18 August 2021, 07:00

Source - LSE Regulatory

RNS Number : 9556I

TBC Bank Group PLC

18 August 2021

TBC BANK GROUP PLC ("TBC Bank")

2Q AND 1H 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 the 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 accounts and financial statements. The areas in which the management 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.

Second Quarter and First Half of 2021 Unaudited Consolidated Financial Results Conference Call

TBC Bank Group PLC ("TBC PLC") will release its second quarter and first half of 2021 unaudited consolidated financial results on Wednesday, 18 August 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/93113731736?pwd=MWhLNHlPSVVNRlZVUUxkLzZiVFdNZz09

Webinar ID: 931 1373 1736

Passcode: 124283

Or, use the following dial-ins:

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

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

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

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

Webinar ID 931 1373 1736#, please dial the ID number slowly.

Other international numbers available at: https://tbc.zoom.us/u/aeIeUaqK4W

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

2Q and 1H 2021 Results Announcement

Key Results Highlights...................................................................................................................................5

Letter from the Chief Executive Officer..............................................................................................................................7

Economic Overview.................................................................................................................................................................. 9

Unaudited Consolidated Financial Results Overview for 2Q 2021............................................................................ 11

Unaudited Consolidated Financial Results Overview for 1H 2021.............................................................................24

Additional Disclosures.............................................................................................................................................................. 36

1) TBC Bank - Background..................................................................................................................................................... 36

2) Subsidiaries of TBC Bank Group PLC............................................................................................................................36

3) TBC Insurance........................................................................................................................................................................ 37

4) First digital bank in Uzbekistan..........................................................................................................................................38

5) Reclassification of certain balance sheet profit and loss items and changes in methodology.........................38

6) Loan book breakdown by stages according IFRS 9......................................................................................................39

7) Reconciliation of Return on Equity (ROE) with ROE before expected credit loss allowances......................40

Material Existing and Emerging Risks...................................................................................................................................41

Statement of Directors' Responsibilities............................................................................................................................... 52

Unaudited Condensed Consolidated Interim Financial Statements...............................................................................54

TBC Bank's Unaudited 2Q and 1H 2021 Consolidated Financial Results

Record high profitability on the back of strong revenue generation and improved performance on asset quality side

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.

The information in this announcement, which was approved by the Board of Directors on 17 August 2021, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020, which contained an unmodified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

Key Results Highlights

2Q 2021 P&L Highlights

Profit for the period amounted to GEL 250.4 million (2Q 2020: GEL 126.2 million)
Operating income[1] amounted to GEL 380.3 million (2Q 2020: GEL 250.0 million)
Operating expenses amounted to GEL 134.7 million (2Q 2020: GEL 95.1 million)
Return on average equity (ROE) stood at 31.0% (2Q 2020: 19.5%)
Return on average assets (ROA) stood at 4.4% (2Q 2020: 2.6%)
Cost to income of TBC Bank Group PLC stood at 35.4% (2Q 2020: 38.0%)
Standalone cost to income ratio of the Bank[2] was 28.6% (2Q 2020: 32.3%)
Cost of risk stood at -1.3% (2Q 2020: 0.0%)
Net interest margin (NIM) stood at 5.0% (2Q 2020: 4.3%)
Basic earnings per share stood at GEL 4.55 (2Q 2020: 2.30)
Diluted earnings per share stood at GEL 4.49 (2Q 2020: 2.29)

1H 2021 P&L Highlights

Profit for the period amounted to GEL 403.4 million (1H 2020: GEL 69.2 million)
Operating income¹ amounted to GEL 691.4 million (1H 2020: GEL 540.3 million)
Operating expenses amounted to GEL 256.9 million (1H 2020: GEL 201.5 million)
Return on average equity (ROE) stood at 25.9% (1H 2020: 5.2%)
Return on average assets (ROA) stood at 3.6% (1H 2020: 0.7%)
Cost to income of TBC Bank Group PLC stood at 37.2% (1H 2020: 37.3%)
Standalone cost to income ratio of the Bank² was 30.6% (1H 2020: 32.0%)
Cost of risk stood at -0.4% (1H 2020: 2.1%)
Net interest margin (NIM) stood at 4.8% (1H 2020: 4.7%)
Basic earnings per share stood at GEL 7.33 (2Q 2020: 1.24)
Diluted earnings per share stood at GEL 7.24 (2Q 2020: 1.23)

Balance Sheet Highlights as of 30 June 2021

Gross loans and advances to customers stood at GEL 15,274.9 million, up by 12.0% YoY or at 8.5% on a constant currency basis
Total customer deposits amounted to GEL 12,870.4 million, up by 23.5% YoY or 20.1% on constant currency basis
NPLs were 3.4%, up by 0.5 pp YoY
NPL provision coverage and total coverage ratios stood at 91.3%, or 169.6%, respectively on 30 June 2021 compared to 134.7% or 208.0%, as of 30 June 2020
Net loans to deposits + IFI funding stood at 102.8%, down by 2.5 pp YoY, and Regulatory Net Stable Funding Ratio (NSFR), stood at 130.6% up by 3.1 pp YoY
The Bank's Basel III CET 1, Tier 1 and Total Capital Adequacy Ratios per the NBG's methodology stood at 13.0%, 15.5%, and 19.6%, respectively, compared to minimum regulatory requirements including restored buffers of 11.2%, 13.5%, and 17.8%, respectively.

Market Shares as of 30 June 2021^{^[3]}

Market share by total assets reached 38.2%, up by 0.3 pp YoY (#1 position)
Market share by total loans was 38.1%, down by 1.4 pp YoY (#1 position)
Market share of total deposits reached 37.8%, up by 0.7 pp YoY (#2 position)

Digital Highlights for 2Q 2021

Active retail digital users[4] increased by 15.8% YoY and amounted to 688,000
Average daily active retail digital users (DAU)[5] in June increased by 27.0 % YoY and stood at 249,000
Average daily active retail digital users (DAU) divided by monthly active retail digital users (MAU)[6] stood at 41.8% in June 2021 (June 2020: 38.6%)
97% of all transactions were conducted through digital channels[7] (2Q 2020: 96%)
The penetration ratio for internet and mobile banking[8] stood at 53% for 2Q 2021 (2Q 2020: 47%)

TBC UZ Highlights

The number of registered users increased more than four times since March 2021 and stood at around 403,000 by the end of July.
During the second quarter 2021, we enriched our existing unsecured consumer-lending proposition with new types of loans and added new savings options for deposits.
Our call center and online support services received the highest customer satisfaction score among 27 Uzbek banks, according to an independent survey conducted by Bank.uz.
Our loan portfolio amounted to GEL 31.8 million in July 2021, compared to GEL 1.0 million in March 2021.
Our deposit portfolio amounted to GEL 49.6 million in July 2021, compared to GEL 2.8 million in March 2021.

For more financial information about our Uzbek subsidiary, please refer to Annex 4.

Letter from the Chief Executive Officer

I am delighted to present a strong set of financial results for the second quarter and first half of 2021 on the back of an impressive recovery in the macroeconomic environment. Our outstanding performance resulted in solid capital generation, which allowed the Board to declare an interim dividend of GEL 1.5 per share payable in second half of September 2021. We also continue to deliver on our strategic objectives and I am particularly pleased with the results of our Uzbek business, which has been growing faster than our expectations.

Strong economic rebound

The Georgian economy has rebounded at a speed that exceeded even the most optimistic expectations. Importantly, this growth has been broad-based, supported by strong external inflows and increased domestic demand. According to the preliminary estimates of Geostat[9], the economy posted 29.8% year-on-year real growth in the second quarter. While the low base a year ago played a role, in the second quarter the economy surpassed even its 2019 level by 12.6%. Together with an exceptional performance in exports, the continued strong flow of remittances and a gradual recovery in tourism, record-low interest rates on US$ deposits stimulated consumer spending and real estate investments. Bank credit displayed a solid rebound in the second quarter with 12.6% year-on-year growth in FX adjusted terms, which is also strongly supportive to the outlook. While COVID-19 and election related uncertainties pose downside risks to the outlook, real GDP growth for the year is likely to be above 10.0%, even under conservative assumptions.

Strong financial performance

In the second quarter of 2021, our consolidated net profit amounted to GEL 250.4 million, almost doubling year-on-year, while our return on equity and return on assets stood at 31.0% and 4.4%, respectively.

Our profitability was driven by strong income generation both in the interest and non-interest income categories. Net interest margin returned to its pre-pandemic level and amounted to 5.0%, while net fee and commission income increased by 59.4% year-on-year, primarily due to the revival of business activities, the fast growth at our Uzbek subsidiary, Payme, as well as various business initiatives undertaken in our domestic payments business. The growth in other operating income was partially related to the gain received from sale of one of our investment properties.

Our strong operating income was further supported by recoveries of credit loss allowances due to the improved macro outlook on the back of the better than expected economic performance, as well as repayment from a single large CIB borrower. As a result, our cost of risk decreased to -1.3% in the second quarter 2021. Over the same period, our cost to income ratio dropped to 35.4%, down by 2.6pp year-on-year. This was driven by strong income generation, which offset the growth in operating expenses. At the same time, the stand-alone cost to income ratio for the Bank stood at 28.6%^{^[10]}.

Our strong financial performance in the second quarter of 2021, coupled with resilient results in the first quarter of 2021, resulted in consolidated net profit of GEL 403.4 million in the first half 2021. Over the same period, return on equity stood at 25.9% and return on assets stood at 3.6%.

Our loan book increased by 8.5% year-on-year in constant currency terms, which translated into a 38.1% market share. Over the same period, our deposits increased by 20.1% in constant currency terms. As a result, our market share in total deposits amounted to 37.8% as of 30 June 2021.

