TIDMTBCG
RNS Number : 6798W
TBC Bank Group PLC
16 November 2017
TBC BANK GROUP PLC ("TBC Bank")
9M 2017 AND 3Q 2017 Unaudited Financial Results
The information contained in this announcement and in the
appendices is unaudited and does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006 or
interim financial statements in accordance with International
Accounting Standard 34 'Interim Financial Reporting'. Statutory
accounts for the year to 31 December 2016 were approved by the
Board of Directors on 31 March 2017, published on 3 April 2017, and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified and did not contain any statement
under Section 498 of the Companies Act 2006.
This statement provides a summary of the unaudited business and
financial trends for the nine months ended 30 September 2017 for
TBC Bank Group plc and its subsidiaries. Quarterly financial
information and trends are unaudited and also not subject to the
interim review. Unless otherwise stated, references to results in
previous periods and other general statements regarding past
performance refer to the business results for the same period in
2016.
Forward-Looking Statements
This document contains forward-looking statements; such
forward-looking statements contain known and unknown risks,
uncertainties and other important factors, which may cause actual
results, performance or achievements of TBC Bank Group PLC( "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 has
been extracted from the Group's unaudited management accounts and
financial statements. The areas in which management accounts might
differ from International Financial Reporting Standards and/or U.S.
generally accepted accounting principles could be significant and
you should consult your own professional advisors and/or conduct
your own due diligence for complete and detailed understanding of
such differences and any implications they might have on the
relevant financial information contained in this presentation. Some
numerical figures included in this report have been subject to
rounding adjustments. Accordingly, numerical figures shown as
totals in certain tables might not be an arithmetic aggregation of
the figures that preceded them.
Third Quarter 2017 Unaudited Financial Results Conference
Call
TBC Bank Group PLC ("TBC PLC") will release its third quarter
and nine month of 2017 unaudited financial results on Thursday, 16
November 2017 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, 16 November 2017 at 14.00 (GMT) /
15.00 (CET) / 9.00 (EST)
Please dial-in approximately 5 minutes before the start of the
call quoting the password TBC Bank:
Password: TBC Bank
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: 9874634
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
Sean Wade Anna Romelashvili Investor Relations Department
Director of International Head of Investor Relations
Media and IR
E-mail: ARomelashvili@Tbcbank.com.ge E-mail: ir@tbcbank.com.ge
E-mail: SWade@Tbcbank.com.ge Web: www.tbcgroupbank.com Web: www.tbcgroupbank.com
Web: www.tbcgroupbank.com Tel: +(995 32) 227 27 Tel: +(995 32) 227 27
Tel: +44 (0) 7464 609025 27 27
Address: 68 Lombard Address: 7 Marjanishvili Address: 7 Marjanishvili
St, London EC3V 9LJ, St. Tbilisi, Georgia St. Tbilisi, Georgia
United Kingdom 0102 0102
Table of Contents
3Q and 9M Results Announcement
TBC Bank - Background
Financial Highlights
Recent Developments
Letter from the Chief Executive Officer
Economic Overview
Results Overview 9M and 3Q 2017
Income Statement Discussion
Balance Sheet Discussion
Results by Segments and Subsidiaries
Annexes
TBC BANK Group PLC ("TBC Bank")
TBC Bank Announces 9M 2017 and 3Q 2017 Consolidated Results:
Underlying(1) Net Profit for 9M 2017 up by 39.8% YoY to GEL
272.3 million
Underlying(1) Net Profit for 3Q 2017 up by 29.0% YoY to GEL 88.0
million
The European Union Market Abuse Regulation EU 596/2014 requires
TBC Bank Group PLC to disclose that this announcement contains
Inside Information, as defined in that Regulation
TBC Bank - Background
These unaudited financial results are presented for TBC Bank
Group PLC ("TBC Bank" 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 on 10 August 2016.
In 4Q 2016, TBC Bank acquired Bank Republic which has been
consolidated into the Group's results.
Results reported below prior to 30 September 2016 relate to the
group previously headed by JSC TBC Bank Georgia.
TBC Bank is the largest banking group in Georgia. Following the
acquisition of Bank Republic in late 2016, TBC Bank became the
country's leading universal bank, accounting for 36.5% market share
by total assets, where 99.7% of its business is concentrated. TBC
Bank offers retail, corporate, and MSME banking nationwide.
Financial Highlights
3Q 2017 P&L Highlights
-- Underlying[1] net profit amounted to GEL 88.0 million (3Q
2016: GEL62.1 million; 2Q 2017: GEL 86.3 million)
-- Reported net profit amounted to GEL 86.8 million (3Q 2016:
GEL 71.0 million; 2Q 2017: GEL 79.9 million)
-- Underlying(1) return on equity (ROE) amounted to 20.02% (3Q
2016: 18.1%; 2Q 2017: 20.4%)
-- Reported return on equity (ROE) amounted to 19.8% (3Q 2016:
20.6%; 2Q 2017: 18.9%)
-- Underlying(1) return on asset (ROA) amounted to 3.0% (3Q
2016: 3.5%; 2Q 2017: 3.2%)
-- Reported return on asset (ROA) amounted to 2.9% (3Q 2016:
4.0%; 2Q 2017: 3.0%)
-- Total operating income amounted to 207.1 million up by 28.0%
YoY (up by 7.7% YoY to GEL 174.2 million without the Bank Republic
estimated contribution) and unchanged from 2Q 2017
-- Underlying(1) cost to income ratio stood at 39.8% (3Q 2016:
41.0%; 2Q 2017: 41.2%)
-- Reported cost to income was 40.5% (3Q 2016: 40.5%; 2Q 2017:
44.9%)
-- Cost of risk on loans stood at 1.3% (3Q 2016: 1.1%; 2Q 2017:
1.3%)
-- Net interest Margin (NIM) stood at 6.2% (3Q 2016: 8.3%; 2Q
2017: 6.8%), the estimated effect of new regulatory LCR is
0.4pp[2]
-- Risk adjusted net interest margin (NIM) stood at 5.0% (3Q
2016: 6.7%; 2Q 2017: 5.3%)
9M 2017 P&L Highlights
-- Underlying(1) net profit amounted to GEL 272.3 million, up by
39.8% YoY, hence delivering a ROE without one-offs of 21.6% (9M
2016: 20.3%)
-- Reported net profit was up by 25.2% YoY to GEL 263.2 million,
delivering ROE of 20.9% (9M 2016: 21.8%)
-- Underlying(1) ROA was 3.3% (9M 2016: 3.8%)
-- Reported ROA was 3.2% (9M 2016: 4.1%)
-- Total operating income for the period was up by 33.5% YoY to
GEL 617.7 million (up by 10.1% YoY to GEL 509.5 million without the
Bank Republic estimated contribution effect)
-- Underlying(1) cost to income ratio stood at 40.3% (9M 2016:
41.0%)
-- Reported cost to income stood at 42.1% (9M 2016: 43.3%)
-- Cost of risk on loans stood at 1.2% (9M 2016: 1.1%)
-- Net interest margin (NIM) stood at 6.5% (9M 2016: 7.9%)
-- Risk adjusted net interest margin (NIM) stood at 5.1% (9M
2016: 6.5%)
Balance Sheet Highlights as at 30 September 2017
-- Total assets amounted to GEL 12,136.9 million as of 30
September 2017, up by 60.0% YoY and 7.6% QoQ
-- Gross loans and advances to customers stood at GEL 7,767.6
million as of 30 September 2017, up by 55.2% YoY (up by 33.2% YoY
to GEL 6,665.0 million without the Bank Republic estimated
contribution effect) and up by 5.2% QoQ
-- Net loans to deposits + IFI funding stood at 91.6% and Net
Stable Funding Ratio (NSFR) stood at 134.5%
-- NPLs stood at 3.5%, down by 1.1 pp YoY and up by 0.1 QoQ
-- NPLs coverage stood at 80.5% or 206.8% with collateral on 30
September 2017 compared to 84.3% or 205.0% with collateral on 30
September 2016
-- Total customer deposits stood at GEL 7,096.5 million as of 30
September 2017, up by 54.5% YoY (up by 43.1% YoY to GEL 6,572.8
million without the Bank Republic estimated contribution) and up by
6.5% QoQ
-- Regulatory tier I and total capital adequacy ratios stood at
10.8% and 14.5% respectively
Market Shares[3]
-- Market share in total assets stood at 36.5% up by 8.2 pp YoY
and down by 0.2 pp QoQ
-- Market share in total loans was 38.2% as of 30 September
2017, up by 8.5 pp YoY and up by 0.2 pp QoQ
-- In terms of individual loans, the Bank had a market share of
40.5% as of 30 September 2017, up by 8.2 pp YoY and down by 0.3 pp
QoQ. The market share for legal entity loans was 35.6% up by 8.4 pp
YoY and up by 0.7 pp QoQ
-- Market share of total deposits stood at 38.6% as of 30
September 2017, up by 7.9 pp YoY and down by 1.3 pp QoQ
-- The Bank maintains its longstanding leadership in individual
deposits with a market share of 40.9% up by 5.4 pp YoY and up by
0.7 pp QoQ. In terms of legal entity deposits, TBC Bank holds a
market share of 35.9%, up by 10.7 pp YoY and down by 3.5 pp QoQ
Recent Developments
TBC Bank Receives the Global Award "The Best Integrated
Corporate Bank Site" from Global Finance
-- TBC Bank is pleased to announce that it has received the
award for the Best Integrated Corporate Bank Site in the world from
Global Finance magazine at its Best Digital Bank Awards 2017. This
follows a number of other Global Finance digital bank awards won by
TBC Bank on both local and regional (CEE) levels earlier this
year.
Moody's upgrades TBC Bank Credit Rating
-- Moody's Investors Service (Moody's) upgraded the credit
rating of TBC Bank. The Bank's local-currency deposit rating
improved to Ba2 from Ba3 and its foreign-currency deposit rating to
Ba3 from B1. The ratings continue to carry a stable outlook.
-- The change was driven by Moody's upgrade of Georgia's
government bond ratings to Ba2 stable from Ba3 stable on 11
September 2017.
Georgia among world's Top 10 in Doing Business
-- World Bank's Doing Business recent report ranks Georgia on
9th place among world's 190 countries, highest in Europe and
Central Asia. Georgia has advanced from 16th to 9th place and
surpassed countries like Sweden, Macedonia, Estonia, Finland,
Australia, Taiwan (China), and Latvia, according to the report.
TBC Bank signs a syndicated loan agreement of USD 106.5 million
with FMO and OFID
-- This is the second syndicated loan agreement arranged by FMO
(Netherlands Development Finance Company), a TBC's long-standing
partner. The loan facility is provided in syndication with OFID
(OPEC Fund for International Development). Other participants,
financing USD 56.5 million in total are Symbiotics (through its
MSME Bond Platform); Atlantic Forfaitierungs AG; London Forfaiting
Company Limited and a number of undisclosed institutional investors
through FMO's syndications platform.
-- The FMO funding enables TBC Bank to further support micro,
small and medium-sized enterprise (MSME) financing in Georgia,
while the OFID portion of the facility will support international
trade finance projects.
Additional Information Disclosure
Additional historical information for certain P&L, balance
sheet and capital items and on asset quality is disclosed on our
Investor Relations website on http://tbcbankgroup.com/ under
Financial Highlights section.
Letter from the Chief Executive Officer
I am pleased to present our third quarter financial results,
which continue to show a solid performance. In addition to an
overview of our operating achievements, I would also like to
highlight the recent macro developments in the country.
Our underlying[4] consolidated net profit for the third quarter
of 2017 reached GEL 88.0 million (reported net profit amounted to
GEL 86.8 million) up from the GEL 68.2 million(4) in the third
quarter of 2016, marking a 29% increase. Over the reporting period,
our return on equity excluding one-off costs related to the Bank
Republic integration was 20.02% (19.8% including one-off costs),
while the return on assets excluding one-off costs stood at 3.0%
(2.9% including one-off costs). The net interest margin decreased
in the reporting period and stood at 6.2%. An estimated effect of
new liquidity requirements introduced by National Bank of Georgia
is about 40 bp[5]. However, the decrease in net interest margin was
offset by a strong increase in non-interest income. Net fee and
commission income rose by 43.2% year-on-year or 35.6% without the
Bank Republic estimated effect, mainly driven by growth of
settlement and card operations. As a result, the share of net fee
and commission income in total income reached 15.4% up by 1.7%
year-on-year. At the same time, other non-interest income,
excluding net fee and commission income, increased by 48.3%
year-on-year or 28.4% without the Bank Republic estimated effect.
In addition, our underlying(4) cost to income ratio decreased to
39.8% or 40.5% including one-off items.
In terms of balance sheet growth, our loan book grew by 55.2%
year-on-year, or 33.2% without Bank Republic estimated effect,
resulting in a 38.2% market share, while our deposit portfolio
increased by 54.5% year-on-year, or 43.1% without Bank Republic
estimated effect, leading to the market share of 38.6%.
Our asset quality continues to remain solid with non-performing
loans standing at 3.5% down by 1.1 pp year-on-year and
non-performing loans coverage ratio at 81% or 207% including
collateral.
Over the same period, we maintained strong capital and liquidity
levels. Our total capital adequacy ratio (CAR) per Basel II/III
regulation stood at 14.5% compared to the minimum requirement of
10.5%, and our regulatory tier I ratio stood at 10.8% compared to
the minimum requirement of 8.5%. The newly introduced regulatory
liquidity coverage ratio stood at 115% at the end of the quarter,
compared to the minimum requirement of 100%, while net loans to
deposits + IFI funding stood at 91.6%, and the net stable funding
ratio (NSFR) stood at 134.5%.
In terms of the macroeconomic environment, the economy continues
to grow steadily exceeding most external growth forecasts for the
year. The real annual GDP growth rate reached 4.7% for the first
nine months of 2017, mainly driven by high tourism receipts and an
increase in net exports and remittances. An increase in the
Government's capital expenditure and investments in infrastructure
has also had a positive impact on growth. As a result of
better-than-expected performance to date, the IMF revised its
initial forecast from 3.5% to 4.3% for 2017. I would also like to
highlight that the credit rating company Moody's has upgraded
Government of Georgia's local and foreign currency issuer ratings
to Ba2 from Ba3, while the outlook remains stable. The main
rationale for the upgrade was the country's proven resilience
towards the recent regional economic shocks and on-going process of
diversification of trade and investment relationships. Following
the country revision, Moody's has also upgraded our local-currency
deposit rating to Ba2 from Ba3 and our foreign-currency deposit
rating to Ba3 from B1. The ratings continue to carry a stable
outlook.
