TBC BANK GROUP PLC ("TBC Bank")
4Q 2020 UNAUDITED CONSOLIDATED FINANCIAL RESULTS AND FY 2020 PRELIMINARY UNAUDITED CONSOLIDATED FINANCIAL RESULTS
Forward-Looking Statements
This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause the actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or the "Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the achievement of anticipated levels of profitability, growth, cost and recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Georgian economic, the impact of COVID-19, the political and legal environment, financial risk management and the impact of general business and global economic conditions.
None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and subject to compliance with applicable law and regulation the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.
Certain financial information contained in this presentation, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management's accounts and financial statements. The areas in which the management's accounts might differ from the International Financial Reporting Standards and/or U.S. generally accepted accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, the numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.
Fourth Quarter 2020 Unaudited Consolidated Financial Results and Full Year 2020 Preliminary Unaudited Consolidated Financial Results Conference Call
TBC Bank Group PLC ("TBC PLC") publishes its unaudited consolidated financial results for the fourth quarter 2020 and preliminary consolidated financial results for the full year 2020 on Friday, 19 February 2021 at 7.00 am GMT (11.00 am GET). The results call will be held at 14.00 (GMT) / 15.00 (CET) / 9.00 (EST).
Please click the link below to join the webinar:
https://tbc.zoom.us/j/91410249875?pwd=NlJhSkR3L1FyUjdpYWNMUHZwVjg5UT09
Webinar ID: 914 1024 9875
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Or, use the following dial-ins:
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· Russian Federation: 8800 301 7427 (Toll Free) or 8800 100 6938 (Toll Free)
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Other international numbers available at: https://tbc.zoom.us/u/abi201nLxM
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Contacts
| Zoltan Szalai Director of International Media and Investor Relations
E-mail: ZSzalai@Tbcbank.com.ge Tel: +44 (0) 7908 242128 Web: www.tbcbankgroup.com Address: 68 Lombard St, London EC3V 9LJ, United Kingdom | Anna Romelashvili Head of Investor Relations
E-mail: IR@tbcbank.com.ge Tel: +(995 32) 227 27 27 Web: www.tbcbankgroup.com Address: 7 Marjanishvili St. Tbilisi, Georgia 0102 | Investor Relations Department
E-mail: IR@tbcbank.com.ge Tel: +(995 32) 227 27 27 Web: www.tbcbankgroup.com Address: 7 Marjanishvili St. Tbilisi, Georgia 0102 |
Table of Contents
4Q and FY 2020 Results Announcement
TBC Bank – Background.......................................................................................................................................5
Financial Highlights...............................................................................................................................................5
Letter from the Chief Executive Officer................................................................................................................8
Economic Overview............................................................................................................................................ 11
Unaudited Consolidated Financial Results Overview for 4Q 2020.....................................................................13
Unaudited Consolidated Financial Results Overview for FY 2020.....................................................................25
Additional Disclosures.........................................................................................................................................37
1) Subsidiaries of TBC Bank Group PLC............................................................................................................37
2) TBC Insurance.................................................................................................................................................38
3) Loan book breakdown by stages according IFRS 9........................................................................................39
4) Reconciliation of Return on equity (ROE) with ROE before expected credit loss allowances......................40
TBC Bank Group PLC ("TBC Bank")
TBC Bank Announces Unaudited Preliminary 4Q and FY 2020 Consolidated Financial Results
European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation.
TBC Bank - Background
TBC Bank is the largest banking group in Georgia, where 99.5% of its business is concentrated, with a 38.2% market share by total assets. It offers retail, corporate, and MSME banking nationwide.
These unaudited financial results are presented for TBC Bank Group PLC ("TBC Bank" or "the Group"), which was incorporated on 26 February 2016 as the ultimate holding company for JSC TBC Bank Georgia. TBC Bank became the parent company of JSC TBC Bank Georgia on 10 August 2016, following the Group's restructuring. As this was a common ownership transaction, the results have been presented as if the Group existed at the earliest comparative date as allowed under the International Financial Reporting Standards ("IFRS"), as adopted by the European Union. TBC Bank successfully listed on the London Stock Exchange's premium listing segment on 10 August 2016. TBC Bank is a constituent of the FTSE 250 Index and MSCI United Kingdom Small Cap Index. It is also a member of the FTSE4Good Index Series.
TBC Bank Group PLC's financial results are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Changes in accounting policies, IAS 16
In 2Q 2020, the accounting policy in relation to subsequent measurement of land, buildings and construction in progress was changed from the revaluation model to the cost model. This led to the restatement of appropriate balance sheet amounts in 2019, while no material impact was recorded in the income statement.
Financial Highlights
4Q 2020 P&L Highlights
o Profit for the period amounted to GEL 100.7 million (4Q 2019: GEL 160.0 million)
o Return on average equity (ROE) stood at 13.7% (4Q 2019: 25.2%[1])
o ROE before expected credit loss allowances[2] stood at 24.6% (4Q 2019: 25.2%1)
o Return on average assets (ROA) stood at 1.8% (4Q 2019: 3.5%1)
o Cost to income of TBC Bank Group PLC stood at 39.7% (4Q 2019: 41.8%)
o Standalone cost to income ratio of the Bank[3] was 34.1% (4Q 2019: 36.2%)
o Cost of risk stood at 2.0% (4Q 2019: -0.2%)
o Net interest margin (NIM) stood at 4.8% (4Q 2019: 5.3%)
o Basic earnings per share stood at GEL 1.83 (4Q 2019: GEL 2.92)
o Diluted earnings per share stood at GEL 1.79 (4Q 2019: GEL 2.91)
FY 2020 P&L Highlights
o Profit for the period amounted to GEL 322.5 million (FY 2019: GEL 540.3 million)
o Return on average equity (ROE) stood at 11.7% (FY 2019: 22.9%[4])
o ROE before expected credit loss allowances[5] stood at 24.7% (FY 2019: 26.8%4)
o Return on average assets (ROA) stood at 1.6% (FY 2019: 3.2%4)
o Cost to income of TBC Bank Group PLC stood at 38.4% (FY 2019: 39.9%)
o Standalone cost to income ratio of the Bank[6] was 32.9% (FY 2019: 35.9%)
o Cost of risk stood at 2.4% (FY 2019: 0.7%)
o Net interest margin (NIM) stood at 4.7% (FY 2019: 5.6%)
o Basic earnings per share stood at GEL 5.84 (FY 2019: GEL 9.83)
o Diluted earnings per share stood at GEL 5.76 (FY 2019: GEL 9.76)
Balance Sheet Highlights as of 31 December 2020
o Total assets amounted to GEL 22,557.8 million, up by 23.0% YoY
o Gross loans and advances to customers stood at GEL 15,200.5 million, up by 20.0% YoY or at 8.7% on a constant currency basis
o Net loans to deposits + IFI[7] funding stood at 101.2%, down by 3.6 pp YoY, and Regulatory Net Stable Funding Ratio (NSFR), effective from 30 September 2019, stood at 126.0%
o NPLs were 4.7%, up by 2.0 pp YoY
o NPLs coverage ratios stood at 85.6%, or 189.1% with collateral, on 31 December 2020 compared to 91.1% or 194.2% with collateral, as of 31 December 2019
o Total customer deposits amounted to GEL 12,572.7 million, up by 25.1% YoY or at 13.8% on constant currency basis
o The Bank's Basel III CET 1, Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 10.4%, 13.0%, and 17.1%, respectively, while minimum eased regulatory requirements amounted to of 7.4%, 9.2%, and 13.7%, respectively
Market Shares as of December 2020[8]
o Market share by total assets reached 38.2%, remaining the same YoY
o Market share by total loans was 39.0%, down by 0.5 pp YoY
o Market share of total deposits reached 37.2%, down by 1.8 pp YoY
4Q 2020 Operating Highlights
o The number of affluent customers reached 98.0 thousand as of 31 December 2020, up by 15% YoY
o 96% of all transactions were conducted through digital channels[9] (4Q 2019: 93%)
o The penetration ratio for internet and mobile banking[10] stood at 50% for 4Q 2020 (4Q 2019: 48%)
o The penetration ratio for mobile banking[11] stood at 48% for 4Q 2020 (4Q 2019: 44%)
| Income Statement Highlights |
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| in thousands of GEL | 4Q'20 | 4Q'19 | Change YoY | FY'20 | FY'19 | Change YoY |
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| Net interest income | 231,325 | 209,318 | 10.5% | 835,433 | 801,539 | 4.2% |
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| Net fee and commission income | 52,199 | 54,844 | -4.8% | 182,767 | 187,290 | -2.4% |
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| Other operating non-interest income[12] | 38,573 | 40,075 | -3.7% | 137,391 | 139,414 | -1.5% |
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| Credit loss allowance | (79,370) | 224 | NMF | (351,847) | (91,992) | NMF |
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| Operating profit after expected credit losses | 242,727 | 304,461 | -20.3% | 803,744 | 1,036,251 | -22.4% |
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| Losses from modifications of financial instrument | (5,082) | - | NMF | (41,015) | - | NMF |
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| Operating expenses | (127,950) | (127,124) | 0.6% | (443,623) | (450,726) | -1.6% |
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| Profit before tax | 109,695 | 177,337 | -38.1% | 319,106 | 585,525 | -45.5% |
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| Income tax expense | (8,994) | (17,313) | -48.1% | 3,383 | (45,184) | NMF |
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| Profit for the period | 100,701 | 160,024 | -37.1% | 322,489 | 540,341 | -40.3% |
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Balance Sheet and Capital Highlights | Dec-20 | Dec-19 | Change YoY | |
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| Total Assets | 22,557,805 | 18,359,266* | 23.0% | |
| Gross Loans | 15,200,520 | 12,661,955 | 20.0% | |
| Customer Deposits | 12,572,728 | 10,049,324 | 25.1% | |
| Total Equity | 2,935,934 | 2,599,090* | 13.0% | |
| Regulatory Common Equity Tier I Capital (Basel III) | 1,911,233 | 1,871,892 | 2.1% | |
| Regulatory Tier I Capital (Basel III) | 2,385,181 | 2,281,706 | 4.5% | |
| Regulatory Total Capital (Basel III) | 3,137,912 | 2,974,029 | 5.5% | |
| Regulatory Risk Weighted Assets (Basel III) | 18,301,477 | 15,593,925 | 17.4% | |
* Certain amounts do not correspond to the 2019 consolidated financial statement as they reflect the change in accounting policy for PPE (property, plant and equipment) from the revaluation model to the cost method in 2Q 2020
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| Key Ratios | 4Q'20 | 4Q'19 | Change YoY | FY'20 | FY'19 | Change YoY | |
| ROE | 13.7% | 25.2%* | -11.5 pp | 11.7% | 22.9%* | -11.2 pp | |
| ROE before expected credit loss allowances | 24.6% | 25.2%* | -0.6 pp | 24.7% | 26.8%* | -2.1 pp | |
| ROA | 1.8% | 3.5%* | -1.7 pp | 1.6% | 3.2%* | -1.6 pp | |
| NIM | 4.8% | 5.3% | -0.5 pp | 4.7% | 5.6% | -0.9 pp | |
| Cost to income | 39.7% | 41.8% | -2.1 pp | 38.4% | 39.9% | -1.5 pp | |
| Standalone cost to income of the Bank[13] | 34.1% | 36.2% | -2.1 pp | 32.9% | 35.9% | -3.0 pp | |
| Cost of risk | 2.0% | -0.2% | 2.2 pp | 2.4% | 0.7% | 1.7 pp | |
| NPL to gross loans | 4.7% | 2.7% | 2.0 pp | 4.7% | 2.7% | 2.0 pp | |
| NPLs coverage ratio exc. collateral | 85.6% | 91.1% | -5.5 pp | 85.6% | 91.1% | -5.5 pp | |
| CET 1 CAR (Basel III) | 10.4% | 12.0% | -1.6 pp | 10.4% | 12.0% | -1.6 pp | |
| Regulatory Tier 1 CAR (Basel III) | 13.0% | 14.6% | -1.6 pp | 13.0% | 14.6% | -1.6 pp | |
| Regulatory Total CAR (Basel III) | 17.1% | 19.1% | -2.0 pp | 17.1% | 19.1% | -2.0 pp | |
| Leverage (Times) | 7.7x | 7.1x** | 0.6x | 7.7x | 7.1x** | 0.6x | |
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood at 24.7% and 22.4% for 4Q 2019 and FY 2019, respectively, while ROE before expected credit loss allowances stood at 24.7% and 26.3% and ROA remained unchanged for both periods
** Prior to the change in PPE (property, plant and equipment) accounting policy from revaluation model to cost method, leverage stood at 7.0x for 4Q 2019 and FY 2019
Letter from the Chief Executive Officer
I would like to present our financial and operating results for 2020 and update you on recent economic developments in the country.
Summary of the year
Looking back at 2020, three words come to my mind: support, agility and digitalization.
From the very early days of pandemic outbreak in March, we promptly mobilized all our efforts to support our employees and customers and stood firmly by their side throughout the year. We were one of the first Georgian companies to implement remote working practices for our back-office employees and equip our front offices with all the necessary protective measures to ensure full safety for our customers and employees. In addition, senior management conducted regular online meetings with our colleagues in order to address any concerns that employees might have and to provide assurance about our financial stability. We also made the commitment to retain all our staff during 2020 despite the slowdown in business activities. We pride ourselves on having maintained high employee motivation and engagement levels during the year, with our Employee Net Promoter score amounting to 68%[14] and our Engagement Index reaching as high as 91%[15]. In addition, this year we measured the Employee Happiness Index for the whole organization for the first time, which yielded a very satisfying result: 85%[16] of our employees felt happy and satisfied with their jobs.
Equally important was extending support to our customers and demonstrating through our actions what customer centricity actually means to us. First and foremost, we offered eligible customers two major three-month grace periods, conducted loan restructurings where appropriate, continued to provide funding and actively participated in various government support programmes.