As of 30 June 2021, our CET1, Tier 1 and Total Capital ratios stood at 13.0%, 15.5% and 19.6%, respectively, comfortably above the respective minimum regulatory requirements including the restored buffers of 11.2%, 13.5% and 17.8%. We continue to maintain a robust liquidity position, with net stable funding (NSFR) and liquidity coverage ratios (LCR) standing at 130.6% and 127.1%, respectively, as of 30 June 2021.

Progress towards our strategic objectives

During the quarter, we concentrated our efforts on increasing the utilization of digital channels, enhancing our payments business, as well as expanding our Uzbek operations in line with our strategic priorities. Furthermore, we continue to make further progress in relation to our environmental, social and governance matters ("ESG").

o The number of retail digital transactions during the second quarter of 2021 increased by 53.1% year-on-year and by 19.1% quarter-on-quarter. Over the same period, the number of digital sales also remained strong. The consumer loan sales offloading ratio^{^[11]}amounted to 37%, while the deposit sales offloading ratio^{^[12]} stood high at 72%.

o The volume of payment transactions went up by 26% quarter-on-quarter, while the number of transactions increased by 22% in the second quarter of 2021. As the leading payments provider in the country, we are constantly working on enhancing payments solutions for our customers. In June, we launched a new platform, Payments Space (available on www.tbcpayments.ge), for our merchants, which allows them to easily control their daily transactions, receive analytical reports and manage their payments products.

o Our Uzbek business demonstrated remarkable results over the recent period. The number of registered and active users of our digital banking app TBC UZ continued its rapid growth and reached 403,000 and 135,000, respectively, as of 31 July 2021. We have also started expanding outside Tashkent and already operate 34 client acquisition points in 11 regional cities. Our loan book and deposit portfolio continued their steady growth and reached GEL 31.8 million and GEL 49.6 million, respectively, as of 31 July 2021, while the total number of transactions more than tripled in July compared to March.

o Our Uzbek payments subsidiary, Payme, also continued its rapid growth, driven by P2P transfers and utility payments, which together accounted for around 94% of total volume of transactions conducted in the second quarter 2021. Over the same period, the number of its registered users reached 3.5 million, up by 52.2% year-on-year. In terms of financial metrics, Payme's revenue during the quarter increased by 86.8% year-on-year to GEL 6.6 million, while net profit grew by 81.9% year-on-year to GEL 4.1 million.

o TBC Bank has received accreditation by the Green Climate Fund (GCF), making it the first commercial bank in the Caucasus region to receive this accreditation. It will enable TBC Bank to have direct access to GCF funding to finance various green projects. In addition, we have published our full-scale Sustainability Report for the second year in a row, which is available at www.tbcbankgroup.com. Finally, I am proud to say that our investment banking subsidiary, TBC Capital, participated as joint lead manager in the very successful placement of US$ 500 million Green Eurobonds by Georgian Railway on the London Stock Exchange, a very important transaction for our country. It is only the second Green Eurobond issued from Georgia, and last year, TBC Capital was co-manager of the first such issuance, by "Georgia Global Utilities".

Outlook

Our strong financial results and continued progress towards our strategic objectives during the first half of 2021 together with revived business activities and positive macroeconomic outlook fill me with optimism about the rest of 2021.

To conclude, I would 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 annual loan growth of 10-15%.

Economic Overview

Economic growth

After a 4.5% drop in the first quarter of 2021, Georgia's economy showed unexpected strength in April with real GDP reaching a 44.8% year-on-year expansion, followed by similarly solid year-on-year growth of 25.8% and 18.7% in May and June 2021, respectively. The year-on-year growth in the second quarter was 29.8%. Taking into account the easing restrictions, the upturn in the external sector and the global recovery, it can be firmly stated that the economy has embarked on a rebound path. Real GDP in 2021 had already substantially surpassed 2019 levels, being around a 5.3% higher in the first half of the year and 12.6% higher - in the second quarter.

External sectors

Similar to GDP, the external sector experienced a strong rebound in 2Q 2021 with exports growing by 47.1% year-on-year and 10.9% compared with 2Q 2019. Notably, domestic exports lead the recovery with the share of re-exports in the total exports decreasing significantly, from 41.4% in 2Q 2019 to 27.5% in 2Q 2021. Despite the ongoing recovery in the tourism related imports and re-exports, imports of goods also went up by 44.8% YoY in 2Q 2021and by 1.3% when compared with the same period in 2019. Importantly, the rebound in the trade in goods was broad based, reflecting the increased overall external as well as the domestic demand.

Remittance inflows were also very strong with a 53.5% increase YoY in the second quarter and a 36.8% increase compared to the same period in 2019. Although part of the rebound compared with 2019 can be attributed to the border closures and more cash remittances being transferred through the digital channels, overall growth is still substantial given that the share of cash inflows is only likely to be around 10.0% -15.0%, according to the NBG's estimates.

Tourism inflows in 2Q 2021 increased by 753.3% year-on-year in US$ terms, while dropping by 72.0% compared to the same period in 2019. This was a significant improvement after a 90.7% drop in the first quarter compared to 2019. The latest monthly dynamics are also promising: 64.0% decline in June 2021compared with June 2019, while early indicators based on the spending by non-residents through TBC Bank's channels suggest an even more sizable rebound in July^{^[13]}. Overall, even taking into account increased risks due to a higher number of infection cases, TBC Capital's latest projection of tourism inflows to recover by around 40.0% in 2021 compared to 2019 still looks reasonable[14].

Fiscal stimulus

The fiscal deficit is also expected to remain large in 2021 at an estimated 6.9% of GDP following a deficit of 9.3% of GDP in 2020. However, according to the Ministry of Finance, fiscal consolidation is expected in the coming years with deficit-to-GDP ratios of 4.4%, 3.0% and 2.7% in 2022, 2023 and 2024, respectively. Importantly, the major source of deficit financing in 2020-2021 was an external one, largely compensating for the pandemic related drop in net inflows.

Credit growth

By the end of 2Q 2021, bank credit growth has increased to 12.6% year-on-year, compared to a 7.8% year-on-year growth by the end of 1Q 2021. In terms of segments, MSME lending growth has increased by 5.5pp from 1Q 2021 to 2Q 2021 and amounted to 18.1% year-on year. Corporate lending also increased from 3.5% at the end of 1Q 2021 to 8.3% year-on-year, respectively. Growth in the retail sector, increased by 4.3pp to 12.6% year-on-year on the back of stronger mortgage and non-mortgage loans growth.

Inflation, monetary policy and the exchange rate

After the depreciation against the US$ in the first quarter of 2021, the GEL has regained some of its value since May, mainly on the back of higher exports, remittances, tourism inflows and a tighter monetary policy stance with a refinancing rate of 10.0%. Due to stronger inflows, the NBG has eased its FX market operations, selling US$ 83.7 million in April and only US$ 9.3 million in June. On the other hand, year-on-year inflation reached 11.9% in July, mainly due to the earlier depreciation of GEL and higher commodity and utility prices. Inflation is expected to moderate somewhat throughout the year before reaching the target of 3.0% in 2022.

Going forward

With a stronger than expected rebound in the second quarter, TBC Capital's forecast for real GDP growth in 2021 has been revised upwards to 10.5% followed by a solid 6.5% growth in 2022. Meanwhile, in June the World Bank revised their 2021 growth projections for Georgia from 4.0% to 6.0%, while the IMF increased their forecast in July from 3.5% to 7.7%

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

Unaudited Consolidated Financial Results Overview for 2Q 2021

This statement provides a summary of the unaudited business and financial trends for 2Q 2021 for TBC Bank Group plc and its subsidiaries. The quarterly financial information and trends are unaudited.

TBC Bank Group PLC's financial results has been prepared in accordance with UK-adopted International Accounting Standard (IAS) 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority (FCA).

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

Financial Highlights

Income Statement Highlights
in thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Net interest income	242,767	225,131	184,365	31.7%	7.8%
Net fee and commission income	63,008	45,293	39,517	59.4%	39.1%
Other operating non-interest income[15]	74,512	40,665	26,161	NMF	83.2%
Credit loss allowance	45,291	(17,244)	(12,586)	NMF	NMF
Operating profit after expected credit losses	425,578	293,845	237,457	79.2%	44.8%
Losses from modifications of financial instrument	(104)	(1,487)	(3,527)	-97.1%	-93.0%
Operating expenses	(134,688)	(122,240)	(95,059)	41.7%	10.2%
Profit before tax	290,786	170,118	138,871	NMF	70.9%
Income tax expense	(40,394)	(17,131)	(12,665)	NMF	NMF
Profit for the period	250,392	152,987	126,206	98.4%	63.7%

Balance Sheet and Capital Highlights
in thousands of GEL	Jun-21	Mar-21	Jun-20	Change YoY	Change QoQ
Total Assets	22,091,541	23,617,046	19,813,429	11.5%	-6.5%
Gross Loans	15,274,926	15,332,209	13,635,392	12.0%	-0.4%
Customer Deposits	12,870,418	14,239,837	10,420,330	23.5%	-9.6%
Total Equity	3,336,825	3,125,735	2,653,405	25.8%	6.8%
Regulatory Common Equity Tier I Capital (Basel III)	2,382,595	2,059,599	1,631,006	46.1%	15.7%
Regulatory Tier I Capital (Basel III)	2,837,805	2,550,144	2,068,052	37.2%	11.3%
Regulatory Total Capital (Basel III)	3,573,282	3,327,134	2,787,136	28.2%	7.4%
Regulatory Risk Weighted Assets (Basel III)	18,275,845	18,921,231	16,249,475	12.5%	-3.4%

Key Ratios	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
ROE	31.0%	20.3%	19.5%	11.5 pp	10.7 pp
ROA	4.4%	2.7%	2.6%	1.8 pp	1.7 pp
NIM	5.0%	4.7%	4.3%	0.7 pp	0.3 pp
Cost to income	35.4%	39.3%	38.0%	-2.6 pp	-3.9 pp
Standalone cost to income of the Bank[16]	28.6%	33.1%	32.3%	-3.7 pp	-4.5 pp
Cost of risk	-1.3%	0.5%	0.0%	-1.3pp	-1.8 pp
NPL to gross loans	3.4%	4.8%	2.9%	0.5 pp	-1.4 pp
NPL provision coverage ratio	91.3%	81.0%	134.7%	-43.4pp	10.3 pp
Total NPL coverage ratio	169.6%	154.4%	208.0%	-38.4 pp	15.2 pp
CET 1 CAR (Basel III)	13.0%	10.9%	10.0%	3.0 pp	2.1 pp
Regulatory Tier 1 CAR (Basel III)	15.5%	13.5%	12.7%	2.8 pp	2.0 pp
Regulatory Total CAR (Basel III)	19.6%	17.6%	17.2%	2.4 pp	2.0 pp
Leverage (Times)	6.6x	7.6x	7.5x	-0.9 pp	1.0 pp

Net Interest Income

In 2Q 2021, net interest income amounted to GEL 242.8 million, up by 31.7% YoY and 7.8% on a QoQ basis.