Turning again to the operating performance, I would like to
update you on our achievements in our digitalization strategy. The
number of transaction conducted via digital channels continues to
grow, especially in mobile banking. As a result, our off-loading
ratio[6] reached 86.8%, while mobile banking penetration ratio
increased to 26.9% up by 6.6 pp year-on-year. We also continue to
innovate and offer new products and services to our customers, our
Chat Bot, available through Facebook messenger, has become a "love
mark", attracting around 94,000 customers with 4.6 million
conversations. Just recently, we added new features to our Chat Bot
and started selling travel insurance and movie tickets, which are
expected to increase usage and user experience of our
customers.
On the corporate side, we continue to attract new clients. In
the third quarter, we added a new blue chip client, a leading
Georgian telecommunication company. Within our MSME business, in
addition to attracting a new facility from FMO, we have enriched
the product offering in our branches by combining leasing solutions
with our traditional banking products. Initial feedback is very
positive and we expect to achieve good synergies with this combined
offering. I am also delighted to see first results of our insurance
company, the number of customers has increased to around 240,000
from just 3,000 at the time of acquisition, while our market
share[7] excluding health insurance reached 10.9% as of 30
September 2017 compared to 3.5% as of 31 December 2016.
Outlook
Our future growth outlook remains positive supported by
accelerated economic activity, a continued recovery in regional
economies, as well as an overall improvement in the risk outlook
for the country. Therefore, we would like to reiterate our targets:
ROE of 20% plus, cost to income ratio below 40%, divided pay-out
ratio at 25-35% and loan book growth at c.15% and tier 1 capital
adequacy ratio around 10.5%. At the same time, we will continue to
focus on increasing our non-interest income, among other things,
through our bancassurance, investment banking and brokerage
services, trade finance products as well as cards and POS terminal
operations. Improving cost efficiency through our automatisation
efforts and extracting cost synergies after the successful
integration of Bank Republic also remain among our highest
priorities.
Economic Overview
GDP Growth
In the first nine months of 2017 GDP growth averaged 4.7% YoY in
real terms, initial estimates of the statistics office (Geostat)
sets growth at 4.4% in 3Q 2017 following the 4.9% growth in H1
2017. Acceleration of economic growth have been mostly driven by
the sharp growth of exports, tourism and remittance inflows in the
country. From the sectors perspective, the construction sector grew
by +18.8% YoY, growth in trade and repairs, the largest sector of
the Georgian economy, averaged 2.3% in H1 2017 as opposed to 0%
growth in H1 2016. Transport and communications went up by 6.8% YoY
in H1 2017, versus a 0.7% YoY contraction in H1 of 2016, reflecting
the increased trade turnover among the countries in the region as
well as a sharp increase in the number of international visitors.
Growth remained robust in hotels and restaurants (+10.9% YoY), real
estate (+6.8% YoY), financial intermediation (+6.6% YoY) while all
other sectors have also contributed positively to GDP growth.
Inflation and Monetary Policy
Annual inflation retreated from its peak of 7.1% in June to 6.2%
in September, 2017. Annual CPI inflation in September was mostly
driven by increased prices on food and non-alcoholic beverages
(+6.5% YoY), transport (+14.7% YoY) and alcoholic drinks and
tobacco (+17.4% YoY). The price increases on transport and tobacco
reflect the hike of excise tax rates on these goods at the
beginning of 2017, with the estimated direct impact of 2.5 pp. out
of 6.2% inflation figure in September. This impact should dissipate
from the beginning of 2018. During the latest monetary policy
committee meeting held on October 25th, the NBG maintained the
policy rate unchanged at 7%. The NBG announced that the policy rate
should gradually reach its neutral at 5-6% over the medium term,
unless unexpected factors would alter the inflation path.
External Environment and Current Account Balance
The external environment improved markedly since the 2014-16
slowdown. The GDP growth of Georgia's main trading partners is
gradually strengthening, while increased growth in the EU and firm
recovery in the CIS economies positively affected the Georgian
economy. In its October update of the World Economic Outlook, the
IMF revised upwards its 2017 and 2018 growth projections for almost
all Georgia's major trading partners. Better than expected
performance year-to-date and improved outlook for the region
economies suggests that downside risks in the external environment
declined markedly.
Reflecting the improved growth in the trading partner economies,
exports recovered strongly in the first nine months of 2017 (+28.3%
YoY). Exports to EU increased by 18.9% YoY in 9m 2017, over the
same period exports to CIS grew by 59.0% YoY, a figure that
reversely reflects the sharp declines of 2015 and 2016. Exports to
other countries went up by 10.1% YoY over the same period. Georgian
exports are gradually becoming more geographically balanced,
compared to the same period of 2014, in 9m 2017 share of total
exports to CIS countries fell from c. 52% to c. 41%, while the
share to EU countries increased from 21% to 24%, and share to other
countries climbed significantly, from 26% to 36%. China is emerging
among the top destination for Georgian exports, per 9 month 2017
figures, China entered top 5 exports markets. Over the same period
exports to China went up by 15.4% YoY, following the 33.5% YoY
growth in 2016 and c. 40% YoY growth in 2015. It is expected that
FTA with China, which is slated to become operational from the
beginning of 2018, should further accelerate exports growth to the
second largest economy of the world. This diversification trend
should continue along with the better application of the benefits
offered by FTAs with the EU and China.
Georgia's image as an attractive tourism destination strengthens
further as tourist numbers surged by 28.6% YoY in 3Q 2017 and by
28.8% YoY in 9m 2017. Growth in number of visitors has been the
highest from EU (+24.8% YoY), followed by CIS (+19.0% YoY) and
other countries (+18.6% YoY).
While immediate neighbours of Georgia still make up roughly
3/4th of the total incoming visitors, their share is gradually
declining while visitors from other areas, like the Middle East,
are increasing. In 2016, tourists from the Middle East increased by
130% YoY to reach c. 330,000 and accounted for 5.2% of total
arrivals, while in 9m 2017 arrivals increased a further by 92.4%
YoY and Middle Eastern tourists accounted for c. 9% of the
total.
In 3Q remittance inflows went up by 19.7% YoY, mostly driven by
increasing remittances from Israel (+102.2% YoY), Russia (+13.3%
YoY), Italy (+23.8% YoY) and Turkey (+26.1% YoY). In the first nine
months of 2017 remittances were up 19.7% YoY, but they remain below
pre-2015 levels, suggesting that further growth in private money
transfers should be expected as major remitting countries continue
to recover from the 2015-16 economic slowdown.
In H1 2017 the CA deficit stood at 9.4% of the GPD, 3.2% below
the same figure a year earlier. In absolute terms, the CA deficit
improved by USD 202 million, mostly due to the sharp recovery of
exports of goods and services as well as continued growth of
remittance inflows. Continued positive dynamics in external inflows
suggests the CA deficit improved further in 3Q 2017.
FDI continues to be the major source of financing the CA
deficit. In H1 2017 the net FDI inflows stood at 9.2% of GDP and
fully covered the CA deficit. In the first half of 2017 FDI inflows
declined by 5.5% compared to the same period of 2016. As the South
Caucasus Pipeline expansion project, financed by BP, nears its
completion, FDI in transports and communication dropped by 30% YoY
in H1 2017. The decline was partly offset by higher FDI in
construction (up 7.5% YoY), hotels and restaurants (up 6.3% YoY)
and real estate (up 2.1% YoY). Overall, FDI, measured as a share of
GDP, remained above 10%, the highest level among the CIS and
Central and Eastern European countries.
Fiscal Policy
The successful completion of the first review of the IMF's
extended fund facility underlines Georgia's prudent macro
management policies. The IMF team praised the government's efforts
to boost much-needed public investment while maintaining the fiscal
deficit below 2016 levels. In the 2017 budget the deficit is
expected to come in at 3.5% of GDP against the initially planned
4.1% of GDP. In the first nine months of 2017 the budget deficit
stood at c. 2% of GDP, compared to the 3.3% over the same period in
previous year. Agreement with IMF envisages budget deficit at 3%
for 2018 and further decrease of deficit to GDP ratio over the
medium term. Public debt to GDP ratio stood at an estimated 43.1%
as of the end of 3Q 2017, up by 1.0% compared to the previous
quarter. According to the baseline scenario of debt sustainability
analysis by the Ministry of Finance, public debt will remain below
44% of GDP over the next three years.
Recent Achievements and Growth Prospects
Moody's upgraded Georgia's sovereign credit rating to Ba2 from
Ba3, with stable outlook. The decision reflects the resiliency of
the Georgian economy during 2014-16 regional slowdown and its sharp
recovery in H1 2017. Prudent macro and financial sector supervision
policies, as well as the potential of further export
diversification enabled by FTAs with all major economic powers in
the broader region, were also cited as key factors in Moody's
revision. We expect the improved credit rating to strengthen
Georgia's role in the region as an economic "safe heaven". Lower
sovereign credit risk implies improved access to external funding
for the companies operating in Georgia to finance the growth and
capitalize on the structural advantages of the economy.
Georgia entered top 10 countries in World Bank's Doing Business
2018 ranking, country moved up by 7 steps to 9th place, becoming
the best performer in Europe and Central Asia region. Georgia's
outstanding performance in this rankings highlights the continued
efforts of government to improve the business environment and to
make Georgia one of the easiest places to do business globally.
Going forward, it is expected that economic recovery will
continue, IMF expects growth to average 4.3% in 2017 and to
accelerate further over the medium term. Ongoing recovery in
regional countries, improved sovereign risk rating and increased
clarity of the fiscal policy directions over the medium will
positively influence country risk and improve growth prospects of
the economy. Long awaited Baku-Tbilisi-Kars railway was officially
opened by the end of October, 2017. Completion of this project
marks another major milestone for Georgia to strengthen its
position as a regional tourism and transportation hub and
represents the shortest route linking Chinese and central Asian
economies to European countries. New transportation pillar along
with the, free trade agreements with EU, China and all major
economic powers in the broader region should give additional
momentum to the growth and diversification of Georgia's exports.
These factors, coupled with favourable business environment and
continued reform efforts by the government is expected to keep
Georgian economy growing at rates above the most of the peers
in
the broader region.
Results Overview 9M and 3Q 2017
Income Statement Highlights
in thousands of GEL 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
in % YoY QoQ
Net Interest Income 438,620 336,764 30.2% 146,546 149,742 120,227 21.9% -2.1%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Net Fee and Commission
Income 87,007 61,876 40.6% 31,790 28,741 22,194 43.2% 10.6%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Other Operating Non-Interest
Income 92,041 64,169 43.4% 28,758 28,611 19,398 48.3% 0.5%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Provisioning Charges -70,472 -43,728 61.2% -27,097 -25,717 -15,059 79.9% 5.4%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Operating Income after
Provisions for Impairment 547,196 419,082 30.6% 179,997 181,377 146,759 22.6% -0.8%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Operating Expenses -259,760 -200,204 29.7% -83,910 -92,929 -65,536 28.0% -9.7%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Profit Before Tax 287,436 218,878 31.3% 96,086 88,447 81,223 18.3% 8.6%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Income Tax Expense -24,263 -8,653 180.4% -9,327 -8,590 -10,235 -8.9% 8.6%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Profit for the Period 263,173 210,225 25.2% 86,759 79,857 70,988 22.2% 8.6%
------------------------------ --------- --------- ------- -------- -------- -------- ------- -------
Balance Sheet and Capital
Highlights
Sep-17 Jun-17 Change Sep-16 Change
QoQ YoY
In Millions GEL USD GEL USD GEL USD
--------------------------- --------- -------- --------- -------- ------- -------- -------- -------
Total Assets 12,136.9 4,900.4 11,280.8 4,686.3 7.6% 7,583.7 3,255.2 60.0%
Gross Loans 7,767.6 3,136.3 7,386.4 3,068.5 5.2% 5,003.6 2,147.7 55.2%
Customer Deposits 7,096.5 2,865.3 6,666.4 2,769.4 6.5% 4,593.2 1,971.6 54.5%
Total Equity 1,790.3 722.9 1,690.5 702.3 5.9% 1,388.6 596.1 28.9%
Regulatory Tier I Capital 1,354.7 547.0 1,282.9 532.9 5.6% 1,124.6 482.7 20.5%
Regulatory Total Capital 1,821.8 735.6 1,732.8 719.8 5.1% 1,368.7 587.5 33.1%
Regulatory Risk Weighted
Assets 12,560.6 5,071.5 11,866.0 4,929.4 5.9% 8,427.8 3,617.5 49.0%
--------------------------- --------- -------- --------- -------- ------- -------- -------- -------
Key Ratios 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
in YoY QoQ
%
ROE 21.6%*/20.9% 21.8% -0.9% 20.02%*/19.8% 18.9% 20.6% -0.8% 0.9%
ROA 3.3%*/3.2% 4.1% -0.9% 3.0%*/2.9% 3.0% 4.0% -1.1% 0.1%
Pre-Provision ROE 27.3%*/26.6% 26.4% 0.2% 26.3%*/26.1% 25.1% 25.1% 1.0% 1.0%
Cost to Income 40.3%*/42.1% 43.3% -1.2% 39.8%*/40.5% 44.9% 40.5% 0.0% -4.4%
Cost of Risk 1.2% 1.1% 0.1% 1.3% 1.3% 1.1% 0.2% 0.0%
NPL to Gross Loans 3.5% 4.6% -1.1% 3.5% 3.4% 4.6% -1.1% 0.1%
Regulatory Tier 1
CAR 10.8% 13.3% -2.5% 10.8% 10.8% 13.3% -2.5% 0.0%
Regulatory Total CAR 14.5% 16.2% -1.7% 14.5% 14.6% 16.2% -1.7% -0.1%
Leverage (Times) 6.8x 5.5x 1.3x 6.8x 6.7x 5.5x 1.3x 0.1x
---------------------- ------------- ------ ------- -------------- ------ ------ ------- -------
* Without one-off costs
Income Statement Discussion
Net Interest
Income
In thousands 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
of GEL in % YoY QoQ
----------------------- -------- -------- -------- -------- -------- -------- -------- -------
Loans and Advances
to Customers 664,220 466,608 42.4% 225,467 223,665 164,235 37.3% 0.8%
Investment Securities
Available for
Sale 31,744 17,860 77.7% 12,657 10,286 5,679 122.9% 23.0%
Due from Other
Banks 9,432 3,591 162.7% 4,524 3,157 1,055 NMF 43.3%
Bonds Carried
at Amortized
Cost 25,035 23,254 7.7% 9,785 7,809 7,039 39.0% 25.3%
Investment in
Leases 15,486 11,671 32.7% 5,819 4,981 3,950 47.3% 16.8%
Other - 98 -100.0% - - 98 -100.0% NMF
Interest Income 745,918 523,082 42.6% 258,252 249,898 182,056 41.9% 3.3%
----------------------- -------- -------- -------- -------- -------- -------- -------- -------
Customer Accounts 167,740 106,954 56.8% 59,329 54,560 36,501 62.5% 8.7%
Due to Credit
Institutions 111,360 55,504 100.6% 42,407 36,589 17,040 148.9% 15.9%
Subordinated
Debt 26,681 22,563 18.3% 9,494 8,502 7,847 21.0% 11.7%
Debt Securities
in Issue 1,517 1,297 17.0% 476 505 442 7.7% -5.9%
Interest Expense 307,298 186,318 64.9% 111,705 100,157 61,830 80.7% 11.5%
----------------------- -------- -------- -------- -------- -------- -------- -------- -------
Net Interest
Income 438,620 336,764 30.2% 146,546 149,742 120,227 21.9% -2.1%
----------------------- -------- -------- -------- -------- -------- -------- -------- -------
Net Interest
Margin 6.5% 7.9% -1.4% 6.2% 6.8% 8.3% -2.1% -0.6%
----------------------- -------- -------- -------- -------- -------- -------- -------- -------
9M 2017 to 9M 2016 Comparison
In 9M 2017, net interest income grew by 30.2% YoY to GEL 438.6
million (GEL 353.7 million without the Bank Republic estimated
contribution effect), resulting from a 42.6% higher interest income
and 64.9% higher interest expense.