Conducting business as usual and serving our customers without any disruption via our distribution network was another priority for us. Our market-leading digital channels proved to be essential, enabling our customers to conduct most of their banking transactions remotely. Moreover, our call center worked with increased capacity during the early days of the pandemic in order to address our customers' concerns in a timely manner. We are delighted that our efforts were acknowledged by our customers and TBC was once again regarded as the best service provider in the country in 2020, based on a customer satisfaction survey conducted by IPM, an independent research company, in December.
Macro overview
Following a 5.6% drop in the third quarter, real GDP decreased by 6.5% year-on-year in the last quarter of 2020 due to the reintroduction of a partial lockdown in late November. For the full year 2020, the drop in GDP was 6.1%. Since the beginning of the pandemic, tourism inflows have remained close to zero, although non-tourism inflows have displayed resilience. During the year, exports decreased by 12.0% in USD terms (or increased by 3.5% without re-exports), while imports dropped by 15.9% over the same period. As a result, the trade balance improved by around one billion USD, or by 18.8%, compared to 2019. In addition, remittance inflows increased by 8.8%[17] in 2020, including a strong 15.7% year-on-year growth in the fourth quarter.
Alongside fiscal stimulus, credit also supported economic activity. During the year, the total banking loan portfolio expanded by 9.1%, excluding the exchange rate effect, mainly driven by the retail segment on the back of the state mortgage subsidy programme. The two three-month long loan repayment grace periods introduced during the year also contributed to the increase in loan balances.
Based on TBC Capital's latest estimates, the economy is expected to recover by 4.2% in 2021. According to the World Bank's latest projections,[18] the Georgian economy will grow by 4.0% and 6.0% in 2021 and 2022, respectively.
Resilient financial performance
In 2020, our operating income amounted to GEL 1,556 million, up by 2.4% year-on-year basis driven by increase in net interest income. Over the same period, our income generation was supported by effective cost management. During the year, we also recorded a net modification loss of financial instruments in the amount of GEL 41.0 million to reflect the decrease in the present value of cash flows resulting from the loan repayment grace periods granted to borrowers. As a result, our ROE before expected credit loss allowances amounted to 24.7% compared to 26.8% a year ago. For the full year 2020, our net interest margin was 4.7%, while the cost to income ratio for the group amounted to 38.4%, an improvement of 1.5pp year-on-year, and 32.9% for the standalone bank. In 2020, our provision charges increased significantly to cover the potential impact of the COVID-19 pandemic on our borrowers, which resulted in a total cost of risk for the full year of 2.4% compared to 0.7% in 2019. As a result, we recorded consolidated net profit of GEL 322.5 million for 2020, while our return on equity and return on assets stood at 11.7% and 1.6%, respectively.
Our loan book increased by 8.7% year-on-year in constant currency terms, which translated into a 39.0% market share. Over the same period, our deposits increased by 13.8% on constant currency terms. As a result, our market share in total deposits amounted to 37.2% as of 31 December 2020.
Our liquidity and capital positions remain strong. As of 31 December 2020, our net stable funding (NSFR) and liquidity coverage ratios (LCR) stood at 126.0% and 134.2%, respectively. Our capital ratios improved quarter-on-quarter as a result of net profit generation (no extra COVID-19 related provisions were booked in the fourth quarter, per NBG provisioning rules). Our CET1, Tier 1 and Total Capital ratios stood at 10.4%, 13.0% and 17.1%, respectively, and remained comfortably above the eased minimum regulatory requirements by 3.0%, 3.8% and 3.4%, accordingly.
Business update
As digital offerings became a true necessity during the pandemic, we further increased our digital focus and introduced new products and services, including a fully digital onboarding process via our internet and mobile banking, digital lending platforms for retail customers, a mobile app for businesses and a digital platform for factoring. Our offloading ratio in the retail segment[19] remained high at 96% in the fourth quarter 2020, while the number of digital users[20] over the same period reached around 692,000, up by 8.7% year-on-year.
In 2020, we maintained our leading position in the payments business, both in terms of payments acceptance and retail transactions. The total volume of transactions performed by our retail banking customers stood at GEL 76.2 billion, down by 6.3% year-on-year, while our payments acceptance business processed GEL 14.3 billion transactions, up by 8.3% year-on-year, served around 14,750 merchants and kept our market share in e-commerce & POS of 58%[21] by volume of transactions. Our subsidiary, TBC Pay increased its presence in the self-service terminal market to 3,905 terminals and maintained its leading position among peers. During 2020, we focused on further strengthening the seamlessness of our payment services, introducing innovative payment solutions and strengthening our risk management practices. For retail customers we introduced subscription services and digital cards, and we also entered the Tbilisi transportation payment network. For businesses, we further streamlined the onboarding processes and introduced a digital plug-and-play checkout solution for ecommerce payments.
Last year was a significant milestone in terms of our international expansion. In April, we received our banking licence in Uzbekistan, and in October, we launched our services for the wider public under the TBC UZ brand. At the center of our services is our digital banking platform, Space. By the end of January, we attracted 26,520 users, delivered 12,002 debit cards, gained 1,857 deposit customers and managed to launch our initial lending value proposition. We already operate around 20 outlets, which are used for customer onboarding and assisted service support. At present, we are only serving the retail segment, and we plan to extend our offering to MSMEs at a later stage. TBC UZ is run by an experienced management team, comprised of both Uzbek and Georgian professionals. I am also impressed by the results of our Uzbek payments subsidiary, Payme, which grew significantly during the year, despite COVID-19, and is the second largest payments provider in the country with its 2.9 million users. Its revenue increased by 94.7% and amounted to GEL 16.6 million, while net profit grew by 89.1% and reached GEL 8.3 million.
I would also like to update you on our Azerbaijan venture. The shareholder agreement with Yelo Bank expired at the end of 2020 before the merger between TBC Kredit and Yelo Bank could be implemented. Our Azeri subsidiary, TBC Kredit, will continue its operations as previously, and our international expansion efforts will be focused on Uzbekistan market.
I would like to inform you regarding our recent ESG achievement. We became the first bank in Georgia to successfully complete ISO 14001:2015 certification audit remotely and receive the ISO 14001:2015 certification for environmental management system. The certification serves as testament to our environmental management system's full compliance with international standards.
Further important news for our shareholders was the inclusion of TBC Bank Group PLC into the MSCI United Kingdom Small Cap Index from December 1, 2020.
Outlook
2020 was a transformational year, significantly changing the way people lead their daily lives and interact with each other. We did our best to embrace the change and turn challenges into new opportunities. Remote working practices have given our employees more flexibility in finding the right work-life balance, online meetings have proved very effective, while further digitalization of our processes and offerings have helped our customers to save more time. Going forward, we will continue to strengthen our digital and analytical capabilities across all levels of the group in line with our vision of making life easier for our customers as well as other stakeholders.
I would also like to re-iterate our medium term guidance: ROE of above 20%, a cost to income ratio below 35%, a dividend pay-out ratio of 25-35% and loan book annual growth of around 10-15%.
Economic Overview
Economic growth
Georgia's real GDP decreased by 6.1% in 2020 due to COVID-19 related lock-down and restrictions throughout the year. However, real GDP is expected to increase by 4.2% in 2021, followed by a solid 7.4% YoY growth in 2022 according to TBC Capital estimates.
External sector
While the tourism sector was hit hard with an 84.0%[22] decline in inflows in USD terms on an annual basis in 2020, other inflows demonstrated much more resilience. In 2020, exports in goods only declined by 12.0% in USD terms, but, without re-exports, they increased by 3.5%. It is important to highlight that the Georgian economy produces very few, if any, investment goods, the demand for which will be more subdued compared to the demand for essentials. In addition, remittance inflows have shown positive dynamics, with money transfers up by 8.8%[23] year-on-year. Regarding tourism, it is important to consider Georgia's favourable tourism structure: the share of business and long-haul trips in tourism inflows is relatively small; the majority of visitors arrive by car and Georgia enjoys an abundance of open-air tourism facilities. This, coupled with the roughly 20% growth in tourism inflows before the pandemic, despite the 2019 Russian flight ban, enables us to argue that, alongside progress in vaccinations and medical treatment, the tourism industry in Georgia will gradually get back on track: in the baseline scenario we assume a recovery of 30.0% in tourism inflows in 2021 compared to the 2019 level, followed by a 90.0% recovery in 2022.
As domestic demand deteriorated further due to the re-introduction of the partial lockdown, the decline in imports of goods dipped to 17.2% year-on-year in the fourth quarter, compared to a 11.3% decrease in the third quarter. For 2020 as a whole, imports dropped by 15.9% compared to 2019. The decline was partially offset by more resilient food and beverages (-4.6% YoY) and industrial supplies (-6.7% YoY). On the other hand, all other broad categories suffered from sharp declines: consumer goods (-16.3% YoY), capital goods (-22.1% YoY), transport equipment (-25.0%), and fuels (-27.5% YoY). As exports were stronger than imports, the balance of trade in goods improved by 1.075 billion USD, or by 18.8% year-on-year in 2020. However, the CA balance still likely worsened for the full year, as the above-mentioned effects will be outweighed by the deteriorating balance of trade in services due to the close-to-zero tourism inflows.
Fiscal stimulus
Fiscal stimulus strongly supported the economy throughout the year. Fiscal spending, predominantly financed externally, stood at around 9.1% of GDP in 2020. According to TBC Capital estimates, out of the external funding raised by the government in 2020, approximately USD 300 million is to be utilized in 2021. Therefore, this buffer, coupled with additional attracted borrowings amounting to around USD 774 million, is expected to be available in 2021.
Credit growth
Bank credit growth weakened to 9.1% YoY in FX adjusted terms by the end of Q4 2020, compared to a 12.0% year-on-year growth by the end of 3Q 2020. In terms of segments, corporate lending slowed to 6.9%. Similarly, MSME loan book growth slowed to 10.5% YoY, compared to 15.3% by the end of Q3 2020. On the other hand, retail lending continued its strong performance, with 9.9% YoY growth by the end of Q4 2020, following a 9.3% YoY increase by the end of Q3 2020. Retail lending was supported by strong mortgage demand on the back of the government mortgage subsidy programme. As for the non-mortgage segment, growth strengthened on the back of the low base effect in 2019, due to the NBG's responsible lending regulations. At the same time, the grace periods on loan repayments also contributed to higher credit balances in 2020.
Inflation, monetary policy and the exchange rate
Although the GEL exchange rate depreciation remained an additional challenge in 2020, the response of the central bank has been appropriate, compensating for the external shock through active interventions on the FX market, selling a total of USD 873.2 million. On the other hand, the NBG remained prudent, easing the monetary policy rate gradually from 9.0% before pandemic to 8.0% as of the end of December 2020. By the end of 2020, the USD/GEL exchange rate stabilized at 3.28, down by 0.3% from the previous quarter. The monthly dynamics of prices indicate some moderation of inflation by the end of 2020, as prices only went up by 2.4%, mostly explained by the government subsidy programme for household utilities. According to the baseline scenario, given the delays in the exchange rate pass-through to inflation, increased utility bills, and higher production costs, the inflation rate is first expected to rise in 2021, before gradually retreating to its target level, which is only likely in 2022. Amid the declining inflation expectations, the refinance rate is assumed to be reduced to 7.50-7.75% in 2021.
Going forward
According to the World Bank's latest Global Economic Prospects[24], the Georgian economy is expected to recover by 4.0% and 6.0% in 2021 and in 2022, respectively. The projection is broadly in line with TBC Capital's baseline scenario, with a 4.2% increase in 2022 and a higher 7.4% rebound in the following year.
More information on the Georgian economy and financial sector can be found at www.tbccapital.ge.
Unaudited Consolidated Financial Results Overview for 4Q 2020
This statement provides a summary of the unaudited business and financial trends for 4Q 2020 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.
TBC Bank Group PLC's financial results are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Please note, that there might be slight differences in previous periods' figures due to rounding.
Changes in accounting policies, IAS 16
In 2Q 2020, the accounting policy in relation to subsequent measurement of land, buildings and construction in progress was changed from the revaluation model to the cost model. This led to the restatement of appropriate balance sheet amounts, in 2019, while no material impact was recorded in the income statement.
Net Interest Income
In 4Q 2020, net interest income amounted to GEL 231.3 million, up by 10.5% YoY and 9.2% on a QoQ basis.
The YoY increase in interest income by GEL 61.7 million, or 15.7%, was primarily related to an increase in interest income from loans, which was driven by an increase in the gross loan portfolio of GEL 2,538.6 million, or 20.0%. This was partially offset by a 0.7pp drop in loan yields on the back of decrease in the average Libor and refinance rate, currency depreciation, as well as segment mix change. Furthermore, the increase in interest income was driven by the growth in interest income from investment securities, related to an increase in the respective portfolio by GEL 613.3 million, or 30.5%, as well as an increase in the respective yields by 1.3pp. The latter was driven by the increased share of new securities acquired in 2020 with higher interest rates, due to an increasing trend in the refinance rate.
Over the same period, interest expense increased by GEL 35.9 million, or 18.7%, mainly driven by an increase in interest expense from deposits, which was related to a growth in the respective portfolio of GEL 2,523.4 million, or 25.1% YoY, mainly driven by the corporate and retail segments. In addition, the increase in interest expense from deposits was driven by an increase in the cost of corporate deposits by 0.6pp, due to an increase in the Ministry of Finance (MOF) placements; without the latter, corporate yield would have been 0.1pp lower due to a decrease in the average refinance rate. Another driver was the increase in interest expense from other borrowed funds due to an increase in the respective portfolio by GEL 918.7 million, or 26.8%, driven by an increase in the average balance of the NBG loan. This increase was partially offset by the drop in the respective yield by 0.9pp, mainly driven by FC yield on the back of the decrease in Libor.
