TBC BANK GROUP PLC ("TBC Bank")

1Q 2021 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 economy; 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 regulations, 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.

 

First Quarter 2021 Unaudited Consolidated Financial Results

 

TBC Bank Group PLC ("TBC PLC") will release its first quarter 2021 unaudited consolidated financial results on Tuesday, 18 May 2021 at 7.00 am BST (10.00 am GET), while the results call will be held at 14.00 (BST) / 15.00 (CEST) / 9.00 (EDT).

 

Please click the link below to join the webinar:

 

https://tbc.zoom.us/j/99387732806?pwd=NGNmWnlVMHNZNHZrRTRlSkJkQkQ3Zz09

 

Webinar ID: 993 8773 2806

Password: 556262

 

Or, use the following dial-ins:

·      Georgia: +995 3224 73988  or +995 7067 77954  or 800 100 293 (Toll Free)

·      United Kingdom: 0 800 260 5801 (Toll Free) or 0 800 358 2817 (Toll Free) or 0 800 031 5717 (Toll Free)

·      US: 877 853 5257 (Toll Free) or 888 475 4499 (Toll Free) or 833 548 0276 (Toll Free) or 833 548 0282 (Toll Free)

·      Russia: 8800 100 6938 (Toll Free) or 8800 301 7427 (Toll Free)

 

 

Webinar ID 993 8773 2806#, please dial the ID number slowly.

 

Other international numbers available at: https://tbc.zoom.us/u/abi201nLxM

 

The call will be held in two parts. The first part will be comprised of presentations and during the second part of the call, you will have the opportunity to ask questions. All participants will be muted throughout the webinar.

 

Webinar Instructions:

For those participants who will be joining through the webinar, in order to ask questions, please use the "hand icon" that you will see at the bottom of the screen. The host will unmute those participants who have raised hands one after another. After the question is asked, the participant will be muted again. 

 

Call Instructions:

For those participants who will be using the dial in number to join the webinar, please dial *9 to raise your hand.

 

 

 

 

 

 

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

 

1Q 20201 Results Announcement

 

TBC Bank - Background

Financial Highlights

Letter from the Chief Executive Officer

Economic Overview

Unaudited Consolidated Financial Results Overview for 1Q 2021

Additional Disclosures

1)          Subsidiaries of TBC Bank Group PLC

2)          TBC Insurance

3)          Reclassification of certain balance sheet and profit and loss items and changes in methodology

4)          Loan book breakdown by stages according IFRS 9

5)          Reconciliation of Return on Equity (ROE) with ROE before expected credit loss allowances

 

 

 

 

TBC Bank Group PLC ("TBC Bank")

 

TBC Bank Announces Unaudited 1Q 2021 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 99.6% of its business is concentrated, with a 39.0% market share by total assets. It offers retail, CIB, 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. It is also a member of the FTSE4Good Index Series and the MSCI United Kingdom Small Cap Index.

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.

Financial Highlights

 

1Q 2021 P&L Highlights 

o  Profit for the period amounted to GEL 153.0 million (1Q 2020: GEL -57.0 million)

o  Return on average equity (ROE) stood at 20.3% (1Q 2020: -8.8%)

o  ROE before expected credit loss allowances[1] stood at 22.6% (1Q 2020: 29.2%[2])

o  Return on average assets (ROA) stood at 2.7% (1Q 2020: -1.2%)

o  Cost to income of TBC Bank Group PLC stood at 39.3% (1Q 2020: 36.7%)

o  Standalone cost to income ratio of the Bank[3] was 33.1% (1Q 2020: 31.8%)

o  Cost of risk stood at 0.5% (1Q 2020: 2.6%)

o  Net interest margin (NIM) stood at 4.7% (1Q 2020: 5.1%)

o  Basic earnings per share stood at GEL 2.78 (1Q 2020: NA)

o  Diluted earnings per share stood at GEL 2.72 (1Q 2020: NA)

 

Balance Sheet Highlights as of 31 March 2021

o  Total assets amounted to GEL 23,617.0 million, up by 18.2% YoY

o  Gross loans and advances to customers stood at GEL 15,332.2 million, up by 10.1% YoY or at 6.1% on a constant currency basis

o  Net loans to deposits + IFI[4] funding stood at 92.2%, down by 9.6 pp YoY, and Regulatory Net Stable Funding Ratio (NSFR), stood at 131.4%

o  NPLs were 4.8%, up by 1.9 pp YoY

o  NPL provision coverage and total coverage ratios stood at 81.0%, or 154.4%, respectively on 31 March 2021 compared to 133.8% or 206.4%, as of 31 March 2020[5]

o  Total customer deposits amounted to GEL 14,239.8 million, up by 27.0% YoY or 23.1% on constant currency basis

o  The Bank's Basel III CET 1, Tier 1 and Total Capital Adequacy Ratios per NBG methodology stood at 10.9%, 13.5%, and 17.6%, respectively, while minimum eased regulatory requirements amounted to of 7.8%, 9.7%, and 13.7%, respectively.

 

Market Shares as of March 2021^[6]

o  Market share by total assets reached 39.0%, up by 0.6 pp YoY (#1 position)

o  Market share by total loans was 38.5%, down by 0.9 pp YoY  (#1 position)

o  Market share of total deposits reached 39.8%, remained the same YoY (#1 position)

 

Digital Highlights for 1Q 2021

o  Retail digital active users increased by 16.4% YoY and amounted to 718,000

o  Average daily active users in March increased by 16.6 % YoY and stood at 281,000

o  Daily active users (DAU) divided by monthly active users (MAU) stood at 46.0% in March 2021 (March 2020: 40.6%)

o  95% of all transactions were conducted through digital channels[7] (1Q 2020: 94%)

o  The penetration ratio for internet and mobile banking[8] stood at 53% for 1Q 2021 (1Q 2020: 48%)

 

TBC UZ Highlights

in thousands				11-May-2021			April-2021		March-2021		February-2021	January-2021
# of total registered users				192			157		98		68	28
# of monthly active users				N/A			76		49		43	17
Loan portfolio (GEL)				9,280			6,144		953		413	153
Deposit portfolio (GEL)				8,726			6,543		2,839		2,227	1,108
# of total cards issued (cumulative figures)				47			42		31		18	8
# of other cards attached (cumulative figures)				61			55		35		20	8
Total monthly number of transactions:				N/A			280		178		89	27
P2P & service payments monthly transactions				N/A			58		43		31	12
POS monthly transactions				N/A			202		121		52	13
ATM monthly transactions				N/A			20		14		6	2

 

Income Statement Highlights
in thousands of GEL		1Q'21		4Q'20		1Q'20	Change YoY		Change QoQ
Net interest income		225,131		231,325		207,959	8.3%		-2.7%
Net fee and commission income		45,293		52,199		43,552	4.0%		-13.2%
Other operating non-interest income[9]		40,665		38,573		38,744	5.0%		5.4%
Credit loss allowance		(17,244)		(83,855)		(247,090)	-93.0%		-79.4%
Operating profit after expected credit losses		293,845		238,242		43,165	NMF		23.3%
Losses from modifications of financial instrument		(1,487)		(5,082)		(30,643)	-95.1%		-70.7%
Operating expenses		(122,240)		(123,465)		(106,476)	14.8%		-1.0%
Profit before tax		170,118		109,695		(93,954)	NMF		55.1%
Income tax expense		(17,131)		(8,994)		36,948	NMF		90.5%
Profit for the period		152,987		100,701		(57,006)	NMF		51.9%

  

Balance Sheet and Capital Highlights	Mar-21	Dec-20	Mar-20	Change YoY		Change QoQ
in thousands of GEL
Total Assets	23,617,046	22,577,805	19,982,532*		18.2%	4.6%
Gross Loans	15,332,209	15,200,520	13,929,639		10.1%	0.9%
Customer Deposits	14,239,837	12,572,728	11,209,150		27.0%	13.3%
Total Equity	3,125,735	2,935,934	2,525,136*		23.8%	6.5%
Regulatory Common Equity Tier I Capital (Basel III)	2,059,599	1,911,233	1,518,950		35.6%	7.8%
Regulatory Tier I Capital (Basel III)	2,550,144	2,385,181	1,987,693		28.3%	6.9%
Regulatory Total Capital (Basel III)	3,327,134	3,137,912	2,767,850		20.2%	6.0%
Regulatory Risk Weighted Assets (Basel III)	18,921,231	18,301,477	16,604,960		13.9%	3.4%

* Certain amounts do not correspond to the first quarter 2020 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

 

 