Without the Bank Republic estimated contribution effect, the
interest income increased by GEL 94.6 million, or 18.1% YoY, mainly
driven by a higher interest income from loans to customers by GEL
78.2 million, or 16.8%, which is primarily related to the 33.2%
gross loan portfolio increase. A rise in interest income from
investment securities (comprising both investment securities
available for sale and bonds carried at amortized cost) of GEL 8.6
million, or 20.9% also contributed to the overall increase. That in
turn was driven by the significant rise in the respective
portfolio. In addition, net interest income from due from other
banks increased by GEL 4.1 million or 114.7%, which was also caused
by the large increase in respective portfolio.
In 9m 2017 the Bank Republic effect mainly contributed a GEL
119.4 million, or 18.0% to the interest income from loans and
advances to customers, which totalled GEL 664.2 million, and GEL
7.1 million, or 12.5%, to interest income from investment
securities, which amounted to GEL 56.8 million in 9M 2017. As a
result, the overall Bank Republic estimated contribution effect was
GEL 128.2 million, or 17.2%, to the interest income.
Loan yields declined over the same period from 13.5% to 12.0%.
The drop was driven by a decrease in rates on FC-denominated loans,
from 10.3% to 9.1%, as well as by decline in GEL-denominated loans
rates from 19.4% to 16.8%. The decline of yields on investment
securities, from 8.9% to 8.1%, over the same period is related to a
lower average refinance rate in the country in 9M 2017 compared to
9M 2016. As a result, the yields on average interest earning assets
dropped from 12.3% in 9M 2016 to 11.1% in 9M 2017.
In the reporting period, without the Bank Republic estimated
contribution effect, interest expense increased by GEL 77.7
million, or 41.7% YoY. The rise was mainly due to a higher interest
expense on due to customer accounts by GEL 40.2 million, or 37.6%,
and due to credit institutions by GEL 36.0 million or 64.8%. The
hike in interest expense on both customer accounts and on due to
credit institutions was driven by the large increase in respective
portfolios related to the overall business growth, as well as to
the implementation of the new regulatory liquidity
framework.[8]
The Bank Republic estimated contribution effect added a GEL 20.6
million, or 12.3%, to the interest expense on customer accounts,
which amounted GEL 167.7 million in 9M 2017 and GEL 19.9 million or
17.9% to interest expense on interest expense due to credit
institutions, which amounted GEL 111.4 million. As a result, the
overall Bank Republic contribution effect was a GEL 43.3 million,
or 14.1%, to the interest expense.
The cost of deposits remained flat at 3.4% in 9M 2017 and in the
same period the cost of borrowing dropped to 6.4%, from 7.5% in 9M
2016. This was mainly due to the 2.0 pp decrease in rates on
Lari-denominated borrowings and the 0.8 pp decrease in rates on
FC-denominated borrowings. As a result, the cost of funding ratio
declined by 0.1 pp to 4.4% in 9M 2017.
Consequently, NIM was 6.5% in 9M 2017, compared to 7.9% in 9M
2016.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017, the net interest income increased by GEL 26.3
million, or 21.9% YoY to GEL 146.5 million (GEL 119.2 million
without the Bank Republic estimated contribution effect), as a
result of a GEL 76.2 million, or 41.9%, increase in interest income
and a GEL 49.9 million, or 80.7%, rise in interest expense,
compared to 3Q 2016.
Without the Bank Republic estimated contribution effect, the GEL
38.8 million, or 21.3% YoY, increase in interest income was mainly
due to a GEL 26.7 million, or 16.3%, increase in interest income
from loans. This in turn was due to the 33.2% rise in the loan
portfolio more than offsetting declining yield effect as discussed
below. The gain in interest income was also driven by the growth in
interest income from investment securities (comprising both
investment securities available for sale and bonds carried at
amortized cost) by GEL 7.6 million, or 59.7%, which resulted from
the significant increase in respective portfolio.
The Bank Republic estimated contribution effect added a GEL 34.5
million, or 15.3%, to the interest income from loans and advances
to customers, which amounted to GEL 225.5 million in 3Q 2017, as
well as GEL 2.1 million, or 9.5%, to interest income from
investment securities, which totalled GEL 22.4 million in 2Q 2017.
Consequently, the overall Bank Republic contribution effect was a
GEL 37.4 million, or 14.5%, to the interest income.
In the reporting period loan yields declined from 13.5% to 11.9%
as a result of the decrease in FC rates from 10.3% to 8.8% and
decrease in GEL rates from 19.4% to 16.5%. The yields on investment
securities remained broadly flat at 8.4%. Consequently, these
changes led to the decrease in yields on average interest earning
assets from 12.3% in 2Q 2016 to 10.9% in 3Q 2017.
Without the Bank Republic estimated contribution effect,
interest expense amounted to GEL 101.6 million, making an increase
of GEL 39.8 million, or 64.4% YoY. The growth was primarily
attributable to the increased interest expense on due to credit
institutions by GEL 21.8 million, or 128.2%, and due to customer
accounts by GEL 17.1 million, or 46.8% related to the significant
increase in respective portfolios related to the overall business
growth, as well as to the implementation of the new regulatory
liquidity framework.[9]
The Bank Republic estimated contribution added GEL 5.8 million,
or 9.7%, to the interest expense on customer accounts, which
amounted to GEL 59.3 million in 3Q 2017. It also added GEL 3.5
million, or 8.3%, to the interest expense on due to credit
institutions, which totalled GEL 42.4 million in 3Q 2017.
Consequently, the Bank Republic contribution effect was GEL 10.1
million or 9.0%.
The rate on credit institutions decreased by 0.3 pp to 6.6%,
while the cost of deposits increased by 0.1 pp to 3.4%. As a
result, the cost of funds increased to 4.5%, up by 0.2pp in 3Q
2016.
Consequently, NIM decreased to 6.2% in 3Q 2017, compared to 8.3%
in 3Q 2016.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, net interest income decreased by GEL 3.2
million, or 2.1% QoQ, to GEL 146.5 million due to 8.4 million, or
3.3%, higher interest income and GEL 11.5 million, or 11.5%, higher
interest expense.
The increase in interest income mainly resulted from the
increase in interest income on loans by GEL 1.8 million, or 0.8%,
which was the result of a 5.2% increase in respective portfolio.
This was partially offset by a 0.5pp decrease in yields on loans to
11.9%. The drop in loan yields stemmed from 0.5pp fall in GEL rates
to 16.5% and 0.7 pp decrease in FC rates to 8.8%. The rise in
interest income was also driven by the increase in interest income
from investment securities by GEL 4.3 million, or 24.0%, which was
mainly driven by a 10.6% increase in respective portfolio, as well
as 0.6 pp increase to 8.4% on yields on investment securities.
Yields on investment securities increased mainly due to higher
proportion of longer term securities in total portfolio. As a
result, yields on average interest earning assets decreased to
10.9%, compared to 11.3% in 2Q 2017.
The increase in interest expense was primarily due to the rise
in the interest expense on borrowed funds due to credit
institutions by GEL 5.8 million, or 15.9%, which resulted from the
15.1% increase in the respective portfolio and 0.2pp increase in
respective rate to 6.6%, mainly related to libor rate increase. The
GEL 4.8 million, or 8.7% QoQ increase in interest expense on
customer deposits was driven by 6.5% increased respective
portfolio, while cost of deposits remained unchanged at 3.4%. As a
result, the cost of funds stayed stable at 4.5%. Increase in
borrowed funds due to credit institutions and customer deposits,
was mainly driven by the implementation of the new regulatory
liquidity framework.[10]
Consequently, on a QoQ basis, NIM decreased by 0.6 pp to 6.2%.
In September 2017, the NBG introduced more stringent liquidity
requirements resulting in higher level of liquid assets. Estimated
effect of newly introduced regulatory liquidity coverage ratio is
0.4%[11].
Net fee and commission income
In thousands of GEL 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
in % YoY QoQ
-------------------------------------- -------- --------- ------- ------- ------- ------- ------- ----------
Card Operations 60,907 42,282 44.0% 20,662 19,416 15,434 33.9% 6.4%
Settlement Transactions 43,328 28,844 50.2% 15,170 14,063 10,730 41.4% 7.9%
Guarantees Issued 10,367 8,391 23.5% 4,295 3,328 2,259 90.1% 29.0%
Issuance of Letters
of Credit 4,449 3,906 13.9% 990 2,050 1,353 -26.8% -51.7%
Cash Transactions 12,046 9,083 32.6% 4,576 4,042 3,594 27.3% 13.2%
Foreign Exchange Operations 1,003 793 26.5% 420 362 239 76.0% 16.1%
Other 6,171 4,040 52.7% 2,440 1,957 1,502 62.4% 24.6%
Fee and Commission Income 138,271 97,340 42.0% 48,552 45,219 35,112 38.3% 7.4%
-------------------------------------- -------- --------- ------- ------- ------- ------- ------- ----------
Card Operations 35,414 23,766 49.0% 11,409 11,229 8,856 28.8% 1.6%
Settlement Transactions 5,282 4,074 29.7% 1,897 1,866 1,476 28.6% 1.7%
Guarantees Issued 1,319 476 176.9% 758 294 210 NMF 158.0%
Letters of Credit 705 1,327 -46.9% 239 252 424 -43.5% -4.9%
Cash Transactions 3,282 1,883 74.4% 1,177 1,098 614 91.9% 7.3%
Foreign Exchange Operations 92 67 36.6% 3 1 - NMF 222.2%
Other 5,170 3,871 33.6% 1,279 1,740 1,339 -4.5% -26.5%
Fee and Commission Expense 51,264 35,464 44.6% 16,763 16,478 12,918 29.8% 1.7%
-------------------------------------- -------- --------- ------- ------- ------- ------- ------- ----------
Card Operations 25,493 18,516 37.7% 9,253 8,187 6,578 40.7% 13.0%
Settlement Transactions 38,046 24,771 53.6% 13,272 12,198 9,254 43.4% 8.8%
Guarantees 9,048 7,915 14.3% 3,537 3,034 2,050 72.6% 16.6%
Letters of Credit 3,745 2,579 45.2% 751 1,798 929 -19.2% -58.2%
Cash Transactions 8,764 7,201 21.7% 3,398 2,944 2,980 14.0% 15.4%
Foreign Exchange Operations 911 726 25.5% 417 361 239 74.8% 15.5%
Other 1,001 170 NMF 1,161 218 163 NMF NMF
Net Fee and Commission
Income 87,007 61,876 40.6% 31,790 28,741 22,194 43.2% 10.6%
-------------------------------------- -------- --------- ------- ------- ------- ------- ------- ----------
9M 2017 to 9M 2016 Comparison
In 9M 2017, net fee and commission income totalled GEL 87.0
million, up by GEL 25.1 million, or 40.6%, compared to 9M 2016.
This increase resulted mainly from a GEL 13.3 million, or 53.6%,
rise in net fee and commission income from settlement transactions
(which among other things is related to one of the subsidiaries,
TBC Pay), a GEL 7.0 million, or 37.7%, increase in net card
operations; a GEL 1.2 million, or 45.2%, rise in net letters of
credit issued, and a GEL 1.6 million, or 21.7%, increase in net
cash transactions. The Bank Republic estimated contribution was GEL
5.4 million, or 6.2%, in the net fee and commission income.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017, net fee and commission income totalled GEL 31.8
million, up by GEL 9.6 million, or 43.2% compared to 3Q 2016. This
hike resulted mainly from a GEL 4.0 million, or 43.4%, gain in net
fee and commission income from settlement transactions (which among
other things is related to one of the subsidiaries, TBC Pay), a GEL
2.7 million, or 40.7%, increase in net card operations; a GEL 1.5
million, or 72.6% in guarantees and GEL 0.4 million, or 14.0%
increase in cash transactions. The Bank Republic estimated
contribution effect was a GEL 1.7 million, or 5.3%, in net fee and
commission income.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, net fee and commission income increased by GEL
3.0 million, or 10.6%, compared to 2Q 2017. This was primarily
driven by a GEL 1.1 million, or 8.8%, increase in net fee and
commission income from net settlement transactions, by a GEL 1.1
million, or 13.0%, increase in net card operations, and by a GEL
0.5 million, or 16.6%, increases in the net guarantees issued.
