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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 45.00 | 1.49% | 3,065.00 | 3,055.00 | 3,075.00 | 3,070.00 | 2,950.00 | 2,950.00 | 124,926 | 16:35:01 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMTBCG
RNS Number : 7421Y
TBC Bank Group PLC
13 May 2019
TBC BANK GROUP PLC ("TBC Bank")
1Q 2019 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
Forward-Looking Statements
This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause the actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
First Quarter 2019 Unaudited Consolidated Financial Results
TBC Bank Group PLC ("TBC PLC") will release its first quarter 2019 unaudited consolidated financial results on Monday, 13 May 2019 at 7.00 am BST (10.00 am GET).
On the same day at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT), Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Please dial-in approximately five minutes before the start of the call quoting the password "TBC":
Password: TBC UK Toll Free: 0808 109 0700 Standard International Access: +44 (0) 20 3003 2666 USA Toll Free: 1 866 966 5335 New York New York: +1 212 999 6659 Russia Toll Free: 8 10 8002 4902044 Moscow: +7 (8) 495 249 9843 Replay Numbers Replay Passcode: 9490274 UK Toll Free: 0800 633 8453 Standard International Access: +44 (0) 20 8196 1998 USA Toll Free: 1 866 583 1035 Russia Toll Free: 8 10 8002 4832044 Moscow: +7 (8) 495 249 9840
Contacts
Hot Features
Premium
Zoltan Szalai Anna Romelashvili Investor Relations Department
Director of International Head of Investor Relations
Media and Investor Relations
E-mail: ZSzalai@Tbcbank.com.ge E-mail: IR@tbcbank.com.ge E-mail: IR@tbcbank.com.ge
Tel: +44 (0) 7908 242128 Tel: +(995 32) 227 27 Tel: +(995 32) 227 27
Web: www.tbcbankgroup.com 27 27
Address: 68 Lombard Web: www.tbcbankgroup.com Web: www.tbcbankgroup.com
St, London EC3V 9LJ, Address: 7 Marjanishvili Address: 7 Marjanishvili
United Kingdom St. Tbilisi, Georgia St. Tbilisi, Georgia
0102 0102
Table of Contents
1Q 2019 Results Announcement
TBC Bank - Background
Financial Highlights
Recent Developments
Development of Customer Focused Ecosystems
Letter from the Chief Executive Officer
Economic Overview
Unaudited Consolidated Financial Results Overview for 1Q 2019
Additional Disclosures
TBC BANK Group PLC ("TBC Bank")
1Q 2019 Consolidated Financial Results:
Net Profit for 1Q 2019 up by 36.7% YoY to GEL 133.3 million
European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation.
TBC Bank - Background
TBC Bank is the largest banking group in Georgia, where 99.8% of its business is concentrated, with a 37.4% market share by total assets. It offers retail, corporate, and MSME banking nationwide.
These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS"), as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing segment on 10 August 2016.
TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS.
Financial Highlights
1Q 2019 P&L Highlights
-- Net profit amounted to GEL 133.3 million (1Q 2018: GEL 97.5 million; 4Q 2018: GEL 130.1 million)
-- Return on equity (ROE) amounted to 23.8% (1Q 2018 : 21.0%; 4Q 2018: 24.3%)
-- Return on assets (ROA) amounted to 3.6 % (1Q 2018: 3.2%; 4Q 2018: 3.5%)
-- Total operating income amounted to GEL 271.9 million (1Q 2018: GEL 238.7 million; 4Q 2018: GEL 312.3 million)
-- Cost to income was 37.7% (1Q 2018: 38.1%; 4Q 2018: 39.7%)
-- Cost of risk stood at 1.4% (1Q 2018: 1.3%; 4Q 2018: 1.4%)
-- FX adjusted cost of risk stood at 1.4% (1Q 2018: 1.7%; 4Q 2018: 1.3%)
-- Net interest margin (NIM) stood at 6.1% (1Q 2018: 6.9%; 4Q 2018: 6.7%)
-- Risk adjusted net interest margin (NIM) stood at 4.7% (1Q 2018: 5.2%; 4Q 2018: 5.4%)
Balance Sheet Highlights as of 31 March 2019
-- Total assets amounted to GEL 15,172.3 million as of 31 March 2019, up by 22.3% YoY and down by 2.1% QoQ
-- Gross loans and advances to customers stood at GEL 10,366.9 million as of 31 March 2019, up by 22.9% YoY and down by 0.1% QoQ
-- Net loans to deposits + IFI funding stood at 90.5% and Net Stable Funding Ratio (NSFR) stood at 123.8%[1]
-- NPLs were 3.3%, up by 0.2 pp YoY and QoQ
-- NPLs coverage ratios stood at 100.1%, or 210.8% with collateral, on 31 March 2019 compared, to 114.6% or 225.8% with collateral, as of 31 March 2018 and 102.7%, or 216.4% with collateral on 31 December 2018
-- Total customer deposits amounted to GEL 9,166.8 million as of 31 March 2019, up by 20.4% YoY and down by 2.0% QoQ
-- As of 31 March 2019, the Bank's Basel III tier 1 and total capital adequacy ratios per NBG methodology stood at 13.8% and 19.1% respectively, while minimum requirements amounted to 11.9% and 16.9%
Market Shares[2]
-- Market share by total assets reached 37.4% as of 31 March 2019, up by 2.1pp YoY and down by 0.8pp QoQ
-- Market share by total loans was 38.4% as of 31 March 2019, up by 0.6pp YoY and down by 0.4pp QoQ
-- In terms of individual loans, TBC Bank had a market share of 39.3% as of 31 March 2019, down by 0.3pp YoY and by 0.7pp QoQ. The market share for legal entity loans was 37.4%, up by 1.8pp YoY and stable on QoQ basis
-- Market share of total deposits reached 40.4% as of 31 March 2019, up by 1.5pp YoY and down by 0.8pp QoQ
-- Market share of individual deposits stood at to 39.5%, down by 1.1pp YoY and by 1.7pp on QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 41.4%, up by 4.4pp YoY and up by 0.2pp QoQ.
Recent Developments
Payme - Expansion in Uzbekistan
TBC Bank has acquired 51% stake of LLC Inspired, a leading payment platform in Uzbekistan trading under the Payme brand.
Payme is a leading profitable payment service provider in Uzbekistan supplying high-quality payment solutions to its 1.3 million customers, including a marketplace platform for loans from certain Uzbek banks.
The company has grown rapidly in recent years, increasing its number of clients by around 70% during 2018, while its revenue and net income grew by 41.9% and 24.5% respectively year-on-year. The steady growth also continued in the first quarter 2019 with revenue and net profit growing by 21.9% and 73.0% quarter-on-quarter respectively.
The acquisition of Payme is another important step in our planned expansion into Uzbekistan. It will enable us to gain immediate access to a large customer base in the country and use our core digital strengths in Georgia to innovate the Uzbekistani market. With Payme joining our effort, we intend to further develop the payment business and also use it as a platform to develop new ecosystems in the country.
Awards
-- The Best Bank in Georgia 2019 - For the eighth consecutive year, TBC Bank has been awarded the Best Bank in Georgia 2019 by the prestigious Global Finance magazine, underlining our ongoing commitment to offering the very best banking services to our customers.
-- Special Award for Responsible Capitalism in Adversity - TBC Bank's CEO Vakhtang Butskhrikidze has won the Special Award for Responsible Capitalism in Adversity from the prestigious FIRST organisation - a multidisciplinary international affairs organization, which aims to enhance dialogue between leaders in industry, finance and government.
-- FMO - In October 2018, TBC Bank signed a loan agreement in the amount of GEL 103 million with FMO, the Dutch Development Bank. The local currency funding was obtained by FMO through a public placement of bonds on the Georgian Stock Exchange. This transaction was selected by EMEA Finance as the Best Local Currency Loan of 2018.
Development of Customer Focused Ecosystems
In order to integrate better with our customers, we started to develop customer focused ecosystems, which are closely linked with our financial products and services and enable us to create synergies with our core banking offerings.
E-commerce
-- In August 2018 we purchased Swoop, Georgia's well-known online discount and sales company for USD 70,000.
-- We have started developing an e-commerce market place in Georgia through building an innovative digital trading platform, Vendoo.
-- Our estimated investment for the next two years will be around USD 2-3 million.
Progress since acquisition:
-- Assembled a team of experienced professionals in digital business.
-- Designed a brand new cloud technology platform based on open source.
-- Beta version of the platform is already launched with electronics and personal care products on the following web-page: www.vendoo.ge. The launch of the full version is scheduled in May.
Real Estate
-- In January 2019, we acquired 90% shares of the real estate platform Allproperty.ge for USD 225,000.
-- Started developing digital real estate ecosystem, that will offer our customers a wide range of products and services, including finding the suitable real estate, comparing different properties, getting financing, buying furniture, and many more.
-- Our estimated investment for the next two years is set at around USD 2 million.
Progress since acquisition:
-- Strengthened the management team.
-- Designed target agile operating model.
-- Started rebranding through new brand name Livo and developing new platform www.livo.ge.
-- Data mining and lead generation practices have been implemented.
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 the Financial Highlights section.
Letter from the Chief Executive Officer
I am pleased to present the financial results for the first quarter 2019 and update you on our operating performance as well as provide an overview of the recent macroeconomic developments in Georgia.
Our consolidated net profit for the first quarter of 2019 reached GEL 133.3 million, up by 36.7% year-on-year, while our return on equity was 23.8% and our return on assets stood at 3.6%. Our robust profitability was supported by strong growth in net fee and commission income of 19.7% and other operating income of 16.9% year-on-year, as well as positive operating jaws leading to the reduction of the cost to income ratio by 0.4 percentage points to 37.7%. Over the same period, cost of risk remained at 1.4%.
As anticipated, our net interest margin decreased in the first quarter of 2019 mainly due to the new regulation limiting the banks' ability to lend money to higher-yield retail customers. The requirement came into force at the beginning of the year leading to the contraction in net interest margin by 0.5 percentage points. A further decrease of 0.1 percentage points was related to our higher than usual liquidity levels resulting in a net interest margin of 6.1% in the reporting period. Over the same period, our effective interest rate on loans decreased by 0.7 percentage points quarter-on-quarter and stood at 11.5% in first quarter 2019 driven by new regulation as well as decrease in NBG refinance rate.
In terms of balance sheet, our loan book expanded by 22.9% year-on-year, supported by growth across all business segments, which resulted in a market share of 38.4%, up by 0.6 percentage points year-on-year. Over the same period, deposits increased by 20.4%, expanding our deposit market share to 40.4%, up by 1.5 percentage points year-on-year.
We continue to operate with solid capital and liquidity levels. As of 31 March 2019, our tier 1 and total capital adequacy ratios (CAR) per Basel III guidelines were 13.8% and 19.1%, respectively, compared to 12.8% and 17.9% as of year-end and well above the corresponding minimum requirements of 11.9% and 16.9%. The increase in capital ratios were mainly related to the net profit generated in the quarter and the optimization of the credit risk weighted assets, as well as decrease in the market risk. As of 31 March 2019, our net loans to deposits + IFI funding ratio stood at 90.5% and the net stable funding ratio (NSFR) was 123.8%[3].
I am also pleased with the results of our insurance subsidiary, TBC Insurance, which continues to generate strong growth and strengthen its position as a leading player in the market. In the first quarter of 2019, its P&C and life insurance market share increased by 3.3 percentage points year-on-year and stood at 22.8%[4], while over the same period its market share in the retail segment amounted to 39.8%([4]) .
Regarding Georgia's macro environment, in the first quarter 2019 real GDP growth averaged 4.7% year-on-year, per initial estimates of GeoStat. Over the same period, the growth of exports, tourism and remittance inflows moderated and stood at 9.1% year-on-year. This reflects a slower growth in Georgia's trading partners and continued economic difficulties in Turkey. The total banking loan portfolio growth continues to moderate, primarily reflecting the regulations on retail lending, and, as of 31 March 2019, it had increased by 14.0% year-on-year, excluding FX effect([5]) . From the segments perspective corporate, MSME and retail loans grew respectively by 12.9%, 21.8% and 11.2% year-on-year. It should be also noted, that in April 2019, the international rating company Standard&Poor's (S&P) improved Georgia's sovereign rating from stable to positive and confirmed the rating at "BB". The positive outlook primarily reflects the S&P's position that Georgia's economic and external performance has the potential to outperform its current forecast over the next 12 months. It also reflects the country's continued compliance with the conditions of the existing funded IMF arrangement.
Finally, I would like to update you on our progress towards our strategic priorities:
-- Digitalization. In the first quarter of 2019, our offloading ratio in the retail segment reached 91.9%[6], up by 2.9 percentage points year-on-year, while sales conducted through digital channels amounted to 44.7%. Furthermore, our mobile banking penetration increased by 5.7 percentage points year-on-year and amounted to 36.7%, while the mobile or internet banking penetration ratio grew by 3.9 percentage pionts to reach 41.9%.