Key Ratios	1Q'21		4Q'20	1Q'20	Change YoY	Change QoQ
ROE		20.3%	13.7%	-8.8%	29.1 pp	6.6 pp
ROE before expected credit loss allowances		22.6%	25.2%	29.2%*	-6.6 pp	-2.6 pp
ROA		2.7%	1.8%	-1.2%	3.9 pp	0.9 pp
NIM		4.7%	4.8%	5.1%	-0.4 pp	-0.1 pp
Cost to income		39.3%	38.3%	36.7%	2.6 pp	1.0 pp
Standalone cost to income of the Bank[10]		33.1%	33.4%	31.8%	1.3 pp	-0.3 pp
Cost of risk		0.5%	2.0%	2.6%	-2.1 pp	-1.5 pp
NPL to gross loans		4.8%	4.7%	2.9%	1.9 pp	0.1 pp
NPL provision coverage ratio		81.0%	85.6%	133.8%	-52.8 pp	-4.6 pp
Total NPL coverage ratio[11]		154.4%	159.4%	206.4%	-52.0 pp	-5.0 pp
CET 1 CAR (Basel III)		10.9%	10.4%	9.1%	1.8 pp	0.5 pp
Regulatory Tier 1 CAR (Basel III)		13.5%	13.0%	12.0%	1.5 pp	0.5 pp
Regulatory Total CAR (Basel III)		17.6%	17.1%	16.7%	0.9 pp	0.5 pp
Leverage (Times)		7.6x	7.7x	7.9x*	-0.3x	-0.1 pp

* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE before expected credit loss allowances stood at 28.7% and, leverage stood at 7.8x for 1Q 2020

 

Letter from the Chief Executive Officer  

 

Having successfully withstood the challenges of the pandemic in 2020, we entered the path to recovery in 2021 on the back of the promising macroeconomic environment. I am delighted to present a strong set of financial results for the first quarter 2021 and update you on our progress in our strategic priorities.

Macro overview

Having been hit hard by the pandemic, the economy likely reached a turning point in March 2021 and has begun to recover. The GDP growth for the first quarter 2021 stood at -4.2%. While the drop was still sizable, it was in line with expectations. On the upside, in March GDP grew by 4.0%, which was stronger than expected. While the vaccination campaign in Georgia needs to speed up, taking into account a stronger performance in exports, imports, and remittances, as well as evidence of a gradual recovery in tourism inflows, we expect 2021 GDP forecast to be in the range of 4.2-4.7%. 

 

In the first quarter 2021, non-tourism inflows demonstrated a strong recovery, as exports of goods increased by 5.2% year-on-year in USD terms (or by 13.6% excluding re-exports). Notably, March exports already reached the March 2019 level. At the same time, remittances increased by a solid 28.4%^[12] year-on-year and by 31.6% when compared to 2019. Tourism inflows also show signs of recovery, as March inflows were down by 87.9% compared to 2019, while in January and February the drop was -93.7% and -91.9%, respectively. Moreover, March 2021 imports have almost reached the March 2019 level, indicating a rebound in domestic demand.

 

In response to rising inflation and a weakening currency, the central bank has hiked the refinance rate further to 9.5% from 8.0% at the beginning of the year.  It is important to mention that the Georgia successfully placed Eurobonds in the amount of USD 500 million at an unprecedentedly low price (coupon rate of 2.75%) on the London Stock Exchange in April 2021. In addition, it is promising that external fiscal financing remains sizable in 2021.

 

Resilient financial performance

In the first quarter 2021, we recorded robust financial results. Our consolidated net profit amounted to GEL 153.0 million, while our return on equity and return on assets stood at 20.3% and 2.7%, respectively.

Our profitability was driven by resilient income generation and lower provision charges. The former was primarily related to net interest income, while our cost of risk amounted to only 0.5% due to recoveries in CIB segment.  In the first quarter 2021, our net interest margin decreased by 0.4 percentage points year-on-year and amounted to 4.7%, due to a combination of factors: currency depreciation, increased liquidity and a decrease in the interest earned on NBG mandatory reserves due to decline in the Fed rate, which together more than offset the decrease in the cost of funding. As expected, quarter-on-quarter our net interest margin slightly decreased by 0.1%, due to the partial lock-down from January to mid-February.

In the first quarter 2021, our operating expenses increased by 14.8% year-on-year, mainly due to the lower base effect as a result of the reversal of share based management bonuses in 2020, as well as increased staff costs related to our Uzbek operations. Consequently, our cost to income ratio stood at 39.3% in the first quarter 2021, while the stand-alone cost to income ratio for the Bank stood at 33.1%^[13].

In the first quarter 2021, our loan book increased by 6.1% year-on-year in constant currency terms, which translated into a 38.5% market share. Over the same period, our deposits increased by 23.1% in constant currency terms. As a result, our market share in total deposits amounted to 39.8% as of 31 March 2021.

Our liquidity and capital positions remain strong. As of 31 March 2021, our net stable funding (NSFR) and liquidity coverage ratios (LCR) stood at 131.4% and 136.7%, respectively. Our capital ratios improved quarter-on-quarter as a result of net profit generation. Our CET1, Tier 1 and Total Capital ratios stood at 10.9%, 13.5% and 17.6%, respectively, and remained comfortably above the eased minimum regulatory requirements by 3.1%, 3.8% and 3.9% respectively.

Business update

We continue to harness our digital channels and are focused on driving both transactions and sales through them. Our offloading ratio in the retail segment^[14] remained as high as 95% in the first quarter of 2021, while the number of digital users^[15] increased by 16.4% year-on-year and reached around 718,000. The number of average daily digital users also continued to grow and increased by 16.6% year-on-year in March, while the DAU/MAU ratio^[16] amounted to 46.0%, up by 5.4 percentage points year-on-year. As a result, in the first quarter 2021 our internet and mobile banking penetration ratio^[17] was 53%, up by 5.0pp year-on-year. 

Recently, we have also launched a fully digital onboarding process in our internet and mobile banking, which enables Georgian residents to undergo a personal identification process and become TBC customers just in 90 seconds. During the first quarter of 2021, around 16.0%^[18] of all our new customers benefited from this service.

We also recorded strong results in terms of our sales offloading ratio across all major product categories. The consumer loans sales offloading ratio amounted to 37%, up by 3.0pp year-on-year.  This includes both pre-approved loans and lead generation through the call center, internet and mobile banking, as well as end-to-end digital sales via our web channel (www.tbccredit.ge) and Space mobile app. In the second quarter of 2021, we are planning to launch an end-to-end loans sales process in our internet and mobile banking, which is expected to further speed up the sales disbursement process in these channels. In terms of deposits, we have a fully automated end-to-end digital process in our internet and mobile banking, as well as Space mobile app, and our deposits sales offloading ratio stood as high as 73% in the first quarter 2021.  Debit cards can be also ordered remotely, via internet and mobile banking, Space mobile app, the web portal and the call center. Our sales offloading ratio[19] for debit cards amounted to 24%, compared to 22% a year ago.

Having established ourselves as the largest payments provider in Georgia, we continue to expand our payments business in the country.  After successfully entering Tbilisi public transportation payment network at the end of 2020, we have won the tender process for supplying public transportation with modern payment infrastructure in two other big cities: Gori and Kutaisi. These projects will be launched in May 2021 and will allow us to offer convenient and seamless payment solutions to the wider Georgian population. Overall, in the first quarter 2021, we observed an increase in the number and volume of payment transactions, which went up by around 12% and 13% quarter-on-quarter, respectively. Our market share by the number and volume of e-commerce & POS transactions reached 53%^[20] and 58%²⁰, respectively, in first quarter 2021.

Finally, I would like to update you regarding our progress in Uzbekistan. As previously reported, we launched our fully digital banking operation in Uzbekistan for retail customers in October 2020 and started lending operations January 2021. As of 11 May, the number of registered users of TBC UZ - our digital bank app, reached around 192,000, while our loan book amounted to around GEL 9.3 million. We have also managed to attract around GEL 8.7 million in deposits over the same period, which is a very remarkable achievement and indicates that the recognition of our brand is increasing rapidly in this new market. The number of transactions in also growing, especially in POS terminals, which is driven by the growing number of our cards, which reached around 47,000 as of 11 May.

Furthermore, in the first quarter 2021, our Uzbek payments subsidiary, Payme, continued its impressive growth, with the number of its registered users reaching 3.4 million, up by 72.5% year-on-year. Its revenues during the quarter increased by 100.8% year-on-year to GEL 5.2 million, while net profit grew by 134.1% year-on-year to GEL 3.0 million. Growth was driven by the increased number of users as well as the expansion of services. The number of transactions per active user stood at 10.8, compared to 8.9 a year ago.