The YoY rise in interest income by GEL 65.5 million, or 16.7%, was mainly driven by an increase in interest income from loans related to a growth in the gross loan portfolio of GEL 1,639.5 million, or 12.0%, together with an increase in the respective yield by 0.5pp.

In 2Q 2021, interest expense increased by GEL 10.7 million, or 5.0%, mainly driven by an increase in interest expense from deposits, which was related to a growth in the respective portfolio of GEL 2,450.1 million, or 23.5% YoY. Over the same period, the cost of deposits stood at 3.4% and remained broadly flat YoY. The growth was partially offset by a decrease in interest expense from other borrowed funds, on the back of a decline in the respective portfolio by GEL 821.5 million, or 19.8%. Overall, the change in liability structure towards deposits had a positive effect on our cost of funding, which dropped by 0.4pp on a YoY basis.

The increase in interest income on a QoQ basis of GEL 18.0 million, or 4.1%, was mainly driven by an increase in interest income from loans to customers on the back of 0.4pp growth in loan yields. This increase was mainly attributable to GEL loan yields, on the back of an increase in the refinance rate. Over the same period, the loan portfolio remained broadly stable.

The increase in interest expense of GEL 2.5 million, or 1.1% on a QoQ basis, was mainly driven by an increase in other borrowed funds on the back of a rise in the respective yield by 1.4pp. The increase in GEL yields was due to growth in the refinance rate, while the increase in FC yields was related to prepayment fees on certain borrowed funds. The respective portfolio decreased by GEL 109.1 million, or 3.2%. This increase was partially offset by a decrease in interest expense from customer accounts, which was attributable to decrease in a Ministry of Finance deposits and the release of a single short-term CIB depositor. As a result, the respective portfolio decreased by GEL 1,369.4 million, or 9.6% on a QoQ basis.

In 2Q 2021, our NIM stood at 5.0%, up by 0.7pp YoY and 0.3pp on a QoQ basis.

In thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Interest income	458,572	440,613	393,114	16.7%	4.1%
Interest expense	(223,456)	(220,980)	(212,714)	5.0%	1.1%
Net gains from currency swaps	7,651	5,498	3,965	93.0%	39.2%
Net interest income	242,767	225,131	184,365	31.7%	7.8%

NIM	5.0%	4.7%	4.3%	0.7 pp	0.3 pp

Net fee and commission income

In 2Q 2021, net fee and commission income totaled GEL 63.0 million, up by 59.4% YoY and 39.1% QoQ.

The strong YoY and QoQ increases were attributable to the revival of business activities in 2Q 2021, which was further supported by various initiatives undertaken on our domestic payments business, which resulted in upgrading the existing cards with higher class cards and the contribution of our fast-growing Uzbek payments subsidiary, Payme.

In thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Net fee and commission income
Card operations	22,627	10,323	10,962	NMF	NMF
Settlement transactions	28,435	24,567	18,169	56.5%	15.7%
Guarantees issued and letters of credit	9,561	9,402	9,498	0.7%	1.7%
Other	2,385	1,001	888	NMF	NMF
Total net fee and commission income	63,008	45,293	39,517	59.4%	39.1%

Other Non-Interest Income

Total other non-interest income increased significantly and amounted GEL 74.5 million in 2Q 2021.

Both the YoY and QoQ increases in other non-interest income were related to an increase in other operating income and net income from foreign currency operations. The former increase was driven by the gain from the disposal of one of our investment properties, in the amount of GEL 26.3 million, while the latter increase was due to an increase in the scale of FX transactions.

In thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Other non-interest income
Net income from foreign currency operations	31,372	28,507	19,137	63.9%	10.1%
Net insurance premium earned after claims and acquisition costs[17]	5,470	4,403	5,481	-0.2%	24.2%
Other operating income	37,670	7,755	1,543	NMF	NMF
Total other non-interest income	74,512	40,665	26,161	NMF	83.2%

Credit Loss Allowance

Credit loss allowance for loans in 2Q 2021 amounted to GEL 45.3 million. The recoveries of credit loss allowances were mainly attributable to improved macro outlook on the back of the better than expected economic performance, as well as repayment from a single large CIB borrower.

In thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Credit loss allowance for loan to customers	50,112	(17,549)	(8,191)	NMF	NMF
Credit loss allowance for other transactions	(4,821)	305	(4,395)	9.7%	NMF
Total credit loss allowance	45,291	(17,244)	(12,586)	NMF	NMF
Operating profit after expected credit losses	425,578	293,845	237,457	79.2%	44.8%

Cost of risk	-1.3%	0.5%	0.0%	-1.3 pp	-1.8 pp

Operating Expenses

In 2Q 2021, our operating expenses expanded by 41.7% YoY and 10.2% on a QoQ basis.

The QoQ Increase in staff costs was related to the expansion of our Uzbek operations as well as one-off staff costs incurred in 2Q 2021. While the YoY increase was further amplified by restoration of management bonuses and increase in staff variable compensation driven by increased operating income.

The QoQ growth in administrative and other expenses was entirely attributable to expansion of the Uzbek operations, excluding Uzbekistan operation these costs would have remained flat QoQ. As for the YoY growth in administrative and other expenses, it was attributable to the low base in 2Q 2020 due to cost optimizations related to COVID-19 (including GEL 4.2 million from rent reduction per IFRS 16).

The growth in operating expenses was offset by our strong operating income, which resulted in exceptionally low cost to income ratio of 35.4% in 2Q 2021.

In thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Operating expenses
Staff costs	(77,757)	(70,314)	(57,204)	35.9%	10.6%
Provisions for liabilities and charges	(54)	45	(59)	-8.5%	NMF
Depreciation and amortization	(19,337)	(17,364)	(16,427)	17.7%	11.4%
Administrative & other operating expenses	(37,540)	(34,607)	(21,369)	75.7%	8.5%
Total operating expenses	(134,688)	(122,240)	(95,059)	41.7%	10.2%

Cost to income	35.4%	39.3%	38.0%	-2.6 pp	-3.9 pp
Standalone cost to income*	28.6%	33.1%	32.3%	-3.7 pp	-4.5 pp

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

Net Income

In 2Q, we generated GEL 250.4 million in net profit, up by 98.4% YoY and 63.7% QoQ. Our record high profitability was driven by strong operating performance across all revenue categories, as well as recoveries in credit loss allowances across all segments.

As a result, our ROE and ROA for the second quarter reached 31.0% and 4.4%, accordingly, while ROE before credit loss allowances stood at 26.0%.

In thousands of GEL	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Losses from modifications of financial instruments	(104)	(1,487)	(3,527)	-97.1%	-93.0%
Profit before tax	290,786	170,118	138,871	NMF	70.9%
Income tax expense	(40,394)	(17,131)	(12,665)	NMF	NMF
Profit for the period	250,392	152,987	126,206	98.4%	63.7%

ROE	31.0%	20.3%	19.5%	11.5 pp	10.7 pp
ROE before expected credit loss allowances	26.0%	22.4%	21.3%	4.7 pp	3.6 pp
ROA	4.4%	2.7%	2.6%	1.8 pp	1.7 pp

Funding and Liquidity

As of 30 June 2021, total liquidity coverage ratio, as defined by the NBG, was 127.1%, above the 100% limit. The decrease on a QoQ basis in the foreign currency liquidity coverage ratio was attributable to the release of a short-term placement from a single CIB client, while the decline in the GEL liquidity coverage ratio was mainly related to a repayment of a wholesale funding, as well as an increase in the loan book.

As of 30 June 2021, NSFR stood at 130.6%, compared to the regulatory limit of 100%.

	30-Jun-21	31-Mar-21	Change QoQ
Minimum net stable funding ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Net stable funding ratio as defined by the NBG	130.6%	131.4%	-0.8 pp

Net loans to deposits + IFI funding	102.8%	92.2%	10.6 pp
Leverage (Times)	6.6x	7.6x	-1.0x

Minimum total liquidity coverage ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Minimum LCR in GEL, as defined by the NBG	75%*	n/a	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	127.1%	136.7%	-9.6 pp
LCR in GEL, as defined by the NBG	122.9%	140.8%	-17.9 pp
LCR in FC, as defined by the NBG	129.2%	135.5%	-6.3 pp

* In May 2021, NBG restored the NBG GEL LCR limit, which was temporarily removed for one year

Regulatory Capital

As of 30 June 2021, our capital adequacy ratios were comfortably above the minimum regulatory requirements including the restored buffers.

By 31 July 2021, we have restored all temporarily released capital buffers. This has lifted any restrictions on capital distribution.

Our strong capital generation was driven by our exceptional operating income as well as strong performance on the asset quality side. The growth was further supported currency local currency appreciation QoQ.

