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"). 

 

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%.

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.

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.

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.

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.

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).

 

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:

·      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

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

* 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 

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

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)

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%

* 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 YoY growth without the currency exchange rate effect, we used the US$/GEL exchange rate of 3.0552 as of 30 June 2020. As of 30 June 2021 the US$/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: 1H 2021 of 3.3207, 1H 2020 of 3.0323.

.

 

Additional Disclosures

1)   TBC Bank - Background

 

TBC Bank is the largest banking group in Georgia, where 99.4% of its business is concentrated, with a 38.2% 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 United Kingdom. TBC PLC is listed on the London Stock Exchange under the symbol TBCG and is a constituent of the FTSE Small Cap Index. 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 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).

2)   Subsidiaries of TBC Bank Group PLC[26] 

 

 

 

Ownership / voting
% as of 30 June 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

21,434,038

97.02%

    United Financial    Corporation JSC

99.5%

Georgia

1997

Card processing

17,774

0.08%

    TBC Capital LLC

100.0%

Georgia

1999

Brokerage

4,498

0.02%

    TBC Leasing JSC

100.0%

Georgia

2003

Leasing

359,836

1.63%

    TBC Kredit LLC

100.0%

Azerbaijan

1999

Non-banking credit institution

16,767

0.08%

    TBC Pay LLC

100.0%

Georgia

2009

Processing

40,565

0.18%

    Index LLC

100.0%

Georgia

2011

Real estate management

1,500

0.01%

    TBC Invest LLC

100.0%

Israel

2011

PR and marketing

328

0.00%

JSC TBC Insurance

100.0%

Georgia

2014

Insurance

84,769

0.39%

     Redmed LLC

100.0%

Georgia

2019

E-commerce

1,262

0.00%

TBC Ecosystem Companies

100.0%

Georgia

2019

Asset Management

17

0.00%

    Swoop JSC

100.0%

Georgia

2010

Retail Trade

544

0.00%

    LLC Online Tickets

55.0%

Georgia

2015

Software Services

1,667

0.01%

    TKT UZ

75.00%

Uzbekistan

2019

Retail Trade

119

0.00%

    My.ge LLC

65.0%

Georgia

2008

E-commerce, Housing and Auto

8,752

0.04%

    LLC Vendoo (Geo)

100.0%

Georgia

2019

Retail Leasing

3,228

0.01%

    LLC Mypost

100.0%

Georgia

2019

Postal Service

108

0.00%

    LLC Billing Solutions

51.00%

Georgia

2019

Software Services

426

0.00%

    All property.ge LLC

90.0%

Georgia

2013

Real estate management

2,579

0.01%

    LLC F Solutions

100.0%

Georgia

2019

Software Services

9

0.00%

TBC Connect LLC

100.0%

Georgia

2020

Software Services

2

0.00%

TBC Concept

100.0%

Georgia

2020

Food Industry

305

0.00%

Artarea.ge LLC

100.0%

Georgia

2021

PR and marketing

51

0.00%

Saba

85.0%

Georgia

2012

Education

47

0.00%

Art Gallery

100.0%

Georgia

2012

PR and marketing

0

0.00%

Space International JSC

100.0%

Georgia

2021

Software Services

128

0.00%

TBC Group Support LLC

100.0%

Georgia

2020

Risk Management

0

0.00%

Inspired LLC

51.0%

Uzbekistan

2011

Processing

13,265

0.06%

TBC Bank UZ JSCB

100.0%

Uzbekistan

2020

Banking

64,351

0.29%

LLC Vendoo (UZ Leasing)

100.00%

Uzbekistan

2019

Consumer financing

1,429

0.01%

 

 

3)   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 property and casualty insurance and life insurance (non-health) market and the largest player in the retail segment, holding 16.7% and 32.2% market shares[27] without border motor third party liability (MTPL) insurance, respectively, in 2Q 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 2Q 2021, net profit including the health insurance business amounted to GEL 2,846 thousands, which was broadly flat YoY, attributable to a high base in 2Q 2020, which resulted from the decrease in claims due to the COVID-19 lockdown, as well as effective cost control.

The QoQ increase in net profit including health insurance business was driven by the revival of business activities and the seasonal low in 1Q 2021.