Other Operating Non-Interest
Income and Gross Insurance
Profit
In thousands of GEL 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
in % YoY QoQ
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Gains Less Losses from
Trading in Foreign Currencies
and Foreign Exchange
Translations 65,759 44,810 46.8% 20,330 23,237 16,724 21.6% -12.5%
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Share of Profit of Associates 661 - NMF 84 484 - NMF -82.6%
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Gains Less Losses/(Losses
Less Gains) from Derivative
Financial Instruments -39 -299 -86.9% -1 -35 173 -100.5% NMF
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Gains less Losses from
Disposal of Investment
Securities Available
for Sale - 8,795 -100.0% - - - -100.0% NMF
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Revenues from Cash-In
Terminal Services 838 800 4.7% 241 334 292 -17.2% -27.8%
Revenues from Operational
Leasing 5,134 4,614 11.3% 1,623 1,726 1,086 49.5% -5.9%
Gain from Sale of Investment
Properties 1,578 230 NMF 404 982 - NMF -58.9%
Gain from Sale of Inventories
of Repossessed Collateral 1,701 1,391 22.3% 756 591 222 NMF 28.0%
Administrative Fee Income
from International Financial
Institutions - 505 -100.0% - -151 147 -100.0% -100.0%
Revenues from Non-Credit
Related Fines 125 447 -72.1% 29 46 46 -38.5% -37.9%
Gain on Disposal of
Premises and Equipment 257 99 160.0% 66 164 3 NMF -59.8%
Other 11,174 2,778 NMF 3,452 -623 706 NMF NMF
Other Operating Income 20,806 10,864 91.5% 6,572 3,069 2,501 NMF NMF
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Gross Insurance Profit 4,854 - NMF 1,773 1,856 - NMF -4.4%
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
Other Operating Non-Interest
Income 92,041 64,169 43.4% 28,758 28,611 19,398 48.3% 0.5%
-------------------------------- ------- ------- -------- ------- ------- ------- -------- --------
9M 2017 to 9M 2016 Comparison
Total other operating non-interest income and insurance profit
increased by GEL 27.9 million, or by 43.4%, YoY to GEL 92.0 million
in 9M 2017. This increase was mainly driven by a GEL 21.0 million
or 46.8% increase in net gains less losses from trading in foreign
currencies and foreign exchange translations mainly driven by
increased trade volume. The rise is also due to a GEL 4.9 million
increase in gross insurance profit and a GEL 1.3 million increase
in gain from sale of investment properties as well as GEL 8.4
increase in "other" subsection of other operating income. The
latter is mainly attributable to GEL 2.6 million reimbursed taxes,
a GEL 2.9 million related to fair value adjustment of previously
acquired portfolio due to better than expected performance, and a
GEL 2.1 million related to expense sharing programme by our partner
payment technology companies. The rise across these items, was
largely offset by a GEL 8.8 million drop in net gains less losses
from disposal of investment securities available for sale due to
one-off gain from sale of investment security in 2Q 2016. The Bank
Republic's estimated contribution in total other operating
non-interest income was GEL 17.9 million or 19.5% , out of which
GEL 10.8 million was related to gains less losses from trading in
foreign currencies and foreign exchange translations.
3Q 2017 to 3Q 2016 Comparison
Total other operating non-interest income and insurance profit
increased by GEL 9.4 million, or by 48.3%, YoY to GEL 28.8 million
in 3Q 2017. This increase was mainly driven by the GEL 3.6 million,
or 21.6%, increase in gains less losses from trading in foreign
currencies and foreign exchange translations. These in turn were
caused by the increased trade volume, plus a GEL 1.8 million gain
in gross insurance profit and GEL 2.7 million rise in "other"
subsection of other operating income mainly related to the
reimbursed taxes as mentioned above. The Bank Republic's estimated
contribution was GEL
3.9 million, or 13.4%, out of which GEL 3.1 million was related
to gains less losses from trading in foreign currencies and foreign
exchange translations.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, total other operating non-interest income and
insurance profit increased by GEL 0.1 million, or by 0.5%,
primarily driven by increase in "other" subsection of other
operating income by GEL 4.1 million related to reimbursed taxes
mentioned above. This was largely offset by the GEL 2.9 million
decrease in gains minus losses from trading in foreign currencies
and foreign exchange translations, attributable to lower margins in
3Q related to less volatility of the currency rate in 3Q vs 2Q, as
well as accounting impact of dividend distribution whereby
distribution had negative impact in 3Q fully offsetting its
positive impact in 2Q.
Provision for Impairment
In thousands of GEL 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
in % YoY QoQ
------------------------------- -------- -------- -------- -------- -------- -------- ------- --------
Provision for Loan Impairment -65,403 -38,796 68.6% -25,036 -23,444 -13,518 85.2% 6.8%
Provision for Impairment
of Investments in Finance
Lease -414 -236 75.1% -285 -97 -126 126.7% 192.7%
Provision for/(Recovery
of Provision) Performance
Guarantees and Credit
Related Commitments 866 -3,557 -124.3% -680 1,454 -1,481 -54.1% -146.8%
Provision for Impairment
of Other Financial Assets -5,522 -1,128 NMF -1,097 -3,628 66 NMF -69.8%
Impairment of Investment
Securities Available
for Sale 0 -11 -100.0% 0 0 0 NMF NMF
Total Provision Charges
for Impairment -70,472 -43,728 61.2% -27,097 -25,717 -15,059 79.9% 5.4%
------------------------------- -------- -------- -------- -------- -------- -------- ------- --------
Operating Income after
Provisions for Impairment 547,196 419,082 30.6% 179,997 181,377 146,759 22.6% -0.8%
------------------------------- -------- -------- -------- -------- -------- -------- ------- --------
Cost of Risk 1.2% 1.1% 0.1% 1.3% 1.3% 1.1% 0.2% 0.0%
------------------------------- -------- -------- -------- -------- -------- -------- ------- --------
9M 2017 to 9M 2016 Comparison
In 9M 2017, total provision charges increased by GEL 26.7
million to GEL 70.5 million, compared to 9M 2016, mainly driven by
the increased charges on loans by GEL 26.6 million, while the cost
of risk on loans was broadly stable at 1.2%. There was a GEL 4.4
million increase in provision for impairment of other financial
assets, which was offset by a GEL 4.4 million decrease in provision
for performance guarantees and credit related commitments.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017, total provision charges grew by GEL 12.0 million to
GEL 27.1 million compared to 3Q 2016. The rise is mainly caused by
higher charges on loans, by GEL 11.5 million, and by a GEL 1.2
million increase in provision for impairment of other financial
assets. This effect was slightly offset by a GEL 0.8 million
decline in provision for performance guarantees and credit related
commitments.
In 3Q 2017, the cost of risk on loans was 1.3%, compared to 1.1%
in 3Q 2016. The difference is driven by fluctuation in GEL exchange
rate; the cost of risk without currency effect was stable at 1.2%
in 3Q 2017 and 3Q 2016.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, total provision charges increased by a GEL 1.4
million, amounting to GEL 27.1 million. Provision charges on loans
increased by GEL 1.6 million. A GEL 2.1 million increase in
provisions for other financial assets also contributed to increase
in total provision charges. The increase was partially offset by
the GEL 2.5 million drop in provision charges for performance
guarantees and credit related commitments.
The cost of risk on loans amounted to 1.3%, unchanged from 2Q
2017.
Further details on asset quality are available under Balance
Sheet Discussion section.
Operating Expenses
In thousands of GEL 9M'17 9M'16 Change 3Q'17 2Q'17 3Q'16 Change Change
in % YoY QoQ
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Staff Costs 148,995 109,677 35.8% 46,620 54,838 40,205 16.0% -15.0%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Provisions for Liabilities
and Charges -2,495 - NMF - -2,400 - NMF -100.0%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Depreciation and Amortization 26,840 20,647 30.0% 9,317 8,919 7,037 32.4% 4.5%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Professional services 9,659 18,951 -49.0% 3,834 2,410 2,143 78.9% 59.1%
Advertising and marketing
services 10,289 7,528 36.7% 3,492 3,737 2,682 30.2% -6.6%
Rent 17,224 12,654 36.1% 5,635 5,753 4,257 32.4% -2.0%
Utility services 4,552 3,634 25.3% 1,533 1,302 1,212 26.4% 17.7%
Intangible asset enhancement 6,958 5,605 24.1% 2,177 2,567 1,905 14.3% -15.2%
Taxes other than on
income 4,576 3,677 24.4% 1,763 1,301 1,185 48.8% 35.5%
Communications and supply 2,868 2,246 27.7% 1,067 1,015 742 43.9% 5.1%
Stationary and other
office expenses 3,397 2,406 41.2% 1,157 1,140 773 49.6% 1.5%
Insurance 1,705 1,954 -12.8% -271 1,446 684 -139.6% -118.7%
Security services 1,476 1,323 11.6% 477 483 442 7.8% -1.2%
Premises and equipment
maintenance 3,839 1,940 97.9% 1,142 1,054 671 70.2% 8.4%
Business trip expenses 1,376 1,226 12.2% 468 543 350 33.7% -13.7%
Transportation and vehicles
maintenance 1,184 961 23.2% 386 381 319 21.0% 1.4%
Charity 763 699 9.1% 346 145 214 61.8% 137.9%
Personnel training and
recruitment 918 768 19.5% 191 323 259 -26.3% -40.9%
Write-down of current
assets to fair value
less costs to sell -373 -1,645 -77.3% -189 -126 -1,697 -88.8% 50.4%
Loss on disposal of
Inventory 1,188 652 82.3% 2 231 115 -98.5% -99.2%
Loss on disposal of
investment properties 385 - NMF 0 385 - NMF -100.0%
Loss on disposal of
premises and equipment 306 333 -8.0% 135 48 259 -47.8% 182.5%
Impairment of intangible
assets 1,916 19 NMF 66 1,850 - NMF -96.4%
Acquisition costs 1,887 - NMF 1,063 518 - NMF 105.1%
Gross Change in IBNR - - NMF -391 170 - NMF NMF
Other 10,325 4,947 108.7% 3,890 4,897 1,776 119.0% -20.6%
Administrative and Other
Operating Expenses 86,420 69,880 23.7% 27,974 31,573 18,294 52.9% -11.4%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Operating Expenses 259,760 200,204 29.7% 83,910 92,929 65,536 28.0% -9.7%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Profit before Tax 287,436 218,878 31.3% 96,086 88,447 81,223 18.3% 8.6%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Income Tax Expense -24,263 -8,653 180.4% -9,327 -8,590 -10,235 -8.9% 8.6%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Profit for the Period 263,173 210,225 25.2% 86,759 79,857 70,988 22.2% 8.6%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
Cost to Income 42.1% 43.3% -1.2% 40.5% 44.9% 40.5% 0.0% -4.4%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
ROE 20.9% 21.8% -0.9% 19.8% 18.9% 20.6% -0.8% 0.9%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
ROA 3.2% 4.1% -0.9% 2.9% 3.0% 4.0% -1.1% -0.1%
------------------------------- -------- -------- ------- ------- ------- -------- -------- --------
9M 2017 to 9M 2016 Comparison
Total operating expenses, excluding one-offs and the Bank
Republic estimated contribution effect, amounted to GEL 203.4
million YoY, up by 10.4%, or GEL 19.2 million. This increase was
mainly driven by a GEL 10.1 million increase in staff costs,
primarily related to the expanded business scale and performance.
The remaining increase in operating expenses was attributable to a
GEL 8.9 million increase in administrative expenses and a GEL 2.7
million increase in depreciation and amortization. This effect was
slightly offset by a GEL 2.5 million reversal of provision for
liabilities and charges.
In 9m 2016 the one-off costs related to the Premium Listing
amounted to 16.0 million, while in 9M 2017 one-off costs were
related to the Bank Republic integration and amounted to GEL 10.9
million.
Out of the total operating expenses the Bank Republic estimated
contribution amounted to GEL 45.4 million, or 17.5%, of which GEL
26.2 million were related to staff costs and GEL 15.7 million to
administrative and other operating expenses. Total operating
expense including one-offs and the Bank Republic estimated
contribution effect, amounted to GEL 259.8 million.
As a result, the cost to income ratio stood at 42.1% (40.3% with
one-offs) in 9M 2017, compared to 43.3% (41.0% with one-offs) in 9M
2016.
3Q 2017 to 3Q 2016 Comparison
In 3Q 2017 total operating expense, excluding one-offs and the
Bank Republic estimated contribution effect, was GEL 65.7 million,
up by GEL 1.2 million, or 1.8% YoY. This resulted from a GEL 3.3
million increase in administrative and other operating expenses,
mainly related to the expanded business scale and performance and
was partially offset by a GEL 3.3 million decrease in staff costs
compared to 3Q 2016.
In 3Q 2016 the one-off costs amounting to GEL 1.0 million were
related to Premium Listing, while in 3Q 2017 the one-off costs
totalled GEL 1.4 million and were attributable to BR integration
costs.
Bank Republic estimated contribution to total operating expenses
is an addition of GEL 16.7 million, which is comprised of GEL 9.7
million staff cost and GEL 5.9 million administrative and other
operating expenses. Total operating expense, including one-offs and
the Bank Republic estimated contribution effect, amounted to GEL
83.9 million.
As a result, the cost to income ratio was 40.5%, or 39.8%
without one-off effect, in 3Q 2017, compared to 40.5% in 3Q 2016,
or 41.0% without one-offs.
3Q 2017 to 2Q 2017 Comparison
On a QoQ basis, total operating expenses excluding one-offs and
reversal of provision for liabilities and charges (in amount of GEL
2.4 mln in 2Q 2017) declined by GEL 5.2 million, or 5.9%, compared
to 2Q 2017, mostly due to a GEL 5.1 million decrease in staff
costs, mainly related to synergies from Bank Republic integration.
Bank Republic integration costs amounted GEL 7.6 million in 2Q and
GEL 1.4 million in 3Q.
Total operating expenses including the Bank Republic integration
cost were GEL 83.9 million. As a result, the cost to income ratio
stood at 40.5%, 39.8% with one-offs, down by 4.4pp from 2Q 2017,
41.2% with one-offs.
Balance Sheet Discussion
In millions of GEL Sep-17 Jun-17 Sep-16 Change Change
QoQ YoY
------------------------------------ --------- --------- -------- ------- -------
Cash, Due from Banks and Mandatory
Cash Balances with NBG 2,507.9 2,191.9 1,532.5 14.4% 63.6%
Loans and Advances to Customers
(Net) 7,549.1 7,174.3 4,809.5 5.2% 57.0%
Financial Securities 1,113.4 1,007.1 605.9 10.6% 83.8%
Fixed and Intangible Assets
& Investment Property 480.0 478.7 375.0 0.3% 28.0%
Other Assets 486.5 428.9 260.8 13.4% 86.5%
Total Assets 12,136.9 11,280.8 7,583.7 7.6% 60.0%
------------------------------------ --------- --------- -------- ------- -------
Due to Credit Institutions 2,675.9 2,313.5 1,195.0 15.7% 123.9%
Customer Accounts 7,096.5 6,666.4 4,593.2 6.5% 54.5%
Debt Securities in Issue 19.8 24.1 24.2 -17.8% -18.2%
Subordinated Debt 411.2 390.1 283.6 5.4% 45.0%
Other Liabilities 143.2 196.2 98.9 -27.0% 44.7%
Total Liabilities 10,346.6 9,590.3 6,195.1 7.9% 67.0%
------------------------------------ --------- --------- -------- ------- -------
Total Equity 1,790.3 1,690.5 1,388.6 5.9% 28.9%
------------------------------------ --------- --------- -------- ------- -------
Assets
As of 30 September 2017, TBC Bank's total assets amounted to GEL
12,136.9 million, up by GEL 4,553.2 million, or 60.0%, YoY. This
was mainly due to the increase in gross loans to customers by the
GEL 2,764.1 million, or 55.2%. In addition, the YoY increase
resulted from a GEL 975.4 million, or 63.6%, hike in cash due from
banks and mandatory cash balances with NBG, a GEL 507.5 million or
83.8% rise in financial securities and a GEL 105.0 million, or
28.0%, increase in fixed and intangible assets and investment
property, largely attributable to the Bank Republic estimated
contribution effect.