In thousands of GEL	30-Jun-21	31-Mar-21	Change QoQ

CET 1 Capital	2,382,595	2,059,599	15.7%
Tier 1 Capital	2,837,805	2,550,144	11.3%
Total Capital	3,573,282	3,327,134	7.4%
Total Risk-weighted Exposures	18,275,845	18,921,231	-3.4%


Minimum CET 1 ratio	11.2%*	7.8%	3.4 pp
CET 1 Capital adequacy ratio	13.0%	10.9%	2.1 pp

Minimum Tier 1 ratio	13.5%*	9.7%	3.8 pp
Tier 1 Capital adequacy ratio	15.5%	13.5%	2.0 pp

Minimum total capital adequacy ratio	17.8%*	13.7%	4.1 pp
Total Capital adequacy ratio	19.6%	17.6%	2.0 pp

* Minimum requirements with restored buffers

Loan Portfolio

As of 30 June 2021, the gross loan portfolio reached GEL 15,274.9 million, down by 0.4% QoQ, or up by 3.7% on a constant currency basis.

The proportion of gross loans denominated in foreign currency decreased by 2.9pp QoQ and accounted for 56.3% of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency decreased by 1.1pp QoQ and stood at 58.0%.

As of 30 June 2021, our market share in total loans stood at 38.1%, down by 0.4pp QoQ. Our loan market share in legal entities was 38.0%, remaining the same QoQ, and our loan market share in individuals stood at 38.3%, down by 0.7pp QoQ.

In thousands of GEL	30-Jun-21	31-Mar-21	Change QoQ
Loans and advances to customers

Retail	5,688,519	5,761,488	-1.3%
Retail loans GEL	3,100,158	2,980,635	4.0%
Retail loans FC	2,588,361	2,780,853	-6.9%
CIB	5,851,634	5,939,056	-1.5%
CIB loans GEL	1,746,149	1,629,821	7.1%
CIB loans FC	4,105,485	4,309,235	-4.7%
MSME	3,734,773	3,631,665	2.8%
MSME loans GEL	1,828,264	1,647,846	10.9%
MSME loans FC	1,906,509	1,983,819	-3.9%
Total loans and advances to customers	15,274,926	15,332,209	-0.4%

	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Loan yields	10.2%	9.8%	9.7%	0.5 pp	0.4 pp
Loan yields GEL	15.1%	14.6%	15.0%	0.1 pp	0.5 pp
Loan yields FC	6.7%	6.6%	6.5%	0.2 pp	0.1 pp
Retail Loan Yields	11.4%	11.1%	10.7%	0.7 pp	0.3 pp
Retail loan yields GEL	15.8%	15.7%	15.8%	0.0 pp	0.1 pp
Retail loan yields FC	6.4%	6.2%	6.1%	0.3 pp	0.2 pp
CIB Loan Yields	9.0%	8.7%	8.5%	0.5 pp	0.3 pp
CIB loan yields GEL	13.8%	12.8%	13.3%	0.5 pp	1.0 pp
CIB loan yields FC	7.1%	7.1%	6.9%	0.2 pp	0.0 pp
MSME Loan Yields	10.3%	9.8%	10.2%	0.1 pp	0.5 pp
MSME loan yields GEL	15.1%	14.5%	15.2%	-0.1 pp	0.6 pp
MSME loan yields FC	6.1%	5.9%	6.1%	0.0 pp	0.2 pp

Loan Portfolio Quality

In 2Q, NPL improved by 1.4pp across all segments, driven by resumed repayments from restructured retail and MSME customers, as well as by the repayment of a single large CIB borrower.

The total Par 30 ratio improved by 0.3pp and amounted to 2.2%. The decrease was mainly driven by the CIB segment due to two large borrowers (including the one mentioned above). The Retail and MSME ratios stayed stable compared to previous quarter.

Our NPLs had a 91% provision coverage as of 30 June 2021 and an additional 79% collateral coverage. Only 13% of NPLs were unsecured loans with strong provision coverage of 294%.

Par 30	30-Jun-21	31-Mar-21	Change QoQ
Retail	3.0%	3.0%	0.0%
CIB	0.3%	1.2%	-0.9%
MSME	3.9%	3.8%	0.1%
Total Loans	2.2%	2.5%	-0.3%

Non-performing Loans	30-Jun-21	31-Mar-21	Change QoQ
Retail	4.0%	6.0%	-2.0%
CIB	1.6%	2.2%	-0.6%
MSME	5.4%	7.0%	-1.6%
Total Loans	3.4%	4.8%	-1.4%

NPL Coverage[18]	30-Jun-21		31-Mar-21
	Provision Coverage	Total Coverage	Provision Coverage	Total Coverage
Retail	117.9%	189.6%	93.8%	161.0%
CIB	82.9%	157.0%	81.9%	150.5%
MSME	64.8%	152.7%	63.1%	147.5%
Total	91.3%	169.6%	81.0%	154.4%

NPL Coverage (30 June 2021)[19]
	Collateral coverage	Provision coverage	Total coverage	Share in NPL portfolio
Secured[20]	90%	62%	152%	87%
Unsecured	-	294%	294%	13%
Total	79%	91%	170%	100%

Cost of risk

The recoveries of credit loss allowances translated into -1.3% cost of risk for 2Q 2021. As mentioned above, the recoveries were driven by improved macro outlook on the back of the better than expected economic performance, as well as repayment from a single large CIB borrower.

Cost of risk	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ

Retail	-0.1%	0.8%	-0.7%	0.6%	-0.9%
CIB	-2.0%	-0.2%	0.3%	-2.3%	-1.8%
MSME	-2.0%	1.0%	1.0%	-3.0%	-3.0%
Total	-1.3%	0.5%	0.0%	-1.3%	-1.8%

Deposit Portfolio

The total deposits portfolio decreased by 9.6% QoQ, or 5.0% on a constant currency basis and amounted to GEL 12,870.4 million.

The decrease on a QoQ basis was attributable to a decline of a Ministry of Finance deposits, as well as release of short-term placement from a single CIB client. Without Minstry of Finance deposits, our deposits portfolio would have been broadly stable on constant currency basis. The proportion of deposits denominated in a foreign currency decreased by 2.5pp QoQ and accounted for 65.7% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency decreased by 0.8pp QoQ and stood at 67.4%.

As of 30 June 2021, our market share in deposits amounted to 37.8%, down by 2.0pp QoQ, while our market share in deposits to legal entities stood at 35.7%, down by 4.1pp QoQ. Our market share in deposits to individuals stood at 39.6%, down by 0.2pp QoQ.

In thousands of GEL	30-Jun-21	31-Mar-21	Change QoQ
Customer Accounts

Retail	5,287,787	5,369,851	-1.5%
Retail deposits GEL	1,269,466	1,266,543	0.2%
Retail deposits FC	4,018,321	4,103,308	-2.1%
CIB	5,939,188	6,728,126	-11.7%
CIB deposits GEL	2,218,972	1,803,883	23.0%
CIB deposits FC	3,720,216	4,924,243	-24.5%
MSME	1,397,516	1,299,482	7.5%
MSME deposits GEL	675,932	619,717	9.1%
MSME deposits FC	721,584	679,765	6.2%
Total Customer Accounts*	12,870,418	14,239,837	-9.6%

* Total deposit portfolio includes Ministry of Finacne deposits in the amount of, GEL 843 mln and GEL 245 mln as of 31 March 2021 and 30 June 2021, respectively

	2Q'21	1Q'21	2Q'20	Change YoY	Change QoQ
Deposit rates	3.4%	3.5%	3.4%	0.0 pp	-0.1 pp
Deposit rates GEL	6.6%	6.6%	6.4%	0.2 pp	0.0 pp
Deposit rates FC	1.7%	1.9%	1.9%	-0.2%	-0.2 pp
Retail Deposit Yields	2.2%	2.5%	2.7%	-0.5 pp	-0.3 pp
Retail deposit rates GEL	4.7%	5.0%	5.7%	-1.0 pp	-0.3 pp
Retail deposit rates FC	1.5%	1.7%	1.7%	-0.2 pp	-0.2 pp
CIB Deposit Yields	4.0%	3.9%	4.5%	-0.5 pp	0.1 pp
CIB deposit rates GEL	8.3%	7.9%	8.5%	-0.2 pp	0.4 pp
CIB deposit rates FC	2.1%	2.2%	2.5%	-0.4 pp	-0.1 pp
MSME Deposit Yields	0.9%	0.8%	0.9%	0.0 pp	0.1 pp
MSME deposit rates GEL	1.5%	1.5%	1.7%	-0.2 pp	0.0 pp
MSME deposit rates FC	0.3%	0.2%	0.4%	-0.1 pp	0.1 pp

Segment definition and PL

Business Segments

The segment definitions are as follows:

· Corporate and Investment Banking (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 CIB 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 US$ 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 CIB 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

