Final Results

RNS Number : 5797D
TBC Bank Group PLC
20 February 2020
 
 

 

TBC BANK GROUP PLC ("TBC Bank")

4Q 2019 UNAUDITED CONSOLIDATED FINANCIAL RESULTS AND FY 2019 PRELIMINARY UNAUDITED CONSOLIDATED FINANCIAL RESULTS
 

Forward-Looking Statements

 

This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause the actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.

 

None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.

 

Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.

 

 

Fourth Quarter 2019 Unaudited Consolidated Financial Results and Full Year 2019 Preliminary Unaudited Consolidated Financial Results Conference Call

 

TBC Bank Group PLC ("TBC PLC") announces that its consolidated financial results for the fourth quarter 2019 and preliminary consolidated financial results for the full year 2019 will be published on Thursday, 20 February 2020 at 7.00 am GMT (11.00 am GET).

 

On that day, Vakhtang Butskhrikidze, CEO, and Giorgi Shagidze, CFO, will host a conference call to discuss the results.

 

Date & time: Thursday, 20 February 2020 at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST)

 

Please dial-in approximately five minutes before the start of the call quoting the password TBC: 

 

 

 

Password:

TBC

UK Toll Free:

0808 109 0700

Standard International Access:

+44 (0) 20 3003 2666

USA Toll Free:

1 866 966 5335

New York New York:  

+1 212 999 6659

Russia Toll Free:

8 10 8002 4902044

Moscow:

+7 (8) 495 249 9843

 

Replay Numbers

 

Replay Passcode:

8513998

UK Toll Free:

0800 633 8453

Standard International Access:  

+44 (0) 20 8196 1998

USA Toll Free:

1 866 583 1035

Russia Toll Free:

8 10 8002 4832044

Moscow:

+7 (8) 495 249 9840

 

Contacts

 

 

Zoltan Szalai

Director of International Media and Investor Relations 

 

E-mail: ZSzalai@Tbcbank.com.ge 

Tel:  +44 (0) 7908 242128

Web: www.tbcbankgroup.com

Address:  68 Lombard St, London EC3V 9LJ, United Kingdom 

Anna Romelashvili       

Head of Investor Relations

 

E-mail: IR@tbcbank.com.ge 

Tel:  +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

Investor Relations Department

 

 

 

E-mail: IR@tbcbank.com.ge 

Tel:  +(995 32) 227 27 27

Web: www.tbcbankgroup.com

Address: 7 Marjanishvili St. Tbilisi, Georgia 0102

 

 

Table of Contents

 

4Q and FY 2019 Results Announcement

 

TBC Bank - Background

Performance Highlights

Letter from the Chief Executive Officer

Operating Overview

Recent Developments

International Expansion

Economic Overview

Unaudited Consolidated Financial Results Overview for 4Q 2019

Unaudited Consolidated FinancialResults Overview for FY 2019

Additional Disclosures

1)Subsidiaries of TBC Bank Group PLC

2)Update on strategic objectives

3)Reconciliation of reported IFRS consolidated figures with the underlying numbers

4)Net gains from currency swaps

5)TBC Insurance

6) Azerbaijan

7) ESG ratings and scores

8) Loan book breakdown by stages according IFRS 9

 

 

TBC Bank Group PLC ("TBC Bank")

 

TBC Bank Announces Unaudited Preliminary 4Q and FY 2019 and Consolidated Financial Results:

Underlying Profit for the period for the FY 2019 up by 19.8% YoY to GEL 545.1 million

Reported Profit for the period for the FY 2019 up by 23.5% YoY to GEL 540.3 million

 

 European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation.

 

TBC Bank - Background

TBC Bank is the largest banking group in Georgia, where 99.6% of its business is concentrated, with a 38.2% market share by total assets. It offers retail, corporate, and MSME banking nationwide.

These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS"), as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing segment on 10 August 2016.

TBC Bank Group PLC's financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The Group classifies and separately discloses certain incomes and expenses, which are non-recurring by nature and are caused by extraordinary events, as one-off items in order to provide a consistent view and enable better analysis of the financial performance of the Group. Adjusted performance is an alternative performance measure (APM) and the reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under Annex 3 section on pages 45-46.

 

Performance Highlights

4Q 2019 P&L Highlights 

Profit for the period amounted to GEL 160.0 million (4Q 2018: GEL 130.1 million)

Return on average equity (ROE) stood at 24.7% (4Q 2018: 24.3%)

Return on average assets (ROA) stood at 3 .5% (4Q 2018: 3.5%)

Cost to income of ТBC Bank standalone[1]was 36.2% (4Q 2018: 37.0%)

Cost to income of TBC Bank Group PLC 41.8% (4Q 2018: 39.7%)

Cost of risk stood at -0.2% (4Q 2018: 1.4%)

Net interest margin (NIM) stood at 5.3% (4Q 2018: 6.7%)

Risk adjusted net interest margin (NIM) stood at 5.4% (4Q 2018: 5.4%)

Basic earnings per share stood at 2.92 (4Q 2018: 2.40)

Diluted earnings per share 2.91 (4Q 2018: 2.37) 

FY 2019 P&L Highlights

Underlying profit for the period amounted to GEL 545.1 million (FY 2018: GEL 454.9 million)

Reported profit for the period amounted to GEL 540.3 million (FY 2018: GEL 437.4 million)

Underlying return on average equity (ROE) amounted to 22.6% (FY 2018: 22.8%)

Reported return on average equity (ROE) amounted to 22.4% (FY 2018: 22.0%)

Underlying return on average assets (ROA) amounted to 3.3% (FY 2018: 3.3%)

Reported return on average assets (ROA) amounted to 3.2% (FY 2018: 3.2%)

Cost to income of ТBC Bank standalone[2] was 35.9% (FY 2018: 35.6%)

Underlying cost to income of TBC Bank Group PLC stood at 39.5% (FY 2018: 37.8%)

Reported Cost to income of TBC Bank Group PLCstood at 39.9% (FY 2018: 37.8%)

Cost of risk on loans stood at 0.7% (FY 2018: 1.6%)

Net interest margin (NIM) stood at 5.6% (FY 2018: 6.9%)

Risk adjusted net interest margin (NIM) stood at 4.8% (FY 2018: 5.4%)

Basic earnings per share stood at 9.83 (FY 2018: 8.07)

Diluted earnings per share 9.76 (FY 2018: 8.00) 

Balance Sheet Highlights as of 31 December 2019

Total assets amounted to GEL 18,410.3 million as of 31 December 2019, up by 18.8% YoY

Gross loans and advances to customers stood at GEL 12,662.0 million as of 31 December 2019, up by 22.1% YoY

Net loans to deposits + IFI[3] funding stood at 104.8%, up by 14.9 pp YoY, and Regulatory Net Stable Funding Ratio (NSFR), effective from 30 September 2019, stood at 126.7%

NPLs were 2.7%, down by 0.4 pp YoY

NPLs coverage ratios stood at 91.1%, or 194.2% with collateral, on 31 December 2019 compared to 102.7% or 216.4% with collateral, as of 31 December 2018

Total customer deposits amounted to GEL 10,049.3 million as of 31 December 2019, up by 7.5% YoY

As of 31 December 2019, the Bank's Basel III CET 1, Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 12.0%, 14.6% and 19.1% respectively, while minimum requirements amounted to 10.4%, 12.5% and 17.5% respectively

Market Share[4]

Market share by total assets reached 38.2% as of 31 December 2019, remaining the same YoY

Market share by total loans was 39.5% as of 31 December 2019, up by 0.7 pp YoY

Market share of total deposits reached 39.0% as of 31 December, down by 2.2 pp YoY

 

4Q 2019 operating highlights

The number of affluent customers reached 82.5 thousand as of 31 December 2019, up by 102% YoY

93% of all transactions were conducted through digital channels (4Q 2018: 91%)

The number of digital transactions amounted to 21.6 million up by 20.0% YoY, while the number of branch transactions stood at 1.7 million, down by 0.2% YoY

The penetration ratio for internet or mobile banking[5] stood at 45% for 4Q 2019 (4Q 2018: 40%)

The penetration ratio for mobile banking[6] stood at 44% for 4Q 2019 (4Q 2018: 40%)

 

Income Statement Highlights

 

 

 

 

 

 

in thousands of GEL

4Q'19

4Q'18

Change YoY

FY'19

FY'18

Change YoY

Net interest income

209,318

214,803

-2.6%

801,539

778,022

3.0%

Net fee and commission income

54,844

44,064

24.5%

187,290

157,530

18.9%

Other operating non-interest income[7]

40,075

53,395

-24.9%

139,414

151,916

-8.2%

Credit loss allowance

224

(44,036)

NMF

(91,992)

(166,239)

-44.7%

Operating income after credit loss allowance

304,461

268,226

13.5%

1,036,251

921,229

12.5%

Operating expenses

(127,124)

(123,904)

2.6%

(450,726)

(411,029)

9.7%

Profit before tax

177,337

144,322

22.9%

585,525

510,200

14.8%

Income tax expense

(17,313)

(14,235)

21.6%

(45,184)

(72,765)

-37.9%

Profit for the period

160,024

130,087

23.0%

540,341

437,435

23.5%

Underlying profit for the period

160,024

130,087

23.0%

545,105

454,861

19.8%

        

 

Balance Sheet and Capital Highlights

 

 

 

 

Dec-19

Dec-18

Change YoY

in thousands of GEL

 

 

 

Total Assets

  18,410,274

  15,497,993

18.8%

Gross Loans

  12,661,955

  10,372,582

22.1%

Customer Deposits

  10,049,324

  9,352,142

7.5%

Total Equity

  2,647,655

  2,205,968

20.0%

Regulatory Common Equity Tier I Capital (Basel III)

1,871,892

1,629,594

14.9%

Regulatory Tier I Capital (Basel III)

2,281,706

1,678,716

35.9%

Regulatory Total Capital (Basel III)

2,974,029

2,351,269

26.5%

Regulatory Risk Weighted Assets (Basel III)

15,593,925

13,154,872

18.5%

 

Key Ratios

4Q'19

4Q'18

Change YoY

FY'19

FY'18

Change YoY

Underlying ROE

24.7%

24.3%

0.4 pp

22.6%

22.8%

-0.2 pp

Reported ROE

24.7%

24.3%

0.4 pp

22.4%

22.0%

0.4 pp

Underlying ROA

3.5%

3.5%

0.0 pp

3.3%

3.3%

0.0 pp

Reported ROA

3.5%

3.5%

0.0 pp

3.2%

3.2%

0.0 pp

NIM

5.3%

6.7%

-1.4 pp

5.6%

6.9%

-1.3 pp

Risk adjusted NIM

5.4%

5.4%

0.0 pp

4.8%

5.4%

-0.6 pp

Cost to income of standalone Bank[8]

36.2%

37.0%

-0.8 pp

35.9%

35.6%

0.3 pp

Underlying cost to income

41.8%

39.7%

2.1 pp

39.5%

37.8%

1.7 pp

Reported Cost to income

41.8%

39.7%

2.1 pp

39.9%

37.8%

2.1 pp

Cost of risk

-0.2%

1.4%

-1.6 pp

0.7%

1.6%

-0.9 pp

FX adjusted cost of risk

-0.1%

1.3%

-1.4 pp

0.7%

1.5%

-0.8 pp

NPL to gross loans

2.7%

3.1%

-0.4 pp

2.7%

3.1%

-0.4 pp

NPLs coverage ratio exc. collateral

91.1%

102.7%

-11.6 pp

91.1%

102.7%

-11.6 pp

CET 1 CAR (Basel III)

12.0%

12.4%

-0.4 pp

12.0%

12.4%

-0.4 pp

Regulatory Tier 1 CAR (Basel III)

14.6%

12.8%

1.8 pp

14.6%

12.8%

1.8 pp

Regulatory Total CAR (Basel III)

19.1%

17.9%

1.2 pp

19.1%

17.9%

1.2 pp

Leverage (Times)

7.0x

7.0x

0.0x

7.0x

7.0x

0.0x

        

Letter from the Chief Executive Officer

I am delighted to present our strong financial and operating results for the full year 2019 and to provide an overview of the recent macroeconomic developments in Georgia.

Our underlying consolidated net profit[9] for the full year 2019 reached GEL 545.1 million (reported net profit amounted to GEL 540.3 million), up by 19.8% compared to 2018, while our underlying return on equity was 22.6% and our underlying return on assets stood at 3.3% (the reported return on equity stood at 22.4% and our reported return on assets stood at 3.2%).

In 2019, our operating income amounted GEL 1,128.2, up by 3.7% year-on-year, which was supported by increase in net fee and commission income and net interest income. The growth in net interest income was related to re-classification of net gains on currency swaps in the amount of GEL 28.6 million from other operating income, which offset by the decline in net interest income related to introduction of responsible lending regulation from 1 January 2019, limiting the Bank's ability to lend money to higher-yield retail customers. Consequently, the net interest margin decreased by 1.3 pp year-on-year and stood at 5.6% in 2019 and 5.3% in the fourth quarter of 2019. By the end of 2019, the net interest margin has been fully rebased to the new level and we expect it to stabilize at the 2019 fourth quarter level.

The growth in net profit was also strongly supported by a decrease in credit loss allowance, which was driven by improved performance across all segments and change in the product mix. As a result, our cost of risk stood at 0.7% in 2019 compared to 1.6% in 2018. We also updated our guidance on cost of risk for 2020 and expect it to be around 1.0%, given the positive effects of the responsible lending regulation on loan book quality.

In 2019, our operating expenses increased by 9.7% year-on-year or 8.3% on an underlying basis, resulting in an underlying cost-to-income ratio of 39.5% (the reported cost-to-income ratio stood at 39.9%), up by 1.7 pp year-on-year. The increase in the cost-to-income ratio was mainly related to investments in our new ecosystems. Over the same period, the bank's standalone cost-to-income ratio remained strong and stood at 35.9%.[10]

In terms of balance sheet growth, our loan book expanded by 22.1% year-on-year, or by 17.9% on constant currency basis, mainly supported by growth in the corporate and MSME segments. Over the same period, deposits increased by 7.5% year-on-year, or by 2.9% on constant currency basis, driven by our policy of reducing deposits due to high liquidity as a result of the recent bond issuance. As a result, as of 31 December 2019, our loan book market share stood at 39.5%, up by 0.7 pp year-on-year, while our deposit market share stood at 39.0%, down by 2.2 pp year-on-year.

Our capital position and liquidity levels continue to be strong. As of 31 December 2019, our regulatory CET 1, tier 1 and total capital adequacy ratios per Basel III guidelines stood at 12.0%, 14.6% and 19.1% respectively, while minimum requirements amounted to 10.4%, 12.5% and 17.5% respectively. Our regulatory liquidity coverage ratio stood at 110% compared to the minimum requirement of 100%, while the regulatory net stable funding ratio (NSFR) per Basel III guidelines stood at 127%, above the minimum requirement of 100%.

