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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -25.00 | -0.83% | 2,995.00 | 2,985.00 | 2,995.00 | 2,995.00 | 2,950.00 | 2,950.00 | 1,612 | 12:54:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMTBCG
RNS Number : 4488H
TBC Bank Group PLC
15 November 2018
TBC BANK GROUP PLC ("TBC Bank")
3Q AND 9M 2018 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
Forward-Looking Statements
This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause the actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
Third Quarter and Nine Months of 2018 Unaudited Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") will release its unaudited consolidated financial results for the third quarter and nine-month of 2018 on Thursday, 15 November 2018 at 7.00 am GMT (11.00 am GET).
On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.
Date & time: Thursday, 15 November 2018 at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST)
Please dial-in approximately five minutes before the start of the call quoting the password TBC:
Password: TBC UK Toll Free: 0808 109 0700 Standard International Access: +44 (0) 20 3003 2666 USA Toll Free: 1 866 966 5335 New York New York: +1 212 999 6659 Russia Toll Free: 8 10 8002 4902044 Moscow: +7 (8) 495 249 9843 Replay Numbers Replay Passcode: 5808754 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: IR@tbcbank.com.ge
E-mail: ZSzalai@Tbcbank.com.ge Tel: +(995 32) 227 27 E-mail: IR@tbcbank.com.ge
Tel: +44 (0) 7908 242128 27 Tel: +(995 32) 227 27
Web: www.tbcbankgroup.com Web: www.tbcbankgroup.com 27
Address: 68 Lombard Address: 7 Marjanishvili Web: www.tbcbankgroup.com
St, London EC3V 9LJ, St. Tbilisi, Georgia Address: 7 Marjanishvili
United Kingdom 0102 St. Tbilisi, Georgia
0102
Table of Contents
3Q and 9M 2018 Results Announcement
TBC Bank - Background
Financial Highlights
Recent Developments
Letter from the Chief Executive Officer
Economic Overview
Unaudited Consolidated Financial Results Overview for 3Q 2018
Unaudited Consolidated Financial Results Overview for 9M 2018
Additional Disclosures
TBC BANK Group PLC ("TBC Bank")
TBC Bank Announces Unaudited 3Q and 9M 2018 and Consolidated Financial Results:
Net Profit for 3Q 2018 up by 23.8% YoY to GEL 107.4 million
Net Profit for 9M 2018 up by 16.8% YoY to GEL 307.3 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 99.7% of its business is concentrated, and where it has 37.2% market share by total assets. TBC Bank 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.
In 4Q 2016, TBC Bank acquired Bank Republic which has been consolidated into the Group's results.
Financial Highlights
3Q 2018 P&L Highlights
-- Net profit amounted to GEL 107.4 million (3Q 2017: GEL 86.8 million; 2Q 2018: GEL 102.4 million)
-- Return on equity (ROE) amounted to 21.2% (3Q 2017: 19.8%; 2Q 2018: 21.3%)
-- Return on assets (ROA) amounted to 3.1 % (3Q 2017: 2.9%; 2Q 2018: 3.2%)
-- Total operating income amounted to GEL 278.1 million, up by 34.3% YoY and up by 7.6% QoQ
-- Cost to income was 37.4% (3Q 2017: 40.5%; 2Q 2018: 35.6%)
-- Cost of risk stood at 1.9% (3Q 2017: 1.3%; 2Q 2018: 1.8%)
-- FX adjusted cost of risk stood at 1.5% (3Q 2017 1.2%; 2Q 2018: 1.7%)
-- Net interest margin (NIM) stood at 6.9% (3Q 2017: 6.2%; 2Q 2018: 7.1%)
-- Risk adjusted net interest margin (NIM) stood at 5.4% (3Q 2017: 5.0%; 2Q 2018: 5.5%)
9M 2018 P&L Highlights
-- Net profit amounted to GEL 307.3 million (9M 2017: GEL 263.2 million)
-- Return on equity (ROE) amounted to of 21.2% (9M 2017: 20.9%)
-- Return on assets (ROA) was 3.1% (9M 2017: 3.2%)
-- Total operating income for the period was up by 25.5% YoY to GEL 775.2 million
-- Cost to income stood at 37.0% (9M 2017: 42.1%)
-- Cost of risk on loans stood at 1.7% (9M 2017: 1.2%)
-- Net interest margin (NIM) stood at 7.0% (9M 2017: 6.5%)
-- Risk adjusted net interest margin (NIM) stood at 5.3% (9M 2017: 5.1%)
Balance Sheet Highlights as of 30 September 2018
-- Total assets amounted to GEL 14,424.0 million as of 30 September 2018, up by 18.8% YoY and up by 6.2% QoQ
-- Gross loans and advances to customers stood at GEL 9,622.6 million as of 30 September 2018, up by 23.9% YoY and up by 8.2% QoQ
-- Net loans to deposits + IFI funding stood at 88.0% and Net Stable Funding Ratio (NSFR) stood at 118.0%
-- NPLs were 3.1%, down by 0.4pp YoY and unchanged QoQ
-- NPLs coverage ratios stood at 113.2%, or 209.0% with collateral, on 30 September 2018 compared, to 80.5% or 206.8% with collateral, as of 30 September 2017[1] and 116.1%, or 216.1% with collateral on 30 June 2018
-- Total customer deposits amounted to GEL 8,740 million as of 30 September 2018, up by 23.2% YoY and up by 10.2% QoQ
-- As of 30 September 2018, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 12.8% and 16.4% respectively, while minimum requirements amounted to 10.3% and 15.8%
Market Shares[2]
-- Market share in total assets reached 37.2% as of 30 September 2018, up by 0.7pp YoY and up by 0.1pp QoQ
-- Market share in total loans was 38.4% as of 30 September 2018, up by 0.2pp YoY and up by 0.1pp QoQ
-- In terms of individual loans, TBC Bank had a market share of 39.9% as of 30 September 2018, down by 0.6pp YoY and up by 0.1pp QoQ. The market share for legal entity loans was 36.6%, up by 1.0pp YoY and up by 0.1pp QoQ
-- Market share of total deposits reached 40.3% as of 30 September 2018, up by 1.7pp YoY and up by 0.8pp QoQ
-- Market share of individual deposits attained to 41.1%, up by 0.2pp YoY and down by 0.1pp QoQ. In terms of legal entity deposits, TBC Bank holds a market share of 39.4%, up by 3.5pp YoY and up by 1.9pp QoQ.
Recent Developments
Recent and Upcoming Regulations
-- On 1 September 2018, a 50% effective interest cap on loans was introduced, although we do not expect it to have any material impact on TBC Bank's performance;
-- Other regulatory initiatives are also expected to come into force by the end of 2018, including the following: 1) an increase in the limit, below which loans cannot be issued to individuals in foreign currency, from GEL 100,000 to GEL 200,000, 2) an introduction of new caps on PTI and LTV ratios and 3) a regulation on loans to customers without verified income.
-- While final details are not known yet, these regulations are expected to support further de-dollarization and it might decrease the retail loan growth rate in the short to medium term. Therefore, we are revising our medium term annual loan growth rate guidance to 10-15%. However, our other targets remain unchanged with return on equity above 20%, cost to income ratio below 35% and a dividend pay-out ratio of 25-35%.
Georgia ranks 6th in 2019 "Doing Business" report
-- Georgia continues its remarkable progress on the World Bank's Doing Business rankings. According to the 2019 Ease of Doing Business report, Georgia ranks 6(th) among 190 countries surveyed globally; up from the 9(th) in the previous year. Georgia stands just after Korea and before Norway and it outscores all CEE countries.
TBC Bank Group PLC announces Board changes
-- TBC Bank has appointed two female board members, Maria Luisa Cicognani and Tsira Kemularia, as Independent Non-Executive Directors. They will also serve as Supervisory Board members of TBC PLC's main subsidiary - JSC TBC Bank. Following the appointment of Ms Cicognani and Ms Kemularia, Stefano Marsaglia and Stephan Wilcke have stepped down from the TBC PLC Board and the Supervisory Board of JSC TBC Bank.
TBC Bank and FMO Sign a GEL 103 Million Loan Agreement
-- TBC Bank has signed a loan agreement in the amount of GEL 103 million with FMO, the Netherlands Development Finance Company. The five-year loan facility will be used primarily to finance young entrepreneurs running micro, small and medium size enterprises in Georgia, as well as young retail customers requiring mortgage loans. The local currency funding will be obtained by FMO through a public bond placement on the Georgian Stock Exchange.
TBC Bank and EIB Sign EUR 30 Million Loan Agreement
-- TBC Bank has signed a loan agreement in the amount of EUR 30 million with the European Investment Bank (EIB). The five-year loan facility will primarily be used to finance small and medium size enterprises in Georgia.
TBC Bank wins the Best Private Bank in Georgia 2018 award from PWM and The Banker Magazines
-- TBC Bank has been named the Best Private Bank in Georgia 2018 by Professional Wealth Management (PWM) and The Banker magazines. This prestigious award is acknowledgement of TBC Bank's continuous efforts to deliver exceptional private banking services in Georgia. Participants were evaluated against a set of growth and performance measures, as well as on their particular private banking services.
TBC Bank wins Two Global Digital Awards from Global Finance Magazine
-- TBC Bank has been named the world's Best in Social Media Marketing and Services 2018 and the world's Best Integrated Consumer Banking Site 2018 by Global Finance Magazine. In the list of winners TBC Bank stands among some of the world's leading banks.
TBC Bank wins the Best Foreign Exchange Provider 2019 in Georgia from Global Finance Magazine
-- TBC Bank has been named the Best Foreign Exchange Provider 2019 in Georgia by Global Finance Magazine. The winners were chosen based on extensive criteria including transaction volume, market share, scope of global coverage, customer service, competitive pricing and innovative technologies.
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 delighted to present our strong financial results for the third quarter in 2018 and a brief overview of the recent economic developments, as well as give you an update on our international plans.
In the third quarter, we recorded a consolidated net profit of GEL 107.4 million, up by 23.8% year-on-year. Our return on equity amounted to 21.2%, up by 1.4 percentage points year-on-year, while our return on assets was 3.1%, up by 0.2 percentage points year-on-year.
We continued to deliver on our promises and achieved a net interest margin at 6.9% during the quarter, within the range of our short-term guidance. Over the same period, our net fee and commission income grew by 23.9% year-on-year, consistent with our annual growth guidance and mainly driven by the increasing number of card and settlement transactions. Our cost to income ratio decreased by 3.1 percentage points year-on-year to 37.4%.
During the quarter, our loan book grew by 23.9% year-on-year, bringing our market share to 38.4%, up by 0.2 percentage points year-on-year. Our asset quality remained sound, with FX adjusted cost of risk at 1.5% and non-performing loans at 3.1%. Over the same period, our customer accounts grew by 23.2% year-on-year, increasing our market share to 40.3%, up by 1.7 percentage points year-on-year.
Our capital and liquidity ratios continued to remain solid. As of 30 September 2018, our tier 1 and total capital adequacy ratios (CAR) per Basel III guidelines stood at 12.8% and 16.4% respectively, compared to the corresponding minimum requirement of 10.3% and 15.8%. At the same time, our net loans to deposits + IFI funding ratio stood at 88.0% and the net stable funding ratio (NSFR) was 118.0%.
I am particularly pleased with the achievements of our digital strategy as the number of transactions and sales volume through digital channels continue to grow. As a result, in the third quarter of 2018 our offloading ratio was 90%[3], while 47%[4] of all sales were completed via digital channels in September 2018. In addition, our recently launched, fully-digital bank, Space, continued to rapidly attract new customers and had approximately 186,000 users as of 30 September 2018.
The growth of the Georgian economy remains solid despite increased uncertainties in the region, contractionary fiscal policy and one-offs related to some large infrastructure projects. In the third quarter, real GDP([5]) grew by 4.0%, while growth in September reached 5.6%. Investment demand has been the major contributor to growth, supported by healthy business lending as well as the strong pace of reforms aimed at improving the business environment in the country. Georgia ranked 6(th) out of 190 countries in the recently released "Doing Business 2019 report", up from 9(th) position in the previous year. While the growth of total external inflows slowed during the quarter, mostly due the situation in Turkey and Iran, it still remained in double digits thanks to the geographically diversified sources of inflows. During the quarter exports of goods increased by 21.1% year-on-year, mainly supported by exports to CIS countries. Over the same period, remittances grew by 12.0% year-on-year and tourism inflows expanded by 11.7% year-on-year, mainly driven by EU countries. Despite the temporary negative spill-overs from some neighbouring countries, the Georgian economy is expected to continue its solid growth, with the IMF projecting an average of 5.0% annual GDP growth over the next five years.
Finally, I would like to welcome our two new board members: Maria Luisa Cicognani and Tsira Kemularia, who joined our Board as independent Non-Executive Directors. Ms. Cicognani and Ms. Kemularia have extensive international experience at some of the world's leading institutions and will bring valuable perspectives and expertise to our Board.
Following the increase in diversity of our Board and our continued efforts to improve corporate governance, including implementation of the new executive compensation system, we expect substantial improvement in our governance scores, and we are very pleased to see ISS upgrading our score to 4 as of 1 November 2018.
Outlook
On 1 September 2018, a 50% effective interest rate cap on loans was introduced, although we do not expect it to have any material impact on TBC Bank's performance. Other regulatory initiatives are also expected to come into force by the end of 2018, including the following:
-- An increase in the limit below which loans cannot be issued to individuals in a foreign currency, from GEL 100,000 to GEL 200,000;
-- The introduction of new caps on PTI and LTV ratios; and -- Regulation of loans to customers without verified income.
While the final details are not known yet, these regulations are expected to support further de-dollarisation and they may also decrease the retail loan growth rate in the short-to-medium term. Therefore, we are revising our medium term annual loan growth rate guidance to 10-15%. However, our other targets remain unchanged: a return on equity above 20%, a cost to income ratio below 35% and a dividend pay-out ratio of 25-35%.
Regarding our insurance business, I am very pleased with its results. Starting from this year, we have become the second largest player on the P&C insurance market and the largest player in the retail segment, holding 18.3% and 30.0% market shares[6] respectively, based on internal estimates. In the third quarter, the number of customers grew steadily and totaled around 300,000, up by 113% year-on-year.
While Georgia will remain our main focus, the vast expertise we have built in the last three decades, including our advanced digital banking technology, should provide us with a strong competitive advantage to carefully enter selected new markets and start growing our banking business beyond Georgia.
In this context, I would like to provide you with an update on the progress made in our international strategy:
Azerbaijan
Following the completion of due diligence of Nikoil Bank, our Board of Directors is expected to approve the transaction on 16(th) November, after which we will sign the definitive agreements. The next step is obtaining the regulatory approval, which could take up to a few months. After the merger is completed, TBC Bank will hold up to 10% of the merged entity and will have an option to acquire the number of shares needed to achieve 50%+1 share of the merged entity within 3 years, based on a fixed price formula.
In parallel, we have started to develop and implement the new strategy of the merged entity. The bank will be serving retail and MSME customers and will have a strong focus on digital offerings including our fully-digital bank, Space. The main shareholder of Nikoil has already recapitalised the bank by investing USD 45 million by September 2018. A further capital increase has also been agreed upon, whereby TBC Bank will be investing, consistent with its 10% shareholding, between three and five million US dollars each year subject to reaching appropriate KPIs by the merged entity. Within three years, we expect the bank to have USD 1,400 million in its loan book, USD 200 million in total equity and a return on equity of above 20%.
I am very pleased that we are establishing an outstanding team for the merged entity. In addition to the CEO, Nikoloz Shurgaia, who has extensive international banking experience and education, the following new members have joined the team:
-- Chief Operating Officer - Nukri Tetrashvili, former CEO of TBC Kredit
-- Chief Digital Officer -Senior Digital Manager with a solid track record at large Georgian bank
-- Chief Risk Officer - David Tediashvili, former Head of Retail Credit Risk Department at TBC Bank
-- Chief Financial Officer - Emil Dushdurov, former Associate Director, Deal Advisory at KPMG Azerbaijan
Uzbekistan
I would like to present our progress in our quest to expand our digital banking offerings not only in the Caucasus region, but also in Central Asia, namely in Uzbekistan. This is still at the concept phase and subject to approvals, including from the local authorities. Therefore, the project could change as we progress.
Uzbekistan is a very attractive market with a large and growing population of 32 million and with retail and MSME loans to GDP ratio([7]) of below 5% as of the end 2017. Georgia and Uzbekistan have good cultural links, share a similar past dating back to the Soviet Union times and are both part of China's One Belt One Road initiative.
We believe that now is the right time to enter this market as the country has embarked on a path of reforms, many of which have been designed based on advice given by former Georgian government officials, and is creating a business friendly environment.
We aspire to build a greenfield, next generation bank for retail and MSME customers with a primary focus on digital channels including our fully-digital bank, Space. We also plan to operate hi-tech, asset-light branches with digital offerings.