The increase in interest income on a QoQ basis of GEL 27.6 million, or 6.5%, was mainly driven by an increase in interest income from loans to customers, which was related to an increase in the respective portfolio of GEL 609.7 million, or 4.2%, as well as an increase in loan yields of 0.2pp, due to currency mix change with increased share of GEL loans.
The increase in interest expense of GEL 10.2 million, or 4.7% on a QoQ basis, was mainly driven by an increase in interest expense from deposits and other borrowed funds. The former increase was related to growth in the respective portfolio by GEL 229.3 million, or 1.9% QoQ. This effect was partially offset by the decrease in the cost of retail deposits of 0.1pp on the back of high liquidity. The increase in interest expense from other borrowed funds was due to an increase in the respective portfolio of GEL 444.2 million, or 11.4%, driven by an increase in the average balance of the NBG loan. This increase was further supported by an increase in the respective yield of 0.2pp, driven by FC yields due to the pre-payment of one large borrowed fund.
In 4Q 2020, our net gains from currency swaps decreased by 42.2% YoY and was up by 64.1% on a QoQ basis. The YoY decrease was driven by the decline in interest rate spread on the international markets, due to a decline in the federal funds rate, while the QoQ increase was mainly attributable to an increase in currency swap operations.
In 4Q 2020, our NIM stood at 4.8%, down by 0.5 pp YoY and up 0.2 pp on a QoQ basis.
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Interest income | 453,874 | 426,232 | 392,154 | 15.7% | 6.5% |
| Interest expense | (227,786) | (217,639) | (191,891) | 18.7% | 4.7% |
| Net gains from currency swaps | 5,237 | 3,191 | 9,055 | -42.2% | 64.1% |
| Net interest income | 231,325 | 211,784 | 209,318 | 10.5% | 9.2% |
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| NIM | 4.8% | 4.6% | 5.3% | -0.5 pp | 0.2 pp |
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Net fee and commission income
In 4Q 2020, net fee and commission income totaled GEL 52.2 million, down by 4.8% YoY, and up by 9.9% QoQ.
The YoY decrease was mainly driven by card operations due to the slow-down in economic activities related to the COVID-19 pandemic. This was slightly offset by an increase in net fee income from guarantees and letters of credit, attributable to an increase in the respective portfolio.
The increase on a QoQ basis was spread across all major categories, with the largest contribution coming from settlement transactions, on the back of increased transfer operations and seasonality, which were more than offset by the negative effects of the restrictive measures in 4Q 2020.
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Net fee and commission income |
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| Card operations | 10,326 | 11,318 | 16,649 | -38.0% | -8.8% |
| Settlement transactions | 25,736 | 22,535 | 24,887 | 3.4% | 14.2% |
| Guarantees issued and letters of credit | 10,366 | 9,624 | 8,831 | 17.4% | 7.7% |
| Other | 5,771 | 4,022 | 4,477 | 28.9% | 43.5% |
| Total net fee and commission income | 52,199 | 47,499 | 54,844 | -4.8% | 9.9% |
Other Non-Interest Income
Total other non-interest income decreased by 3.7% YoY and increased by 13.7% QoQ, amounting to GEL 38.6 million in 4Q 2020.
The YoY decrease was related to a decline in net insurance premium earned after claims and acquisition costs, which was mainly driven by the following factors: increased claims on health insurance business, as well as increased motor claims due to government restrictive measures on public transportation, which led to higher usage of private automobiles.
The QoQ increase was mainly due to growth in FX operations, driven by an increased number and volume of transactions across all segments as well as higher margins and increased demand for FX derivative products.
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Other non-interest income |
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| Net income from foreign currency operations | 28,100 | 22,131 | 28,006 | 0.3% | 27.0% |
| Net insurance premium earned after claims and acquisition costs[25] | 3,263 | 5,941 | 5,659 | -42.3% | -45.1% |
| Other operating income | 7,210 | 5,841 | 6,410 | 12.5% | 23.4% |
| Total other non-interest income | 38,573 | 33,913 | 40,075 | -3.7% | 13.7% |
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Credit Loss Allowance
Credit loss allowance for loans in 4Q 2020 amounted to GEL 79.4 million, which translated into a 2.0% cost of risk.
Both the YoY and QoQ increases were mainly driven by deteriorated macro expectations, as a result of the partial lockdown related to COVID-19 in 4Q 2020.
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Credit loss allowance for loan to customers | (75,711) | (5,884) | 5,148 | NMF | NMF |
| Credit loss allowance for other transactions | (3,659) | (7,542) | (4,924) | -25.7% | -51.5% |
| Total credit loss allowance | (79,370) | (13,426) | 224.0 | NMF | NMF |
| Operating profit after expected credit losses | 242,727 | 279,770 | 304,461 | -20.3% | -13.2% |
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| Cost of risk | 2.0% | 0.2% | -0.2% | 2.2 pp | 1.8 pp |
Operating Expenses
In 4Q 2020, our operating expenses remained broadly stable YoY and increased by 12.7% QoQ.
The QoQ increase was mainly driven by an increase in staff and administrative &other expenses attributable to seasonally high costs in 4Q, while operating costs remained broadly stable YoY due to effective cost control measures.
As a result, in 4Q 2020, our cost to income ratio stood at 39.7%, down by 2.1pp YoY and up by 1.0pp on a QoQ basis, while our standalone cost to income stood at 34.1%, down by 2.1 pp YoY and up by 0.6 pp on a QoQ basis.
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Operating expenses |
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| Staff costs | (67,782) | (62,255) | (68,934) | -1.7% | 8.9% |
| Provisions for liabilities and charges | (724) | (2,059) | (2,632) | -72.5% | -64.8% |
| Depreciation and amortization | (18,838) | (17,339) | (9,921) | 89.9% | 8.6% |
| Administrative & other operating expenses | (40,606) | (31,860) | (45,637) | -11.0% | 27.5% |
| Total operating expenses | (127,950) | (113,513) | (127,124) | 0.6% | 12.7% |
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| Cost to income | 39.7% | 38.7% | 41.8% | -2.1 pp | 1.0 pp |
| Standalone cost to income* | 34.1% | 33.5% | 36.2% | -2.1 pp | 0.6 pp |
* For the ratio calculation all relevant group recurring costs are allocated to the bank
NMF - no meaningful figures
Net Income
In 4Q 2020, we generated GEL 100.7 million in net profit, down by 37.1% YoY, or 34.0% QoQ. Both the YoY and QoQ decreases were primarily due to the second wave of governmental COVID-19 related restrictive measures, which resulted in increased provision expense.
As a result, our ROE stood at 13.7%, down by 11.5pp YoY, while ROE before expected credit loss allowances stood at 24.6%, down by 0.6pp YoY.
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Losses from modifications of financial instruments | (5,082) | (1,763) | - | NMF | NMF |
| Profit before tax | 109,695 | 164,494 | 177,337 | -38.1% | -33.3% |
| Income tax expense | (8,994) | (11,906) | (17,313) | -48.1% | -24.5% |
| Profit for the period | 100,701 | 152,588 | 160,024 | -37.1% | -34.0% |
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| ROE | 13.7% | 22.0% | 25.2%* | -11.5pp | -8.3 pp |
| ROE before expected credit loss allowances | 24.6% | 23.9% | 25.2%* | -0.6pp | 0.7 pp |
| ROA | 1.8% | 2.9% | 3.5%* | -1.7pp | -1.1 pp |
*Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood at 24.7%, while ROE before expected credit loss allowances stood at 24.7% and ROA remained unchanged in 4Q 2019
Funding and Liquidity
As of 31 December 2020, the total liquidity coverage ratio, as defined by the NBG, was 134.2%, above the 100% limit, while the LCR in GEL and FC stood at 132.2% and 134.9% respectively, above the respective limits of 75% and 100%.
However, in light of the COVID-19 pandemic, starting from May 2020 the NBG removed the minimum requirement on GEL LCR of 75%, for a one-year period. Despite the ease of requirement, we continue to operate with high liquidity buffers.
As of 31 December 2020, NSFR stood at 126.0%, compared to the regulatory limit of 100%, effective from September 2019.
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| 31-Dec-20 | 30-Sep-20 | Change QoQ |
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| Minimum net stable funding ratio, as defined by the NBG | 100% | 100% | 0.0 pp |
| Net stable funding ratio as defined by the NBG | 126.0% | 127.0% | -1.0 pp |
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| Net loans to deposits + IFI funding | 101.2% | 97.5% | -3.7 pp |
| Leverage (Times) | 7.7x | 7.7x | 0.0x |
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| Minimum liquidity ratio, as defined by the NBG | 30.0% | 30.0% | 0.0 pp |
| Liquidity ratio, as defined by the NBG | 33.3% | 33.8% | -0.5 pp |
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| Minimum total liquidity coverage ratio, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
| Minimum LCR in GEL, as defined by the NBG | n/a | n/a | NMF |
| Minimum LCR in FC, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
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| Total liquidity coverage ratio, as defined by the NBG | 134.2% | 123.6% | 10.6 pp |
| LCR in GEL, as defined by the NBG | 132.2% | 118.0% | 14.2 pp |
| LCR in FC, as defined by the NBG | 134.9% | 126.4% | 8.5 pp |
Regulatory Capital
As of 31 December 2020, CET1, Tier1 and Total Capital increased QoQ by 9.9%, 7.9% and 5.1% respectively, mainly due to net income generation. The increase in risk weighted assets was mainly related to growth of the loan book.
No extra COVID-19 related provisions were booked in the fourth quarter per NBG provisioning rules.
Over the same period, our CET1, Tier 1 and Total Capital ratios stood at 10.4%, 13.0% and 17.1%, respectively, and remained comfortably above the eased minimum regulatory requirements by 3.0%, 3.8% and 3.4% accordingly.
| In thousands of GEL | 31-Dec-20 | 30-Sep-20 | Change QoQ |
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| CET 1 Capital | 1,911,233 | 1,738,739 | 9.9% |
| Tier 1 Capital | 2,385,181 | 2,211,178 | 7.9% |
| Total Capital | 3,137,912 | 2,984,109 | 5.1% |
| Total Risk-weighted Exposures | 18,301,477 | 17,478,610 | 4.7% |
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| Minimum CET 1 ratio | 7.4% | 6.9% | 0.5 pp |
| CET 1 Capital adequacy ratio | 10.4% | 9.9% | 0.5 pp |
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| Minimum Tier 1 ratio | 9.2% | 8.7% | 0.5 pp |
| Tier 1 Capital adequacy ratio | 13.0% | 12.7% | 0.3 pp |
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| Minimum total capital adequacy ratio | 13.7% | 13.2% | 0.5 pp |
| Total Capital adequacy ratio | 17.1% | 17.1% | 0.0 pp |
Loan Portfolio
As of 31 December 2020, the gross loan portfolio reached GEL 15,200.5 million, up by 4.2% QoQ or up by 3.0% on a constant currency basis. The limited growth was related to the second wave of pandemic-related restrictions in 4Q. The proportion of gross loans denominated in foreign currency increased by 2.0pp QoQ and accounted for 59.4% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency decreased by 2.4pp QoQ and stood at 59.0%.
As of 31 December 2020, our market share in total loans stood at 39.0%, down by 0.3pp QoQ. Our loan market share in legal entities was 38.6%, down by 0.2pp over the same period, and our loan market share in individuals stood at 39.4%, down by 0.4pp QoQ.
| In thousands of GEL | 31-Dec-20 | 30-Sep-20 | Change QoQ |
| Loans and advances to customers |
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| Retail | 5,953,687 | 5,795,824 | 2.7% |
| Retail loans GEL | 2,996,854 | 2,793,475 | 7.3% |
| Retail loans FC | 2,956,833 | 3,002,349 | -1.5% |
| Corporate | 5,690,749 | 5,324,007 | 6.9% |
| Corporate loans GEL | 1,576,778 | 1,293,618 | 21.9% |
| Corporate loans FC | 4,113,971 | 4,030,389 | 2.1% |
| MSME | 3,556,084 | 3,470,946 | 2.5% |
| MSME loans GEL | 1,592,836 | 1,540,558 | 3.4% |
| MSME loans FC | 1,963,248 | 1,930,388 | 1.7% |
| Total loans and advances to customers | 15,200,520 | 14,590,777 | 4.2% |
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| 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Loan yields | 10.2% | 10.0% | 10.9% | -0.7 pp | 0.2 pp |
| Loan yields GEL | 15.3% | 15.3% | 15.7% | -0.4 pp | 0.0 pp |
| Loan yields FC | 6.8% | 6.6% | 7.6% | -0.8 pp | 0.2 pp |
| Retail Loan Yields | 11.8% | 11.3% | 11.8% | 0.0 pp | 0.5 pp |
| Retail loan yields GEL | 16.7% | 16.5% | 17.1% | -0.4 pp | 0.2 pp |
| Retail loan yields FC | 7.1% | 6.5% | 7.1% | 0.0 pp | 0.6 pp |
| Corporate Loan Yields | 8.5% | 8.6% | 9.7% | -1.2 pp | -0.1 pp |
| Corporate loan yields GEL | 13.1% | 13.3% | 13.3% | -0.2 pp | -0.2 pp |
| Corporate loan yields FC | 6.9% | 7.0% | 8.2% | -1.3 pp | -0.1 pp |
| MSME Loan Yields | 10.1% | 10.1% | 11.3% | -1.2 pp | 0.0 pp |
| MSME loan yields GEL | 14.8% | 14.9% | 15.7% | -0.9 pp | -0.1 pp |
| MSME loan yields FC | 6.3% | 6.1% | 7.2% | -0.9 pp | 0.2 pp |
Loan Portfolio Quality
Total PAR 30 increased by 0.9pp on a QoQ basis and stood at 2.6%. The increase was driven by retail and MSME segments due to the low base in 3Q, related to payment holidays offered to our customers. The slight decrease in corporate PAR 30 was due to growth in the respective loan portfolio.