Regarding macro developments, the Georgian economy demonstrated continued strong performance in fourth quarter 2019 and expanded by 5.3%[11] year-on-year, following 5.8% growth in Q3 2019, while the growth for the full year 2019 was estimated to be 5.2%. High GDP growth was mainly supported by solid external inflows driven by stronger exports and remittances, which grew by 15.9% and 13.1% year-on-year in the fourth quarter respectively, as well as by recovering tourism. The number of tourists went up by 12.0% year-on-year, while tourism revenue increased by 5.4% over the same period, mainly driven by strong growth in the number of visitors from the EU, Turkey and other neighbouring countries. The expansionary fiscal stance and relatively strong increase in lending also contributed to GDP growth. The 5.2% growth of the economy for the full year 2019 is particularly encouraging given the backdrop of the challenges the economy faced in 2019, the most important being Russia's flight ban.

 

Turning to the development of our business, I would like to start with our progress in Uzbekistan:

In January 2020, we obtained a preliminary banking licence in Uzbekistan, which is an essential step in the process of launching our banking operations in the country in the near future. As previously announced, our strategy is to develop a greenfield, next-generation banking ecosystem for retail and MSME customers in Uzbekistan. The primary focus will be on digital channels, including our neobank, Space. For our Uzbek venture, we are planning to join forces with International Financial Institutions and a local partner. Our plans foresee a minimum 51% shareholding. We have already secured interest from the EBRD and IFC and have reached an agreement on the main terms with the Uzbek-Oman Investment Company to act as our local partner. 

Last year, we launched several important preparatory work-streams, including implementation of the core banking system in co-operation with a local IT company. We also set up a pilot branch in Tashkent for proof of concept and built a core team for the bank. Thus, we are well advanced in the process and expect to obtain the final licence and start banking operations in summer 2020.

The total amount of the initial investment from all the shareholders is expected to be US$ 40 million, which we plan to invest in two stages: US$ 12 million before receiving the licence, and US$ 28 million after receiving the licence. In terms of our product offerings, we plan to start with consumer loans, car loans, savings and current accounts and add mortgages and MSME loans later.

In parallel, we are actively developing our payments business in the country through our recently acquired subsidiary, Payme, which is the leading payments company in the country, already serving around 1.8 million customers. The company is growing rapidly, and in 2019, its revenue went up by 84% and amounted to GEL 8.6 million, while its EBITDA reached GEL 4.5 million, up by 77% year-on-year.

In December 2019, we also launched our point-of-sale consumer financing operations in Uzbekistan, which is already available at 15 locations and we plan to expand to 50 locations by the end of 2020.

Another important development during the quarter was signing the partnership agreement between our neobank, Space, and Visa, a world's leader in digital payments. This will allow us to jointly develop innovative, user-centric and secure banking solutions and expand our digital banking footprint beyond Georgia.

Finally, I would like to give you an update about recent changes to the composition of the Management Board of JSC TBC Bank. David Chkonia, our Chief Risk Officer, left the bank at the end of his contractual term in order to pursue other career opportunities. Consequently, Nino Masurashvili, deputy CEO, who was previously in charge of retail banking development, has been appointed as the new Chief Risk Officer and Tornike Gogichaishvili, Deputy CEO and Chief Operations Officer (COO) of the Bank has been appointed to lead the retail banking business. The functions that were previously carried out by the COO have been re-allocated to be the responsibility of the CFO and the Deputy CEO, SME & Micro Banking. I would like to thank David Chkonia for his significant contribution to enhancing our risk management system and to wish him success in his future career. Also, I would like to wish Nino Masurashvili and Tornike Gogichaishvili success in their new roles.

Outlook

In 2019, we recorded strong financial results and made significant progress against our strategic priorities, including the development of customer focused ecosystems and international expansion in Uzbekistan. This lays a solid foundation for further development of these initiatives and I am very excited about our ambitious plans for 2020. Our leading digital capabilities, outstanding customer experience and advanced data analytical capabilities, coupled with our strong team spirit, make me confident that we are well positioned to achieve sustainable growth and to deliver superior results to our shareholders. Therefore, I would like to reiterate our medium-term targets: ROE of above 20%, cost to income ratio below 35%, dividend pay-out ratio of 25-35% and loan book growth of around 10-15%. 

Operating Overview

Recent Developments

Preliminary banking licence in Uzbekistan

TBC PLC has obtained a preliminary banking licence in Uzbekistan, which is an essential step in the process to launch our banking operations in the country in the near future.

As previously announced, TBC PLC's strategy is to develop a greenfield, next-generation banking ecosystem for retail and MSME customers in Uzbekistan. The primary focus will be on digital channels, including our neobank, Space.

 

 For more information about the international strategy in Uzbekistan please refer pages 11-12.

New borrowings from IFIs

TBC Bank has signed a loan agreement in the amount of GEL 90 million equivalent with the European Investment Bank (EIB). The funds are available to draw either in EUR, USD or GEL. The five-year loan facility will be used primarily to finance micro, small and medium size businesses in Georgia and support the development of private enterprise.

TBC Bank has signed three loan agreements totaling USD 23 million equivalent in Georgian Lari (GEL) with the European Bank for Reconstruction and Development (EBRD). Funding will be available for investments in green technology, especially in climate adaptation and mitigation technologies.

Structural Changes of the Management Board

TBC Bank has appointed a new Chief Risk Officer, following the departure of the previous Chief Risk Officer at the end of his contractual term in order to pursue other career opportunities. As a result, TBC Bank has decided to implement the following structural changes to the composition of the Management Board:

Nino Masurashvili, Deputy CEO, who had previously been in charge of retail banking development of TBC Bank, has been appointed as the new Chief Risk Officer;

Tornike Gogichaishvili, Deputy CEO and Chief Operations Officer of the Bank, has been appointed to lead the Bank's retail banking business;

Certain functions that have previously been carried out directly by the COO have been re-allocated to be the responsibility of the CFO or the Deputy CEO, SME & Micro Banking.

Digital Channels

Our neobank, Space, has signed a partnership agreement with Visa, a world's leader in digital payments, to jointly develop innovative banking services and expand digital banking footprints in new geographies. Through the partnership, Visa will work with Space to jointly develop innovative, user-centric and secure banking solutions and help Space in their ambitions to expand to other countries focusing on CISSEE.

Awards

TBC Bank has won a number of prestigious awards from leading industry magazines:

TBC Bank was named 'Bank of the Year 2019 in Georgia' by The Banker magazine in its annual country awards. This award is recognition of the bank's strong financial performance, coupled with superior customer experience and fully-fledged digital capabilities. The criteria for choosing country winners for this award included digital transformation, efficiency and internal capabilities to move into a new era.

TBC Bank was named the 'Best Foreign Exchange Provider 2020 in Georgia' by Global Finance Magazine. The criteria for choosing the country winners for this award included transaction volume, market share and scope of global coverage as well as the quality of customer service, pricing and the use of innovative technologies.

The bank received the 'Best Trade Finance Provider in Georgia' award in 2020 from Global Finance and was also named 'Market Leader' and 'Best Service Provider' in Georgia in the Trade Finance Survey 2020 conducted by Euromoney. These awards recognise TBC Bank's leading position in trade finance and emphasize the Bank's successful cooperation with international networks.

International Expansion

Uzbekistan

Preliminary Banking Licence

In January 2020, TBC Group PLC obtained a preliminary banking licence in Uzbekistan, which is an essential step in the process to launch our banking operations in the country in the near future. Obtaining a banking licence is a two-step process, wherein the banks are first granted a preliminary licence, after which they are expected to meet certain predefined requirements to receive the final licence.

 

Milestones completed before preliminary banking licence:

Core Banking deployment;

Launch of digital pilot branch;

Key staff on boarded;

Agreement of key terms and conditions with international and local shareholders.

 

Main targets for 2020:

Meet technical requirements to obtain licence

Data center and core banking implementation;

Security systems;

Get operations up and running.

Investments in 2020:

USD 12 mln to be invested in the share capital before obtaining licence;

Further USD 28 mln to be invested into the share capital.

Branches

Initially launch 5 branches for friends and families;

Scale up to 20 branches by the end of the year.

Space platform

Serve customers through space platform.

 

Product launch estimated plan of the greenfield bank:

Short term

Consumer loans;

Auto loans;

Saving accounts;

Current accounts.

Medium term

Mortgages;

MSME loans.

 

Financial targets for greenfield bank:

1st Year

Loss around USD 6-8 mln.

2nd Year

Break Even.

Medium target

ROE in the range of TBC Group's target

Loan book target up to USD 700 mln

 

Other initiatives:

Payments - Payme

Revenue and EBITDA increased by 84.0% and 76.9% YoY, respectively for FY 2019;

Number of transactions increased by 24.5% YoY.

Consumer Financing - Vendoo

55 point of sales by the end of 2020;

USD 10.2 million outstanding portfolio by the end of 2020;

61,700 installments by the end of 2020.

Online tickets - TKT.uz

Selling tickets of: cinema, theater, concerts, transport, sport and etc.;

First transaction occurred in late December 2019.

 

Organizational structure:

 

Expected Supervisory Board Composition:

Chairman - Giorgi Shagidze, Deputy CEO, CFO of TBC Bank (Project lead until launch); Former Global Operations Executive at Barclays Bank PLC

Board Member - Nikoloz Kurdiani, Deputy CEO of TBC Bank; Former Head of the Retail Division of ATF Bank, UniCredit Group in Kazakhstan

Independent Board Member - Wojciech Sobieraj, CEO of Aion Bank; Former CEO of Alior Bank

Independent Board Member - Sharof Sharipov, CFO of Token Group (US/UK); Former CFO of 10x Future Technologies

Independent Board Member - Seit Devdariani, Project Coordinator for EBRD project: PFI Capacity-Building Technical Cooperation Programme (Azerbaijan), Former CEO of BBMB Bank (Belarus)

 Expected composition of the Management Board:

CEO - Sandro Rtveladze, Group Head of Retail Banking and a country director of Bayport Savings and Loans Plc. (Ghana) at Bayport Financial Services (in a process of exiting current employment); Former Deputy CEO at Liberty Bank (Georgia)

CFO - Vano Baliashvili, Former Deputy CEO, COO of TBC Bank; Also served as CFO at TBC Bank

COO - Rostom Talakhadze, Former Head of logistics of TBC Bank

CTO - Nikoloz Mamulashvili, Former Head of Development of TBC Bank

Deputy CEO - Sitora R. Tulyaganova, Former Head of Legal, InFinBank

 Other Key Staff:

Head of Commercial - Evgeniy Vishnevskiy, Former Commercial Director at Uzbektelecom

Head of HR - Hilola Suleymanova, Former Managing Partner of DaVinci Management Consulting

Chief Accountant - Aida Nazirova,  Former Chief Accountant of Ipak Yuli Bank

 

 

Additional Information Disclosure

The following materials in connection with TBC PLC's financial results are disclosed on our Investor Relations website at http://tbcbankgroup.com/ under the Results Announcement section. 

 

Economic Overview

Economic growth and the external sector

GDP growth came in at 5.3% YoY in 4Q 2019 and averaged 5.2% YoY in 2019, according to GeoStat's initial estimates.  The growth was broad-based across different sectors of the economy. In the first 9 months of 2019, trade and repairs (+7.4% YoY), real estate (+5.9% YoY), transport and logistics (+7.5% YoY), information and communication (+14.5% YoY) and the construction sector (+5.2% YoY) all significantly contributed to overall GDP growth. 

 

As for the external sector, the overall dynamics of the external balance remained healthy despite the negative impact stemming from the Russian flight ban. Reflecting lower tourism inflows, the balance of trade in services declined slightly from 12.7% of GDP in 2018 to 12.4% of GDP in trailing four quarters as of 3Q 2019. However, this decline was counteracted by the lower deficit of trade in goods (down by 1.9% of GDP), as well as by a more moderate improvement in the income account deficit (down by 0.5% of GDP). As a result, the Current Account (CA) balance to GDP ratio improved to 4.5% as of the last four quarters ending in 3Q 2019, compared to 6.8% in 2018. The CA deficit continued to be fully financed with FDI inflows, which posted +13.7% YoY growth in 3Q 2019 after a declining trend from very high levels. As of the last four quarters ending in 3Q 2019, net FDI stood at 4.9% of GDP. Despite being somewhat below the average of the past couple of years, FDI inflows at current levels are still quite high when compared to peer countries in the neighbourhood, as well as in Central and Eastern Europe.

 

The positive tendency in the major components of the CA balance continued in 4Q 2019 as well. Following the dip in tourism inflows in 3Q 2019 (-6.9% YoY in USD terms), it recovered quickly to 5.4% YoY growth in USD terms in 4Q 2019, on the back of strong growth in the number of visitors from the EU, Turkey, and other neighbouring countries, offsetting the negative impact of a falling number of visitors from Russia. Growth of the exports of goods improved to 15.9% YoY in 4Q, compared to an 11.1% increase in the first 9 months of 2019. Similarly, remittance inflows also accelerated to 13.1% YoY in 4Q 2019. At the same time, imports of goods also posted a stronger growth towards the end of the year (+5.6% YoY in 4Q 2019). Overall, based on the dynamics of the major components, the CA balance probably improved further in 4Q 2019 YoY.

 

Exchange rate, inflation and credit

The GEL exchange rate depreciation since June 2019 has been the major factor behind the rise in inflation up to 7% as of the end of 2019. In response to higher inflationary pressures, the NBG tightened the monetary policy rate from 6.5% at the beginning of September to 9.0% as of the end of 2019. A tighter monetary policy stance in GEL, coupled with the strong external sector, contributed to a stronger GEL exchange rate. By the end of 2019, the USD/GEL exchange rate stood at 2.87, down by 3.0% QoQ. The monthly inflation dynamics indicate some moderation of inflation by the end of 2019. According to the latest projections of the central bank, CPI inflation is projected to gradually decline towards the target, starting from 2Q 2020, before reaching the target by the end of 2020.

 

Despite tighter monetary policy in GEL, lending growth remained solid, mostly on the back of accelerated FX lending by the end of 2019, supported by the lower reserve requirements and ample bank liquidity in FX. As of the end of 2019, the bank loan portfolio went up by 16.1% YoY, excluding the exchange rate effect, mostly on the back of business lending (+23.3% YoY excl. FX effect), strongly supporting the solid economic growth. At the same time, retail growth was relatively slow (+6.0% YoY excl. FX effect), owing to tighter prudential regulations. Despite some acceleration of FX lending, de-dollarization of the financial sector remains a top priority for the central bank; however, in future rather more attention is expected to be devoted to de-dollarization of liabilities.