We would like to establish the bank in partnership with international financial institutions and a local partner. Our plans foresee a minimum 51% shareholding and an initial investment of USD 20-30 million. We have already secured preliminary interest from certain international financial institutions and we are in the process of finding a local partner.
Our medium to long-term financial aspirations for the Uzbek subsidiary is to contribute above 20% to TBC Bank Group PLC's assets and income and to achieve sustainable ROE up to 25%.
On the one hand, our planned expansion in Azerbaijan and Uzbekistan should allow us to reach out to a population of around 40 million compared to just 4 million in Georgia, offering us tremendous new growth opportunities given the competitive advantages of our products and services. On the other hand, we plan to follow an asset-light, limited capital investment approach with a strong focus on digital channels and to invest in stages to make sure that we are comfortable with the results and the operating environment before committing additional investment.
We will aim to transfer our international aspirations into specific financial targets within the period of one year.
Economic Overview[8]
Economic growth
Economic growth remained at solid 5.5% in 2Q 2018. In nominal terms, the GDP increased by 10.6% YoY over the same period. Amid increased uncertainties in the countries across the region, a contractionary fiscal policy and one-offs related to large infrastructure projects, growth slowed to 4.0% in 3Q 2018, with latest September growth at 5.6%, in line with initial estimates of the national statistics' office Geostat. Reflecting the increased uncertainties in the external sector IMF revised GDP growth projections to 5.0% for 2018, down from 5.5% projected previously.
Structural reforms continue to support the domestic as well as foreign investment growth. According to the World Bank's "Doing Business 2019" report, Georgia further strengthened its position and ranked 6(th) among the 190 countries surveyed - up by 3 steps from the 9(th) position in previous year. With this position, Georgia stands among the countries such as Hong Kong, Korea, Norway, while outperforming all of the CEE countries. Continued tax reform contributes significantly to the strengthening of Georgia's position in "Doing Business 2019" rankings. Total tax and contribution rate as a percentage of corporate taxes currently stand at 9.9%, among the lowest globally, down from 16.4% in 2018([9]) .
The investment demand has fuelled growth in 2Q 2018. Investment increased by 26.4% YoY in nominal terms and amounted to 34% of GDP over the last four quarters ending 2Q 2018, the highest level since 2006. The increase was driven by solid growth in capital investments (+21.2% YoY) as well as investments in inventory (+81.8% YoY). Consumption rose by 6.9% YoY in nominal terms as of 2Q 2018.
In 2Q 2018 trade and repairs (+10.5% YoY), manufacturing (+7.6% YoY), real estate (+13.8% YoY), and financial intermediation (+22.0% YoY) were the fastest growing sectors, contributing the most to real GDP growth, while agriculture (-3.3% YoY) and construction (-7.1% YoY) sectors contracted. The drop in the construction sector was primarily due to the one-off factors related to fiscal underspending on several large scale infrastructure projects as well as finalization of the South Caucasus pipeline expansion project.
Consolidated budget posted the surplus of an estimated 0.7% of GDP both in 3Q 2018 and in the first nine months of 2018. These figures imply sizeable contractionary impact of fiscal policy as budget deficit stood at 3.3% in 3Q 2017 and 2.0% in first nine months of 2017. In 3Q 2018 tax revenues increased by 8.7% YoY, over the same period total spending declined modestly by 0.5% YoY.
The contractionary impact of the fiscal spending was balanced by the economy's accelerated bank lending. As of September 2018 the total bank loan portfolio increased by 19.1%[10] YoY. Loans to SME and corporate segment increased by a solid 20.3% and 19.8% YoY respectively. Retail loan growth also remained strong at 18.1%, primarily driven by the increase of mortgage loans. The NBG's regulation related to the non-mortgage lending introduced back in May 2018 have resulted in slowdown of this segment.
The growth of total external inflows from exports, tourism and remittances slowed in 3Q 2018 amid increased uncertainties in some of Georgia's economic partners. Despite the negative impact mostly from Turkey and Iran, the growth of inflows remains in double digits thanks to their geographically diversified sources.
Exports of goods increased by a solid 21.1%([11]) YoY in 3Q 2018. The growth was driven by growing exports to CIS countries (+41.9% YoY). Over the same period exports to EU decreased modestly by 1.7% YoY, while the exports to other countries increased by 9.5% YoY. The sharp drop of the Turkish lira and sanctions on Iranian oil exports negatively affected the growth of exports to these countries and dropped by 15% YoY and 28.8% YoY respectively. The share of Turkey and Iran in Georgia's total exports fell to 6.8% in 3Q 2018, thus the negative spillovers from these countries should be limited going forward.
After a 23.2% increase in the first half of 2018, the growth in imports retreated to 11.8% YoY in 3Q 2018, reflecting the expected slower economic growth in 3Q as well as restrictions on non-mortgage loans having negative impact on the imports of durable consumer goods. The trade deficit widened by only 6.4% in 3Q 2018 compared to the 20.5% growth 1H 2018. Declining growth rate of the trade deficit was evident since March 2018 with even improvement in September.
In 3Q 2018 tourism inflows grew by 11.7% YoY. The increase of visitors from the EU was steepest at 39.0% YoY. Visitors from the CIS countries increased by 9.6% YoY while the visitors from other countries went up by 4.0% YoY. The latter was negatively affected primarily by declining visitors from Iran (-26.3% YoY).
Remittances grew by 12.0% YoY in 3Q 2018 with EU countries remaining the major driver of growth. Private money transfers slowed from the CIS (+3.6% YoY) and other countries (7.5% YoY). In the same period sizeable decline in remittances from Turkey in 3Q 2018 (-13.8%) was the main drag on growth. Inflows also declined from Russia (-1.6% YoY) albeit more moderately.
The current account (CA) deficit was traditionally fully financed by FDIs and remained broadly unchanged from previous year, standing at 9.2% of GDP as of last four quarters ending 2Q 2018.
Important to mention that in the 3rd quarter 2018 NBG bought 62.5 mln USD, indicating that FX inflows are sufficient for higher growth and without negative impact of fiscal spending on domestic demand exchange rate would not have been necessarily depreciated.
In September, the USD/GEL exchange rate depreciated by 0.9% YTD and by 5.6% YoY. In the same period, the EUR/GEL exchange rate appreciated by 2.4% YTD and weakened by 3.6% YoY. Real effective exchange rate of GEL could be undervalued following the appreciation of Turkish lira and some USD/GEL weakness in Sept-October 2018. As of October 31 GEL real effective exchange rate was around same levels as in Jan-Feb 2018, close to its peak depreciation by the end of November 2017.
Inflation and monetary policy
CPI inflation stood at 2.7% in September, slightly below the NBG's 3% target. The core inflation remained around 1pp below the headline inflation, the difference being mostly driven by rising oil prices. The NBG started to gradually ease the monetary policy by cutting its refinancing rate by 0.25pp to 7% in July 2018. NBG left the policy rate unchanged at 7% during their September and October meetings. NBG expects to decrease interest rates going forward, however depending on external as well as domestic developments.
Going forward
Despite the temporary negative spillovers from the neighboring countries, the Georgian economy is expected to continue its solid performance. According to the IMF projections, growth is expected to average at 5% over the next five years. Solid growth projections are backed by the continuous reforms to further strengthen the economy as an attractive business destination. Furthermore, tax-free access to almost all major markets in the region enables Georgia to continue to diversify its export markets and increase the economy's resilience against headwinds.
More information on the Georgian economy and financial sector can be found at www.tbcresearch.ge
Unaudited Consolidated Financial Results Overview for 3Q 2018
This statement provides a summary of the unaudited business and financial trends for 3Q 2018 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.
Starting from 1 January 2018, TBC Bank adopted IFRS 9 and IFRS 15. Therefore, the comparative information for 2017 is not comparable to the information presented for 2018.
Please note, that there might be slight differences in previous periods' figures due to rounding.
Income Statement Highlights -------------------------------------------- --------------- ------------- -------------- ----------- ----------- in thousands of GEL 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Net Interest Income 199,612 188,204 146,546 36.2% 6.1% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Net Fee and Commission Income 39,384 39,162 31,790 23.9% 0.6% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Other Operating Non-Interest Income 39,093 31,052 28,758 35.9% 25.9% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Credit Loss Allowance (47,650) (35,091) (27,097) 75.8% 35.8% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Operating Income after Credit Loss Allowance 230,439 223,327 179,997 28.0% 3.2% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Operating Expenses (104,103) (92,090) (83,910) 24.1% 13.0% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Profit Before Tax 126,336 131,237 96,087 31.5% -3.7% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Income Tax Expense (18,952) (28,799) (9,327) NMF -34.2% -------------------------------------------- --------------- ------------- -------------- ----------- ----------- Profit for the Period 107,384 102,438 86,760 23.8% 4.8% -------------------------------------------- --------------- ------------- -------------- ----------- -----------
NMF - no meaningful figures
Balance Sheet and Capital Highlights
Sep-18 Jun-18 Change QoQ
-------------------
in thousands of GEL GEL USD GEL USD
---------------------------------------------- ------------ ----------- ------------ ----------- ------
Total Assets 14,423,997 5,515,658 13,583,510 5,540,671 6.2%
Gross Loans 9,622,563 3,679,616 8,895,947 3,628,629 8.2%
Customer Deposits 8,740,449 3,342,300 7,932,585 3,235,677 10.2%
Total Equity 2,055,951 786,184 1,943,684 792,823 5.8%
Regulatory Tier I Capital (Basel III)* 1,580,547 604,393 1,498,857 611,379 5.5%
Regulatory Total Capital (Basel III)* 2,020,501 772,629 1,908,398 778,430 5.9%
Regulatory Risk Weighted Assets (Basel III)* 12,305,756 4,705,654 11,200,354 4,568,590 9.9%
---------------------------------------------- ------------ ----------- ------------ ----------- ------
*As per new NBG regulation which came into force in December 2017
Key Ratios 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ ------------------------------------ ------ ------ ------ ----------- ----------- ROE 21.2% 21.3% 19.8% 1.4% -0.1% ROA 3.1% 3.2% 2.9% 0.2% -0.1% Cost to Income 37.4% 35.6% 40.5% -3.1% 1.8% Cost of Risk 1.9% 1.8% 1.3% 0.6% 0.1% FX adjusted Cost of Risk 1.5% 1.7% 1.2% 0.3% -0.2% NPL to Gross Loans 3.1% 3.1% 3.5% -0.4% 0.0% Regulatory Tier 1 CAR (Basel III)* 12.8% 13.4% 10.8% 2.0% -0.6% Regulatory Total CAR (Basel III)* 16.4% 17.0% 14.5% 1.9% -0.6% Leverage (Times) 7.0x 7.0x 6.8x 0.2x 0.0x ------------------------------------ ------ ------ ------ ----------- -----------
*The 2018 figures are given as per new NBG regulation, which came into force in December 2017, while the 3Q 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines.
Income Statement Discussion
Net interest Income
In thousands of GEL 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ ------------------------------------ -------------- ------------------ ------------------ ----------- ----------- Loans and Advances to Customers 288,435 270,378 225,467 27.9% 6.7% Investment Securities Measured at Fair Value through Other Comprehensive Income 15,310 11,968 12,657 21.0% 27.9% Due from Other Banks 5,537 7,027 4,524 22.4% -21.2% Bonds Carried at Amortised Cost 10,994 9,842 9,785 12.4% 11.7% Investment in Leases 10,415 8,937 5,819 79.0% 16.5% Interest Income 330,691 308,152 258,252 28.0% 7.3% ------------------------------------ -------------- ------------------ ------------------ ----------- ----------- Customer Accounts 68,727 64,804 59,329 15.8% 6.1% Due to Credit Institutions 51,989 44,785 42,407 22.6% 16.1% Subordinated Debt 10,033 9,959 9,494 5.7% 0.7% Debt Securities in Issue 330 400 476 -30.7% -17.5% Interest Expense 131,079 119,948 111,706 17.3% 9.3% ------------------------------------ -------------- ------------------ ------------------ ----------- ----------- Net Interest Income 199,612 188,204 146,546 36.2% 6.1% ------------------------------------ -------------- ------------------ ------------------ ----------- ----------- Net Interest Margin 6.9% 7.1% 6.2% 0.7% -0.2% ------------------------------------ -------------- ------------------ ------------------ ----------- -----------
NMF - no meaningful figures
3Q 2018 to 3Q 2017 Comparison
Net interest income increased by GEL 53.1 million, or 36.2%, to GEL 199.6 million, compared to 3Q 2017, driven by a GEL 72.4 million, or 28.0%, higher interest income and a GEL 19.4 million, or 17.3%, higher interest expense.
Interest income grew by GEL 72.4 million, or 28.0%, YoY to GEL 330.7 million, mainly due to an increase in interest income from loans and advances to customers of GEL 63.0 million or 27.9%, which is primarily related to an increase in gross loan portfolio of GEL 1,854.9 million, or 23.9%, YoY. This effect was further magnified by a 0.5pp rise in loan yields, which was mainly driven by an increase in rates on GEL denominated loans by 1.4pp to 17.9% which offset the decrease in yields on FC denominated loans by 0.3pp to 8.5%. The growth in interest income also resulted from a higher interest income from investment in leases (through our subsidiary), due to an increase in the size of the respective portfolio, as well as increase in yields. Yields on interest earning assets expanded by 0.5pp to 11.4%, compared to 3Q 2017.
The GEL 19.4 million, or 17.3%, YoY growth in interest expense to GEL 131.1 million in 3Q 2018 was mainly due to GEL 9.4 million, or 15.8%, increase in interest expense on customer accounts and GEL 9.6 million, or 22.6%, increase in interest expense on amounts due to credit institutions. The increase in interest expense on customer accounts was attributable to a GEL 1,643.9 million, or 23.2%, growth in the respective portfolio. This effect was slightly offset by a 0.1pp drop in the cost of deposits to 3.3%, which resulted from a 0.4pp decrease in the cost of FC denominated deposits to 2.1% and a 0.1pp decrease in the cost of LC denominated deposits to 5.6%. The increase in interest expense on amounts due to credit institutions was attributable to a GEL 305.3 million, or 11.4% increase in the respective portfolio and a 0.5pp increase in effective rates on the amounts due to credit institutions, up to 7.1%, mainly related to higher libor rate. The cost of funding decreased by 0.1p p and stood at 4.4%.
Consequently, NIM stood at 6.9% in 3Q 2018, compared to 6.2% in 3Q 2017, while the risk adjusted NIM stood at 5.4%, compared to 5.0% in 3Q 2017.
3Q 2018 to 2Q 2018 Comparison
On a QoQ basis, net interest income grew by 6.1% as a result of a 7.3% higher interest income and a 9.3% higher interest expense.
The GEL 22.5 million, or 7.3%, QoQ increase in interest income mainly resulted from the growth in interest income on loans by GEL 18.1 million, or 6.7%. This in turn was due to an increase in loan portfolio by GEL 726.6 million, or 8.2%. The increase in interest income was also magnified by a rise in interest income from investment securities by GEL 3.3 million, or 27.9%, due to both growth in the respective portfolio and an increase in the respective yield by 0.1pp to 7.2%. The increase was slightly offset by the drop in interest income from due from credit institutions by GEL 1.5 million, or 21.2%, mainly driven by the decrease in respective yield by 1.1pp to 2.0%. The yield on interest earning assets decreased by 0.3pp to 11.4%, compared to 2Q 2018.
The GEL 11.1 million, or 9.3%, QoQ increase in interest expense was primarily due to the GEL 7.2 million, or 16.1%, increase in interest expense on amounts due to credit institutions. The main driver was a rise in the respective effective rate by 0.2pp to 7.1%, related to rise in libor rate. Another contributor to the rise in interest expense was the GEL 3.9 million, or 6.1% higher interest expense on customer accounts. This, resulted from the GEL 807.9 million, or 10.2%, increase in the respective portfolio, while the cost of deposits remained flat and stood at 3.3%. The cost of funding remained stable at 4.4%.
Consequently, on a QoQ basis, NIM decreased by 0.2pp and stood at 6.9%. Meanwhile risk adjusted NIM decreased by 0.1pp compared to the previous quarter and stood at 5.4%.