Outlook

The management and the Board realizes the importance of dividend payments to our shareholders. In terms of the financial year 2020, the Board has decided not to recommend the payment of dividends since we still need to build up sufficient capital to meet the National Bank of Georgia's regulatory requirements. The improving business environment, coupled with our strong data analytical capabilities and focus on digital, fills me with confidence that in 2021 we will be able to return to our pre-COVID profitability levels and we will assess the potential for future dividends subject to macroeconomic developments and containment of COVID-19 pandemic.

 

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 growth averaged -4.2% in the first quarter of 2021. Considering the lower number of infections, eased restrictions, and the base effect, growth improved considerably throughout the quarter, reaching a stronger-than-expected 4.0% year-on-year increase in March following 11.5% and 5.1% year-on-year drops in January and February, respectively. Notably, March GDP was around 1.3% higher than the 2019 level. 

 

External sector

While the tourism sector was hit hard during the pandemic, other inflows demonstrated much more resilience and have even recently rebounded strongly in March 2021. In 1Q 2021, exports in goods increased by 5.2% year-on-year in USD terms. Notably, growth was more sizable without re-exports, amounting to 13.6% year-on-year. In addition, remittances displayed strong dynamics and increased by 28.4% year-on-year. Compared to 2019, the increase in remittances stood at 31.6%, which was only partially attributable to border closures, leading to cash remittances being transferred through the digital channels. Tourism inflows declined by 87.5% in 1Q 2021 year-on-year in USD terms. The drop remains at a sharp 90.7% compared to 2019, though some signs of recovery were already evident in March, 2021. Compared to 2019, revenues in the tourism sector decreased by 87.9% in March, while rates of contraction were -93.7% and -91.9% in January and February, respectively. Going forward, it is important to consider Georgia's favourable tourism structure: the share of business and long-haul trips in tourism inflows is relatively small and Georgia enjoys an abundance of open-air tourism facilities. This, coupled with 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 should get back on track relatively quickly. In the baseline scenario, we assume 25.0% of 2019 tourism inflows to recover in 2021, followed by a 90.0% recovery in 2022. The vaccination campaign is expected to speed up in the summer and the herd immunity to be reached in the second quarter of 2022.

Alongside eased restrictions and the recovery in economic activities, there are also signs of improvement in the aggregate demand. The imports of goods decreased by 1.0% year-on-year in the first quarter of 2021, compared to a 16.3% decrease in the fourth quarter of 2020. In 1Q 2021, imports of fuels and lubricants (+1.9% year-on-year) and capital goods (+0.5% year-on-year) displayed positive growth rates. On the other hand, all other broad categories suffered from declines: food and beverages (-12.3% year-on-year), consumer goods (-4.9% year-on-year), transport equipment (-2.0% year-on-year) and industrial supplies (-1.3% year-on-year). As the recovery in exports was stronger than in imports, the balance of trade in goods improved by 5.0% year-on-year in 1Q 2021. However, the current account balance is expected to worsen for the first quarter year-on-year as the above-mentioned effects will be outweighed by the deteriorating balance of trade in services, due to the distressed tourism inflows.

Fiscal stimulus

Fiscal spending, which is predominantly financed externally, stood at around 9.1% of GDP in 2020. Fiscal stimulus remains supportive in 2021 as well, with a planned deficit of 7.6% of GDP. According to TBC Capital estimates, out of the external funding raised by the government in 2020, approximately USD 280 million is to be utilized in 2021. Therefore, this buffer, coupled with planned additional borrowings of around USD 774 million, is expected to be available in 2021. Notably, in April 2021 Georgia successfully issued a USD 500 million 5-year Eurobond with the coupon rate of 2.75%, which is the lowest ever coupon level for a Georgian borrower.

Credit growth

Bank credit growth weakened to 7.8% year-on-year in FX adjusted terms by the end of 1Q 2021, compared to a 9.1% year-on-year growth by the end of 4Q 2020. In terms of segments, CIB lending slowed to 3.5% year-on-year. In the same period, growth also slowed in the retail segment from 9.9% year-on-year in 4Q 2020 to 8.4% in 1Q 2021. The decline of credit growth in the retail segment was driven by a decrease in both mortgage and non-mortgage segments. Unlike the CIB and retail segments, MSME lending growth increased by 1.4 pp from 4Q 2020 to 1Q 2021 and amounted to 12.6% year-on-year.

 

Inflation, monetary policy and the exchange rate

After relative stability in the beginning of the year, with the change of the central bank governor in Turkey and the depreciation of lira at the very end of the first quarter, the GEL weakened further against the USD. At the same time, the NBG stayed active on the FX market, selling a total of USD 160.0 million in the form of auctions in the first quarter. In March 2021, the end of the state subsidy program, coupled with increased prices for all commodity groups and a weaker GEL, led to 7.2% annual inflation, which was higher than expected. In order to combat inflationary pressures, the NBG increased the monetary policy rate by 0.5 pp in March and an additional 1.0 pp in April to 9.5%.

 

Going forward

According to TBC Capital latest estimates, real GDP is expected to increase by 4.7% in 2021, followed by a solid 7.0% growth in 2022. As for projections of other research houses, the GDP projections for 2021 vary from 3.5% by IMF to 5.5% by Renaissance Capital.

 

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

  

Unaudited Consolidated Financial Results Overview for 1Q 2021

This statement provides a summary of the unaudited business and financial trends for 1Q 2021 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.

Net Interest Income

In 1Q 2021, net interest income amounted to GEL 225.1 million, up by 8.3% YoY and down by 2.7% on a QoQ basis.

The YoY increase in interest income by GEL 45.8 million, or 11.6%, was mainly driven by an increase in interest income from loans that resulted from an increase in the gross loan portfolio of GEL 1,402.6 million, or 10.1%. This increase was partially offset by a 0.5pp drop in loan yields, mainly due to a decrease in the average refinance and Libor rates as well as currency depreciation. Another contributor to the growth of interest income was the increase in investment securities related to both an increase in the respective portfolio by GEL 254.4 million, or 12.4%, and an increase in the respective yield by 0.2pp on the back of a decreased share of securities with lower interest rates.

Over the same period, interest expense increased by GEL 25.6 million, or 13.1%, mainly driven by an increase in interest expense from deposits, which was related to a growth in the respective portfolio of a GEL 3,030.7 million, or 27.0% YoY, mainly driven by the retail and CIB segments. Cost of deposit stood at 3.5% and remained broadly flat YoY.

The decrease in interest income on a QoQ basis of GEL 13.3 million, or 2.9%, was mainly driven by a decrease in interest income from loans to customers. This decrease was mainly related to a 0.3pp drop in loan yields on the back of change in the product mix towards mortgages. Over the same period, the loan portfolio remained broadly stable due to seasonality and the partial lock-down from January to mid-February. Another driver was a reduction in investment securities on the back of a decline in the respective portfolio by GEL 315.4 million, or 12.0%. This effect was slightly offset by a 0.1pp increase in the respective yield related to the decreased share of securities with lower interest rates, as mentioned above.

The decrease in interest expense of GEL 6.8 million, or 3.0% on a QoQ basis, was mainly related to a decrease in other borrowed funds and a drop in the respective yield. The decline in the respective portfolio by GEL 909.2 million, or 20.9%, was driven by a decrease in the NBG loan, while a 0.5pp drop in the respective yield was related to the pre-payment of one large borrowed fund in 4Q 2020.

In 4Q 2020, our net gains from currency swaps decreased by 35.7% YoY and was up by 5.0% 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 the scale of currency swap operations.

In 1Q 2021, our NIM stood at 4.7%, down by 0.4pp YoY and 0.1pp on a QoQ basis.

Net fee and commission income

In 1Q 2021, net fee and commission income totaled GEL 45.3 million, up by 4.0% YoY, and down by 13.2% QoQ.

The YoY increase was mainly driven by an increase in settlement transactions, guarantees issued and letters of credit. The former increase was mainly attributable to an increase in fee income from our Uzbek subsidiary, Payme, while the latter increase was driven by an increase in the respective portfolios. This growth was partially offset by a decline in fee income from card operations related to COVID-19.

The decrease on a QoQ basis in net fee and commission income was due to the partial lock-down from January to mid-February 2021, as well as low seasonality.