 

 

Fiscal spending

Fiscal spending significantly supported growth in 2019, with the budget deficit estimated at 2.7% of GDP in 2019. The actual impact of the fiscal sector on growth was even higher, taking into consideration the advance payments made by the end of 2018, which supported growth in 2019. Taking into account those advance payments, the fiscal deficit was estimated at around 4.2% of GDP, almost double the amount the previous year. Going forward, according to the budget projections for 2020, the fiscal stance is expected to be less expansionary for 2020 and more oriented towards social spending. Nevertheless, the share of capital expenditures remains high and, on a macro level, the budget is balanced.

 

Going forward

Above 5% economic growth for the full year 2019 once more underlines the resilience and high growth potential of Georgian economy. This growth is particularly encouraging on the backdrop of the challenges that economy faced in 2019, the most important being Russia's flight ban. According to the TBC research, projection of external inflows, credit and fiscal stance indicate to 5% growth in 2020, however, considering some possible election related uncertainties, 4.5% remains a baseline scenario, close to the IMF 4.3% growth projection (5.2% long term projection).

More information on the Georgian economy and financial sector can be found at www.tbcresearch.ge.

 

Unaudited Consolidated Financial Results Overview for 4Q 2019

This statement provides a summary of the unaudited business and financial trends for 4Q 2019 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.

Starting from 1 January 2019, TBC Bank adopted IFRS 16. Therefore, the comparative information for 2018 is not comparable to the information presented for 2019.

TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The Group classifies and separately discloses certain incomes and expenses, which are non-recurring by nature and are caused by extraordinary events, as one-off items in order to provide a consistent view and enable better analysis of the financial performance of the Group. Adjusted performance is an alternative performance measure (APM) and the reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given in Annex 3 on pages 45-46.

Please note, that there might be slight differences in previous periods' figures due to rounding.

 

 

Net Interest Income

 

In 4Q 2019, net interest income amounted to GEL 209.3 million, down by 2.6% YoY and up by 8.1% on QoQ basis.

The YoY increase in interest income was primarily related to an increase in interest income from loans, which was related to an increase in the gross loan portfolio of GEL 2,289.4 million, or 22.1%. This effect was partially offset by a 1.3 pp drop in loan yields, mainly in the retail and MSME segments.  The decrease in retail loan yields was driven by the continued impact of the NGB's regulation from January 2019, which limits the banks' ability to lend money to higher-yield retail customers, while the decrease in MSME loan yields was in line with the overall market trend.

Over the same period, interest expense increased by GEL 51.2 million, or 36.3%, which was mainly related to interest expense from bonds issued in summer 2019, as well as increase in an interest expense from deposits. The latter was related both to the growth in the respective portfolio by 7.5% YoY, and to an increase in deposit cost by 0.3 pp over the same period.

The QoQ increase in interest income was mainly due to an increase in the loan portfolio by GEL 981.7 million, or 8.4%, while loan yields remained broadly stable. Over the same period, interest expense increased by GEL 10.7 million, or 5.9%, mainly related to the increase in the NBG loan.

In 4Q 2019, we re-classified net gains on currency swaps from other operating income to net interest income. More information is given in annex 4 on page 46.

Thus, our NIM was 5.3% down by 1.4 pp YoY and up by 0.2 pp on a QoQ basis, while risk adjusted NIM for the period amounted to 5.4%, remained the same YoY and up by 1.0 pp QoQ.

In thousands of GEL

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Interest income

392,154

366,472

355,543

10.3%

7.0%

Interest expense

(191,891)

(181,192)

(140,740)

36.3%

5.9%

Net gains from currency swaps

9,055

8,355

N/A

100%

8.4%

Net interest income

209,318

193,635

214,803

-2.6%

8.1%

 

 

 

 

 

 

NIM

5.3%

5.1%

6.7%

-1.4 pp

0.2 pp

Risk adjusted NIM

5.4%

4.4%

5.4%

0.0 pp

1.0 pp

 

Net fee and commission income

 

In 4Q 2019, net fee and commission income totalled GEL 54.8 million, up by 24.5% YoY and by 16.4% QoQ.

The YoY rise was mainly driven by an increase in net fee and commission income from plastic card operations, and settlement transactions. The former increase was mainly related to the increase in the number of active cards as well as the increase in the number of POS terminals related to the overall growth of the business. At the same time, the increase in net fee and commission income from settlement transactions YoY mainly driven by the increase in the number of TBC Status's clients (our affluent retail sub-segment),up by 102% YoY to 82.5 thousands.

On a QoQ basis, the rise was mainly driven by net fee and commission income from card operations and settlement transactions as mentioned above as well as seasonality.

In thousands of GEL

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Net fee and commission income

 

 

 

 

 

Card operations

16,649

13,479

13,110

27.0%

23.5%

Settlement transactions

24,887

18,355

16,971

46.6%

35.6%

Guarantees issued and letters of credit

8,831

8,197

7,368

19.9%

7.7%

Other

4,477

7,074

6,615

-32.3%

-36.7%

Total net fee and commission income

54,844

47,105

44,064

24.5%

16.4%

 

Other Non-Interest Income

 

Total other non-interest income decreased by 24.9% YoY and increased by 2.7% QoQ, amounting to GEL 40.1 million in 4Q 2019.

The YoY decrease was mainly driven by the high base of other operating income last year due to the gain from sale of investment properties and the recognition of an option to buy shares in one of our large corporate clients in 2018. Another driver was the decrease in net income from foreign currency operations related to the re-classification of net gains on currency swaps. More information is given in annex 4 on page 46.

 The QoQ increase was mainly driven by other operating income, due to the gain from the sale of repossessed assets. This rise was slightly offset by the decrease in net income from foreign currency operations, mainly due to higher volatility in 3Q 2019.

Net insurance premium earned after claims and acquisition costs increased by 46.9% on YoY and by 18.3% QoQ, mainly related to the increased scale of the insurance business. More information about TBC insurance can be found in Annex 5 on page 47.

In thousands of GEL

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Other non-interest income

 

 

 

 

 

Net income from foreign currency operations

28,006

29,260

33,029

-15.2%

-4.3%

Net insurance premium earned after claims and acquisition costs[12]

5,659

4,784

3,853

46.9%

18.3%

Other operating income

6,410

4,974

16,513

-61.2%

28.9%

Total other non-interest income

40,075

39,018

53,395

-24.9%

2.7%

 

 

 

 

 

 

 

Credit Loss Allowance

 

In 4Q 2019, total credit loss allowance amounted to GEL 0.2 million.

The YoY decrease was mainly due to decrease in credit loss allowance on loans to customers, driven by strong performance in all segments, as well as a portfolio product mix change, related to the responsible lending regulation effective from 1 January 2019.

QoQ improvement was also related to strong performance across all segments.

In thousands of GEL

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Credit loss allowance for loan to customers

5,148

(20,695)

(34,398)

NMF

NMF

Credit loss allowance for other transactions

(4,924)

(5,054)

(9,638)

-48.9%

-2.6%

Total credit loss allowance

224

(25,749)

(44,036)

NMF

NMF

Operating income after credit loss allowance

304,461

254,009

268,226

13.5%

19.9%

 

 

 

 

 

 

Cost of risk

-0.2%

0.7%

1.4%

-1.6 pp

-0.9 pp

NMF - no meaningful figures

 

Operating Expenses

 

In 4Q 2019, total operating expenses expanded by 2.6% YoY and by 13.8% QoQ, amounting to GEL 127.1 million.

YoY growth was mainly driven by increase in staff costs, driven by the overall expansion of business as well as the increase in the share price[13] over a three-year period for the purpose of top and middle management share based bonuses accruals  (while there was no material change in expected total share compensation).  This was partially offset by the decrease in depreciation and amortizations expenses, which was driven by amendments in the deprecation period of certain assets in 4Q 2019.   

On QoQ basis, the increase was driven by administrative and other expenses and resulted from seasonally high costs in 4Q. Over the same period depreciation decreased by 43.1%, as mentioned above.

In 4Q 2019, cost to income stood at 41.8%, up by 2.1 pp YoY and 1.9 pp QoQ.

In thousands of GEL

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Operating expenses

 

 

 

 

 

Staff costs

(68,934)

(62,230)

(63,213)

9.1%

10.8%

Provisions for liabilities and charges

(2,632)

(73)

-

NMF

NMF

Depreciation and amortization

(9,921)

(17,433)

(12,333)

-19.6%

-43.1%

Administrative & other operating expenses

(45,637)

(31,969)

(48,358)

-5.6%

42.8%

Total operating expenses

(127,124)

(111,705)

(123,904)

2.6%

13.8%

 

 

 

 

 

 

Cost to income

41.8%

39.9%

39.7%

2.1 pp

1.9 pp

NMF - no meaningful figures

Net Income

Net income for the fourth quarter increased by GEL 29.9 million, or 23.0%, YoY and increased by GEL 33.2 million, or 26.2%, QoQ, amounting to GEL 160.0 million.

As a result, ROE stood at 24.7%, up by 0.4 pp YoY and by 4.3 pp QoQ, while ROA stood at 3.5%, stable on a YoY basis and up by 0.7 pp QoQ

In thousands of GEL

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

 

 

 

 

 

 

Profit before tax

177,338

142,303

144,322

22.9%

24.6%

Income tax expense

(17,313)

(15,527)

(14,235)

21.6%

11.5%

Profit for the period

160,025

126,776

130,087

23.0%

26.2%

 

 

 

 

 

 

ROE

24.7%

20.4%

24.3%

0.4 pp

4.3 pp

ROA

3.5%

2.8%

3.5%

0.0 pp

0.7 pp

Funding and Liquidity

In September 2019, we had high liquidity due to bond issuance in summer, which was utilised during 4Q by increasing loan book.  

 

31-Dec-19

30-Sep-19

Change

 

 

 

 

 

 

 

 

Minimum net stable funding ratio, as defined by the NBG

100%

100%

0.0 pp

Net stable funding ratio as defined by the NBG

126.7%

137.7%

-11.0%

 

 

 

 

Net loans to deposits + IFI funding

104.8%

97.0%

7.9 pp

Leverage (Times)

7.0x

7.3x

-0.3x

 

 

 

 

Minimum liquidity ratio, as defined by the NBG

30.0%

30.0%

0.0 pp

Liquidity ratio, as defined by the NBG

32.2%

39.2%

-7.0 pp

 

 

 

 

Minimum total liquidity coverage ratio, as defined by the NBG

100.0%

100.0%

0.0 pp

Minimum LCR in GEL, as defined by the NBG

75.0%

75.0%

0.0 pp

Minimum LCR in FC, as defined by the NBG

100.0%

100.0%

0.0 pp

 

 

 

 

Total liquidity coverage ratio, as defined by the NBG

110.1%

131.6%

-21.5 pp

LCR in GEL, as defined by the NBG

83.7%

87.7%

-4.0 pp

LCR in FC, as defined by the NBG

128.4%

162.8%

-34.4 pp

Regulatory Capital

As of 31 December 2019, the Bank's CET 1, Tier 1 and Total Capital adequacy ratios stood at 12.0%, 14.6% and 19.1%, respectively, above the respective minimum requirements of  10.4%, 12.5% and 17.5%.

CET 1 and Tier 1 capital adequacy ratios were broadly stable on a QoQ basis, while the total capital adequacy ratio reduced by 0.3 pp, which was mainly driven by the increase in loan portfolio and was partially offset by net income generation.

In thousands of GEL

31-Dec-19

30-Sep-19

Change

 

 

 

 

CET 1 Capital

1,871,892

1,770,734

5.7%

Tier 1 Capital

2,281,706

2,191,792

4.1%

Total Capital

2,974,029

2,894,704

2.7%

Total Risk-weighted Exposures

15,593,925

14,889,695

4.7%

 

 

 

 

Minimum CET 1 ratio

10.4%

9.8%

0.6 pp

CET 1 Capital adequacy ratio

12.0%

11.9%

0.1 pp

 

 

 

 

Minimum Tier 1 ratio

12.5%

11.9%

0.6 pp

Tier 1 Capital adequacy ratio

14.6%

14.7%

-0.1 pp

 

 

 

 

Minimum total capital adequacy ratio

17.5%

16.7%

0.8 pp

Total Capital adequacy ratio

19.1%

19.4%

-0.3 pp

Loan Portfolio

As of 31 December 2019, the gross loan portfolio reached GEL 12,662.0 million, up by 8.4% QoQ, or by 9.8% on a constant currency basis, which was mainly supported by growth in the corporate segment due to the acquisition of both large and mid-corporate clients. Over the same period, the proportion of gross loans denominated in foreign currency increased by 0.5 pp on a QoQ basis and accounted for 58.7% of total loans.

At the end of December 2019, our market share in total loans stood at 39.5% up by 0.8 pp QoQ, while our loan market share in legal entities was 38.9% up by 1.2 pp QoQ and our loan market share in individuals stood at 40.0% up by 0.5 pp QoQ.

In thousands of GEL

31-Dec-19

30-Sep-19

Change

Loans and advances to customers

 

 

 

 

 

 

 

Retail

5,053,203

4,903,134

3.1%

Retail loans  GEL

2,386,750

2,284,431

4.5%

Retail loans FC

2,666,453

2,618,703

1.8%

Corporate

4,660,473

4,029,321

15.7%

Corporate loans  GEL

1,424,309

1,248,851

14.0%

Corporate loans FC

3,236,164

2,780,470

16.4%

MSME

2,948,279

2,747,802

7.3%

MSME loans  GEL

1,419,804

1,354,789

4.8%

MSME loans FC

1,528,475

1,393,013

9.7%

Total loans and advances to customers

12,661,955

11,680,257

8.4%

 

 

 

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Loan yields

10.9%

10.8%

12.2%

-1.3 pp

0.1%

Loan yields  GEL

15.7%

15.2%

17.4%

-1.7 pp

0.5 pp

Loan yields FC

7.6%

7.7%

8.7%

-1.1 pp

-0.1 pp

Retail Loan Yields

11.8%

11.8%

13.6%

-1.8 pp

0.0 pp

Retail loan yields  GEL

17.1%

17.2%

20.7%

-3.6 pp

-0.1 pp

Retail loan yields FC

7.1%

7.3%

7.8%

-0.7 pp

-0.2 pp

Corporate Loan Yields

9.7%

9.2%

10.0%

-0.3pp

0.5%

Corporate loan yields  GEL

13.3%

11.7%

10.9%

2.4 pp

1.7 pp

Corporate loan yields FC

8.2%

8.1%

9.7%

-1.5 pp

0.1 pp

MSME Loan Yields

11.3%

11.2%

12.2%

-0.9pp

0.1 pp

MSME loan yields  GEL

15.7%

15.0%

16.2%

-0.5 pp

0.7 pp

MSME loan yields FC

7.2%

7.7%

8.6%

-1.4 pp

-0.5 pp

Loan Portfolio Quality

Total PAR 30 decreased by 0.3 pp on QoQ basis and stood at 1.7%. The decrease was driven by improved performance across all segments. Moreover, our total NPLs stood at 2.7%, down by 0.2 pp, which was attributable to the strong performance of the retail and MSME segments.