As expected, the NPL ratio increased at the end of 2020, as the COVID-19 impact continued to materialize and amounted to 4.7% compared to 3.5% at the end of September. The 2.3pp increase in the retail segment was mainly due to the COVID-19 related restructurings offered to our customers on an individual basis, while the 1.4pp growth in the MSME segment came on the back of the negative impact of COVID-19 on several SME borrowers, which were classified as NPLs after the monitoring process of the vulnerable borrowers. This effect was slightly offset by a 0.1pp decline in the corporate segment, driven by an increase in that portfolio.
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Par 30 | 31-Dec-20 | 30-Sep-20 | Change QoQ |
| Retail | 3.4% | 1.5% | 1.9 pp |
| Corporate | 1.1% | 1.3% | -0.2 pp |
| MSME | 3.8% | 2.9% | 0.9 pp |
| Total Loans | 2.6% | 1.7% | 0.9 pp |
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| Non-performing Loans | 31-Dec-20 | 30-Sep-20 | Change QoQ |
| Retail | 5.6% | 3.3% | 2.3 pp |
| Corporate | 2.5% | 2.6% | -0.1 pp |
| MSME | 6.6% | 5.2% | 1.4 pp |
| Total Loans | 4.7% | 3.5% | 1.2 pp |
| NPL Coverage | Dec-20 | Sep-20 | |||||
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| Exc. Collateral | Incl. Collateral | Exc. Collateral | Incl. Collateral |
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| Retail | 101.3% | 178.5% | 155.9% | 236.6% |
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| Corporate | 76.4% | 230.1% | 75.4% | 224.5% |
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| MSME | 68.6% | 179.2% | 71.9% | 186.4% |
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| Total | 85.6% | 189.1% | 104.6% | 215.8% |
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Cost of risk
In 4Q, total cost of risk amounted to 2.0%. Both the YoY and QoQ increases in credit loss allowances were mainly driven by deteriorated macro expectations, as a result of the recent partial lockdown related to COVID-19.
| Cost of Risk | 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
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| Retail | 2.6% | 0.2% | 0.3% | 2.3 pp | 2.4 pp |
| Corporate | 0.2% | 0.0% | -0.2% | 0.4 pp | 0.2 pp |
| MSME | 4.0% | 0.4% | -1.0% | 5.0 pp | 3.6 pp |
| Total | 2.0% | 0.2% | -0.2% | 2.2 pp | 1.8 pp |
Deposit Portfolio
The total deposits portfolio increased by 1.9% QoQ and amounted to GEL 12,572.7 million, while on a constant currency basis, the deposit portfolio increased by 1.6%. The proportion of deposits denominated in a foreign currency decreased by 2.7pp QoQ and accounted for 66.3 % of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency decreased by 4.7pp QoQ and stood at 61.7%.
As of 31 December 2020, our market share in deposits amounted to 37.2%, down by 1.1pp QoQ, while our market share in deposits to legal entities stood at 34.5%, down by 3.7pp over the same period. Our market share in deposits to individuals stood at 39.5%, up by 1.2pp QoQ.
| In thousands of GEL | 31-Dec-20 | 30-Sep-20 | Change QoQ |
| Customer Accounts |
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| Retail | 7,255,020 | 6,699,866 | 8.3% |
| Retail deposits GEL | 1,330,942 | 1,255,575 | 6.0% |
| Retail deposits FC | 5,924,078 | 5,444,291 | 8.8% |
| Corporate | 3,939,501 | 4,330,403 | -9.0% |
| Corporate deposits GEL | 2,240,287 | 2,627,043 | -14.7% |
| Corporate deposits FC | 1,699,214 | 1,703,360 | -0.2% |
| MSME | 1,378,207 | 1,313,145 | 5.0% |
| MSME deposits GEL | 671,658 | 612,991 | 9.6% |
| MSME deposits FC | 706,549 | 700,154 | 0.9% |
| Total Customer Accounts | 12,572,728 | 12,343,414 | 1.9% |
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| 4Q'20 | 3Q'20 | 4Q'19 | Change YoY | Change QoQ |
| Deposit rates | 3.6% | 3.7% | 3.4% | 0.2 pp | -0.1 pp |
| Deposit rates GEL | 6.6% | 6.7% | 6.0% | 0.6 pp | -0.1 pp |
| Deposit rates FC | 2.0% | 2.0% | 2.0% | 0.0 pp | 0.0 pp |
| Retail Deposit Yields | 2.9% | 3.0% | 2.9% | 0.0 pp | -0.1 pp |
| Retail deposit rates GEL | 5.4% | 5.8% | 5.1% | 0.3 pp | -0.4 pp |
| Retail deposit rates FC | 2.3% | 2.3% | 2.3% | 0.0 pp | 0.0 pp |
| Corporate Deposit Yields | 5.7% | 5.7% | 5.1% | 0.6 pp | 0.0 pp |
| Corporate deposit rates GEL | 8.4% | 8.3% | 7.9% | 0.5 pp | 0.1 pp |
| Corporate deposit rates FC | 1.6% | 1.5% | 1.5% | 0.1 pp | 0.1 pp |
| MSME Deposit Yields | 1.0% | 1.0% | 0.9% | 0.1 pp | 0.0 pp |
| MSME deposit rates GEL | 1.7% | 1.7% | 1.5% | 0.2 pp | 0.0 pp |
| MSME deposit rates FC | 0.3% | 0.4% | 0.3% | 0.0 pp | -0.1 pp |
Segment definition and PL
Business Segments
The segment definitions are as follows:
· Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which have been granted facilities with more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;
· Retail - non-business individual customers; all individual customers are included in retail deposits;
· MSME - business customers who are not included in the corporate segment; or legal entities which have been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and
· Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.
Business customers are all legal entities or individuals who have been granted a loan for business purposes.
Income Statement by Segments
| 4Q'20 | Retail | MSME | Corporate | Corp.Centre | Total |
| Interest income | 173,931 | 88,538 | 121,660 | 69,745 | 453,874 |
| Interest expense | (50,119) | (3,407) | (59,681) | (114,579) | (227,786) |
| Net gains from currency swaps | - | - | - | 5,237 | 5,237 |
| Net transfer pricing | (13,074) | (31,073) | 14,944 | 29,203 | - |
| Net interest income | 110,738 | 54,058 | 76,923 | (10,394) | 231,325 |
| Fee and commission income | 57,326 | 7,985 | 17,041 | 5,396 | 87,748 |
| Fee and commission expense | (29,490) | (2,801) | (2,432) | (826) | (35,549) |
| Net fee and commission income | 27,836 | 5,184 | 14,609 | 4,570 | 52,199 |
| Net insurance premium earned after claims and acquisition costs | - | - | - | 3,263 | 3,263 |
| Net gains from derivatives, foreign currency operations and translation | 7,521 | 7,554 | 14,214 | (1,204) | 28,085 |
| Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income | - | - | - | 578 | 578 |
| Other operating income | 2,858 | 81 | 429 | 3,522 | 6,890 |
| Share of profit of associates | - | - | - | (243) | (243) |
| Other operating non-interest income and insurance profit | 10,379 | 7,635 | 14,643 | 5,916 | 38,573 |
| Credit loss allowance for loans to customers | (38,335) | (34,896) | (2,480) | - | (75,711) |
| Credit loss allowance for performance guarantees and credit related commitments | (192) | 345 | 1,914 | - | 2,067 |
| Credit loss allowance for investments in finance lease | - | - | - | (1,459) | (1,459) |
| Credit loss allowance for other financial assets | 226 | - | (2,035) | (1,555) | (3,364) |
| Credit loss allowance for financial assets measured at fair value through other comprehensive income | - | - | (609) | (294) | (903) |
| Profit/(loss) before G&A expenses and income taxes | 110,652 | 32,326 | 102,965 | (3,216) | 242,727 |
| Losses from modifications of financial instruments | (1,099) | (54) | (1,997) | (1,932) | (5,082) |
| Staff costs | (28,530) | (13,427) | (10,695) | (15,130) | (67,782) |
| Depreciation and amortization | (12,082) | (2,973) | (1,177) | (2,606) | (18,838) |
| Provision for liabilities and charges | (200) | - | (400) | (124) | (724) |
| Administrative and other operating expenses | (21,850) | (6,511) | (4,367) | (7,878) | (40,606) |
| Operating expenses | (62,662) | (22,911) | (16,639) | (25,738) | (127,950) |
| Profit/(loss) before tax | 46,891 | 9,361 | 84,329 | (30,886) | 109,695 |
| Income tax expense | (943) | 545 | (3,491) | (5,105) | (8,994) |
| Profit/(loss) for the year | 45,948 | 9,906 | 80,838 | (35,991) | 100,701 |
Consolidated Financial Statements of TBC Bank Group PLC
| Consolidated Balance Sheet |
|
| ||
| In thousands of GEL | Dec-20 | Sep-20 | ||
| Cash and cash equivalents | 1,635,405 | 1,454,973 | ||
| Due from other banks | 50,805 | 39,941 | ||
| Mandatory cash balances with National Bank of Georgia | 2,098,506 | 2,024,080 | ||
| Loans and advances to customers | 14,594,274 | 14,055,807 | ||
| Investment securities measured at fair value through other comprehensive income | 1,527,268 | 1,346,770 | ||
| Bonds carried at amortized cost | 1,089,801 | 1,322,203 | ||
| Investments in finance leases | 271,660 | 268,430 | ||
| Investment properties | 68,689 | 83,458 | ||
| Current income tax prepayment | 69,889 | 58,721 | ||
| Deferred income tax asset | 2,787 | 602 | ||
| Other financial assets[26] | 171,301 | 263,979 | ||
| Other assets | 266,960 | 259,736 | ||
| Premises and equipment | 372,956 | 359,001 | ||
| Right of use assets | 53,927 | 59,040 | ||
| Intangible assets | 239,523 | 207,670 | ||
| Goodwill | 59,964 | 60,296 | ||
| Investments in associates | 4,090 | 2,265 | ||
| TOTAL ASSETS | 22,577,805 | 21,866,972 | ||
| LIABILITIES |
|
| ||
| Due to credit institutions | 4,486,373 | 4,127,175 | ||
| Customer accounts | 12,572,728 | 12,343,414 | ||
| Lease liabilities | 58,983 | 67,131 | ||
| Other financial liabilities26 | 227,432 | 183,376 | ||
| Current income tax liability | 853 | 565 | ||
| Debt Securities in issue | 1,496,497 | 1,527,318 | ||
| Deferred income tax liability | 13,088 | 4,370 | ||
| Provisions for liabilities and charges | 25,335 | 25,417 | ||
| Other liabilities | 87,842 | 79,171 | ||
| Subordinated debt | 672,740 | 682,648 | ||
| TOTAL LIABILITIES | 19,641,871 | 19,040,585 | ||
| EQUITY |
|
| ||
| Share capital | 1,682 | 1,682 | ||
| Shares held by trust | (33,413) | (34,451) | ||
| Share premium | 848,459 | 848,459 | ||
| Retained earnings | 2,281,428 | 2,180,291 | ||
| Group re-organisation reserve | (162,167) | (162,167) | ||
| Share based payment reserve | (20,568) | (25,222) | ||
| Fair value reserve | 11,158 | 7,994 | ||
| Cumulative currency translation reserve | (2,124) | (931) | ||
| Net assets attributable to owners | 2,924,455 | 2,815,655 | ||
| Non-controlling interest | 11,479 | 10,732 | ||
| TOTAL EQUITY | 2,935,934 | 2,826,387 | ||
| TOTAL LIABILITIES AND EQUITY | 22,577,805 | 21,866,972 | ||
Consolidated Statement of Profit or Loss and Other Comprehensive Income
| In thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 |
| Interest income | 453,874 | 426,232 | 392,154 |
| Interest expense | (227,786) | (217,639) | (191,891) |
| Net gains from currency swaps | 5,237 | 3,191 | 9,055 |
| Net interest income | 231,325 | 211,784 | 209,318 |
| Fee and commission income | 87,748 | 87,677 | 86,751 |
| Fee and commission expense | (35,549) | (40,178) | (31,907) |
| Net fee and commission income | 52,199 | 47,499 | 54,844 |
| Net insurance premiums earned | 12,542 | 14,199 | 12,386 |
| Net insurance claims incurred and agents' commissions | (9,279) | (8,258) | (6,727) |
| Net insurance premium earned after claims and acquisition costs | 3,263 | 5,941 | 5,659 |
| Net gains from derivatives, foreign currency operations and translation | 28,085 | 22,174 | 28,002 |
| Gains less losses from disposal of investment securities measured at fair value through other comprehensive income | 578 | - | 20 |
| Other operating income | 6,890 | 5,645 | 6,276 |
| Share of profit of associates | (243) | 153 | 118 |
| Other operating non-interest income | 35,310 | 27,972 | 34,416 |
| Credit loss allowance for loans to customers | (75,711) | (5,884) | 5,148 |
| Credit loss allowance for investments in finance lease | (1,459) | (2,661) | 615 |
| Credit loss allowance for performance guarantees and credit related commitments | 2,067 | 1,968 | (290) |
| Credit loss allowance for other financial assets | (3,364) | (6,481) | (5,165) |
| Credit loss allowance for financial assets measured at fair value through other comprehensive income | (903) | (368) | (84) |
| Operating profit after expected credit losses | 242,727 | 279,770 | 304,461 |
| Losses from modifications of financial instruments | (5,082) | (1,763) | - |
| Staff costs | (67,782) | (62,255) | (68,934) |
| Depreciation and amortization | (18,838) | (17,339) | (9,921) |
| (Provision for)/ recovery of liabilities and charges | (724) | (2,059) | (2,632) |
| Administrative and other operating expenses | (40,606) | (31,860) | (45,637) |
| Operating expenses | (127,950) | (113,513) | (127,124) |
| Profit/(loss) before tax | 109,695 | 164,494 | 177,337 |
| Income tax expense | (8,994) | (11,906) | (17,313) |
| Profit/(loss) for the period | 100,701 | 152,588 | 160,024 |
| Other comprehensive income: |
|
|
|
| Items that may be reclassified subsequently to profit or loss: |
|
|
|
| Movement in fair value reserve | 3,163 | 9,486 | (13,828) |
| Exchange differences on translation to presentation currency | (1,211) | 4,753 | (483) |
| Other comprehensive income for the period | 1,952 | 14,239 | (14,311) |
| Total comprehensive income for the period | 102,653 | 166,827 | 145,713 |
| Profit/(loss) attributable to: |
|
|
|
| - Shareholders of TBCG | 99,371 | 150,756 | 159,416 |
| - Non-controlling interest | 1,330 | 1,832 | 608 |
| Profit/(loss) for the period | 100,701 | 152,588 | 160,024 |
| Total comprehensive income is attributable to: |
|
|
|
| - Shareholders of TBCG | 101,297 | 165,002 | 145,122 |
| - Non-controlling interest | 1,356 | 1,825 | 591 |
| Total comprehensive income for the period | 102,653 | 166,827 | 145,713 |
Key Ratios
Average Balances
The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts, which were prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.