Fee and Commission
Income
In thousands of 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ
GEL
------------------- ------------------- -------------------- -------------------- ----------- -----------
Card Operations 28,227 25,274 20,662 36.6% 11.7%
Settlement
Transactions 17,709 17,454 15,170 16.7% 1.5%
Guarantees Issued 4,652 4,859 4,295 8.3% -4.3%
Issuance of
Letters of Credit 2,021 1,289 990 NMF 56.8%
Cash Transactions 3,950 4,543 4,576 -13.7% -13.1%
Foreign Currency
Exchange
Transactions 482 406 420 14.8% 18.7%
Other 2,512 4,440 2,439 3.0% -43.4%
------------------- -------------------- --------------------
Fee and Commission
Income 59,553 58,265 48,552 22.7% 2.2%
------------------- ------------------- -------------------- -------------------- ----------- -----------
Card Operations 14,730 12,975 11,409 29.1% 13.5%
Settlement
Transactions 2,037 2,143 1,897 7.4% -4.9%
Guarantees Issued 426 313 758 -43.8% 36.1%
Letters of Credit 433 327 239 81.2% 32.4%
Cash Transactions 1,524 1,242 1,177 29.5% 22.7%
Foreign Currency
Exchange
Transactions (4) 3 3 NMF NMF
Other 1,023 2,100 1,279 -20.0% -51.3%
------------------- -------------------- --------------------
Fee and Commission
Expense 20,169 19,103 16,762 20.3% 5.6%
------------------- ------------------- -------------------- -------------------- ----------- -----------
Card Operations 13,497 12,299 9,253 45.9% 9.7%
Settlement
Transactions 15,672 15,311 13,273 18.1% 2.4%
Guarantees 4,226 4,546 3,537 19.5% -7.0%
Letters of Credit 1,588 962 751 NMF 65.1%
Cash Transactions 2,426 3,301 3,399 -28.6% -26.5%
Foreign Currency
Exchange
Transactions 486 403 417 16.5% 20.6%
Other 1,489 2,340 1,160 28.4% -36.4%
------------------- -------------------- --------------------
Net Fee And
Commission Income 39,384 39,162 31,790 23.9% 0.6%
------------------- ------------------- -------------------- -------------------- ----------- -----------
3Q 2018 to 3Q 2017 Comparison
In 3Q 2018, net fee and commission income totalled GEL 39.4 million, up by GEL 7.6 million, or 23.9%, compared to 3Q 2017. This mainly resulted from an increase in net fee and commission income from card operations of GEL 4.2 million, or 45.9% and an increase in net fee and commission income from settlement transactions of GEL 2.4 million, or 18.1%.
The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 17.4% and 13.9% respectively. The increase in net fee and commission income from settlement transactions was mainly related to our subsidiary, TBC Pay, driven by increased number of transactions and the growth in net fee and commission income from our affluent retail sub-segment, TBC Status.
3Q 2018 to 2Q 2018 Comparison
On a QoQ basis, net fee and commission income increased by GEL 0.2 million, or 0.6%, compared to 2Q 2018. This was primarily driven by an increase in net fee and commission income from card transactions of GEL 1.2 million, or 9.7%. The rise was partially offset by the decline in other net fee and commission income by GEL 0.9 million, mainly due to the arrangement fee received in 2Q 2018 related to one corporate client in the amount of GEL 1.3 million. The decrease in cash transactions of GEL 0.9 million was due to reclassification of fees received from remittances to settlement transactions in 3Q 2018.
Other Operating
Non-Interest Income
and Gross Insurance
Profit
-----------
In thousands of GEL 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ
---------------------- ---------------- --------------- ----------------- ----------- -----------
Net Income from
Foreign Currency
Operations 31,040 23,251 20,330 52.7% 33.5%
---------------------- ---------------- --------------- ----------------- ----------- -----------
Share of Profit of
Associates 294 340 84 NMF -13.5%
---------------------- ---------------- --------------- ----------------- ----------- -----------
Gains Less
Losses/(Losses Less
Gains) from
Derivative Financial
Instruments (56) 396 (1) NMF NMF
---------------------- ---------------- --------------- ----------------- ----------- -----------
Gains less Losses 2 - - NMF NMF
from Disposal of
Investment Securities
Measured at Fair
Value through Other
Comprehensive Income
---------------------- ---------------- --------------- ----------------- ----------- -----------
Revenues from Cash-In
Terminal Services 237 226 241 -1.7% 4.9%
Revenues from
Operational Leasing 1,671 1,567 1,623 3.0% 6.6%
Gain from Sale of
Investment
Properties 492 855 404 21.8% -42.5%
Gain from Sale of
Inventories of
Repossessed
Collateral 868 100 756 14.8% NMF
Revenues from
Non-Credit Related
Fines 62 111 29 NMF -44.1%
Gain on Disposal of
Premises and
Equipment 36 154 66 -45.5% -76.6%
Other 1,324 799 3,453 -61.7% 65.7%
---------------- --------------- -----------------
Other Operating
Income 4,690 3,812 6,572 -28.6% 23.0%
---------------------- ---------------- --------------- ----------------- ----------- -----------
Gross Insurance
Profit[12] 3,123 3,253 1,773 76.1% -4.0%
---------------------- ---------------- --------------- ----------------- ----------- -----------
Other Operating
Non-Interest Income
and Gross Insurance
Profit 39,093 31,052 28,758 35.9% 25.9%
---------------------- ---------------- --------------- ----------------- ----------- -----------
NMF - no meaningful
figures
3Q 2018 to 3Q 2017 Comparison
Total other operating non-interest income and gross insurance profit grew by GEL 10.3 million, or 35.9%, to GEL 39.1 million in 3Q 2018. This primarily resulted from the growth in net income from foreign currency operations by GEL 10.7 million, or 52.7% and the increase in gross insurance profit of GEL 1.4 million, or 76.1%. Higher net income from foreign currency operations resulted from an increased number and volume of FX transactions, as well as larger margins, driven by higher exchange rate volatility. The increase was partially offset by the drop in other operating income by GEL 1.9 million, or by 28.6%, due to higher one-off incomes in 3Q 2017.
Higher gross insurance profit resulted from a sharp increase in the number of customers by around 60,000, which in turn led to a high increase in gross written premium by 84.4% YoY to GEL 15,833 thousand on a stand-alone basis. More information about TBC insurance can be found in annex 23 on page 47.
3Q 2018 to 2Q 2018 Comparison
On a QoQ basis, total other operating non-interest income and gross insurance profit increased by GEL 8.0 million, or by 25.9%. This mainly resulted from the growth in net income from foreign currency operations by GEL 7.8 million, or by 33.5%, related to a higher turnover of FX operations and higher foreign exchange margins, that were mainly caused by increased quarter-on-quarter volatility of exchange rate. Another contributor was other operating income, which grew by GEL 0.9 million or 23.0%. This was partially offset by the decline in losses less gains from derivative financial instruments by GEL 0.5 million.
Credit Loss Allowance
In thousands of GEL 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ
--------------------------------------- ---------------- ---------------- --------------- ----------- -----------
Credit Loss Allowance for Loan to
Customers (43,345) (37,982) (25,036) 73.1% 14.1%
Credit Loss Allowance for Investments
in Finance Lease (493) (252) (285) 73.0% 95.6%
Credit Loss Allowance for Performance
Guarantees and Credit Related
Commitments (24) 1,375 (680) -96.5% NMF
Credit Loss Allowance for Other
Financial Assets (3,706) 1,950 (1,096) NMF NMF
Credit Loss Allowance for Financial
Assets Measured at Fair Value through
Other Comprehensive
Income (29) (12) - NMF NMF
Credit Loss Allowance for Financial
Assets Measured at Amortised Cost (53) (170) - NMF -68.8%
---------------- ---------------- ---------------
Total Credit Loss Allowance (47,650) (35,091) (27,097) 75.8% 35.8%
--------------------------------------- ---------------- ---------------- --------------- ----------- -----------
Operating Income after Credit Loss
Allowance 230,439 223,327 179,997 28.0% 3.2%
--------------------------------------- ---------------- ---------------- --------------- ----------- -----------
Cost of Risk 1.9% 1.8% 1.3% 0.6% 0.1%
--------------------------------------- ---------------- ---------------- --------------- ----------- -----------
NMF - no meaningful figures
3Q 2018 to 3Q 2017 Comparison
In 3Q 2018, total credit loss allowance grew by GEL 20.6 million to GEL 47.7 million compared to 3Q 2017.
This was primarily attributable to an increase in credit loss allowance for loans to customers of GEL 18.3 million, mainly driven by local currency depreciation and recoveries of credit loss allowance in corporate segment in 3Q 2017. Another contributor to the increase was credit loss allowance on other financial assets by GEL 2.6 million.
In 3Q 2018, the cost of risk stood at 1.9% (1.5% without the FX effect), compared to 1.3% (1.2% without the FX effect) in 3Q 2017.
3Q 2018 to 2Q 2018 Comparison
On a QoQ basis, total credit loss allowance grew by GEL 12.6 million to GEL 47.7 million.
This was mainly driven by an increase in credit loss allowance for loans to customers by GEL 5.3 million and an increase in credit loss allowance for other financial assets by GEL 5.7 million. The increase was fully attributable to local currency depreciation.
In 3Q 2018, the cost of risk stood at 1.9% (1.5% without the FX effect), compared to 1.8% (1.7% without the FX effect) in 2Q 2018.
Operating Expenses In thousands of GEL 3Q'18 2Q'18 3Q'17 Change YoY Change QoQ ---------------------------------------- --------------- --------------- ---------------- ----------- ----------- Staff Costs 54,294 50,732 46,620 16.5% 7.0% ---------------------------------------- --------------- --------------- ---------------- ----------- ----------- Provisions for Liabilities and Charges 4,000 - - NMF NMF ---------------------------------------- --------------- --------------- ---------------- ----------- ----------- Depreciation and Amortization 11,944 10,992 9,317 28.2% 8.7% ---------------------------------------- --------------- --------------- ---------------- ----------- ----------- Professional services 4,107 1,498 3,834 7.1% NMF Advertising and marketing services 7,193 7,117 3,492 NMF 1.1% Rent 6,016 5,843 5,635 6.8% 3.0% Utility services 1,702 1,453 1,533 11.0% 17.1% Intangible asset enhancement 2,628 2,572 2,177 20.7% 2.2% Taxes other than on income 1,799 1,946 1,763 2.0% -7.6% Communications and supply 1,558 1,160 1,067 46.0% 34.3% Stationary and other office expenses 1,021 1,324 1,157 -11.8% -22.9% Insurance 1,063 483 (271) NMF NMF Security services 517 506 477 8.4% 2.2% Premises and equipment maintenance 2,167 1,128 1,142 89.8% 92.1% Business trip expenses 578 669 468 23.5% -13.6% Transportation and vehicles maintenance 703 413 386 82.1% 70.2% Charity 181 281 346 -47.7% -35.6% Personnel training and recruitment 465 233 191 NMF 99.6% Write-down of current assets to fair
value less costs to sell (436) (567) (189) NMF -23.1%
Loss on disposal of inventory 36 80 2 NMF -55.0%
Loss on disposal of investment
properties - 30 - NMF -100.0%
Loss on disposal of premises and
equipment 99 58 135 -26.7% 70.7%
Impairment of intangible assets - - 66 -100.0% NMF
Acquisition costs - - 1,063 -100.0% NMF
Gross change in IBNR[13] - - (391) -100.0% NMF
Other 2,468 4,139 3,890 -36.6% -40.4%
--------------- --------------- ----------------
Administrative and Other Operating
Expenses 33,865 30,366 27,973 21.1% 11.5%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
Operating Expenses 104,103 92,090 83,910 24.1% 13.0%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
Profit before Tax 126,336 131,237 96,087 31.5% -3.7%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
Income Tax Expense (18,952) (28,799) (9,327) NMF -34.2%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
Profit for the Period 107,384 102,438 86,760 23.8% 4.8%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
Cost to Income 37.4% 35.6% 40.5% -3.1% 1.8%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
ROE 21.2% 21.3% 19.8% 1.4% -0.1%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
ROA 3.1% 3.2% 2.9% 0.2% -0.1%
---------------------------------------- --------------- --------------- ---------------- ----------- -----------
3Q 2018 to 3Q 2017 Comparison
In 3Q 2018, total operating expenses expanded by GEL 20.2 million, or by 24.1% YoY to GEL 104.1 million, primarily due to an increase in staff costs of GEL 7.7 million, or 16.5% YoY driven by increased scale of business and higher performance bonuses. Another contributor to the increase was administrative expenses, which grew by GEL 5.9 million, or 21.1%, mainly related to uneven spending of advertising and marketing services during the year.
As a result, cost to income ratio decreased to 37.4% in 3Q 2018, compared to 40.5% in 3Q 2017.
3Q 2018 to 2Q 2018 Comparison
On a QoQ basis, total operating expenses grew by GEL 12.0 million, or 13.0%. This was primarily attributable to a GEL 3.6 million, or 7.0% rise in staff cost, related to increased scale of business and higher performance bonuses and a GEL 3.5 million, or 11.5% increase in administrative expenses, mainly related to professional services that are not equally spent during the year. The increase in provision to liabilities and charges by GEL 4.0 million, also contributed to the growth of total operating expense.
As a result, the cost to income ratio expanded by 1.8pp from 35.6%, compared to 2Q 2018.
Net Income
Net income for the third quarter increased by GEL 5.0 million, or 4.8%, QoQ and by GEL 20.6 million, or 23.8%, YoY and amounted to GEL 107.4 million.
As a result, ROE stood at 21.2%, up by 1.4pp YoY and down by 0.1pp QoQ, while ROA stood at 3.1%, up by 0.2pp YoY but down by 0.1 pp QoQ.
Balance Sheet Discussion In thousands of GEL Sep-18 Jun-18 Change QoQ ----------------------------------------------------------- ----------------- ----------------- ----------- Cash, Due from Banks and Mandatory Cash Balances with NBG 2,693,455 2,681,809 0.4% Loans and Advances to Customers (Net) 9,279,982 8,574,580 8.2% Financial Securities 1,386,239 1,295,570 7.0% Fixed and Intangible Assets & Investment Property 549,938 540,455 1.8% Other Assets 514,383 491,096 4.7% Total Assets 14,423,997 13,583,510 6.2% ----------------------------------------------------------- ----------------- ----------------- ----------- Due to Credit Institutions 2,981,269 3,097,602 -3.8% Customer Accounts 8,740,449 7,932,585 10.2% Debt Securities in Issue 13,027 19,641 -33.7% Subordinated Debt 412,803 397,576 3.8% Other Liabilities 220,499 192,422 14.6% Total Liabilities 12,368,047 11,639,826 6.3% ----------------------------------------------------------- ----------------- ----------------- ----------- Total Equity 2,055,950 1,943,684 5.8% ----------------------------------------------------------- ----------------- ----------------- -----------
Assets
On a QoQ basis, total assets increased by GEL 840.5 million, or 6.2%, mainly due to a GEL 705.4 million, or 8.2%, increase in net loans to customers. The QoQ increase in total assets also resulted from a GEL 11.7 million or 0.4% rise in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) and a GEL 90.7 million or 7.0% increase in financial securities.
As of 30 September 2018, the gross loan portfolio reached GEL 9,622.6 million, up by 8.2% QoQ. At the same time, gross loans denominated in foreign currency accounted for 59.2% of total loans, compared to 58.5% as of 30 June 2018.
Asset Quality
Borrowers with FX income
30-Sep-18 30-June-18
---------------------- ---------------------------------------------- ----------------------------------------------
Segments % of FX loans of which borrowers with FX % of FX loans of which borrowers with FX
income** income**
---------------------- -------------- ------------------------------ -------------- ------------------------------
Retail 53.7% 28.1% 50.6% 26.9%
Consumer 18.9% 26.1% 18.2% 25.6%
Mortgage 81.9% 28.5% 80.4% 27.2%
Corporate 73.3% 52.5%* 76.7% 53.5%
MSME 52.1% 14.9% 51.8% 14.3%
Total Loan Portfolio 59.2% 34.4% 58.5% 34.4%
---------------------- -------------- ------------------------------ -------------- ------------------------------
(Based on internal estimates)
* Pure exports account for 7.3% of total Corporate FX denominated loans
** FX income implies both direct and indirect income
PAR 30 by Segments and Currencies Sep-18 Jun-18
--------------------------------------------------- -------------------- --------------------
GEL FC Total GEL FC Total
Corporate 0.0% 1.1% 0.8% 0.0% 0.4% 0.3%
Retail 4.5% 1.7% 3.0% 3.7% 1.8% 2.7%
MSME 1.8% 3.6% 2.7% 1.6% 3.7% 2.7%
Total 2.9% 1.9% 2.3% 2.5% 1.7% 2.0%
--------------------------------------------------- ----- ----- ------ ----- ----- ------
Loans overdue by more than 30 days to gross loans
Total
Total PAR 30 increased by 0.3pp QoQ and stood at 2.3%. The increase
was attributable to retail and corporate loan book.
Retail Segment
The retail segment's PAR 30 amounted to 3.0%, up by 0.3pp QoQ.
The increase was mainly attributable to credit cards, fast consumer
and other higher yield products.
Corporate
The corporate segment's PAR 30 amounted to 0.8%, up by 0.5pp QoQ.
Increase in corporate segment was mainly attributable to unusually
low overdue amounts in 2Q 2018.
MSME
The MSME segment's PAR 30 remained stable QoQ and stood at 2.7%
as of 30 September 2018.
NPLs Sep-18 Jun-18
----------- -------------------- --------------------
GEL FC Total GEL FC Total
Corporate 1.2% 3.2% 2.6% 1.5% 3.2% 2.8%
Retail 3.7% 2.4% 3.0% 2.8% 2.9% 2.9%
MSME 2.3% 5.7% 4.1% 2.2% 5.7% 4.0%
Total 2.8% 3.4% 3.1% 2.4% 3.6% 3.1%
----------- ----- ----- ------ ----- ----- ------
Total
Total NPLs was stable on QoQ basis and stood at 3.1%.
