 million, less than the expected GEL 23.3 million. The bank has upgraded annualised cost synergies guidance from GEL 20.5 million to GEL 24.0 million.
Stable employee turnover after the acquisition
Following the acquisition of the Bank Republic front office employee turnover was low at c.3%.
Bank Republic Loan portfolio increased by 15.3% since acquisition[32]
QoQ decline in loans is mainly attributable to seasonal factors and at constant currency rate gross loans portfolio remains broadly stable
Accelerated growth in customer acquisition
Following the acquisition, total number of customers increased by 11% across all segments and reached around 380,000.
[1] Market share figures are based on data from the National Bank of Georgia (NBG)
[2] Excluding market share of Credo Bank, which registered as a bank in 1Q 2017
[3] Number of transactions conducted in remote channels divided by total number of transactions, based on JSC TBC Bank standalone data
[4] Region in this context comprises Georgia, Azerbaijan and Armenia
[5] Number of active products divided by number of active customers
[6] Core inflation excludes energy, food and administered prices
[7] Estimated number for Nominal GDP
[8] Measured as sum of government spending on salaries and goods and services
[9] Based on internal estimates
[10] Pure exports account for 7.0% of total Corporate USD denominated loans
[11] Pure exports account for 10.1% of total Corporate USD denominated loans
[12] Based on new legislation loans up to GEL100k should be disbursed in GEL, therefore wholesale pawn shop loans are not considered FX income linked
[13] The National Bank of Georgia enforced Basel II/III regulation in June 2014.
[14] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016
[15] 12.1% without change in the accounting rule
[16] 13.2% without one-offs
[17] 14.2% without change in the accounting rule
[18] 9.6% without one-offs
[19] 10.6% without change in accounting rule
[20] 12.0% without one-offs
[21] 10.9% without change in accounting rule
[22] 12.2% without one-offs
[23] Cross-sell ratio is defined as number of active products divided by the number of active customers
[24] Real growth comprises of new client additions in the amount of GEL 25 million less repayments of existing clients in the amount of GEL 16 million.
[25] TBC Bank Group PLC figures without Bank Republic effect
[26] Bank Republic after fair value adjustments
[27] TBC Bank Group P:C figures without Bank Republic effect
[28] Bank Republic after fair value adjustments
[29] Based on management accounts
[30] Per old segmentation
[31] 7.8% excluding market share of Credo Bank, which registered as a bank in 1Q 2017
[32] Bank Republic deposit portfolio is not relevant as new corporate deposits are transferred to TBC Bank branches
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRFKMGMKNLKGNZM
(END) Dow Jones Newswires
May 22, 2017 02:00 ET (06:00 GMT)
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