| Key Ratios |
|
|
|
|
|
|
|
|
| Ratios (based on monthly averages, where applicable) | 4Q'20 | 3Q'20 | 4Q'19 |
|
|
|
|
|
| Profitability ratios: |
|
|
|
| ROE1 | 13.7% | 22.0% | 25.2%* |
| ROA2 | 1.8% | 2.9% | 3.5%* |
| ROE before expected credit loss allowances3 | 24.6% | 23.9% | 25.2%* |
| Cost to income4 | 39.7% | 38.7% | 41.8% |
| NIM5 | 4.8% | 4.6% | 5.3% |
| Loan yields6 | 10.2% | 10.0% | 10.9% |
| Deposit rates7 | 3.6% | 3.7% | 3.4% |
| Yields on interest earning assets8 | 9.5% | 9.4% | 9.9% |
| Cost of funding9 | 4.8% | 4.9% | 4.9% |
| Spread10 | 4.7% | 4.5% | 5.0% |
|
|
|
|
|
| Asset quality and portfolio concentration: |
|
|
|
| Cost of risk11 | 2.0% | 0.2% | -0.2% |
| PAR 90 to Gross Loans12 | 1.5% | 1.3% | 1.1% |
| NPLs to Gross Loans13 | 4.7% | 3.5% | 2.7% |
| NPLs coverage14 | 85.6% | 104.6% | 91.1% |
| NPLs coverage with collateral15 | 189.1% | 215.8% | 194.2% |
| Credit loss level to Gross Loans16 | 4.0% | 3.7% | 2.5% |
| Related Party Loans to Gross Loans17 | 0.0% | 0.1% | 0.1% |
| Top 10 Borrowers to Total Portfolio18 | 7.9% | 7.9% | 8.3% |
| Top 20 Borrowers to Total Portfolio19 | 12.1% | 12.0% | 12.3% |
|
|
|
|
|
| Capital optimisation: |
|
|
|
| Net Loans to Deposits plus IFI Funding20 | 101.2% | 97.5% | 104.8% |
| Net Stable Funding Ratio21 | 126.0% | 127.0% | 126.7% |
| Liquidity Coverage Ratio22 | 134.2% | 123.6% | 110.1% |
| Leverage23 | 7.7x | 7.7x | 7.1x** |
| CET 1 CAR (Basel III)24 | 10.4% | 9.9% | 12.0% |
| Regulatory Tier 1 CAR (Basel III)25 | 13.0% | 12.7% | 14.6% |
| Regulatory Total 1 CAR (Basel III)26 | 17.1% | 17.1% | 19.1% |
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood at 24.7%, while ROE before expected credit loss allowances stood at 24.7% and ROA remained unchanged in 4Q 2019
** Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, Leverage as of 31 December 2019 stood at 7.0x
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period; annualised where applicable.
3. Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all credit loss allowance, but after net modification losses divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period.
4. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG that currently have negative interest, and includes other earning items from due from banks.
6. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
7. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
8. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
9. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
10. 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).
11. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
12. 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.
13. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.
14. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.
15. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
16. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
17. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
18. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
19. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
20. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
21. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines.
22. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
23. Leverage equals total assets to total equity.
24. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
25. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the QoQ growth of the Balance Sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 3.2878 as of 30 September 2020. As of 31 December 2020 the USD/GEL exchange rate equaled 3.2766. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 4Q 2020 of 3.2705, 3Q 2020 of 3.1021, 4Q 2019 of 2.9458.
Unaudited Consolidated Financial Results Overview for FY 2020
This statement provides a summary of the unaudited business and financial trends for FY 2020 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.
TBC Bank Group PLC's financial results are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Changes in accounting policies, IAS 16
In 2Q 2020, the accounting policy in relation to subsequent measurement of land, buildings and construction in progress was changed from the revaluation model to the cost model. This led to the restatement of appropriate balance sheet amounts in 2019, while no material impact was recorded in the income statement.
Net Interest Income
In FY 2020, we generated GEL 835.4 million net interest income, up by 4.2% YoY.
The YoY increase in interest income of GEL 231.2 million, or 16.1%, was mainly supported by an increase in interest income from loans, which was driven by an increase in the respective portfolio by GEL 2,538.6 million, or 20.0%. This effect was partially offset by a 0.9pp drop in loan yields across all segments, mainly related to a decrease in the Libor rate, currency devaluation, a change in the segment mix towards corporate, as well as the slowdown of lending activities due to the pandemic. Furthermore, growth was supported by interest income from investment securities, on the back of an increase in the respective portfolio of 613.3 million, or 30.5%, as well as by the increased share of new securities acquired in 2020 with higher interest rates due to the increased average refinance rate.
Our interest expense increased by GEL 189.7 million, or 28.6%, which was mainly related to an increase in interest expense from deposits and other borrowed funds. The former increase was attributable to a growth in the respective portfolio of GEL 2,523.4 million, or 25.1%, which was further supported by an increase in yields due to an increase in the average refinance rate, as well as currency depreciation. The latter increase was mainly driven by growth in the NBG loan balances, which further supported the growth in the respective yield by 0.1pp (the GEL yield went up by 0.9pp on the back of the higher average refinance rate, while the FC yield declined by 1.3pp due to the decrease in the Libor rate). Another contributor was the growth in debt securities in issue related to an increase in interest expense from the Senior and AT1 Bonds issued in June and July 2019, respectively, in the amount of US$ 425 million.
In FY 2020, our NIM stood at 4.7%, down by 0.9pp YoY.
| In thousands of GEL | FY'20 | FY'19 | Change YoY |
| Interest income | 1,667,999 | 1,436,843 | 16.1% |
| Interest expense | (853,516) | (663,860) | 28.6% |
| Net gains from currency swaps | 20,950 | 28,556 | -26.6% |
| Net interest income | 835,433 | 801,539 | 4.2% |
|
|
|
|
|
| NIM | 4.7% | 5.6% | -0.9 pp |
Net fee and commission income
In FY 2020, net fee and commission income totalled GEL 182.8 million, down by 2.4% YoY.
The slight decrease on a YoY basis is caused by card operations and other fee and commission income on the back of reduced economic activity due to the COVID-19 pandemic. This effect was positively impacted by an increase in fees from guarantees issued and settlement transactions. The former increase was driven by the increase in the respective portfolio, while the latter growth was related to the fee income from the payments transactions of our Uzbek subsidiary Payme (Inspired LLC), which was acquired in mid-2019.
| In thousands of GEL | FY'20 | FY'19 | Change YoY | ||||
| Net fee and commission income |
|
|
| ||||
| Card operations | 45,147 | 56,037 | -19.4% |
| |||
| Settlement transactions | 86,284 | 73,228 | 17.8% |
| |||
| Guarantees issued and letters of credit | 37,909 | 30,289 | 25.2% |
| |||
| Other | 13,427 | 27,736 | -51.6% |
| |||
| Total net fee and commission income | 182,767 | 187,290 | -2.4% |
| |||
Other Non-Interest Income
Total other non-interest income decreased slightly YoY and amounted to GEL 137.4 million in FY 2020. The decline of GEL 2,023.0, or 1.5%, was mainly driven by the reduction in foreign currency operations on the back of slower economic activity in 2020 compared to the previous period, because of the COVID-19 pandemic.
| In thousands of GEL | FY'20 | FY'19 | Change YoY | |||
| Other non-interest income |
|
|
| |||
| Net income from foreign currency operations | 98,010 | 101,467 | -3.4% | |||
| Net insurance premium earned after claims and acquisition costs[27] | 19,485 | 18,510 | 5.3% | |||
| Other operating income | 19,896 | 19,437 | 2.4% | |||
| Total other non-interest income | 137,391 | 139,414 | -1.5% | |||
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| ||
Credit Loss Allowance
Total credit loss allowance in 2020 amounted to GEL 351.8 million. This year, we booked additional COVID-19 related provisions, which resulted in significant growth in provision charges. As a result, our CoR for the full year 2020 stood at 2.4%.
| In thousands of GEL | FY'20 | FY'19 | Change YoY |
| Credit loss allowance for loan to customers | (330,811) | (82,030) | NMF |
| Credit loss allowance for other transactions | (21,036) | (9,962) | NMF |
| Total credit loss allowance | (351,847) | (91,992) | NMF |
| Operating profit after expected credit losses | 803,744 | 1,036,251 | -22.4% |
|
|
|
|
|
| Cost of risk | 2.4% | 0.7% | 1.7 pp |
NMF - no meaningful figures
Operating Expenses
In FY 2020, our total operating expenses decreased by 1.6% YoY, thanks to our effective cost control measures.
The decrease in administrative & other operating expenses was driven by a reduction in consultation services and business trip expenses, as well as the impact of renegotiated rent expenses per IFRS 16 in the amount of GEL 4.2 million.
Thus, in FY 2020 our cost to income ratio stood at 38.4%, down by 1.5pp YoY, while our standalone cost to income was 32.9%, down by 3.0pp over the same period.
| In thousands of GEL | FY'20 | FY'19 | Change YoY |
| Operating expenses |
|
|
|
| Staff costs | (244,043) | (247,803) | -1.5% |
| Provisions for liabilities and charges | (2,706) | (1,264) | NMF |
| Depreciation and amortization | (68,392) | (59,478) | 15.0% |
| Administrative & other operating expenses | (128,482) | (142,181) | -9.6% |
| Total operating expenses | (443,623) | (450,726) | -1.6% |
|
|
|
|
|
| Cost to income | 38.4% | 39.9% | -1.5 pp |
| Standalone Cost to income* | 32.9% | 35.9% | -3.0 pp |
* For the ratio calculation all relevant group recurring costs are allocated to the bank
Net Income
In FY 2020 we managed to maintain resilient profitability, driven by the increase in net interest income and effective cost management. Over the same period, we also recorded losses from modifications of financial instruments, in the amount of GEL 41.0 million to reflect the decrease in the present value of cash-flows resulting from the loan repayment grace periods granted to the borrowers. As a result, our ROE before expected credit loss allowances stood at 24.7%, down by 2.1pp.
Over the same period, credit loss allowances increased significantly to cover the potential impact of the COVID-19 pandemic on our borrowers reducing our ROE to 11.7%.
| In thousands of GEL | FY'20 | FY'19 | Change YoY |
| Losses from modifications of financial instruments | (41,015) | - | NMF |
| Profit before tax | 319,106 | 585,525 | -45.5% |
| Income tax expense | 3,383 | (45,184) | NMF |
| Profit for the period | 322,489 | 540,341 | -40.3% |
|
|
|
|
|
| ROE | 11.7% | 22.9%* | -11.2 pp |
| ROE before expected credit loss allowances | 24.7% | 26.8%* | -2.1 pp |
| ROA | 1.6% | 3.2%* | -1.6 pp |
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood at 22.4% while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in FY 2019
Funding and Liquidity
As of 31 December 2020, the total liquidity coverage ratio, as defined by the NBG, was 134.2 %, above the 100% limit, while the LCR in GEL and FC stood at 132.2% and 134.9%, respectively, above the respective limits of 75% and 100%.
However, in light of the COVID-19 pandemic, starting from May 2019, the NBG removed the minimum requirement on GEL LCR of 75%, for a one-year period. Despite the easing of the requirement, we continue to operate with high liquidity buffers.
As of 31 December 2020, NSFR stood at 126.0%, compared to the regulatory limit of 100%, effective from September 2019.
|
| 31-Dec-20 | 31-Dec-19 | Change YoY |
|
|
|
|
|
|
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|
|
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| Minimum net stable funding ratio, as defined by the NBG | 100% | 100% | 0.0 pp |
| Net stable funding ratio as defined by the NBG | 126.0% | 126.7% | -0.7 pp |
|
|
|
|
|
| Net loans to deposits + IFI funding | 101.2% | 104.8% | -3.6 pp |
| Leverage (Times) | 7.7x | 7.1x* | 0.6x |
|
|
|
|
|
| Minimum liquidity ratio, as defined by the NBG | 30.0% | 30.0% | 0.0 pp |
| Liquidity ratio, as defined by the NBG | 33.3% | 32.2% | -1.1 pp |
|
|
|
|
|
| Minimum total liquidity coverage ratio, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
| Minimum LCR in GEL, as defined by the NBG | n/a | 75.0% | NMF |
| Minimum LCR in FC, as defined by the NBG | 100.0% | 100.0% | 0.0 pp |
|
|
|
|
|
| Total liquidity coverage ratio, as defined by the NBG | 134.2% | 110.1% | 24.1 pp |
| LCR in GEL, as defined by the NBG | 132.2% | 83.7% | 48.5 pp |
| LCR in FC, as defined by the NBG | 134.9% | 128.4% | 6.5 pp |
*Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, Leverage stood at 7.0x as of 31 December 2019
Regulatory Capital
As of 31 December 2020, CET1 Capital increased by 2.1% YoY, mainly due to net income generation, while Tier1 and Total Capital grew by 4.5% and 5.5% respectively, further supported by an increase in FX denominated AT1 bonds and subordinated loans due to GEL depreciation.