2Q'21	Retail	MSME	CIB	Corp.Centre	Total
Interest income	163,057	95,892	139,272	60,351	458,572
Interest expense	(30,689)	(3,058)	(61,772)	(127,937)	(223,456)
Net gains from currency swaps	-	-	-	7,651	7,651
Net transfer pricing	(36,770)	(36,678)	12,728	60,720	-
Net interest income	95,598	56,156	90,228	785	242,767
Fee and commission income	58,575	13,434	25,149	7,887	105,045
Fee and commission expense	(11,920)	(8,180)	(19,509)	(2,428)	(42,037)
Net fee and commission income	46,655	5,254	5,640	5,459	63,008
Net insurance premium earned after claims and acquisition costs	-	-	-	5,470	5,470
Net gains from derivatives, foreign currency operations and translation	8,600	6,999	14,254	1,835	31,688
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	-	-	515	4,138	4,653
Other operating income	2,181	668	1,117	28,525	32,491
Share of profit of associates	-	-	-	210	210
Other operating non-interest income and insurance profit	10,781	7,667	15,886	40,178	74,512
Credit loss allowance for loans to customers	1,661	18,365	30,086	-	50,112
Credit loss allowance for performance guarantees and credit related commitments	70	(158)	1,372	-	1,284
Credit loss allowance for investments in finance lease	-	-	-	(1,204)	(1,204)
Credit loss allowance for other financial assets	(3,309)	-	(1,143)	(1,237)	(5,689)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	-	-	840	408	1,248
Other non-financial assets impairment	95	23	7	(585)	(460)
Profit/(loss) before G&A expenses and income taxes	151,551	87,307	142,916	43,804	425,578
Losses from modifications of financial instruments	(112)	(63)	71	-	(104)
Staff costs	(34,266)	(14,170)	(11,676)	(17,645)	(77,757)
Depreciation and amortization	(12,355)	(3,085)	(1,303)	(2,594)	(19,337)
Provision for liabilities and charges	-	-	-	(54)	(54)
Administrative and other operating expenses	(17,865)	(7,256)	(3,470)	(8,949)	(37,540)
Operating expenses	(64,486)	(24,511)	(16,449)	(29,242)	(134,688)
Profit before tax	86,953	62,733	126,538	14,562	290,786
Income tax expense	(10,368)	(8,784)	(16,307)	(4,935)	(40,394)
Profit	76,585	53,949	110,231	9,627	250,392

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance sheet

In thousands of GEL	Jun-21	Mar-21
Cash and cash equivalents	1,414,414	2,425,584
Due from other banks	59,314	54,189
Mandatory cash balances with National Bank of Georgia	2,117,157	2,364,760
Loans and advances to customers	14,796,968	14,742,344
Investment securities measured at fair value through other comprehensive income	2,022,385	2,284,697
Bonds carried at amortized cost*	10,069	17,748
Investments in finance leases	245,261	272,090
Investment properties	33,407	65,605
Current income tax prepayment	14,966	62,022
Deferred income tax asset	6,747	1,453
Other financial assets[21]	287,761	292,410
Other assets	311,218	265,299
Premises and equipment	371,909	377,273
Right of use assets	51,160	54,535
Intangible assets	284,555	272,597
Goodwill	59,964	59,964
Investments in associates	4,286	4,476
TOTAL ASSETS	22,091,541	23,617,046
LIABILITIES
Due to credit institutions	3,482,830	3,612,067
Customer accounts	12,870,418	14,239,837
Lease liabilities	53,755	60,934
Other financial liabilities²¹	124,308	153,606
Current income tax liability	653	697
Debt Securities in issue	1,445,614	1,583,929
Deferred income tax liability	18,457	21,865
Provisions for liabilities and charges	21,435	22,526
Other liabilities	101,265	87,888
Subordinated debt	635,981	707,962
TOTAL LIABILITIES	18,754,716	20,491,311
EQUITY
Share capital	1,682	1,682
Shares held by trust	(25,489)	(25,494)
Share premium	848,459	848,459
Retained earnings	2,680,951	2,432,872
Group re-organisation reserve	(162,167)	(162,167)
Share based payment reserve	(15,348)	(19,288)
Fair value reserve	170	36,929
Cumulative currency translation reserve	(5,199)	759
Net assets attributable to owners	3,323,059	3,113,752
Non-controlling interest	13,766	11,983
TOTAL EQUITY	3,336,825	3,125,735
TOTAL LIABILITIES AND EQUITY	22,091,541	23,617,046

* 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	2Q'21	1Q'21	2Q'20
Interest income	458,572	440,613	393,114
Interest expense	(223,456)	(220,980)	(212,714)
Net gains from currency swaps	7,651	5,498	3,965
Net interest income	242,767	225,131	184,365
Fee and commission income	105,045	81,108	65,038
Fee and commission expense	(42,037)	(35,815)	(25,521)
Net fee and commission income	63,008	45,293	39,517
Net insurance premiums earned	16,146	14,143	13,385
Net insurance claims incurred and agents' commissions	(10,676)	(9,740)	(7,904)
Net insurance premium earned after claims and acquisition costs	5,470	4,403	5,481
Net gains from derivatives, foreign currency operations and translation	31,688	28,496	19,124
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	4,653	2,388	(1,480)
Other operating income	32,491	4,992	3,083
Share of profit of associates	210	386	(47)
Other operating non-interest income	69,042	36,262	20,680
Credit loss allowance for loans to customers	50,112	(17,549)	(8,191)
Credit loss allowance for investments in finance lease	(1,204)	(1,311)	(3,408)
Credit loss allowance for performance guarantees and credit related commitments	1,284	646	1,227
Credit loss allowance for other financial assets	(5,689)	363	(988)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	1,248	594	46
Other non-financial assets impairment	(460)	13	(1,272)
Operating profit after expected credit losses	425,578	293,845	237,457
Losses from modifications of financial instruments	(104)	(1,487)	(3,527)
Staff costs	(77,757)	(70,314)	(57,204)
Depreciation and amortization	(19,337)	(17,364)	(16,427)
(Provision for)/ recovery of liabilities and charges	(54)	45	(59)
Administrative and other operating expenses	(37,540)	(34,607)	(21,369)
Operating expenses	(134,688)	(122,240)	(95,059)
Profit before tax	290,786	170,118	138,871
Income tax expense	(40,394)	(17,131)	(12,665)
Profit	250,392	152,987	126,206
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve	(36,758)	25,772	(38)
Exchange differences on translation to presentation currency	(5,976)	2,903	(2,002)
Other comprehensive income for the period	(42,734)	28,675	(2,040)
Total comprehensive income for the period	207,658	181,662	124,166
Profit attributable to:
- Shareholders of TBCG	247,945	151,224	125,100
- Non-controlling interest	2,447	1,763	1,106
Profit	250,392	152,987	126,206
Total comprehensive income is attributable to:
- Shareholders of TBCG	205,195	179,923	123,060
- Non-controlling interest	2,463	1,739	1,106
Total comprehensive income for the period	207,658	181,662	124,166

Consolidated Statement of Cash Flows

In thousands of GEL	30-Jun-2021	31-Mar-2021
Cash flows from (used in) operating activities
Interest received	906,444	442,636
Interest received on currency swaps	13,149	5,498
Interest paid	(452,751)	(183,320)
Fees and commissions received	170,658	74,044
Fees and commissions paid	(78,793)	(36,510)
Insurance and reinsurance received	43,358	20,559
Insurance claims paid	(16,239)	(7,270)
Income received from trading in foreign currencies	32,659	(33,046)
Other operating income received	28,880	14,282
Staff costs paid	(134,594)	(65,416)
Administrative and other operating expenses paid	(79,430)	(37,873)
Income tax paid	(4,446)	(1,199)
Cash flows from operating activities before changes in operating assets and liabilities	428,895	192,385
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia	23,326	100,916
Loans and advances to customers	(711,980)	(23,866)
Net investments in lease	24,158	6,083
Other financial assets	(38,835)	(89,537)
Other assets	14,151	18,454
Net change in operating liabilities
Due to credit institutions	11,940	21,347
Customer accounts	667,190	1,360,791
Other financial liabilities	(137,291)	(104,089)
Other liabilities and provision for liabilities and charges	16,659	6,595
Net cash flows (used in)/from operating activities	298,213	1,489,079
Cash flows from (used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive income	(196,871)	(28,972)
Proceeds from disposal of investment securities measured at fair value through other comprehensive income	-	275,679
Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income	757,583	92,438
Proceeds from redemption of bonds carried at amortised cost	19,633	-
Acquisition of premises, equipment and intangible assets	(91,993)	(49,264)
Proceeds from disposal of premises, equipment and intangible assets	6,334	351
Proceeds from disposal of investment property	20,210	3,430
Net cash used in investing activities	514,896	293,662
Cash flows from (used in) financing activities
Proceeds from other borrowed funds	1,757,879	1,190,364
Redemption of other borrowed funds	(2,736,476)	(2,160,119)
Repayment of principal of lease liabilities	(5,591)	(3,950)
Redemption of subordinated debt	(12,562)
Dividends paid	(1,741)	(1,354)
Net cash flows from financing activities	(998,491)	(975,059)
Effect of exchange rate changes on cash and cash equivalents	(35,609)	(17,502)
Net (decrease)/ increase in cash and cash equivalents	(220,991)	790,180
Cash and cash equivalents at the beginning of the year	1,635,405	1,635,404
Cash and cash equivalents at the end of the year	1,414,414	2,425,584

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)	2Q'21	1Q'21	2Q'20

Profitability ratios:
ROE¹	31.0%	20.3%	19.5%
ROA²	4.4%	2.7%	2.6%
ROE before expected credit loss allowances³	26.0%	22.4%	21.3%
Cost to income⁴	35.4%	39.3%	38.0%
NIM⁵	5.0%	4.7%	4.3%
Loan yields⁶	10.2%	9.8%	9.7%
Deposit rates⁷	3.4%	3.5%	3.4%
Yields on interest earning assets⁸	9.5%	9.2%	9.1%
Cost of funding⁹	4.6%	4.5%	5.0%
Spread¹⁰	4.9%	4.7%	4.1%

Asset quality & portfolio concentration:
Cost of risk¹¹	-1.3%	0.5%	0.0%
PAR 90 to Gross Loans¹²	1.2%	1.6%	1.0%
NPLs to Gross Loans¹³	3.4%	4.8%	2.9%
NPL provision coverage¹⁴	91.3%	81.0%	134.7%
Total NPL coverage¹⁵	169.6%	154.4%	208.0%
Credit loss level to Gross Loans¹⁶	3.1%	3.8%	3.9%
Related Party Loans to Gross Loans¹⁷	0.1%	0.0%	0.1%
Top 10 Borrowers to Total Portfolio¹⁸	7.8%	8.2%	8.2%
Top 20 Borrowers to Total Portfolio¹⁹	11.9%	12.4%	12.3%

Capital & liquidity positions:
Net Loans to Deposits plus IFI* Funding²⁰	102.8%	92.2%	105.3%
Net Stable Funding Ratio²¹	130.6%	131.4%	127.5%
Liquidity Coverage Ratio²²	127.1%	136.7%	124.8%
Leverage²³	6.6x	7.6x	7.5x
CET 1 CAR (Basel III)²⁴	13.0%	10.9%	10.0%
Regulatory Tier 1 CAR (Basel III)²⁵	15.5%	13.5%	12.7%
Regulatory Total 1 CAR (Basel III)²⁶	19.6%	17.6%	17.2%

* International Financial Institutions

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 with respective tax effects, 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. 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. 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. 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 US$/GEL exchange rate of 3.4118 as of 31 March 2021. As of 30 June 2021 the US$/GEL exchange rate equaled 3.1603. For P&L items growth calculations without currency effect, we used the average US$/GEL exchange rate for the following periods: 2Q 2021 of 3.3271, 1Q 2021 of 3.3142, 2Q 2020 of 3.1379.