 

Information excluding health insurance

2Q'21

1Q'21

2Q'20

1H'21

1H'20

In thousands of GEL

 

 

 

 

 

Gross written premium

22,831

21,263

18,849

44,094

37,143

Net earned premium[28]

18,595

16,653

15,535

35,248

31,538

Net profit

3,512

2,895

3,033

6,406

5,092

 

 

 

 

 

 

Net combined ratio

81.6%

83.5%

79.4%

82.5%

82.9%

 

 

 

Information including health insurance

2Q'21

1Q'21

2Q'20

1H'21

1H'20

In thousands of GEL

 

 

 

 

 

Gross written premium

26,414

25,515

21,540

51,929

41,735

Net earned premium

21,539

19,131

17,329

40,671

34,647

Net profit

2,846

2,193

2,894

5,039

4,365

 

 

 

 

 

 

Net combined ratio

88.0%

90.1%

82.6%

89.0%

87.0%

Note: IFRS standalone data

 

 

4)   First digital bank in Uzbekistan

In October 2020 we successfully launched TBC UZ, a digital commercial bank in Uzbekistan, which demonstrated a rapid growth:

 

 

in thousands of GEL

Jul-2021

Jun-2021

May-2021

Apr-2021

Mar-2021

# of total registered users

403

302

230

157

98

Loan portfolio (GEL)

31,797

25,239

14,997

6,144

953

Deposit portfolio (GEL)

49,585

15,543

11,567

6,543

2,839

# of total cards issued (cumulative figures)

78

66

54

42

31

# of other cards attached (cumulative figures)

187

126

81

49

29

Total monthly number of transactions

626

563

407

323

203

 

 

5)   Reclassification of certain balance sheet 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 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)

June 2021

142.8

2,193.7

March 2021

139.0

2,415.9

June 2020

129.7

1,792.1

 

 

Reclassification of other non-financial assets impairment

In 2021, the Group reclassified impairment/recovery of non-financial assets from "Administrative and other operating expenses" to "Impairment of other non-financial assets". A significant part of any impairment/recoveries recorded is related to repossessed assets and investment properties. The management believes that those type of assets are not actively used in daily operations, but are primarily targeted for sale in the future. Considering the nature of those expenses/recovery, such a presentation is more appropriate and would increase the understandability and clarity of the Group's financial statements. The presentation of comparative figures has been adjusted to conform to the presentation of the current period amounts:

 

 

As originally presented

at 30 June 2020

Reclassification

As reclassified at

30 June 2020

Impairment of other non-financial assets

-

(625)

(625)

Administrative and other operating expenses

(56,016)

625

(55,391)

 

 

Changes in methodology - NPL collaterals coverage

In 1Q 2021, in order 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 30 June 2020, 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

79%

65%

267%

254%

CIB

160%

70%

268%

178%

MSME

115%

85%

207%

177%

Total

112%

73%

247%

208%

 

6)   Loan book breakdown by stages according IFRS 9

 

Total (in million GEL)

 

30-Jun-21

31-Mar-21

30-Jun-20

Stage

Gross

LLP rate*

Gross

LLP rate*

Gross

LLP rate*

1

12,709

0.9%

12,101

1.1%

11,332

1.6%

2

1,803

5.6%

2,296

5.4%

1,899

10.3%

3

763

34.4%

935

36.1%

404

38.9%

Total

15,275

3.1%

15,332

3.8%

13,635

3.9%

 

 

CIB (in million GEL)

 

30-Jun-21

31-Mar-21

30-Jun-20

Stage

Gross

LLP rate*

Gross

LLP rate*

Gross

LLP rate*

1

4,899

0.9%

4,760

1.1%

4,556

1.1%

2

826

1.0%

991

0.9%

479

1.3%

3

127

18.8%

188

24.5%

165

32.9%

Total

5,852

1.3%

5,939

1.8%

5,200

2.1%

 

 

MSME (in million GEL)

 

30-Jun-21

31-Mar-21

30-Jun-20

Stage

Gross

LLP rate*

Gross

LLP rate*

Gross

LLP rate*

1

3,026

0.7%

2,764

0.9%

2,652

1.5%

2

459

6.3%

583

7.0%

443

10.0%

3

250

31.9%

285

32.5%

111

34.7%

Total

3,735

3.5%

3,632

4.4%

3,206

3.8%

 

 

Retail (in million GEL)

 

30-Jun-21

31-Mar-21

30-Jun-20

Stage

Gross

LLP rate*

Gross

LLP rate*

Gross

LLP rate*

1

4,784

1.0%

4,577

1.0%

4,124

2.1%

2

519

12.3%

722

10.4%

976

14.9%

3

386

41.1%

462

43.1%

129

50.1%

Total

5,689

4.7%

5,761

5.6%

5,229

5.7%

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

 

 

 

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

 

 

Income Statement Highlights

 

 

 

 

 

#

in thousands of GEL

2Q'21

1Q'21

2Q'20

1H'21

1H'20

 

1.

Net interest income

242,767

225,131

184,365

467,898

392,324

 

2.