On a QoQ basis, total assets increased by GEL 856.1 million, or
7.6%, mainly due to increased cash. This was due from banks and
mandatory cash balances with the NBG by GEL 316.1 million, or
14.4%, increased net loans by GEL 374.8 million or 5.2% and
increased financial assets by GEL 106.3 million or 10.6%. The
liquid assets to liability ratio stood at 35.0%, compared to 33.5%
as of 30 September 2016 and 33.3% as of 30 June 2017.
As of 30 September 2017, the gross loan portfolio amounted to
GEL 7,767.6 million, up by GEL 2,764.1 million or 55.2% YoY (up by
GEL 1,661.4 or 33.2% increase without the Bank Republic estimated
contribution effect) and by GEL 381.2 million or 5.2% QoQ. Gross
loans denominated in foreign currency accounted for 59.2% of the
total, compared to 63.4% as of 30 September 2016 and 60.8% as of 30
June 2017. As of 30 September 2017, NPLs stood at 3.5%, compared to
4.6% and 3.4% as of 30 September 2016 and 30 June 2017,
respectively. The NPLs provision coverage ratio stood at 80.5%
(206.8% including the collateral), compared to 84.3% as of 30
September 2016 and 84.3% as of 30 June 2017.
Asset Quality
Foreign Currency Income Linked Borrowers
30-Sep-17 30-Jun-17
---------------------- ----------------------------- -----------------------------
Segments FC share FC linked FC share FC linked
income borrowers income borrowers
share share
---------------------- --------- ------------------ --------- ------------------
Retail 49.9% 25.5% 50.4% 25.6%
Consumer 19.8% 21.6% 21.3% 21.0%
Mortgage 81.7% 26.5% 83.0% 27.0%
Corporate 72.0% 53.9%* 74.9% 51.3%
MSME 64.6% 16.7% 66.3% 17.0%
Total Loan Portfolio 59.2% 32.9% 60.8% 34.4%
---------------------- --------- ------------------ --------- ------------------
(Based on internal estimates)
* Pure exports account for 5.2% of total Corporate FX
denominated loans
PAR 30(1) by Segments
and Currencies
PAR 30 Sep-17 Jun-17 Sep-16
------------- -------------------- -------------------- --------------------
GEL FC Total GEL FC Total GEL FC Total
Corporate 0.3% 2.8% 2.1% 0.4% 1.6% 1.3% 0.1% 1.0% 0.8%
Retail 3.2% 2.2% 2.7% 3.1% 2.2% 2.7% 2.9% 3.1% 3.0%
MSME 1.7% 4.1% 3.2% 2.3% 3.9% 3.4% 1.5% 3.4% 2.8%
Total 2.3% 2.9% 2.7% 2.5% 2.4% 2.4% 2.1% 2.4% 2.3%
------------- ----- ----- ------ ----- ----- ------ ----- ----- ------
(1) loans overdue by more than 30 days to gross loans
Total
The total PAR 30 ratio increased on QoQ and YoY basis by 0.2pp and 0.4pp
respectively. The rise is mainly driven by one large corporate borrower,
whose exposure is guaranteed by the AAA-rated Export Development Agency.[12]
Retail Segment
The retail segment PAR 30 amounted to 2.7%, 0.3 pp YoY drop, and remained
unchanged on QoQ basis. The YoY decrease is driven by the improved performance
of the mortgage book.
Corporate
The corporate segment PAR 30 amounted to 2.1%, a 1.3pp increase YoY, and
0.8pp on QoQ basis. The rise is driven by one large corporate borrower
mentioned above.
MSME
The MSME segment PAR 30 amounted to 3.2%, a 0.4 pp increase YoY, and stayed
broadly stable on QoQ basis. NPLs
NPLs Sep-17 Jun-17 Sep-16
----------- -------------------- -------------------- --------------------
GEL FC Total GEL FC Total GEL FC Total
Corporate 0.3% 4.7% 3.4% 0.3% 5.0% 3.8% 1.1% 9.1% 7.1%
Retail 2.8% 3.1% 2.9% 2.4% 3.0% 2.7% 2.2% 4.0% 3.1%
MSME 2.7% 6.0% 4.8% 2.0% 5.9% 4.6% 1.7% 5.5% 4.3%
Total 2.3% 4.3% 3.5% 1.9% 4.4% 3.4% 1.9% 6.2% 4.6%
----------- ----- ----- ------ ----- ----- ------ ----- ----- ------
Total
Total NPLs stood at 3.5% down by 1.1 pp on YoY basis and broadly unchanged
QoQ. The YoY drop was mainly driven by the improved performance of the
corporate book.
Retail Segment
Retail NPLs stood at 2.9% down by 0.2pp on YoY basis and up by 0.3pp QoQ.
Corporate
Corporate NPLs stood at 3.4% down by 3.7pp on YoY basis and down by 0.4pp
QoQ. The decline is related to the overall improved performance of the
book.
MSME
MSME NPLs increased by 0.5pp on YoY basis and remained broadly stable
on QoQ.
NPLs
Coverage
NPLs Sep17 Jun-17 Sep-16
Coverage
Exc. Incl. Exc. Incl. Exc. Incl.
Collateral Collateral Collateral Collateral Collateral Collateral
----------- ----------- ----------- ----------- ----------- ----------- -----------
Corporate 52.5% 256.8% 59.7% 273.0% 79.6% 223.5%
Retail 120.6% 201.6% 126.8% 211.5% 113.1% 204.8%
MSME 49.7% 172.5% 53.6% 174.9% 53.6% 168.4%
Total 80.5% 206.8% 84.3% 219.3% 84.3% 205.0%
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total
NPL coverage ratio stood at 80.5% down by 3.8% on YoY and QoQ
basis.
NPL collateral coverage ratio stood at 206.8% up by 1.8pp and
down by 12.6pp on YoY and QoQ respectively.
Liabilities
As of 30 September 2017, TBC Bank's total liabilities amounted
to GEL 10,346.6 million, up by 67.0% YoY and by 7.9% QoQ. The YoY
growth of GEL 4,151.6 million was primarily due to a GEL 2,503.3
million, or 54.5%, increase in customer deposits. Total liabilities
also grew due to the increase in amounts due to credit institutions
by GEL 1,480.9 million and following a rise in subordinated debt by
GEL 127.6 million. All these increases in liabilities largely
resulted from the Bank Republic estimated contribution effect.
On a QoQ basis, total liabilities rose by GEL 756.3 million, or
7.9%, primarily due to the GEL 430.1 million, or 6.5%, increase in
customer deposits. This mainly resulted from the growth in retail
deposits. A GEL 362.4 million, or 15.7%, rise in amounts due to
credit institutions also contributed to the growth of total
liabilities.
Liquidity
The Bank's liquidity ratio, as defined by the NBG, stood at
35.3% as of 30 September 2017, compared to 34.9% and 34.2% as of 30
September 2016 and 30 June 2017, respectively. As of 30 September
2017, the newly introduced short term liquidity ratio, total LCR,
as defined by NBG, stood at 115.2% above the 100.0% limit, while
LCR for GEL and FC stood at 92.4% and 130.2% respectively, both
higher of their respective limits, 75% and 100%.
Total Equity
As of 30 September 2017, TBC's total equity amounted to GEL
1,790.3 million, up from GEL 1,388.6 million as of 30 September
2016, and from GEL 1,690.5 million as of 30 June 2017. The YoY
change in equity was mainly due to the net profit contribution of
GEL 351.2 million, which was offset by a GEL 74.8 million
(consisting of GEL 66.7 million cash-based and GEL 8.1 million
share-based) dividend distribution (gross of tax). The QoQ change
was primarily due to net profit, which increased the total equity
by GEL 86.8 million.
Regulatory Capital
As of 30 September 2017, the Bank's Basel II/III Tier 1 and
Total Capital Adequacy Ratios (CAR) stood at 10.8% and 14.5%,
respectively, compared to 13.3% and 16.2% as of 30 September 2016,
and 10.8% and 14.6% as of 30 June 2017. The minimum capital
requirements set by the NBG for Basel II/III Tier 1 and Total
Capital Adequacy Ratios are 8.5% and 10.5%, respectively.
The Bank's Basel II/III Tier 1 Capital amounted to GEL 1,354.7
million, compared to GEL 1,124.6 million as of 30 September 2016
and GEL 1,282.9 million as of 30 June 2017. The Bank's Basel II/III
Total Capital amounted to GEL 1,821.8 million, compared to GEL
1,368.7 million as of 30 September 2016 and GEL 1,732.8 million as
of 30 June 2017. Risk Weighted Assets were GEL 12,560.6 million as
of 30 September 2017, up by GEL 4,132.9 million YoY and up by GEL
694.6 million QoQ.
QoQ Tier 1 Capital increased by GEL 71.8 million and Total
Capital increased by GEL 89.1 million mostly due to net profit. The
rest was due to the increase in subordinated loans and general
reserves in Tier 2 Capital in the amount of GEL 17.3 million. The
QoQ rise in Risk Weighted Assets is mainly due to the growth of the
loan book, while YoY it increased due to the addition of Bank
Republic's risk weighted assets as well as organic growth of the
Bank's loan book.
Results by Segments and Subsidiaries
The segment definitions are as per below:
-- Corporate - Legal Entities with an annual revenue of GEL 8.0
million or more or who have been granted a loan in an amount
equivalent to USD 1.5 million or more. Some other business
customers may also be assigned to this segment or transferred to
the MSME segment on a discretionary basis.
-- MSME (Micro, Small and Medium) - all business customers who
are not included in either Corporate and Retail segments; or Legal
Entities who have been granted a Pawn shop loan;
-- Retail - all non-business individual customers or individual
business customers who have been granted a loan in an amount
equivalent below USD 8.0 thousand. All individual customers are
included in retail deposits.
Businesses customers are all legal entities or individuals who
have been granted a loan for business purpose.
Income Statement by Segments
9M'17 Retail MSME Corporate Corp.Centre Total
--------------------------------------- --------- -------- ---------- ------------ ---------
Interest Income 388,527 134,267 142,615 80,510 745,918
Interest Expense -87,073 -8,193 -72,474 -139,558 -307,298
Net Transfer Pricing -51,698 -36,934 13,494 75,138 0
Net Interest Income 249,757 89,139 83,634 16,090 438,620
--------------------------------------- --------- -------- ---------- ------------ ---------
Fee and Commission Income 103,008 14,575 19,017 1,670 138,271
Fee and Commission Expense -39,397 -6,327 -5,312 -227 -51,264
Net fee and Commission Income 63,611 8,248 13,705 1,443 87,007
--------------------------------------- --------- -------- ---------- ------------ ---------
Insurance Profit - - - 4,854 4,854
--------------------------------------- --------- -------- ---------- ------------ ---------
Gains Less Losses from Trading in
Foreign Currencies 15,553 20,920 25,075 -71 61,478
Foreign Exchange Translation Gains
Less Losses/(Losses Less Gains) - - - 4,282 4,282
Net Losses from Derivative Financial
Instruments - - - -39 -39
Other Operating Income 9,388 1,008 6,342 4,068 20,806
Share of profit of associates - - - 661 661
Other Operating Non-Interest Income
and Insurance Profit 24,941 21,928 31,418 13,754 92,041
--------------------------------------- --------- -------- ---------- ------------ ---------
Provision for Loan Impairment -85,417 -11,197 31,212 - -65,403
(Provision)/Recovery of Provision
for Liabilities, Charges and Credit
Related Commitments -302 485 1,108 -424 866
Recovery of Provision/(Provision)
for Impairment of Investments in
Finance Lease - - - -414 -414
(Provision)/Recovery of Provision
for Impairment of other Financial
Assets 14 -107 -1,080 -4,350 -5,522
Profit before G&A Expenses and Income
Taxes 252,603 108,496 159,998 26,100 547,196
--------------------------------------- --------- -------- ---------- ------------ ---------
Staff Costs -93,445 -24,183 -18,524 -12,843 -148,995
Depreciation and Amortization -21,482 -3,595 -1,059 -704 -26,840
Provision for Liabilities and Charges - - - 2,495 2,495
Administrative and Other Operating
Expenses -58,192 -10,640 -5,231 -12,356 -86,420
Operating Expenses -173,120 -38,417 -24,814 -23,408 -259,760
--------------------------------------- --------- -------- ---------- ------------ ---------
Profit before Tax 79,484 70,078 135,183 2,691 287,436
--------------------------------------- --------- -------- ---------- ------------ ---------
Income Tax Expense -9,916 -10,074 -20,531 16,258 -24,263
Profit for the Year 69,567 60,004 114,652 18,950 263,173
--------------------------------------- --------- -------- ---------- ------------ ---------
Portfolios by Segments
In thousands of GEL Sep-17 Jun-17 Sep-16
------------------------------------------------------------ ---------- ----------- ----------
Loans and Advances to Customers
Consumer 1,972,012 1,919,788 1,276,859
Mortgage 1,900,186 1,744,421 1,015,550
Pawn 34,861 35,648 32,973
Retail 3,907,059 3,699,858 2,325,383
Corporate 2,128,478 2,057,644 1,471,931
MSME 1,732,096 1,628,934 1,206,251
Total Loans and Advances to Customers (Gross) 7,767,634 7,386,434 5,003,564
Less: Provision for Loan Impairment -218,573 -212,129 -194,035
Total Loans and Advances to Customers (Net) 7,549,061 7,174,305 4,809,530
------------------------------------------------------------ ---------- ----------- ----------
Customer Accounts
Retail Deposits 4,015,754 3,707,854 2,807,996
Corporate Deposits 2,130,763 2,057,651 1,006,739
MSME 950,005 900,908 778,502
Total Customer Accounts 7,096,523 6,666,413 4,593,237
------------------------------------------------------------ ---------- ----------- ----------
Retail Banking
As of 30 September 2017, retail loans stood at GEL 3,907.1
million (or GEL 3,124.5 million without Bank Republic estimated
contribution effect), up by GEL 1581.7 million, or 68.0%, YoY. The
main contributor to the growth was the 87.1% hike in mortgage loans
on YoY basis. Retail loans increased by GEL 207.2 million, or 5.6%,
QoQ. As of 30 September 2017, TBC Bank's retail loans accounted for
40.5% market share of total individual loans. As of 30 September
2017, foreign currency loans represented 49.9% of the total retail
loan portfolio.
In the reporting period, retail deposits increased to GEL
4,015.8 million (or to GEL 3722.1 million without Bank Republic
estimated contributed effect), up by GEL 1,207.8 million or 43.0%
YoY. Retail deposits grew by GEL 307.9 million, or 8.3%, on a QoQ
basis and accounted for 40.9% market share of total individual
deposits. The increase in retail deposits was mainly attributable
to the increase in current deposits by 58.3% YoY and 11.1% QoQ.