-- Agile transformation. We have also successfully completed the first wave of our agile transformation and established the new organisation structure for our back office operations, which we believe will lead to faster time-to-market, improved productivity and higher employee engagement.
-- Ecosystems. We continue to actively develop our e-commerce platform, Vendoo by deploying a brand new cloud technology based on open source. The launch of the marketplace is scheduled in May 2019 with electronics and personal care products. In relation to our real estate platform, we have designed a target agile operating model, implemented data mining and lead generation practices and started the rebranding process.
-- International expansion:
o Uzbekistan. In April 2019, we acquired a 51% stake in Payme, a leading payment platform in Uzbekistan, for a consideration of USD 5.5 million. Payme supplies high-quality payment solutions to its 1.3 million customers through facilitating utility payments, P2P transfers, loan repayments, mPOS for QR-based payments and e-commerce purchases. It also provides a marketplace platform for loans from selected Uzbek banks. Payme has grown rapidly in recent years, increasing the number of clients by around 70% during 2018, while during the same period its revenue and net profit grew by 41.9% and 24.5% respectively. The steady growth also continued in the first quarter 2019 with revenue and net profit growing by 21.9% and 73.0% quarter-on-quarter respectively. The acquisition of Payme is another important step in our planned expansion into Uzbekistan. It will enable us to gain immediate access to a large customer base in the country and use our core digital strengths in Georgia to innovate in the Uzbek market. With Payme joining our effort, we intend to further develop the payment business and also use it as a platform to develop new ecosystems in the country.
o Azerbaijan. I am proud to report that our joint efforts with Nikoil Bank's management continue to pay off. The bank has generated a net profit of USD 1.8 million in the first quarter 2019 on the back of improved income generation and cost efficiency.
Overall, I am delighted with our first quarter financial and operating results and I feel confident that we are well-positioned to achieve sustainable growth and to deliver high returns to our shareholders. Therefore, we would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 35%, dividend pay-out ratio of 25-35% and loan book growth of 10-15%.
Economic Overview[7]
Economic growth
Economic growth remained strong in 2018, despite the higher volatility in Georgia's economic partners and the contractionary fiscal stance domestically GDP increased by 4.7% the 4.8% of 2017. The growth was broad-based across almost all sectors, with trade and repairs (+5.9% YoY), transport and communications (+8.2% YoY), real estate (+12.1% YoY), and manufacturing (+3.4% YoY), as major drivers in 2018. Almost all other sectors posted growth rates. Construction declined by 3.1% YoY mostly due to the finalisation of the BP's SCPX project and underperformance in the public infrastructure spending, while the development of residential and non-residential buildings maintained solid growth. In 1Q 2019 real GDP growth averaged 4.7% YoY, per initial estimates of GeoStat.
Positive tendency of the CA balance improvement continued in 4Q 2018 as well with CA deficit to GDP ratio at 7.7% in 2018 compared to 8.8% in 2017. This is mostly due to the robust growth of tourism, exports and remittance inflows as well as the narrower income account deficit for 2018. FDI inflows, representing a major source of financing for the CA deficit, declined by 34.9% YoY and came in at still solid 7.9% of GDP in 2018 - this is a normalised level following the above trend inflows over 2014-17. The reduction mostly reflected the finalisation of the BP's SCPX project and the change of ownership of non-resident companies to residents as well as repayment of some FDI related debt.
Growth of exports, tourism and remittance inflows moderated and stood at 9.1% YoY in 1Q 2019, reflecting the normalisation of growth in Georgia's economic partners and continued economic difficulties in Turkey. Also, the effect of stronger USD should be considered as when measured in EUR and GEL, better reflecting the underlying value of assets in the country, growth of inflows stood at 18.1% and 17.2% YoY, respectively.
Imports of goods further declined by 4.7% YoY, due to the retail lending regulations, lower oil prices, high base effect in the previous year reflecting some one-off imports in 1Q 2018 and a stronger USD. As a result, balance of trade in goods improved by a solid 14.2% YoY.
The National Bank of Georgia continued to refill reserves and purchased sizeable USD 186 million - an estimated 7% of 1Q 2019 GDP. As of the end of March, the NBG's gross international reserves stood at USD 3.5 billion, up by 15.2% YoY. The estimated net international reserves exceeded the lower threshold for June 2019 as defined at USD 1.456 billion for June 2019 as defined in the agreement with the IMF by around USD 200 million.
Growth of bank loan portfolio continues to moderate, primarily reflecting regulations on retail lending. As of 1Q 2019 the total bank loan portfolio increased by 14.0% YoY, excluding the FX effect[8]. From a segment perspective, corporate, MSME and retail loans increased by 12.9%, 21.8% and 11.2% YoY, respectively. Excluding one-offs in corporate segment, total loan portfolio growth would have stood at an estimated 15.3% YoY with corporate segment up by 17.0%. Overall, even taking into account one-offs, slower growth of the loan portfolio is still evident driven by retail lending regulations on the one hand and normalizing growth rates in business credit following cyclical pick up in 2018 on the other. Bank loans-to-GDP ratio stood at 64.7% in 2018, up by 5.8 pp from end 2017, driven by the higher credit growth and the exchange rate weakening. When measured in constant currency terms, the bank loans-to-GDP ratio remains close to its long-term trend, indicating that there are no signs of excessive lending growth.
Following the contractionary stance in 2018, budget spending accelerated since the beginning of 2019. In Q1 2019 the total government spending went up by 15.5% YoY. The budget deficit stood at an estimated 0.2% of GDP, compared to surplus of 1.9% over the same period last year. Stronger fiscal spending, coupled with sizeable advance payments by the end of 2018, is expected to provide significant growth stimulus in the coming months.
Annual inflation stood at 3.7% as of March 2019, mostly driven by an higher excise tax on tobacco, increased prices on travel and a low base effect. Excluding the one-off impact of excise taxes, CPI inflation remained somewhat below the NBG's 3% target. Low inflation, relatively lower risks to inflation stemming from the external sector, and likely weak demand side pressures on prices, led the NBG to cut the policy rate twice, from 7% at the end of 2018 to 6.5%. During their latest meeting on the 1(st) of May monetary policy committee left the policy rate unchanged at 6.5%.
As of the end of March 2019, the USD/GEL exchange rate depreciated by 11.5% YoY, while the EUR/GEL exchange rate depreciated by a more modest 1.5% YoY. Over the same period, the GEL real effective exchange rate was almost unchanged, depreciating by only 0.1% YoY.
Resilience of Georgia's economy have been confirmed by the S&P as the agency improved the outlook to Georgia's credit rating from stable to positive. According to the rating commentary, demonstrated economic resilience amid turbulent region over 2014-18, efforts to widen the exports and foreign investment geography along with the continued investments in infrastructure, country's its strong institutional framework compared to region economies in the wider region, stable public debt levels and prudent policymaking all remain supportive to the country's credit rating.
Going forward
Georgia continues to position itself as an attractive business environment with structural reforms and high GDP growth potential. According to the IMF's recently published World Economic Outlook[9], Georgian economy is projected to increase at 4.6% in 2019 and 5.0% in 2020. Thereafter, over 2021-2024 the economy is expected to expand at 5.2%.
More information on the Georgian economy and financial sector can be found at www.tbcresearch.ge
Unaudited Consolidated Financial Results Overview for 1Q 2019
This statement provides a summary of the unaudited business and financial trends for 1Q 2019 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.
TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. Starting from 1 January 2019, TBC Bank adopted IFRS 16. Therefore, the comparative information for 2018 is not comparable to the information presented for 2019.
Please note, that there might be slight differences in previous periods' figures due to rounding.
Income Statement Highlights
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
in thousands of GEL 1Q'19 4Q'18 1Q'19 Change YoY Change QoQ
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Net interest income 196,958 214,803 175,403 12.3% -8.3%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Net fee and commission income 41,807 44,064 34,919 19.7% -5.1%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Other operating non-interest income 33,181 53,395 28,377 16.9% -37.9%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Credit loss allowance (33,095) (44,036) (39,463) -16.1% -24.8%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Operating income after credit loss
allowance 238,851 268,226 199,236 19.9% -11.0%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Operating expenses (102,514) (123,904) (90,932) 12.7% -17.3%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Profit before tax 136,337 144,322 108,304 25.9% -5.5%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Income tax expense (3,015) (14,235) (10,778) -72.0% -78.8%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Profit for the period 133,322 130,087 97,526 36.7% 2.5%
------------------------------------------ ---------------- ------------- --------------- ----------- -----------
Balance Sheet and Capital
Highlights
Mar-19 Dec-18 Change Mar-18 Change
QoQ YoY
In thousands GEL USD GEL USD GEL USD
of GEL
------------- ----------- ----------- ----------- ---------- ------- ----------- ----------- ------- Total Assets 15,172,306 5,637,329 15,497,993 5,790,179 -2.1% 12,401,047 5,136,285 22.3% Gross Loans 10,366,915 3,851,867 10,372,582 3,875,283 -0.1% 8,432,916 3,492,758 22.9% Customer Deposits 9,166,789 3,405,956 9,352,142 3,494,038 -2.0% 7,610,804 3,152,255 20.4% Total Equity 2,347,756 872,318 2,205,968 824,168 6.4% 1,930,404 799,538 21.6% Regulatory Tier I Capital (Basel III) 1,746,745 649,010 1,678,716 627,182 4.1% 1,517,250 628,417 15.1% Regulatory Total Capital (Basel III) 2,421,461 899,703 2,351,269 878,454 3.0% 1,943,425 804,931 24.6% Regulatory Risk Weighted Assets (Basel III) 12,689,740 4,714,922 13,154,872 4,914,769 -3.5% 10,999,578 4,555,823 15.4% ------------- ----------- ----------- ----------- ---------- ------- ----------- ----------- ------- Key Ratios 1Q'19 4Q'18 1Q'18 Change YoY Change QoQ ----------------------------------- ------ ------ ------ ----------- ----------- ROE 23.8% 24.3% 21.0% 2.8 pp -0.5 pp ROA 3.6% 3.5% 3.2% 0.4 pp 0.1 pp NIM 6.1% 6.7% 6.9% -0.8 pp -0.6 pp Cost to income 37.7% 39.7% 38.1% -0.4 pp -2.0 pp Cost of risk 1.4% 1.4% 1.3% 0.1 pp 0.0 pp FX adjusted Cost of Risk 1.4% 1.3% 1.7% -0.3 pp 0.1 pp NPL to gross loans 3.3% 3.1% 3.1% 0.2 pp 0.2 pp Regulatory tier 1 CAR (Basel III) 13.8% 12.8% 13.8% 0.0 pp 1.0 pp Regulatory total CAR (Basel III) 19.1% 17.9% 17.7% 1.4 pp 1.2 pp Leverage (times) 6.5x 7.0x 6.4x 0.1x -0.5x ----------------------------------- ------ ------ ------ ----------- -----------
Income Statement Discussion
Net Interest Income
In thousands of GEL 1Q'19 4Q'18 1Q'18 Change YoY Change QoQ ---------------------------------------- -------------- --------------- ----------------- ----------- ----------- Loans and advances to customers 292,055 309,106 256,053 14.1% -5.5% Investment securities measured at fair value through other comprehensive income 19,934 16,612 13,168 51.4% 20.0% Due from other banks 5,866 6,261 4,919 19.3% -6.3% Bonds carried at amortised cost 9,429 11,752 8,037 17.3% -19.8% Investment in leases 10,631 11,812 7,672 38.6% -10.0% Interest income 337,915 355,543 289,849 16.6% -5.0% ---------------------------------------- -------------- --------------- ----------------- ----------- ----------- Customer accounts 75,133 70,288 62,922 19.4% 6.9% Due to credit institutions 49,246 58,247 41,477 18.7% -15.5% Subordinated debt 15,672 11,939 9,640 62.6% 31.3% Finance Lease 637 - - NMF NMF Debt securities in issue 269 266 407 -33.9% 1.1% Interest expense 140,957 140,740 114,446 23.2% 0.2% ---------------------------------------- -------------- --------------- ----------------- ----------- ----------- Net interest income 196,958 214,803 175,403 12.3% -8.3% ---------------------------------------- -------------- --------------- ----------------- ----------- ----------- Net interest margin 6.1% 6.7% 6.9% -0.8 pp -0.6 pp ---------------------------------------- -------------- --------------- ----------------- ----------- -----------
NMF - no meaningful figures
1Q 2019 to 1Q 2018 Comparison
Net interest income increased by GEL 21.6 million, or 12.3%, to GEL 197.0 million, compared to 1Q 2018, driven by a GEL 48.1 million, or 16.6%, higher interest income and a GEL 26.5 million, or 23.2%, higher interest expense.