Net fee and commission income

63,008

45,293

39,517

108,301

83,069

 

3.

Other operating non-interest income

74,512

40,665

26,161

115,177

64,905

 

4.

Credit loss allowance

45,291

(17,244)

(12,586)

28,047

(259,676)

 

5.

Operating profit after expected credit losses

425,578

293,845

237,457

719,423

280,622

 

6.

Losses from modifications of financial instrument

(104)

(1,487)

(3,527)

(1,591)

(34,170)

 

7.

Operating expenses

(134,688)

(122,240)

(95,059)

(256,928)

(201,535)

 

8.

Profit before tax

290,786

170,118

138,871

460,904

44,917

 

9.

Income tax expense

(40,394)

(17,131)

(12,665)

(57,525)

24,283

 

10.

Profit for the period

250,392

152,987

126,206

403,379

69,200

 

12.

Profit for the period less Non-controlling interest

247,946

151,224

125,100

399,170

67,625

 

13.

Income tax expense of credit loss allowance

4,685

(1,593)

(1,215)

2,901

(25,071)

 

14.

Profit before Credit loss allowances less Non-controlling interest and respective tax effect

(12 - 4 + 13)

207,340

166,875

136,471

374,024

302,230

 

                       

 

 

#

in thousands of GEL

2Q'21

1Q'21

2Q'20

1H'21

1H'20

 

15.

Average equity attributable to the PLC's equity holders

3,203,351

3,017,527

2,576,397

3,109,965

2,607,011

 

16.

Return on equity (ROE) (12÷15)*

31.0%

20.3%

19.5%

25.9%

5.2%

 

17.

Return on equity (ROE) before expected credit loss allowances (14÷15)*

26.0%

22.4%

21.3%

24.3%

23.3%

 

 

*annualised where applicable

 

 

 

 

 

                 

 

Material Existing and Emerging Risks

The emergence of the COVID-19 pandemic has enhanced the critical importance of risk management to the Group's strategy. During the COVID-19 era, it is even more essential to identify any emerging risks and uncertainties that could adversely impact the Group's performance, financial condition and prospects. This section analyses the material principal and emerging risks and uncertainties the Group faces. However, we cannot exclude the possibility of the Group's performance being affected by risks and uncertainties other than those listed below.

 

Principal Risks and Uncertainties

 

1. Credit risk is an integral part of the Group's business activities

As a provider of banking services, the Group is exposed to the risk of loss due to the failure of a customer or counterparty to meet their obligations to settle outstanding amounts in accordance with agreed terms.

Risk description

Credit risk is the greatest material risk faced by the Group, given the Group is engaged principally in traditional lending activities. The Group's customers include legal entities as well as individual borrowers.

Due to the high level of dollarization of Georgia's financial sector, currency-induced credit risk is a component of credit risk, which relates to risks arising from foreign currency-denominated loans to unhedged borrowers in the Group's portfolio. Credit risk also includes concentration risk, which is the risk related to credit portfolio quality deterioration as a result of large exposures to single borrowers or groups of connected borrowers, or loan concentration in certain economic industries. Losses may be further aggravated by unfavorable macroeconomic conditions. These risks are described in more detail as a separate principal risk.

 

COVID-19 has increased uncertainty and caused significant economic disruptions in many sectors, particularly in the hospitality & leisure, real estate management and development sectors. Such economic disruptions run the risk of deteriorating the financial standing of borrowers and increase the credit risk for the Group.

 

Risk mitigation

A comprehensive credit risk assessment framework is in place with a clear segregation of duties among the parties involved in the credit analysis and approval process. The credit assessment process is distinct across segments, and is further differentiated across various product types to reflect the differing natures of these asset classes. Corporate, SME and larger retail and micro loans are assessed on an individual basis, whereas the decision-making process for smaller retail and micro loans is largely automated. The rules for manual and automated underwriting are developed by units within the risk function, which are independent from the origination and business development units. In the case of corporate and medium-sized business borrowers, the loan review process is conducted within specific sectoral teams, which accumulate deep knowledge of the corresponding sectoral developments.

 

The Group uses a robust monitoring system to react promptly to macro and micro developments, identify weaknesses in the credit portfolio and outline solutions to make informed risk management decisions.

 

Monitoring processes are tailored to the specifics of individual segments, as well as encompassing individual credit exposures, overall portfolio performance and external trends that may impact on the portfolio's risk profile. Additionally, the Group uses a comprehensive portfolio supervision system to identify weakened credit exposures and take prompt, early remedial actions, when necessary.