Retail Segment
The retail segment's NPLs remained broadly stable QoQ and stood
at 3.0%.
Corporate
The corporate segment's NPLs stood at 2.6%, down by 0.2pp on a
QoQ due to significant increase in corporate loan book.
MSME
The MSME segment's NPLs remained broadly stable on QoQ basis and
stood at 4.1%.
NPLs Coverage Sep-18 Jun-18
Exc. Collateral Incl. Exc. Collateral Incl. Collateral
Collateral
--------------- ---------------- ---------------- ---------------- -----------------
Corporate 104.3% 242.5% 99.2% 232.1%
Retail 140.8% 206.4% 153.9% 226.8%
MSME 80.8% 184.8% 76.9% 187.6%
Total 113.2% 209.0% 116.1% 216.1%
--------------- ---------------- ---------------- ---------------- -----------------
Liabilities
As of 30 September 2018, TBC Bank's total liabilities amounted to GEL 12,368.0 million, up by GEL 728.2 million, or 6.3%, QoQ. The rise was primarily due to a GEL 807.9 million, or 10.2%, increase in customer accounts and was partially offset by the decline in amounts due to credit institutions by GEL 116.3 million, or 3.8%.
Liquidity
As of 30 September 2018 the Bank's liquidity ratio, as defined by the NBG, stood at 31.9%, compared to 33.3% as of 30 June 2018. As of 30 September 2018, the total liquidity coverage ratio (LCR), as defined by the NBG, was 111.6%, above the 100.0% limit, while the LCR in GEL and FC stood at 86.5% and 128.1% respectively, above the respective limits of 75% and 100%.
Total Equity
As of 30 September 2018, TBC's total equity totalled GEL 2,056.0 million, up by GEL 112.3 million from GEL 1,943.7 million as of 30 June 2018. The QoQ change in equity was mainly due to increase in net income GEL 102.4 million.
Regulatory Capital
According to the new methodology introduced at the end of 2017, as of 30 September 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 16.4%, respectively, compared to the minimum required levels of 10.3% and 15.8%. In comparison, as of 30 June 2018, the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 13.4% and 17.0%, respectively, compared to the minimum required levels of 10.2% and 15.6%.
In 30 September 2018, the Bank's Basel III Tier 1 Capital amounted to GEL 1,580.5 million, up by GEL 81.6 million, or 5.5%, compared to June 2018, due to increase in net income. The Bank's Basel III Total Capital amounted to GEL 2,020.5 million, up by GEL 112.1 million, or 5.9%, QoQ. Risk weighted assets stood at GEL 12,305.8 million as of 30 September 2018, compared to GEL 11,200.4 million as of 30 June 2018, mainly related to the increased loan book.
Results by Segments and Subsidiaries
The segment definitions are as follows (updated in 2018):
-- 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 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 purpose.
Income Statement by Segments
3Q'18 Retail MSME Corporate Corp.Centre Total ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Interest Income 153,360 69,807 66,930 40,594 330,691 Interest Expense (31,545) (2,409) (34,773) (62,352) (131,079) Net Transfer Pricing (19,335) (22,160) 10,577 30,918 - Net Interest Income 102,480 45,238 42,734 9,160 199,612 ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Fee and Commission Income 43,967 5,537 9,765 284 59,553 Fee and Commission Expense (16,655) (1,757) (1,671) (86) (20,169) Net fee and Commission Income 27,312 3,780 8,094 198 39,384 ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Gross Insurance Profit - - - 3,123 3,123 Net income from foreign currency operations 8,539 5,445 11,767 (1,113) 24,638 Foreign Exchange Translation Gains Less Losses/(Losses Less Gains) - - - 6,402 6,402 Net Losses from Derivative Financial Instruments (44) - - (12) (56) Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income - - - 2 2 Other Operating Income 1,688 140 2,367 495 4,690 Share of profit of associates - - - 294 294 Other Operating Non-Interest Income and Insurance Profit 10,183 5,585 14,134 9,191 39,093 ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Credit Loss Allowance for Loan to Customers (29,063) (6,543) (7,739) - (43,345) Credit Loss Allowance for Performance Guarantees and Credit Related Commitments (41) (663) 763 (83) (24) Credit Loss Allowance for Investments in Finance Lease - - - (493) (493) Credit Loss Allowance for Other Financial Assets (90) - (2,580) (1,036) (3,706) Credit Loss Allowance for Financial Assets Measured at Fair Value through Other Comprehensive Income - - (85) 56 (29) Credit Loss Allowance for Financial Assets Measured at Amortised Cost - - - (53) (53) Profit before G&A Expenses and Income Taxes 110,781 47,397 55,321 16,940 230,439 ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Staff Costs (29,098) (10,293) (8,298) (6,605) (54,294) Depreciation and Amortization (9,557) (1,301) (584) (502) (11,944) Provision for liabilities and charges - - - (4,000) (4,000) Administrative and Other Operating Expenses (20,726) (4,989) (2,451) (5,699) (33,865) Operating Expenses (59,381) (16,583) (11,333) (16,806) (104,103) ---------------- ------------------- -------------------- ------------------- -------------------- --------------------
Profit before Tax 51,400 30,814 43,988 134 126,336 ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Income Tax Expense (6,794) (4,408) (6,570) (1,180) (18,952) ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Profit for the Year 44,606 26,406 37,418 (1,046) 107,384 ---------------- ------------------- -------------------- ------------------- -------------------- -------------------- Portfolios by Segments In thousands of GEL Sep-18 Jun-18 ---------------------------------------------------- ---------------- ------------------ Loans and Advances to Customers Consumer 1,958,883 1,975,426 Mortgage 2,452,157 2,185,630 Pawn 35,357 35,393 Retail 4,446,397 4,196,449 Corporate 2,891,628 2,581,612 MSME 2,284,538 2,117,886 Total Loans and Advances to Customers (Gross) 9,622,563 8,895,947 Less: Credit loss allowance for Loans to Customers (342,581) (321,367) Total Loans and Advances to Customers (Net) 9,279,982 8,574,580 ---------------------------------------------------- ---------------- ------------------ Customer Accounts Retail 4,850,586 4,467,638 Corporate 2,920,526 2,559,449 MSME 969,337 905,498 Total Customer Accounts 8,740,449 7,932,585 ---------------------------------------------------- ---------------- ------------------
Retail Banking
As of 30 September 2018, retail loans stood at GEL 4,446.4 million, up by GEL 249.9 million, or 6.0%, QoQ and they accounted for 39.9% market share of total individual loans. As of the same date foreign currency loans represented 53.7% of the total retail loan portfolio.
In the reporting period, retail deposits stood at GEL 4,850.6 million, up by GEL 382.9 million, or 8.6%, QoQ and accounted for 41.1% market share of total individual deposits. As of 30 September 2018 term deposits accounted for 53.4% of the total retail deposit portfolio, while foreign currency deposits represented 83.0% of the total.
In 3Q 2018, retail loan yields and deposit rates stood at 14.1% and 2.7%, respectively. The segment's cost of risk on loans was 2.7% .The retail segment contributed 41.5%, or GEL 44.6 million, to the total net income in 3Q 2018.
Corporate Banking
As of 30 September 2018, corporate loans amounted to GEL 2,891.6 million, up by GEL 310.0 million, or 12.0%, QoQ. Foreign currency loans accounted for 73.3% of the total corporate loan portfolio. The market share of total legal entities loans stood at 36.6%.
As of the same date, corporate deposits totalled GEL 2,920.5 million, up by GEL 361.1 million, or 14.1%, QoQ. Foreign currency corporate deposits represented 45.7% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 39.4%.
In 3Q 2018, corporate loan yields and deposit rates stood at 9.6% and 4.9%, respectively. In the same period, the cost of risk on loans was 1.1%. In terms of profitability, the corporate segment's net profit reached GEL 37.4 million, or 34.8%, of the total net income.
MSME Banking
As of 30 September 2018, MSME loans amounted to GEL 2,284.5, up by GEL 166.7 million, or 7.9%, QoQ. Foreign currency loans accounted for 52.1% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 969.3 million, up by GEL 63.8 million, or 7.0%, QoQ. Foreign currency MSME deposits represented 47.5% of the total MSME deposit portfolio.
In 3Q 2018, MSME loan yields and deposit rates stood at 12.6% and 1.0% respectively, while the cost of risk on loans was 1.2%. In terms of profitability, net profit for the MSME segment amounted to GEL 26.4 million, or 24.6%, of the total net income.
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Sep-18 Jun-18
-------------------------------------------------------------------------- -------------------- --------------------
Cash and cash equivalents 1,114,672 1,605,163
Due from other banks 152,010 42,469
Mandatory cash balances with National Bank of Georgia 1,426,773 1,034,177
Loans and advances to customers 9,279,982 8,574,580
Investment securities measured at fair value through other comprehensive
income 868,060 817,876
Bonds carried at amortised cost 518,179 477,694
Investments in associates 2,220 1,925
Investments in finance leases 183,715 172,027
Investment properties 78,274 78,094
Current income tax prepayment 7,650 7,369
Deferred income tax asset 2,499 2,331
Other financial assets 103,520 107,741
Other assets 186,061 171,046
Premises and equipment 375,002 374,414
Intangible assets 96,662 87,947
Goodwill 28,718 28,657
TOTAL ASSETS 14,423,997 13,583,510
-------------------------------------------------------------------------- -------------------- --------------------
LIABILITIES
Due to Credit Institutions 2,981,269 3,097,602
Customer accounts 8,740,449 7,932,585
Other financial liabilities 90,966 88,320
Current income tax liability 30 26
Debt Securities in issue 13,027 19,641
Deferred income tax liability 27,202 22,980
Provisions for liabilities and charges 16,329 11,732
Other liabilities 85,972 69,364
Subordinated debt 412,803 397,576
TOTAL LIABILITIES 12,368,047 11,639,826
-------------------------------------------------------------------------- -------------------- --------------------
EQUITY
Share capital 1,650 1,650
Share premium 796,854 796,808
Retained earnings 1,372,798 1,261,578
Group reorganisation reserve (162,166) (162,166)
Share based payment reserve (18,689) (21,085)
Revaluation reserve for premises 64,962 64,962
Revaluation reserve for available-for-sale securities 4,875 2,541
Cumulative currency translation reserve (7,277) (7,345)
Net assets attributable to owners 2,053,007 1,936,943
-------------------------------------------------------------------------- -------------------- --------------------
Non-controlling interest 2,943 6,741
-------------------- --------------------
TOTAL EQUITY 2,055,950 1,943,684
-------------------------------------------------------------------------- -------------------- --------------------
TOTAL LIABILITIES AND EQUITY 14,423,997 13,583,510
-------------------------------------------------------------------------- -------------------- --------------------
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
In thousands of GEL 3Q'18 2Q'18 3Q'17
----------------------------------------------------------- ---------------- ---------------- -----------------
Interest income 330,691 308,152 258,252
Interest expense (131,079) (119,948) (111,706)
Net interest income 199,612 188,204 146,546
----------------------------------------------------------- ---------------- ---------------- -----------------
Fee and commission income 59,553 58,265 48,552
Fee and commission expense (20,169) (19,103) (16,762)
Net Fee and Commission Income 39,384 39,162 31,790
----------------------------------------------------------- ---------------- ---------------- -----------------
Net insurance premiums earned 5,976 6,168 2,590
Net insurance claims incurred and agents' commissions (2,853) (2,915) (817)
----------------------------------------------------------- ---------------- ---------------- -----------------
Insurance Profit 3,123 3,253 1,773
----------------------------------------------------------- ---------------- ---------------- -----------------
Net income from foreign currency operations 24,638 21,701 18,085
Net gain/(losses) from foreign exchange translation 6,402 1,550 2,245
Net gains/(losses) from derivative financial instruments (56) 396 (1)
Gains less Losses from disposal of Investment Securities 2 - -
measured at fair value through other
comprehensive income
Other operating income 4,690 3,812 6,572
Share of profit of associates 294 340 84
Other operating non-interest income 35,970 27,799 26,985
----------------------------------------------------------- ---------------- ---------------- -----------------
Credit loss allowance for loan to customers (43,345) (37,982) (25,036)
Credit loss allowance for investments in finance lease (493) (252) (285)
Credit loss allowance for performance guarantees and
credit related commitments (24) 1,375 (680)
Credit loss allowance for other financial assets (3,706) 1,950 (1,096)
Credit loss allowance for financial assets measured at
fair value through other comprehensive
income (29) (12) -
Credit loss allowance for financial assets measured at
amortised cost (53) (170) -
Operating income after credit loss allowance for
impairment 230,439 223,327 179,997
----------------------------------------------------------- ---------------- ---------------- -----------------
Staff costs (54,294) (50,732) (46,620)
Depreciation and amortization (11,944) (10,992) (9,317)
(Provision for)/ recovery of liabilities and charges (4,000) - -
Administrative and other operating expenses (33,865) (30,366) (27,973)
Operating expenses (104,103) (92,090) (83,910)
----------------------------------------------------------- ---------------- ---------------- -----------------
Profit before tax 126,336 131,237 96,087
----------------------------------------------------------- ---------------- ---------------- -----------------
Income tax expense (18,952) (28,799) (9,327)
---------------- ---------------- -----------------
Profit for the period 107,384 102,438 86,760
----------------------------------------------------------- ---------------- ---------------- -----------------
Other Comprehensive income:
----------------------------------------------------------- ---------------- ---------------- -----------------
Items that may be reclassified subsequently to profit or
loss:
----------------------------------------------------------- ---------------- ---------------- -----------------
Revaluation of available for-sale-investments 2,365 (1,547) 1,929
----------------------------------------------------------- ---------------- ---------------- -----------------
Exchange differences on translation to presentation
currency 71 81 399
----------------------------------------------------------- ---------------- ---------------- -----------------
Items that will not be reclassified to profit or loss:
----------------------------------------------------------- ---------------- ---------------- -----------------
Income tax recorded directly in other comprehensive income - (5,151) -
----------------------------------------------------------- ---------------- ---------------- -----------------
Other comprehensive income for the Period 2,436 (6,617) 2,328
----------------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive income for the Period 109,820 95,821 89,088
----------------------------------------------------------- ---------------- ---------------- -----------------
Profit attributable to:
----------------------------------------------------------- ---------------- ---------------- -----------------
- Shareholders of TBCG 106,779 102,589 85,523
----------------------------------------------------------- ---------------- ---------------- -----------------
- Non-controlling interest 605 (151) 1,237
----------------------------------------------------------- ---------------- ---------------- -----------------
Profit for the period 107,384 102,438 86,760
----------------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive income is attributable to:
----------------------------------------------------------- ---------------- ---------------- -----------------
- Shareholders of TBCG 109,183 96,060 87,883
----------------------------------------------------------- ---------------- ---------------- -----------------
- Non-controlling interest 637 (239) 1,205
----------------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive income for the Period 109,820 95,821 89,088
----------------------------------------------------------- ---------------- ---------------- -----------------
Key Ratios
Average Balances
The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the Management for monitoring and control purposes.
Key Ratios Ratios (based on monthly averages, where applicable) 3Q'18 2Q'18 3Q'17 ------------------------------------------------------ ------- ------- -------- ROE(1) 21.2% 21.3% 19.8% ROA(2) 3.1% 3.2% 2.9% ROE before credit loss allowance(3) 30.7% 28.6% 26.1% Cost to Income(4) 37.4% 35.6% 40.5% Cost of Risk(5) 1.9% 1.8% 1.3% FX adjusted Cost of Risk(6) 1.5% 1.7% 1.2% NIM(7) 6.9% 7.1% 6.2% Risk Adjusted NIM(8) 5.4% 5.5% 5.0% Loan Yields(9) 12.4% 12.5% 11.9% Risk Adjusted Loan Yields(10) 10.9% 10.8% 10.7% Deposit rates(11) 3.3% 3.3% 3.4% Yields on interest Earning Assets(12) 11.4% 11.7% 10.9% Cost of Funding(13) 4.4% 4.4% 4.5% Spread(14) 7.0% 7.3% 6.4% PAR 90 to Gross Loans(15) 1.3% 1.1% 1.6% NPLs to Gross Loans(16) 3.1% 3.1% 3.5% NPLs coverage(17) 113.2% 116.1% 80.5%* NPLs coverage with collateral(18) 209.0% 216.1% 206.8%* Credit Loss Level to Gross Loans(19) 3.6% 3.6% 2.8%* Related Party Loans to Gross Loans(20) 0.1% 0.1% 0.1% Top 10 Borrowers to Total Portfolio(21) 10.3% 9.2% 8.3% Top 20 Borrowers to Total Portfolio(22) 14.1% 13.2% 12.5% Net Loans to Deposits plus IFI Funding(23) 88.0% 89.5% 91.5% Net Stable Funding Ratio(24) 118.0% 127.8% 134.5% Liquidity Coverage Ratio(25) 111.6% 119.2% 115.0% Leverage(26) 7.0x 7.0x 6.8x Regulatory Tier 1 CAR (Basel III)(27) 12.8% 13.4% 10.8%** Regulatory Total 1 CAR (Basel III)(28) 16.4% 17.0% 14.5%** ------------------------------------------------------ ------- ------- --------
* Figures per IAS39
** 3Q 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; Annualised where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. 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 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 equal cost of risk at constant currency.