The YoY increase in risk-weighted assets was mainly driven by the GEL depreciation and portfolio growth.
CET1 and Tier 1 CAR ratios decreased by 1.6pp YoY. The decrease was mainly attributable to the effect of Covid-19 on the Bank`s net income and the depreciation of GEL on a YoY basis. The total CAR ratio decreased by 2.0% YoY, which was due to the additional amortization of sub-debt instruments.
As a result, the Bank's CET1, Tier 1 and Total Capital ratios stood at 10.4%, 13.0% and 17.1%, respectively, and remained comfortably above the eased minimum regulatory requirements by 3.0%, 3.8% and 3.4%, accordingly.
| In thousands of GEL | 31-Dec-20 | 31-Dec-19 | Change YoY |
|
|
|
|
|
| CET 1 Capital | 1,911,233 | 1,871,892 | 2.1% |
| Tier 1 Capital | 2,385,181 | 2,281,706 | 4.5% |
| Total Capital | 3,137,912 | 2,974,029 | 5.5% |
| Total Risk-weighted Exposures | 18,301,477 | 15,593,925 | 17.4% |
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|
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|
|
| Minimum CET 1 ratio | 7.4% | 10.4% | -3.0 pp |
| CET 1 Capital adequacy ratio | 10.4% | 12.0% | -1.6 pp |
|
|
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|
|
| Minimum Tier 1 ratio | 9.2% | 12.5% | -3.3 pp |
| Tier 1 Capital adequacy ratio | 13.0% | 14.6% | -1.6 pp |
|
|
|
|
|
| Minimum total capital adequacy ratio | 13.7% | 17.5% | -3.8 pp |
| Total Capital adequacy ratio | 17.1% | 19.1% | -2.0 pp |
Loan Portfolio
As of 31 December 2020, the gross loan portfolio reached GEL 15,200.5 million, up by 20.0% YoY or up by 8.7% on a constant currency basis. The YoY increase was spread across all segments. The proportion of gross loans denominated in foreign currency increased by 0.7pp YoY and accounted for 59.4% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency decreased by 3.5pp and stood at 55.2%.
As of 31 December 2020, our market share in total loans stood at 39.0%, down by 0.5pp YoY, while our loan market share in legal entities was 38.6%, down by 0.3pp over the same period, and our loan market share in individuals stood at 39.4%, down by 0.6pp YoY.
| In thousands of GEL | 31-Dec-20 | 31-Dec-19 | Change YoY |
| Loans and advances to customers |
|
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|
|
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|
| Retail | 5,953,687 | 5,053,203 | 17.8% |
| Retail loans GEL | 2,996,854 | 2,386,750 | 25.6% |
| Retail loans FC | 2,956,833 | 2,666,453 | 10.9% |
| Corporate | 5,690,749 | 4,660,473 | 22.1% |
| Corporate loans GEL | 1,576,778 | 1,424,309 | 10.7% |
| Corporate loans FC | 4,113,971 | 3,236,164 | 27.1% |
| MSME | 3,556,084 | 2,948,279 | 20.6% |
| MSME loans GEL | 1,592,836 | 1,419,804 | 12.2% |
| MSME loans FC | 1,963,248 | 1,528,475 | 28.4% |
| Total loans and advances to customers | 15,200,520 | 12,661,955 | 20.0% |
|
| FY'20 | FY'19 | Change YoY |
| Loan yields | 10.1% | 11.0% | -0.9 pp |
| Loan yields GEL | 15.3% | 15.7% | -0.4 pp |
| Loan yields FC | 6.7% | 7.8% | -1.1 pp |
| Retail Loan Yields | 11.3% | 12.1% | -0.8 pp |
| Retail loan yields GEL | 16.4% | 18.0% | -1.6 pp |
| Retail loan yields FC | 6.6% | 7.3% | -0.7 pp |
| Corporate Loan Yields | 8.7% | 9.3% | -0.6 pp |
| Corporate loan yields GEL | 13.2% | 11.6% | 1.6 pp |
| Corporate loan yields FC | 7.1% | 8.4% | -1.3 pp |
| MSME Loan Yields | 10.3% | 11.4% | -1.1 pp |
| MSME loan yields GEL | 15.1% | 15.4% | -0.3 pp |
| MSME loan yields FC | 6.3% | 7.7% | -1.4 pp |
Loan Portfolio Quality
Total par 30 increased by 0.9pp YoY and stood at 2.6%, driven by all segments. The increase in the retail and MSME segments was related to the overall deterioration in the quality of the respective portfolios due to COVID-19, while the increase in the corporate segment was mainly due to one corporate borrower. However, the outlook for that client is positive and the exposure is expected to be settled in 1Q 2021.
The NPL ratio increased YoY, as the COVID-19 impact began to materialize and amounted to 4.7% at the end of 2020, compared to 2.7% at the end of 2019. The increase in the retail segment was mainly due to the COVID-19 related restructurings offered to our customers on an individual basis, while the increase in the MSME segment was due to negative impact of COVID-19 on several SME borrowers, which were classified as NPLs after the monitoring process of the vulnerable borrowers. In addition, the growth in the corporate segment was mainly due to one corporate borrower, as mentioned above.
|
Par 30 | 31-Dec-20 | 31-Dec-19 | Change YoY |
| Retail | 3.4% | 2.1% | 1.3 pp |
| Corporate | 1.1% | 0.5% | 0.6 pp |
| MSME | 3.8% | 2.8% | 1.0 pp |
| Total Loans | 2.6% | 1.7% | 0.9 pp |
| Non-performing Loans | 31-Dec-20 | 31-Dec-19 | Change YoY |
| Retail | 5.6% | 3.0% | 2.6 pp |
| Corporate | 2.5% | 1.8% | 0.7 pp |
| MSME | 6.6% | 3.8% | 2.8 pp |
| Total Loans | 4.7% | 2.7% | 2.0 pp |
| NPL Coverage | 31-Dec-20 | 31-Dec-19 | ||
|
| Exc. Collateral | Incl. Collateral | Exc. Collateral | Incl. Collateral |
| Retail | 101.3% | 178.5% | 97.1% | 241.4% |
| Corporate | 76.4% | 230.1% | 111.1% | 182.9% |
| MSME | 68.6% | 179.2% | 59.7% | 173.7% |
| Total | 85.6% | 189.1% | 91.1% | 194.2% |
Cost of risk
The total cost of risk for FY 2020 stood at 2.4%, up by 1.7pp. The YoY increase was spread across all segments and was driven by the extra credit loss allowances booked in 2020 in relation to COVID-19 expected losses.
| Cost of Risk | FY'20 | FY'19 | Change YoY |
|
|
|
|
|
| Retail | 3.7% | 1.6% | 2.1 pp |
| Corporate | 0.6% | -0.1% | 0.7 pp |
| MSME | 3.1% | 0.3% | 2.8 pp |
| Total | 2.4% | 0.7% | 1.7 pp |
Deposit Portfolio
The total deposits portfolio increased by 25.1% YoY and amounted to GEL 12,572.7 million, while on a constant currency basis the total deposit portfolio increased by 13.8% over the same period. The proportion of deposits denominated in foreign currency increased by 0.4pp YoY and accounted for 66.3% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency decreased by 3.0pp YoY and stood at 62.9%.
As of 31 December 2020, our market share in deposits amounted to 37.2%, down by 1.8pp YoY, and our market share in deposits to legal entities stood at 34.5%, down by 6.1pp over the same period. Our market share in deposits to individuals stood at 39.5%, up by 1.6% YoY.
| In thousands of GEL | 31-Dec-20 | 31-Dec-19 | Change YoY |
| Customer Accounts |
|
|
|
|
|
|
|
|
| Retail | 7,255,020 | 5,673,917 | 27.9% |
| Retail deposits GEL | 1,330,942 | 1,098,681 | 21.1% |
| Retail deposits FC | 5,924,078 | 4,575,236 | 29.5% |
| Corporate | 3,939,501 | 3,187,319 | 23.6% |
| Corporate deposits GEL | 2,240,287 | 1,735,746 | 29.1% |
| Corporate deposits FC | 1,699,214 | 1,451,573 | 17.1% |
| MSME | 1,378,207 | 1,188,088 | 16.0% |
| MSME deposits GEL | 671,658 | 594,388 | 13.0% |
| MSME deposits FC | 706,549 | 593,700 | 19.0% |
| Total Customer Accounts | 12,572,728 | 10,049,324 | 25.1% |
|
| FY'20 | FY'19 | Change YoY |
| Deposit rates | 3.6% | 3.3% | 0.3 pp |
| Deposit rates GEL | 6.5% | 5.8% | 0.7 pp |
| Deposit rates FC | 2.0% | 2.0% | 0.0 pp |
| Retail Deposit Yields | 2.9% | 2.8% | 0.1 pp |
| Retail deposit rates GEL | 5.6% | 5.0% | 0.6 pp |
| Retail deposit rates FC | 2.3% | 2.3% | 0.0 pp |
| Corporate Deposit Yields | 5.5% | 4.9% | 0.6 pp |
| Corporate deposit rates GEL | 8.2% | 7.4% | 0.8 pp |
| Corporate deposit rates FC | 1.5% | 1.7% | -0.2 pp |
| MSME Deposit Yields | 1.0% | 0.9% | 0.1 pp |
| MSME deposit rates GEL | 1.6% | 1.5% | 0.1 pp |
| MSME deposit rates FC | 0.3% | 0.3% | 0.0 pp |
Segment definition and PL
Business Segments
The segment definitions are as follows:
· Corporate - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which have been granted facilities with more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis;
· Retail - non-business individual customers; all individual customers are included in retail deposits;
· MSME - business customers who are not included in the corporate segment; or legal entities which have been granted a pawn shop loan; or individual customers of the fully-digital bank, Space; and
· Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-banking subsidiaries of the Group.
Business customers are all legal entities or individuals who have been granted a loan for business purposes.