In thousands of GEL	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Net fee and commission income
Card operations	10,323	10,326	12,540	-17.7%	0.0%
Settlement transactions	24,567	25,736	19,843	23.8%	-4.5%
Guarantees issued and letters of credit	9,402	10,366	8,421	11.6%	-9.3%
Other	1,001	5,771	2,748	-63.6%	-82.7%
Total net fee and commission income	45,293	52,199	43,552	4.0%	-13.2%

 

Other Non-Interest Income

Total other non-interest income increased by 5.0% YoY and 5.4% QoQ, amounting to GEL 40.7 million in 1Q 2021.

Both the YoY and QoQ increases in other non-interest income were related to the disposals of investment securities available for sale in the amount of GEL 2.4 million.  

The QoQ increase in gross insurance profit was related to an increased gross net insurance premium earned as well as decreased claims, while the YoY decrease was related to the economic slowdown related to the pandemic.

In thousands of GEL	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Other non-interest income
Net income from foreign currency operations	28,507	28,100	28,642	-0.5%	1.4%
Net insurance premium earned after claims and acquisition costs[21]	4,403	3,263	4,800	-8.3%	34.9%
Other operating income	7,755	7,210	5,302	46.3%	7.6%
Total other non-interest income	40,665	38,573	38,744	5.0%	5.4%

 

Credit Loss Allowance

Credit loss allowance for loans in 1Q 2021 amounted to GEL 17.2 million, which translated into a 0.5% cost of risk. Provision charges were attributable to Retail and MSME segments, which were partially offset by the recovery of provision charges in CIB segment.

In thousands of GEL	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Credit loss allowance for loan to customers	(17,549)	(75,711)	(241,025)	-92.7%	-76.8%
Credit loss allowance for other transactions	305	(8,144)	(6,065)	NMF	NMF
Total credit loss allowance	(17,244)	(83,855)	(247,090)	-93.0%	-79.4%
Operating profit after expected credit losses	293,845	238,242	43,165	NMF	23.3%
Cost of risk	0.5%	2.0%	2.6%	-2.1 pp	-1.5 pp

 

Operating Expenses

In 1Q 2021, our operating expenses expanded by 14.8% YoY and remained broadly stable on a QoQ basis.

The YoY increase was mainly related to the low base of share-based payments in 1Q 2020, as a result of the reversal of management's bonuses, an increase in staff costs in TBC UZ, as well as depreciation of local currency.

As a result, in 1Q 2021, our cost to income ratio stood at 39.3%, up by 2.6pp YoY and 1.0pp on a QoQ basis, while our standalone cost to income stood at 33.1%, up by 1.3pp YoY and down by 0.3pp on a QoQ basis.

In thousands of GEL	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Operating expenses
Staff costs	(70,314)	(67,782)	(56,802)	23.8%	3.7%
Provisions for liabilities and charges	45	(724)	136	-66.9%	NMF
Depreciation and amortization	(17,364)	(18,838)	(15,788)	10.0%	-7.8%
Administrative & other operating expenses	(34,607)	(36,121)	(34,022)	1.7%	-4.2%
Total operating expenses	(122,240)	(123,465)	(106,476)	14.8%	-1.0%
Cost to income	39.3%	38.3%	36.7%	2.6 pp	1.0 pp
Standalone cost to income*	33.1%	33.4%	31.8%	1.3 pp	-0.3 pp

* For the ratio calculation all relevant group recurring costs are allocated to the bank

Net Income

In 1Q 2021, we generated GEL 153.0 million in net profit, up by 51.9% QoQ, which was driven by the resilient income generation capabilities further strengthened by our lower provision charges.

The net loss in 1Q 2020 was due to non-recurring items related to COVID-19: high credit loss allowances (in the amount of GEL 215.7 million) to cover for any potential losses, as well net modification loss on financial instruments (in the amount of GEL 30.6 million) related to grace periods granted to borrowers.

As a result, our ROE and ROA for the first quarter reached 20.3% and 2.7%, accordingly. 

In thousands of GEL	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Losses from modifications of financial instruments	(1,487)	(5,082)	(30,643)	-95.1%	-70.7%
Profit before tax	170,118	109,695	(93,954)	NMF	55.1%
Income tax expense	(17,131)	(8,994)	36,948	NMF	90.5%
Profit for the period	152,987	100,701	(57,006)	NMF	51.9%
ROE	20.3%	13.7%	-8.8%	29.1%	6.6%
ROE before expected credit loss allowances	22.6%	25.2%	29.2%*	-6.6%	-2.6%
ROA	2.7%	1.8%	-1.2%	3.9%	0.9%

*Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method ROE before expected credit loss allowances stood at 28.7% in 1Q 2020

 

Funding and Liquidity

As of 31 March 2021, the total liquidity coverage ratio, as defined by the NBG, was 136.7%, above the 100% limit. The increased liquidity in 1Q 2021 was mainly related to the one large short-term deposit placed in February.

As of 31 March 2020, NSFR stood at 131.4%, compared to the regulatory limit of 100%.

	31-Mar-21	31-Dec-20	31-Mar-20	Change YoY	Change QoQ
Minimum net stable funding ratio, as defined by the NBG	100%	100%	100%	0.0 pp	0.0 pp
Net stable funding ratio as defined by the NBG	131.4%	126.0%	124.7%	6.7 pp	5.4 pp
Net loans to deposits + IFI funding	92.2%	101.2%	101.8%	-9.6 pp	-9.0 pp
Leverage (Times)	7.6x	7.7x	7.7x	-0.1x	-0.1x
Minimum liquidity ratio, as defined by the NBG	30.0%	30.0%	30.0%	0.0 pp	0.0 pp
Liquidity ratio, as defined by the NBG	35.4%	33.3%	30.6%	4.8 pp	2.1 pp
Minimum total liquidity coverage ratio, as defined by the NBG	100.0%	100.0%	100.0%	0.0 pp	0.0 pp
Minimum LCR in GEL, as defined by the NBG	n/a	n/a	n/a	NMF	NMF
Minimum LCR in FC, as defined by the NBG	100.0%	100.0%	100.0%	0.0 pp	0.0 pp
Total liquidity coverage ratio, as defined by the NBG	136.7%	134.2%	107.6%	29.1 pp	2.5 pp
LCR in GEL, as defined by the NBG	140.8%	132.2%	107.0%	33.8 pp	8.6 pp
LCR in FC, as defined by the NBG	135.5%	134.9%	107.8%	27.7 pp	0.6 pp

 

Regulatory Capital

 

As of 31 March 2021, CET1, Tier1 and Total Capital increased QoQ by 7.8%, 6.9% and 6.0% respectively, mainly due to net income generation. Positive effect of income generation was partially offset by a negative effect of GEL devaluation and capital deductions as well as changes in other RWA. Portfolio RWA change was not material during the quarter.

Over the same period, our CET1, Tier 1 and Total Capital ratios stood at 10.9%, 13.5% and 17.6%, respectively, and remained comfortably above the eased minimum regulatory requirements by 3.1%, 3.8% and 3.9% accordingly. 

In 1Q 2021, the NBG outlined a new schedule for the gradual introduction of capital requirements under Basel III: Based on the new schedule, concentration risk and the Net GRAPE buffers phase-in continued from March 2021 and will be fully integrated by March 2023. As a result, in March 2021, pillar II requirements on CET1 and Tier 1 increased by 0.4pp and 0.5pp respectively.

In thousands of GEL	31-Mar-21	31-Dec-20	31-Mar-20	Change YoY	Change QoQ
CET 1 Capital	2,059,599	1,911,233	1,518,950	35.6%	7.8%
Tier 1 Capital	2,550,144	2,385,181	1,987,693	28.3%	6.9%
Total Capital	3,327,134	3,137,912	2,767,850	20.2%	6.0%
Total Risk-weighted Exposures	18,921,231	18,301,477	16,604,960	13.9%	3.4%

 

Minimum CET 1 ratio	7.8%			7.4%		6.9%	0.9 pp		0.4 pp
CET 1 Capital adequacy ratio	10.9%			10.4%		9.1%	1.8 pp		0.4 pp
Minimum Tier 1 ratio	9.7%			9.2%		8.8%	0.9 pp		0.5 pp
Tier 1 Capital adequacy ratio	13.5%			13.0%		12.0%	1.5 pp		0.5 pp
Minimum total capital adequacy ratio	13.7%			13.7%		13.3%	0.4 pp		0.0 pp
Total Capital adequacy ratio	17.6%			17.1%		16.7%	0.9 pp		0.5 pp

 

Loan Portfolio

As of 31 March 2021, the gross loan portfolio reached GEL 15,332.2 million, up by 10.1% YoY and 0.9% QoQ, or up by 6.1% YoY and down by 0.3% QoQ on a constant currency basis.