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 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 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 total loan amount of top 10 borrowers divided by the gross loan portfolio.
22. Top 20 borrowers to total portfolio equals total loan amount of 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 available amount of stable funding divided by required amount of stable funding as defined in Basel III.
25. Liquidity coverage ratio equals high-quality liquid assets divided by 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 2.4516 as of 30 June 2018. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4767 as of 30 September 2017. As of 30 September 2018 the USD/GEL exchange rate equalled 2.6151. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 3Q 2018 of 2.5295, 2Q 2018 of 2.4460, 3Q 2017 of 2.4232.
Unaudited Consolidated Financial Results Overview for 9M 2018
This statement provides a summary of the unaudited business and financial trends for 9M 2018 for TBC Bank Group plc and its subsidiaries. Quarterly financial information and trends are unaudited.
Starting from 1 January 2018, TBC Bank adopted IFRS 9 and IFRS 15. Therefore, the comparative information for 2017 is not comparable to the information presented for 2018.
Please note, that there might be slight differences in previous periods' figures due to rounding.
Income Statement Highlights
in thousands of GEL 9M'18 9M'17 Change YoY
Net Interest Income 563,219 438,620 28.4%
---------------------------------------------- --------------- ------------- -----------
Net Fee and Commission Income 113,466 87,007 30.4%
---------------------------------------------- --------------- ------------- -----------
Other Operating Non-Interest Income 98,521 92,041 7.0%
---------------------------------------------- --------------- ------------- -----------
Credit Loss Allowance (122,203) (70,472) 73.4%
---------------------------------------------- --------------- ------------- -----------
Operating Income after Credit Loss Allowance 653,003 547,196 19.3%
---------------------------------------------- --------------- ------------- -----------
Operating Expenses (287,125) (259,760) 10.5%
---------------------------------------------- --------------- ------------- -----------
Profit Before Tax 365,878 287,436 27.3%
---------------------------------------------- --------------- ------------- -----------
Income Tax Expense (58,530) (24,263) 141.2%
---------------------------------------------- --------------- ------------- -----------
Profit for the Period 307,348 263,173 16.8%
---------------------------------------------- --------------- ------------- -----------
Balance Sheet and Capital Highlights
Sep-18 Sep-17 Change YoY
------------------------------------------ ------------- -------------------------- -------------------
in thousands of GEL GEL USD GEL USD
------------------------------------------ ------------- ----------- ------------- ----------- ------
Total Assets 14,423,997 5,515,658 12,136,922 4,900,441 18.8%
Gross Loans 9,622,563 3,679,616 7,767,634 3,136,284 23.9%
Customer Deposits 8,740,449 3,342,300 7,096,523 2,865,314 23.2%
Total Equity 2,055,950 786,184 1,790,307 722,860 14.8%
Regulatory Tier I Capital (Basel III)* 1,580,547 604,393 1,354,679 546,969 16.7%
Regulatory Total Capital (Basel III)* 2,020,501 772,629 1,821,822 735,584 10.9%
Regulatory Risk Weighted Assets (Basel
III)* 12,305,756 4,705,654 12,560,644 5,071,524 -2.0%
------------------------------------------ ------------- ----------- ------------- ----------- ------
*September 2018 figures are given per new NBG regulation, which came into force in December 2017, while September 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines
Key Ratios 9M'18 9M'17 Change YoY ------------------------------------ ------ ------ ----------- ROE 21.2% 20.9% 0.3% ROA 3.1% 3.2% -0.1% Cost to Income 37.0% 42.1% -5.1% Cost of Risk 1.7% 1.2% 0.5% FX adjusted Cost of Risk 1.7% 1.4% 0.3% NPL to Gross Loans 3.1% 3.5% -0.4% Regulatory Tier 1 CAR (Basel III)* 12.8% 10.8% 2.0% Regulatory Total CAR (Basel III)* 16.4% 14.5% 1.9% Leverage (Times) 7.0x 6.8x 0.2x ------------------------------------ ------ ------ -----------
*September 2018 figures are given per new NBG regulation, which came into force in December 2017, while September 2017 figures are given based on previous regulation in accordance with Basel II/III guidelines
Income Statement Discussion
Net Interest Income In thousands of GEL 9M'18 9M'17 Change YoY ----------------------------------------------------------------------- ------------- ------------- ----------- Loans and Advances to Customers 814,866 664,220 22.7% Investment Securities Measured at Fair Value through Other Comprehensive Income 40,445 31,744 27.4% Due from Other Banks 17,482 9,433 85.3% Bonds Carried at Amortised Cost 28,873 25,035 15.3% Investment in Leases 27,026 15,486 74.5% Interest Income 928,692 745,918 24.5% ----------------------------------------------------------------------- ------------- ------------- ----------- Customer Accounts 196,453 167,740 17.1% Due to Credit Institutions 138,251 111,360 24.1% Subordinated Debt 29,632 26,681 11.1% Debt Securities in Issue 1,137 1,517 -25.0% ----------------------------------------------------------------------- ------------- ------------- ----------- Interest Expense 365,473 307,298 18.9% ----------------------------------------------------------------------- ------------- ------------- ----------- Net Interest Income 563,219 438,620 28.4% ----------------------------------------------------------------------- ------------- ------------- ----------- Net Interest Margin 7.0% 6.5% 0.5% ----------------------------------------------------------------------- ------------- ------------- -----------
9M 2018 to 9M 2017 Comparison
In 9M 2018, net interest income grew by GEL 124.6 million, or 28.4%, YoY to GEL 563.2 million, resulting from a GEL 182.8 million, or 24.5%, higher interest income and a GEL 58.2 million or 18.9% higher interest expense.
Interest income grew by GEL 182.8 million, or 24.5%, YoY to GEL 928.7 million. This was mainly driven by an increase in interest income from loans and advances to customers of GEL 150.7 million, or 22.7%, which is primarily related to a rise in the gross loan portfolio by GEL 1,854.9 million, or 23.9%, YoY. This effect was further magnified by a 0.4pp increase in loan yields to 12.4%, which was driven by a rise in rates on GEL denominated loans of 1.2pp that was partially offset by the decrease in yields on FC denominated loans by 0.6pp. Another contributor to the increase in interest income was investment in leases, which was up by GEL 11.5 million, or 74.5%. This resulted from a significant increase in the size of such receivables by GEL 72.5 million, or 65.2%, and magnified by an increase in the respective yield of 1.1pp, up to 22.3%. Yields on interest earning assets expanded by 0.4pp to 11.5%, compared to 9M 2017.
The YoY growth in interest expense by GEL 58.2 million or 18.9% to a GEL 365.5 million in 9M 2018 was mainly due to 17.1% increase in interest expense on customer accounts by GEL 28.7 million and a rise in interest expense on amounts due to credit institutions by GEL 26.9 million or 24.1%. The higherinterest expense on customer accounts was attributable to a GEL 1,643.9 million, or 23.2%, growth in the respective portfolio, partially offset by a 0.1pp decline in the cost of deposit down to 3.3%, which resulted from by a 0.4pp decrease in cost of deposits of FC denominated deposits. Another contributor to the increase in interest expense was the portfolio of amounts due to credit institutions, up by GEL 305.4 million, or 11.4%, and a 0.6pp higher effective rate on the respective portfolio, which stood at 7.0%, mainly related to the rise in libor rate. As a result, the cost of funding remained stable on a YoY basis at 4.4%.
Consequently, NIM was 7.0% in 9M 2018, compared to 6.5% in 9M 2017.
Fee and Commission Income
------------
In thousands of GEL 9M'18 9M'17 Change in %
---------------------------------------- ---------------- --------------- ------------
Card Operations 75,237 60,907 23.5%
Settlement Transactions 51,402 43,328 18.6%
Guarantees Issued 13,731 10,367 32.4%
Issuance of Letters of Credit 4,382 4,449 -1.5%
Cash Transactions 12,938 12,046 7.4%
Foreign Currency Exchange Transactions 1,378 1,003 37.4%
Other 9,584 6,171 55.3%
---------------- ---------------
Fee and Commission Income 168,652 138,271 22.0%
---------------------------------------- ---------------- --------------- ------------
Card Operations 38,173 35,414 7.8%
Settlement Transactions 6,322 5,282 19.7%
Guarantees Issued 1,045 1,319 -20.8%
Letters of Credit 1,020 705 44.7%
Cash Transactions 3,883 3,282 18.3%
Foreign Currency Exchange Transactions 1 92 -98.9%
Other 4,742 5,170 -8.3%
---------------- ---------------
Fee and Commission Expense 55,186 51,264 7.7%
---------------------------------------- ---------------- --------------- ------------
Card Operations 37,064 25,493 45.4%
Settlement Transactions 45,080 38,046 18.5%
Guarantees 12,686 9,048 40.2%
Letters of Credit 3,362 3,744 -10.2%
Cash Transactions 9,055 8,764 3.3%
Foreign Currency Exchange Transactions 1,377 911 51.2%
Other 4,842 1,001 NMF
---------------- ---------------
Net Fee and Commission Income 113,466 87,007 30.4%
---------------------------------------- ---------------- --------------- ------------
NMF - no meaningful figures
9M 2018 to 9M 2017 Comparison
In 9M 2018, net fee and commission income totalled GEL 113.5 million, up by GEL 26.5 million, or 30.4%, compared to 9M 2017. This mainly resulted from an increase in net fee and commission income from card operations of GEL 11.6 million, or 45.4% and an increase in net fee and commission income from settlement transactions of GEL 7.0 million, or 18.5%.
The rise in net fee and commission income from card operations is related to the increased number of active cards and POS terminals by 17.4% and 13.9% respectively. The increase in net fee and commission income from settlement transactions was mainly related to our subsidiary, TBC Pay, driven by a higher number of transactions and the growth in net fee and commission income from our affluent retail sub-segment, TBC Status.
Other Operating Non-Interest Income and Gross Insurance Profit
In thousands of GEL 9M'18 9M'17 Change in %
-------------------------------------------------------------------- ---------------- ---------------- ------------
Net Income from Foreign Currency Operations 73,845 65,759 12.3%
-------------------------------------------------------------------- ---------------- ---------------- ------------
Share of Profit of Associates 942 661 42.5%
-------------------------------------------------------------------- ---------------- ---------------- ------------
Gains Less Losses/(Losses Less Gains) from Derivative Financial
Instruments 357 (39) NMF
-------------------------------------------------------------------- ---------------- ---------------- ------------
Gains less Losses from Disposal of Investment Securities Measured 2 - NMF
at Fair Value through Other
Comprehensive Income
-------------------------------------------------------------------- ---------------- ---------------- ------------
Revenues from Cash-In Terminal Services 1,490 838 77.8%
Revenues from Operational Leasing 4,813 5,134 -6.3%
Gain from Sale of Investment Properties 2,389 1,578 51.4%
Gain from Sale of Inventories of Repossessed Collateral 1,073 1,701 -36.9%
Revenues from Non-Credit Related Fines 316 125 NMF
Gain on Disposal of Premises and Equipment 235 257 -8.6%
Other 4,637 11,173 -58.5%
---------------- ----------------
Other Operating Income 14,953 20,806 -28.1%
-------------------------------------------------------------------- ---------------- ---------------- ------------
Gross Insurance Profit[14] 8,422 4,854 73.5%
-------------------------------------------------------------------- ---------------- ---------------- ------------
Other Operating Non-Interest Income and Gross Insurance Profit 98,521 92,041 7.0%
-------------------------------------------------------------------- ---------------- ---------------- ------------
NMF - no meaningful figures
9M 2018 to 9M 2017 Comparison
Total other operating non-interest income and gross insurance profit increased by GEL 6.5 million, or 7.0%, to GEL 98.5 million in 9M 2018. This mainly resulted from the rise in net income from foreign currency operations by GEL 8.1 million, or 12.3%, mainly due to increased clients' FX transactions, broadly consistent with the business scale growth. Another contributor was gross insurance profit up by GEL 3.6 million, or 73.5%. The increase was partially offset by the drop in other operating income by GEL 5.9 million or 28.1%, related to the higher one-off incomes in 9M 2017.
The increase in gross insurance profit was related to the hike in the number of customers by around 60,000, which in turn led to a high increase in gross written premium by 124.4% YoY on a stand-alone basis. More information about TBC insurance can be found in annex 23 on page 47.
Credit Loss Allowance
In thousands of GEL 9M'18 9M'17 Change in %
--------------------------------------------------------------------- ---------------- --------------- ------------
Credit Loss Allowance for Loan to Customers (109,325) (65,403) 67.2%
Credit Loss Allowance for Investments in Finance Lease (986) (414) NMF
Credit Loss Allowance for Performance Guarantees and Credit Related
Commitments (2,524) 866 NMF
Credit Loss Allowance for Other Financial Assets (9,175) (5,521) 66.2%
Credit Loss Allowance for Financial Assets Measured at Fair Value (64) - NMF
through Other Comprehensive
Income
Credit Loss Allowance for Financial Assets Measured at Amortised (129) - NMF
Cost
---------------- ---------------
Total Credit Loss Allowance (122,203) (70,472) 73.4%
--------------------------------------------------------------------- ---------------- --------------- ------------
Operating Income after Credit Loss Allowance 653,003 547,196 19.3%
--------------------------------------------------------------------- ---------------- --------------- ------------
Cost of Risk 1.7% 1.2% 0.5%
--------------------------------------------------------------------- ---------------- --------------- ------------
NMF - no meaningful figures
9M 2018 to 9M 2017 Comparison
In 9M 2018, total credit loss allowance increased by GEL 51.7 million to GEL 122.2 million, compared to 9M 2017. The main contributor to the growth was credit loss allowance for loans to customers up by GEL 43.9 million. The increase was attributable to the corporate segment following a high recovery of credit loss in 9M 2017.
Operating Expenses ---------------------------------------------------------------- --------------- In thousands of GEL 9M'18 9M'17 Change in % ---------------------------------------------------------------- --------------- --------------- ------------ Staff Costs 157,141 148,995 5.5% ---------------------------------------------------------------- --------------- --------------- ------------ Provisions for Liabilities and Charges 4,000 (2,495) NMF ---------------------------------------------------------------- --------------- --------------- ------------ Depreciation and Amortization 33,407 26,840 24.5% ---------------------------------------------------------------- --------------- --------------- ------------
Professional services 8,566 9,659 -11.3%
Advertising and marketing services 18,837 10,289 83.1%
Rent 17,723 17,224 2.9%
Utility services 4,889 4,552 7.4%
Intangible asset enhancement 7,694 6,958 10.6%
Taxes other than on income 5,401 4,576 18.0%
Communications and supply 3,751 2,868 30.8%
Stationary and other office expenses 3,528 3,397 3.9%
Insurance 2,031 1,705 19.1%
Security services 1,518 1,476 2.8%
Premises and equipment maintenance 4,331 3,839 12.8%
Business trip expenses 1,567 1,376 13.9%
Transportation and vehicles maintenance 1,494 1,184 26.2%
Charity 742 763 -2.8%
Personnel training and recruitment 874 918 -4.8%
Write-down of current assets to fair value less costs to sell (1,006) (373) NMF
Loss on disposal of inventory 136 1,188 -88.6%
Loss on disposal of investment properties 60 385 -84.4%
Loss on disposal of premises and equipment 435 306 42.2%
Impairment of intangible assets - 1,916 -100.0%
Acquisition costs - 1,887 -100.0%
Other 10,006 10,327 -3.1%
--------------- ---------------
Administrative and Other Operating Expenses 92,577 86,420 7.1%
---------------------------------------------------------------- --------------- --------------- ------------
Operating Expenses 287,125 259,760 10.5%
---------------------------------------------------------------- --------------- --------------- ------------
Profit before Tax 365,878 287,436 27.3%
---------------------------------------------------------------- --------------- --------------- ------------
Income Tax Expense (58,530) (24,263) 141.2%
---------------------------------------------------------------- --------------- --------------- ------------
Profit for the Period 307,348 263,173 16.8%
---------------------------------------------------------------- --------------- --------------- ------------
Cost to Income 37.0% 42.1% -5.1%
---------------------------------------------------------------- --------------- --------------- ------------
ROE 21.2% 20.9% 0.3%
---------------------------------------------------------------- --------------- --------------- ------------
ROA 3.1% 3.2% -0.1%
---------------------------------------------------------------- --------------- --------------- ------------
NMF - no meaningful figures
9M 2018 to 9M 2017 Comparison
In 9M 2018, total operating expenses expanded by GEL 27.4 million, or 10.5%, YoY. This mainly resulted from an increase in staff costs of GEL 8.1 million, or 5.5%, an increase in depreciation and amortisation of GEL 6.6 million, or 24.5% and an increase in administrative expenses by GEL 6.2 million, or 7.1%, mainly related to the growth of advertising and marketing services. The growth across the board was related to the overall growth of the business scale and higher performance.