 

The Group's credit portfolio is structurally highly diversified across customer types, product types and industry segments, which minimizes credit risk at the Group level. As of 30 June 2021, the retail segment represented 37.2% of the total portfolio, which was split between mortgage and non-mortgage exposures of 66.7% and 33.3%, respectively. No single business sector represented more than 9.6% of the total portfolio as of 30th June 2021.

 

Collateral represents the most significant credit risk mitigation tool for the Group, making effective collateral management one of the key risk management components. Collateral on loans extended by the Group may include, but is not limited to, real estate, cash deposits, vehicles, equipment, inventory, precious metals, securities and third party guarantees.

 

The Group has a largely collateralized portfolio in all its segments, with real estate representing a major share of collateral. As of 30 June 2021, 75.4% of the Group's portfolio was secured by cash, real estate or gold. A sound collateral management framework ensures that collateral serves as an adequate mitigating factor for credit risk management purposes.

 

As a result of the COVID-19 pandemic, the Group has identified highly vulnerable clients and outlined a strategy for payment holidays, refinancing, or restructuring across all segments. Since the start of the COVID-19 pandemic, the Bank granted payment holidays on principal and interest payments to individual and MSME customers as well as to corporate borrowers that have been adversely affected by the government lockdowns. In line with our strategy, some clients were only given payment holidays on interest, while other clients were given payment holidays on both interest and principal amounts. The government expanded upon a special support programme for the affected sectors: for example, restaurants and small and medium sized hotels received subsidies in the amount of 70-80% of interest payments.

 

In the first half of 2021, the grace periods ended for those loans that had been restructured in late 2020. On the back of strong economic recovery and easing of Covid-19-related restrictions,the vast majority of these borrowers managed to successfully continue repayment, which resulted in a decrease in non-performing loans and improvements in the portfolio quality in general.

 

Additionally, the Bank actively performs stress testing and scenario analysis in order to check the resilience of borrowers under various stress conditions. The stress tests entail assumptions about the depreciation of the local currency, GDP growth, sectoral growth, unemployment, inflation, changes in real estate and commodity prices, changes in interest rates and loan and deposit portfolio developments. The Bank carries out intensive financial monitoring to identify the borrower's weakened financial and business prospects in order to offer them a restructuring plan that is tailored to their individual needs.

 

The Bank revised credit underwriting standards across all segments in light of the COVID-19 pandemic and tightened them, where applicable. The revision and tightening of the standards, among other measures, included: changes in the delegation on decision-making and approval, particularly for borrowers from vulnerable sectors, applied haircuts to the revenues of individual borrowers from affected sectors, and the integration of macroeconomic sectoral expectations into the assessment process for business borrowers.

 

 

2. The Group faces currency-induced credit risk due to the high share of loans denominated in foreign currencies in the Group's portfolio

A potential material GEL depreciation is one of the most significant risks that could negatively impact portfolio quality, due to the large presence of foreign currencies on the Group's balance sheet. Unhedged borrowers could suffer from an increased debt burden when their liabilities denominated in foreign currencies are amplified.

 

Risk description

A significant share of the Group's loans (and a large share of the total banking sector loans in Georgia) is denominated in currencies other than GEL, mainly in US$ and EUR. As of 30 June 2021, 56.3% of the Group's total gross loans and advances to customers (before provision for loan impairment) were denominated in foreign currencies.

 

The income of many customers is directly linked to foreign currencies via remittances, tourism or exports. Nevertheless, customers may not be protected against significant fluctuations in the GEL exchange rate against the currency of the loan. The US$/GEL rate remained volatile throughout the first half of 2021 and the average currency exchange rate of GEL weakened by 9.5% year-on-year. The GEL remains in free float and is exposed to many internal and external factors that in some circumstances could result in its depreciation.

 

Risk mitigation

Particular attention is paid to currency-induced credit risk, due to the high share of loans denominated in foreign currencies in the portfolio. Vulnerability to exchange rate depreciation is monitored in order to promptly implement an action plan, as and when needed. The ability to withstand certain exchange rate depreciation is incorporated into the credit underwriting standards, which also include significant currency devaluation buffers for unhedged borrowers. In addition, the Group holds significant capital against currency-induced credit risk.

 

Given the experience and knowledge built throughout the recent currency volatility, the Group is in a good position to promptly mitigate exchange rate depreciation risks. In January 2019, the government authorities continued their efforts to reduce the economy's dependence on foreign currency financing by increasing the cap to GEL 200,000, under which loans must be disbursed in local currency. In addition, the NBG, under its responsible lending initiative, which came into force on 1 January 2019, introduced significantly more conservative PTI and LTV thresholds for unhedged retail borrowers, further limiting their exposure to currency induced credit risk. The NBG eased the above-mentioned regulation from April 2020 for hedged borrowers. For unhedged borrowers, however, PTI and LTV thresholds will remain significantly more conservative.