Interest income grew by GEL 48.1 million, or 16.6%, YoY to GEL 337.9 million, mainly due to an increase in interest income from loans and advances to customers of GEL 36.0 million, or 14.1%. This is primarily related to an increase in net loan portfolio of GEL 1,892.5 million, or 23.3%, YoY. This effect was partially offset by a 0.8 pp drop in loan yields, driven by a decrease in rates on both LC and FC-denominated loans. The gain in interest income was also driven by increased interest income from investment securities (comprising of investment securities measured at fair value through other comprehensive income and bonds carried at amortized cost) by GEL 8.2 million, or 38.5%, which resulted from a significant increase in the respective net portfolios by GEL 540.1 million, or 53.4%. This effect was partially offset by a 0.6 pp decline in respective yield, related to the declining refinance rate. The yield on interest earning assets decreased by 1.0 pp to 10.5%, compared to 1Q 2018.
The GEL 26.5 million, or 23.2%, YoY growth in interest expense to GEL 141.0 million in 1Q 2019 was mainly due to GEL 12.2 million, or 19.4%, increase in interest expense on customer accounts and a GEL 7.8 million, or 18.7%, increase in interest expense on amounts due to credit institutions. The rise in interest expense on customer accounts was attributable to a GEL 1,556.0 million, or 20.4%, increase in the respective portfolio and the expenses of the mandatory deposit insurance, which was reclassified to interest expense from administrative and other operating costs starting from January 1st 2019. Without this expense, the growth of interest expense on customer account would have been GEL 10.9 million, or 17.3%. Cost of deposits remained stable on a YoY basis. The higher interest expense on amounts due to credit institutions was attributable to a GEL 422.5 million, or 18.6%, growth in the respective portfolio. This effect was further magnified by a 0.1 pp increase in the respective yield to 7.1%. The cost of funding increased by 0.1 pp and stood at 4.5%.
Consequently, NIM stood at 6.1% in 1Q 2019, compared to 6.9% in 1Q 2018, while the risk adjusted NIM was 4.7%, compared to 5.2% in 1Q 2018.
1Q 2019 to 4Q 2018 Comparison
On a QoQ basis, net interest income declined by GEL 17.8 million, or 8.3% as a result of a GEL 17.6 million, or 5.0% decrease in interest income and a GEL 0.2 million, or 0.2% higher interest expense.
The decrease in interest income by GEL 17.6 million, or 5.0%, QoQ mainly resulted from the drop in interest income on loans by GEL 17.1 million, or 5.5%. This in turn was due to a decline in loan yields by 0.7 pp, which was attributable to a decrease in rates on both LC and FC-denominated loans. The net loan portfolio remained broadly stable on a QoQ basis. The decrease in interest income was also magnified by a decline in interest income from investment in leases by GEL 1.2 million, or 10.0%, due to decrease in the respective yield by 3.1 pp to 20.8%. This effect was partially offset by a GEL 4.4 million or 2.2% increase in portfolio of investment in leases. The yield on interest earning assets decreased by 0.6 pp from 11.1%, compared to 4Q 2018.
The increase in interest expense by GEL 0.2 million, or 0.2%, QoQ was primarily due to a GEL 4.8 million, or 6.9%, rise in interest expense on customer accounts. The main driver was a rise in the respective effective rate by 0.2 pp, to 3.3%, related to an increase in effective rate on LC-denominated deposits by 0.6 pp, to 5.9%. This effect was partially offset by a 0.1 pp drop in effective rate on FC-denominated deposit, to 1.9% and a decrease in customer accounts by GEL 185.4 million, or 2.0% on a QoQ basis. Another contributor to the rise in interest expense was the GEL 3.7 million, or 31.3% higher interest expense on subordinated loans. This resulted from a 0.2 pp rise in respective yield to 9.7%, which was further magnified by a GEL 13.4 million, or 2.1%, increase in the respective portfolio. The increase was offset by a drop in interest expense on amounts due to credit institutions by GEL 9.0 million, or 15.5%. This decline was primarily attributable to decrease in effective rate by 0.5 pp, to 7.1% and a decline in respective portfolio by GEL 338.9 million, or 11.2%, related to decreased borrowing from NBG. The cost of funding increased by 0.1 pp and stood at 4.5%.
Consequently, on a QoQ basis, NIM decreased by 0.6 pp and stood at 6.1%. Meanwhile risk adjusted NIM was down by 0.7 pp and stood at 4.7%.
Fee and Commission Income
In thousands of GEL 1Q'19 4Q'18 1Q'18 Change YoY Change QoQ
------------------------------- --------------- ---------------- ------------------ ----------- -----------
Card operations 28,486 30,830 21,736 31.1% -7.6%
Settlement transactions 17,617 19,319 16,239 8.5% -8.8%
Guarantees issued 5,857 6,084 4,220 38.8% -3.7%
Issuance of letters of credit 1,040 2,081 1,072 -3.0% -50.0%
Cash transactions 3,169 4,209 4,445 -28.7% -24.7%
Foreign currency exchange
transactions 757 805 490 54.5% -6.0%
Other 3,976 3,721 2,632 51.1% 6.9%
--------------- ---------------- ------------------
Fee and commission income 60,902 67,049 50,834 19.8% -9.2%
------------------------------- --------------- ---------------- ------------------ ----------- -----------
Card operations 14,350 17,720 10,467 37.1% -19.0%
Settlement transactions 2,749 2,347 2,142 28.3% 17.1%
Guarantees issued 402 415 306 31.4% -3.1%
Letters of credit 389 382 260 49.6% 1.8%
Cash transactions 1,017 1,297 1,117 -9.0% -21.6%
Foreign currency exchange
transactions 28 2 2 NMF NMF
Other 160 822 1,621 -90.1% -80.5%
--------------- ---------------- ------------------
Fee and commission expense 19,095 22,985 15,915 20.0% -16.9%
------------------------------- --------------- ---------------- ------------------ ----------- -----------
Card operations 14,136 13,110 11,269 25.4% 7.8%
Settlement transactions 14,868 16,972 14,097 5.5% -12.4%
Guarantees 5,455 5,669 3,914 39.4% -3.8%
Letters of credit 651 1,699 812 -19.8% -61.7%
Cash transactions 2,152 2,912 3,328 -35.3% -26.1%
Foreign currency exchange
transactions 729 803 488 49.4% -9.2%
Other 3,816 2,899 1,011 NMF 31.6%
--------------- ---------------- ------------------
Net fee and commission income 41,807 44,064 34,919 19.7% -5.1%
------------------------------- --------------- ---------------- ------------------ ----------- -----------
NMF - no meaningful figures
1Q 2019 to 1Q 2018 Comparison
In 1Q 2019, net fee and commission income totalled GEL 41.8 million, up by GEL 6.9 million, or 19.7%, compared to 1Q 2018. This mainly resulted from an increase in net fee and commission income from card operations of GEL 2.9 million, or 25.4% and an increase in other net fee and commission income of GEL 2.8 million.
The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 12.1% and 20.5% respectively. The increase in other net fee and commission income was mainly driven by corporate and investment banking segment performance.
1Q 2019 to 4Q 2018 Comparison
On a QoQ basis, net fee and commission income fell by GEL 2.3 million, or 5.1%, compared to 4Q 2018. This was primarily driven by a decline in net fee and commission income from settlement transactions of GEL 2.1 million, or 12.4% and a GEL 0.8 million decrease in net fee and commission income from cash transaction. This effect was partially offset by a GEL 1.0 million, or 7.8% increase in net fee and commission income from card operations.
The drop is explained by a seasonal high number of transactions, volumes and related fee and commission income in the fourth quarter.
Other Operating Non-Interest Income and Gross Insurance
Profit
-----------
In thousands of GEL 1Q'19 4Q'18 1Q'18 Change YoY Change QoQ
----------------------- --------------- --------------- ----------------- ----------- -----------
Net income from
foreign currency
operations 25,214 33,029 19,553 29.0% -23.7%
----------------------- --------------- --------------- ----------------- ----------- -----------
Share of profit of
associates 169 212 307 -45.0% -20.3%
----------------------- --------------- --------------- ----------------- ----------- -----------
Gains less
losses/(losses less
gains) from
derivative financial
instruments (158) (184) 17 NMF -14.1%
----------------------- --------------- --------------- ----------------- ----------- -----------
Gains less losses from 68 - - NMF NMF
disposal of investment
securities measured at
fair value through OCI
----------------------- --------------- --------------- ----------------- ----------- -----------
Revenues from sale of
cash-in terminals 214 225 1,026 -79.1% -4.9%
Revenues from
operational leasing 863 1,731 1,575 -45.2% -50.1%
Gain from sale of
investment properties 148 7,392 1,041 -85.8% -98.0%
Gain from sale of
inventories of
repossessed
collateral 260 1,504 105 NMF -82.7%
Revenues from
non-credit related
fines 68 367 142 -52.1% -81.5%
Gain on disposal of
premises and
equipment 1,231 117 45 NMF NMF
Other 1,375 5,149 2,520 -45.4% -73.3%
--------------- --------------- -----------------
Other operating income 4,159 16,485 6,454 -35.6% -74.8%
----------------------- --------------- --------------- ----------------- ----------- -----------
Gross insurance
profit[10] 3,729 3,853 2,046 82.3% -3.2%
----------------------- --------------- --------------- ----------------- ----------- -----------
Other operating
non-interest income
and gross insurance
profit 33,181 53,395 28,377 16.9% -37.9%
----------------------- --------------- --------------- ----------------- ----------- -----------
NMF - no meaningful
figures
1Q 2019 to 1Q 2018 Comparison
Total other operating non-interest income and gross insurance profit grew by GEL 4.8 million, or 16.9%, to GEL 33.2 million in 1Q 2019. This primarily resulted from the growth in net income from foreign currency operations by GEL 5.7 million, or 29.0% and the increase in gross insurance profit of GEL 1.7 million. This increase was partially offset by a GEL 2.3 million, or 35.6% decrease in other operating income. Higher net income from foreign currency operations resulted from an increased number and volume of FX transactions, broadly consistent with the growth of the scale of business.
Higher gross insurance profit mainly resulted from increased cross-selling of various insurance products. More information about TBC insurance can be found in Annex 23 on pages 33-34.
1Q 2019 to 4Q 2018 Comparison
On a QoQ basis, total other operating non-interest income and gross insurance profit decreased by GEL 20.2 million, or by 37.9%. This mainly resulted from the decline in net income from foreign currency operations by GEL 7.8 million, or 23.7%, a fall in gains from sale of investment property by GEL 7.2 million and a GEL 3.8 million, or 45.4% decrease in other operating income, mainly related to the recognition of an option to buy equity shares of one large corporate client in 4Q 2018. The decrease in net income from foreign currency was mainly driven by seasonal decrease in economic activity in the first quarter as compared to the most active fourth quarter.
Credit Loss Allowance In thousands of GEL 1Q'19 4Q'18 1Q'18 Change YoY Change QoQ ------------------------------------- ---------------- ---------------- ----------------- ----------- ----------- Credit loss allowance for loan to
customers (36,416) (34,398) (27,999) 30.1% 5.9%
Credit loss allowance for
investments in finance lease (41) (779) (240) -82.9% -94.7%
Credit loss allowance for
performance guarantees and credit
related commitments 432 (1,532) (3,875) NMF NMF
Credit loss allowance for other
financial assets 2,969 (7,305) (7,326) NMF NMF
Credit loss allowance for financial
assets measured at fair value
through other comprehensive
income (39) (22) (23) 69.6% 77.3%
---------------- ---------------- ----------------- -----------
Total credit loss allowance (33,095) (44,036) (39,463) -16.1% -24.8%
------------------------------------- ---------------- ---------------- ----------------- ----------- -----------
Operating income after credit loss
allowance 238,851 268,226 199,236 19.9% -11.0%
------------------------------------- ---------------- ---------------- ----------------- ----------- -----------
Cost of risk 1.4% 1.4% 1.3% 0.1 pp 0.0 pp
------------------------------------- ---------------- ---------------- ----------------- ----------- -----------
NMF - no meaningful figures
1Q 2019 to 1Q 2018 Comparison
In 1Q 2019, total credit loss allowance declined by GEL 6.4 million to GEL 33.1 million compared to 1Q 2018.
This was primarily attributable to a recovery of credit loss allowance for other financial assets driven by a single corporate debtor. The recovery was partially offset by a GEL 8.4 million increase in credit loss allowance for loans to customers. GEL appreciation in 1Q 2018 had a positive effect on credit loss allowance for loans to customers.
In 1Q 2019, the cost of risk stood at 1.4% (1.4% without the FX effect), compared to 1.3% (1.7% without the FX effect) in 1Q 2018.
1Q 2019 to 4Q 2018 Comparison
On a QoQ basis, total credit loss allowance declined by GEL 10.9 million to GEL 33.1 million.
This was attributable to a recovery of credit loss allowance for other financial assets due to a single corporate debtor.
In 1Q 2019, the cost of risk stood at 1.4% (1.4% without the FX effect), compared to 1.4% (1.3% without the FX effect) in 4Q 2018.