As a result, cost to income ratio was 37.0% in 9M 2018, 5.1pp lower than the 42.1% in 9M 2017.
Income Tax
In 9M 2018, TBC Bank reversed the one-off deferred tax gain, which was recognised in 2016 due to the recent amendment to the Georgian Tax Code in relation to corporate income tax. The amendment, which came into force on 12 June 2018, postponed the tax relief for re-invested profit from 1 January 2019 to 1 January 2023 for financial institutions. This reversal has resulted in a GEL 17.4 million expense on the profit and loss statement and a GEL 5.1 million reduction in equity in 9M 2018.
Net Income
Net income for 9M increased by GEL 44.1 million, or 16.8%, YoY and stood at GEL 307.3 million.
As a result, ROE stood at 21.2%, up by 0.3pp YoY, and ROA stood at 3.1%, down by 0.1pp YoY.
Balance Sheet Discussion In thousands of GEL Sep-18 Sep-17 Change YoY ----------------------------------------------------------- ----------------- --------------- ----------- Cash, Due from Banks and Mandatory Cash Balances with NBG 2,693,455 2,507,912 7.4% Loans and Advances to Customers (Net) 9,279,982 7,549,061 22.9% Financial Securities 1,386,239 1,113,373 24.5% Fixed and Intangible Assets & Investment Property 549,938 480,045 14.6% Other Assets 514,383 486,531 5.7% Total Assets 14,423,997 12,136,922 18.8% ----------------------------------------------------------- ----------------- --------------- ----------- Due to Credit Institutions 2,981,269 2,675,930 11.4% Customer Accounts 8,740,449 7,096,523 23.2% Debt Securities in Issue 13,027 19,818 -34.3% Subordinated Debt 412,803 411,193 0.4% Other Liabilities 220,499 143,151 54.0% Total Liabilities 12,368,047 10,346,615 19.5% ----------------------------------------------------------- ----------------- --------------- ----------- Total Equity 2,055,950 1,790,307 14.8% ----------------------------------------------------------- ----------------- --------------- -----------
Assets
As of 30 September 2018, the Group's total assets amounted to GEL 14,424.0 million, up by GEL 2,287.1 million, or 18.8%, YoY. The increase was mainly due to a rise in net loans to customers of GEL 1,730.9 million, or by 22.9%, YoY. It also resulted from a GEL 185.5 million, or 7.4%, rise in liquid assets (comprising cash, due from banks and mandatory cash balances with NBG) and a GEL 272.9 million, or 24.5%, increase in financial securities, compared to 30 September 2017.
As of 30 September 2018, the gross loan portfolio reached GEL 9,622.6 million, up by 23.9% YoY while proportion of gross loans denominated in foreign currency remained unchanged on a YoY basis and accounted for 59.2% of total loans.
Asset Quality
PAR 30 by Segments and Currencies Sep-18 Sep-17
--------------------------------------------------- ---------------------- ----------------------
GEL FC Total GEL FC Total
Corporate 0.0% 1.1% 0.8% 0.3% 2.8% 2.1%
Retail 4.5% 1.7% 3.0% 3.2% 2.2% 2.7%
MSME 1.8% 3.6% 2.7% 1.7% 4.1% 3.2%
Total 2.9% 1.9% 2.3% 2.3% 2.9% 2.7%
--------------------------------------------------- ------- ----- ------ ------- ----- ------
Loans overdue by more than 30 days to gross loans
Total
The total PAR 30 has declined by 0.4pp YoY. The YoY decrease is related to the improvements across the corporate and MSME segments by 1.3pp and 0.5pp respectively.
Retail Segment
The retail segment's PAR 30 increased by 0.3pp and amounted to 3.0% on a YoY basis, mainly driven by credit cards and other higher yield products, aligned with the respective yield increases.
Corporate
The corporate segment's PAR 30 decreased by 1.3pp YoY. The decrease was driven by improved performance of the corporate loan book.
MSME
The MSME segment's PAR 30 decreased by 0.5pp YoY. YoY decrease was driven by the improved performance of both micro and SME portfolios.
NPLs Sep-18 Sep-17
----------- ---------------------- ----------------------
GEL FC Total GEL FC Total
Corporate 1.2% 3.2% 2.6% 0.3% 4.7% 3.4%
Retail 3.7% 2.4% 3.0% 2.8% 3.1% 2.9%
MSME 2.3% 5.7% 4.1% 2.7% 6.0% 4.8%
Total 2.8% 3.4% 3.1% 2.3% 4.3% 3.5%
----------- ------- ----- ------ ------- ----- ------
Total
Total NPLs stood at 3.1%, down by 0.4pp on YoY basis, mainly driven by the improved performance of the corporate and MSME loan books.
Retail Segment
The retail segment's NPLs remained broadly stable and stood at 3.0%.
Corporate
The corporate NPLs stood at 2.6%, down by 0.8pp on YoY basis, due to overall improved performance of the corporate loan book.
MSME
The MSME NPLs declined by 0.7pp on a YoY basis, and stood at 4.1%, driven by improved performance in NPLs in both the micro and SME portfolios.
NPLs Coverage Sep-18 Sep-17
Exc. Collateral Incl. Collateral Exc. Collateral Incl. Collateral
--------------- ---------------- ----------------- ---------------- -----------------
Corporate 104.3% 242.5% 52.5% 256.8%
Retail 140.8% 206.4% 120.6% 201.6%
MSME 80.8% 184.8% 49.7% 172.5%
Total 113.2% 209.0% 80.5% 206.8%
--------------- ---------------- ----------------- ---------------- -----------------
NPLs Coverage
YoY total credit loss allowance coverage grew from 80.5% to 113.2%. The key driver of the increase was the transition to the IFRS 9 methodology.
Liabilities
As of 30 September 2018, TBC Bank's total liabilities amounted to GEL 12,368.0 million, up by GEL 2,021.4 million, or 19.5% YoY. This was primarily due to a GEL 305.4 million, or 11.4%, increase in amounts due to credit institutions and a hike in customer accounts of GEL 1,643.9 million, or 23.2%. Total liabilities also expanded, due to an increase in deferred income tax liability of GEL 26.4 million, which was mainly related to the reversal of the deferred tax gain, as mentioned above.
Liquidity
As of 30 September 2018, the Bank's liquidity ratio, as defined by the NBG, stood at 31.9%, compared to 35.3% as of 30 September 2017. As of 30 September 2018, the total liquidity coverage ratio (LCR), as defined by the NBG, was 111.6%, above the 100.0% limit, while the LCR in GEL and FC stood at 86.5% and 128.1% respectively, above the respective limits of 75% and 100%.
Total Equity
As of 30 September 2018, TBC's total equity amounted to GEL 2,056.0 million, up by GEL 265.6 million or by 14.8% from GEL 1,790.3 million as of 30 September 2017. This YoY change in equity was mainly due to net profit contribution of GEL 404.1 million during the last 12 months, which was mostly offset by dividend distribution of GEL 88.9 million in May 2018 and by IFRS 9 transition effect in the amount of GEL 63.7 million as of 1 January 2018.
Regulatory Capital
According to the newly introduced methodology, as of 30 September 2018 the Bank's Basel III Tier 1 and Total Capital Adequacy Ratios (CAR) stood at 12.8% and 16.4%, respectively, compared to the minimum required levels of 10.3% and 15.8%.
In 30 September 2018, The Bank's Basel III Tier 1 Capital amounted to GEL 1,580.5 million. The Bank's Basel III Total Capital totalled GEL 2,020.5 million. Risk weighted assets amounted to GEL 12,305.8 million as of 30 September 2018.
Results by Segments and Subsidiaries
The segment definitions are as follows (updated in 2018):
-- 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 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 purpose.
Income Statement by Segments 9M'18 Retail MSME Corporate Corp.Centre Total ------------------ ------------------- -------------------- ------------------- ---------------- ---------------- Interest Income 452,367 182,341 184,768 109,216 928,692 Interest Expense (90,496) (7,326) (98,632) (169,019) (365,473) Net Transfer Pricing (62,039) (60,158) 26,745 95,452 - Net Interest Income 299,832 114,857 112,881 35,649 563,219 ------------------ ------------------- -------------------- ------------------- ---------------- ---------------- Fee and Commission Income 122,297 16,158 28,164 2,033 168,652 Fee and Commission Expense (45,062) (4,966) (4,931) (227) (55,186) Net fee and Commission Income 77,235 11,192 23,233 1,806 113,466 ------------------ ------------------- -------------------- ------------------- ---------------- ---------------- Gross Insurance Profit - - - 8,422 8,422 Net income from foreign currency operations 20,418 15,475 31,583 (4,056) 63,420 Foreign Exchange Translation Gains Less Losses/(Losses Less Gains) - - - 10,425 10,425 Net Losses from Derivative Financial Instruments (44) - - 401 357 Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income - - - 2 2 Other Operating Income 6,367 505 6,943 1,138 14,953 Share of profit of associates - - - 942 942 Other Operating Non-Interest Income 26,741 15,980 38,526 17,274 98,521 ------------------ ------------------- -------------------- ------------------- ---------------- ---------------- Credit Loss Allowance for Loan to Customers (83,935) (16,315) (9,075) - (109,325) Credit Loss Allowance for Performance Guarantees and Credit Related Commitments (136) (703) (1,116) (569) (2,524) Credit Loss Allowance for Investments in Finance Lease - - - (986) (986) Credit Loss Allowance for Other Financial Assets (3,933) (2) (3,277) (1,963) (9,175) Credit Loss Allowance for Financial Assets Measured at Fair Value through Other Comprehensive Income - - (116) 52 (64) Credit Loss Allowance for Financial Assets Measured at Amortised Cost - - - (129) (129) Profit before G&A Expenses and Income Taxes 315,804 125,009 161,056 51,134 653,003 ------------------ ------------------- -------------------- ------------------- ---------------- ---------------- Staff Costs (91,893) (29,823) (21,668) (13,757) (157,141) Depreciation and Amortization (26,930) (3,643) (1,622) (1,212) (33,407) Provision for liabilities and charges - - - (4,000) (4,000) Administrative and Other Operating Expenses (60,157) (13,260) (6,047) (13,113) (92,577) Operating Expenses (178,980) (46,726) (29,337) (32,082) (287,125) ------------------ ------------------- -------------------- ------------------- ---------------- ----------------
Profit before Tax 136,824 78,283 131,719 19,052 365,878
------------------ ------------------- -------------------- ------------------- ---------------- ----------------
Income Tax
Expense (18,254) (11,716) (19,874) (8,686) (58,530)
------------------- -------------------- ------------------- ---------------- ----------------
Profit for the
Year 118,570 66,567 111,845 10,366 307,348
------------------ ------------------- -------------------- ------------------- ---------------- ----------------
Portfolios by Segments
In thousands of GEL 30-Sep-2018 30-Sep-2017
---------------------------------------------------- ------------- -------------
Loans and Advances to Customers
Consumer 1,958,883 1,972,012
Mortgage 2,452,157 1,900,186
Pawn 35,357 34,862
Retail 4,446,397 3,907,060
Corporate 2,891,628 2,128,478
MSME 2,284,538 1,732,096
Total Loans and Advances to Customers (Gross) 9,622,563 7,767,634
Less: Credit loss allowance for Loans to Customers (342,581) (218,573)
Total Loans and Advances to Customers (Net) 9,279,982 7,549,061
---------------------------------------------------- ------------- -------------
Customer Accounts
Retail 4,850,586 4,015,754
Corporate 2,920,526 2,130,763
MSME 969,337 950,006
Total Customer Accounts 8,740,449 7,096,523
---------------------------------------------------- ------------- -------------
Retail Banking
As of 30 September 2018, retail loans stood at GEL 4,446.4 million, up by GEL 539.3 million, or 13.8%, YoY and accounted for 39.9% market share of total individual loans. As of 30 June 2018, foreign currency loans represented 53.7% of the total retail loan portfolio.
In the reporting period, retail deposits stood at GEL 4,850.6 million, up by GEL 834.8 million, or 20.8%, YoY accounting for 41.1% market share of total individual deposits. As of 30 September 2018, term deposits accounted for 53.4% of the total retail deposit portfolio, while foreign currency deposits represented 83.0% of the total retail deposit portfolio.
In 9M 2018, retail loan yields and deposit rates stood at 14.4% and 2.7%, respectively. The segment's cost of risk on loans was 2.7%.The retail segment contributed 38.6%, or GEL 118.6 million, to the total net income in 9M 2018.
Corporate Banking
As of 30 September 2018, corporate loans amounted to GEL 2,891.6 million, up by GEL 763.1 million, or 35.9%, YoY. Foreign currency loans accounted for 73.3% of the total corporate loan portfolio. The market share of total legal entities loans stood at 36.6%.
As of the same date, corporate deposits totalled GEL 2,920.5 million, up by GEL 789.7 million, or 37.1%, YoY. Foreign currency corporate deposits represented 45.7% of the total corporate deposit portfolio. The market share of total legal entities deposits stood at 39.4%.
In 9M 2018, corporate loan yields and deposit rates stood at 9.4% and 5.1%, respectively. In the same period, the cost of risk on loans was 0.5%. In terms of profitability, the corporate segment's net profit reached GEL 111.8 million, or 36.4% of the total net income.
MSME Banking
As of 30 September 2018, MSME loans amounted to GEL 2,284.5, up by GEL 552.4 million, or 31.9%, YoY. Foreign currency loans accounted for 52.1% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 969.3 million, up by GEL 19.3 million, or 2.0%, YoY. Foreign currency MSME deposits represented 47.5% of the total MSME deposit portfolio.
In 9M 2018, MSME loan yields and deposit rates stood at 12.1% and 1.0% respectively, while the cost of risk on loans was 1.1%. In terms of profitability, net profit for the MSME segment amounted to GEL 66.6 million, or 21.7%, of the total net income.