 

3. The Group's performance may be compromised by adverse developments in the economic environment, particularly due to the COVID-19 pandemic

An abrupt slowdown in the economic recovery, or even contraction, owing to pandemic-related disruptions and further lockdowns due to the slow vaccination process and newly emerged virus variants, will likely have an additional adverse impact on the repayment capacity of borrowers, restraining their future investment and expansion plans. In addition, the Fed's new hike cycle started earlier than expected amid fast recovery in the US economy, which could trigger the GEL depreciation and slower growth of the Georgian economy. These occurrences would be reflected in the Group's portfolio quality and profitability, and would also impede portfolio growth rates. Negative macroeconomic developments could compromise the Group's performance through various parameters, such as exchange rate depreciation, a spike in interest rates, rising unemployment, a decrease in household disposable income, falling property prices, worsening loan collateralization, or falling debt service capabilities of companies as a result of decreasing sales. Potential political and economic instability in neighboring countries and main trading/economic partners could negatively impact Georgia's economic outlook through a worsening current account (e.g. decreased exports, tourism inflows, remittances and foreign direct investments).

 

Risk description

As a result of the COVID-19 pandemic, Georgia endured an economic downturn in 2020, with real GDP down by 6.2%. The 2021 first quarter real GDP growth came in at a negative 4.5%, yet affected by the pandemic-related restrictions and still relatively high base effect a year before; thereafter, amid easing COVID-related restrictions and global recovery, the economy has embarked on a rebound path, increasing by 44.8% YoY (+20.8 compared to 2019), 25.8% YoY (+8.8 compared to 2019) and 18.7% YoY (+9.6% compared to 2019) in April, May and June, respectively. Going forward, according to TBC Capital projections the economy is estimated to recover by 10.5% and 6.5% in 2021 and 2022 respectively. According to the World Bank's latest projections[29], the Georgian economy is projected to grow at 6.0% in 2021 and by 5.0% in 2022.

 

Since the beginning of 2021, the GEL gained some value against the US dollar, rising from 3.28 US$/GEL to 3.14 US$/GEL, as of 15 July. In June 2021, consumer prices went up considerably by 9.9%, which can be primarily explained by increased commodity prices, a weak GEL and increased gas tariffs in Tbilisi. Since the beginning of 2021, the NBG increased its policy rate from 8.0% to 9.5%. Considering the moderating inflation outlook, the recovery in tourism inflows and lower pressures on the exchange rate, it is likely that there will be gradual rate cuts this year.

 

In addition to use of the interest rate policy tool, the NBG continued to supply FX to the market in 2021, selling in total US$ 248 million as of June 2021 (US$ 873.2 million in 2020). These interventions were primarily financed through external government borrowing. The fiscal deficit also significantly supported the overall growth as well as assisting those businesses and households that were impacted negatively by the pandemic. According to the budget plan, the fiscal deficit is expected to be sizeable again in 2021, with a deficit to GDP ratio of 6.9% (compared to 9.3% of GDP in 2020). Bank credit growth strengthened to 12.6% year-on-year in FX adjusted terms by the end of June 2021, compared to 9.1% year-on-year growth by the end of 2020.

 

Risk mitigation

To decrease its vulnerability to economic cycles, the Group identifies cyclical industries and proactively manages its underwriting approach and clients within its risk appetite framework. The Group has in place a macroeconomic monitoring process that relies on close, recurrent observation of economic developments in Georgia, as well as in neighboring countries, to identify early warning signals indicating imminent economic risks. This system allows the Group to promptly assess significant economic and political occurrences and analyze their implications for the Group's performance. The identified implications are duly translated into specific action plans with regards to reviewing the underwriting standards, risk appetite metrics or limits, including the limits for each of the most vulnerable industries. Additionally, the stress-testing and scenario analysis applied during the credit review and portfolio monitoring processes enable the Group to have an advance evaluation of the impact of macroeconomic shocks on its business. Resilience towards a changing macroeconomic environment is incorporated into the Group's credit underwriting standards. As such, borrowers are expected to withstand certain adverse economic developments through prudent financials, debt-servicing capabilities and conservative collateral coverage.

 

Taking into account the impact of the COVID-19 crisis on Georgia's economy, the Group has adjusted its risk management framework, leveraging its already existing stress testing practices. This included more thorough and frequent monitoring of the portfolio as well as stress testing, to ensure close control of the changes in capital, liquidity, and portfolio quality during times of increased uncertainty.       