 

Par 30

31-Dec-19

30-Sep-19

Change

Retail

2.1%

2.3%

-0.2 pp

Corporate

0.5%

0.8%

-0.3 pp

MSME

2.8%

3.0%

-0.2 pp

Total Loans

1.7%

2.0%

-0.3 pp

 

Non-performing Loans

31-Dec-19

30-Sep-19

Change

Retail

3.0%

3.2%

-0.2 pp

Corporate

1.8%

1.8%

0.0 pp

MSME

3.8%

4.3%

-0.5 pp

Total Loans

2.7%

2.9%

-0.2 pp

 

NPL Coverage

Dec-19

Sep-19

 

Exc. Collateral

Incl. Collateral

Exc. Collateral

Incl. Collateral

Corporate

97.1%

241.4%

118.5%

317.8%

Retail

111.1%

182.9%

113.2%

183.9%

MSME

59.7%

173.7%

64.9%

179.2%

Total

91.1%

194.2%

97.7%

209.9%

 

Cost of risk 

The total cost of risk for 4Q 2019 stood at -0.2% down by 1.6 pp YoY and by 0.9 pp on a QoQ basis.

The YoY decrease was driven by the product mix change as well as robust credit quality across all segments, while the decrease on a QoQ basis was related to the strong performance across all segments.

In Q4 2019, retail cost of risk decreased by 2.6pp YoY and 1.1pp QoQ, driven by the strong performance of retail segment, translated into improved credit risk parameters and change in product mix in retail portfolio, due to responsible lending regulation.

 

 

In Q4 2019, MSME cost of risk decreased by 0.9pp QoQ and YoY, mainly due to the SME sub segment. Decrease in SME portfolio is driven by repayment of several impaired borrowers, as well as overall strong performance of the portfolio, resulting in improved credit risk parameters. In case of the Micro segment, cost of risk remained broadly stable.

 

Cost of Risk

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

 

 

 

 

 

 

Retail

0.3%

1.4%

2.9%

-2.6 pp

-1.1 pp

Corporate

-0.2%

0.4%

0.1%

-0.3 pp

-0.6 pp

MSME

-1.0%

-0.1%

-0.1%

-0.9 pp

-0.9 pp

Total

-0.2%

0.7%

1.4%

-1.6 pp

-0.9 pp

 

Deposit Portfolio

The total deposits portfolio increased by 1.5% QoQ and amounted to 10,049.3 million, while on a constant currency basis the total deposit portfolio was up by 3.3%. The slow growth in deposits is related to our high liquidity due to the recent bonds issuance in the summer. The proportion of deposits denominated in foreign currency increased by 0.4 pp on a QoQ basis and accounted for 65.9% of total deposits.

By the end December 2019, our market share in deposits amounted to 39.0% down by 0.3 pp QoQ and our market share in deposits to legal entities stood at 40.6% up by 0.5 pp QoQ. Our market share in deposits to individuals stood at 37.9% down by 0.7 pp QoQ.

In thousands of GEL

31-Dec-19

30-Sep-19

Change

Customer Accounts

 

 

 

 

 

 

 

Retail

5,673,917

5,550,227

2.2%

Retail deposits  GEL

1,098,681

1,057,854

3.9%

Retail deposits FC

4,575,236

4,492,373

1.8%

Corporate

3,187,319

3,242,875

-1.7%

Corporate deposits  GEL

1,735,746

1,770,123

-1.9%

Corporate deposits FC

1,451,573

1,472,752

-1.4%

MSME

1,188,088

1,104,221

7.6%

MSME deposits  GEL

594,388

586,603

1.3%

MSME deposits FC

593,700

517,618

14.7%

Total Customer Accounts

10,049,324

9,897,323

1.5%

 

 

4Q'19

3Q'19

4Q'18

Change YoY

Change QoQ

Deposit rates

3.4%

3.2%

3.1%

0.3 pp

0.2 pp

Deposit rates GEL

6.0%

5.3%

5.3%

0.7 pp

0.7 pp

Deposit rates FC

2.0%

2.1%

2.0%

0.0 pp

-0.1 pp

Retail Deposit Yields

2.9%

2.8%

2.6%

0.3 pp

0.1 pp

Retail deposit rates GEL

5.1%

4.4%

4.6%

0.5 pp

0.7 pp

Retail deposit rates FC

2.3%

2.4%

2.2%

0.1 pp

-0.1 pp

Corporate Deposit Yields

5.1%

4.7%

4.5%

0.6 pp

0.4 pp

Corporate deposit rates GEL

7.9%

6.9%

6.8%

1.1 pp

1.0 pp

Corporate deposit rates FC

1.5%

1.8%

1.8%

-0.3 pp

-0.3 pp

MSME Deposit Yields

0.9%

1.0%

1.0%

-0.1 pp

-0.1 pp

MSME deposit rates GEL

1.5%

1.5%

1.6%

-0.1 pp

0.0 pp

MSME deposit rates FC

0.3%

0.3%

0.3%

0.0 pp

0.0 pp

 

 

Segment definition and PL

Business Segments

The segment definitions are as follows (updated in 2019):

· Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which have been granted facilities with more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;

· Retail - non-business individual customers; all individual customers are included in retail deposits;

· MSME - business customers who are not included in the corporate segment; or legal entities which have been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and

· Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.

Business customers are all legal entities or individuals who have been granted a loan for business purposes.

Income Statement by Segments

4Q'19

Retail

MSME

Corporate

Corp.Centre

Total

Interest income

147,780

81,014

107,974

55,386

392,154

Interest expense

(41,085)

(2,757)

(41,292)

(106,757)

(191,891)

Net gains from currency swaps

-

 

 

9,055

9,055

Net transfer pricing

(18,069)

(28,729)

869

45,929

-

Net interest income

  88,626

  49,528

  67,551

  3,613

  209,318

Fee and commission income

60,488

7,837

12,770

5,656

86,751

Fee and commission expense

(26,483)

(2,777)

(2,133)

(515)

(31,907)

Net fee and commission income

34,005

5,061

10,637

5,141

54,844

Net insurance premium earned after claims and acquisition costs

-

-

-

5,659

5,659

Net income from foreign currency operations

8,018

6,304

13,311

(8,607)

19,026

Foreign exchange translation gains less losses/(losses less gains)

-

-

-

8,980

8,980

Net gains/(losses) from derivative financial instruments

2

-

-

(6)

(4)

Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income

-

-

-

20

20

Other operating income

2,032

187

1,211

2,846

6,276

Share of profit of associates

-

-

-

118

118

Other operating non-interest income and insurance profit

10,052

6,491

14,522

9,010

40,075

Credit loss allowance for loans to customers

(4,246)

6,797

2,597

-

5,148

Credit loss allowance for performance guarantees and credit related commitments

(13)

(235)

(42)

-

(290)

Credit loss allowance for investments in finance lease

-

-

-

615

615

Credit loss allowance for other financial assets

(3,683)

(11)

(228)

(1,243)

(5,165)

Credit loss allowance for financial assets measured at fair value through other comprehensive income

-

-

(49)

(35)

(84)

Profit before G&A expenses and income taxes

124,741

67,631

94,987

17,101

304,461

Staff costs

(34,765)

(12,379)

(11,059)

(10,731)

(68,934)

Depreciation and amortization

(7,247)

(1,253)

(280)

(1,141)

(9,921)

Provision for liabilities and charges

-

-

-

(2,632)

(2,632)

Administrative and other operating expenses

(17,448)

(4,480)

(4,646)

(19,063)

(45,637)

Operating expenses

(59,460)

(18,112)

(15,985)

(33,567)

(127,124)

Profit before tax

65,281

49,519

79,002

(16,466)

177,337

Income tax expense

(6,060)

(4,438)

(7,256)

441

(17,313)

Profit for the year

59,221

45,081

71,746

(16,025)

160,024

 

 

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet

 

 

 

In thousands of GEL 

Dec-19

Sep-19

 

Cash and cash equivalents

  1,003,583

  1,349,260

 

Due from other banks

  33,605

  30,297

 

Mandatory cash balances with National Bank of Georgia

  1,591,829

  1,954,662

 

Loans and advances to customers

  12,349,399

  11,344,779

 

Investment securities measured at fair value through other comprehensive income

  985,293

  1,177,963

 

Bonds carried at amortized cost

  1,022,684

  871,640

 

Investments in finance leases

  256,660

  241,840

 

Investment properties

  72,667

  78,449

 

Current income tax prepayment

  25,695

  29,599

 

Deferred income tax asset

  2,173

  2,179

 

Other financial assets

  133,736

  243,330

 

Other assets

  255,712

  205,066

 

Premises and equipment

  385,736

  381,065

 

Right of use assets

  59,693

  59,040

 

Intangible assets

  167,597

  134,837

 

Goodwill

  61,558

  63,215

 

Investments in associates

  2,654

  2,536

 

TOTAL ASSETS 

  18,410,274

  18,169,757

 

LIABILITIES 

 

 

 

Due to credit institutions

  3,593,901

  3,613,093

 

Customer accounts 

  10,049,324

  9,897,323

 

Lease liabilities

  59,898

  62,126

 

Other financial liabilities 

  113,608

  96,781

 

Current income tax liability 

  1,634

  1,128

 

Debt Securities in issue

  1,213,598

  1,251,649

 

Deferred income tax liability 

  21,331

  21,142

 

Provisions for liabilities and charges 

  23,128

  22,729

 

Other liabilities 

  95,162

  88,672

 

Subordinated debt 

  591,035

  615,939

 

TOTAL LIABILITIES 

  15,762,619

  15,670,582

 

EQUITY 

 

 

 

Share capital

1,682

1,682

 

Shares held by trust

(27,516)

(15)

 

Share premium

848,459

828,936

 

Retained earnings

1,953,364

1,794,060

 

Group re-organisation reserve

(162,167)

(162,167)

 

Share based payment reserve

(17,803)

(28,104)

 

Revaluation reserve for premises

56,374

56,606

 

Fair value reserve

(6,476)

7,345

 

Cumulative currency translation reserve

(6,850)

(6,367)

 

Net assets attributable to owners

2,639,067

2,491,976

 

Non-controlling interest 

8,588

7,199

 

TOTAL EQUITY 

2,647,655

2,499,175

 

TOTAL LIABILITIES AND EQUITY 

18,410,274

18,169,757

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

 

 

In thousands of GEL 

4Q'19

3Q'19

4Q'18

Interest income

  392,154

  366,472

  355,543

Interest expense

  (191,891)

  (181,192)

  (140,740)

Net gains from currency swaps

  9,055

  8,355

N/A

Net interest income

  209,318

  193,635

  214,803

Fee and commission income

  86,751

  76,795

  67,049

Fee and commission expense

  (31,907)

  (29,690)

  (22,985)

Net fee and commission income

  54,844

  47,105

  44,064

Net insurance premiums earned

  12,386

  9,821

  7,023

Net insurance claims incurred and agents' commissions

  (6,727)

  (5,037)

  (3,170)

Net insurance premium earned after claims and acquisition costs

  5,659

  4,784

  3,853

Net income from foreign currency operations

  19,026

  25,266

  28,258

Net gain/(losses) from foreign exchange translation

  8,980

  3,994

  4,771

Net gains/(losses) from derivative financial instruments

  (4)

  (32)

  (184)

Gains less losses from disposal of investment securities measured at fair value through other comprehensive income

  20

  2

  - 

Other operating income

  6,276

  4,831

  16,485

Share of profit of associates

  118

  173

  212

Other operating non-interest income

  34,416

  34,234

  49,542

Credit loss allowance for loans to customers

  5,148

  (20,695)

  (34,398)

Credit loss allowance for investments in finance lease

  615

  (211)

  (779)

Credit loss allowance for performance guarantees and credit related commitments

  (290)

  (1,474)

  (1,532)

Credit loss allowance for other financial assets

  (5,165)

  (3,513)

  (7,305)

Credit loss allowance for financial assets measured at fair value through other comprehensive income

  (84)

  144

  (22)

Operating income after credit loss allowance for impairment

  304,461

  254,009

  268,226

Staff costs

  (68,934)

  (62,230)

  (63,213)

Depreciation and amortization

  (9,921)

  (17,433)

  (12,333)

(Provision for)/ recovery of liabilities and charges

  (2,632)

  (73)

  - 

Administrative and other operating expenses

  (45,637)

  (31,969)

  (48,358)

Operating expenses

  (127,124)

  (111,705)

  (123,904)

Profit before tax

  177,337

  142,304

  144,322

Income tax expense

  (17,313)

  (15,527)

  (14,235)

Profit for the period

  160,024

  126,777

  130,087

Other comprehensive income:

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

Movement in fair value reserve

  (13,828)

  (5,327)

  3,757

Exchange differences on translation to presentation currency

  (483)

  111

  340

Items that will not be reclassified to profit or loss:

 

 

 

Revaluation of premises and equipment

  - 

  - 

  10,749

Income tax recorded directly in other comprehensive income

  - 

  - 

  2,788

Other comprehensive income for the period

  (14,311)

  (5,216)

  17,634

Total comprehensive income for the period

  145,713

  121,561

  147,721

Profit attributable to:

 

 

 

 - Shareholders of TBCG

  159,416

  125,244

  129,952

 - Non-controlling interest

  608

  1,533

  135

Profit for the period

  160,024

  126,777

  130,087

Total comprehensive income is attributable to:

 

 

 

 - Shareholders of TBCG

  145,122

  120,034

  147,628

 - Non-controlling interest

  591

  1,527

  93

Totalcomprehensive income for the period

  145,713

  121,561

  147,721

         

 

Key Ratios

Average Balances

The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts, which were prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.