Operating Expenses
In thousands of GEL 1Q'19 4Q'18 1Q'18 Change YoY Change QoQ
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Staff costs 57,753 63,213 52,116 10.8% -8.6%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Provisions for liabilities and (200) - - NMF NMF
charges
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Depreciation and amortization 16,169 12,333 10,470 54.4% 31.1%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Professional services 3,526 5,385 2,962 19.0% -34.5%
Advertising and marketing services 4,478 10,738 4,527 -1.1% -58.3%
Expenses related to lease 2,630 - - NMF NMF
contracts[11]
Rent - 6,666 5,864 NMF NMF
Utility services 1,947 1,602 1,735 12.2% 21.5%
Intangible asset enhancement 2,741 3,672 2,494 9.9% -25.4%
Taxes other than on income 1,817 1,356 1,656 9.7% 34.0%
Communications and supply 1,435 1,422 1,034 38.8% 0.9%
Stationary and other office
expenses 1,119 1,312 1,184 -5.5% -14.7%
Insurance 229 2,558 485 -52.8% -91.0%
Security services 504 522 496 1.6% -3.4%
Premises and equipment maintenance 2,035 1,767 1,035 96.6% 15.2%
Business trip expenses 409 706 320 27.8% -42.1%
Transportation and vehicles
maintenance 410 549 378 8.5% -25.3%
Charity 1,004 332 280 NMF NMF
Personnel training and recruitment 291 1,006 176 65.3% -71.1%
Write-down of current assets to
fair value less costs to sell - (19) (3) -100.0% -100.0%
Loss on disposal of Inventory 14 1 20 -30.0% NMF
Loss on disposal of investment
properties - 36 31 -100.0% -100.0%
Loss on disposal of premises and
equipment 233 425 278 -16.2% -45.2%
Impairment of intangible assets - 1 - NMF -100.0%
Other 3,970 8,321 3,394 17.0% -52.3%
--------------- ---------------- ------------------
Administrative & other operating
expenses 28,792 48,358 28,346 1.6% -40.5%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Operating expenses 102,514 123,904 90,932 12.7% -17.3%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Profit before tax 136,337 144,322 108,304 25.9% -5.5%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Income tax expense (3,015) (14,235) (10,778) -72.0% -78.8%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Profit for the period 133,322 130,087 97,526 36.7% 2.5%
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
Cost to income 37.7% 39.7% 38.1% -0.4 pp -2.0 pp
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
ROE 23.8% 24.3% 21.0% 2.8 pp -0.5 pp
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
ROA 3.6% 3.5% 3.2% 0.4 pp 0.1 pp
------------------------------------- --------------- ---------------- ------------------ ----------- -----------
NMF - no meaningful figures
1Q 2019 to 1Q 2018 Comparison
In 1Q 2019, total operating expenses expanded by GEL 11.6 million, or 12.7% YoY to GEL 102.5 million, primarily due to an increase in staff costs of GEL 5.6 million, or 10.8% YoY and a rise in depreciation and amortization, of GEL 5.7 million, or 54.4%. The growth in staff cost was mainly driven by a higher scale and performance, while increase in depreciation and amortization was primarily related to IFRS 16.
We have continued to deliver positive operational JAWS ratio[12], leading to a decrease in cost to income ratio by 0.4 pp to 37.7% in 1Q 2019.
1Q 2019 to 4Q 2018 Comparison
On a QoQ basis, total operating expenses decreased by GEL 21.4 million, or 17.3%. This was primarily attributable to a GEL 19.6 million, or 40.5% decline in administrative & other operating expenses and a GEL 5.5 million, or 8.6% drop in staff cost. The decrease in operating expenses was related to seasonally high costs across various categories of expenses in 4Q.
Our cost to income ratio improved by 2.0 pp from 39.7%, compared to 4Q 2018.
Net Income
Net income for the first quarter increased by GEL 3.2 million, or 2.5%, QoQ and by GEL 35.8 million, or 36.7%, YoY and amounted to GEL 133.3 million.
As a result, ROE stood at 23.8%, up by 2.8 pp YoY and down by 0.5 pp QoQ, while ROA stood at 3.6%, up by 0.4 pp YoY and down by 0.1 pp QoQ.
Balance Sheet Discussion In thousands of GEL Mar-19 Dec-18 Change QoQ Mar-18 Change YoY -------------------------------- ------------------ -------------------- ----------- ---------------- ----------- Cash, due from banks and mandatory cash balances with NBG 2,373,893 2,637,036 -10.0% 2,246,989 5.6% Loans and advances to customers (Net) 10,029,320 10,038,452 -0.1% 8,136,820 23.3% Financial securities 1,550,767 1,659,442 -6.5% 1,010,659 53.4% Fixed and intangible assets & investment property 570,047 561,020 1.6% 531,297 7.3% Right of use assets 60,951 - NMF - NMF Other assets 587,328 602,043 -2.4% 475,282 23.6% Total assets 15,172,306 15,497,993 -2.1% 12,401,047 22.3% -------------------------------- ------------------ -------------------- ----------- ---------------- ----------- Due to credit institutions 2,692,585 3,031,503 -11.2% 2,270,119 18.6% Customer accounts 9,166,789 9,352,142 -2.0% 7,610,804 20.4% Debt securities in issue 13,415 13,343 0.5% 19,371 -30.7% Subordinated debt 664,330 650,919 2.1% 402,058 65.2% Other liabilities 287,431 244,118 17.7% 168,291 70.8% Total liabilities 12,824,550 13,292,025 -3.5% 10,470,643 22.5% -------------------------------- ------------------ -------------------- ----------- ---------------- ----------- Total equity 2,347,756 2,205,968 6.4% 1,930,404 21.6% -------------------------------- ------------------ -------------------- ----------- ---------------- -----------
NMF - no meaningful figures
Assets
As of 31 March 2019, the Group's total assets amounted to GEL 15,172.3 million, up by GEL 2,771.3 million, or by 22.3% YoY. The increase was mainly due to the rise in net loans to customers by GEL 1,892.5 million, or by 23.3% YoY. The YoY increase in total assets also resulted from a GEL 540.1 million, or 53.4%, rise in financial securities compared to 31 March 2018.
On a QoQ basis, total assets dropped by GEL 325.7 million, or 2.1%, mainly due to a GEL 263.1 million, or 10.0%, decline in liquid assets (comprising cash, due from banks and mandatory cash balances with the NBG) and a GEL 108.7 million or 6.5% decrease in financial securities. The decline was slightly offset by an increase in fixed and intangible assets & investment property by GEL 70.0 million, or 12.5%.
As of 31 March 2019, the gross loan portfolio reached GEL 10,366.9 million, up by 22.9% YoY and down by 0.1% QoQ. At the same time, gross loans denominated in foreign currency accounted for 59.6% of total loans, compared to 58.2% and 60.1% as of 31 March 2018 and 31 December 2018 respectively.
Asset Quality
Borrowers with FX income
31-Mar-19 31-Dec-18 31-Mar-18
----------------- ------------------------------- -------------------------------- --------------------------------
Segments % of FX loans of which % of FX loans of which % of FX loans of which
borrowers with borrowers with borrowers with
FX income** FX income** FX income**
----------------- -------------- --------------- -------------- ---------------- -------------- ----------------
Retail 56.0% 28.7% 56.1% 28.5% 49.4% 25.4%
Non-mortgage 19.9% 23.6% 19.9% 24.1% 18.0% 24.5%
Mortgage 81.1% 29.6% 82.7% 29.3% 80.1% 25.6%
Corporate 70.0% 51.4%* 71.5% 51.4%* 75.6% 53.1%*
MSME 52.2% 14.3% 53.1% 15.2% 53.2% 14.9%
----------------- -------------- --------------- -------------- ---------------- -------------- ----------------
Total loan
portfolio 59.6% 34.4% 60.1% 34.0% 58.2% 34.0%
----------------- -------------- --------------- -------------- ---------------- -------------- ----------------
(Based on internal estimates)
* Pure exports account for 6.4%, 7.0% and 7.0% of total corporate FX denominated loans as at 31 March 2019, 31 December 2018 and 31 March 2018, respectively.
** FX income implies both direct and indirect income.
PAR 30 by Segments and Mar-19 Dec-18 Mar-18
Currencies
------------------------------ ---------------------- ---------------------- ----------------------
GEL FC Total GEL FC Total GEL FC Total
Corporate 1.1% 1.2% 1.2% 0.7% 0.3% 0.4% 0.0% 1.1% 0.9%
Retail 4.4% 1.8% 2.9% 4.0% 1.5% 2.6% 2.9% 1.7% 2.3%
MSME 2.7% 3.5% 3.1% 2.4% 3.2% 2.8% 1.9% 3.5% 2.7%
------- ----- ------
Total 3.2% 1.9% 2.4% 2.8% 1.4% 2.0% 2.2% 1.9% 2.0%
------------------------------ ------- ----- ------ ------- ----- ------ ------- ----- ------
Loans overdue by more than 30
days to gross loans
Total
Total PAR 30 increased by 0.4 pp on QoQ basis as well as on YoY basis, standing at 2.4%, which was driven by increase of PAR 30 in all segments.
Retail Segment
The retail segment's PAR 30 amounted to 2.9%, up by 0.3 pp QoQ and by 0.6pp YoY. The increase was mainly attributable to higher yield products such as credit cards and unsecured consumer loans, which have been substantially reduced by new regulations this year.
Corporate
The corporate segment's PAR 30 amounted to 1.2%, up by 0.8 pp QoQ and by 0.3 pp YoY. This was driven by two mid-sized corporate clients.
MSME
The MSME segment's PAR 30 increased by 0.3 pp QoQ and by 0.4 pp YoY and stood at 3.1% as of 31 March 2019. This was mainly driven by SME sub-segment.
NPLs Mar-19 Dec-18 Mar-18
----------- -------------------- -------------------- --------------------
GEL FC Total GEL FC Total GEL FC Total
Corporate 1.7% 3.0% 2.6% 1.6% 3.1% 2.7% 0.9% 3.0% 2.5%
Retail 4.3% 2.3% 3.2% 3.7% 2.3% 2.9% 2.4% 3.0% 2.7%
MSME 3.0% 5.6% 4.4% 2.6% 5.5% 4.2% 2.6% 6.2% 4.5%
----- ----- ------
Total 3.3% 3.2% 3.3% 2.9% 3.3% 3.1% 2.2% 3.7% 3.1%
----------- ----- ----- ------ ----- ----- ------ ----- ----- ------
Total
Total NPLs rose by 0.2 pp on QoQ and YoY basis and stood at 3.3%. The increase was mainly driven by consumer loans.
Retail Segment
The retail segment's NPLs remained increased by 0.3 pp QoQ and by 0.5 pp YoY and stood at 3.2%, driven by consumer loans.
Corporate
On both QoQ and YoY basis, the corporate segment's NPLs ratio remained broadly stable.
MSME
The MSME segment's NPLs increased by 0.2 pp QoQ and was broadly stable on YoY basis. QoQ increase was due to both SME and micro sub-segments.
NPLs Coverage Mar-19 Dec-18 Mar-18
--------------- -------------------------------- -------------------------------- ---------------------------------
Exc. Incl. Exc. Incl. Exc. Collateral Incl.
Collateral Collateral Collateral Collateral Collateral
--------------- --------------- --------------- --------------- --------------- ---------------- ---------------
Corporate 95.4% 288.7% 96.4% 286.9% 103.8% 275.5%
Retail 123.8% 190.0% 132.4% 204.4% 157.6% 235.6%
MSME 71.4% 175.2% 68.4% 174.0% 70.2% 179.2%
--------------- --------------- --------------- --------------- --------------- ---------------- ---------------
Total 100.1% 210.8% 102.7% 216.4% 114.6% 225.8%
--------------- --------------- --------------- --------------- --------------- ---------------- ---------------
Liabilities
As of 31 March 2019, TBC Bank's total liabilities amounted to GEL 12,824.6 million, up by GEL 2,353.9 million, or by 22.5% YoY. This primarily resulted from a GEL 1,556.0 million, or 20.4%, increase in customer accounts and GEL 422.5 million or 18.6% increase in amounts due to credit institutions.
On a QoQ basis, total liabilities dropped by GEL 467.5 million, or 3.5%. The decrease was mainly driven by decline in amounts due to credit institutions by GEL 338.9 million, or 11.2% and in customer accounts by GEL 185.4 million, or 2.0%. The decrease in customer accounts on a QoQ basis was related to seasonality, reduction in loan growth due to new regulation and retail deposit reduction mostly in January before the settlement of the dispute with NBG (for further details please refer to our website: www.tbcbankgroup.com).
Liquidity
As of 31 March 2019 the Bank's liquidity ratio, as defined by the NBG, stood at 35.9%, compared to 33.3% and 30.8% as of 31 December 2018 and 31 March 2018 respectively, above the NBG limit of 30%. As of 31 March 2019, the total liquidity coverage ratio (LCR), as defined by the NBG, was 117.5%, above the 100.0% limit. The LCR in GEL and FC stood at 111.9% and 122.2% respectively, above the respective limits of 75% and 100%.
Total Equity
As of 31 March 2019, TBC's total equity totalled GEL 2,347.8 million, up by GEL 417.4 million from GEL 1,930.4 million as of 31 March 2018. The YoY change in equity was primarily attributable to net profit contribution of GEL 473.2 million during last 12 months, which was partially offset by dividend distribution of GEL 88.9 million in May 2018.