 

4. The Group faces the capital risk of not meeting the minimum regulatory requirements under the increasing capital requirement framework, which may compromise growth and strategic targets. Additionally, adverse changes in FX rates may impact the capital adequacy ratios

 

Risk description

In December 2017, the NBG introduced a new capital adequacy framework. Under the updated regulation, capital requirements consist of a Pillar 1 minimum requirement, combined buffers (systemic, countercyclical and conservation buffers) and Pillar 2 buffers.

 

The regulation includes a phase-in schedule and gradually introduces the buffers over the course of a four-year period. However, in response to the COVID-19 pandemic, the NBG has implemented certain countercyclical measures in relation to capital adequacy requirements, which are as follows:

Postponing the phasing-in of concentration risk and the net General Risk Assessment Programme (GRAPE) buffer capital requirements on CET1 and Tier 1 capital that was supposed to be introduced in March 2020;

Allowing banks to use the conservation buffer and 2/3 of the Currency Induced Credit Risk (CICR) buffer;

Allowing banks to release all the remaining Pillar 2 buffers (remaining 1/3 CICR, concentration risk and Net Grape buffers) in case of necessity.

Since the above-mentioned countercyclical measures were put in place, the NBG outlined a new schedule for the gradual introduction of capital requirements under Basel III. According to the new schedule, concentration risk and the net GRAPE buffers phase-in resumed from March 2021 and will be fully introduced by March 2023. The systemic buffer will increase by 0.5pp to 2.5% at the end of 2021.

 

In June 2021, the NBG also announced its decision on the restoration of CICR and Conservation buffers. Based on this decision, the restoration of buffers will begin from January 2022 and will last for two years. Banks will be required to fully restore the CICR buffer by the end of 2022 and Conservation buffer by the end of 2023. However, the Bank should fully restore and comply with the buffers in case it wants to pay out dividends.

 

Since the introduction of these measures, the Bank has been utilizing both the conservation and 2/3rds of the CICR buffer, and was restricted from making any capital distributions. However, amid strong capital generation, as of June 2021, TBC Bank is in full compliance with the fully restored minimum requirements and has confirmed to the NBG that it will fully restore the temporarily released capital buffers by 31 July 2021. This lifts any regulatory restriction on making capital distributions.

 

The Bank's capitalization as of 30th June 2021 is given in the table below:

 

Minimum Requirements

Fully Restored Minimum Requirements

TBC Capital Adequacy Ratios

Surplus
 over Min Requirements

Surplus  over Fully Restored Minimum  Requirements

CET1 Capital

7.8%

11.2%

13.0%

5.2%

1.8%

Tier 1 Capital

9.8%

13.5%

15.5%

5.7%

2.0%

Total Capital

13.7%

17.8%

19.6%

5.9%

1.8%

 

Apart from the challenges brought by the Covid-19 pandemic, GEL volatility has been and remains one of the most significant risks impacting the Bank's capital adequacy. A 10% GEL depreciation would translate into a 0.87pp, 0.77pp and 0.64 pp drop in the Bank's CET 1, Tier 1 and Total regulatory capital adequacy ratios, respectively.

 

Risk mitigation

The Group undertakes stress-testing and sensitivity analysis to quantify extra capital consumption under different scenarios. Such analyses indicate that the Group holds sufficient capital to meet the current minimum regulatory requirements. Capital forecasts, as well as the results of the stress-testing and what-if scenarios, are actively monitored with the involvement of the Bank's Management Board and Risk Committee to ensure prudent management and timely actions when needed.

 

 

 

 

 

5. The Group is exposed to regulatory and enforcement action risk

The Bank's activities are highly regulated and thus face regulatory risk. The NBG can increase prudential requirements across the whole sector as well as for specific institutions within it. Therefore, the Group's profitability and performance may be compromised by an increased regulatory burden.

 

Risk description

The NBG sets lending limits and other economic ratios (including, inter alia, lending, liquidity and investment ratios) in addition to mandatory capital adequacy ratios.

 

Under Georgian banking regulations, the Bank is required, among other things, to comply with minimum reserve requirements and mandatory financial ratios, and to regularly file periodic reports. The Bank is also regulated by the tax code and other relevant laws in Georgia. Following the Company's listing on the London Stock Exchange's premium segment, the Group became subject to increased regulations from the UK Financial Conduct Authority. In addition to its banking operations, the Group also offers other regulated financial services products, including leasing, insurance and brokerage services.

 

The Bank's subsidiary was granted a banking license in Uzbekistan and launched operations in 2020. As a result, the regulatory compliance requirements have increased for the Group.

 

The Group takes all necessary steps to comply with the relevant legislation and regulations. The Group is also subject to financial covenants in its debt agreements.