  Key Ratios

 

 

 

 

 

 

 

Ratios (based on monthly averages, where applicable)

4Q'19

3Q'19

4Q'18

 

 

 

 

Profitability ratios:

 

 

 

ROE2

24.7%

20.4%

24.3%

ROA4

3.5%

2.8%

3.5%

ROE before credit loss allowance5

24.7%

24.6%

32.5%

Cost to Income7

41.8%

39.9%

39.7%

NIM8

5.3%

5.1%

6.7%

Risk Adjusted NIM9

5.4%

4.4%

5.4%

Loan Yields10

10.9%

10.8%

12.2%

Risk Adjusted Loan Yields11

11.0%

10.1%

10.9%

Deposit rates12

3.4%

3.2%

3.1%

Yields on interest Earning Assets13

9.9%

9.8%

11.1%

Cost of Funding14

4.9%

4.8%

4.4%

Spread15

5.2%

5.2%

6.6%

 

 

 

 

Asset quality and portfolio concentration:

 

 

 

Cost of Risk16

-0.2%

0.7%

1.4%

PAR 90 to Gross Loans17

1.1%

1.2%

1.2%

NPLs to Gross Loans18

2.7%

2.9%

3.1%

NPLs coverage19

91.1%

97.7%

102.7%

NPLs coverage with collateral20

194.2%

209.9%

216.4%

Credit loss level to Gross Loans21

2.5%

2.9%

3.2%

Related Party Loans to Gross Loans22

0.1%

0.1%

0.1%

Top 10 Borrowers to Total Portfolio23

8.3%

9.0%

10.1%

Top 20 Borrowers to Total Portfolio24

12.3%

13.0%

14.2%

 

 

 

 

Capital optimisation:

 

 

 

Net Loans to Deposits plus IFI Funding25

104.8%

96.9%

89.9%

Net Stable Funding Ratio26

126.7%

137.7%

129.3%*

Liquidity Coverage Ratio27

110.1%

131.6%

113.9%

Leverage28

7.0x

7.3x

7.0x

CET 1 CAR (Basel III)29

12.0%

11.9%

12.4%

Regulatory Tier 1 CAR (Basel III)30

14.6%

14.7%

12.8%

Regulatory Total 1 CAR (Basel III)31

19.1%

19.4%

17.9%

(*) Based on internal estimates

 

 

Ratio definitions

1. Underlying return on average total equity (ROE) equals underlying net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period adjusted for the respective one-off items; annualised where applicable.

2. Reported return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.

3. Underlying return on average total assets (ROA) equals underlying net income of the period divided by monthly average total assets for the same period; annualised where applicable.

4. Reported return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period; annualised where applicable.

5. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.

6. Underlying cost to income ratio equals total underlying operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

7. Reported cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

8. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG that currently have negative interest, and includes other earning items from due from banks.

9. Risk Adjusted Net Interest Margin is NIM minus the cost of risk without one-offs and the currency effect.

10. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

11. Risk Adjusted Loan yield is loan yield minus the cost of risk without one-offs and currency effect.

12. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.

13. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.

14. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.

15. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).

16. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

17. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.

18. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.

19. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.

20. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.

21. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.

22. Related party loans to total loans equals related party loans divided by the gross loan portfolio.

23. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.

24. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.

25. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.

26. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines.

27. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.

28. Leverage equals total assets to total equity.

29. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

30. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

31. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

Exchange Rates

To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.9552 as of 30 September 2019. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6766 as of 31 December 2018. As of 31 December 2019 the USD/GEL exchange rate equaled 2.8677. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: FY 2019 of 2.8192, FY 2018 of 2.5345, 4Q 2019 of 2.9458, 3Q 2019 of 2.9194, 4Q 2018 of 2.6752.

 

Unaudited Consolidated Financial Results Overview for FY 2019 

This statement provides a summary of the unaudited business and financial trends for FY 2019 for TBC Bank Group plc and its subsidiaries. The financial information and trends are unaudited.

Starting from 1 January 2019, TBC Bank adopted IFRS 16. Therefore, the comparative information for 2018 is not comparable to the information presented for 2019.

TBC Bank Group PLC financial results are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and the Companies Act 2006 applicable to companies reporting under IFRS. The Group classifies and separately discloses certain incomes and expenses, which are non-recurring by nature and are caused by extraordinary events, as one-off items in order to provide a consistent view and enable better analysis of the financial performance of the Group. Adjusted performance is an alternative performance measure (APM) and the reconciliation of the underlying profit and loss items with the reported profit and loss items and the underlying ratios are given under Annex 3 section on pages 45-46.

Please note, that there might be slight differences in previous periods' figures due to rounding.

Net Interest Income

In FY 2019, net interest income amounted to GEL 801.5 million down by 3.0% YoY.

The YoY increase in interest income was primarily related to an increase in interest income from loans, which was related to growth of gross loan portfolio by GEL 2,289.4 million, or 22.1%. This effect was partially offset by a 1.3 pp drop in loan yields, mainly in the retail and MSME segments.  The decrease in retail loan yields was driven by a continued impact of the NGB's regulation from January 2019, which limits the banks' ability to lend money to higher-yield retail customers, while the decrease in MSME loan yields was in line with the overall market trend.

Over the same period, interest expense increased by GEL 157.6 million, or 31.1%, which was mainly related to interest expense from bonds issued in summer 2019, as well as the increase in interest expense from deposits. The latter was related both to growth in the respective portfolio by 7.5% YoY and to an increase in deposit cost by 0.1 pp over the same period.

In 2019, we re-classified net gains on currency swaps from other operating income to net interest income. More information is given in annex 4 on page 46.

Consequently, NIM stood at 5.6% in FY 2019, compared to 6.9% in FY 2018, while risk adjusted NIM for the same period amounted to 4.8%, down by 0.6 pp YoY.

In thousands of GEL

FY'19

FY'18

Change YoY

Interest income

  1,436,843

  1,284,235

11.9%

Interest expense

  (663,860)

  (506,213)

31.1%

Net gains from currency swaps

  28,556

N/A 

100% 

Net interest income

  801,539

  778,022

3.0%

 

 

 

 

NIM

5.6%

6.9%

-1.3 pp

Risk adjusted NIM

4.8%

5.4%

-0.6 pp

 

Net fee and commission income

In FY 2019, net fee and commission income totalled GEL 187.3 million, up by 18.9% on a YoY basis.

The increase on a YoY basis was spread across all categories and was related to overall growth of business.

In thousands of GEL

FY'19

FY'18

Change YoY

Net fee and commission income

 

 

 

Card operations

56,037

50,174

11.7%

Settlement transactions

73,228

62,051

18.0%

Guarantees issued and letters of credit

30,289

23,414

29.4%

Other

27,736

21,891

26.7%

Total net fee and commission income

187,290

157,530

18.9%

 

Other Non-Interest Income

Total other non-interest income decreased by 8.2% on a YoY basis and amounted to GEL 139.4 million in FY 2019. This primarily resulted from decrease in other operating income due to high base last year as mentioned above. Another driver was the decrease in net income from foreign currency operations related to the re-classification of net gains on currency swaps. More information is given in annex 4 on page 46.

This decrease was partially offset by increase in net insurance premium earned after claims and acquisition costs, which increased by 50.8% YoY, mainly related to the increased scale of the insurance business. More information about TBC insurance can be found in Annex 5 on page 47.

In thousands of GEL

FY'19

FY'18

Change YoY

Other non-interest income

 

 

 

Net income from foreign currency operations

101,467

106,874

-5.1%

Net insurance premium earned after claims and acquisition costs[14]

18,510

12,275

50.8%

Other operating income

19,437

32,767

-40.7%

Total other non-interest income

139,414

151,916

-8.2%

 

 

 

 

Credit Loss Allowance

In FY 2019, total credit loss allowance amounted to GEL 92.0 million, down by 44.7% on a YoY basis. 

The decrease was mainly related to credit loss allowance on loans to customers, which was driven by strong performance in all segments, as well as the portfolio product mix change, related to the responsible lending regulation effective from 1 January 2019.

In thousands of GEL

FY'19

FY'18

Change YoY

Credit Loss Allowance

 

 

 

Credit loss allowance for loan to customers

-42.9%

Credit loss allowance for other transactions

  (9,962)

  (22,516)

-55.8%

Total credit loss allowance

  (91,992)

  (166,239)

-44.7%

Operating income after credit loss allowance

  1,036,251

  921,229

12.5%

 

 

 

 

Cost of risk

0.7%

1.6%

-0.9 pp

 

Operating Expenses

 

In FY 2019, total reported operating expenses expanded 9.7% on a YoY basis and amounted to GEL 450.8 million, while over the same period underlying operating expenses increased by 8.3% and stood at GEL 445.1 million.

The increase was primarily due to an increase in staff costs and a rise in depreciation and amortization. The increase in staff costs was due to expansion of business as well as increase in share price over the three year period for the purpose of top and middle management share based bonuses accruals. The increase in depreciation and amortization was mainly due to the adoption of IFRS 16 from January 2019, which led to the reclassification of leases from administrating expenses to depreciation

As a result, our cost to income ratio increased by 2.1 pp and stood 39.9% in FY 2019, while underlying cost to income was 39.5% up by 1.7 pp YoY.

In thousands of GEL

FY'19

FY'18

Change YoY

Operating expenses

 

 

 

Staff costs

(247,803)

(220,354)

12.5%

Provisions for liabilities and charges

(1,264)

(4,000)

-68.4%

Depreciation and amortization

(59,478)

(45,740)

30.0%

Administrative & other operating expenses

(142,181)

(140,935)

0.9%

Total Reported operating expenses

(450,726)

(411,029)

9.7%

Total Underlying operating expenses

(445,121)

(411,029)

8.3%

 

 

 

 

Reported Cost to income

39.9%

37.8%

2.1 pp

Underlying Cost to income

39.5%

37.8%

1.7 pp

 

Net Income

 

Reported net income for the full year 2019 increased by GEL 102.9 million, or 23.5% and stood at GEL 540.3 million. Without one-off items our net income would have increased by GEL 90.2 million, or 19.8% and amounted to GEL 545.1 million.

As a result, ROE stood at 22.4%, up by 0.4 pp YoY, while ROA remained unchanged and stood at 3.2%. Our underlying ROE stood at 22.6% down by 0.2 pp YoY, while ROA stood at 3.3% and remained the same over the same period.

In thousands of GEL

FY'19

FY'18

Change YoY

 

 

 

 

Profit before tax

  585,525

  510,200

14.8%

Income tax expense

  (45,184)

  (72,765)

-37.9%

Reported Profit for the period

  540,341

  437,435

23.5%

Underlying Profit for the period

545,105

454,861

19.8%

 

 

 

 

Reported ROE

22.4%

22.0%

0.4 pp

Underlying ROE

22.6%

22.8%

-0.2 pp

Reported ROA

3.2%

3.2%

0.0 pp

Underlying ROA

3.3%

3.3%

0.0 pp

Funding and Liquidity

 

 

31-Dec-19

31-Dec-18

Change

 

 

 

 

 

 

 

 

Minimum net stable funding ratio, as defined by NBG

100.0%

N/A

N/A

Net stable funding ratio

126.7%

129.3%[15]

-2.6%

 

 

 

 

Net loans to deposits + IFI funding

104.8%

89.9%

14.9%

Leverage (Times)

7.0x

7.0x

0.0x

 

 

 

 

Minimum liquidity ratio, as defined by the NBG

30.0%

30.0%

0.0%

Liquidity ratio, as defined by the NBG

32.2%

33.3%

-1.1%

 

 

 

 

Minimum total liquidity coverage ratio, as defined by the NBG

100.0%

100.0%

0.0%

Minimum LCR in GEL, as defined by the NBG

75.0%

75.0%

0.0%

Minimum LCR in FC, as defined by the NBG

100.0%

100.0%

0.0%

 

 

 

 

Total liquidity coverage ratio, as defined by the NBG

110.1%

113.9%

-3.8%

LCR in GEL, as defined by the NBG

83.7%

102.5%

-18.8%

LCR in FC, as defined by the NBG

128.4%

121.1%

7.3%

 

Regulatory Capital

 

As of 31 December 2019, the Bank's Basel III CET 1 capital stood at 12.0%, down by 0.4 pp on a YoY basis. The drop was mainly driven by the increased portfolio and GEL depreciation during 2019. This effect was partially offset by net income generation over the same period.  Our Tier 1 and Total capital ratios increased by 1.8 pp and 1.2 pp respectively. The increase was mainly driven by income generation and issuance of AT1 instrument (in the amount of USD 125 million) in summer 2019.

In thousands of GEL

31-Dec-19

31-Dec-18

Change

 

 

 

 

CET 1 Capital

1,871,892

1,629,594

14.9%

Tier 1 Capital

2,281,706

1,678,716

35.9%

Total Capital

2,974,029

2,351,269

26.5%

Total Risk-weighted Exposures

15,593,925

13,154,872

18.5%

 

 

 

 

Minimum CET 1 ratio

10.4%

8.3%

2.1 pp

CET 1 Capital adequacy ratio

12.0%

12.4%

-0.4 pp

 

 

 

 

Minimum Tier 1 ratio

12.5%

10.3%

2.2 pp

Tier 1 Capital adequacy ratio

14.6%

12.8%

1.8 pp

 

 

 

 

Minimum total capital adequacy ratio

17.5%

15.8%

1.7 pp

Total Capital adequacy ratio

19.1%

17.9%

1.2 pp

Loan Portfolio

 

As of 31 December 2019, the gross loan portfolio reached GEL 12,662.0 million, up by 22.1% YoY, or by 17.9% on a constant currency basis. This was mainly supported by growth in the corporate segments (as well as by the re-segmentation  of certain clients from the MSME segment in 1Q 2019 in the amount of GEL 128.0 mln). Over the same period, the proportion of gross loans denominated in foreign currency decreased by 1.4 pp on a YoY basis and accounted for 58.7% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency increased by 2.9 pp and stood at 57.2%.

 

At the end of December 2019, our market share in total loans stood at 39.5% up by 0.7 pp YoY, while our loan market share in legal entities was 38.9% up by 1.6 pp YoY, and our loan market share in individuals stood at 40.0% and remained the same YoY.

In thousands of GEL

31-Dec-19

31-Dec-18

Change

Loans and advances to customers

 

 

 

 

 

 

 

Retail

5,053,203

4,698,699

7.5%

Retail loans  GEL

2,386,750

2,063,283

15.7%

Retail loans FC

2,666,453

2,635,416

1.2%

Corporate

4,660,473

3,177,289

46.7%

Corporate loans  GEL

1,424,309

905,372

57.3%

Corporate loans FC

3,236,164

2,271,917

42.4%

MSME

2,948,279

2,496,594

18.1%

MSME loans  GEL

1,419,804

1,170,343

21.3%

MSME loans FC

1,528,475

1,326,251

15.2%

Total loans and advances to customers

12,661,955

10,372,582

22.1%

 

 

FY'19

FY'18

Change YoY

Loan yields

11.0%

12.3%

-1.3 pp

Loan yields  GEL

15.7%

17.8%

-2.1 pp

Loan yields FC

7.8%

8.5%

-0.7 pp

Retail Loan Yields

12.1%

14.2%

-2.1 pp

Retail loan yields  GEL

18.0%

20.8%

-2.8 pp

Retail loan yields FC

7.3%

7.9%

-0.6 pp

Corporate Loan Yields

9.3%

9.5%

-0.2 pp

Corporate loan yields  GEL

11.6%

11.0%

0.6 pp

Corporate loan yields FC

8.4%

9.0%

-0.6 pp

MSME Loan Yields

11.4%

12.1%

-0.7 pp

MSME loan yields  GEL

15.4%

16.2%

-0.8 pp

MSME loan yields FC

7.7%

8.7%

-1.0 pp

Loan Portfolio Quality

The total PAR 30 improved by 0.3 pp on a YoY basis, driven by the retail segment, while total NPLs stood at 2.7%, down by 0.4 pp, which was primarily attributable to the strong performance of the corporate and MSME segments.