On a QoQ basis TBC's total equity increased by GEL 141.8 million, or 6.4%. The QoQ change in equity was due to increase in net income by GEL 133.3 million.
Regulatory Capital
As of 31 March 2019 the Bank's Basel III tier 1 and total capital adequacy ratios (CAR) stood at 13.8% and 19.1%, respectively, compared to the minimum required levels of 11.9% and 16.9%. In comparison, as of 31 March 2018, the Bank's Basel III tier 1 and total capital adequacy ratios (CAR) stood at 13.8% and 17.7%, respectively, higher than the minimum required levels of 10.2% and 15.0%. As of 31 December 2018 the Bank's Basel III tier 1 and total capital adequacy ratios (CAR) stood at 12.8% and 17.9%, respectively, higher than the minimum required levels of 11.8% and 16.7%. We are exploring the opportunity to further strengthen our capital structure through AT1 security, which could be in the form of an USD denominated AT1 note issuance in 2019.
In 31 March 2019, the Bank's Basel III tier 1 capital amounted to GEL 1,746.7 million, up by GEL 229.5 million, or 15.1%, compared to March 2018, due to an increase in net income. The Bank's Basel III total capital amounted to GEL 2,421.5 million, up by GEL 478.0 million, or 24.6%, YoY. The increase in total capital was attributable to the generated income within the period, as well as attraction of new subordinated loans with total amount GEL 230.5 million. Risk weighted assets stood at GEL 12,689.7 million as of 31 March 2019, up by GEL 1,690.2 million, or 15.4%, compared to March 2018, mainly related to the rise in loan book, as well as growth in risk weighted assets for operational risk.
On a QoQ basis, the Bank's Basel III tier 1 capital amounted increased by GEL 68.0 million, or 4.1%, compared to December 2018, while the Bank's Basel III total capital increased by GEL 70.2 million, or 3.0%, YoY. The increase in tier 1 capital and total capital was attributable to the increase in net income. Risk weighted assets decreased by GEL 465.1 million, or 3.5%, compared to December 2018, mainly related to the optimization of the credit risk weighted assets, as well as decrease in market risk.
Results by segments and subsidiaries
The segment definitions are as follows:
-- Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million, or which have been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to MSME on a discretionary basis;
-- MSME (Micro, Small and Medium) - business customers who are not included in either the corporate or the retail segments; or legal entities who have been granted a pawn shop loan; or individual customers of the newly launched, fully digital bank - Space;
-- Retail - non-business individual customers or individual business customers who have been granted mortgage loans; all individual customers are included in retail deposits;
-- Corporate Centre - comprises the Treasury, other support and back office functions, and the non-banking subsidiaries of the Group;
Business customers are all legal entities or individuals who have been granted a loan for business purposes.
Summary of key changes:
-- Some customers were moved to the corporate segment on a discretionary basis considering practical aspects of client account servicing and administration. As a result, the corporate loan portfolio increased by GEL 128 million and the corporate deposit portfolio grew by GEL 70 million.
Income Statement by Segments
1Q'19 Retail MSME Corporate Corp.Centre Total ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Interest income 145,814 69,376 78,904 43,821 337,915 Interest expense (34,666) (2,204) (38,898) (65,189) (140,957) Net transfer pricing (17,024) (23,463) 11,585 28,902 - Net interest income 94,124 43,709 51,591 7,534 196,958 ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Fee and commission income 44,021 5,255 11,250 376 60,902 Fee and commission expense (15,727) (1,666) (1,603) (99) (19,095) Net fee and commission income 28,294 3,589 9,647 277 41,807 ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Gross insurance profit - - - 3,729 3,729 Net income from foreign currency operations 6,159 4,446 12,207 (1,225) 21,587 Foreign exchange translation gains less losses/(losses less gains) - - - 3,627 3,627 Net losses from derivative financial instruments (148) - - (10) (158) Gains less losses from disposal of investment securities measured at fair value through OCI - - - 68 68 Other operating income 2,409 460 264 1,026 4,159 Share of profit of associates - - - 169 169 Other operating non-interest income and insurance profit 8,420 4,906 12,471 7,384 33,181 ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Credit loss allowance for loan to customers (27,359) (9,485) 428 - (36,416) Credit loss allowance for performance guarantees and credit related commitments 393 183 (144) - 432 Credit loss allowance for investments in finance lease - - - (41) (41) Credit loss allowance for other financial assets 38 - 3,864 (933) 2,969 Credit loss allowance for financial assets measured at fair value through other comprehensive income - - (39) - (39) Profit before G&A expenses and income taxes 103,910 42,902 77,818 14,221 238,851 ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Staff costs (33,134) (11,368) (8,164) (5,087) (57,753) Depreciation and amortization (12,499) (2,015) (717) (938) (16,169) Provision for liabilities and charges - - - 200 200 Administrative and other operating expenses (17,769) (4,800) (2,925) (3,298) (28,792) Operating expenses (63,402) (18,183) (11,806) (9,123) (102,514) ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Profit before tax 40,508 24,719 66,012 5,098 136,337
----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Income tax expense (5,217) (3,750) (9,871) 15,823 (3,015) ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Profit for the year 35,291 20,969 56,141 20,921 133,322 ----------------------- ------------------ ---------------- ---------------- ------------------- ---------------- Portfolios by Segments In thousands of GEL Mar-19 Dec-18 Mar-18 --------------------------------- -------------- ----------------- ------------- Loans and advances to customers Non-mortgage 1,882,816 1,989,516 1,961,411 Mortgage 2,695,457 2,709,183 2,007,914 Retail 4,578,273 4,698,699 3,969,325 Corporate 3,364,911 3,177,289 2,489,516 MSME 2,423,731 2,496,594 1,974,075 Total loans and advances to customers (Gross) 10,366,915 10,372,582 8,432,916 Less: credit loss allowance for loans to customers (337,595) (334,130) (296,096) Total loans and advances to customers (Net) 10,029,320 10,038,452 8,136,820 --------------------------------- -------------- ----------------- ------------- Customer accounts Retail 4,914,927 5,103,971 4,197,277 Corporate 3,316,436 3,230,653 2,474,559 MSME 935,426 1,017,518 938,968 Total Customer accounts 9,166,789 9,352,142 7,610,804 --------------------------------- -------------- ----------------- -------------
Retail Banking
As of 31 March 2019, retail loans stood at GEL 4,578.3 million, up by GEL 608.9 million, or 15.3%, YoY and they accounted for 39.3% market share of total individual loans. Compared to December 2018, retail loans declined by GEL 120.4 million, or 2.6%. As of March 2019 foreign currency loans represented 56.0% of the total retail loan portfolio.
In the reporting period, retail deposits stood at GEL 4,914.9 million, up by GEL 717.7 million, or 17.1%, YoY and accounted for 39.5% market share of total individual deposits. On a QoQ basis, retail deposits decreased by GEL 189 million, or 3.7%. As of 31 March 2019 term deposits accounted for 54.3% of the total retail deposit portfolio, while foreign currency deposits represented 80.8% of the total.
In 1Q 2019, retail loan yields and deposit rates stood at 12.8% and 2.8%, respectively. The segment's cost of risk on loans was 2.4% . The retail segment contributed 26.5%, or GEL 35.3 million, to the total net income in 1Q 2019.
Corporate Banking
As of 31 March 2019, corporate loans amounted to GEL 3,364.9 million, up by GEL 747.4 million, or 30.0%, YoY and up by GEL 59.7 million, or 1.9% QoQ without re-segmentation effect[13]. Foreign currency loans accounted for 70.0% of the total corporate loan portfolio as of March 2019. The market share of total legal entities loans stood at 37.4%.
As of the same date, corporate deposits totalled GEL 3,316.4 million, up by GEL 771.9 million, or 31.2%, YoY and up by GEL 15.9 million, or 0.5%, QoQ without re-segmentation effect[14]. Foreign currency corporate deposits represented 41.9% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 41.4%.
In 1Q 2019, corporate loan yields and deposit rates stood at 9.5% and 4.9%, respectively. In the same period, the cost of risk on loans was -0.1%. In terms of profitability, the corporate segment's net profit reached GEL 56.1 million, or 42.1%, of the total net income.
MSME Banking
As of 31 March 2019, MSME loans amounted to GEL 2,423.7 million, up by GEL 577.6 million, or 29.3%, YoY and up by GEL 55.1 million, or 2.2%, QoQ without re-segmentation effect(1) . Foreign currency loans accounted for 52.2% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 935.4 million, up by GEL 66.4 million, or 7.1%, YoY and down by GEL 12.2 million, or 1.2%, QoQ without re-segmentation effect(2) . Foreign currency MSME deposits represented 46.1% of the total MSME deposit portfolio.
In 1Q 2019, MSME loan yields and deposit rates stood at 11.7% and 0.9% respectively, while the cost of risk on loans was 1.6%. In terms of profitability, net profit for the MSME segment amounted to GEL 21.0 million, or 15.7%, of the total net income.
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet In thousands of GEL Mar-19 Dec-18 Mar-18 ---------------------------------------------------- --------------------- -------------------- ------------------- Cash and cash equivalents 927,830 1,166,911 1,245,562 Due from other banks 29,981 47,316 23,311 Mandatory cash balances with National Bank of Georgia 1,416,082 1,422,809 978,116 Loans and advances to customers 10,029,320 10,038,452 8,136,820 Investment securities measured at fair value through other comprehensive income 889,137 1,005,239 580,784 Bonds carried at amortised cost 661,630 654,203 429,875 Investments in finance leases 208,243 203,802 145,546 Investment properties 84,055 84,296 76,690 Current income tax prepayment 11,102 2,116 8,454 Deferred income tax asset 1,973 2,097 2,527 Other financial assets 124,093 167,518 127,851 Other assets 207,518 192,792 160,662 Premises and equipment 366,327 367,504 369,610 Right of use assets 60,951 - - Intangible assets 119,665 109,220 84,997 Goodwill 31,798 31,286 28,657 Investments in associates 2,601 2,432 1,585 TOTAL ASSETS 15,172,306 15,497,993 12,401,047 ---------------------------------------------------- --------------------- -------------------- ------------------- LIABILITIES Due to Credit Institutions 2,692,585 3,031,503 2,270,119 Customer accounts 9,166,789 9,352,142 7,610,804 Other financial liabilities 171,421 98,714 90,499 Current income tax liability 36 63 44 Debt Securities in issue 13,415 13,343 19,371 Deferred income tax liability 19,337 22,237 663 Provisions for liabilities and charges 18,250 18,767 12,467 Other liabilities 78,387 104,337 64,618 Subordinated debt 664,330 650,919 402,058 TOTAL LIABILITIES 12,824,550 13,292,025 10,470,643 ---------------------------------------------------- --------------------- -------------------- ------------------- EQUITY Share capital 1,672 1,650 1,626 Share premium 831,773 796,854 753,298 Retained earnings 1,657,330 1,523,879 1,266,299 Group reorganisation reserve (162,166) (162,166) (162,166) Share based payment reserve (43,080) (16,294) (24,608) Revaluation reserve for premises 56,701 57,240 70,039 Fair value reserve 9,702 8,680 4,146 Cumulative currency translation reserve (7,295) (6,937) (7,425) Net assets attributable to owners 2,344,637 2,202,906 1,901,209 ---------------------------------------------------- --------------------- -------------------- -------------------
Non-controlling interest 3,119 3,062 29,195
--------------------- -------------------- -------------------
TOTAL EQUITY 2,347,756 2,205,968 1,930,404
---------------------------------------------------- --------------------- -------------------- -------------------
TOTAL LIABILITIES AND EQUITY 15,172,306 15,497,993 12,401,047
---------------------------------------------------- --------------------- -------------------- -------------------
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
In thousands of GEL 1Q'19 4Q'18 1Q'18
----------------------------------------------------------- ---------------- ---------------- -----------------
Interest income 337,915 355,543 289,849
Interest expense (140,957) (140,740) (114,446)
Net interest income 196,958 214,803 175,403
----------------------------------------------------------- ---------------- ---------------- -----------------
Fee and commission income 60,902 67,049 50,834
Fee and commission expense (19,095) (22,985) (15,915)
Net fee and commission income 41,807 44,064 34,919
----------------------------------------------------------- ---------------- ---------------- -----------------
Net insurance premiums earned 7,329 7,023 4,435
Net insurance claims incurred and agents' commissions (3,600) (3,170) (2,389)
----------------------------------------------------------- ---------------- ---------------- -----------------
Insurance profit 3,729 3,853 2,046
----------------------------------------------------------- ---------------- ---------------- -----------------
Net income from foreign currency operations 21,587 28,258 17,080
Net gain/(losses) from foreign exchange translation 3,627 4,771 2,473
Net gains/(losses) from derivative financial instruments (158) (184) 17
Gains less losses from disposal of investment securities 68 - -
measured at fair value through other
comprehensive income
Other operating income 4,159 16,485 6,454
Share of profit of associates 169 212 307
Other operating non-interest income 29,452 49,542 26,331
----------------------------------------------------------- ---------------- ---------------- -----------------
Credit loss allowance for loan to customers (36,416) (34,398) (27,999)
Credit loss allowance for investments in finance lease (41) (779) (240)
Credit loss allowance for performance guarantees and
credit related commitments 432 (1,532) (3,875)
Credit loss allowance for other financial assets 2,969 (7,305) (7,326)
Credit loss allowance for financial assets measured at
fair value through other comprehensive
income (39) (22) (23)
Operating income after credit loss allowance for
impairment 238,851 268,226 199,236
----------------------------------------------------------- ---------------- ---------------- -----------------
Staff costs (57,753) (63,213) (52,116)
Depreciation and amortization (16,169) (12,333) (10,470)
(Provision for)/ recovery of liabilities and charges 200 - -