 

Risk mitigation

The Group has established systems and processes to ensure full regulatory compliance, which are embedded in all levels of the Group's operations. A dedicated compliance department reports directly to the Chief Executive Officer and has the primary role in the management of regulatory compliance risk. The Group's Risk Committee is responsible for regulatory compliance at the Board level. In terms of banking regulations and Georgia's taxation system, the Group is closely engaged with the regulator to ensure that new procedures and requirements are discussed in detail before their implementation. Although the decisions made by regulators are beyond the Group's control, significant regulatory changes are usually preceded by a consultation period that allows all lending institutions to provide feedback and adjust their business practices.

 

6. The Group is exposed to concentration risk

Banks operating in developing markets are typically exposed to both single-name and sector concentration risks. The Group has large individual exposures to single-name borrowers whose potential default would entail increased credit losses and higher impairment charges. The Group's portfolio is well diversified across sectors, resulting in only moderate vulnerability to sector concentration risks. However, should exposure to common risk drivers increase, the risks are expected to amplify correspondingly.

 

Risk description

The Group's loan portfolio is diversified, with maximum exposure to the single largest industry (Hospitality, Restaurants & Leisure) standing at 9.2% of the loan portfolio, which demonstrates adequate credit portfolio diversification. At the end of half year 2021, exposure to the 20 largest borrowers stands at 11.9% of the loan portfolio, which is in line with the Group's target of alleviating concentration risk.

 

Risk mitigation

The Group constantly monitors the concentrations of its exposure to single counterparties, as well as sectors and common risk drivers, and it introduces limits for risk mitigation. As part of its risk appetite framework, the Group limits both single-name and sector concentrations. Any considerable change in the economic or political environment, in Georgia as well as in neighbouring countries, will trigger the Group's review of the risk appetite criteria to mitigate the emerging risk of concentration. Stringent monitoring tools are in place to ensure compliance with the established limits. Due to the increased uncertainty caused by the COVID-19 pandemic, close monitoring was carried out consistently, based on macro expectations, to estimate the performance of the top 20 corporate borrowers.

 

In addition, the Bank has dedicated restructuring teams to manage borrowers with financial difficulties. When it is deemed necessary, clients are transferred to such teams for more efficient handling and, ultimately, to limit any resulting credit risk losses. The NBG's new capital framework introduced a concentration buffer under Pillar 2 that helps to ensure that the Group remains adequately capitalized to mitigate concentration risks.

 

7. Liquidity risk is inherent in the Group's operations

While the Group currently has sufficient financial resources available to meet its obligations as they fall due, liquidity risk is inherent in banking operations and can be heightened by numerous factors. These include an overreliance on, or an inability to access, a particular source of funding, as well as changes in credit ratings or market-wide phenomena, such as the global financial crisis that took place in 2007. Access to credit for companies in emerging markets is significantly influenced by the level of investor confidence and, as such, any factors affecting investor confidence (e.g. a downgrade in credit ratings, central bank or state interventions, or debt restructurings in a relevant industry) could influence the price or availability of funding for companies operating in any of these markets.

 

Risk description

The Group was in compliance with the minimum liquidity requirements set by the NBG, which include the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). As of 30 June 2021, the net loan to deposits plus international financial institution funding ratio stood at 102.8%, the liquidity coverage ratio at 127.1%, and the net stable funding ratio at 130.6%. These figures are all comfortably above the NBG's minimum requirements or guidance for such ratios.

 

 

30-Jun-21

31-Dec-20

31-Dec-19

Minimum net stable funding ratio, as defined by the NBG

100%

100%

100%

Net stable funding ratio as defined by the NBG

130.6%

126.0%

126.7%

 

 

 

 

Net loans to deposits + IFI funding

102.8%

101.2%

104.8%

 

 

 

 

Minimum total liquidity coverage ratio, as defined by the NBG

100.0%

100.0%

100.0%

Minimum LCR in GEL, as defined by the NBG

75%

n/a

75.0%

Minimum LCR in FC, as defined by the NBG

100.0%

100.0%

100.0%

 

 

 

 

Total liquidity coverage ratio, as defined by the NBG

127.1%

134.2%

110.1%

LCR in GEL, as defined by the NBG

122.9%

132.2%

83.7%

LCR in FC, as defined by the NBG

129.2%

134.9%

128.4%

 

In May 2021, NBG restored the NBG GEL LCR limit (>=75%), which was removed for one year as one of the countercyclical measures implemented in relation to liquidity requirements as a result of COVID-19.