Unaudited Consolidated Financial Results Overview for 1H 2021

This statement provides a summary of the unaudited business and financial trends for 1H 2021 for TBC Bank Group plc and its subsidiaries. The half year financial information and trends are unaudited.

Financial Highlights

Income Statement Highlights
in thousands of GEL	1H'21	1H'20	Change YoY
Net interest income	467,898	392,324	19.3%
Net fee and commission income	108,301	83,069	30.4%
Other operating non-interest income[22]	115,177	64,905	77.5%
Credit loss allowance	28,047	(259,676)	NMF
Operating profit after expected credit losses	719,423	280,622	NMF
Losses from modifications of financial instrument	(1,591)	(34,170)	NMF
Operating expenses	(256,928)	(201,535)	27.5%
Profit before tax	460,904	44,917	NMF
Income tax expense	(57,525)	24,283	NMF
Profit for the period	403,379	69,200	NMF

Balance Sheet and Capital Highlights
in thousands of GEL	Jun-21	Jun-20	Change YoY
Total Assets	22,091,541	19,813,429	11.5%
Gross Loans	15,274,926	13,635,392	12.0%
Customer Deposits	12,870,418	10,420,330	23.5%
Total Equity	3,336,825	2,653,405	25.8%
Regulatory Common Equity Tier I Capital (Basel III)	2,382,595	1,631,006	46.1%
Regulatory Tier I Capital (Basel III)	2,837,805	2,068,052	37.2%
Regulatory Total Capital (Basel III)	3,573,282	2,787,136	28.2%
Regulatory Risk Weighted Assets (Basel III)	18,275,845	16,249,475	12.5%

Key Ratios	1H'21	1H'20	Change YoY
ROE	25.9%	5.2%	20.7 pp
ROA	3.6%	0.7%	2.9 pp
NIM	4.8%	4.7%	0.1 pp
Cost to income	37.2%	37.3%	-0.1 pp
Standalone cost to income of the Bank[23]	30.6%	32.0%	-1.4 pp
Cost of risk	-0.4%	2.1%	-2.5 pp
NPL to gross loans	3.4%	2.9%	0.5 pp
NPL provision coverage ratio	91.3%	134.7%	-43.4 pp
Total NPL coverage ratio	169.6%	208.0%	-38.4 pp
CET 1 CAR (Basel III)	13.0%	10.0%	3.0 pp
Regulatory Tier 1 CAR (Basel III)	15.5%	12.7%	2.8 pp
Regulatory Total CAR (Basel III)	19.6%	17.2%	2.4 pp
Leverage (Times)	6.6x	7.5x	-0.9x

Net Interest Income

In 1H 2021, net interest income amounted to GEL 467.9 million, up by 19.3% YoY, whereby interest income increased by 14.1% and interest expense increased by 8.9%.

The YoY increase in interest income was primarily related to an increase in interest income from loans, which was driven by an increase in the gross loan portfolio by GEL 1,639.5 million, or 12.0%. Over the same period, loan yield remained broadly stable.

Our interest expense increased by 8.9%, which was primarily related to an increase in interest expense from deposits due to an increase in the respective portfolio of GEL 2,450.1 million. Over the same period, the cost of deposits remained broadly stable YoY, as the increase in GEL cost of deposits was more than offset by a decrease in FC cost of deposits.

In 1H 2021, our NIM stood at 4.8%, up by 0.1pp YoY.

In thousands of GEL	1H'21	1H'20	Change YoY
Interest income	899,185	787,893	14.1%
Interest expense	(444,436)	(408,091)	8.9%
Net gains from currency swaps	13,149	12,522	5.0%
Net interest income	467,898	392,324	19.3%

NIM	4.8%	4.7%	0.1 pp

Net fee and commission income

In 1H 2021, net fee and commission income totalled GEL 108.3 million, up by 30.4% YoY. The increase was spread across all major sub-categories due to the revival of business activities, further supported by various initiatives undertaken on the payments side, as well as the contribution from our fast-growing Uzbek payments subsidiary, Payme.

In thousands of GEL	1H'21	1H'20	Change YoY
Net fee and commission income
Card operations	32,951	23,502	40.2%
Settlement transactions	53,002	38,012	39.4%
Guarantees issued and letters of credit	18,963	17,919	5.8%
Other	3,385	3,636	-6.9%
Total net fee and commission income	108,301	83,069	30.4%

Other Non-Interest Income

Total other non-interest income increased by 77.5% YoY and amounted to GEL 115.2 million in 1H 2021. The YoY increase was driven by growth in net income from foreign currency operations and growth in other operating income. The former increase was driven by an increase in the scale of FX transactions, while the later increase was driven by a gain from the disposal of one of our investment properties, in the amount of GEL 26.3 million.

In thousands of GEL	1H'21	1H'20	Change YoY
Other non-interest income
Net income from foreign currency operations	59,880	47,779	25.3%
Net insurance premium earned after claims and acquisition costs[24]	9,873	10,281	-4.0%
Other operating income	45,424	6,845	NMF
Total other non-interest income	115,177	64,905	77.5%

Credit Loss Allowance

Total credit loss allowance in 1H 2021 amounted to GEL 28.0 million. This significant decrease was driven by recoveries in 2Q across all segments, as explained above, and by a high base in 1H 2020 due to creation of COVID-19 related provisions.

In thousands of GEL	1H'21	1H'20	Change YoY
Credit loss allowance for loans	32,563	(249,216)	NMF
Credit loss allowance for other transactions	(4,516)	(10,460)	-56.8%
Total credit loss allowance	28,047	(259,676)	NMF
Operating income after credit loss allowance	719,423	280,622	NMF

Cost of risk	-0.4%	2.1%	-2.5 pp

NMF - no meaningful figures

Operating Expenses

In 1H 2021, our total operating expenses expanded by 27.5% YoY.

YoY growth in staff costs was mainly attributable to the low base of share-based payments in 1H 2020, as a result of reversal of management's bonuses, increase in staff bonuses related to revival of business activities in 1H 2021, as well as the expansion of our Uzbekistan operations. The increase in administrative expenses were mainly impacted by cost optimizations in 1H 2020 related to COVID-19 (including GEL 4.2 mln from renegotiated rent expenses per IFRS 16).

The cost to income ratio stood at 37.2%, down by 0.1 pp YoY, while our standalone cost to income was 30.6%, down by 1.4pp over the same period.

In thousands of GEL	1H'21	1H'20	Change YoY
Operating expenses
Staff costs	(148,071)	(114,006)	29.9%
Provisions for liabilities and charges	(9)	77	NMF
Depreciation and amortization	(36,701)	(32,215)	13.9%
Administrative & other operating expenses	(72,147)	(55,391)	30.3%
Total operating expenses	(256,928)	(201,535)	27.5%

Cost to income	37.2%	37.3%	-0.1 pp
Standalone Cost to income*	30.6%	32.0%	-1.4 pp

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

NMF - no meaningful figures

Net Income

In 1H 2021, our solid profitability was related to strong performance in operating profit across all categories, as well as recoveries in credit loss allowances across all segments.

As a result, our ROE stood at 25.9%, ROE before expected credit loss allowances stood at 24.3% and ROA stood at 3.6%.

In thousands of GEL	1H'21	1H'20	Change YoY
Losses from modifications of financial instruments	(1,591)	(34,170)	-95.3%
Profit before tax	460,904	44,917	NMF
Income tax expense	(57,525)	24,283	NMF
Profit for the period	403,379	69,200	NMF

ROE	25.9%	5.2%	20.7 pp
ROE before expected credit loss allowances	24.3%	23.3%	1.0 pp
ROA	3.6%	0.7%	2.9 pp

Funding and Liquidity

As of 30 June 2021, the total liquidity coverage ratio, as defined by the NBG, was 127.1%, above the 100% limit, while the LCR in GEL and FC stood at 122.9% and 129.2% respectively, above the respective limits of 75% and 100%.

As of 30 June 2021, NSFR stood at 130.6%, compared to the regulatory limit of 100%.

	30-Jun-21	30-Jun-20	Change YoY
Minimum net stable funding ratio, as defined by the NBG	100%	100%	0.0 pp
Net stable funding ratio as defined by the NBG	130.6%	127.5%	3.1 pp

Net loans to deposits + IFI funding	102.8%	105.3%	-2.5 pp
Leverage (Times)	6.6x	7.5x	-0.9x

Minimum total liquidity coverage ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Minimum LCR in GEL, as defined by the NBG	75%*	n/a	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	127.1%	124.8%	2.3 pp
LCR in GEL, as defined by the NBG	122.9%	141.0%	-18.1 pp
LCR in FC, as defined by the NBG	129.2%	117.3%	11.9 pp

* In May 2021, NBG restored the NBG GEL LCR limit, which was temporarily removed for one year

Regulatory Capital

On a YoY basis, the bank's CET1, Tier 1 and Total capital adequacy ratios increased by 3.0pp, 2.8pp and 2.4pp, respectively. The increase was mainly driven by strong net income generation, which was partially offset by local currency depreciation and an increase in loan book.