Administrative and other operating expenses (28,792) (48,358) (28,346)
Operating expenses (102,514) (123,904) (90,932)
----------------------------------------------------------- ---------------- ---------------- -----------------
Profit before tax 136,337 144,322 108,304
----------------------------------------------------------- ---------------- ---------------- -----------------
Income tax expense (3,015) (14,235) (10,778)
---------------- ---------------- -----------------
Profit for the period 133,322 130,087 97,526
----------------------------------------------------------- ---------------- ---------------- -----------------
Other comprehensive income:
----------------------------------------------------------- ---------------- ---------------- -----------------
Items that may be reclassified subsequently to profit or
loss:
----------------------------------------------------------- ---------------- ---------------- -----------------
Movement in fair value reserve 1,023 3,757 2,374
----------------------------------------------------------- ---------------- ---------------- -----------------
Exchange differences on translation to presentation
currency (358) 340 (67)
----------------------------------------------------------- ---------------- ---------------- -----------------
Items that will not be reclassified to profit or loss:
----------------------------------------------------------- ---------------- ---------------- -----------------
Revaluation of premises and equipment (539) 10,749 -
----------------------------------------------------------- ---------------- ---------------- -----------------
Income tax recorded directly in other comprehensive income - 2,788 -
----------------------------------------------------------- ---------------- ---------------- -----------------
Other comprehensive income for the period 126 17,634 2,307
----------------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive income for the period 133,448 147,721 99,833
----------------------------------------------------------- ---------------- ---------------- -----------------
Profit attributable to:
----------------------------------------------------------- ---------------- ---------------- -----------------
- Shareholders of TBCG 133,237 129,952 95,758
----------------------------------------------------------- ---------------- ---------------- -----------------
- Non-controlling interest 85 135 1,768
----------------------------------------------------------- ---------------- ---------------- -----------------
Profit for the period 133,322 130,087 97,526
----------------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive income is attributable to:
----------------------------------------------------------- ---------------- ---------------- -----------------
- Shareholders of TBCG 133,363 147,628 98,031
----------------------------------------------------------- ---------------- ---------------- -----------------
- Non-controlling interest 85 93 1,802
----------------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive income for the period 133,448 147,721 99,833
----------------------------------------------------------- ---------------- ---------------- -----------------
Consolidated Statements of Cash Flows
In thousands of GEL 31-Mar-19 31-Mar-18
--------------------------------------------------------------------------------------- ----------- ----------------
Cash flows from/(used in) operating activities
Interest received 332,214 286,870
Interest paid (128,621) (114,810)
Fees and commissions received 61,001 50,177 Fees and commissions paid (19,076) (15,988) Insurance premium received 15,568 10,632 Insurance claims paid (2,083) (4,547) Income received from trading in foreign currencies 21,588 17,080 Other operating income received (7,403) (6,747) Staff costs paid (68,852) (81,180) Administrative and other operating expenses paid (39,165) (34,351) Income tax paid (15,619) (113) Cash flows from operating activities before changes in operating assets and liabilities 149,552 107,023 --------------------------------------------------------------------------------------- ----------- ---------------- Net change in operating assets Due from other banks and mandatory cash balances with the National Bank of Georgia 44,243 24,793 Loans and advances to customers (14,169) (254,413) Investment in finance lease (9) (10,397) Other financial assets 49,780 27,467 Other assets (6,977) 2,262 Net change in operating liabilities Due to other banks 159,324 27,601 Customer accounts (199,925) 142,411 Other financial liabilities 11,798 (10,447) Financial lease liabilities (3,202) - Other liabilities and provision for liabilities and charges 2,039 406 Net cash from operating activities 192,454 56,706 --------------------------------------------------------------------------------------- ----------- ---------------- Cash flows from/(used in) investing activities Acquisition of investment securities measured at fair value through other comprehensive income (29,994) (80,411) Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income 145,921 158,849 Acquisition of bonds carried at amortised cost (119,747) (56,429) Proceeds from redemption of bonds carried at amortised cost 98,613 71,405 Acquisition of premises, equipment and intangible assets (24,729) (15,394) Disposal of premises, equipment and intangible assets 4,965 910 Proceeds from disposal of investment property 1,414 4,192 Acquisition of subsidiaries, net of cash acquired (596) - Net cash used in investing activities 75,847 83,122 --------------------------------------------------------------------------------------- ----------- ---------------- Cash flows from/(used in) financing activities Proceeds from other borrowed funds 267,489 645,260 Redemption of other borrowed funds (778,163) (935,698) Proceeds from subordinated debt - - Redemption of subordinated debt - - Proceeds from debt securities in issue (14) 75 Redemption of debt securities in issue - - Dividends paid - - Issue of ordinary shares - 17,397 Net cash flows from financing activities (510,688) (272,966) --------------------------------------------------------------------------------------- ----------- ---------------- Effect of exchange rate changes on cash and cash equivalents 3,306 (52,777) --------------------------------------------------------------------------------------- ----------- ---------------- Net increase in cash and cash equivalents (239,081) (185,915) --------------------------------------------------------------------------------------- ----------- ---------------- Cash and cash equivalents at the beginning of the year 1,166,911 1,431,477 --------------------------------------------------------------------------------------- ----------- ---------------- Cash and cash equivalents at the end of the year 927,830 1,245,562 --------------------------------------------------------------------------------------- ----------- ----------------
Key Ratios
Average Balances
The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.
Key Ratios Ratios (based on monthly averages, where applicable) 1Q'19 4Q'18 1Q'18 ------------------------------------------------------ ------- ------- ------- ROE(1) 23.8% 24.3% 21.0% ROA(2) 3.6% 3.5% 3.2% ROE before credit loss allowance(3) 29.7% 32.5% 29.6% Cost to income(4) 37.7% 39.7% 38.1% Cost of risk(5) 1.4% 1.4% 1.3% FX adjusted cost of risk(6) 1.4% 1.3% 1.7% NIM(7) 6.1% 6.7% 6.9% Risk adjusted NIM(8) 4.7% 5.4% 5.2% Loan yields(9) 11.5% 12.2% 12.3% Risk adjusted loan yields(10) 10.1% 10.9% 10.6% Deposit rates(11) 3.3% 3.1% 3.3% Yields on interest earning assets(12) 10.5% 11.1% 11.5% Cost of funding(13) 4.5% 4.4% 4.4% Spread(14) 6.0% 6.6% 7.1% PAR 90 to gross loans(15) 1.3% 1.2% 1.2% NPLs to gross loans(16) 3.3% 3.1% 3.1% NPLs coverage(17) 100.1% 102.7% 114.6% NPLs coverage with collateral(18) 210.8% 216.4% 225.8% Credit loss level to gross loans(19) 3.3% 3.2% 3.5% Related party loans to gross loans(20) 0.1% 0.1% 0.1% Top 10 borrowers to total portfolio(21) 9.6% 10.1% 9.4% Top 20 borrowers to total portfolio(22) 13.5% 14.2% 13.4% Net loans to deposits plus IFI Funding(23) 90.5% 89.9% 93.2% Net stable funding ratio*(24) 123.8% 124.2% 124.5% Liquidity coverage ratio(25) 117.5% 113.9% 104.6% Leverage(26) 6.5x 7.0x 6.4x Regulatory tier 1 CAR (Basel III)(27) 13.8% 12.8% 13.8% Regulatory total 1 CAR (Basel III)(28) 19.1% 17.9% 17.7% ------------------------------------------------------ ------- ------- -------
(*)Per updated methodology.
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by the monthly average total assets for the same period. Annualised where applicable.
3. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.
4. 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).
5. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
6. FX adjusted cost of risk is calculated based on currency rates of the respective prior periods.
7. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG which currently has negative interest, and includes other earning items from due from banks.
8. Risk Adjusted Net interest margin is NIM minus the cost of risk without one-offs and currency effect.
9. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
10. Risk Adjusted Loan yield is loan yield minus the cost of risk without one-offs and currency effect.
11. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
12. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
13. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
14. 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).
15. 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.
16. 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.
17. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.
18. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
19. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
20. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
21. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
22. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
23. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
24. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined in Basel III.
25. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
26. Leverage equals total assets to total equity.
27. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
28. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6766 as of 31 December 2018. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4144 as of 31 March 2018. As of 31 March 2019 the USD/GEL exchange rate equalled 2.6914. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2019 of 2.6680, 4Q 2018 of 2.6752, 1Q 2018 of 2.4854.
Additional Disclosures
Subsidiaries of TBC Bank Group PLC[15]
Ownership Country Year of Industry Total Assets
/ voting incorporation (after elimination)
% as
of 31
March
2019
---------- ----------- --------------- -------------------- -----------------------
Subsidiary Amount % in TBC
GEL'000 Group
--------------------------- ---------- ----------- --------------- -------------------- ------------ ---------
JSC TBC Bank 99.9% Georgia 1992 Banking 14,746,354 97.19%
United Financial
Corporation JSC 98.7% Georgia 2001 Card processing 9,393 0.06%
TBC Capital LLC 100.0% Georgia 1999 Brokerage 6,082 0.04%
TBC Leasing JSC 99.6% Georgia 2003 Leasing 269,612 1.78%
Non-banking
TBC Kredit LLC 100.0% Azerbaijan 1999 credit institution 30,484 0.20%
Banking System Service Information
Company LLC 100.0% Georgia 2009 services 956 0.01%
TBC Pay LLC 100.0% Georgia 2008 Processing 32,797 0.22%
Real estate
Index LLC 100.0% Georgia 2009 management 611 0.00%
Real Estate Management Real estate
Fund JSC* 0.0% Georgia 2010 management 21 0.00%
TBC Invest LLC 100.0% Israel 2011 PR and marketing 156 0.00%
BG LLC* 0.0% Georgia 2018 Asset management 12,786 0.08%
JSC TBC Insurance 100.0% Georgia 2014 Insurance 58,607 0.39%
Swoop JSC 100.0% Georgia 2010 Retail Trade 922 0.01%
All Property LTD 90.0% Georgia 2013 Real Estate 134 0.00%
GE Commerce LTD 100.0% Georgia 2018 Retail Trade 1,053 0.01%
(*)The Group has de facto control over these subsidiaries
1) Earnings per Share
In GEL 1Q 2019 4Q 2018 1Q 2018 Earnings per share for profit attributable to the owners of the Group: -------------------------------------------- -------- -------- -------- - Basic earnings per share 2.45 2.40 1.80 - Diluted earnings per share 2.45 2.37 1.79 -------------------------------------------- -------- -------- --------
Source: IFRS Consolidated
2) Sensitivity Analysis
31-Mar-19 10% Currency Devaluation
Sensitivity Analysis Effect
----------------------------------------- ---------- -------------------------
NIM* -0.14%
Technical Cost of Risk +0.11%
----------------------------------------- ---------- -------------------------
Regulatory Total Capital 2,421 2,466
Regulatory Capital adequacy ratios tier 0.63% - 0.82%
1 and total capital decrease by
----------------------------------------- ---------- -------------------------
(*) Linear depreciation is assumed for NIM sensitivity analysis
Source: IFRS statements and Management Figures
3) The share of selected FC denominated P/L Items
Selected P&L Items 1Q FC % of Respective 2019 Totals ---------------------------- ------------------- Interest Income 40% Interest Expense 49% Fee and Commission Income 30% Fee and Commission Expense 67% Administrative Expenses 18% ---------------------------- -------------------
Source: IFRS statements and Management figures
4) Open Interest Rate Position as of 31 March 2019
Open interest rate Open interest rate
position in GEL GEL 662 m position in FC GEL 2,610 m
------------------- --------------------------- -------------------
GEL m % share GEL % share
in totals m in totals
--------------------------------- ------ ----------- --------------------------- ------ -----------
Assets 3,361 22% Assets 4,353 29%
------ ----------- ------ -----------
Securities with fixed
yield(<=1y)* 391 25% Nostro** 85 24%
------ -----------
Securities with floating
yield 542 35% NBG Reserves** 1,416 96%
------ -----------
Loans with floating
yield 2,272 22% NBG Deposits 0 0%
------ -----------
Reserves in NBG 137 9% Libor Loans 2,852 28%
------ -----------
Interbank loans& Deposits
& Repo 19 5% Interest Rate Swap 0 0%
------ ----------- ------ -----------
Liabilities 2,699 21%
------ ----------- ------ -----------
Current accounts*** 788 9% Liabilities 1,743 14%
------ ----------- ------ -----------
Saving accounts*** 524 6% Senior Loans 1,324 56%
------ -----------
Refinancing Loan of
NBG & MoF Deposits 808 34% Subordinated Loans 419 63%
------ -----------
Interbank Loans &Deposits
& Repo 63 20%
------ -----------
IFI Borrowings 516 22%
------ -----------
(*) 52% 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 June 2018, according to NBG regulation is it possible to apply negative interest rates on NBG reserves and correspondent accounts. However, negative rate is floored by 0% in case of USD and by (-0.6)% in case of EUR accounts.