Term deposits accounted for 55.4% of the total retail deposit
portfolio as of 30 September 2017, while foreign currency deposits
represented 84.4% of the total retail deposit portfolio.
In 9M 2017, retail loan yields and deposit rates stood at 14.0%
and 3.1% respectively, and the segment's cost of risk on loans was
3.1%. The retail segment contributed 26.4%, or GEL 69.6 million, to
the TBC's total net income in 9M 2017.
Corporate Banking
As of 30 September 2017, corporate loans amounted to GEL 2,128.5
million (or GEL 1,956.8 million excluding Bank Republic estimated
effect), up by GEL 656.5.0 million or 44.6% YoY. QoQ growth in
corporate loans accounted for GEL 70.8 million or 3.4%. Foreign
currency loans accounted for 72.0% of the total corporate loan
portfolio. Market share in legal entities increased by 0.7pp QoQ to
35.6% mainly due to attracting a new blue chip customer, a leading
Georgian telecommunication company.
As of the same date, corporate deposits totalled GEL 2,130.8
million (or GEL 1,974.5 million without the Bank Republic effect),
up by GEL 1,124.0 million or 111.7% YoY. Corporate deposits grew by
GEL 73.1 million or 3.6% QoQ. Foreign currency corporate deposits
represented 48.8% of the total corporate deposit portfolio. Market
share stood at 35.9%, a decrease due to excess liquidity in foreign
currency.
In 9M 2017, corporate loan yields and deposit rates stood at
9.3% and 5.1%, respectively. In the same period, the cost of risk
on loans was -2.1%. In terms of profitability, the corporate
segment's net profit reached GEL 114.7 million, or 43.6% of the
Bank's total net income.
MSME Banking
As of 30 September 2017, MSME loans amounted to GEL 1,732.1
million (GEL 1,583.7 million excluding Bank Republic estimated loan
portfolio), up by GEL 525.8 million, or 43.6%, YoY. MSME loan
portfolio growth was GEL 103.2 million or 6.3% QoQ. Foreign
currency loans accounted for 63.8% of the total MSME portfolio.
As of the same date, MSME deposits stood at GEL 950.0 million
(GEL 876.2 million excluding Bank Republic estimated deposit
portfolio), up by GEL 171.5million or 22.0% YoY and by GEL 49.1
million or 5.4% QoQ. Foreign currency MSME deposits represented
53.0% of the total MSME deposit portfolio.
In 9M 2017, MSME loan yields and deposit rates stood at 11.0%
and 1.3%, respectively while the cost of risk on loans was 0.9%. In
terms of profitability, net profit for the MSME segment amounted to
GEL 60.0 million, or 22.8%, of TBC's total net income.
Annexes
Subsidiaries of TBC Bank Group PLC[13]
Ownership Country Year of Industry Total Assets
/ voting incorporation (after elimination)
% as of or acquisition
30 September
2017
-------------- ----------- ---------------- -------------------- -----------------------
Subsidiary Amount % in TBC
GEL'000 Group
------------------------ -------------- ----------- ---------------- -------------------- ------------ ---------
TBC Insurance 100.0% Georgia 2016 Insurance 21,449 0.18%
Financial
JSC TBC Bank 98.2% Georgia 2016 sector 11,895,462 98.01%
United Financial
Corporation JSC 98.7% Georgia 1997 Card processing 6,959 0.06%
TBC Capital LLC 100.0% Georgia 1999 Brokerage 3,959 0.03%
TBC Leasing JSC 99.6% Georgia 2003 Leasing 145,546 1.20%
Non-banking
TBC Kredit LLC 75.0% Azerbaijan 2008 credit institution 33,417 0.28%
Banking System
Service Information
Company LLC 100.0% Georgia 2009 services 627 0.01%
TBC Pay LLC 100.0% Georgia 2009 Processing 27,165 0.22%
Real estate
Mali LLC 100.0% Georgia 2011 management 93 0.00%
Real Estate
Management Real estate
Fund JSC 100.0% Georgia 2010 management 23 0.00%
TBC Invest LLC 100.0% Israel 2011 PR and marketing 218 0.00%
LTD Merckhali Operating
Pirveli 100.0% Georgia 2009 Leasing - 0.00%
------------------------ -------------- ----------- ---------------- -------------------- ------------ ---------
Consolidated Financial Statements of TBC Bank Group PLC
Consolidated Balance Sheet
In thousands of GEL Sep-17 Jun-17 Sep-16
-------------------------------------------- ----------- ----------- ----------
Cash and cash equivalents 1,445,521 1,219,108 843,431
Due from other banks 41,696 41,096 12,284
Mandatory cash balances with National Bank
of Georgia 1,020,695 931,654 676,780
Loans and advances to customers (Net) 7,549,061 7,174,305 4,809,530
Investment securities available for sale 674,210 608,083 252,736
Investment in subsidiaries 1,309 1,021 -
Repurchase receivables 11,000 9,961 57,232
Investment securities held to maturity 428,163 389,036 295,901
Investments in finance leases 111,223 96,329 77,496
Investment properties 88,750 93,501 71,122
Goodwill 28,657 28,657 2,726
Intangible assets 69,864 65,034 49,663
Premises and equipment 321,431 320,139 254,214
Other financial assets 103,487 88,852 62,799
Deferred tax asset 3,592 3,407 2,181
Current income tax prepayment 18,380 7,719 9,515
Insurance and reinsurance receivables 10,456 5,386 -
Other assets 209,427 197,533 106,103
TOTAL ASSETS 12,136,922 11,280,822 7,583,712
-------------------------------------------- ----------- ----------- ----------
LIABILITIES
Due to Credit Institutions 2,675,930 2,313,550 1,195,031
Customer accounts 7,096,523 6,666,413 4,593,237
Current income tax liability 362 273 551
Debt Securities in issue 19,818 24,106 24,227
Deferred income tax liability 851 2,138 1,822
Provisions for liabilities and charges 11,072 10,733 13,908
Other financial liabilities 52,182 120,076 42,732
Subordinated debt 411,193 390,070 283,637
Insurance contracts liabilities 7,434 1,943 -
Other liabilities 71,251 61,014 39,917
TOTAL LIABILITIES 10,346,615 9,590,315 6,195,063
-------------------------------------------- ----------- ----------- ----------
EQUITY
Share capital 1,605 1,601 1,494
Share premium 714,651 706,580 572,780
Retained earnings 1,137,497 1,051,974 781,463
Group reorganisation reserve -162,167 -162,167 -
Share based payment reserve 7,291 4,753 20,398
Revaluation reserve for premises 70,045 70,045 -12,672
Revaluation reserve for available-for-sale
securities 863 -1,105 2,025
Cumulative currency translation reserve -7,301 -7,695 -7,681
TOTAL EQUITY 1,762,485 1,663,985 1,357,808
-------------------------------------------- ----------- ----------- ----------
Non-controlling interest 27,822 26,522 30,842
TOTAL EQUITY 1,790,307 1,690,506 1,388,649
-------------------------------------------- ----------- ----------- ----------
TOTAL LIABILITIES AND EQUITY 12,136,922 11,280,822 7,583,712
-------------------------------------------- ----------- ----------- ----------
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
In thousands of GEL 9M'17 9M'16 3Q'17 2Q'17 3Q'16
----------------------------------------------------- --------- --------- --------- --------- --------
Interest income 745,918 523,082 258,252 249,898 182,056
Interest expense -307,298 -186,318 -111,705 -100,157 -61,830
Net interest income 438,620 336,764 146,546 149,742 120,227
----------------------------------------------------- --------- --------- --------- --------- --------
Fee and commission income 138,271 97,340 48,552 45,219 35,112
Fee and commission expense -51,264 -35,464 -16,763 -16,478 -12,918
Net Fee and Commission Income 87,007 61,876 31,790 28,741 22,194
----------------------------------------------------- --------- --------- --------- --------- --------
Insurance profit 4,854 - 1,773 1,856 -
----------------------------------------------------- --------- --------- --------- --------- --------
Gains less losses from trading in foreign
currencies 61,478 44,798 18,086 22,246 15,713
Foreign exchange translation gains less losses 4,282 12 2,245 991 1,012
Gains less losses/(losses less gains) from
derivative financial instruments -39 -299 -1 -35 173
(Losses less gains) / Gains less losses from - 8,795 - - -
disposal of investment securities available
for sale
Share of profit of associates 661 - 84 484 -
Other operating income 20,806 10,864 6,572 3,069 2,501
Other operating non-interest income 87,187 64,169 26,985 26,755 19,398
----------------------------------------------------- --------- --------- --------- --------- --------
Provision for loan impairment -65,403 -38,796 -25,036 -23,444 -13,518
Provision for impairment of investments in
finance lease -414 -236 -285 -97 -126
Provision for/ (recovery of provision) performance
guarantees and credit related commitments 866 -3,557 -680 1,454 -1,481
Provision for impairment of other financial
assets -5,522 -1,128 -1,097 -3,628 66
Impairment of investment securities available - -11 - - -
for sale
Operating income after provisions for impairment 547,196 419,082 179,997 181,377 146,759
----------------------------------------------------- --------- --------- --------- --------- --------
Staff costs -148,995 -109,677 -46,620 -54,838 -40,205
Depreciation and amortisation -26,840 -20,647 -9,317 -8,919 -7,037
Provision for liabilities and charges 2,495 - - 2,400 -
Administrative and other operating expenses -86,420 -69,880 -27,974 -31,573 -18,294
Operating expenses -259,760 -200,204 -83,910 -92,929 -65,536
----------------------------------------------------- --------- --------- --------- --------- --------
Profit before tax 287,436 218,878 96,086 88,447 81,223
----------------------------------------------------- --------- --------- --------- --------- --------
Income tax expense -24,263 -8,653 -9,327 -8,590 -10,235
Profit for the period 263,173 210,225 86,759 79,857 70,988
----------------------------------------------------- --------- --------- --------- --------- --------
Other Comprehensive income:
----------------------------------------------------- --------- --------- --------- --------- --------
Items that may be reclassified subsequently
to profit or loss:
----------------------------------------------------- --------- --------- --------- --------- --------
Revaluation 4,544 3,717 -1,929 -4,022 -573
----------------------------------------------------- --------- --------- --------- --------- --------
Gains less losses reclassified to profit or - -8,853 - - -
loss upon disposal
----------------------------------------------------- --------- --------- --------- --------- --------
Income tax recorded directly in other comprehensive - 1,401 - - -
income
----------------------------------------------------- --------- --------- --------- --------- --------
Exchange differences on translation to presentation
currency 241 -1,095 -399 62 770
----------------------------------------------------- --------- --------- --------- --------- --------
Items that will not be reclassified to profit
or loss:
----------------------------------------------------- --------- --------- --------- --------- --------
Income tax recorded directly in other comprehensive
income -422 10,506 - 422 -
----------------------------------------------------- --------- --------- --------- --------- --------
Other comprehensive income for the year 4,363 5,675 2,328 3,538 -197
----------------------------------------------------- --------- --------- --------- --------- --------
Total comprehensive income for the year 267,536 215,900 89,086 83,395 70,791
----------------------------------------------------- --------- --------- --------- --------- --------
Profit attributable to:
----------------------------------------------------- --------- --------- --------- --------- --------
- Owners of the Bank 259,043 209,786 85,524 78,544 69,526
----------------------------------------------------- --------- --------- --------- --------- --------
- Non-controlling interest 4,130 438 1,235 1,313 1,462
----------------------------------------------------- --------- --------- --------- --------- --------
Profit for the period 263,173 210,225 86,759 79,857 70,988
----------------------------------------------------- --------- --------- --------- --------- --------
Total comprehensive income is attributable
to:
----------------------------------------------------- --------- --------- --------- --------- --------
- Owners of the Bank 263,427 215,462 87,902 82,052 69,328
----------------------------------------------------- --------- --------- --------- --------- --------
- Non-controlling interest 4,109 438 1,184 1,343 1,462
----------------------------------------------------- --------- --------- --------- --------- --------
Total comprehensive income for the year 267,536 215,900 89,086 83,395 70,791
----------------------------------------------------- --------- --------- --------- --------- --------
Consolidated Statements of Cash Flows
In thousands of GEL As of 30-Sep-2017 As of 30-Sep-2016
------------------------------------------------- ------------------ ------------------
Cash flows from operating activities
Interest received 726,012 506,288
Interest paid (304,258) (184,749)
Fees and commissions received 139,408 98,373
Fees and commissions paid (51,358) (35,660)
Insurance premium received 13,908 -
Insurance claims paid (5,946) -
Income received from trading in foreign
currencies 61,478 44,798
Other operating income received 9,638 10,249
Staff costs paid (143,370) (103,141)
Administrative and other operating expenses
paid (78,995) (58,448)
Income tax (paid) / refunded (42,785) (24,101)
Cash flows from operating activities before
changes in operating assets and liabilities 323,732 253,609
------------------------------------------------- ------------------ ------------------
Net change in operating assets
Due from other banks and mandatory cash
balances with the National Bank of Georgia (73,036) (198,929)
Loans and advances to customers (777,837) (499,749)
Investment in finance lease (20,647) (4,018)
Other financial assets (11,776) (1,225)
Other assets 1,119 7,883
Due to other banks (219,247) 141,395
Customer accounts 914,052 498,230
Other financial liabilities (4,403) (6,094)
Other liabilities and provision for liabilities
and charges 1,241 500
Net cash from operating activities 133,198 191,602
------------------------------------------------- ------------------ ------------------
Cash flows from investing activities
Acquisition of investment securities available
for sale (545,956) (99,730)
Proceeds from redemption at maturity of
investment securities available for sale 299,890 8,854
Acquisition of bonds carried at amortised
cost (215,883) (230,326)
Proceeds from redemption of bonds carried
at amortised cost 168,130 126,240
Acquisition of premises, equipment and
intangible assets (47,410) (34,462)
Disposal of premises, equipment and intangible
assets 1,436 462
Proceeds from disposal of investment property 7,831 (254)
Acquisition of subsidiaries, net of cash (350) -
acquired
Net cash used in investing activities (332,311) 52,632
------------------------------------------------- ------------------ ------------------
Cash flows from financing activities
Proceeds from other borrowed funds 1,464,205 411,889
Redemption of other borrowed funds (771,829) (459,423)
Proceeds from subordinated debt 60,188 18,131
Redemption of subordinated debt - (13,644)
Proceeds from debt securities in issue - 7,780
Redemption of debt securities in issue (2.075) (4,636)
Dividends paid (67,927) (54,560)
Issue of ordinary shares 29 -
Net cash from / (used in) financing activities 682,591 (94,463)
------------------------------------------------- ------------------ ------------------
Effect of exchange rate changes on cash
and cash equivalents 16,863 (26,691)
------------------------------------------------- ------------------ ------------------
Net increase / (decrease) in cash and cash
equivalents 500,341 123,080
------------------------------------------------- ------------------ ------------------
Cash and cash equivalents at the beginning
of the year 945,180 720,351
------------------------------------------------- ------------------ ------------------
Cash and cash equivalents at the end of
the year 1,445,521 843,431
------------------------------------------------- ------------------ ------------------
3Q 2017 Bank Republic Financial Results Based on Internal
Estimates
Bank Republic Profit and Loss
In thousands of GEL 3Q 2017
--------------------------------------------- --------
Interest income 37,413
Interest expense 10,077
Net interest income 27,336
--------------------------------------------- --------
Net F&C income 1,700
--------------------------------------------- --------
Card operations -353
Settlement transactions 1,242
Guarantees and letters of credit 713
Other 98
Other non-interest income 3,858
--------------------------------------------- --------
FX gain/losses 3,148
Other 710
Operating income 32,894
--------------------------------------------- --------
Operating expenses 16,733
--------------------------------------------- --------
Staff costs 9,718
Depreciation and amortization 1,145
Administrative and other operating expenses 5,869
Operating profit 16,161
--------------------------------------------- --------
Bank Republic Loan Portfolio
In thousands of GEL as of 30 September
2017
------------------------------ -------------------
Total gross loans 1,102,629
------------------------------ -------------------
Retail 782,521
Corporate 171,689
MSME 148,418
Bank Republic Deposit Portfolio
In thousands of GEL as of 30 September
2017
--------------------------------- -------------------
Total deposits 523,720
--------------------------------- -------------------
Retail 293,661
Corporate 156,268
MSME 73,791
Key Ratios
Average Balances
Average balances included in this document are calculated as the
average of the relevant monthly balances as of each month-end.