Income Statement by Segments
| FY'20 | Retail | MSME | Corporate | Corp.Centre | Total |
| Interest income | 617,124 | 335,161 | 462,383 | 253,331 | 1,667,999 |
| Interest expense | (184,990) | (12,100) | (203,390) | (453,036) | (853,516) |
| Net gains from currency swaps | - | - | - | 20,950 | 20,950 |
| Net transfer pricing | (59,379) | (125,599) | 34,455 | 150,523 | - |
| Net interest income | 372,755 | 197,462 | 293,448 | (28,232) | 835,433 |
| Fee and commission income | 214,377 | 26,405 | 57,197 | 16,198 | 314,177 |
| Fee and commission expense | (109,822) | (10,896) | (8,575) | (2,117) | (131,410) |
| Net fee and commission income | 104,555 | 15,509 | 48,622 | 14,081 | 182,767 |
| Net insurance premium earned after claims and acquisition costs | - | - | - | 19,485 | 19,485 |
| Net gains from derivatives, foreign currency operations and translation | 31,561 | 27,187 | 51,443 | (12,173) | 98,018 |
| Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income | - | - | - | (624) | (624) |
| Other operating income | 6,901 | 429 | 1,856 | 11,326 | 20,512 |
| Share of profit of associates | - | - | - | - | - |
| Other operating non-interest income and insurance profit | 38,462 | 27,616 | 53,299 | 18,014 | 137,391 |
| Credit loss allowance for loans to customers | (201,652) | (100,070) | (29,089) | - | (330,811) |
| Credit loss allowance for performance guarantees and credit related commitments | (241) | (67) | 3,546 | - | 3,238 |
| Credit loss allowance for investments in finance lease | - | - | - | (8,398) | (8,398) |
| Credit loss allowance for other financial assets | (1,476) | - | (5,600) | (6,991) | (14,067) |
| Credit loss allowance for financial assets measured at fair value through other comprehensive income | - | - | (875) | (934) | (1,809) |
| Profit/(loss) before G&A expenses and income taxes | 312,403 | 140,450 | 363,351 | (12,460) | 803,744 |
| Losses from modifications of financial instruments | (23,633) | (7,153) | (6,345) | (3,884) | (41,015) |
| Staff costs | (110,988) | (48,631) | (35,580) | (48,844) | (244,043) |
| Depreciation and amortization | (45,256) | (11,187) | (4,296) | (7,653) | (68,392) |
| Provision for liabilities and charges | (2,200) | - | (400) | (106) | (2,706) |
| Administrative and other operating expenses | (66,987) | (22,186) | (13,649) | (25,660) | (128,482) |
| Operating expenses | (225,431) | (82,004) | (53,925) | (82,263) | (443,623) |
| Profit/(loss) before tax | 63,339 | 51,293 | 303,081 | (98,607) | 319,106 |
| Income tax expense | 21,360 | 3,568 | (18,695) | (2,850) | 3,383 |
| Profit/(loss) for the year | 84,699 | 54,861 | 284,386 | (101,457) | 322,489 |
Consolidated Financial Statements of TBC Bank Group PLC
| Consolidated Balance Sheet |
| ||
| In thousands of GEL | Dec-20 | Dec-19 | |
| Cash and cash equivalents | 1,635,405 | 1,003,583 | |
| Due from other banks | 50,805 | 33,605 | |
| Mandatory cash balances with National Bank of Georgia | 2,098,506 | 1,591,829 | |
| Loans and advances to customers | 14,594,274 | 12,349,399 | |
| Investment securities measured at fair value through other comprehensive income | 1,527,268 | 985,293 | |
| Bonds carried at amortized cost | 1,089,801 | 1,022,684 | |
| Investments in finance leases | 271,660 | 256,660 | |
| Investment properties | 68,689 | 72,667 | |
| Current income tax prepayment | 69,889 | 25,695 | |
| Deferred income tax asset | 2,787 | 2,173 | |
| Other financial assets[28] | 171,301 | 133,736 | |
| Other assets | 266,960 | 255,712 | |
| Premises and equipment | 372,956 | 334,728* | |
| Right of use assets | 53,927 | 59,693* | |
| Intangible assets | 239,523 | 167,597 | |
| Goodwill | 59,964 | 61,558 | |
| Investments in associates | 4,090 | 2,654 | |
| TOTAL ASSETS | 22,577,805 | 18,359,266* | |
| LIABILITIES |
|
| |
| Due to credit institutions | 4,486,373 | 3,593,901 | |
| Customer accounts | 12,572,728 | 10,049,324 | |
| Lease liabilities | 58,983 | 59,898 | |
| Other financial liabilities28 | 227,432 | 113,608 | |
| Current income tax liability | 853 | 1,634 | |
| Debt Securities in issue | 1,496,497 | 1,213,598 | |
| Deferred income tax liability | 13,088 | 18,888* | |
| Provisions for liabilities and charges | 25,335 | 23,128 | |
| Other liabilities | 87,842 | 95,162 | |
| Subordinated debt | 672,740 | 591,035 | |
| TOTAL LIABILITIES | 19,641,871 | 15,760,176 | |
| EQUITY |
|
| |
| Share capital | 1,682 | 1,682 | |
| Shares held by trust | (33,413) | (27,516) | |
| Share premium | 848,459 | 848,459 | |
| Retained earnings | 2,281,428 | 1,961,231* | |
| Group re-organisation reserve | (162,167) | (162,167) | |
| Share based payment reserve | (20,568) | (17,803) | |
| Fair value reserve | 11,158 | (6,476) | |
| Cumulative currency translation reserve | (2,124) | (6,850) | |
| Net assets attributable to owners | 2,924,455 | 2,590,560* | |
| Non-controlling interest | 11,479 | 8,530* | |
| TOTAL EQUITY | 2,935,934 | 2,599,090* | |
| TOTAL LIABILITIES AND EQUITY | 22,577,805 | 18,359,266* | |
* Figures calculated due to the changed PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method in 2Q 2020
Consolidated Statement of Profit or Loss and Other Comprehensive Income
| In thousands of GEL | FY'20 | FY'19 |
| Interest income | 1,667,999 | 1,436,843 |
| Interest expense | (853,516) | (663,860) |
| Net gains from currency swaps | 20,950 | 28,556 |
| Net interest income | 835,433 | 801,539 |
| Fee and commission income | 314,177 | 293,431 |
| Fee and commission expense | (131,410) | (106,141) |
| Net fee and commission income | 182,767 | 187,290 |
| Net insurance premiums earned | 53,359 | 38,199 |
| Net insurance claims incurred and agents' commissions | (33,874) | (19,689) |
| Net insurance premium earned after claims and acquisition costs | 19,485 | 18,510 |
| Net gains from derivatives, foreign currency operations and translation | (98,018) | 101,187 |
| Gains less losses from disposal of investment securities measured at fair value through other comprehensive income | (624) | 169 |
| Other operating income | 20,512 | 18,916 |
| Share of profit of associates | - | 632 |
| Other operating non-interest income | 117,906 | 120,904 |
| Credit loss allowance for loans to customers | (330,811) | (82,030) |
| Credit loss allowance for investments in finance lease | (8,398) | 582 |
| Credit loss allowance for performance guarantees and credit related commitments | 3,238 | (2,156) |
| Credit loss allowance for other financial assets | (14,067) | (8,098) |
| Credit loss allowance for financial assets measured at fair value through other comprehensive income | (1,809) | (290) |
| Operating profit after expected credit losses | 803,744 | 1,036,251 |
| Losses from modifications of financial instruments | (41,015) | - |
| Staff costs | (244,043) | (247,803) |
| Depreciation and amortization | (68,392) | (59,478) |
| (Provision for)/ recovery of liabilities and charges | (2,706) | (1,264) |
| Administrative and other operating expenses | (128,482) | (142,181) |
| Operating expenses | (443,623) | (450,726) |
| Profit/(loss) before tax | 319,106 | 585,525 |
| Income tax expense | 3,383 | (45,184) |
| Profit/(loss) for the period | 322,489 | 540,341 |
| Other comprehensive income: |
|
|
| Items that may be reclassified subsequently to profit or loss: |
|
|
| Movement in fair value reserve | 17,633 | (15,156) |
| Exchange differences on translation to presentation currency | 4,707 | 85 |
| Other comprehensive income for the period | 22,340 | (15,071) |
| Total comprehensive income for the period | 344,829 | 525,270 |
| Profit/(loss) attributable to: |
|
|
| - Shareholders of TBCG | 317,752 | 537,895 |
| - Non-controlling interest | 4,737 | 2,446 |
| Profit/(loss) for the period | 322,489 | 540,341 |
| Total comprehensive income is attributable to: |
|
|
| - Shareholders of TBCG | 340,092 | 522,843 |
| - Non-controlling interest | 4,737 | 2,427 |
| Total comprehensive income for the period | 344,829 | 525,270 |
Consolidated Statement of Cash Flows
| In thousands of GEL | FY'20 | FY'19 |
| Cash flows from (used in) operating activities |
|
|
| Interest received | 1,462,815 | 1,360,296 |
| Interest received on currency swaps | 20,950 | 28,556 |
| Interest paid | (839,258) | (647,427) |
| Fees and commissions received | 297,024 | 282,715 |
| Fees and commissions paid | (133,385) | (106,526) |
| Insurance and reinsurance received | 86,447 | 76,101 |
| Insurance claims paid | (27,139) | (21,787) |
| Income received from trading in foreign currencies | (92,191) | 79,287 |
| Other operating income received | 48,402 | 44,248 |
| Staff costs paid | (238,577) | (216,465) |
| Administrative and other operating expenses paid | (134,348) | (169,582) |
| Income tax paid | (46,268) | (70,413) |
| Cash flows from operating activities before changes in operating assets and liabilities | 404,472 | 639,003 |
| Net change in operating assets |
|
|
| Due from other banks and mandatory cash balances with the National Bank of Georgia | (353,975) | (22,009) |
| Loans and advances to customers | (1,059,684) | (2,013,577) |
| Net investments in lease | (2,902) | (43,719) |
| Other financial assets | (67,267) | 19,612 |
| Other assets | 33,108 | 1,577 |
| Net change in operating liabilities |
|
|
| Due to other banks | (32,294) | (1,938) |
| Customer accounts | 1,475,292 | 272,023 |
| Other financial liabilities | 115,370 | (8,267) |
| Other liabilities and provision for liabilities and charges | (8,153) | 5,816 |
| Net cash flows (used in)/from operating activities | 503,967 | (1,151,479) |
| Cash flows from (used in) investing activities |
|
|
| Acquisition of investment securities measured at fair value through other comprehensive income | (763,530) | (1,781,816) |
| Proceeds from disposal of investment securities measured at fair value through other comprehensive income | 287,917 | 240,603 |
| Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income | 165,631 | 1,598,536 |
| Acquisition of subsidiaries, net of cash acquired | 694 | (39,297) |
| Acquisition of bonds carried at amortised cost | (639,824) | (613,383) |
| Proceeds from redemption of bonds carried at amortised cost | 413,038 | 216,871 |
| Acquisition of premises, equipment and intangible assets | (164,379) | (120,333) |
| Proceeds from disposal of premises, equipment and intangible assets | 3,627 | 13,225 |
| Cash acquired from acquired subsidiaries | - | 2,996 |
| Proceeds from disposal of investment property | 13,513 | 13,338 |
| Net cash used in investing activities | (683,313) | (469,260) |
| Cash flows from (used in) financing activities |
|
|
| Proceeds from other borrowed funds | 4,036,810 | 1,819,899 |
| Redemption of other borrowed funds | (3,324,230) | (1,392,897) |
| Repayment of principal of lease liabilities | (13,251) | (6,453) |
| Redemption of subordinated debt | - | (104,079) |
| Proceeds from debt securities in issue | 31,602 | 1,176,049 |
| Redemption of debt securities in issue | - | (14,296) |
| Dividends paid | (0) | (91,928) |
| Net cash flows from financing activities | 730,931 | 1,386,295 |
| Effect of exchange rate changes on cash and cash equivalents | 80,237 | 71,116 |
| Net (decrease)/ increase in cash and cash equivalents | 631,822 | (163,328) |
| Cash and cash equivalents at the beginning of the year | 1,003,583 | 1,166,911 |
| Cash and cash equivalents at the end of the year | 1,635,405 | 1,003,583 |
Key Ratios
Average Balances
The average balances included in this document are calculated as the average of the relevant monthly balances as of each month-end. Balances have been extracted from TBC's unaudited and consolidated management accounts, which were prepared from TBC's accounting records. These were used by the management for monitoring and control purposes.
| Key Ratios |
|
|
|
|
|
|
| Ratios (based on monthly averages, where applicable) | FY'20 | FY'19 |
|
|
|
|
| Profitability ratios: |
|
|
| ROE1 | 11.7% | 22.9%* |
| ROA2 | 1.6% | 3.2%* |
| ROE before expected credit loss allowances 3 | 24.7% | 26.8%* |
| Cost to income4 | 38.4% | 39.9% |
| NIM5 | 4.7% | 5.6% |
| Loan yields6 | 10.1% | 11.0% |
| Deposit rates7 | 3.6% | 3.3% |
| Yields on interest earning assets8 | 9.5% | 10.0% |
| Cost of funding9 | 4.9% | 4.7% |
| Spread10 | 4.6% | 5.3% |
|
|
|
|
| Asset quality and portfolio concentration: |
|
|
| Cost of risk11 | 2.4% | 0.7% |
| PAR 90 to Gross Loans12 | 1.5% | 1.1% |
| NPLs to Gross Loans13 | 4.7% | 2.7% |
| NPLs coverage14 | 85.6% | 91.1% |
| NPLs coverage with collateral15 | 189.1% | 194.2% |
| Credit loss level to Gross Loans16 | 4.0% | 2.5% |
| Related Party Loans to Gross Loans17 | 0.0% | 0.1% |
| Top 10 Borrowers to Total Portfolio18 | 7.9% | 8.3% |
| Top 20 Borrowers to Total Portfolio19 | 12.1% | 12.3% |
|
|
|
|
| Capital optimisation: |
|
|
| Net Loans to Deposits plus IFI Funding20 | 101.2% | 104.8% |
| Net Stable Funding Ratio21 | 126.0% | 126.7% |
| Liquidity Coverage Ratio22 | 134.2% | 110.1% |
| Leverage23 | 7.7x | 7.1x** |
| CET 1 CAR (Basel III)24 | 10.4% | 12.0% |
| Regulatory Tier 1 CAR (Basel III)25 | 13.0% | 14.6% |
| Regulatory Total 1 CAR (Basel III)26 | 17.1% | 19.1% |
* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method ROE stood at 22.4%, while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in FY 2019
** Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, Leverage stood at 7.0x as of 31 December 2019
Ratio definitions
1. Return on average total equity (ROE) equals net income attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.
2. Return on average total assets (ROA) equals net income of the period divided by monthly average total assets for the same period; annualised where applicable.
3. Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all credit loss allowance, but after net modification losses divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period.
4. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).
5. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities excluding corporate shares, net investment in finance lease, net loans, and amounts due from credit institutions. The latter excludes all items from cash and cash equivalents, excludes EUR mandatory reserves with NBG that currently have negative interest, and includes other earning items from due from banks.
6. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
7. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.
8. Yields on interest earning assets equal total interest income divided by monthly average interest earning assets; annualised where applicable.
9. Cost of funding equals total interest expense divided by monthly average interest bearing liabilities; annualised where applicable.
10. 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).
11. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.
12. 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.
13. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.
14. NPLs coverage ratio equals total credit loss allowance for loans to customers calculated per IFRS 9 divided by the NPL loans.
15. NPLs coverage with collateral ratio equals credit loss allowance for loans to customers per IFRS 9 plus the total collateral amount of NPL loans (excluding third party guarantees) discounted at 30-50% depending on segment type divided by the NPL loans.
16. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.
17. Related party loans to total loans equals related party loans divided by the gross loan portfolio.
18. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.
19. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.
20. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.
21. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines.
22. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG.
23. Leverage equals total assets to total equity.
24. Regulatory CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
25. Regulatory tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
26. Regulatory total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the Pillar 1 requirements of the NBG Basel III standards. The reporting started from the end of 2017. Calculations are made for TBC Bank stand-alone, based on local standards.
Exchange Rates
To calculate the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.8677 as of 31 December 2019. As of 31 December 2020, the USD/GEL exchange rate equalled 3.2766. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: FY 2020 3.1097, FY 2019 2.8192.