(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1 month prior notification).
5) Yields and Rates
Yields and Rates 1Q'19 4Q'18 3Q'18 2Q'18 1Q'18
------------------------------ ------ ------ ------ ------ ------
Loan yields 11.5% 12.2% 12.4% 12.5% 12.3%
Retail loan yields GEL 19.6% 20.7% 20.8% 21.3% 20.5%
Retail loan yields FX 7.4% 7.8% 7.9% 8.0% 8.4%
Retail Loan Yields 12.8% 13.6% 14.1% 14.7% 14.6%
Corporate loan yields
GEL 10.8% 10.9% 11.0% 11.4% 11.2%
Corporate loan yields
FX 9.0% 9.7% 9.1% 8.7% 8.6%
Corporate Loan Yields 9.5% 10.0% 9.6% 9.4% 9.2%
MSME loan yields GEL 15.7% 16.2% 16.6% 15.9% 15.0%
MSME loan yields FX 8.1% 8.6% 8.9% 8.5% 8.9%
MSME Loan Yields 11.7% 12.2% 12.6% 12.0% 11.3%
Deposit rates 3.3% 3.1% 3.3% 3.3% 3.3%
Retail deposit rates GEL 5.4% 4.6% 4.4% 4.3% 4.4%
Retail deposit rates FX 2.2% 2.2% 2.3% 2.4% 2.5%
Retail Deposit Yields 2.8% 2.6% 2.7% 2.7% 2.8%
Corporate deposit rates
GEL 7.5% 6.8% 7.5% 7.9% 8.0%
Corporate deposit rates
FX 1.6% 1.8% 2.0% 1.9% 2.0%
Corporate Deposit Yields 4.9% 4.5% 4.9% 5.2% 5.2%
MSME deposit rates GEL 1.4% 1.6% 1.7% 1.7% 1.8%
MSME deposit rates FX 0.3% 0.3% 0.4% 0.4% 0.5%
MSME Deposit Yields 0.9% 1.0% 1.0% 1.0% 1.1%
Yields on Securities 7.5% 7.6% 7.8% 7.7% 8.1%
------------------------------ ------ ------ ------ ------ ------
Source: IFRS Consolidated
6) Risk Adjusted Yields
& Cost of Risk
Risk-adjusted Yields 1Q'19 4Q'18 3Q'18 2Q'18 1Q'18
------------------------- ------ ------ ------ ------ ------
Loan yields 10.1% 10.9% 10.9% 10.8% 10.6%
Retail Loan Yields 10.4% 10.6% 11.6% 12.1% 11.6%
Corporate Loan Yields 9.6% 10.1% 9.1% 8.6% 9.3%
MSME Loan Yields 10.1% 12.4% 11.8% 11.1% 9.8%
------------------------- ------ ------ ------ ------ ------
1Q'19 4Q'18 3Q'18 2Q'18 1Q'18
------------------------- ------ ------ ------ ------ ------
Cost of Risk 1.4% 1.4% 1.9% 1.8% 1.3%
Retail 2.4% 2.9% 2.7% 2.6% 2.7%
Corporate -0.1% 0.1% 1.1% 0.9% -0.8%
MSME 1.6% -0.1% 1.2% 1.0% 1.0%
Source: IFRS Consolidated
7) Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
Mar-19 Dec-18 Sep-18 Jun-18 Mar-18
------------------------- ------- ------- ------- ------- -------
SDL Loans as % of Gross
Loans 3.9% 3.6% 3.8% 3.3% 3.1%
------------------------- ------- ------- ------- ------- -------
Source: NBG
8) Cross Sell Ratio[16] and Number Active Products
Mar-19 Sep-18 Mar-18 Sep-17 Mar-17
--------------------------- ------- ------- ------- ------- -------
Cross Sell Ratio 3.75 3.85 3.88 3.78 3.57
Number of Active Products
(in million) 4.62 4.58 4.58 4.06 3.16
--------------------------- ------- ------- ------- ------- -------
Source: Management's figures.
9) Diversified Deposit Base
Status: monthly income >=GEL 3,000 or loans/deposits >=GEL 30,000
VIP: deposit >=USD 100,000 as well as on discretionary basis; WM: >=USD 100,000 as well as on discretionary basis
Wealth Management includes UHNW and HNW non-resident clients
31 March 2019 Volume of Deposits Number of Deposits ----------------------- ------------------- ------------------- MASS 36% 91.4% STATUS 32% 8.1% VIP 23% 0.4% Wealth Management for non-resident clients 9% 0.1% ----------------------- ------------------- -------------------
Source: Management figures.
10) Loan Concentration
Mar-19 Dec-18 Sep-18 Jun-18 Mar-18
------------------------ ------- ------- ------- ------- -------
Top 20 Borrowers as %
of total portfolio 13.5% 14.2% 14.1% 13.2% 13.4%
Top 10 Borrowers as %
of total portfolio 9.6% 10.1% 10.3% 9.2% 9.4%
Related Party Loans as
% of total portfolio 0.1% 0.1% 0.1% 0.1% 0.1%
------------------------ ------- ------- ------- ------- -------
Source: IFRS consolidated.
11) Number of Transactions in Digital Channels (in thousands)
1Q 19 1Q 18 1Q 17 1Q 16
--------------------------------------- ------ ------ ------ ------
Internet banking number of
transactions 2,499 2,449 2,098 1,669
--------------------------------------- ------ ------ ------ ------
Mobile banking number of transactions 9,194 5,315 2,622 1,150
--------------------------------------- ------ ------ ------ ------
Source: Management figures.
12) Penetration Ratios of Digital Channels
1Q 19 1Q 18 1Q 17 1Q 16
---------------------------- ------ ------ ------ ------
Internet or Mobile Banking
Penetration Ratio* 42% 38% 34% 32%
---------------------------- ------ ------ ------ ------
Mobile Banking Penetration
Ratio** 37% 31% 25% 17%
---------------------------- ------ ------ ------ ------
Source: Management figures.
* Internet or Mobile Banking penetration equals active clients of Interment or Mobile Banking divided by total active clients.
** Mobile Banking penetration equals active clients of Mobile Banking divided by total active clients.
13) Number of Active Clients (in thousands)
Mar-19 Mar-18 Mar-17 Mar -16
---------------------------- ------- ------- ------- --------
Internet or mobile banking 529 447 298 220
---------------------------- ------- ------- ------- --------
Mobile banking 411 365 219 121
---------------------------- ------- ------- ------- --------
Source: Management figures.
14) Distribution of Transactions in Digital Channels
1Q 19
------------------- ------
Mobile Banking 29%
------------------- ------
Internet Banking 11%
------------------- ------
Branches 8%
------------------- ------
TBC Pay terminals 21%
------------------- ------
ATMs 30%
------------------- ------
Other 1%
------------------- ------
92% of all transactions are conducted through digital channels
15) Distribution of Sales in Channels
1Q 19 1Q 18 1Q 17 1Q 16
------------------------ ------ ------ ------ ------
IB, MB, ATM, Web 45% 30% 24% 27%
------------------------ ------ ------ ------ ------
Branches & Call Centre 55% 70% 76% 73%
------------------------ ------ ------ ------ ------
45% of sales are conducted through digital channels*.
* For products being offered through remote channels: pre-approved loans, credit cards, limit increase and opening of accounts.
16) Percentage of Selected Product Sales in Digital Channels
1Q 19 1Q 18 1Q 17
-------------------- ------ ------ ------
Deposits 72% 59% 50%
-------------------- ------ ------ ------
Pre-approved loans 23%* 35% 14%
-------------------- ------ ------ ------
Debit cards 26% 14% -
-------------------- ------ ------ ------
* The decrease is due to new regulations.
17) POS Terminal Transactions
Mar-19 Dec-18 Sep-18 Jun-18 Mar-18
---------------------------- ------- ------- ------- ------- -------
POS number of transactions
(in millions) 26.6 27.4 24.1 22.3 17.9
---------------------------- ------- ------- ------- ------- -------
POS volume of transactions
(in mln GEL) 1,017 1,117 986 850 661
---------------------------- ------- ------- ------- ------- -------
* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches.
18) Funding repayment ladder
Subordinated and Senior Loans' Principal Amount Outflow by Year (USD million)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
-------------------- ------ ------ ------ ------ ----- ----- ----- ----- ----- -----
Senior loans 113.9 182.1 261.1 107.0 89.4 36.8 28.2 10.6 4.6 -
Subordinated loans 6.4 13.9 11.1 11.4 32.2 1.1 39.0 72.9 16.1 37.0
Source: Management figures, revolving non IFI loans from NBG are excluded.
19) NPL Build Up (in GEL million)
NPLs NPLs as Real Growth FX Effect Write-Offs Repossessed NPLs as
of Dec-18 of Mar-19
----------- ----------- ------------ ---------- ----------- ------------ -----------
Retail 137 43 - (34) (2) 144
Corporate 85 4 - - (2) 87
MSME 103 12 1 (7) (3) 106
Total 325 59 1 (41) (7) 337
----------- ----------- ------------ ---------- ----------- ------------ -----------
20) Net Write-Offs,
1Q 2019
--------------------- ----------- ----------- ---------------
In GEL million Write-Offs Recoveries Net Write-Offs
--------------------- ----------- ----------- ---------------
Retail (34) 4 (30)
Corporate - 1 1
MSME (7) 3 (4)
--------------------- ----------- ----------- ---------------
Total (41) 8 (33)
--------------------- ----------- ----------- ---------------
Source: IFRS Consolidated.
21) Portfolio Breakdown by Collateral Types as of 31-Mar-19 ----------------------------------------- Cash Cover 2% Gold 3% Inventory 9% Real Estate 67% Third Party Guarantees 6% Other 2% Unsecured 11% ---------------------------------- -----
72% of the loans are secured by cash, gold and real estate.
Source: IFRS Consolidated.
22) Loan to Value by Segments as of 31-Mar-19
Retail Corporate MSME Total
------------------------------------- ------------ ------- -----------
56% 49% 47% 51%
Mortgage loan's LTV
stood at 51%
23) TBC Insurance
TBC Insurance is a rapidly growing, wholly owned subsidiary of TBC Bank and it is the Bank's main bancassurance partner. The company was acquired by the Group in October 2016 and it has since grown significantly, becoming the second largest player on the P&C and life insurance market and the largest player in the retail segment, holding 22.8% and 39.8% market shares[17] without border motor third party liability (MTPL) insurance, respectively in 1Q 2019[18].
TBC insurance serves both individual and legal entities and it provides a broad range of insurance products covering motor, travel, personal accident, credit life and property, business property, liability, cargo and agro insurance products. The company differentiates itself for its advanced digital channels, which include TBC bank's award winning Internet and mobile banking applications, a wide network of self-service terminals, a web channel, as well as a Georgian-speaking chat-bot B-Bot, which is available through Facebook messenger.
In 1Q 2019, TBC Insurance achieved strong growth results. The gross written premium grew by 39.8% YoY and amounted to GEL 17.5 million driven by strong focus on cross-selling. Over the same period, the net combined ratio([19]) increased by 6.8 pp and stood at 82.8%. This was mainly driven by several new products launched at the end of December 2018 leading to the increase in operating expenses. As a result, the net profit for 1Q 2019 stood at GEL 2.0 million without subsidiaries. At the same time TBC insurance maintains strong capital levels, with solvency ratio above regulatory minimum of 100%, standing at 140.8%.
In thousands of GEL 1Q'19 4Q'18 3Q'18 2Q'18 1Q'18
------------------------ ------- ------- ------- ------- -------
Gross written premium 17,471 17,075 15,833 14,677 12,494
Net earned premium[20] 10,677 10,554 9,841 8,804 6,458
Net profit 2,004 2,556 2,271 1,497 1,260
1Q'19 4Q'18 3Q'18 2Q'18 1Q'18
------------------------ ------- ------- ------- ------- -------
Net combined ratio 82.8% 80.7% 78.8% 81.0% 76.0%
Market share 22.8% 23.0% 20.7% 18.5% 19.5%
Figures are provided without subsidiaries of TBC Insurance: Swoop JSC, GE Commerce LTD, All Property LTD.