Balances have been extracted from TBC's unaudited and consolidated
management accounts prepared from TBC's accounting records, which
were used by the Management for monitoring and control
purposes.
Key Ratios
Ratios (based on monthly 9M'17 9M'16 3Q'17 2Q'17 3Q'16
averages, where applicable)
----------------------------------- ------------- ------- -------------- ------- -------
ROE(1) 21.6%*/20.9% 21.8% 20.02%*/19.8% 18.9% 20.6%
ROA(2) 3.3*/3.2% 4.1% 3.0%*/2.9% 3.0% 4.0%
Pre-provision ROE 27.3%*/26.6% 26.4% 26.3%*/26.1% 25.1% 25.1%
Pre-provision ROA 4.1%*/4.0% 4.9% 3.9%*/3.9% 3.9% 4.8%
Cost to income(3) 40.3*/42.1% 43.3% 39.8%*/40.5% 44.9% 40.5%
Cost of risk(4) 1.2% 1.1% 1.3% 1.3% 1.1%
NIM(5) 6.5% 7.9% 6.2% 6.8% 8.3%
Risk adjusted nIM(6) 5.1% 6.5% 5.0% 5.3% 6.7%
Loan yields(7) 12.0% 13.5% 11.9% 12.4% 13.5%
Risk adjusted loan yields(8) 10.6% 12.2% 10.7% 10.9% 12.2%
Deposit rates(9) 3.4% 3.4% 3.4% 3.5% 3.3%
Yields on interest earning
assets(10) 11.1% 12.3% 10.9% 11.3% 12.5%
Cost of funding(11) 4.4% 4.5% 4.5% 4.5% 4.3%
Spread(12) 6.6% 7.8% 6.4% 6.8% 8.2%
PAR 90 to gross loans(13) 1.6% 1.5% 1.6% 1.6% 1.5%
NPLs to gross loans(14) 3.5% 4.6% 3.5% 3.4% 4.6%
NPLs coverage(15) 80.5% 84.3% 80.5% 84.3% 84.3%
NPLs coverage plus collateral(16) 206.8% 205.0% 206.8% 219.3% 205.0%
Provision level to gross
loans(17) 2.8% 3.9% 2.8% 2.9% 3.9%
Related party loans to gross
loans(18) 0.1% 0.1% 0.1% 0.1% 0.1%
Top 10 borrowers to total
portfolio(19) 8.6% 8.6% 8.6% 9.1% 8.6%
Top 20 borrowers to total
portfolio(20) 12.3% 13.4% 12.3% 13.0% 13.4%
Net loans to deposits plus
IFI funding(21) 91.6% 93.8% 91.6% 90.6% 93.8%
Net stable funding ratio(22) 134% 114% 134% 129% 114%
Liquidity coverage ratio(23) 115% N/A 115% 106% N/A
Leverage(24) 6.8x 5.5x 6.8x 6.7x 5.5x
Hypothetical Tier 1 CAR(25) 14.7% 18.0% 14.7% 19.4 18.0
Hypothetical Total CAR(25) 19.2% 21.9% 19.2% 14.4 21.9
Regulatory Tier 1 CAR(26) 10.8% 13.3% 10.8% 10.8% 13.3%
Regulatory Total CAR(27) 14.5% 16.2% 14.5% 14.6% 16.2%
----------------------------------- ------------- ------- -------------- ------- -------
*without one-offs
Ratio definitions
1. Return on average total equity (ROE) equals net income
attributable to owners divided by monthly average of total
shareholders 'equity attributable to the PLC's equity holders for
the same period; Pre-provision ROE excludes all provision charges.
Annualized where applicable.
2. Return on average total assets (ROA) equals net income of the
period divided by monthly average total assets for the same period.
Pre-provision ROE excludes all provision charges. Annualised where
applicable.
3. Cost to income ratio equals total operating expenses for the
period divided by the total revenue for the same period. (Revenue
represents the sum of net interest income, net fee and commission
income and other non-interest income).
4. Cost of risk equals provision for loan impairment divided by
monthly average gross loans and advances to customers. Annualized
where applicable.
5. Net interest margin (NIM) is net interest income divided by
monthly average interest-earning assets. Annualised where
applicable. Interest-earning assets include investment securities
excluding corporate shares, net investment in finance lease, net
loans, amount due from credit institutions. The latter excludes all
items from cash and cash equivalents, excludes EUR mandatory
reserves with NBG which currently has negative interest, and
includes other earning items from due from banks
6. Risk Adjusted Net interest margin is NIM minus Cost of Risk
without one -offs and currency effect
7. Loan yields equal interest income on loans and advances to
customers divided by monthly average gross loans and advances to
customers. Annualised where applicable.
8. Risk Adjusted Loan yield is loan yield minus cost of risk
without one-offs and currency effect
9. Deposit rates equal interest expense on customer accounts
divided by monthly average total customer deposits. Annualised
where applicable.
10. Yields on interest earning assets equal total interest
income divided by monthly average interest earning assets.
Annualized where applicable.
11. Cost of funding equals total interest expense divided by
monthly average interest bearing liabilities. Annualised where
applicable.
12. Spread equals difference between yields on interest earning
assets (including but not limited to yields on loans, securities
and due from banks) and cost of funding (including but not limited
to cost of deposits, cost on borrowings and due to banks).
13. PAR 90 to gross loans ratio equals loans for which principal
or interest repayment is overdue for more than 90 days divided by
the gross loan portfolio for the same period.
14. NPLs to gross loans equals loans with 90 days past due on
principal or interest payments, and loans with well-defined
weakness, regardless of the existence of any past-due amount or of
the number of days past due divided by the gross loan portfolio for
the same period.
15. NPLs coverage ratio equals total loan loss provision divided
by the NPL loans.
16. NPLs coverage with collateral ratio equals loan loss
provision plus total collateral amount of NPL loans (excluding
third party guarantees) discounted at 30-50% depending on segment
type divided by the NPL loans.
17. Provision level to gross loans equals loan loss provision
divided by the gross loan portfolio for the same period.
18. Related party loans to total loans equals related party
loans divided by the gross loan portfolio.
19. Top 10 borrowers to total portfolio equals total loan amount
of top 10 borrowers divided by the gross loan portfolio.
20. Top 20 borrowers to total portfolio equals total loan amount
of top 20 borrowers divided by the gross loan portfolio.
21. Net loans to deposits plus IFI funding ratio equals net
loans divided by total deposits plus borrowings received from
international financial institutions.
22. Net stable funding ratio equals available amount of stable
funding divided by required amount of stable funding as defined in
Basel III. NSFR ratio for 9m '17, 3Q'17 and 2Q'17 is calculated per
updated internal methodology in line with Basel 2014
guidelines.
23. Liquidity coverage ratio equals high-quality liquid assets
divided by total net cash outflow amount as defined by NBG.
24. Leverage equals total assets to total equity.
25. Hypothetical ratios - hypothetical ratio based on the Basel
III guidelines except for calculation of credit equivalent amounts
for interest rate and foreign exchange related contracts, which are
calculated based on original exposure method being in line with NBG
Pillar 1 requirements. Calculations are made for TBC Bank
stand-alone, based on local standards.
26. Regulatory tier 1 CAR equals tier I capital divided by total
risk weighted assets, both calculated in accordance with the pillar
1 requirements of NBG Basel II/III standards. The reporting started
from the end of 2012. Calculations are made for TBC Bank
stand-alone, based on local standards.
27. Regulatory total CAR equals total capital divided by total
risk weighted assets, both calculated in accordance with the pillar
1 requirements of NBG Basel II/III standards. The reporting started
from the end of 2012. Calculations are made for TBC Bank
stand-alone, based on local standards.
Exchange Rates
To calculate the Balance Sheet items' QoQ growth without
currency exchange rate effect, we used USD/GEL exchange rate of
2.4072 as of 30 June 2017. For calculations of YoY growth without
currency exchange rate effect, we used USD/GEL exchange rate of
2.3297 as of 30 September 2016. The USD/GEL exchange rate as of 30
September 2017 equaled 2.4767. For P&L items growth
calculations without currency effect, we used the average USD/GEL
exchange rate for the following periods: 3Q 2017 of 2.4207, 2Q 2017
of 2.4315, 3Q 2016 of 2.3224.
Segment Definition & Bank Republic Contribution
Assumption
Segment Definitions:
Corporate: legal entities with an annual revenue of GEL 8.0
million or more or who have been granted a loan in an amount
equivalent to USD 1.5 million or more. Some other business
customers may also be assigned to the corporate segment or
transferred to MSME on a discretionary basis.
MSME: business customers who are not included in either
corporate or retail segments; or legal entities who have been
granted a Pawn shop loan.
Retail: non-business individual customers or individual business
customers who have been granted a loan in an amount equivalent
below USD 8.0 thousand; all individual customers are included in
retail deposits.
Corporate Centre and Other Operations: comprise the Treasury,
other support and back office functions, and non-banking
subsidiaries of the Group.
Business customers: legal entities or individuals who have been
granted a loan for business purpose.
Bank Republic Contribution Assumptions:
To make YoY analyses more comparable, the Bank has segregated
the Bank Republic contribution after the merger on May 8, 2017,
which is based on direct income and cost attribution calculation
and where not practicable, based on established allocation rules,
appropriate management assumptions and estimates.
The management has estimated the Bank Republic contribution
effect within the Group's financial results based on the following
rationale:
-- Loan and deposit portfolio as well as the interest income and
expense from these portfolios have been calculated for all Bank
Republic's existing clients with outstanding exposure for the
reporting period, as well as for all new clients attracted through
the former branches of Bank Republic
-- For the remaining items of B/S and P&L where the direct
attribution is not practical, the management has used the
allocation based on Bank Republic loan and deposit books
contribution to each operating segment
Additional Disclosures
1) Earnings per Share
In GEL 3Q 2017
Earnings per share for profit attributable to the owners
of the Group:
---------------------------------------------------------- --------
- Basic earnings per share 4.92
- Diluted earnings per share 4.85
---------------------------------------------------------- --------
Source: IFRS Consolidated
2) Sensitivity Scenario
10% Currency Devaluation
Sensitivity Scenario 30-Sep-17 Effect
------------------------------------ ---------- -------------------------
NIM* -0.1%
Technical Cost of Risk +0.2%
------------------------------------ ---------- -------------------------
Regulatory Total Capital 1,822 1,858
Regulatory Capital adequacy ratios 0.67% - 0.72%
tier 1 and total capital decrease
by
------------------------------------ ---------- -------------------------
(*) Linear depreciation is assumed for NIM sensitivity
analysis
Source: IFRS statements and Management Figures
3) FC details for Selected P/L Items
Selected P&L Items 3Q 2017 FC % of Respective Totals
---------------------------- --------------------------
Interest Income 44%
Interest Expense 54%
Fee and Commission Income 35%
Fee and Commission Expense 58%
Administrative Expenses 20%
---------------------------- --------------------------
Source: IFRS statements and Management figures
4) GEL Refinance Rate and Libor Linked B/S Items 30 September
2017
GEL Refinance Rate
Gap GEL -183 m Libor Gap GEL 791 m
---------------------------------- ------------------- ---------------------- -------------------
GEL m % share GEL % share
in totals m in totals
---------------------------------- ------ ----------- ---------------------- ------ -----------
Assets 1,645 14% Assets 2,129 18%
---------------------------------- ------ ----------- ---------------------- ------ -----------
Securities with fixed
yield(<=1y)* 470 42% Nostro** 278 47%
---------------------- ------ -----------
Securities with floating
yield 127 11% NBG Reserves** 1,021 71%
---------------------- ------ -----------
Loans with Floating
yield 932 12% NBG Deposits 171 12%
---------------------- ------ -----------
Reserves in NBG 106 7% Libor Loans 626 8%
---------------------- ------ -----------
Interbank loans& Deposits Interest Rate
& Repo 9 2% Options 33
---------------------------------- ------ ----------- ---------------------- ------ -----------
Liabilities 1,828 18%
---------------------------------- ------ ----------- ---------------------- ------ -----------
Current accounts*** 380 5% Liabilities 1,338 13%
---------------------------------- ------ ----------- ---------------------- ------ -----------
Saving accounts*** 319 4% Senior Loans 1,027 40%
---------------------------------- ------ -----------
Refinancing Loan of Subordinated
NBG 775 30% Loans 311 76%
---------------------------------- ------ -----------
Interbank Loans &Deposits
& Repo 83 55%
---------------------------------- ------ -----------
IFI Borrowings 271 11%
---------------------------------- ------ -----------
(*) 67% of the less than 1 year securities are maturing in 6
months
(**) Income on NBG reserves and Nostros are calculated as
benchmark minus margin whereby benchmarks are correlated with
Libor. According to NBG regulation from March, 2016 it is possible
to apply negative interest rates on NBG reserves and correspondent
accounts, therefore these two items close the gap in case of both
upward and downward movement of Libor rate.