Par 30

31-Dec-19

31-Dec-18

Change

Retail

2.1%

2.6%

-0.5 pp

Corporate

0.5%

0.4%

0.1 pp

MSME

2.8%

2.8%

0.0 pp

Total Loans

1.7%

2.0%

-0.3 pp

 

Non-performing Loans

31-Dec-19

31-Dec-18

Change

Retail

3.0%

2.9%

0.1 pp

Corporate

1.8%

2.7%

-0.9 pp

MSME

3.8%

4.2%

-0.4 pp

Total Loans

2.7%

3.1%

-0.4 pp

 

NPLs Coverage

Dec-19

Dec-18

 

Exc. Collateral

Incl. Collateral

Exc. Collateral

Incl. Collateral

Corporate

97.1%

241.4%

96.2%

286.9%

Retail

111.1%

182.9%

132.4%

204.4%

MSME

59.7%

173.7%

68.4%

174.0%

Total

91.1%

194.2%

102.7%

216.4%

 

Cost of risk 

The total cost of risk for FY 2019 stood at 0.7%, down by 0.9 pp YoY, driven by the change of product mix, as well as by robust credit quality across all segments,related to the responsible lending regulation effective from 1 January 2019. 

Cost of Risk

FY'19

FY'18

Change YoY

 

 

 

 

Retail

1.6%

2.7%

-1.1 pp

Corporate

-0.1%

0.4%

-0.5 pp

MSME

0.3%

0.7%

-0.4 pp

Total

0.7%

1.6%

-0.9 pp

 

 Deposit Portfolio

 

The total deposit portfolio increased by 7.5% YoY and amounted to GEL 10,049.3 million, while on a constant currency basis the total deposit portfolio was up by 2.9%. The proportion of deposits denominated in foreign currency increased by 0.2 pp on a YoY basis and accounted for 65.9% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency increased by 1.3 pp and stood at 64.4%.

By the end December 2019, our market share in deposits amounted to 39.0% down by 2.2 pp YoY, and our market share in deposits to legal entities stood at 40.6% down by 0.7 pp. Our market share in deposits to individuals stood at 37.9%, down by 3.3 pp YoY.

In thousands of GEL

31-Dec-19

31-Dec-18

Change

Customer Accounts

 

 

 

 

 

 

 

Retail

5,673,917

5,103,971

11.2%

Retail deposits  GEL

1,098,681

935,339

17.5%

Retail deposits FC

4,575,236

4,168,632

9.8%

Corporate

3,187,319

3,230,653

-1.3%

Corporate deposits  GEL

1,735,746

1,754,282

-1.1%

Corporate deposits FC

1,451,573

1,476,371

-1.7%

MSME

1,188,088

1,017,518

16.8%

MSME deposits  GEL

594,388

515,827

15.2%

MSME deposits FC

593,700

501,691

18.3%

Total Customer Accounts

10,049,324

9,352,142

7.5%

 

 

FY'19

FY'18

Change YoY

Deposit rates

3.3%

3.2%

0.1 pp

Deposit rates GEL

5.8%

5.6%

0.2 pp

Deposit rates FC

2.0%

2.1%

-0.1 pp

Retail Deposit Yields

2.8%

2.7%

0.1 pp

Retail deposit rates GEL

5.0%

4.4%

0.6 pp

Retail deposit rates FC

2.3%

2.4%

-0.1 pp

Corporate Deposit Yields

4.9%

4.9%

0.0 pp

Corporate deposit rates GEL

7.4%

7.5%

-0.1 pp

Corporate deposit rates FC

1.7%

1.9%

-0.2 pp

MSME Deposit Yields

0.9%

1.0%

-0.1 pp

MSME deposit rates GEL

1.5%

1.7%

-0.2 pp

MSME deposit rates FC

0.3%

0.4%

-0.1 pp

 

 

Segment definition and PL

Business Segments

The segment definitions are as follows (updated in 2019):

· Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which have been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;

· Retail - non-business individual customers; all individual customers are included in retail deposits;

· MSME - business customers who are not included in the corporate segment; or legal entities which have been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and

· Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.

Business customers are all legal entities or individuals who have been granted a loan for business purposes.

Income Statement by Segments

FY'19

Retail

MSME

Corporate

Corp.Centre

Total

Interest income

582,788

299,451

356,652

197,952

1,436,843

Interest expense

(152,751)

(10,202)

(160,064)

(340,843)

(663,860)

Net gains on currency swaps

-

-

-

28,556

28,556

Net transfer pricing

(66,951)

(101,424)

31,352

137,023

-

Net interest income

363,086

187,825

227,940

22,688

801,539

Fee and commission income

207,258

26,271

49,338

10,564

293,431

Fee and commission expense

(88,679)

(9,081)

(7,069)

(1,312)

(106,141)

Net fee and commission income

118,579

17,190

42,269

9,252

187,290

Net insurance premium earned after claims and acquisition costs

-

-

-

18,510

18,510

Net income from foreign currency operations

30,990

24,220

49,851

(25,782)

79,279

Foreign exchange translation gains less losses/(losses less gains)

-

-

-

22,188

22,188

Net gains/(losses) from derivative financial instruments

(264)

-

-

(16)

(280)

Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income

-

-

-

169

169

Other operating income

9,563

1,093

2,953

5,307

18,916

Share of profit of associates

-

-

-

632

632

Other operating non-interest income and insurance profit

40,289

25,313

52,804

21,008

139,414

Credit loss allowance for loans to customers

(77,323)

(7,968)

3,261

-

(82,030)

Credit loss allowance for performance guarantees and credit related commitments

411

124

(2,691)

-

(2,156)

Credit loss allowance for investments in finance lease

-

-

-

582

582

Credit loss allowance for other financial assets

(3,545)

(11)

2,211

(6,753)

(8,098)

Credit loss allowance for financial assets measured at fair value through other comprehensive income

-

-

(141)

(149)

(290)

Profit before G&A expenses and income taxes

441,497

222,473

325,653

46,628

1,036,251

Staff costs

(134,143)

(48,018)

(38,360)

(27,282)

(247,803)

Depreciation and amortization

(45,522)

(7,210)

(2,571)

(4,175)

(59,478)

Provision for liabilities and charges

-

-

-

(1,264)

(1,264)

Administrative and other operating expenses

(77,563)

(21,094)

(17,127)

(26,397)

(142,181)

Operating expenses

(257,228)

(76,322)

(58,058)

(59,118)

(450,726)

Profit before tax

184,269

146,151

267,595

(12,490)

585,525

Income tax expense

(18,101)

(14,825)

(29,048)

16,790

(45,184)

Profit for the year

166,168

131,326

238,547

4,300

540,341

 

 

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet

 

 

In thousands of GEL 

Dec-19

Dec-18

Cash and cash equivalents

  1,003,583

  1,166,911

Due from other banks

  33,605

  47,316

Mandatory cash balances with National Bank of Georgia

  1,591,829

  1,422,809

Loans and advances to customers

  12,349,399

  10,038,452

Investment securities measured at fair value through other comprehensive income

  985,293

  1,005,239

Bonds carried at amortized cost

  1,022,684

  654,203

Investments in finance leases

  256,660

  203,802

Investment properties

  72,667

  84,296

Current income tax prepayment

  25,695

  2,116

Deferred income tax asset

  2,173

  2,097

Other financial assets

  133,736

  167,518

Other assets

  255,712

  192,792

Premises and equipment

  385,736

  367,504

Right of use assets

  59,693

  - 

Intangible assets

  167,597

  109,220

Goodwill

  61,558

  31,286

Investments in associates

  2,654

  2,432

TOTAL ASSETS 

  18,410,274

  15,497,993

LIABILITIES 

 

 

Due to credit institutions

  3,593,901

  3,031,503

Customer accounts 

  10,049,324

  9,352,142

Lease liabilities

  59,898

  - 

Other financial liabilities 

  113,608

  98,714

Current income tax liability 

  1,634

  63

Debt Securities in issue

  1,213,598

  13,343

Deferred income tax liability 

  21,331

  22,237

Provisions for liabilities and charges 

  23,128

  18,767

Other liabilities 

  95,162

  104,337

Subordinated debt 

  591,035

  650,919

TOTAL LIABILITIES 

  15,762,619

  13,292,025

EQUITY 

 

 

Share capital

  1,682

  1,650

Shares held by trust

  (27,516)

  - 

Share premium

  848,459

  796,854

Retained earnings

  1,953,364

  1,523,879

Group re-organisation reserve

 (162,167.00)

  (162,168)

Share based payment reserve

  (17,803)

  (16,294)

Revaluation reserve for premises

  56,374

  57,240

Fair value reserve

  (6,476)

  8,680

Cumulative currency translation reserve

  (6,850)

  (6,935)

Net assets attributable to owners

  2,639,067

  2,202,906

Non-controlling interest 

  8,588

  3,062

TOTAL EQUITY 

  2,647,655

  2,205,968

TOTAL LIABILITIES AND EQUITY 

  18,410,274

  15,497,993

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 

 

In thousands of GEL 

FY'19

FY'18

Interest income 

  1,436,843

  1,284,235

Interest expense

  (663,860)

  (506,213)

Net gains from currency swaps

  28,556

N/A

Net interest income

  801,539

  778,022

Fee and commission income

293,431

235,701

Fee and commission expense

(106,141)

(78,171)

Net fee and commission income

187,290

157,530

Net insurance premiums earned

38,199

23,601

Net insurance claims incurred and agents' commissions

(19,689)

(11,326)

Net insurance premium earned after claims and acquisition costs

18,510

12,275

Net income from foreign currency operations 

79,279

91,678

Net gain/(losses) from foreign exchange translation

22,188

15,196

Net gains/(losses) from derivative financial instruments

(280)

173

Gains less losses from disposal of investment securities measured at fair value through other comprehensive income

169

2

Other operating income

18,916

31,438

Share of profit of associates

632

1,154

Other operating non-interest income

120,904

139,641

Credit loss allowance for loans to customers

(82,030)

(143,723)

Credit loss allowance for investments in finance lease

582

(1,765)

Credit loss allowance for performance guarantees and credit related commitments

(2,156)

(4,056)

Credit loss allowance for other financial assets

(8,098)

(16,609)

Credit loss allowance for financial assets measured at fair value through other comprehensive income

(290)

(86)

Operating income after credit loss allowance for impairment

1,036,251

921,229

Staff costs

(247,803)

(220,354)

Depreciation and amortization

(59,478)

(45,740)

(Provision for)/ recovery of liabilities and charges

(1,264)

(4,000)

Administrative and other operating expenses

(142,181)

(140,935)

Operating expenses

(450,726)

(411,029)

Profit before tax

585,525

510,200

Income tax expense

(45,184)

(72,765)

Profit for the period

540,341

437,435

Other comprehensive income:

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

Movement in fair value reserve

(15,156)

6,949

Exchange differences on translation to presentation currency

85

425

Items that will not be reclassified to profit or loss:

 

 

Revaluation of premises and equipment

-

10,749

Income tax recorded directly in other comprehensive income

-

(2,363)

Other comprehensive income for the period

(15,071)

15,760

Total comprehensive income for the period

525,270

453,195

Profit attributable to:

 

 

 - Shareholders of TBCG

537,895

435,078

 - Non-controlling interest

2,446

2,357

Profit for the period

540,341

437,435

Total comprehensive income is attributable to:

 

 

 - Shareholders of TBCG

522,843

450,901

 - Non-controlling interest

2,427

2,294

Totalcomprehensive income for the period

525,270

453,195

    

 

Consolidated Statements of Cash Flows

 

 

In thousands of GEL

31-Dec-19

31-Dec-18

Cash flows from/(used in) operating activities

 

 

Interest received

1,388,852

1,224,606

Interest paid

(647,427)

(501,984)

Fees and commissions received

282,715

235,508

Fees and commissions paid

(106,526)

(78,140)

Insurance premium received

76,101

54,682

Insurance claims paid

(21,787)

(15,174)

Income received from trading in foreign currencies

79,287

91,678

Other operating income received

44,248

11,407

Staff costs paid

(216,465)

(202,897)

Administrative and other operating expenses paid

(169,582)

(136,670)

Income tax paid

(70,413)

(34,918)

Cash flows from operating activities before changes in operating assets and liabilities

639,003

648,098

Net change in operating assets

 

 

Due from other banks and mandatory cash balances with the National Bank of Georgia

(22,009)

(343,772)

Loans and advances to customers

(2,013,577)

(1,718,446)

Investment in finance lease

(43,719)

(54,784)

Other financial assets

19,612

(35,570)

Other assets

1,577

(4,486)

Net change in operating liabilities

 

 

Due to other banks

(1,938)

69,755

Customer accounts

272,023

1,371,675

Other financial liabilities

(8,267)

(12,136)

Change in finance lease liabilities

(6,453)

 

Other liabilities and provision for liabilities and charges

5,816

3,618

Net cash flows (used in)/from operating activities

(1,157,932)

(76,048)

Cash flows from/(used in) investing activities

 

 

Acquisition of investment securities measured at fair value through other comprehensive income

(1,781,816)

(717,729)

Proceeds from disposal of investment securities measured at fair value through other comprehensive income

240,603

14,781

Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income

1,598,536

370,571

Acquisition of subsidiaries, net of cash acquired

(39,297)

809

Acquisition of bonds carried at amortised cost

(613,383)

(395,717)

Proceeds from redemption of bonds carried at amortised cost

216,871

200,658

Acquisition of premises, equipment and intangible assets

(120,333)

(89,263)

Proceeds from disposal of premises, equipment and intangible assets

13,225

813

Cash acquired

2,996

-

Proceeds from disposal of investment property

13,338

42,515

Net cash used in investing activities

(469,260)

(572,562)

Cash flows from/(used in) financing activities

 

 

Proceeds from other borrowed funds

1,819,899

1,776,489

Redemption of other borrowed funds

(1,392,897)

(1,515,562)

Proceeds from subordinated debt

-

255,900

Redemption of subordinated debt

(104,079)

(60,910)

Proceeds from debt securities in issue

1,176,049

(7,596)

Redemption of debt securities in issue

(14,296)

-

Dividends paid

(91,928)

(85,484)

Acquisition of non-controlling interest in subsidiary

-

-

Net cash flows from financing activities

1,392,748

362,837

Effect of exchange rate changes on cash and cash equivalents

71,116

21,207

Net increase in cash and cash equivalents

(163,328)

(264,566)

Cash and cash equivalents at the beginning of the year

1,166,911

1,431,477

Cash and cash equivalents at the end of the year

1,003,583

1,166,911

 

Key Ratios

Average Balances

The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts, which were prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.