The YoY increase was spread across all segments, while the limited growth on a QoQ basis was due to low seasonality coupled with the partial lock-down from January to mid-February. The proportion of gross loans denominated in foreign currency decreased by 3.2pp YoY and 0.3pp QoQ and accounted for 59.2% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency decreased by 4.8pp YoY and stood at 57.7%.

As of 31 March 2021, our market share in total loans stood at 38.5%, down by 0.9pp YoY and 0.5 pp QoQ. Our loan market share in legal entities was 38.0%, down by 0.5 pp YoY and 0.6 pp QoQ, and our loan market share in individuals stood at 39.0%, down by 1.3 pp YoY and 0.4 pp QoQ.

In thousands of GEL	31-Mar-21	31-Dec-20	31-Mar-20	Change YoY	Change QoQ
Loans and advances to customers
Retail	5,761,488	5,812,565	5,296,860	8.8%	-0.9%
Retail loans GEL	2,980,635	2,973,775	2,430,149	22.7%	0.2%
Retail loans FC	2,780,853	2,838,790	2,866,711	-3.0%	-2.0%
CIB	5,939,056	5,831,871	5,398,092	10.0%	1.8%
CIB loans GEL	1,629,821	1,599,857	1,373,481	18.7%	1.9%
CIB loans FC	4,309,235	4,232,014	4,024,611	7.1%	1.8%
MSME	3,631,665	3,556,084	3,234,687	12.3%	2.1%
MSME loans GEL	1,647,846	1,592,836	1,432,858	15.0%	3.5%
MSME loans FC	1,983,819	1,963,248	1,801,829	10.1%	1.0%
Total loans and advances to customers	15,332,209	15,200,520	13,929,639	10.1%	0.9%

 

	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Loan yields	9.8%	10.2%	10.3%	-0.5 pp	-0.4 pp
Loan yields GEL	14.6%	15.3%	15.5%	-0.9 pp	-0.7 pp
Loan yields FC	6.6%	6.8%	6.8%	-0.2 pp	-0.2 pp
Retail Loan Yields	11.1%	11.9%	11.4%	-0.3 pp	-0.8 pp
Retail loan yields GEL	15.7%	16.7%	16.8%	-1.1 pp	-1.0 pp
Retail loan yields FC	6.2%	7.1%	6.5%	-0.3 pp	-0.9 pp
CIB Loan Yields	8.7%	8.4%	8.9%	-0.2 pp	0.3 pp
CIB loan yields GEL	12.8%	13.0%	13.3%	-0.5 pp	-0.2 pp
CIB loan yields FC	7.1%	6.9%	7.1%	0.0 pp	0.2 pp
MSME Loan Yields	9.8%	10.1%	10.8%	-1.0 pp	-0.3 pp
MSME loan yields GEL	14.5%	14.8%	15.6%	-1.1 pp	-0.3 pp
MSME loan yields FC	5.9%	6.3%	6.4%	-0.5 pp	-0.4 pp

Loan Portfolio Quality

QoQ PAR 30 ratio improved by 0.1 pp and stood at 2.5%. Par 30 increased in CIB segment, which was fully offset by the Retail segment. Par 30 increase in CIB was related to one large borrower. However, it should be noted that the respective overdue amount was repaid by the end of April 2021. The decrease in PAR 30 in Retail segment was  attributable to both mortgage and consumer portfolios.

QoQ basis, total non-performing loans (NPLs) slightly increased in 1Q 2021 and stood at 4.8%.  NPLs increased in Retail and MSME segments, which were almost fully offset by the CIB segment. The 0.4pp increase in the MSME segment was caused by the increase in PAR 90 loans. The main segments contributing to the growth were agricultural loans and the loans that previously had grace periods and were due to resume payments in 4Q 2020.  The 0.3pp increase in Retail segment was also due to PAR 90 loans, which benefited from  the second stage of payment holidays and were due to resume payments from 4Q 2020. The 0.2pp decline in the CIB segment was mainly attributable to one large borrower.

Our NPLs had 81% provision coverage as of 31 March 2021 and an additional 73% collateral coverage. Only 19% of NPLs were unsecured loans, but their provision coverage amounted to 187%.

 

Par 30	31-Mar-21	31-Dec-20	31-Mar-20		Change YoY	Change QoQ
Retail	3.0%	3.4%	2.4%		0.6 pp	-0.4 pp
CIB	1.2%	1.1%	1.6%		-0.4 pp	0.1 pp
MSME	3.8%	3.8%	3.2%		0.6 pp	0.0 pp
Total Loans	2.5%	2.6%	2.3%		0.2 pp	-0.1 pp

 

 

Non-performing Loans	31-Mar-21	31-Dec-20	31-Mar-20	Change YoY	Change QoQ
Retail	6.0%	5.7%	3.0%	3.0 pp	0.3 pp
CIB	2.2%	2.4%	2.0%	0.2 pp	-0.2 pp
MSME	7.0%	6.6%	4.3%	2.7 pp	0.4 pp
Total Loans	4.8%	4.7%	2.9%	1.9 pp	0.1 pp

 

 

NPL Coverage[22]	Mar-21		Dec-20		Mar-20
	provision coverage	Total coverage	provision coverage	Total coverage	provision coverage	Total coverage
Retail	93.8%	161.0%	101.1%	169.6%	200.6%	263.2%
CIB	81.9%	150.5%	77.1%	148.0%	99.1%	171.3%
MSME	63.1%	147.5%	68.6%	151.8%	84.7%	169.2%
Total	81.0%	154.4%	85.6%	159.4%	133.8%	206.4%

 

 

 

NPL Coverage (31 March 2021)[23]
	Collateral coverage	Provision  coverage				Total coverage		Share in NPL portfolio
Secured[24]	90%	57%				147%		81%
Unsecured	-	187%				187%		19%
Total	73%	81%				154%		100%

 

 

 

Cost of risk 

 

In 1Q 2021, the total cost of risk stood at 0.5%, 1.5 pp lower compared to previous quarter. Provision charges were attributable to Retail and MSME segments, which were partially offset by the recovery of provision charges in CIB segment.  The provision charges in Retail and MSME segments were attributable to increased Par 90 loans, while the recovery in CIB segment was attributable to two stage 3 borrowers.

Cost of risk	1Q'21	4Q'20	1Q'20*	Change YoY	Change QoQ
Retail	0.8%	2.6%	4.7%	-3.9 pp	-1.8 pp
CIB	-0.2%	0.2%	0.7%	-0.9 pp	-0.4 pp
MSME	1.0%	4.0%	2.1%	-1.1 pp	-3.0 pp
Total	0.5%	2.0%	2.6%	-2.1 pp	-1.5 pp

* Total cost of risk for 1Q 2020 consisted of annualized cost of risk without COVID-19 impact of 0.9% and not annualized COVID-19 related cost of risk  of 1.7%. Retail cost of risk compromised of cost of risk without COVID-19 impact of 1.8% and not annualized COVID-19 related cost of risk  of 2.9%, while for MSME and corporate segment were 0.6% & 1.5% and 0.3% and 0.4%, respectively.

Deposit Portfolio

The total deposits portfolio increased by 27.0% YoY and 13.3% QoQ and amounted to GEL 14,239.8 million, while on a constant currency basis, the deposit portfolio increased by 23.1% YoY and 10.6% QoQ. The proportion of deposits denominated in a foreign currency decreased by 1.9pp both YoY and QoQ and accounted for 68.2% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency increased by 0.9pp YoY and stood at 67.2%.

As of 31 March 2021, our market share in deposits amounted to 39.8%, which was the same on a YoY basis and up by 2.7pp QoQ, while our market share in deposits to legal entities stood at 39.8%, down by 2.3pp YoY and up by 5.3pp QoQ. Our market share in deposits to individuals stood at 39.8%, up by 1.9pp YoY and 0.4pp QoQ.