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Sep-18 Sep-17
----------------------------------------------------------------------------- -------------------- -----------------
Cash and cash equivalents 1,114,672 1,445,521
Due from other banks 152,010 41,696
Mandatory cash balances with National Bank of Georgia 1,426,773 1,020,695
Loans and advances to customers 9,279,982 7,549,061
Investment securities Measured at Fair Value through Other Comprehensive
Income 868,060 685,210
Bonds carried at amortised cost 518,179 428,163
Investments in associates 2,220 1,309
Investments in finance leases 183,715 111,223
Investment properties 78,274 88,750
Current income tax prepayment 7,650 18,380
Deferred income tax asset 2,499 3,592
Other financial assets 103,520 113,942
Other assets 186,061 209,428
Premises and equipment 375,002 321,431
Intangible assets 96,662 69,864
Goodwill 28,718 28,657
TOTAL ASSETS 14,423,997 12,136,922
----------------------------------------------------------------------------- -------------------- -----------------
LIABILITIES
Due to Credit Institutions 2,981,269 2,675,930
Customer accounts 8,740,449 7,096,523
Other financial liabilities 90,966 59,616
Current income tax liability 30 362
Debt Securities in issue 13,027 19,818
Deferred income tax liability 27,202 851
Provisions for liabilities and charges 16,329 11,072
Other liabilities 85,972 71,250
Subordinated debt 412,803 411,193
TOTAL LIABILITIES 12,368,047 10,346,615
----------------------------------------------------------------------------- -------------------- -----------------
EQUITY
Share capital 1,650 1,605
Share premium 796,854 714,651
Retained earnings 1,372,798 1,137,497
Group reorganisation reserve (162,166) (162,166)
Share based payment reserve (18,689) 7,291
Revaluation reserve for premises 64,962 70,045
Revaluation reserve for available-for-sale securities 4,875 863
Cumulative currency translation reserve (7,277) (7,301)
Net assets attributable to owners 2,053,007 1,762,485
----------------------------------------------------------------------------- -------------------- -----------------
Non-controlling interest 2,943 27,822
-------------------- -----------------
TOTAL EQUITY 2,055,950 1,790,307
----------------------------------------------------------------------------- -------------------- -----------------
TOTAL LIABILITIES AND EQUITY 14,423,997 12,136,922
----------------------------------------------------------------------------- -------------------- -----------------
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In thousands of GEL 9M'18 9M'17
-------------------------------------------------------------------------------- ---------------- ----------------
Interest income 928,692 745,918
Interest expense (365,473) (307,298)
Net interest income 563,219 438,620
-------------------------------------------------------------------------------- ---------------- ----------------
Fee and commission income 168,652 138,271
Fee and commission expense (55,186) (51,264)
-------------------------------------------------------------------------------- ---------------- ----------------
Net Fee and Commission Income 113,466 87,007
-------------------------------------------------------------------------------- ---------------- ----------------
Net insurance premiums earned 16,578 8,972
Net insurance claims incurred and agents' commissions (8,156) (4,118)
-------------------------------------------------------------------------------- ---------------- ----------------
Insurance Profit 8,422 4,854
-------------------------------------------------------------------------------- ---------------- ----------------
Net income from foreign currency operations 63,420 61,477
Net gain/(losses) from foreign exchange translation 10,425 4,282
Net gains/(losses) from derivative financial instruments 357 (39)
Gains less Losses from Disposal of Investment Securities Measured at Fair Value 2 -
through Other
Comprehensive Income
Other operating income 14,953 20,806
Share of profit of associates 942 661
Other operating non-interest income 90,099 87,187
-------------------------------------------------------------------------------- ---------------- ----------------
Credit loss allowance for loan to customers (109,325) (65,403)
Credit loss allowance for investments in finance lease (986) (414)
Credit loss allowance for performance guarantees and credit related commitments (2,524) 866
Credit loss allowance for other financial assets (9,175) (5,521)
Credit loss allowance for financial assets measured at fair value through other (64) -
comprehensive
income
Credit loss allowance for financial assets measured at amortised cost (129) -
Operating income after credit loss allowance 653,003 547,196
-------------------------------------------------------------------------------- ---------------- ----------------
Staff costs (157,141) (148,995)
Depreciation and amortization (33,407) (26,840)
(Provision for)/ recovery of liabilities and charges (4,000) 2,495
Administrative and other operating expenses (92,577) (86,420)
Operating expenses (287,125) (259,760)
-------------------------------------------------------------------------------- ---------------- ----------------
Profit before tax 365,878 287,436
-------------------------------------------------------------------------------- ---------------- ----------------
Income tax expense (58,530) (24,263)
---------------- ----------------
Profit for the period 307,348 263,173
-------------------------------------------------------------------------------- ---------------- ----------------
Other Comprehensive income:
-------------------------------------------------------------------------------- ---------------- ----------------
Items that may be reclassified subsequently to profit or loss:
-------------------------------------------------------------------------------- ---------------- ----------------
Revaluation of available for-sale-investments 3,192 4,544
-------------------------------------------------------------------------------- ---------------- ----------------
Exchange differences on translation to presentation currency 85 241
-------------------------------------------------------------------------------- ---------------- ----------------
Items that will not be reclassified to profit or loss:
-------------------------------------------------------------------------------- ---------------- ----------------
Income tax recorded directly in other comprehensive income (5,151) (422)
-------------------------------------------------------------------------------- ---------------- ----------------
Other comprehensive income for the Period (1,874) 4,363
-------------------------------------------------------------------------------- ---------------- ----------------
Total comprehensive income for the Period 305,474 267,536
-------------------------------------------------------------------------------- ---------------- ----------------
Profit attributable to:
-------------------------------------------------------------------------------- ---------------- ----------------
- Shareholders of TBCG 305,126 259,043
-------------------------------------------------------------------------------- ---------------- ----------------
- Non-controlling interest 2,222 4,130
-------------------------------------------------------------------------------- ---------------- ----------------
Profit for the period 307,348 263,173
-------------------------------------------------------------------------------- ---------------- ----------------
Total comprehensive income is attributable to:
-------------------------------------------------------------------------------- ---------------- ----------------
- Shareholders of TBCG 303,273 263,406
-------------------------------------------------------------------------------- ---------------- ----------------
- Non-controlling interest 2,201 4,130
-------------------------------------------------------------------------------- ---------------- ----------------
Total comprehensive income for the Period 305,474 267,536
-------------------------------------------------------------------------------- ---------------- ----------------
Consolidated Statements of Cash Flows
In thousands of GEL 30-Sep-18 30-Sep-17
------------------------------------------------------------------------------------- --------------- --------------
Cash flows from/(used in) operating activities
Interest received 898,534 726,012
Interest paid (357,224) (304,258)
Fees and commissions received 180,489 139,408
Fees and commissions paid (55,190) (51,358)
Insurance premium received 18,045 13,908
Insurance claims paid (7,803) (5,946)
Income received from trading in foreign currencies 63,420 61,478 Other operating income received 4,379 9,638 Staff costs paid (153,876) (143,370) Administrative and other operating expenses paid (97,685) (78,995) Income tax paid (24,758) (42,785) Cash flows from operating activities before changes in operating assets and liabilities 468,331 323,732 ------------------------------------------------------------------------------------- --------------- -------------- Net change in operating assets Due from other banks and mandatory cash balances with the National Bank of Georgia (479,208) (73,036) Loans and advances to customers (1,064,695) (777,837) Investment in finance lease (37,065) (20,647) Other financial assets 38,446 (11,776) Other assets (9,900) 1,119 Net change in operating liabilities Due to other banks 116,376 (219,247) Customer accounts 887,193 914,052 Other financial liabilities (9,738) (4,403) Other liabilities and provision for liabilities and charges 6,484 1,241 Net cash from operating activities (83,776) 133,198 ------------------------------------------------------------------------------------- --------------- -------------- Cash flows from/(used in) investing activities Acquisition of investment securities measured at fair value through other comprehensive income (479,092) (514,803) Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income 272,477 269,640 Acquisition of bonds carried at amortised cost (235,480) (247,035) Proceeds from redemption of bonds carried at amortised cost 167,258 198,380 Acquisition of premises, equipment and intangible assets (55,321) (47,410) Disposal of premises, equipment and intangible assets 1,140 1,436 Proceeds from disposal of investment property 8,448 7,831 Acquisition of subsidiaries, net of cash acquired - (350) Net cash used in investing activities (320,570) (332,311) ------------------------------------------------------------------------------------- --------------- -------------- Cash flows from/(used in) financing activities Proceeds from other borrowed funds 1,456,759 1,464,205 Redemption of other borrowed funds (1,250,372) (771,829) Proceeds from subordinated debt - 60,188 Redemption of subordinated debt (32,166) - Proceeds from debt securities in issue (7,446) - Redemption of debt securities in issue - (2,075) Dividends paid (85,483) (67,927) Issue of ordinary shares - 29 Net cash flows from financing activities 81,292 682,591 ------------------------------------------------------------------------------------- --------------- -------------- Effect of exchange rate changes on cash and cash equivalents 6,249 16,863 ------------------------------------------------------------------------------------- --------------- -------------- Net increase in cash and cash equivalents (316,805) 500,341 ------------------------------------------------------------------------------------- --------------- -------------- Cash and cash equivalents at the beginning of the year 1,431,477 945,180 ------------------------------------------------------------------------------------- --------------- -------------- Cash and cash equivalents at the end of the year 1,114,672 1,445,521 ------------------------------------------------------------------------------------- --------------- --------------
Key Ratios
Average Balances
The average balances in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts prepared from TBC's accounting records. These were used by the Management for monitoring and control purposes.
Key Ratios Ratios (based on monthly averages, where applicable) 9M'18 9M'17 ------------------------------------------------------ ------- -------- ROE(1) 21.2% 20.9% ROA(2) 3.1% 3.2% ROE before credit loss allowance(3) 29.6% 26.6% Cost to Income(4) 37.0% 42.1% Cost of Risk(5) 1.7% 1.2% FX adjusted Cost of Risk(6) 1.7% 1.4% NIM(7) 7.0% 6.5% Risk Adjusted NIM(8) 5.3% 5.1% Loan Yields(9) 12.4% 12.0% Risk Adjusted Loan Yields(10) 10.7% 10.6% Deposit rates(11) 3.3% 3.4% Yields on interest Earning Assets(12) 11.5% 11.1% Cost of Funding(13) 4.4% 4.4% Spread(14) 7.1% 6.6% PAR 90 to Gross Loans(15) 1.3% 1.6% NPLs to Gross Loans(16) 3.1% 3.5% NPLs coverage(17) 113.2% 80.5%* NPLs coverage with collateral(18) 209.0% 206.8%* Credit Loss Level to Gross Loans(19) 3.6% 2.8%* Related Party Loans to Gross Loans(20) 0.1% 0.1% Top 10 Borrowers to Total Portfolio(21) 10.3% 8.3% Top 20 Borrowers to Total Portfolio(22) 14.1% 12.5% Net Loans to Deposits plus IFI Funding(23) 88.0% 91.5% Net Stable Funding Ratio(24) 118.0% 134.5% Liquidity Coverage Ratio(25) 111.6% 115.0% Leverage(26) 7.0x 6.8x Regulatory Tier 1 CAR (Basel III)(27) 12.8% 10.8%** Regulatory Total 1 CAR (Basel III)(28) 16.4% 14.5%** ------------------------------------------------------ ------- --------
* Figures per IAS39
**9M 2017 figures are based on previous regulation in accordance with Basel II/III guidelines
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; Annualised where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period. 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 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 equal cost of risk at constant currency.
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 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 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 total loan amount of top 10 borrowers divided by the gross loan portfolio.
22. Top 20 borrowers to total portfolio equals total loan amount of 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 available amount of stable funding divided by required amount of stable funding as defined in Basel III.
25. Liquidity coverage ratio equals high-quality liquid assets divided by 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 2.4516 as of 30 June 2018. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.4767 as of 30 September 2017. As of 30 September 2018 the USD/GEL exchange rate equalled 2.6151. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 3Q 2018 of 2.5295, 2Q 2018 of 2.4460, 3Q 2017 of 2.4232.
Additional Disclosures
Subsidiaries of TBC Bank Group PLC[15]
Ownership Country Year of Industry Total Assets
/ voting incorporation (after elimination)
% as
of 30
September
2018
----------- ----------- --------------- -------------------- -----------------------
Subsidiary Amount % in TBC
GEL'000 Group
--------------------------- ----------- ----------- --------------- -------------------- ------------ ---------
JSC TBC Bank 99.9% Georgia 1992 Banking 14,029,388 97.26%
United Financial
Corporation JSC 98.7% Georgia 1997 Card processing 9,511 0.07%
TBC Capital LLC 100.0% Georgia 1999 Brokerage 9,505 0.07%
TBC Leasing JSC 99.6% Georgia 2003 Leasing 245,348 1.70%
Non-banking
TBC Kredit LLC 100.0% Azerbaijan 1999 credit institution 37,996 0.26%
Banking System Service Information
Company LLC 100.0% Georgia 2009 services 762 0.01%
TBC Pay LLC 100.0% Georgia 2009 Processing 33,924 0.24%
Real estate
Index LLC 100.0% Georgia 2011 management 344 0.00%
Real Estate Management Real estate
Fund JSC 100.0% Georgia 2010 management 21 0.00%
TBC Invest LLC 100.0% Israel 2011 PR and marketing 239 0.00%
BG LLC* 0.0% Georgia 2018 Asset management 5,626 0.04%
JSC TBC Insurance 100.0% Georgia 2014 Insurance 48,242 0.33%
Swoop JSC 98.13% Georgia 2010 Retail Trade 813 0.01%
GE Commerce LTD 100.0% Georgia 2018 Retail Trade 223 0.00%
(*) In July 2018 the Group obtained de facto control over BG LLC
1) Earnings per Share
In GEL 9m 2018 9m 2017 Earnings per share for profit attributable to the owners of the Group: -------------------------------------------- -------- -------- - Basic earnings per share 5.67 4.92 - Diluted earnings per share 5.62 4.85 -------------------------------------------- -------- --------
Source: IFRS Consolidated
In GEL 3Q 2018 3Q 2017 Earnings per share for profit attributable to the owners of the Group: -------------------------------------------- -------- -------- - Basic earnings per share 1.97 1.62 - Diluted earnings per share 1.95 1.59 -------------------------------------------- -------- --------
Source: IFRS Consolidated
2) Sensitivity Scenario
30-Sep-18 10% Currency Devaluation
Sensitivity Scenario Effect
------------------------------------------------- ---------- -------------------------
NIM* -0.17%
Technical Cost of Risk +0.15%
------------------------------------------------- ---------- -------------------------
Regulatory Total Capital per new NBG regulation 2,021 2,043
Regulatory Capital adequacy ratios tier 0.68% - 0.79%
1 and total capital per new NBG regulation
decrease by
------------------------------------------------- ---------- -------------------------
(*) Linear depreciation is assumed for NIM sensitivity analysis
Source: IFRS statements and Management Figures
3) FC Details for Selected P/L Items
Selected P&L Items 3Q FC % of Respective 2018 Totals ---------------------------- ------------------- Interest Income 38% Interest Expense 50% Fee and Commission Income 32% Fee and Commission Expense 65% Administrative Expenses 15% ---------------------------- -------------------
Source: IFRS statements and Management figures
4) Open Interest Rate Position as of 30 September 2018
Open interest rate Open interest rate
position in GEL GEL - 132 m position in FC GEL 1,963 m
------------------- --------------------------- -------------------
GEL m % share GEL % share
in totals m in totals
---------------------------------- ------ ----------- --------------------------- ------ -----------
Assets 2,407 17% Assets 3,740 26%
------ ----------- ------ -----------
Securities with fixed
yield(<=1y)* 455 33% Nostro** 63 11%
------ -----------
Securities with floating
yield 49 4% NBG Reserves** 1,427 90%
------ -----------
Loans with Floating
yield 1,780 19% NBG Deposits 47 3%
------ -----------
Reserves in NBG 120 8% Libor Loans 2,192 23%
------ -----------
Interbank loans& Deposits
& Repo 3 0% Interest Rate Swap 11
------ ----------- ------ -----------
Liabilities 2,275 18%
------ ----------- ------ -----------
Current accounts*** 464 5% Liabilities 1,777 14%
------ ----------- ------ -----------
Saving accounts*** 535 6% Senior Loans 1,456 52%
------ -----------
Refinancing Loan of
NBG 632 23% Subordinated Loans 321 78%
------ -----------
Interbank Loans &Deposits
& Repo 77 38%
------ -----------
IFI Borrowings 567 20%
------ -----------
(*) 62% of the less than 1-year securities are maturing in 6 months.
(**) Income on NBG reserves and Nostros are calculated as benchmark minus margin whereby benchmarks are correlated with Libor. From March, 2016 according to NBG regulation is it possible to apply negative interest rates on NBG reserves and correspondent accounts, therefore these two items close the gap in case of both upward and downward movement of Libor rate.
(***) The Bank considers that current and saving deposits promptly react to interest rate changes on the market (within 1-month prior notification).