In thousands of GEL	30-Jun-21	30-Jun-20	Change YoY

CET 1 Capital	2,382,595	1,631,006	46.1%
Tier 1 Capital	2,837,805	2,068,052	37.2%
Total Capital	3,573,282	2,787,136	28.2%
Total Risk-weighted Exposures	18,275,845	16,249,475	12.5%

Minimum CET 1 ratio	11.2%*	6.9%	4.3 pp
CET 1 Capital adequacy ratio	13.0%	10.0%	3.0 pp

Minimum Tier 1 ratio	13.5%*	8.7%	4.8 pp
Tier 1 Capital adequacy ratio	15.5%	12.7%	2.8 pp

Minimum total capital adequacy ratio	17.8%*	13.3%	4.5 pp
Total Capital adequacy ratio	19.6%	17.2%	2.4 pp

* Minimum requirement with restored buffers

Loan Portfolio

As of 30 June 2021, the gross loan portfolio reached GEL 15,274.9 million, up by 12.0% YoY or up by 8.5% on a constant currency basis. The YoY increase was spread across all segments. The proportion of gross loans denominated in foreign currency decreased by 4.4pp YoY and accounted for 56.3 % of total loans, while on a constant currency basis the proportion of gross loans denominated in foreign currency was down by 5.9pp YoY and stood at 54.9%.

As of 30 June 2021, our market share in total loans stood at 38.1%, down by 1.4pp YoY, while our loan market share in legal entities was 38.0%, down by 1.3pp over the same period, and our loan market share in individuals stood at 38.3%, down by 1.6pp QoQ.

In thousands of GEL	30-Jun-21	30-Jun-20	Change YoY
Loans and advances to customers
Retail	5,688,519	5,229,005*	8.8%
Retail loans GEL	3,100,158	2,536,206	22.2%
Retail loans FC	2,588,361	2,692,799	-3.9%
CIB	5,851,634	5,200,281	12.5%
CIB loans GEL	1,746,149	1,344,965	29.8%
CIB loans FC	4,105,485	3,855,316	6.5%
MSME	3,734,773	3,206,106	16.5%
MSME loans GEL	1,828,264	1,470,959	24.3%
MSME loans FC	1,906,509	1,735,147	9.9%
Total loans and advances to customers	15,274,926	13,635,392	12.0%

* In 1Q 2021, we reclassified all relevant BS and PL items of the Wealth Management business from Retail Banking to CIB. As of 30 June 2020, GEL 129.7 million loans were reclassified. For more information, please refer to Annex 5.

	1H'21	1H'20	Change YoY
Loan yields	10.0%	10.1%	-0.1 pp
Loan yields GEL	14.8%	15.2%	-0.4 pp
Loan yields FC	6.6%	6.7%	-0.1 pp
Retail Loan Yields	11.2%	11.1%	0.1 pp
Retail loan yields GEL	15.7%	16.3%	-0.6 pp
Retail loan yields FC	6.3%	6.4%	-0.1 pp
CIB Loan Yields	8.8%	8.8%	0.0 pp
CIB loan yields GEL	13.3%	13.3%	0.0 pp
CIB loan yields FC	7.1%	7.1%	0.0 pp
MSME Loan Yields	10.1%	10.5%	-0.4 pp
MSME loan yields GEL	14.8%	15.4%	-0.6 pp
MSME loan yields FC	6.0%	6.3%	-0.3 pp

Loan Portfolio Quality

On a YoY basis, total par 30 and NPL ratio increased by 0.9pp and 0.5pp, respectively, mainly driven by the Retail and MSME segments. The increase was primarily attributable to the low base in 2Q 2020, which was related to the payment holidays offered to our customers. This effect was slightly offset by a 0.3pp drop in the CIB segment, which was driven by a repayment from a single large CIB borrower.

Par 30	30-Jun-21	30-Jun-20	Change YoY
Retail	3.0%	1.3%	1.7 pp
CIB	0.3%	0.6%	-0.3 pp
MSME	3.9%	2.3%	1.6 pp
Total Loans	2.2%	1.3%	0.9 pp

Non-performing Loans	30-Jun-21	30-Jun-20	Change YoY
Retail	4.0%	3.0%	1.0 pp
CIB	1.6%	2.0%	-0.4 pp
MSME	5.4%	4.2%	1.2 pp
Total Loans	3.4%	2.9%	0.5 pp

NPL Coverage		30-Jun-21			30-Jun-20
	Provision Coverage		Total Coverage	Provision Coverage		Total Coverage
Retail	117.9%		189.6%	188.5%		253.8%
CIB	82.9%		157.0%	107.7%		177.7%
MSME	64.8%		152.7%	91.9%		177.0%
Total	91.3%		169.6%	134.7%		208.0%

Cost of risk

The total cost of risk for 1H 2021 stood at -0.4%, down by 2.4pp YoY. The recoveries in credit loss allowances were related to the improved macro outlook on the back of the better than expected economic performance, as well as repayment from a single large CIB borrower as explained above.

Cost of Risk	1H'21	1H'20	Change YoY

Retail	0.4%	3.3%	-2.9 pp
CIB	-1.1%	0.7%	-1.8 pp
MSME	-0.5%	2.3%	-2.8 pp
Total	-0.4%	2.1%	-2.5 pp

Deposit Portfolio

The total deposits portfolio increased by 23.5% YoY and amounted to GEL 12,870.4 million, while on a constant currency basis the total deposit portfolio increased by 20.1pp over the same period. The proportion of deposits denominated in foreign currency was up by 0.1pp YoY and accounted for 65.7% of total deposits, while on a constant currency basis the proportion of deposits denominated in foreign currency dropped by 0.9pp YoY and stood at 64.8%.

As of 30 June 2021, our market share in deposits amounted to 37.8%, up by 0.7 pp YoY, and our market share in deposits to legal entities stood at 35.7%, down by 0.2 pp over the same period. Our market share in deposits to individuals stood at 39.6%, up by 1.6pp QoQ.

In thousands of GEL	30-Jun-21	30-Jun-20	Change YoY
Customer Accounts
Retail	5,287,787	4,227,236*	25.1%
Retail deposits GEL	1,269,466	1,094,920	15.9%
Retail deposits FC	4,018,321	3,132,316	28.3%
CIB	5,939,188	4,874,761*	21.8%
CIB deposits GEL	2,218,972	1,791,102	23.9%
CIB deposits FC	3,720,216	3,083,659	20.6%
MSME	1,397,516	1,178,321	18.6%
MSME deposits GEL	675,932	555,530	21.7%
MSME deposits FC	721,584	622,791	15.9%
Total Customer Accounts**	12,870,418	10,420,330	23.5%

* In 1Q 2021, we reclassified all relevant BS and PL items of the Wealth Management business from Retail Banking to CIB. As of 30 June 2020, GEL 1,792.1 million deposits were reclassified. For more information, please refer to Annex 5.

** Total deposit portfolio includes Ministry of Finance deposits in the amount of GEL 140 million and GEL 246 million as of 30 June 2020 and 30 June 2021, respectively

	1H'21	1H'20	Change YoY
Deposit rates	3.4%	3.5%	-0.1 pp
Deposit rates GEL	6.6%	6.4%	0.2 pp
Deposit rates FC	1.8%	1.9%	-0.1 pp
Retail Deposit Yields	2.4%	2.6%	-0.2 pp
Retail deposit rates GEL	4.9%	5.4%	-0.5 pp
Retail deposit rates FC	1.6%	1.7%	-0.1 pp
CIB Deposit Yields	4.5%	4.0%	0.5 pp
CIB deposit rates GEL	8.0%	8.3%	-0.3 pp
CIB deposit rates FC	2.2%	2.5%	-0.3 pp
MSME Deposit Yields	0.8%	0.9%	-0.1 pp
MSME deposit rates GEL	1.5%	1.6%	-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:

· Retail - non-business individual customers;

· MSME - business customers who are not included in the CIB 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

1H'21	Retail	MSME	CIB	Corp.Centre	Total
Interest income	321,483	181,002	271,402	125,298	899,185
Interest expense	(63,061)	(5,931)	(121,201)	(254,243)	(444,436)
Net gains from currency swaps				13,149	13,149
Net transfer pricing	(72,867)	(68,593)	24,865	116,595	-
Net interest income	185,555	106,478	175,066	799	467,898
Fee and commission income	101,851	23,323	46,861	14,118	186,153
Fee and commission expense	(24,364)	(14,698)	(34,754)	(4,036)	(77,852)
Net fee and commission income	77,487	8,625	12,107	10,082	108,301
Net insurance premium earned after claims and acquisition costs	-	-	-	9,873	9,873
Net gains from derivatives, foreign currency operations and translation	14,201	11,730	22,576	11,677	60,184
Gains less Losses from Disposal of Investment Securities Measured at Fair Value through Other Comprehensive Income	-	-	515	6,526	7,041
Other operating income	3,511	726	1,642	31,604	37,483
Share of profit of associates	-	-	-	596	596
Other operating non-interest income and insurance profit	17,712	12,456	24,733	60,276	115,177
Credit loss allowance for loans to customers	(10,344)	9,687	33,220	-	32,563
Credit loss allowance for performance guarantees and credit related commitments	405	(74)	1,599	-	1,930
Credit loss allowance for investments in finance lease	-	-	-	(2,515)	(2,515)
Credit loss allowance for other financial assets	(3,309)	-	(625)	(1,392)	(5,326)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	-	-	738	1,104	1,842
Other non-financial assets impairment	108	23	7	(585)	(447)
Profit/(loss) before G&A expenses and income taxes	267,614	137,195	246,845	67,769	719,423
Losses from modifications of financial instruments	(642)	(93)	(856)	-	(1,591)
Staff costs	(66,060)	(27,774)	(22,140)	(32,097)	(148,071)
Depreciation and amortization	(23,609)	(5,859)	(2,454)	(4,779)	(36,701)
Provision for liabilities and charges	-	-	-	(9)	(9)
Administrative and other operating expenses	(34,525)	(13,639)	(7,618)	(16,365)	(72,147)
Operating expenses	(124,194)	(47,272)	(32,212)	(53,250)	(256,928)
Profit before tax	142,778	89,830	213,777	14,519	460,904
Income tax expense	(15,329)	(11,402)	(24,846)	(5,948)	(57,525)
Profit	127,449	78,428	188,931	8,571	403,379