In thousands of GEL	31-Mar-21	31-Dec-20	31-Mar-20	Change YoY	Change QoQ
Customer Accounts
Retail	5,369,851	4,965,944	4,182,007	28.4%	8.1%
Retail deposits  GEL	1,266,543	1,226,877	956,496	32.4%	3.2%
Retail deposits FC	4,103,308	3,739,067	3,225,511	27.2%	9.7%
CIB	6,728,126	5,717,347	5,273,640	27.6%	17.7%
CIB deposits  GEL	1,803,883	1,833,122	1,737,663	3.8%	-1.6%
CIB deposits FC	4,924,243	3,884,225	3,535,977	39.3%	26.8%
MSME	1,299,482	1,378,207	1,150,103	13.0%	-5.7%
MSME deposits  GEL	619,717	671,658	483,750	28.1%	-7.7%
MSME deposits FC	679,765	706,549	666,353	2.0%	-3.8%
Total Customer Accounts*	14,239,837	12,572,728	11,209,150	27.0%	13.3%

* Total deposit portfolio includes Ministry of Finance deposits in the amount of GEL 603 mln, GEL 511 mln and GEL 842 mln as of 31 March 2020, 31 December 2020 and

31 March 2021, respectively.    

 

	1Q'21	4Q'20	1Q'20	Change YoY	Change QoQ
Deposit rates	3.5%	3.6%	3.5%	0.0 pp	-0.1 pp
Deposit rates GEL	6.6%	6.6%	6.4%	0.2 pp	0.0 pp
Deposit rates FC	1.9%	2.0%	1.9%	0.0 pp	-0.1 pp
Retail Deposit Yields	2.5%	2.6%	2.5%	0.0 pp	-0.1 pp
Retail deposit rates GEL	5.0%	5.1%	5.1%	-0.1 pp	-0.1 pp
Retail deposit rates FC	1.7%	1.8%	1.6%	0.1 pp	-0.1 pp
CIB Deposit Yields	3.9%	4.2%	4.5%	-0.6 pp	-0.3 pp
CIB deposit rates GEL	7.9%	7.8%	8.0%	-0.1 pp	0.1 pp
CIB deposit rates FC	2.2%	2.5%	2.5%	-0.3 pp	-0.3 pp
MSME Deposit Yields	0.8%	1.0%	0.9%	-0.1 pp	-0.2 pp
MSME deposit rates GEL	1.5%	1.7%	1.5%	0.0 pp	-0.2 pp
MSME deposit rates FC	0.2%	0.3%	0.3%	-0.1 pp	-0.1 pp

 

 

 

Segment definition and PL

Business Segments

The segment definitions are as follows:

·      CIB - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 12.0 million or which has been granted facilities of more than GEL 5.0 million. Some other business customers may also be assigned to the corporate segment or transferred to the MSME segment on a discretionary basis. In addition, CIB includes Wealth Management private banking services to high-net-worth individuals  with the threshold of USD 250,000 on assets under management (AUM), as well as on discretionary basis;

·      Retail - non-business individual customers;

·      MSME - business customers who are not included in the corporate segment; or individual customers of the fully-digital bank, Space.

·      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

1Q'21	Retail	MSME	CIB	Corp.Centre	Total
Interest income	158,426	85,110	132,130	64,947	440,613
Interest expense	(32,372)	(2,873)	(59,429)	(126,306)	(220,980)
Net gains from currency swaps	-	-	-	5,498	5,498
Net transfer pricing	(36,097)	(31,915)	12,137	55,875	-
Net interest income	89,957	50,322	84,838	14	225,131
Fee and commission income	43,276	9,889	21,712	6,231	81,108
Fee and commission expense	(12,444)	(6,518)	(15,245)	(1,608)	(35,815)
Net fee and commission income	30,832	3,371	6,467	4,623	45,293
Net insurance premium earned after claims and acquisition costs	-	-	-	4,403	4,403
Net gains from derivatives, foreign currency operations and translation	5,601	4,731	8,322	9,842	28,496
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	-	-	-	2,388	2,388
Other operating income	1,330	58	525	3,079	4,992
Share of profit of associates	-	-	-	386	386
Other operating non-interest income and insurance profit	6,931	4,789	8,847	20,098	40,665
Credit loss allowance for loans to customers	(12,005)	(8,678)	3,134	-	(17,549)
Credit loss allowance for performance guarantees and credit related commitments	335	84	227	-	646
Credit loss allowance for investments in finance lease	-	-	-	(1,311)	(1,311)
Credit loss allowance for other financial assets	-	-	518	(155)	363
Credit loss allowance for financial assets measured at fair value through other comprehensive income	-	-	(102)	696	594
Other non-financial assets impairment	13	-	-	-	13
Profit/(loss) before G&A expenses and income taxes	116,063	49,888	103,929	23,965	293,845
Losses from modifications of financial instruments	(530)	(30)	(927)	-	(1,487)
Staff costs	(31,794)	(13,604)	(10,464)	(14,452)	(70,314)
Depreciation and amortization	(11,254)	(2,774)	(1,151)	(2,185)	(17,364)
Provision for liabilities and charges	-	-	-	45	45
Administrative and other operating expenses	(16,660)	(6,383)	(4,148)	(7,416)	(34,607)
Operating expenses	(59,708)	(22,761)	(15,763)	(24,008)	(122,240)
Profit/(loss) before tax	55,825	27,097	87,239	(43)	170,118
Income tax expense	(4,961)	(2,618)	(8,539)	(1,013)	(17,131)
Profit/(loss) for the year	50,864	24,479	78,700	(1,056)	152,987

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance Sheet
In thousands of GEL	Mar-21	Dec-20			Mar-20
Cash and cash equivalents	2,425,584	1,635,405			1,127,242
Due from other banks	54,189	50,805			34,699
Mandatory cash balances with National Bank of Georgia	2,364,760	2,098,506			1,900,285
Loans and advances to customers	14,742,344	14,594,274			13,388,126
Investment securities measured at fair value through other comprehensive income	2,284,697	1,527,268			999,578
Bonds carried at amortized cost*	17,748	1,089,801			1,051,603
Investments in finance leases	272,090	271,660			281,717
Investment properties	65,605	68,688			70,926
Current income tax prepayment	62,022	69,889			25,771
Deferred income tax asset	1,453	2,787			21,472
Other financial assets[25]	292,410	171,302			188,196
Other assets	265,299	266,960			245,359
Premises and equipment	377,273	372,956			343,193
Right of use assets	54,535	53,927			58,182
Intangible assets	272,597	239,523			181,283
Goodwill	59,964	59,964			62,108
Investments in associates	4,476	4,090			2,792
TOTAL ASSETS	23,617,046	22,577,805			19,982,532
LIABILITIES
Due to credit institutions	3,612,067	4,486,373			3,767,185
Customer accounts	14,239,837	12,572,728			11,209,150
Lease liabilities	60,934	58,983			66,513
Other financial liabilities25	153,606	227,432			139,223
Current income tax liability	697	853			465
Debt Securities in issue	1,583,929	1,496,497			1,488,024
Deferred income tax liability	21,865	13,088			5
Provisions for liabilities and charges	22,526	25,335			25,861
Other liabilities	87,888	87,842			77,743
Subordinated debt	707,962	672,740			683,227
TOTAL LIABILITIES	20,491,311	19,641,871			17,457,396
EQUITY
Share capital	1,682	1,682			1,682
Shares held by trust	(25,494)	(33,413)			(34,451)
Share premium	848,459	848,459			848,459
Retained earnings	2,432,872	2,281,428			1,904,716
Group re-organisation reserve	(162,167)	(162,167)			(162,167)
Share based payment reserve	(19,288)	(20,568)			(36,177)
Fair value reserve	36,929	11,158			(1,454)
Cumulative currency translation reserve	759	(2,124)			(3,683)
Net assets attributable to owners	3,113,752	2,924,455			2,516,925
Non-controlling interest	11,983	11,479			8,211
TOTAL EQUITY	3,125,735	2,935,934			2,525,136
TOTAL LIABILITIES AND EQUITY	23,617,046	22,577,805			19,982,532

* In 2020, the Group changed its business model in relation to certain portfolio of bonds carried at amortized cost (Ministry of Finance Treasury Bills). The respective reclassifications have been applied prospectively from 1 January 2021, as required by IFRS. As a result of reclassification, Bonds carried at amortized cost in the amount of GEL 1,059,946 thousand has been transferred to Investment securities measured at fair value through other comprehensive income with the fair value of GEL 1,086,008 thousand. The difference has been recognized in other comprehensive income as required by IFRS.