Additional Disclosures
1) Subsidiaries of TBC Bank Group PLC[29]
|
| Ownership / voting | Country | Year of incorporation | Industry | Total Assets | |
| Subsidiary | Amount GEL'000 | % in TBC Group | ||||
| JSC TBC Bank | 99.9% | Georgia | 1992 | Banking | 21,943,826 | 97.19% |
| United Financial Corporation JSC | 99.5% | Georgia | 1997 | Card processing | 15,582 | 0.07% |
| TBC Capital LLC | 100.0% | Georgia | 1999 | Brokerage | 2,465 | 0.01% |
| TBC Leasing JSC | 100.0% | Georgia | 2003 | Leasing | 360,921 | 1.60% |
| TBC Kredit LLC | 100.0% | Azerbaijan | 1999 | Non-banking credit institution | 17,965 | 0.08% |
| TBC Pay LLC | 100.0% | Georgia | 2009 | Processing | 38,250 | 0.17% |
| Index LLC | 100.0% | Georgia | 2011 | Real estate management | 1,201 | 0.01% |
| TBC Invest LLC | 100.0% | Israel | 2011 | PR and marketing | 393 | 0.00% |
| JSC TBC Insurance | 100.0% | Georgia | 2014 | Insurance | 68,169 | 0.31% |
| Redmed LLC | 100.0% | Georgia | 2019 | E-commerce | 939 | 0.00% |
| TBC Ecosystem Companies | 100.0% | Georgia | 2019 | Asset management | 344 | 0.00% |
| Swoop JSC | 100.0% | Georgia | 2010 | Retail Trade | 723 | 0.00% |
| LLC Online Tickets | 55.0% | Georgia | 2015 | Software Services | 1,651 | 0.01% |
| TKT UZ | 75.00% | Uzbekistan | 2019 | Retail Trade | 136 | 0.00% |
| My.ge LLC | 65.0% | Georgia | 2008 | E-commerce, Housing and Auto | 7,869 | 0.03% |
| LLC Vendoo (Geo) | 100.0% | Georgia | 2019 | Retail Leasing | 3,503 | 0.02% |
| LLC Mypost | 100.0% | Georgia | 2019 | Postal Service | 492 | 0.00% |
| LLC Billing Solutions | 51.00% | Georgia | 2019 | Software Services | 408 | 0.00% |
| All property.ge LLC | 90.0% | Georgia | 2013 | Real estate management | 2,377 | 0.01% |
| LLC F Solutions | 100.00% | Georgia | 2019 | Software Services | 10 | 0.00% |
| TBC Connect LLC | 100.00% | Georgia | 2020 | Software Services | - | 0.00% |
| TBC Concept | 100.0% | Georgia | 2020 | Banking | 50 | 0.00% |
| TBC Group Support LLC | 100.0% | Georgia | 2020 | Risk management | - | 0.00% |
| Inspired LLC | 51.0% | Uzbekistan | 2011 | Processing | 10,544 | 0.05% |
| TBC Bank JSCB | 100.0% | Uzbekistan | 2020 | Banking | 69,915 | 0.29% |
| LLC Vendoo (UZ Leasing) | 100.00% | Uzbekistan | 2019 | Consumer financing | 1,579 | 0.01% |
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| ||||||
2) TBC Insurance
TBC Insurance, a wholly owned subsidiary of TBC Bank, is one of the leading players on the Georgian non-health insurance market. The company was acquired by the Group in October 2016 and has since grown significantly, becoming the second largest player on the P&C and life insurance market and the largest player in retail segment, holding 21.0% and 37.2% market shares[30] without border motor third party liability (MTPL) insurance, respectively in FY 2020.
TBC Insurance serves both individual and legal entities and provides a broad range of insurance products covering motor, travel, personal accident, credit life and property, business property, liability, cargo, agro, and health insurance products. The company differentiates itself through its advanced digital channels, which include TBC Bank's award-winning internet and mobile banking applications, a wide network of self-service terminals, a web channel, and B-Bot, a Georgian-speaking chat-bot that is available through Facebook messenger.
In 2Q 2019, TBC Insurance entered the health insurance market with a focus on the premium segment. Our strategy is to focus on affluent individuals and capture the affluent market by leveraging our strong brand name, leading digital capabilities and cross-selling opportunities with payroll customers. As of 31 December 2020, TBC Insurance's health business line served more than 15,000 clients.
In 4Q 2020, the QoQ decrease in net profit was mainly due to increased claims on the life insurance business, as well as increased motor claims due to restrictive governmental measures on public transportation, which led to higher usage of private automobiles. YoY, net profit increased by 6.1% due to an increase in the scale of the business.
For the full year 2020, the strong increase in net earned premium compared to 2019 is due to reinsurance system structural changes. Starting from July 2019, we stopped re-insuring the motor portfolio, which led to decrease in re-insurance costs. On the other hand, this change led to an increase in net claims. Overall, the impact on the net profit was marginally positive due to our well-diversified portfolio and prudent risk management.
Over the same period, profit increased by 33.4% YoY due to an increase in net interest income, as well as a reduction in net claims due to the lock-down in 1H 2020.
| Information excluding health insurance | 4Q'20 | 3Q'20 | 4Q'19 | FY'20 | FY'19 |
| In thousands of GEL |
|
|
|
|
|
| Gross written premium | 21,322 | 19,186 | 19,496 | 77,652 | 75,523 |
| Net earned premium[31] | 16,595 | 15,821 | 15,603 | 63,954 | 51,910 |
| Net profit | 2,864 | 4,187 | 2,973 | 12,816 | 9,792 |
|
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|
|
|
|
|
| Net combined ratio | 87.1% | 77.0% | 81.9% | 82.5% | 79.1% |
| Information including health insurance | 4Q'20 | 3Q'20 | 4Q'19 | FY'20 | FY'19 |
| In thousands of GEL |
|
|
|
|
|
| Gross written premium | 23,077 | 21,557 | 21,808 | 86,369 | 79,031 |
| Net earned premium | 18,696 | 18,015 | 16,367 | 71,359 | 52,882 |
| Net profit | 2,651 | 3,697 | 2,499 | 11,384 | 8,533 |
|
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|
|
|
|
|
| Net combined ratio | 90.1% | 83.0% | 86.5% | 86.8% | 82.8% |
IFRS standalone data; figures are provided without subsidiary of TBC Insurance Redmed
3) Loan book breakdown by stages according IFRS 9
Total (in million GEL)
|
| 31-Dec-20 | 30-Sep-20 | 31-Dec-19 | |||
| Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
| 1 | 11,861 | 1.1% | 11,814 | 1.5% | 11,552 | 0.8% |
| 2 | 2,448 | 5.8% | 2,303 | 8.2% | 757 | 11.0% |
| 3 | 892 | 37.4% | 474 | 34.7% | 353 | 38.0% |
| Total | 15,201 | 4.0% | 14,591 | 3.7% | 12,662 | 2.5% |
Corporate (in million GEL)
|
| 31-Dec-20 | 30-Sep-20 | 31-Dec-19 | |||
| Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
| 1 | 4,574 | 1.2% | 4,314 | 1.1% | 4,435 | 0.9% |
| 2 | 956 | 0.9% | 851 | 1.1% | 104 | 1.9% |
| 3 | 161 | 28.2% | 159 | 30.8% | 122 | 32.8% |
| Total | 5,691 | 1.9% | 5,324 | 2.0% | 4,661 | 1.7% |
MSME (in million GEL)
|
| 31-Dec-20 | 30-Sep-20 | 31-Dec-19 | |||
| Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
| 1 | 2,662 | 0.9% | 2,841 | 1.4% | 2,650 | 0.7% |
| 2 | 631 | 7.4% | 480 | 9.1% | 205 | 9.3% |
| 3 | 263 | 33.7% | 150 | 30.8% | 93 | 31.2% |
| Total | 3,556 | 4.5% | 3,471 | 3.7% | 2,948 | 2.2% |
Consumer (in million GEL)
|
| 31-Dec-20 | 30-Sep-20 | 31-Dec-19 | |||
| Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
| 1 | 1,557 | 3.1% | 1,653 | 5.3% | 1,593 | 2.3% |
| 2 | 267 | 24.8% | 330 | 30.4% | 217 | 24.0% |
| 3 | 188 | 67.7% | 60 | 59.4% | 74 | 60.8% |
| Total | 2,012 | 12.0% | 2,043 | 10.9% | 1,884 | 7.1% |
Mortgage (in million GEL)
|
| 31-Dec-20 | 30-Sep-20 | 31-Dec-19 | |||
| Stage | Gross | LLP rate* | Gross | LLP rate* | Gross | LLP rate* |
| 1 | 3,068 | 0.1% | 3,006 | 0.3% | 2,874 | 0.1% |
| 2 | 594 | 3.6% | 642 | 5.5% | 231 | 4.3% |
| 3 | 280 | 25.7% | 105 | 32.2% | 64 | 32.8% |
| Total | 3,942 | 2.5% | 3,753 | 2.1% | 3,169 | 1.0% |
* LLP rate is defined as credit loss allowances divided by gross loans
4) Reconciliation of Return on equity (ROE) with ROE before expected credit loss allowances
| # | Income Statement Highlights |
|
|
|
|
|
| 1. | in thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | FY'20 | FY'19 |
| 2. | Net interest income | 231,325 | 211,784 | 209,318 | 835,433 | 801,539 |
| 3. | Net fee and commission income | 52,199 | 47,499 | 54,844 | 182,767 | 187,290 |
| 4. | Other operating non-interest income | 38,573 | 33,913 | 40,075 | 137,391 | 139,414 |
| 5. | Credit loss allowance | -79,370 | -13,426 | 224 | -351,847 | -91,992 |
| 6. | Operating profit after expected credit losses | 242,727 | 279,770 | 304,461 | 803,744 | 1,036,251 |
| 7. | Losses from modifications of financial instrument | -5,082 | -1,763 | - | -41,015 | - |
| 8. | Operating expenses | -127,950 | -113,513 | -127,124 | -443,623 | -450,726 |
| 9. | Profit before tax | 109,695 | 164,494 | 177,337 | 319,106 | 585,525 |
| 10. | Income tax expense | -8,994 | -11,906 | -17,313 | 3,383 | -45,184 |
| 11. | Profit for the period | 100,701 | 152,588 | 160,024 | 322,489 | 540,341 |
| 12. | Profit for the period less Non-controlling interest | 99,371 | 150,755 | 159,416 | 317,752 | 537,895 |
| 13. | Profit before Credit loss allowances less Non-controlling interest (12 - 5) | 178,741 | 164,181 | 159,192 | 669,599 | 629,887 |
| # | in thousands of GEL | 4Q'20 | 3Q'20 | 4Q'19 | FY'20 | FY'19 |
| 14. | Average equity attributable to the PLC's equity holders | 2,888,145 | 2,731,868 | 2,507,930 | 2,713,030 | 2,348,165 |
| 15. | Return on equity (ROE) (12÷14)* | 13.7% | 22.0% | 25.2% | 11.7% | 22.9% |
| 16. | Return on equity (ROE) before expected credit loss allowances (13÷14)* | 24.6% | 23.9% | 25.2% | 24.7% | 26.8% |
|
| *annualised where applicable |
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[1] Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, both ROE and ROE before expected credit loss allowances stood at 24.7%, while ROA remained unchanged in 4Q 2019.
[2] Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all credit loss allowance, but after net modification losses divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period, for more information please refer to Annex 4 on page 40.
[3] For the ratio calculation, all relevant group recurring costs are allocated to the Bank.
[4] Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE stood at 22.4%, while ROE before expected credit loss allowances stood at 26.3% and ROA remained unchanged in for the FY 2019.
[5] Return on average total equity (ROE) before expected credit loss allowances equals net income attributable to owners excluding all credit loss allowance, but after net modification losses divided by the monthly average of total shareholders 'equity attributable to the PLC's equity holders for the same period, for more information please refer to Annex 4 on page 40.
[6] For the ratio calculation, all relevant group recurring costs are allocated to the Bank.
[7] International Financial Institutions
[8] Market share figures are based on data from the National Bank of Georgia (NBG). The NBG includes interbank loans for calculating market share in loans.
[9] Including Space
[10] Internet and Mobile Banking penetration equals the number of active clients of Internet or Mobile Banking divided by the total number of active clients. Data includes Space figures.
[11] Mobile Banking penetration equals the number of active clients of Mobile Banking divided by the number of total active clients. Data includes Space figures.
[12] Other operating non-interest income includes net insurance premium earned after claims and acquisition costs.
[13] For the ratio calculation, all relevant group recurring costs are allocated to the Bank.
[14] Our Employee Net Promoter Score was measured in October 2020 by an independent consultant for the Bank's employees.
[15] Our Engagement Index was measured in October 2020 by an independent consultant for the Bank's employees and measures how much employees feel involved in and committed to TBC Bank.
[16] Our Employee Happiness Index was assessed internally based on a comprehensive survey prepared with the assistance of the world's leading consulting firm and measures whether employees feel happy and satisfied with their jobs. The index was measured in July 2020 for the Bank's employees.
[17] Some of the increase was due to the reduced cash inflows and increased digital transfers as a result of the closed borders. Adjusted for this component, the remittance inflows increased by an estimated 5.0% in 2020
[19] Including Space
[20] Retail internet and mobile banking active users, including Space
[21] Based on NBG data
[22] From the beginning of the pandemic, the decline in tourism inflows amounted to 95.0% year-on-year.
[23] Some of the increase was due to reduced cash inflows and increased digital transfers as a result of the closed borders. Adjusted for this component, the inflows stood at around 5.0% year-on-year.
[25] Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit (as shown in Annex 2 on page 38) as follows: net insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.
[26] Other financial assets and liabilities do not contain offset amounts of omnibus accounts for TBC Capital (nominee accounts, where TBC Capital acts as a fiduciary on client's behalf).
[27] Net insurance premium earned after claims and acquisition costs can be reconciled to the standalone net insurance profit (as shown in Annex 2 on page 38) as follows: net insurance premium earned after claims and acquisition costs less credit loss allowance, administrative expenses and taxes, plus fee and commission income and net interest income.
[28] Other financial assets and liabilities do not contain offset amounts of omnibus accounts for TBC Capital (nominee accounts, where TBC Capital acts as a fiduciary on client's behalf).
[29] TBC Bank Group PLC became the parent company of JSC TBC Bank on 10 August 2016.
[30] Based on internal estimates
[31] Net earned premium equals earned premium minus the reinsurer's share of earned premium.
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