  Key Ratios

 

 

 

 

 

Ratios (based on monthly averages, where applicable)

FY'19

FY'18

 

 

 

Profitability ratios:

 

 

Underlying ROE1

22.6%

22.8%

Reported ROE2

22.4%

22.0%

Underlying ROA3

3.3%

3.3%

Reported ROA4

3.2%

3.2%

ROE before credit loss allowance5

26.3%

30.4%

Underlying Cost to Income6

39.5%

37.8%

Reported Cost to Income7

39.9%

37.8%

NIM8

5.6%

6.9%

Risk Adjusted NIM9

4.8%

5.4%

Loan Yields10

11.0%

12.3%

Risk Adjusted Loan Yields11

10.3%

10.8%

Deposit rates12

3.3%

3.2%

Yields on interest Earning Assets13

10.0%

11.4%

Cost of Funding14

4.7%

4.4%

Spread15

5.5%

7.0%

 

 

 

Asset quality and portfolio concentration:

 

 

Cost of Risk16

0.7%

1.6%

PAR 90 to Gross Loans17

1.1%

1.2%

NPLs to Gross Loans18

2.7%

3.1%

NPLs coverage19

91.1%

102.7%

NPLs coverage with collateral20

194.2%

216.4%

Credit loss level to Gross Loans21

2.5%

3.2%

Related Party Loans to Gross Loans22

0.1%

0.1%

Top 10 Borrowers to Total Portfolio23

8.3%

10.1%

Top 20 Borrowers to Total Portfolio24

12.3%

14.2%

 

 

 

Capital optimisation:

 

 

Net Loans to Deposits plus IFI Funding25

104.8%

89.9%

Net Stable Funding Ratio26

126.7%

129.3%*

Liquidity Coverage Ratio27

110.1%

113.9%

Leverage28

7.0x

7.0x

CET 1 CAR (Basel III)29

12.0%

12.4%

Regulatory Tier 1 CAR (Basel III)30

14.6%

12.8%

Regulatory Total 1 CAR (Basel III)31

19.1%

17.9%

(*) Based on internal estimates

 

 

Ratio definitions

1. Underlying return on average total equity (ROE) equals underlying net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period adjusted for the respective one-off items; annualised where applicable.

2. Reported return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.

3. Underlying return on average total assets (ROA) equals underlying net income of the period divided by monthly average total assets for the same period; annualised where applicable.

4. Reported return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period; annualised where applicable.

5. Return on average total equity (ROE) before credit loss allowance equals net income attributable to owners excluding all credit loss allowance divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.

6. Underlying cost to income ratio equals total underlying operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

7. Reported cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

8. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG that currently have negative interest, and includes other earning items from due from banks.

9. Risk Adjusted Net Interest Margin is NIM minus the cost of risk without one-offs and the currency effect.

10. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

11. Risk Adjusted Loan yield is loan yield minus the cost of risk without one-offs and currency effect.

12. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.

13. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.

14. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.

15. Spread equals difference between yields on interest earning assets (including but not limited to yields on loans, securities and due from banks) and cost of funding (including but not limited to cost of deposits, cost on borrowings and due to banks).

16. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

17. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.

18. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.

19. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.

20. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.

21. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.

22. Related party loans to total loans equals related party loans divided by the gross loan portfolio.

23. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.

24. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.

25. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.

26. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines.

27. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.

28. Leverage equals total assets to total equity.

29. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

30. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

31. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.

 

Exchange Rates

To calculate the YoY growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6766 as of 31 December 2018. As of 31 December 2019, the USD/GEL exchange rate equalled 2.8677. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: FY 2019 of 2.8192, FY 2018 of 2.5345.

Additional Disclosures

1)  Subsidiaries of TBC Bank Group PLC[16] 

 

Ownership / voting
% as of 31 December 2019

Country

Year of incorporation

Industry

Total Assets 
(after elimination)

Subsidiary

Amount

GEL'000

% in TBC Group

JSC TBC Bank

99.9%

Georgia

1992

Banking

17,892,883

97.21%

  United Financial Corporation JSC

98.7%

Georgia

1997

Card processing

10,015

0.05%

  TBC Capital LLC

100.0%

Georgia

1999

Brokerage

4,471

0.02%

  TBC Leasing JSC

100.0%

Georgia

2003

Leasing

322,188

1.75%

  TBC Kredit LLC

100.0%

Azerbaijan

1999

Non-banking credit institution

24,700

0.14%

  TBC Pay LLC

100.0%

Georgia

2009

Processing

33,793

0.18%

  Index LLC

100.0%

Georgia

2011

Real estate management

925

0.01%

  TBC Invest LLC

100.0%

Israel

2011

PR and marketing

341

0.00%

JSC TBC Insurance

100.0%

Georgia

2014

Insurance

62,965

0.33%

  Redmed LLC

100.0%

Georgia

2019

E-commerce

370

0.00%

TBC International LLC

100.0%

Georgia

2019

Asset management

367

0.00%

  Swoop JSC

100.0%

Georgia

2010

Retail Trade

409

0.00%

  LLC Online Tickets

55.0%

Georgia

2015

Software Services

2,434

0.01%

  TKT UZ

75.00%

Uzbekistan

2019

Retail Trade

236

0.00%

  My.ge LLC

65.0%

Georgia

2008

E-commerce, Housing and Auto

5,637

0.03%

  LLC Vendoo (Geo)

100.0%

Georgia

2019

Retail Leasing

4,117

0.02%

  LLC Mypost

100.0%

Georgia

2019

Postal Service

96

0.00%

  LLC Billing Solutions

51.00%

Georgia

2019

Software Services

344

0.00%

  All property.ge LLC

90.0%

Georgia

2013

Real estate management

1,179

0.01%

  LLC F Solutions

100.00%

Georgia

2019

Software Services

10

0.00%

  Inspired LLC

51.0%

Uzbekistan

2011

Processing

3,973

0.02%

   LLC Vendoo (UZ Leasing)

100.00%

Uzbekistan

2019

Consumer financing

1,059

0.01%

 

 

2)  Update on strategic objectives

Our mission: Make life easier

Financial services with a strong focus on digital:

Book value as of 31 December 2019 - GEL 2.5 billion

Total assets as of 31 December 2019 - GEL 18.4 billion

Number of customers as of 31 December 2019 - 2.6 million

 

Ecosystems:

Revenue[17] - GEL 81.2 million for FY 2019, up by 79% YoY

Net profit[18] - GEL 37.9 million for FY 2019, up by 101% YoY

Number of visitors[19] in September 2019 -5.4 million

TBC Bank drives 22% of the ecosystems' revenue

Our customer centric ecosystems

We are increasing our touchpoints with customers by creating secure customer centric digital ecosystems that help our customers to satisfy their needs in the most convenient and seamless way possible.

Our ambitions are to:

Establish new standards of customer experience;

Facilitate digital sales and engagement;

Create new revenue streams; and

Collect more valuable customer data.

Payments ecosystem[20]

 

FY 19

FY 18

Change

Number of payments (million)

332.6

253.6

31.2%

Payments ecosystem

236.4

172.7

36.9%

Other payments business

96.2

80.9

18.9%

Volume of payments (GEL billion)

154.1

126.6

21.7%

Payments ecosystem

11.8

8.8

34.1%

Other payments business

142.3

117.8

20.8%

 

We are Number 1 in E-com & POS transactions volume, with a market share of above 53%;[21]

We are among the world's best with over 86% of payments being contactless;[22] and

We have a great innovation record, with a lot of "first in the region" payment innovations such as stickers, P2P, contactless cash withdrawal, Voice payments, Apple Pay, ATM QR withdrawal and TBC Bracelets.

Our aspirations

Annual growth rate for payments commission income of 20%;

Increase annual net revenue from GEL 109 million (with 42% contribution from ecosystems) in 2018 to GEL 218 million by 2022.

 

TBC Pay

TBC Pay is one of Georgia's leading payment companies. TBC Pay operates a wide network of self-service terminals all over Georgia.

Services:

Traditional services: self-service terminals and an online platform (www.tbcpay.ge) that enable individuals to perform payments for various daily services instantly, in an interactive way, on a 24-hour basis;

New services: mobile application; the easiest instant money transfer services between Georgian cards; template management and e-wallet.

 

Financials:

The business is self-sustainable;

TBC Bank drives 25% of TBC Pay's revenue.

 

FY 19

FY 20 F[23]

Revenue (GEL million)

33.7

34.2

Number of transactions (million)

53.0

55.8

EBITDA (GEL million)

16.9

 

 

Update for 4Q 2019:

In 4Q 2019, the volume and number of transactions increased by 7.9% and 4.2% QoQ, respectively.

 

Payme

Payme is a leading digital payment service provider in Uzbekistan, which supplies high-quality payment solutions to its 1.8 million users.[24]

Services:

Traditional services: Utility payments, P2P transfers, Loan repayments, mPOS for QR-based payments, E-commerce purchases;

New services: a new application, Payme 2.0, was created and the beta version was launched in July with an upgraded interface design and new capabilities.

 

Financials:

Investment in 2019 - USD 5.5 million for a 51% shareholding;

The business is self-sustainable and generating a positive cashflow.

 

FY 19

FY 20 F[25]

Revenue (GEL million)

8.6

12.3

Number of registered users (thousand)

1,772

2,800

Number of transactions (million)

40.1

52.5

EBITDA (GEL million)

4.5

 

 

Update for 4Q 2019:

For FY 2019, revenue and EBITDA increased by 84.0% and 76.9%, respectively.

Housing ecosystem

Livo

Livo is the first housing digital ecosystem in Georgia, offering the full range of services needed when buying or renting a home, with an estimated share of the total digital traffic of 20%[26].

Services:

Traditional services: personal profiles, advertisements and 3D tours & photographers;

Innovative services: mortgage loans (TBC and VTB Bank) the first real-estate valuation service in Georgia within 24 hours, premier agent service for brokers.

 

Financials:

Investment in 2019 - USD 980,000 (USD 225,000 for 90% shareholding plus USD 755,000 for future development);

Planned investment in 2020 is GEL 2.0 million from TBC;

Break-even is planned in 3Q 2020;

TBC Bank drives 85% of Livo's revenue, which we plan to reduce to 65% in 2020.

Key financial data

FY 19

FY 20 F

Revenue (GEL million)

2.5/2.2[27]

5.2

EBITDA (GEL million)

-0.6

 

 

Key operating data

Dec - 19

Dec - 20 F

Number of unique visitors (thousand)[28]

274

350

Number of listings (thousand)

24

50

 

Update for 4Q 2019:

In 4Q 2019, the following services were added: mortgage insurance, a special service package for developers, and lead generation for developers and information about air pollution;

The number of listings increased by 41.2% in December compared to September;

 

MyHome.ge

MyHome.ge is the leading classified digital platform in Georgia for real-estate purchase and renting, with an estimated share of the total digital traffic of 35%.[29]

Services:

Traditional services: personal profiles, advertisements, drone & photographers;

Given the large number of current visitors, the strategy for 2020 is to diversify service offerings and increase revenue streams. 

Financials:

Allocated initial investment in August 2019, based on revenue contribution (35%), was GEL 6.7 million;[30]

The business is self-sustainable.

Key financial data

FY 19

FY 20 F

Revenue (GEL million)

1.4

2.2

EBITDA (GEL million)

0.4

 

 

Key operating data

Dec - 19

Dec - 20 F

Number of unique visitors (thousand)[31]

360

430

Number of listings (thousand)

140

145

 

 

Update for 4Q 2019

A dedicated module was added for developers, which allows them to manage their offerings easily;

The number of listings increased by 7.7% in December, compared to September.

 

E-commerce ecosystem

Vendoo

Vendoo is an asset light platform that acts a key intermediary between buyers and sellers, modelled on industry peers such as Alibaba and Rakuten.

The estimated total addressable market was around GEL 200 million in 2019, and is expected to grow by 30% in 2020.

Offerings:

Delivery within 24 hours;

Over 230 large merchants and following offerings: Electronics, personal care products, gardening & housing, toys, household chemistry, books & stationary and beverages; and

Synergies with our banking operations: installment loans, participation in a loyalty program called "Ertguli".

 

Financials:

Investment in 2018-2019 was GEL 7.2 million. In 2020, TBC plans to invest a further GEL 1.7 million;

Break-even is planned in 4Q 2021;

GMV[32] was GEL 2.9 mln in 2019 and is forecasted to reach GEL 14.0 million in 2020.

 

 

 

Key financial data[33]

FY 19

FY 20 F [34]

Revenue (GEL million)

2.4

12.0

EBITDA (GEL million)

(4.4)

 

 

Key operating data

Dec - 19

Dec - 20 F

Number of unique visitors (thousand)

337

500

SKUs[35] (thousand)

27

50

Update for 4Q 2019

GMV more than tripled QoQ and reached GEL 2.1 million in 4Q as a result of our wide-scale seasonal campaigns, while the number of SKUs increased by 35%;

Significantly strengthened its operations to meet the high demand.

 

MyMarket.ge & MyShop.ge

These platforms are the number one players in C2C and B2C e-commerce in Georgia, with an estimated share of the total digital traffic of 80%.[36]

Offerings:

Myshop is an online outlet platform offering a wide range of products;

Mymarket offers both brand new and secondary products as well as various household services.

 

Financials:

Allocated initial investment in August 2019 based on revenue contribution (22%) was GEL 4.2 million[37];

The business is self-sustainable.

Key financial data

FY 19

FY 20 F

Revenue (GEL million)

1.2

1.6

EBITDA (GEL million)

0.3

 

 

Key operating data

Dec - 19

Dec - 20 F

Number of unique visitors (thousand)

900

1,000

Number of sellers (thousand)

45

50

 

Update for 4Q 2019

Completely redesigned interface of Mymarket.ge webpage;

The number of unique visitors increased by 7.5% in December compared to September;

The number of sellers increased by 28.6% in December compared to September.

 Auto ecosystem

MyAuto.ge & MyParts.ge

MyAuto.ge and MyParts.ge are the market leader in automotive and spare parts, with an estimated share of the total digital traffic of 80%[38] in each.

Offerings:

Purchase and renting of secondary cars;

Purchase of auto parts;

MyAuto.ge has 50 dealers and 33,000 sellers;

MyParts.ge has 44 Merchants and 8,440 sellers.

Financials:

Allocated initial investment in August 2019 based on revenue contribution (43%) was GEL 8.5 million[39];

The business is self-sustainable. 

Key financial data

FY 19

FY 20 F

Revenue (GEL million)

2.5

3.6

EBITDA (GEL million)

0.9

 

 

Key operating data

Dec - 19

Dec - 20 F

Number of unique visitors (thousand)

1,550

1,600

Number of listings (thousand)

400

450

Update for 4Q 2019:

The number of unique visitors increased by 11.4% in December compared to September;

The number of listings increased by 15.9% in December compared to September.

Space - Fully digital bank

Space was developed over the course of just 8 months[40] by a dedicated team of 35 professionals. Development costs before the launch of Beta version in May 2019 amounted to GEL 1.4 million. 