 

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

In thousands of GEL	1Q'21	4Q'20	1Q'20
Interest income	440,613	453,874	394,779
Interest expense	(220,980)	(227,786)	(195,377)
Net gains from currency swaps	5,498	5,237	8,557
Net interest income	225,131	231,325	207,959
Fee and commission income	81,108	87,748	73,714
Fee and commission expense	(35,815)	(35,549)	(30,162)
Net fee and commission income	45,293	52,199	43,552
Net insurance premiums earned	14,143	12,542	13,233
Net insurance claims incurred and agents' commissions	(9,740)	(9,279)	(8,433)
Net insurance premium earned after claims and acquisition costs	4,403	3,263	4,800
Net gains from derivatives, foreign currency operations and translation	28,496	28,085	28,635
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	2,388	578	278
Other operating income	4,992	6,890	4,894
Share of profit of associates	386	(243)	137
Other operating non-interest income	36,262	35,310	33,944
Credit loss allowance for loans to customers	(17,549)	(75,711)	(241,025)
Credit loss allowance for investments in finance lease	(1,311)	(1,459)	(870)
Credit loss allowance for performance guarantees and credit related commitments	646	2,067	(2,024)
Credit loss allowance for other financial assets	363	(3,364)	(3,234)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	594	(903)	(584)
Other non-financial assets impairment	13	(4,485)	647
Operating profit after expected credit losses	293,845	238,242	43,165
Losses from modifications of financial instruments	(1,487)	(5,082)	(30,643)
Staff costs	(70,314)	(67,782)	(56,802)
Depreciation and amortization	(17,364)	(18,838)	(15,788)
(Provision for)/ recovery of liabilities and charges	45	(724)	136
Administrative and other operating expenses	(34,607)	(36,121)	(34,022)
Operating expenses	(122,240)	(123,465)	(106,476)
Profit/(loss) before tax	170,118	109,695	(93,954)
Income tax expense	(17,131)	(8,994)	36,948
Profit/(loss) for the period	152,987	100,701	(57,006)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve	25,772	3,163	5,022
Exchange differences on translation to presentation currency	2,903	(1,211)	3,167
Other comprehensive income for the period	28,675	1,952	8,189
Total comprehensive income for the period	181,662	102,653	(48,817)
Profit/(loss) attributable to:
- Shareholders of TBCG	151,224	99,371	(57,475)
- Non-controlling interest	1,763	1,330	469
Profit/(loss) for the period	152,987	100,701	(57,006)
Total comprehensive income is attributable to:
- Shareholders of TBCG	179,923	101,297	(49,267)
- Non-controlling interest	1,739	1,356	450
Total comprehensive income for the period	181,662	102,653	(48,817)

 

 

 

 

 

 

Consolidated Statement of Cash Flows

In thousands of GEL	31-Mar-2021	31-Dec-2020	31-Mar-2020
Cash flows from (used in) operating activities
Interest received	442,636	1,462,815	335,436
Interest received on currency swaps	5,498	20,950	8,557
Interest paid	(183,320)	(839,258)	(143,355)
Fees and commissions received	74,044	297,024	70,010
Fees and commissions paid	(36,510)	(133,385)	(30,504)
Insurance and reinsurance received	20,559	86,447	22,347
Insurance claims paid	(7,270)	(27,139)	(11,259)
Income received from trading in foreign currencies	(33,046)	(92,191)	36,907
Other operating income received	14,282	48,402	2,535
Staff costs paid	(65,416)	(238,577)	(44,993)
Administrative and other operating expenses paid	(37,873)	(134,348)	(41,585)
Income tax paid	(1,199)	(46,268)	(80)
Cash flows from operating activities before changes in operating assets and liabilities	192,385	404,472	204,016
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia	100,916	(353,975)	(74,492)
Loans and advances to customers	(23,866)	(1,059,684)	(191,641)
Net investments in lease	6,083	(2,902)	980
Other financial assets	(89,537)	(41,774)	(48,589)
Other assets	18,454	33,109	16,622
Net change in operating liabilities
Due to other banks	21,347	(32,294)	35,387
Customer accounts	1,360,791	1,432,051	163,321
Other financial liabilities	(104,089)	115,370	57,931
Other liabilities and provision for liabilities and charges	6,595	(8,153)	3,275
Net cash flows (used in)/from operating activities	1,489,079	486,220	166,810
Cash flows from (used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive income	(28,972)	(763,531)	(85,681)
Proceeds from disposal of investment securities measured at fair value through other comprehensive income	275,679	287,917	24,984
Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income	92,438	165,632	57,266
Acquisition of subsidiaries, net of cash acquired	-	694	-
Acquisition of bonds carried at amortised cost	-	(668,477)	(139,561)
Proceeds from redemption of bonds carried at amortised cost	-	413,038	100,970
Acquisition of premises, equipment and intangible assets	(49,264)	(164,379)	(44,151)
Proceeds from disposal of premises, equipment and intangible assets	351	3,627	12,836
Proceeds from disposal of investment property	3,430	13,513	3,129
Net cash used in investing activities	293,662	(711,966)	(70,208)
Cash flows from (used in) financing activities
Proceeds from other borrowed funds	1,190,364	4,036,810	1,321,226
Redemption of other borrowed funds	(2,160,119)	(3,324,230)	(1,434,930)
Repayment of principal of lease liabilities	(3,950)	(13,251)	(4,100)
Acquisition of treasury shares	-	(25,493)	-
Proceeds from debt securities in issue	-	104,838	70,516
Dividends paid	(1,354)	(1,344)	-
Net cash flows from financing activities	(975,059)	777,330	(47,288)
Effect of exchange rate changes on cash and cash equivalents	(17,502)	80,238	74,345
Net (decrease)/ increase in cash and cash equivalents	790,177	631,822	123,659
Cash and cash equivalents at the beginning of the year	1,635,404	1,003,583	1,003,583
Cash and cash equivalents at the end of the year	2,425,584	1,635,405	1,127,242

 

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)	1Q'21	4Q'20	1Q'20
Profitability ratios:
ROE1	20.3%	13.7%	-8.8%
ROA2	2.7%	1.8%	-1.2%
ROE before expected credit loss allowances3	22.6%	25.2%	29.2%*
Cost to income4	39.3%	38.3%	36.7%
NIM5	4.7%	4.8%	5.1%
Loan yields6	9.8%	10.2%	10.3%
Deposit rates7	3.5%	3.6%	3.5%
Yields on interest earning assets8	9.2%	9.5%	9.7%
Cost of funding9	4.5%	4.8%	5.0%
Spread10	4.7%	4.7%	4.7%
Asset quality and portfolio concentration:
Cost of risk11	0.5%	2.0%	2.6%
PAR 90 to Gross Loans12	1.6%	1.5%	1.2%
NPLs to Gross Loans13	4.8%	4.7%	2.9%
NPL provision coverage14	81.0%	85.6%	133.8%
Total NPL coverage15	154.4%	159.4%	206.4%
Credit loss level to Gross Loans16	3.8%	4.0%	3.9%
Related Party Loans to Gross Loans17	0.0%	0.0%	0.1%
Top 10 Borrowers to Total Portfolio18	8.2%	7.9%	8.7%
Top 20 Borrowers to Total Portfolio19	12.4%	12.1%	12.9%
Capital optimisation:
Net Loans to Deposits plus IFI Funding20	92.2%	101.2%	101.8%
Net Stable Funding Ratio21	131.4%	126.0%	124.7%
Liquidity Coverage Ratio22	136.7%	134.2%	107.6%
Leverage23	7.6x	7.7x	7.7x*
CET 1 CAR (Basel III)24	10.9%	10.4%	9.1%
Regulatory Tier 1 CAR (Basel III)25	13.5%	13.0%	12.0%
Regulatory Total 1 CAR (Basel III)26	17.6%	17.1%	16.7%

* Prior to the change in PPE (property, plant and equipment) accounting policy from the revaluation model to the cost method, ROE before expected credit loss allowances stood at 28.7% and leverage stood at 7.8x in1Q 2020

 

 

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 CIB shares), net investment in finance lease, net loans, and amounts due from credit institutions.

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. NPL provision coverage equals total credit loss allowance for loans to customers divided by the NPL loans.

15. Total NPL coverage equals total credit loss allowance plus the minimum of collateral amount of the respective NPL loan (after applying haircuts in the range of 0%-50% for cash, gold, real estate and PPE) and its gross loan exposure divided by the gross exposure of total 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 3.2766 as of 31 December 2020. For the calculations of the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 3.2845 as of 31 March 2020. As of 31 March 2021 the USD/GEL exchange rate equaled 3.4118. For P&L items growth calculations without currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2021 of 3.3142, 4Q 2020 of 3.2705, 1Q 2020 of 2.9267.