24) Regulatory Capital
Total capital and tier 1 capital limits
31-Mar-2019 31-Dec-2019 F 31-Dec-2020 F 31-Dec-2021 F
Actual
Tier Total Tier Total Tier Total Tier Total
1 1 1 1
====== ====== ============ ============ ============ ============ ============ ============
Minimum
Requirement 6.0% 8.0% 6.0% 8.0% 6.0% 8.0% 6.0% 8.0%
====== ====== ============ ============ ============ ============ ============ ============
Conservation
Buffer 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
====== ====== ============ ============ ============ ============ ============ ============
Counter-Cyclical
Buffer 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
====== ====== ============ ============ ============ ============ ============ ============
Systemic
Buffer 1.0% 1.0% 1.5% 1.5% 2.0% 2.0% 2.5% 2.5%
====== ====== ============ ============ ============ ============ ============ ============
Pillar
1 buffers 9.5% 11.5% 10.0% 12.0% 10.5% 12.5% 11.0% 13.0%
====== ====== ============ ============ ============ ============ ============ ============
Pillar
2 2.4% 5.4% 2.5%-4.0% 4.0%-5.5% 2.5%-4.0% 4.0%-5.5% 2.5%-4.0% 4.0%-5.5%
====== ====== ============ ============ ============ ============ ============ ============
Total 11.9% 16.9% 12.5%-14.0% 16.0%-17.5% 13.0%-14.5% 16.5%-18.0% 13.5%-15.0% 17.0%-18.5%
====== ====== ============ ============ ============ ============ ============ ============
25) NBG Initiatives
The new regulation on responsible lending to individuals:
Starting from January 2019, the National Bank of Georgia has adopted the regulation on responsible lending to individuals, which replaces the former regulation introduced in May 2018. The regulation requires financial institutions to conduct solvency analysis of a borrower before issuing a loan and it also sets new limits on Payment to Income (PTI) and Loan to Value (LTV) for individual loans. The thresholds are different for domestic and foreign currency loans in order to protect a borrower and the financial system against the risks stemming from exchange rate fluctuations.
Maximum Payment to Income Ratios:
Monthly income, net (in For non-hedged borrower For hedged borrowers
GEL) in case of maximum/contractual in case of maximum/contractual
maturity maturity
<1,000 20% / 25% 25% / 35%
------------------------------- -------------------------------
>=1,000-2,000< 35% / 45%
------------------------------- -------------------------------
>=2,000-4,000< 25% / 30% 45% / 55%
------------------------------- -------------------------------
>=4,000 30% / 35% 50% / 60%
------------------------------- -------------------------------
Maximum Loan to Value Ratios:
Maximum loan to value ratio (LTV)
for GEL loans 85%
Maximum loan to value ratio (LTV)
for foreign currency loans 70%
--------
Maximum tenures:
Mortgage 15 years
Consumer mortgages collateralized 10 years
by real estate
----------
Auto Loans 6 years
----------
Other consumer loans 4 years
----------
26) Space - fully digital bank
Date # of app. downloads # of registered customers loans in thousands GEL 30-Jun-2018 99,646 47,657 1,112 30-Sep-2018 186,044 72,447 5,814 ------------- -------------------- -------------------------- ------------------------- 31-Dec-2018 258,846 93,994 14,693 ------------- -------------------- -------------------------- ------------------------- 31-Mar-2019 292,423 114,675 16,843 ------------- -------------------- -------------------------- -------------------------
27) International strategy: expansion into Azerbaijan market
Main highlights
-- TBC Bank and Nikoil Bank agreed on shareholders agreement in late December 2018 and signed it in early January 2019.
-- Our shareholding in the joint entity will be 8.34%.
-- We will have the right to exercise a call option during the next four years to obtain 50%+1 shareholding in the joint entity.
-- The call option is based on a fixed price formula and in most scenarios it is between 1-1.15x of the merged entity's book value (it is closer to the book value when exercised in later years).
-- Our additional estimated investment during the next four years will be consistent with our 8.34% shareholding and is estimated to be around USD 3-5 million per year.
Strengthening Management Team
Existing management team of the joint entity CEO - Nikoloz Shurghaia First Deputy CEO, Head of MSME - Farhad Hajinski Deputy CEO, Head of Retail - Fuad Tagiyev New management team of the joint entity COO - Nukri Tetrashvili, former CEO at TBC Kredit CDM - Senior Digital Manager with a solid track record at large Georgian bank CRO - David Tediashvili, former Head of Retail Credit Risk Department at TBC Bank CFO - Emil Dushdurov, former Associate Director, Deal Advisory at KPMG Azerbaijan CIO - Avtandil Tabatadze, former strategic projects manager at TBC Bank
Current Developments
Loans Disbursements (USD '000) Number of customers
1Q 2018 11,738 61,012
4Q 2018 29,376 61,275
-------- ------------------------------- --------------------
1Q 2019 25,030 66,691
-------- ------------------------------- --------------------
Mid-term vision
---------------------- ----------------- -----------------
In USD millions 1Q 2019 results Mid-term targets
of Nikoil of joint entity
Bank*
---------------------- ----------------- -----------------
Loan Portfolio c. 227 c. 1,400
Equity c. 36 c. 200
ROE NMF 20%+
---------------------- ----------------- -----------------
*Based on management
accounts.
-- Core segments: Retail and MSME (not large SMEs and Corporates);
-- Product offerings: A mix of Nikoil Bank and TBC Bank products adapted to the local needs and offered primarily through digital channels, including Space Bank.
28) International strategy: digital greenfield bank in Uzbekistan
This is still in the concept stage and subject to approval (including approval from the authorities), therefore it could change as we progress. The license is expected in 2019.
Why Uzbekistan?
-- Large underpenetrated market: -- with a population of more than 33.45 million -- retail loans to GDP stood at 7.2% at the end of 2018 -- Similar history as part of the Soviet Union and good cultural links
-- Right time given the implementation of reforms, many of which were designed by former Georgian government officials
-- Both Uzbekistan and Georgia are included into China's One Belt One Road initiative -- No digital bank operates in Uzbekistan currently
Strategic Positioning
-- Build a next generation bank for retail and MSME -- Focus on digital channels and SPACE -- Operate asset light, smart branches -- Establishing the highest standards of corporate governance -- Simple and intuitive products and processes -- Transparent and straightforward commissions structure -- Best customer experience -- Automated decision making system.
Main highlights
-- Initial investments from TBC Bank around USD 20-30 million, resulting in 51% shareholding -- Medium to long-term financial targets after license is granted: -- Achieve sustainable ROE up to 25% -- Cost to income ratio below 35%
Our Uzbek and Azerbaijan subsidiaries together will contribute c. 30% to the Group's loan book.
Upcoming Events
-- Opening pilot branch in 2019 for a proof of concept -- Core banking implementation with local IT company -- Multichannel development including Space
-- Our international partners, EBRD and IFC have expressed their interest to participate in this project subject to completion of their internal procedures and approvals
-- We have reached an agreement on main terms with Uzbek-Oman Investment Company (UOIC) to act as our local partner.
29) Payme
Main Highlights
-- TBC Bank Group PLC has entered into an agreement to acquire a 51% stake in LLC Inspired, a leading profitable payment platform in Uzbekistan under the Payme brand
-- The consideration for the 51% stake is USD 5.5 million, implying a valuation of USD 10.8 million for Payme
-- TBC Bank has also entered into a put/call arrangement for the remaining 49% of Payme, which, in normal circumstances, may only be exercised between the fourth and seventh anniversary of the date of completion of the transaction
-- The exercise price will depend on a set of parameters including Payme's revenue, EBIT and the number of active customers that Payme achieves.
Strategic Positioning
The transaction is in line with TBC Bank's international strategy to expand its regional operations, giving us the immediate access to a large customer base in the country and use our core digital strengths in Georgia to innovate in the Uzbekistani market.
Management Team
-- Founded in 2011 and continues to be managed by the three original founding shareholders; -- The team was strengthened by two other shareholders:
o one acting as Business Development and Research Director;
o the other as the Chief Technology Officer.
The management team will remain with Payme on a long-term basis and will continue to be actively involved in the development and execution of Payme's strategy.
Payme Financial and Operating Highlights
1Q 19 Growth
In million USD QoQ
--------------------- ------ -------
Revenue 0.6 21.9%
--------------------- ------ -------
Net profit 0.4 73.0%
--------------------- ------ -------
Number of customers 1.3 13.6%
--------------------- ------ -------
Product Types
* Utility and Top-up * E-commerce Acquiring and Payment GW
* White Label Mobile Banking
* P2P
* Invoicing System
* Loan Repayment
* Personal Finance Manager
* mPOS for QR Payments
30) Nikoil Bank Financials
Profit & Loss Statement
In thousands of USD 1Q'19 4Q'18 1Q'18 ---------------------------------------------------- ----------------------- ------------- ------- Interest income 4,610 4,280 3,630 Interest expense (2,069) (2,068) (2,414) Net interest income 2,541 2,212 1,216 Fee and commission income 551 958 486 Fee and commission expense (267) (426) (221) Net Fee and Commission Income 284 532 265 Net income from foreign currency operations 176 313 350 Net gain/(losses) from foreign exchange translation (1) 119 10 Gains less losses/(losses less gains) from derivative financial instruments - (28) - Other operating non-interest income 175 404 360 Credit loss allowance of loans 2,326 (23,670) 135 Credit loss allowance of other financial assets 44 (8,446) (68) Operating income after credit loss allowance 5,370 (28,968) 1,908 Staff costs (2,036) (2,276) (1,544) Depreciation and amortisation (321) (312) (344) Administrative and other operating expenses (1,165) (1,519) (996) Operating expenses (3,522) (4,107) (2,884) Profit before tax 1,848 (33,075) (976) Income tax expense - - 0 ---------------------------------------------------- ----------------------- ------------- ------- Profit for the period 1,848 (33,075) (976) ---------------------------------------------------- ----------------------- ------------- -------
Balance Sheet
In thousands of USD 31-Mar-19 31-Dec-18 31-Mar-18 --------------------------------------------- --------- --------- --------- Cash and cash equivalents 44,711 29,591 59,728 Due from other banks 36,654 26,833 21,483 Net Loans 135,655 120,704 166,375 Investment securities measured at fair value through other comprehensive income 7,085 46,794 14,517 Current income tax prepayment 4 2 82 Deferred income tax asset 768 768 768 Other financial assets 10,252 545 12,548 Other assets 1,100 7,195 577 Premises and equipment (Net) 5,663 5,571 5,782 Intangible assets (Net) 1,849 1,924 2,008 TOTAL ASSETS 243,741 239,927 283,868 --------------------------------------------- --------- --------- --------- Due to other banks 20,152 20,152 23,708 Customer Accounts 136,900 137,244 150,785 Other borrowed funds 41,112 41,237 33,823 Other financial liabilities 4,998 3,054 5,287 Subordinated debt 5,000 5,000 15,000 TOTAL LIABILITIES 208,162 206,687 228,603 --------------------------------------------- --------- --------- --------- Share capital 204,705 204,705 144,118 Additional paid-in-capital 500 500 500 Retained earnings (169,626) (171,965) (89,353) TOTAL EQUITY 35,579 33,240 55,265 --------------------------------------------- --------- --------- --------- TOTAL LIABILITIES AND EQUITY 243,741 239,927 283,868 --------------------------------------------- --------- --------- ---------
[1]Per updated methodology.
[2]Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.
[3]Per updated methodology.
[4]The calculation of the market share figure excludes the mandatory third-party liability (MTLP) insurance that foreign vehicles entering Georgia are required to buy at the border. This was introduced in March 2018 and the premium collected is shared evenly between 17 insurance companies, thus reducing our market share. Including the MTPL, our total market shares stood at 21.3% and our retail market share amounted to 32.9% as of 1Q 2019.
([5]) Taking into account loans issued in EUR and USD.
([6]) The number of transactions conducted through remote channels divided by the total number of transactions.
([7]) Latest available information.
[8]Taking into account loans issued in EUR and USD.
[9]IMF WEO April 2019 update.
[10]Gross insurance profit can be reconciled to the standalone net insurance profit (as shown in Annex 23 on pages 33-34) as follows: gross insurance profit minus credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.
[11] As at 1 January 2019, the group adopted IFRS 16, under which short term and low value lease contracts, also contracts that do not qualify for lease arrangements and taxes on lease contracts are expensed under this category of administrative expenses
[12]Total operating income growth minus operating expense growth.
[13]In 1Q 2019, GEL 128 million was transferred from MSME to corporate loans.
[14]In 1Q 2019, GEL 70 million was transferred from MSME to corporate deposits.
[15]TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016.
[16]Cross-sell ratio is defined as the number of active products divided by the number of active customers.
[17]Or 21.3% and 32.9% respectively, with MTPL insurance. Starting from March 1, 2018 border MTPL was introduced and GWP was divided evenly between 17 insurance companies, therefore it has decreased our market share.
[18]Based on internal estimates.
([19]) Net insurance claims plus acquisition costs and administrative expenses divided net earned premium.
([20]) Net earned premium equals earned premium minus reinsurer's share of earned premium.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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