Source: IFRS Group Data
5) Yields and Rates
Yields and Rates 3Q'18 2Q'18 1Q'18 4Q'17 3Q'17
------------------------------ ------ ------ ------ ------ ------
Loan yields 12.4% 12.5% 12.3% 12.3% 11.9%
Retail loan yields GEL 20.8% 21.3% 20.5% 19.7% 19.2%
Retail loan yields FX 7.9% 8.0% 8.4% 8.8% 8.5%
Retail Loan Yields 14.1% 14.7% 14.6% 14.2% 13.8%
Corporate loan yields
GEL 11.0% 11.4% 11.2% 12.2% 11.0%
Corporate loan yields
FX 9.1% 8.7% 8.6% 9.2% 8.6%
Corporate Loan Yields 9.6% 9.4% 9.2% 10.0% 9.2%
MSME loan yields GEL 16.6% 15.9% 15.0% 13.6% 13.1%
MSME loan yields FX 8.9% 8.5% 8.9% 9.4% 9.4%
MSME Loan Yields 12.6% 12.0% 11.3% 10.9% 10.7%
Deposit rates 3.3% 3.3% 3.3% 3.5% 3.4%
Retail deposit rates GEL 4.4% 4.3% 4.4% 4.4% 4.0%
Retail deposit rates FX 2.3% 2.4% 2.5% 2.7% 2.8%
Retail Deposit Yields 2.7% 2.7% 2.8% 2.9% 3.0%
Corporate deposit rates
GEL 7.5% 7.9% 8.0% 8.5% 8.3%
Corporate deposit rates
FX 2.0% 1.9% 2.0% 2.1% 2.2%
Corporate Deposit Yields 4.9% 5.2% 5.2% 5.3% 5.2%
MSME deposit rates GEL 1.7% 1.7% 1.8% 2.1% 2.2%
MSME deposit rates FX 0.4% 0.4% 0.5% 0.8% 0.7%
MSME Deposit Yields 1.0% 1.0% 1.1% 1.4% 1.4%
Yields on Securities 7.8% 7.7% 8.1% 6.9% 8.4%
------------------------------ ------ ------ ------ ------ ------
Source: IFRS Consolidated
6) Risk Adjusted Yields
& Cost of Risk
Risk-adjusted Yields 3Q'18 2Q'18 1Q'18 4Q'17 3Q'17
------------------------- ------ ------ ------ ------ ------
Loan yields 10.9% 10.8% 10.6% 11.1% 10.7%
Retail Loan Yields 11.6% 12.1% 11.6% 12.2% 10.8%
Corporate Loan Yields 9.0% 8.5% 9.3% 9.6% 11.1%
MSME Loan Yields 11.8% 11.1% 9.8% 10.4% 9.9%
------------------------- ------ ------ ------ ------ ------
3Q'18 2Q'18 1Q'18 4Q'17 3Q'17
------------------------- ------ ------ ------ ------ ------
Cost of Risk 1.9% 1.8% 1.3% 1.4% 1.3%
Retail 2.7% 2.6% 2.7% 2.0% 3.2%
Corporate 1.1% 0.9% -0.8% 0.7% -1.7%
MSME 1.2% 1.0% 1.0% 0.7% 0.9%
Source: IFRS Consolidated
7) Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
Sep-18 Jun-18 Mar-18 Dec-17 Sep-17
------------------------- ------- ------- ------- ------- -------
SDL Loans as % of Gross
Loans 3.8% 3.3% 3.1% 3.2% 3.4%
------------------------- ------- ------- ------- ------- -------
Source: NBG
8) Cross Sell Ratio[16] and Number Active Products
Sep-18 Jun-18 Mar-18 Dec-17 Sep-17
--------------------------- ------- ------- ------- ------- -------
Cross Sell Ratio 3.85 3.89 3.88 3.94 3.79
Number of Active Products
(in millions) 4.58 4.64 4.58 4.50 4.06
--------------------------- ------- ------- ------- ------- -------
Source: Management 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
30 September 2018 Volume of Deposits Number of Deposits ----------------------- ------------------- ------------------- MASS 39% 92.4% STATUS 30% 7.1% VIP 23% 0.4% Wealth Management for non-resident clients 8% 0.1% ----------------------- ------------------- -------------------
Source: Management figures
10) Loan Concentration
Sep-18 Jun-18 Mar-18 Dec-17 Sep-17
------------------------ ------- ------- ------- ------- -------
Top 20 Borrowers as %
of total portfolio 14.1% 13.2% 13.4% 12.4% 12.5%
Top 10 Borrowers as %
of total portfolio 10.3% 9.2% 9.4% 8.2% 8.3%
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)
3Q 18 3Q 17 3Q 16 3Q 15
--------------------------------------- ------ ------ ------ ------
Internet banking number of
transactions 2,308 2,175 1,828 1,511
--------------------------------------- ------ ------ ------ ------
Mobile banking number of transactions 6,833 3,953 1,814 780
--------------------------------------- ------ ------ ------ ------
Source: Management figures
12) Penetration Ratios of Digital Channels
Sep-18 Sep-17 Sep-16 Sep-15
---------------------------- ------- ------- ------- -------
IB&MB Penetration Ratio 40% 35% 34% 26%
---------------------------- ------- ------- ------- -------
Mobile Banking Penetration
Ratio 34% 27% 20% 12%
---------------------------- ------- ------- ------- -------
Source: Management figures
13) Number of Active Clients (in thousands)
Sep-18 Sep-17 Sep-16 Sep-15
---------------------------- ------- ------- ------- -------
Internet or mobile banking 478 375 269 182
---------------------------- ------- ------- ------- -------
Mobile banking 406 289 162 84
---------------------------- ------- ------- ------- -------
Source: Management figures
14) Distribution of Transactions in Digital Channels
3Q 18
------------------- ------
Mobile Banking 23%
------------------- ------
Internet Banking 11%
------------------- ------
Branches 10%
------------------- ------
TBC Pay terminals 22%
------------------- ------
ATMs 33%
------------------- ------
Other 1%
------------------- ------
90% of all transactions are conducted in digital channels
15) Distribution of Sales in Channels
3Q 18 3Q 17 3Q 16
------------------------ ------ ------ ------
IB, MB, ATM, Web 47% 25% 24%
------------------------ ------ ------ ------
Branches & Call Center 53% 75% 76%
------------------------ ------ ------ ------
53% of sales are conducted in digital channels*
* Only products that are sold in digital channels are counted
16) Digital Sales of Products
3Q 18 3Q 17 3Q 16
-------------------- ------ ------ ------
Deposits 64% 55% 52%
-------------------- ------ ------ ------
Pre-approved loans 68% 18% 12%
-------------------- ------ ------ ------
Debit cards 17% 7% -
-------------------- ------ ------ ------
17) POS Terminal Transactions
Sep-18 Jun-18 Mar-18 Dec-17 Sep-17
---------------------------- ------- ------- ------- ------- -------
POS number of transactions
(in millions) 24.1 22.3 17.9 16.4 13.2
---------------------------- ------- ------- ------- ------- -------
POS volume of transactions
(in mln GEL) 986 850 661 631 543
---------------------------- ------- ------- ------- ------- -------
* Data includes e-commerce and excludes transactions at POS terminals in TBC Bank's branches
18) Net outflow of borrowed funds
Subordinated and Senior Loans' Principal Amount Outflow by Year (USD million)
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 35 136 201 263 121 94 40 46 65 5
Out of USD 35 million cash outflow in 2018, USD 24 million has already been repaid by November 13
Source: Management figures, revolving non IFI loans from NBG are excluded
19) NPL Build Up (in GEL millions)
NPLs NPLs as Real Growth FX Effect Write-Offs Repossessed NPLs as
of Jun-18 of Sep-18
----------- ----------- ------------ ---------- ----------- ------------ -----------
Retail 120 49 4 (37) (2) 134
Corporate 72 - 5 - - 77
MSME 85 9 4 (5) (1) 92
Total 277 58 12 (41) (3) 303
----------- ----------- ------------ ---------- ----------- ------------ -----------
20) Net Write-Offs,
3Q 2018
--------------------- ----------- ----------- ---------------
In GEL millions Write-Offs Recoveries Net Write-Offs
--------------------- ----------- ----------- ---------------
Retail (31) 5 (26)
Corporate - 1 1
MSME (4) 6 2
--------------------- ----------- ----------- ---------------
Total (35) 12 (23)
--------------------- ----------- ----------- ---------------
Source: IFRS Consolidated
21) Portfolio Breakdown by Collateral Types as of 30-Sep-18 ----------------------------------------- Cash Cover 2% Gold 3% Inventory 9% Real Estate 65% Third Party Guarantees 6% Other 2% Unsecured 13% ---------------------------------- -----
Source: IFRS Consolidated
22) Loan to Value by Segments as of 30-Sep-18
Retail Corporate MSME Total
------------------------------------- ------------ ------- -----------
47% 46% 44% 46%
Mortgage loan's LTV
stood at 47%
23) TBC Insurance
TBC Insurance is a wholly owned subsidiary of the Company and the Bank's main bancassurance partner. The Group acquired it in October 2016 and it has been growing rapidly since then. TBC Insurance's product offering comprises motor, travel, personal accident, credit life and property, business property, liability, and cargo insurance products which are sold through a broad range of channels, including insurance agents, auto dealerships, web platforms, as well as TBC Bank's market-leading multichannel network.
In line with the Group's digitalisation strategy, TBC Insurance actively uses digital channels to market and sell its products. In 2017, TBC Insurance launched on the local market the first insurance chat bot, B Bot, which sells different types of insurance products. B Bot is fun to use and is quickly gaining popularity among clients, especially the younger generation. Another popular sales channel is the wide network of TBC Bank's self-service terminals, where customers can buy travel, casualty and collision (CASCO), and motor third-party liability (MTPL) insurance in a very short time. In addition, travel insurance can be purchased through TBC Bank's internet and mobile banking services; more products are planned to be added to this channel in 2018, including payment protection insurance (PPI), CASCO and MTPL.
The insurance business delivered outstanding financial results. Starting from 2018, TBC Insurance is the number two player on P&C insurance market and the largest player in the retail segment, with market shares[17] of 18.1% and 30% respectively as of Q3 2018, based on internal estimates. In Q3 2018, number of customers increased by 25% YoY and remained broadly stable QoQ due to increased focused on cross-selling. In third quarter, TBC insurance posted GEL 15,833 thousand in gross written premium, up by 84.4% YoY and net earned premium reached GEL 9,841 thousand, up by 112.9% in respective period. In addition, net combined ratio decreased to 79% in 3Q 2018 from 92% of the same period in 2017. As a result, net profit amounted to GEL 2,243 thousand in 3Q 2018 compared to GEL 885 thousand in 3Q 2017.
In thousands of GEL 3Q'18 2Q'18 1Q'18 4Q'17 3Q'17
------------------------ ------- ------- ------- ------- ------
Gross written premium 15,833 14,677 12,494 12,153 8,584
Net earned premium[18] 9,841 8,804 6,458 5,881 4,622
Net profit 2,243 1,497 1,260 601 885
3Q'18 2Q'18 1Q'18 4Q'17 3Q'17
------------------------ ------- ------- ------- ------- ------
Net combined ratio 79% 81% 76% 93% 92%
Sep-2018 Jun-2018 Mar-2018 Dec-2017 Sep-2017
------------------- ----------- -------------- -------------- --------- ---------
Market share 18.1% 17.9% 19.0% 13.3% 10.9%
Number of clients 299,238 296,341 295,607 276,848 239,472
24) Regulatory Capital
Total Capital and Tier 1 Capital Limits
Q3 2018 Actual 2018 F 2019 F 2020 F 2021 F
Tier Total Tier Total Tier Total Tier Total Tier Total
1 1 1 1 1
======= ======== ===== ====== ====== ====== ====== ====== ====== ======
Minimum
Requirement 6.0% 8.0% 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% 2.5% 2.5%
======= ======== ===== ====== ====== ====== ====== ====== ====== ======
Counter-Cyclical
Buffer 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
======= ======== ===== ====== ====== ====== ====== ====== ====== ======
Systemic
Buffer 0.0% 0.0% 1.0% 1.0% 1.5% 1.5% 2.0% 2.0% 2.5% 2.5%
======= ======== ===== ====== ====== ====== ====== ====== ====== ======
Pillar 1
buffers 8.5% 10.5% 9.5% 11.5% 10.0% 12.0% 10.5% 12.5% 11.0% 13.0%
======= ======== ===== ====== ====== ====== ====== ====== ====== ======
In addition, the Pillar 2 buffers in tier 1 will be in the range of 1.5%-2.5% in 2018 and gradually increase to the range of 2.5%-4.0% by 2021. The Pillar 2 buffers in total capital will be in the range of 3.0%-5.0% from 2018 to 2021
25) Space - fully digital bank
Date # of app. downloads # of registered customers 30-May-2018 69,510 38,598 30-Jun-2018 99,646 47,657 30-Jul-2018 128,205 55,699 30-Aug-2018 155,267 63,435 30-Sep-2018 186,044 72,447
26) International strategy: expansion into Azerbaijan market
Timeline -------------------------------------------------------------------------------------------------------------- Before September USD 45 mln was injected in capital by Nikoil shareholder in order to recapitalize the bank September Team formation October Strategy developed, shared and approved November Completion of confirmatory due diligence Next Steps Obtain regulatory approval for the merger, which might take up to 3 months
Strengthening Management Team
Existing management team of the joint entity
CEO Nikoloz Shurghaia
First Deputy CEO, Head of MSME Hajinski Farhad Ismailbey
Deputy CEO, Head of Retail Tagiyev Fuad Rauf
New management team of the joint entity
COO Nukri Tetrashvili, former CEO at TBC Kredit
CDO 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
Three year vision
---------------------- ------------ -----------------
In USD millions 3Q results Mid-term targets
of Nikoil of joint entity
Bank*
---------------------- ------------ -----------------
Loan Portfolio c. 240 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 hybrid of Nikoil Bank and TBC Bank products adapted to the local needs and offered primarily through digital channels, including Space Bank
-- Until call option is exercised, TBC Bank's shareholding in joint entity will be up to 10%
-- Our additional estimated investment during next three years will be consistent with our 10% shareholding and is estimated to be around USD 3-5 mln for each year
-- Call option can be exercised within the three year period after the merger based on the fixed price formula to reach 50%+1 shareholding
-- TBC Bank will contribute to the development and execution of the merged entity's strategy and intends to use its Georgian banking sector expertise to support Nikoil Bank's local growth in its targeted retail and MSME customer markets
27) International strategy: digital greenfield bank in Uzbekistan
This is a concept and initial aspirations at this stage and is subject to approvals (including approvals from the authorities), therefore it could change as we progress
Why Uzbekistan?
-- Large underpenetrated market: -- with more than 32 million population -- below 5% retail and MSME loan to GDP([19]) -- Similar past during USSR and good cultural links
-- Right time given implementation of reforms, many of which were designed by former Georgian government officials
-- Welcoming environment -- Both Uzbekistan and Georgia are included into China's One Belt One Road initiative Timeline --------------------------------------------------------------------------------------------------- October 2018 - Official meetings held and our interest confirmed to the Central Bank 1-3 months - Confirmation period from the government and central bank 1-3 months - Pre-licensing process takes 1-3 months from submission of pre-license application 1-6 months - Final license process takes 1-6 months from obtaining pre-license
Our strategy
-- Build a next generation bank for retail and MSME -- Focus on alternative channels including Space, a fully-digital bank -- Operate asset light, high-tech branches
Main highlights
-- Initial investments from TBC Bank around USD 20-30 mln, resulting in 51% shareholding
-- Other investors will include IFIs (EBRD and IFC have expressed interest) and local shareholder
-- All further investments will be subject to achievement of certain KPIs -- Medium to long-term financial targets after license is granted: -- Contribute 20% + TBC Bank Group PLC's assets and/or income -- Achieve sustainable ROE up to 25%
28) Nikoil Bank Financials
Profit & Loss Statement
In thousands of USD 3Q'18 2Q'18 3Q'17 ---------------------------------------------------- -------- -------- ------- Interest income 3,706 3,410 4,041 Interest expense (2,150) (2,491) (2,799) Net interest income 1,556 919 1,242 Fee and commission income 738 694 641 Fee and commission expense (285) (270) (166) Net Fee and Commission Income 453 424 475 Net income from foreign currency operations 234 483 172 Net gain/(losses) from foreign exchange translation 104 64 86 Other operating non-interest income 338 547 258 Credit loss allowance of loans (20,447) (27,537) 1,014 Credit loss allowance of other financial assets (121) 367 (609) Operating income after credit loss allowance (18,221) (25,280) 2,380 Staff costs (1,425) (1,373) (1,236) Depreciation and amortisation (316) (342) (488) Administrative and other operating expenses (1,161) (934) (1,080) Operating expenses (2,902) (2,649) (2,804) Profit before tax (21,123) (27,929) (424) Income tax expense - - - ---------------------------------------------------- -------- -------- ------- Profit for the period (21,123) (27,929) (424) ---------------------------------------------------- -------- -------- -------
Balance Sheet
In thousands of USD 30-Sep-18 30-Jun-18 30-Sep-17 --------------------------------------------- --------- --------- --------- Cash and cash equivalents 35,099 41,206 46,431 Due from other banks 21,190 26,676 7,372 Net Loans 129,544 147,444 156,722 Investment securities measured at fair value through other comprehensive income 26,371 21,208 8,481 Current income tax prepayment 2 23 311 Deferred income tax asset 768 768 768 Other financial assets 13,533 12,386 9,419 Other assets 396 398 1,495 Premises and equipment (Net) 5,576 5,571 6,356 Intangible assets (Net) 1,991 2,066 2,151 TOTAL ASSETS 234,470 257,746 239,506 --------------------------------------------- --------- --------- --------- Due to other banks 23,152 21,944 23,711 Customer Accounts 127,591 152,704 135,593 Other borrowed funds 38,876 37,173 34,494 Other financial liabilities 4,125 4,075 3,865 Subordinated debt 5,000 15,000 19,679 TOTAL LIABILITIES 198,744 230,896 217,342 --------------------------------------------- --------- --------- --------- Share capital 174,118 144,118 108,529 Additional paid-in-capital 500 500 500 Retained earnings (138,891) (117,768) (86,865) TOTAL EQUITY 35,727 26,850 22,164 --------------------------------------------- --------- --------- --------- TOTAL LIABILITIES AND EQUITY 234,470 257,746 239,506 --------------------------------------------- --------- --------- ---------
[1] 30 September 2017 ratios are calculated per IAS 39
[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]) The number of transactions conducted in remote channels divided by total number of transactions.
[4] For products being offered though remote channels.
[5] As per initial estimates of Geostat.
[6] Source: Insurance State Supervision Service of Georgia.
([7]) Source: CBU and commercial banks
([8]) Latest available information
([9]) Doing Business 2019 report
([10]) Excluding exchange rate effect
([11]) Growth in USD terms
[12] Gross insurance profit can be reconciled to the standalone net insurance profit (as shown in annex 23 on page 47) as follows: gross insurance profit less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income
[13] Incurred but not reported
[14] Gross insurance profit can be reconciled to the standalone net insurance profit as follows (as shown in annex 23 on page 47): gross insurance profit less credit loss allowance, administrative expenses and taxes, plus fee and commission income net interest income
[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] Source: Insurance State Supervision Service of Georgia
([18]) Net earned premium equals earned premium minus reinsurer's share of earned premium
[19] Source: CBU and commercial banks
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November 15, 2018 02:01 ET (07:01 GMT)
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