 

 

Additional Disclosures

1)   Subsidiaries of TBC Bank Group PLC[26] 

 

 

	Ownership / voting % as of 31 March 2021	Country	Year of incorporation	Industry	Total Assets  (after elimination)
Subsidiary					Amount GEL'000	% in TBC Group
JSC TBC Bank	99.9%	Georgia	1992	Banking	22,951,795	97.18%
United Financial    Corporation JSC	99.5%	Georgia	1997	Card processing	16,599	0.07%
TBC Capital LLC	100.0%	Georgia	1999	Brokerage	3,580	0.02%
TBC Leasing JSC	100.0%	Georgia	2003	Leasing	370,099	1.57%
TBC Kredit LLC	100.0%	Azerbaijan	1999	Non-banking credit institution	14,959	0.06%
TBC Pay LLC	100.0%	Georgia	2009	Processing	47,171	0.20%
Index LLC	100.0%	Georgia	2011	Real estate management	1,224	0.01%
TBC Invest LLC	100.0%	Israel	2011	PR and marketing	352	0.00%
JSC TBC Insurance	100.0%	Georgia	2014	Insurance	75,572	0.32%
Redmed LLC	100.0%	Georgia	2019	E-commerce	1,044	0.00%
TBC Ecosystem Companies	100.0%	Georgia	2019	Asset management	162	0.00%
Swoop JSC	100.0%	Georgia	2010	Retail Trade	709	0.00%
LLC Online Tickets	55.0%	Georgia	2015	Software Services	1,659	0.01%
TKT UZ	75.00%	Uzbekistan	2019	Retail Trade	134	0.00%
My.ge LLC	65.0%	Georgia	2008	E-commerce, Housing and Auto	8,489	0.04%
LLC Vendoo (Geo)	100.0%	Georgia	2019	Retail Leasing	3,529	0.01%
LLC Mypost	100.0%	Georgia	2019	Postal Service	109	0.00%
LLC Billing Solutions	51.00%	Georgia	2019	Software Services	417	0.00%
All property.ge LLC	90.0%	Georgia	2013	Real estate management	2,501	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	27	0.00%
TBC Group Support LLC	100.0%	Georgia	2020	Risk management	-	0.00%
Inspired LLC	51.0%	Uzbekistan	2011	Processing	12,277	0.05%
TBC Bank UZ JSCB	100.0%	Uzbekistan	2020	Banking	69,521	0.29%
LLC Vendoo (UZ Leasing)	100.00%	Uzbekistan	2019	Consumer financing	1,700	0.01%

 

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 the retail segment, holding 22.0% and 39.3% market shares[27] without border motor third party liability (MTPL) insurance, respectively in 1Q 2021.

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 2019, we entered the health insurance market, with a strategy to target the premium segment by providing superior customer experience coupled with the most innovative approach to products and services. From 2021, we are planning to expand our value proposition to the mid-premium segment, having accumulated sufficient market knowledge and claims statistics.

In 1Q 2021, net profit including the health insurance business amounted to GEL 2,193 thousands, up by 49.1% YoY, or down by 4.6% on a QoQ basis. The YoY increase was mainly driven by strong growth in net interest income, as well as overall growth of business and cost optimization.

 

Information excluding health insurance	1Q'21	4Q'20	1Q'20
In thousands of GEL
Gross written premium	21,363	21,322	18,294
Net earned premium[28]	16,653	16,595	16,002
Net profit	2,895	2,512	2,059
Net combined ratio	83.5%	87.1%	86.3%

 

Information including health insurance	1Q'21	4Q'20	1Q'20
In thousands of GEL
Gross written premium	25,515	23,077	20,195
Net earned premium	19,131	18,696	17,317
Net profit	2,193	2,299	1,471
Net combined ratio	90.1%	90.1%	91.5%

IFRS standalone data

 

 

3)   Reclassification of certain balance sheet and profit and loss items and changes in methodology

 

In 1Q 2021, we reclassified certain BS and PL items for all quarters of 2020 and 1Q 2021, as outlined below.

 

Wealth Management business reclassification

 

Following the structural changes in the Management Board, starting from January 2021, Deputy CEO George Tkhelidze, head of Corporate and Investment Banking, assumed responsibility for the Wealth Management business. As a result, we reclassified all relevant BS and PL items of the Wealth Management business from Retail Banking to Corporate and Investment Banking.

 

The amounts of the Wealth Management loan and deposit portfolios are given in a table below:

 

	Loan book (million GEL)	Deposit portfolio (million GEL)
1Q 2020	188.3	1,984.8
4Q 2020	141.1	2,289.1
1Q 2021	139.0	2,415.9

 

 

Reclassification of other non-financial assets impairment

In 1Q 2021, the Group reclassified the impairment of other non-financial assets (the impairment of premises and equipment, investment properties and intangible assets, as well as write down of current assets to fair value less cost to sell and reversal of the previous write down of current asset to fair value less cost to sell) from administrative expenses to credit loss allowance for other transactions. The amounts reclassified were GEL 0.6 million, GEL 4.5 million and GEL 0.01 million in 1Q 2020, 4Q 2020 and 1Q 2021, respectively.

 

 

Changes in methodology - NPL collaterals coverage

To further increase the focus on the collateral coverage, the Bank reviewed its methodology and applied a more conservative approach, namely under the updated methodology, the collateral amount is capped at the respective loan amount. The NPL coverages for all four quarters of 2020 have been recalculated per updated methodology.

 

The table below outlines the NPL coverage ratios as of 31 March 2021, calculated per previous and the updated methodology.

 

	Collateral coverage		Total NPL coverage (provisions plus collateral)
	Per previous methodology	Per updated methodology	Per previous methodology	Per updated methodology
Retail	75%	67%	169%	161%
CIB	130%	69%	212%	150%
MSME	114%	84%	177%	148%
Total	98%	73%	179%	154%

 

 

4)   Loan book breakdown by stages according IFRS 9

 

Total (in million GEL)

	31-Mar-21		31-Dec-20		31-Mar-20
Stage	Gross	LLP rate*	Gross	LLP rate*	Gross	LLP rate*
1	12,101	1.1%	11,861	1.1%	11,488	1.2%
2	2,296	5.4%	2,448	5.8%	2,016	12.5%
3	935	36.1%	892	37.4%	426	36.8%
Total	15,332	3.8%	15,201	4.0%	13,930	3.9%

 

 

CIB (in million GEL)

	31-Mar-21		31-Dec-20		31-Mar-20
Stage	Gross	LLP rate*	Gross	LLP rate*	Gross	LLP rate*
1	4,760	1.1%	4,701	1.2%	4,987	1.0%
2	991	0.9%	965	0.9%	250	1.1%
3	188	24.5%	166	28.0%	161	32.5%
Total	5,939	1.8%	5,832	1.9%	5,398	2.0%

 

 

MSME (in million GEL)

	31-Mar-21		31-Dec-20		31-Mar-20
Stage	Gross	LLP rate*	Gross	LLP rate*	Gross	LLP rate*
1	2,764	0.9%	2,662	0.9%	2,577	1.2%
2	583	7.0%	631	7.4%	540	9.3%
3	285	32.5%	263	33.7%	118	30.0%
Total	3,632	4.4%	3,556	4.5%	3,235	3.6%

 

 

Retail (in million GEL)

	31-Mar-21		31-Dec-20		31-Mar-20
Stage	Gross	LLP rate*	Gross	LLP rate*	Gross	LLP rate*
1	4,577	1.0%	4,498	1.1%	3,925	1.3%
2	722	10.4%	852	10.3%	1,226	16.3%
3	462	43.1%	463	42.8%	146	46.9%
Total	5,761	5.6%	5,813	5.8%	5,297	6.0%

* LLP rate is defined as credit loss allowances divided by gross loans

 

 

5)   Reconciliation of Return on Equity (ROE) with ROE before expected credit loss allowances

 

#	Income Statement Highlights
1.	in thousands of GEL	1Q'21	4Q'20	1Q'20
2.	Net interest income	225,131	231,325	207,959
3.	Net fee and commission income	45,293	52,199	43,552
4.	Other operating non-interest income	40,665	38,573	38,744
5.	Credit loss allowance	(17,244)	(83,855)	(247,090)
6.	Operating profit after expected credit losses	293,845	238,242	43,165
7.	Losses from modifications of financial instrument	(1,487)	(5,082)	(30,643)
8.	Operating expenses	(122,240)	(123,465)	(106,476)
9.	Profit before tax	170,118	109,695	(93,954)
10.	Income tax expense	(17,131)	(8,994)	36,948
11.	Profit for the period	152,987	100,701	(57,006)
12.	Profit for the period less Non-controlling interest	151,224	99,371	(57,475)
13.	Profit before Credit loss allowances less Non-controlling interest (12 - 5)	168,468	183,226	189,615

 

 

#	in thousands of GEL	1Q'21	4Q'20	1Q'20
14.	Average equity attributable to the PLC's equity holders	3,017,527	2,888,145	2,615,104
15.	Return on equity (ROE) (12÷14)*	20.3%	13.7%	-8.8%
16.	Return on equity (ROE) before expected credit loss allowances (13÷14)*	22.6%	25.2%	29.2%
	*annualised where applicable