(***) The Bank considers that current and saving deposits
promptly react to interest rate changes on the market (within 1
month prior notification)
Source: IFRS Group Data
5) Yields and Rates
Yields and Rates 3Q'17 2Q'17 1Q'17 4Q'16 3Q'16 2Q'16
--------------------------- ------ ------ ------ ------ ------ ------
Loan yields 11.9% 12.4% 11.9% 13.8% 13.5% 13.3%
Retail loan yields
GEL 19.2% 19.7% 20.0% 23.3% 22.8% 22.7%
Retail loan yields
FX 8.5% 9.0% 9.1% 9.9% 9.9% 10.3%
Retail Loan Yields 13.8% 14.2% 13.9% 15.8% 16.0% 16.3%
Corporate loan yields
GEL 11.0% 10.6% 10.0% 9.6% 12.4% 13.7%
Corporate loan yields
FX 8.6% 9.5% 8.8% 12.5% 10.6% 8.8%
Corporate Loan Yields 9.2% 9.8% 9.1% 11.8% 11.0% 9.7%
MSME loan yields
GEL 13.1% 13.4% 13.3% 14.3% 14.2% 14.8%
MSME loan yields
FX 9.4% 10.4% 10.1% 11.1% 10.6% 10.8%
MSME Loan Yields 10.7% 11.4% 11.0% 12.0% 11.7% 11.9%
Deposit rates 3.4% 3.5% 3.4% 3.3% 3.3% 3.4%
Retail deposit rates
GEL 4.0% 3.9% 3.9% 3.7% 4.0% 4.1%
Retail deposit rates
FX 2.8% 3.0% 3.2% 3.4% 3.5% 3.6%
Retail Deposit Yields 3.0% 3.1% 3.3% 3.4% 3.6% 3.7%
Corporate deposit
rates GEL 8.3% 8.5% 8.7% 7.5% 7.3% 7.5%
Corporate deposit
rates FX 2.2% 2.1% 1.7% 2.0% 1.5% 1.3%
Corporate Deposit
Yields 5.2% 5.2% 4.9% 4.4% 4.2% 4.0%
MSME deposit rates
GEL 2.2% 2.2% 2.0% 1.7% 2.1% 2.5%
MSME deposit rates
FX 0.7% 0.6% 0.5% 0.6% 0.4% 0.4%
MSME Deposit Yields 1.4% 1.3% 1.1% 1.1% 1.1% 1.2%
Yields on Securities 8.4% 7.8% 8.1% 8.1% 8.3% 9.1%
--------------------------- ------ ------ ------ ------ ------ ------
Source: IFRS Consolidated
6) Risk Adjusted
Yields
Risk-adjusted Yields 3Q'17 2Q'17 1Q'17 4Q'16 3Q'16 2Q'16
--------------------------- ------ ------- ------ -------- ------ --------
Loan yields 10.7% 10.9% 10.5% 12.6% 12.2% 12.1%
Retail Loan Yields 10.8% 10.9% 10.6% 13.0% 13.3% 13.5%
Corporate Loan Yields 11.1% 11.3% 11.1% 14.3% 12.5% 11.1%
MSME Loan Yields 9.9% 10.5% 9.4% 9.6% 9.9% 10.7%
--------------------------- ------ ------- ------ -------- ------ --------
Source: IFRS Consolidated
Cost of Risk 3Q'17 2Q'17 1Q'17 4Q'16 3Q'16 2Q'16
------------------------ ------ ------ --------- ------ ------- ---------
Retail 3.2% 3.1% 2.9% 3.5% 2.6% 2.8%
Corporate -1.7% -1.6% -2.9% -6.4% -1.6% -1.7%
MSME 0.9% 0.7% 1.1% 3.3% 1.6% 1.2%
Total 1.3% 1.3% 0.9% 0.6% 1.1% 1.1%
------------------------ ------ ------ --------- ------ ------- ---------
Source: IFRS Consolidated
7) Loan Quality per NBG
Sub-Standard, Doubtful and Loss (SDL) Loans Ratio per NBG
Sep-17 Jun-17 Mar-17 Dec-16 Sep-16
------------------------------- ------- ------- ------- ------- -------
SDL Loans as % of Gross Loans 3.4% 3.3% 4.1% 4.3% 5.1%
------------------------------- ------- ------- ------- ------- -------
Source: NBG
8) Cross Sell Ratio[14] and Number Active Products
Sep-17 Jun-17 Mar-17 Dec-16 Sep-16
--------------------------- ------- ------- ------- ------- -------
Cross Sell Ratio 3.79 3.67 3.57 3.68 3.55
Number of Active Products
(in millions) 4.06 3.78 3.16 3.14 2.83
--------------------------- ------- ------- ------- ------- -------
Source: Management figures
9) Diversified Deposit Base
Status: monthly income >=GEL 2,000 or loans/deposits >=GEL
20,000
VIP: deposit >=USD 100,000 as well as on discretionary basis;
WM: >=USD 100,000 as well as on discretionary basis
Wealth Management includes UHNW and HNW non-resident clients
30 September 2017 Volume of Deposits Number of Deposits
------------------------------------ ------------------- -------------------
MASS 39% 93.9%
STATUS 28% 5.5%
VIP 23% 0.4%
Wealth Management for non-resident
clients 10% 0.2%
------------------------------------ ------------------- -------------------
Source: Management figures
10) Loan Concentration
Sep-17 Jun-17 Mar-17 Dec-16 Sep-16
-------------------------- ------- ------- ------- ------- -------
Top 20 Borrowers
as % of total portfolio 13.4% 13.0% 12.2% 11.3% 13.4%
Top 10 Borrowers
as % of total portfolio 8.6% 9.1% 8.3% 7.6% 8.6%
Related Party Loans
as % of total portfolio 0.1% 0.1% 0.1% 0.1% 0.1%
-------------------------- ------- ------- ------- ------- -------
Source: IFRS consolidated
11) Sales breakdown (for products offered through
Multichannel)
Sep-17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15
------------------ ------- ------- ------- ------- ------- ------- ------- -------
Digital Channels 25% 22% 24% 26% 24% 23% 27% 21%
------------------ ------- ------- ------- ------- ------- ------- ------- -------
Call Center 20% 27% 28% 29% 33% 32% 23% 28%
------------------ ------- ------- ------- ------- ------- ------- ------- -------
Branches 55% 51% 49% 45% 43% 46% 50% 51%
------------------ ------- ------- ------- ------- ------- ------- ------- -------
Source: Management figures
12) Number of Transactions in Digital Channels
3Q 17 2Q 17 1Q 17 4Q 16 3Q 16
---------------------------- ------- ------- ------ ------ ------
Internet banking number
of transactions (in
thousands) 2,175 2,166 2,098 2,280 1,828
---------------------------- ------- ------- ------ ------ ------
Mobile banking number
of transactions (in
thousands) 3,953 3,163 2,622 2,532 1,814
---------------------------- ------- ------- ------ ------ ------
POS number of transactions
(in thousands) 13,326 11,328 9,636 8,508 7,146
---------------------------- ------- ------- ------ ------ ------
POS volume of transactions
(in mln GEL) 543 447 394 376 319
---------------------------- ------- ------- ------ ------ ------
* Data includes e-commerce and excludes transactions at POS
terminals in TBC Bank's branches
Source: Management figures
13) Penetration Ratios of Digital Channels
Sep-17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15
-------------------- ------- ------- ------- ------- ------- ------- ------- -------
IB&MB Penetration
Ratio 35% 33% 34% 37% 34% 34% 32% 32%
-------------------- ------- ------- ------- ------- ------- ------- ------- -------
Mobile Banking
Penetration Ratio 27% 25% 25% 24% 20% 19% 17% 15%
-------------------- ------- ------- ------- ------- ------- ------- ------- -------
Source: Management figures
The mid-term targets for digital channels are to broaden the
penetration ratio of internet or mobile banking users to above 45%
from the current level of 35% and to increase the mobile banking
penetration ratio to above 35% from the current level of 27%.
14) Net outflow of borrowed funds
Subordinated and Senior Loans' Principal Amount Outflow by Year
(GEL million)
----------------------------------------------------------------------------------
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
57 502 264 339 273 132 148 28 68 150
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Source: Management figures, revolving non IFI loans from NBG are
excluded
15) Portfolio Breakdown by Collateral
Types as of 30-Sep-17
Cash Cover 2%
---------------------------------- -----
Gold 4%
---------------------------------- -----
Inventory 6%
---------------------------------- -----
Real Estate 64%
---------------------------------- -----
Third Party Guarantees 7%
---------------------------------- -----
Other 1%
---------------------------------- -----
Unsecured 16%
---------------------------------- -----
Source: IFRS Consolidated
16) Loan to Value by Segments as of 30-Sep-17
Retail Corporate MSME Total
------------ ----------------- -------- ---------
42% 46% 45% 44%
17) IFRS 9 project update
The Bank is in the process of implementing the IFRS 9 standard,
which will come into effect starting from 1st January 2018.
Relevant Change Areas for the Bank
-- Key areas of the IFRS 9 standard are classification and
measurement, impairment and hedge accounting
-- Based on the Bank's Business model no significant changes are
expected from classification and measurement and hedge
accounting
-- Key changes come from the impairment part, where the standard
moved from incurred credit loss to expected credit loss model
IFRS 9 Project
-- The Bank started the IFRS 9 implementation project in June
2016
-- The project is carried out with support from Deloitte
-- In parallel to methodology and model development, the Bank is
in the process of respective software implementation
High Level Expected Impact
-- The expected impact is GEL 45-65 million increase in
provisions
-- There will be no impact on profit and loss statement
-- There will be no impact on Regulatory Capital Ratios
18) NBG Initiatives
Newly introduced Liquidity Coverage Ratio
NBG has introduced new liquidity requirements (NBG LCR) for
short-term liquidity risk management purposes The new requirements,
which are in line with Basel III with additional constraints above
the Basel standards, have come into force in September 2017 and
increased the effective liquidity requirements. The limits are
defined for total and as well for both GEL and FC currencies:
Limits
-- Total LCR>=100%
-- GEL LCR>=75%
-- FC LCR>=100%
In addition, in order to improve management of long-term
liquidity, the NBG plans to implement Net Stable Funding Ratio
(NSFR), which will void existing liquidity requirement.
In 2016, the NBG initiated several measures to promote the
Larization and increase public trust in the domestic currency.
Within NBG LCR framework the national currency is treated
preferentially.
Newly introduced changes to RWA under Capital Adequacy
Framework
The NBG has also introduced PTI and LTV ratio for retail loans
which will affect loans issued after 30 November 2017. The
exposures which are out of the defined range will be assigned
higher risk weights from normal 75-100% to higher 100-150%. These
changes will have negative effects on the capital, however they are
expected to be compensated through higher pricing of such loans. In
addition, the NBG has also increased the group exposure limit from
GEL 350,000 to GEL 2 million for the regulatory retail
category.
Required PTI
Income range Hedged borrowers Non-hedged borrowers
============== ================= =====================
<1000 30% 25%
============== ================= =====================
1,000 - 2,000 35% 30%
============== ================= =====================
2,000 - 4,000 40% 35%
============== ================= =====================
4,000 - 8,000 45% 40%
============== ================= =====================
>8,000 50% 45%
============== ================= =====================
Required LTV
Collateral type GEL loans FX loans
================= ========== =========
Ordinary liquid
asset 80% 75%
================= ========== =========
High liquid
asset 90% 85%
================= ========== =========
Upcoming changes in the Capital Adequacy Framework
The NBG is reviewing the existing capital adequacy regulation
and is planning to introduce certain changes from Q4 2017.
Currently these changes are in draft form and are being discussed
with the banks and other stakeholders.
Main changes are as per below:
-- Current capital requirement will be divided across Pillar 1
and Pillar 2 buffers to increase clarity and comparability
-- Capital conservation buffer currently incorporated in minimum
capital requirements will be separated
-- Systemic risk buffer will be introduced for systematically
important banks over 3 year period
-- Countercyclical capital buffer will be introduced and the
rate will be 0%
-- Additional loan portfolio concentration buffer will be
introduced under Pillar 2
-- Current conservative weighting for CICR will be replaced by
appropriate Pillar 2 buffer (Unhedged Currency Induced Credit Risk
Buffer)
-- GRAPE buffer defined by the supervisor will be applied based
on the bank specific risks
The exact requirements, as well as the amount of the buffers and
its impact on the capital planning are not yet determined. The
initial assessments show that the changes should not impact the
growth and dividend guidelines.
19) TBC Insurance
In thousands of GEL 3Q'17 2Q'17 1Q'17 4Q'16
----------------------- ------ ------ ------ ------
Gross written premium 8,584 6,275 4,306 2,227
Net earned premium 4,622 3,873 2,475 1,827
Net profit 885 -94 -458 -929
3Q'17 2Q'17 1Q'17 4Q'16
-------------------- ------ ------ ------ ------
Net combined ratio 92% 107% 114% 166%
3Q'17 2Q'17 1Q'17 4Q'16
------------------- -------- -------- -------- ------
Market share[15] 10.9% 9.0% 7.9% 3.5%
3Q'17 2Q'17 1Q'17 4Q'16
------------------- -------- -------- -------- ------
Number of clients 239,472 174,385 116,456 2,887
[1]Excluding one-off items
[2] Calculated as the difference in cost of incremental funding
in 3Q 2017 applied to the difference between actual average
liquidity in 3Q and minimum requirement plus internal buffer per
old requirement
(1) Excluding one-off items
[3] Market share figures are based on data from the National
Bank of Georgia (NBG). NBG includes interbank loans for calculating
market share in loans
[4] Excluding one-off items
[5] Calculated as the difference in cost of incremental funding
in 3Q 2017 applied to the difference between actual average
liquidity in 3Q and minimum requirement plus internal buffer per
old requirement
[6] Number of transactions conducted in remote channels divided
by total number of transactions
([7]) Based on data provided by Insurance State Supervision
Service of Georgia
[8] Detailed information is provided in Annex 18 (NBG
initiatives) on pages 39-40
[9] Detailed information is provided in Annex 18 (NBG
initiatives) on pages 39-40
[10] Detailed information is provided in Annex 18 (NBG
initiatives) on pages 39-40
[11] Calculated as the difference in cost of incremental funding
in 3Q 2017 applied to the difference between actual average
liquidity in 3Q and minimum requirement plus internal buffer per
old requirement
[12] According to the international credit rating agencies
[13] TBC Bank Group PLC became the parent company of JSC TBC
Bank on 10 August 2016
[14] Cross-sell ratio is defined as the number of active
products divided by the number of active customers
[15] Market share excluding health insurance; Source: Insurance
State Supervision Service of Georgia
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRTKMMMMVVKGNZG
(END) Dow Jones Newswires
November 16, 2017 02:07 ET (07:07 GMT)
Tbc Bank (LSE:TBCG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Tbc Bank (LSE:TBCG)
Historical Stock Chart
From Apr 2023 to Apr 2024