Key metrics as of 31 December 2019

Number of downloads

508 thousand

Total registered customers

181 thousand, out of whom 46% are TBC's dormant customers

Number of transactions (4Q'19)

1.2 mln, out of which 8% was conducted by TBC cards and 8% by other Georgian banks' cards

Transaction amount (4Q'19)

GEL 62 million, out of which 12% was conducted by TBC cards and 11% by other Georgian banks' cards

Loan portfolio

GEL 27 million

Number of borrowers

10 thousand

Number of total cards

121 thousand, out of which 27% was TBC cards and 18% other Georgian banks' cards

Number of space cards

65 thousand

Our Products

Instant Consumer Loan 24/7;

Instant Money Transfer to any bank 24/7;

Use app with other bank cards;

Mobile top and bill payments;

QR instalments; and

Deposits.

Transformation into a data driven organization

The goal is to strengthen TBC's market leading position by becoming a data driven organization.

Why?

In order to become customer centric company and reach a non-replicable competitive advantage on the market, which will:

Have a significant impact on our profitability;

Bring our superior customer experience to the next level; and

Reveal hidden opportunities.

How?

Implementing best-in-class data analytical projects across the bank, which have been designed with the help of world's leading consultants;

Building modern IT infrastructure; and

Developing strong in-house data analytical capabilities by recruiting and training the best talent.

 

Current Progress:

4 Data analytics projects have already been finished and 5 underway;

GEL 8.9 million extra profit in 2019.

Aspirations:

23 Data analytics projects already finished across the Bank; and

GEL 100 million annual extra profit by 2023.

3)  Reconciliation of reported IFRS consolidated figures with the underlying numbers

Item (in thousands of GEL )

FY 2019

FY 2018

Description

Reason for exclusion from the Group's current reported performance

Consulting fees

(5,605)

 

Consulting fees incurred in 2Q 2019, in relation to the recent events regarding historic matters surrounding TBC Bank. For further details, please see the following press release dated 21.02.2019.

These costs are significant and non-recurring in nature, and therefore are not indicative of the Group's current underlying performance.

Reversal of deferred tax gain

-

(17,426)

In 2018, TBC Bank reversed the one-off deferred tax gain recognized 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 tax relief for re-invested profit from 1 January 2019 to 1 January 2023 for financial institutions.

These costs are significant and non-recurring in nature, and therefore are not indicative of the Group's current underlying performance.

 

in thousands of GEL 

FY 2019

FY 2018

Reported net interest income

801,539

778,022

Reported net fee and commission income

187,290

157,530

Reported net insurance premium earned after claims and acquisition costs

18,510

12,275

Reported other operating income

120,904

139,641

Reported operating income

1,128,243

1,087,468

Reported total credit loss allowance

(91,992)

(166,239)

Reported operating income after provisions

1,036,251

921,229

Reported operating expenses

(450,726)

(411,029)

One-off consulting fees

5,605

-

Underlying operating expenses

(445,121)

(411,029)

 

 

 

Reported profit before tax

585,525

510,200

Underlying profit before tax

591,129

510,200

 

 

 

Reported income tax

(45,184)

(72,765)

Effect on tax of one-off items

(841)

 

Reversal of the one-off deferred tax gain

 

17,426

Underlying income tax

(46,024)

(55,339)

 

 

 

Reported profit for the period

540,341

437,435

Underlying profit for the period

545,105

454,861

 

 

 

Reported non-controlling interest (NCI)

2,446

2,357

Underlying NCI

2,446

2,357

Reported profit for the period less NCI

537,895

435,078

Underlying profit for the period less NCI

542,659

452,504

 

 

in thousands of GEL 

Average reported equity attributable to the PLC's equity holders

2,397,141

1,977,359

Adjustment for one-off items on monthly average basis

Average underlying equity attributable to the PLC's equity holders

Average reported total assets

Adjustment for one-off items on monthly average basis

Average underlying total assets

16,792,320

13,623,594

 

 

 

 

FY 2019

FY 2018

Reported cost to income

39.9%

37.8%

Underlying cost to income (APM)

39.5%

37.8%

Reported ROE

22.4%

22.0%

Underlying ROE (APM)

22.6%

22.8%

Reported ROA

3.2%

3.2%

Underlying ROA (APM)

3.3%

3.3%

4)  Net gains from currency swaps

 

In 2019, the Group entered into swap agreements denominated in foreign currencies in order to decrease its cost of funding. As the contracts reached significant volume, the Group revisited the presentation of effects in the Statement of profit or loss. Reclassifications from other non-interest operating income to net interest income have been recorded for the first three quarters in 2019. 2018 information has not been restated due to immateriality of amounts.

 

In thousands of GEL

4Q'19

3Q'19

2Q'19

1Q'19

Net gains from currency swaps

9,054

8,355

6,967

4,179

5)  TBC Insurance

TBC Insurance is a rapidly growing, wholly owned subsidiary of TBC Bank and is the Bank's main bancassurance partner. The company was acquired by the Group in October 2016 and has since grown significantly, becoming the second largest player on the P&C and life insurance market and the largest player in the retail segment, holding 21.3% and 36.4% market shares,[41] without border motor third party liability (MTPL) insurance, respectively in 2019, based on internal estimates.

 

TBC Insurance serves both individual and legal entities and provides a broad range of insurance products covering motor, travel, personal accident, credit life and property, business property, liability, cargo and agro insurance products. The company differentiates itself through its advanced digital channels, which include TBC Bank's award-winning internet and mobile banking applications, a wide network of self-service terminals, a web channel, and B-Bot, a Georgian-speaking chat-bot that is available through Facebook messenger.

 

In 2Q 2019, TBC Insurance entered the health insurance market with a focus on the premium segment. Our strategy is to focus on affluent individuals and capture the affluent market by leveraging our strong brand name, leading digital capabilities and cross selling opportunities with payroll customers. Our medium-term target is to reach 25% market share in the premium health insurance business.

 

In 2019, TBC Insurance achieved strong growth results in non-health business lines. The gross written premium grew by 31.5% YoY and amounted to GEL 79.0 million. Over the same period, the net combined ratio[42]  increased by 3.5 pp and stood at 82.8%, driven by increased operating expenses in health insurance, without health insurance business, net combined ratio would have been 79.1%.  As a result, net profit for 2019 increased by 12.5 % YoY and reached to GEL 8.5 million or GEL 9,792 million without health insurance.

 

Information excluding health insurance

4Q'19

3Q'19

4Q'18

 

12M'19

12M'18

In thousands of GEL

 

 

 

 

 

 

Gross written premium

19,496

18,999

17,075

 

75,523

60,079

Net earned premium[43]

15,603

13,412

10,554

 

51,910

35,657

Net profit

2,973

2,567

2,556

 

9,792

7,584

 

 

 

 

 

 

 

Net combined ratio

81.9%

77.8%

80.7%

 

79.1%

79.3%

 

 

Information including health insurance

4Q'19

3Q'19

4Q'18

 

12M'19

12M'18

In thousands of GEL

 

 

 

 

 

 

Gross written premium

21,808

19,760

17,075

 

79,031

60,079

Net earned premium

16,367

13,579

10,554

 

52,882

35,657

Net profit

2,499

2,227

2,556

 

8,533

7,584

 

 

 

 

 

 

 

Net combined ratio

86.5%

81.6%

80.7%

 

82.8%

79.3%

 

1Q and 2Q 2019 figures are provided without subsidiaries of TBC Insurance: Swoop JSC, GE Commerce LTD, All Property LTD and 3Q and 4Q 2019 figures are given without Redmed LTD;

 

All figures in the above table are presented before consolidation eliminations.

6) Azerbaijan

No investment has been made in relation to this project during 2019 and no material expenses were incurred.

Main highlights:

TBC Bank and Nikoil Bank concluded a shareholders agreement in late December 2018 and signed it in early January 2019. According to this agreement, TBC's shareholding in the joint entity will be 8.34%.  The transaction is subject to regulatory approval;

Currently, the bank is in the process of significant reorganization, which includes re-branding and shifting to digitalization. 

Achievements

Over the course of 2019, Nikoil Bank significantly enhanced its operations:

In late 2019, Nikoil Bank officially started rebranding and introduced a new name, logo and slogan. Nikoil Bank is now called Yelo Bank. The introduction of a new banking service model will take place in parallel with the process of updating the network of branches and transforming them to a completely new design;

New management team was recruited including: CDM, CRO, CFO and CIO, as well as Head of retail and MSME;

Core banking was revised and improved, including the data warehouse;

Risk management was improved in terms of operational risks, credit risks, and compliance.

Mid-term vision

In millions of USD

FY 19 results of Nikoil Bank[44]

Mid-term targets of joint entity

Gross loan portfolio

c. 228

c. 1,400

Equity

c. 34

c. 200

Return on equity

NMF

20% +

Core segments: Retail and MSME (not large SMEs and Corporates);

Product offerings: A mix of Nikoil Bank and TBC Bank products, adapted to the local needs and offered primarily through digital channels, including Space Bank.

7) ESG ratings and scores

 

MSCI - ESG Rating

 

In 2019, TBC Bank Group received a rating of A (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment.

 

 

ISS - ESG

 

TBC Bank Group PLC attained the above mentioned ESG scores from ISS as of 1 February 2020

 

Governance

2

Environment

3

Social

2

 

Lower Governance Risk = 1 - Higher Governance Risk = 10

Higher E&S Disclosure = 1 - Lower E&S Disclosure = 10

 

Sustainalytics

 

TBC Bank Group PLC holds 20.6 ESG rating as of 17 December 2019

 

Negligible

Low

Medium

High

Severe

0-10

10-20

20-30

30-40

40+

 

 

Relative performance

 

 

Rank (1st = lowest risk)

Percentile (1st = lowest risk)

Banks (Industry Group)

83 out of 934

10th

Regional Banks (Subindustry)

11 out of 386

4th

 

8) Loan book breakdown by stages according IFRS 9

 

Total (in million GEL)

Stage

Gross

% of total

Allowance

LLP rate

1

11,552

91.2%

96

0.8%

2

757

6.0%

83

11.0%

3

353

2.8%

134

38.0%

Total

12,662

100.0%

313

2.5%

 

 

Corporate in million GEL

Stage

Gross

% of total

Allowance

LLP rate

1

4,435

95.2%

39

0.9%

2

104

2.2%

2

1.9%

3

122

2.6%

40

32.8%

Total

4,661

100.0%

81

1.7%

 

 

MSME (in million GEL)

Stage

Gross

% of total

Allowance

LLP rate

1

2,650

89.9%

18

0.7%

2

205

6.9%

19

9.3%

3

93

3.2%

29

31.2%

Total

2,948

100.0%

66

2.2%

 

 

Consumer (in million GEL)

Stage

Gross

% of total

Allowance

LLP rate

1

1,593

84.6%

37

2.3%

2

217

11.5%

52

24.0%

3

74

3.9%

45

60.8%

Total

1,884

100.0%

134

7.1%

 

 

Mortgage (in million GEL)

Stage

Gross

% of total

Allowance

LLP rate

1

2,874

90.7%

2

0.1%

2

231

7.3%

10

4.3%

3

64

2.0%

20

32.8%

Total

3,169

100.0%

32

1.0%

 


[1]   For the ratio calculation all relevant group recurring costs are allocated to the bank.

[2] For the ratio calculation all relevant group recurring costs are allocated to the bank.

[3] International Financial Institutions

[4] Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.

[5] Internet or Mobile Banking penetration equals the number of active clients of Internet or Mobile Banking divided by the total number of active clients.

[6] Mobile Banking penetration equals the number of active clients of Mobile Banking divided by the number of total active clients. Data includes Space figures

[7] Other operating non-interest income includes Net insurance premium earned after claims and acquisition costs

[8]   For the ratio calculation all relevant group recurring costs are allocated to the bank.

[9] In 2019, the non-recurring costs included consulting fees in the amount of GEL 5.6 million paid in relation to historic matters surrounding TBC Bank. In 2018, one-off costs included the reversal of deferred tax gains due to a change in legislation in the amount of GEL 17.4 million.

[10] For the ratio calculation all relevant group recurring costs are allocated to the bank

[11] Based on initial estimates of the National Statistics Office of Georgia.

[12] Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit (as shown in Annex 5 on page 47) as follows: net insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.

[13] The new share based payments compensation scheme was approved in December 2018. Expense is accrued based on grant date share price, which was fixed at GBP 14.88 whilst grant date share price of old scheme was USD 11.00.  GEL/USD exchange rate at grant date was fixed at 2.2399 in old scheme, while in new schemes currency exchange rate is not fixed.

[14] Net insurance premium earned after claims and acquisition costs income after claims can be reconciled to the standalone net insurance profit (as shown in Annex 5 on page 47) as follows: net insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.

[15] Based on internal estimates 

[16] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016.

[17] Total ecosystems revenue also includes net fee and commission income from POS terminals and e-commerce.

[18] Total ecosystems net profit also includes net fee and commission income and related operating costs from POS terminals and e-commerce.

[19] Total number of visitors across all systems; some individuals may be visitors of multiple systems. For Payme, the number of registered customers is used.

[20] Includes both retail & business payments. Payments ecosystem includes: Payme, TKT, TBC Pay, E-commerce and POS, while other payments business includes: ATM-TBC Cards, branch, internet and mobile banking.

[21] Source: NBG

[22] The data from Business Insider Intelligence was used for comparison purposes.

[23] Forecasted figures are given without the effects of new regulations effective from March 2020.

[24] Number of registered users

[25]   Updated forecasts

[26] Based on the number of visitors

[27] TBC Contribution from real estate evaluation

[28]   December is characterized by low demand in housing business. As a result, forecasted numbers of unique visitors for Dec-2020 are decreased compared to September for  both for Livo and Myhome

 

[29]   Based on number of visitors

[30] In August 2019 we acquired 65% of My.ge for GEL 19.45 million.

[31] December is characterized by low demand in housing business. As a result, forecasted numbers of unique visitors for Dec-2020 are decreased compared to September for  both for Livo and Myhome.

[32]   Gross merchandise Volume

[33] The revenue and EBITDA include Swoop figures.

[34] Per updated forecast for both financial and operating data

[35] Stock Keeping Units

[36] Based on number of visitors

[37] In August 2019 we acquired 65% of My.ge for GEL 19.45 million.

[38]   Based on number of visitors

[39]   In August 2019 we acquired 65% of My.ge for GEL 19.45 million

[40]   From launching the App's 1st prototype in Jan 2018 to the end of the beta version of Space in Sep 2018

[41] Market shares are based on internal estimates and are given without border MTPL, which was introduced starting from March 2018 and GWP was divided evenly between 17 insurance companies. Total non-health market share in 2019 including Border MTPL stood at 19.7% and 29.9% respectively

[42]   Net insurance claims plus acquisition costs and administrative expenses divided by net earned premium.

[43] Net earned premium equals earned premium minus reinsurer's share of earned premium.

[44] Based on management accounts


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