Consolidated Financial Statements of TBC Bank Group PLC

Consolidated Balance sheet

In thousands of GEL	Jun-21	Jun-20
Cash and cash equivalents	1,414,414	981,803
Due from other banks	59,314	30,879
Mandatory cash balances with National Bank of Georgia	2,117,157	1,794,010
Loans and advances to customers	14,796,968	13,105,988
Investment securities measured at fair value through other comprehensive income	2,022,385	1,082,520
Bonds carried at amortized cost*	10,069	1,335,415
Investments in finance leases	245,261	270,172
Investment properties	33,407	70,716
Current income tax prepayment	14,966	36,703
Deferred income tax asset	6,747	7,470
Other financial assets[25]	287,761	174,378
Other assets	311,218	258,349
Premises and equipment	371,909	345,265
Right of use assets	51,160	62,664
Intangible assets	284,555	194,689
Goodwill	59,964	60,296
Investments in associates	4,286	2,112
TOTAL ASSETS	22,091,541	19,813,429
LIABILITIES
Due to credit institutions	3,482,830	4,403,406
Customer accounts	12,870,418	10,420,330
Lease liabilities	53,755	65,937
Other financial liabilities²¹	124,308	138,749
Current income tax liability	653	692
Debt Securities in issue	1,445,614	1,396,141
Deferred income tax liability	18,457	5
Provisions for liabilities and charges	21,435	25,558
Other liabilities	101,265	80,557
Subordinated debt	635,981	628,649
TOTAL LIABILITIES	18,754,716	17,160,024
EQUITY
Share capital	1,682	1,682
Shares held by trust	(25,489)	(34,450)
Share premium	848,459	848,459
Retained earnings	2,680,951	2,029,545
Group re-organisation reserve	(162,167)	(162,167)
Share based payment reserve	(15,348)	(31,808)
Fair value reserve	170	(1,492)
Cumulative currency translation reserve	(5,199)	(5,685)
Net assets attributable to owners	3,323,059	2,644,084
Non-controlling interest	13,766	9,321
TOTAL EQUITY	3,336,825	2,653,405
TOTAL LIABILITIES AND EQUITY	22,091,541	19,813,429

Consolidated Statement of Profit or Loss and Other Comprehensive Income

In thousands of GEL	1H'21	1H'20
Interest income	899,185	787,893
Interest expense	(444,436)	(408,091)
Net gains from currency swaps	13,149	12,522
Net interest income	467,898	392,324
Fee and commission income	186,153	138,752
Fee and commission expense	(77,852)	(55,683)
Net fee and commission income	108,301	83,069
Net insurance premiums earned	30,289	26,618
Net insurance claims incurred and agents' commissions	(20,416)	(16,337)
Net insurance premium earned after claims and acquisition costs	9,873	10,281
Net gains from derivatives, foreign currency operations and translation	60,184	47,759
Gains less losses from disposal of investment securities measured at fair value through other comprehensive income	7,041	(1,202)
Other operating income	37,483	7,977
Share of profit of associates	596	90
Other operating non-interest income	105,304	54,624
Credit loss allowance for loans to customers	32,563	(249,216)
Credit loss allowance for investments in finance lease	(2,515)	(4,278)
Credit loss allowance for performance guarantees and credit related commitments	1,930	(797)
Credit loss allowance for other financial assets	(5,326)	(4,222)
Credit loss allowance for financial assets measured at fair value through other comprehensive income	1,842	(538)
Other non-financial assets impairment	(447)	(625)
Operating profit after expected credit losses	719,423	280,622
Losses from modifications of financial instruments	(1,591)	(34,170)
Staff costs	(148,071)	(114,006)
Depreciation and amortization	(36,701)	(32,215)
(Provision for)/ recovery of liabilities and charges	(9)	77
Administrative and other operating expenses	(72,147)	(55,391)
Operating expenses	(256,928)	(201,535)
Profit before tax	460,904	44,917
Income tax expense	(57,525)	24,283
Profit	403,379	69,200
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve	(10,985)	4,984
Exchange differences on translation to presentation currency	(3,072)	1,165
Other comprehensive income for the period	(14,057)	6,149
Total comprehensive income for the period	389,322	75,349
Profit attributable to:
- Shareholders of TBCG	399,168	67,625
- Non-controlling interest	4,211	1,575
Profit	403,379	69,200
Total comprehensive income is attributable to:
- Shareholders of TBCG	385,120	73,793
- Non-controlling interest	4,202	1,556
Total comprehensive income for the period	389,322	75,349

Consolidated Statements of Cash Flows

In thousands of GEL	30-Jun-21	30-Jun-20
Cash flows from/(used in) operating activities
Interest received	906,444	579,414
Interest received on currency swaps	13,149	12,522
Interest paid	(452,751)	(404,923)
Fees and commissions received	170,658	131,347
Fees and commissions paid	(78,793)	(56,054)
Insurance and reinsurance received	43,358	43,373
Insurance claims paid	(16,239)	(13,458)
Income received from trading in foreign currencies	32,659	49,406
Other operating income received	28,880	2,860
Staff costs paid	(134,594)	(120,706)
Administrative and other operating expenses paid	(79,430)	(61,860)
Income tax paid	(4,446)	(11,983)


Cash flows from operating activities before changes in operating assets and liabilities	428,895	149,938

Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia	23,326	(183,202)
Loans and advances to customers	(711,980)	(357,130)
Net investments in lease	24,158	11,008
Other financial assets	(38,835)	(8,483)
Other assets	14,151	10,847
Net change in operating liabilities
Due to credit institutions	11,940	85,357
Customer accounts	667,190	(88,078)
Other financial liabilities	(137,291)	11,915
Other liabilities and provision for liabilities and charges	16,659	3,838


Net cash flows from operating activities	298,213	(363,990)


Cash flows from/(used in) investing activities
Acquisition of investment securities measured at fair value through other comprehensive income	(196,871)	(251,486)
Proceeds from redemption at maturity of investment securities measured at fair value through other comprehensive income	757,583	180,702
Acquisition of bonds carried at amortised cost	-	(495,945)
Proceeds from redemption of bonds carried at amortised cost	19,633	171,137
Acquisition of premises, equipment and intangible assets	(91,993)	(74,550)
Proceeds from disposal of premises, equipment and intangible assets	6,334	24,172
Proceeds from disposal of investment property	20,210	3,128
Acquisition of subsidiaries and associates	-	936


Net cash used in investing activities	514,896	(441,906)


Cash flows from/(used in) financing activities
Proceeds from other borrowed funds	1,757,879	1,615,016
Redemption of other borrowed funds	(2,736,476)	(966,746)
Acquisition of treasury shares	-	(25,493)
Repayment of principal of lease liabilities	(5,591)	(5,420)
Redemption of subordinated debt	(12,562)	-
Proceeds from debt securities in issue	-	171,531
Redemption of debt securities in issue	-	(12,569)
Dividends paid	(1,741)	-

Net cash flows from financing activities	(998,491)	776,319

Effect of exchange rate changes on cash and cash equivalents	(35,609)	7,797
	1,635,405	1,003,583
Net increase in cash and cash equivalents	(220,991)	(21,780)
Cash and cash equivalents at the beginning of the period	1,635,405	1,003,583
Cash and cash equivalents at the end of the period	1,414,414	981,803

Key Ratios

Average Balances

Key Ratios

Ratios (based on monthly averages, where applicable)	1H'21	1H'20

Profitability ratios:
ROE¹	25.9%	5.2%
ROA²	3.6%	0.7%
ROE before expected credit loss allowances³	24.3%	23.3%
Cost to income⁴	37.2%	37.3%
NIM⁵	4.8%	4.7%
Loan yields⁶	10.0%	10.1%
Deposit rates⁷	3.4%	3.5%
Yields on interest earning assets⁸	9.4%	9.4%
Cost of funding⁹	4.6%	5.0%
Spread¹⁰	4.8%	4.4%

Asset quality & portfolio concentration:
Cost of risk¹¹	-0.4%	2.1%
PAR 90 to Gross Loans¹²	1.2%	1.0%
NPLs to Gross Loans¹³	3.4%	2.9%
NPL provision coverage¹⁴	91.3%	134.7%
Total NPL coverage¹⁵	169.6%	208.0%
Credit loss level to Gross Loans¹⁶	3.1%	3.9%
Related Party Loans to Gross Loans¹⁷	0.1%	0.1%
Top 10 Borrowers to Total Portfolio¹⁸	7.8%	8.2%
Top 20 Borrowers to Total Portfolio¹⁹	11.9%	12.3%

Capital & liquidity positions:
Net Loans to Deposits plus IFI* Funding²⁰	102.8%	105.3%
Net Stable Funding Ratio²¹	130.6%	127.5%
Liquidity Coverage Ratio²²	127.1%	124.8%
Leverage²³	6.6x	7.5x
CET 1 CAR (Basel III)²⁴	13.0%	10.0%
Regulatory Tier 1 CAR (Basel III)²⁵	15.5%	12.7%
Regulatory Total 1 CAR (Basel III)²⁶	19.6%	17.2%