 

Risk mitigation

To mitigate this risk, the Group holds a solid liquidity position and performs an outflow scenario analysis for both normal and stress circumstances to make sure that it has adequate liquid assets and cash inflows. The Group maintains a diversified funding structure to manage the respective liquidity risks. There is adequate liquidity to withstand significant withdrawals of customer deposits, but the unexpected and rapid withdrawal of a substantial amount of deposits could have a material adverse impact on the Group's business, financial condition, and results of operations and/or prospects.

As part of its liquidity risk management framework, the Group has a liquidity contingency plan in place outlining the risk indicators for different stress scenarios and respective action plans. The liquidity risk position and compliance with internal limits are closely monitored by the Assets and Liabilities Management Committee (ALCO). Due to its high liquidity position in foreign currency, the Bank made prepayments of some IFI resources in the amount of US$ 143m in late 2020 and throughout the first half of 2021.

 

8. Any decline in the Group's net interest income or net interest margin (NIM) could lead to a reduction in profitability

Net interest income accounts for the majority of the Group's total income. Consequently, fluctuations in its NIM affect the results of operations. The new regulations as well as high competition could drive the Group's interest rates down, compromising the Group's profitability. At the same time, the cost of funding is largely exogenous to the Group and is derived from both local and international markets.

 

Risk description

The majority of the Group's total income derives from net interest income. Consequently, the NIM's fluctuations affect the Group's results. In first half of 2021, the NIM increased by 0.1pp year-on-year to 4.8%, mainly driven by a decrease in the cost of funding for both local and foreign currencies, as well as change in liability structure towards deposits.

 

The Bank manages its exposure to interest rate risk, following the NBG IRR regulation introduced from September 2020. As of 30 June 2021, GEL 3,959[30] million in assets (19%) and GEL 2,0953 million in liabilities (11%) were floating in GEL currency, whereas GEL 7,6733 million of assets (36%) and GEL 1,0773 million of liabilities (6%) were floating, related to the LIBOR/Euribor/FED/ECB rates.

 

The Bank was in compliance with the EVE (Economic Value of Equity) sensitivity limit set by the NBG at 15% of Tier 1 Capital, with the ratio standing at 3.3% by 30 June 2021.

 

Risk mitigation

In 2021, NIM had an improving trend, after the decrease since the start of the Covid-19 pandemic; this positive trend is expected to continue throughout 2021. The strong performance in net fee and commission income and other operating income, as well as efficient cost discipline, helps safeguard against margin declines and profitability concerns for the Group going forward.

 

To mitigate the asset-liability maturity mismatch, in cases where loans are extended on fixed rather than floating terms, the interest rate risk is translated into price premiums, safeguarding against changes in interest rates.

 

 

9. The threat posed by cyber-attacks has increased in recent years and it continues to grow. The risk of potential cyber-attacks, which have become more sophisticated, may lead to significant security breaches. Such risks change rapidly and require continued focus and investment

 

Risk description

No major cyber-attack attempts have targeted Georgian commercial banks in recent years. Nonetheless, the Group's rising dependency on IT systems increases its exposure to potential cyber-attacks.

 

Risk mitigation

In order to mitigate the risks associated with cyber-attacks and ensure the security of clients, the Group continuously updates and enhances its in-depth security strategy, which covers multiple preventive and detective controls ranging from the data and end-point computers to edge firewalls.

 

A Security Operations Center has been built, which monitors every possible anomaly that is identified across the organization's network in order to detect potential incidents and respond to them effectively.

 

At least once a year, a full information security and cyber security threat analysis is performed, taking into consideration the relevant regional and sector specific perspectives. At least once every two years, as part of this analysis, an external consultant is contracted to assess the efficiency of our capabilities against industry best practices and real world cyber-attack scenarios. This analysis gives the Group a broad review as well as detailed insight, which helps to further enhance the information and cyber security systems. In addition, cyber-attack readiness exercises are performed on a regular basis. These exercises evaluate the actual position of the Group in this area and provide a benchmark against international best practices.

 

Our employees play a crucial role in information security. As a result, regular mandatory training sessions are conducted for all employees, which are comprised of remote learning courses on security issues, fraud and phishing simulations as well as informative emails to further assist our employees with information security matters. New employees are also given training as part of the onboarding process. These measures ensure that employees are fully aware of their responsibilities and are prepared for various security threats.

 

The Information Security Steering Committee governs information and cyber security to ensure that relevant risks are at an acceptable level and that continuous improvement of the management processes are achieved.

Disaster recovery plans are in place to ensure business continuity in case of contingency.

As a result of the COVID-19 pandemic, the Group activated secure remote working policies, which ensure that homeworking environments are protected against relevant cyber-threats and that the security team provides effective oversight of teleworking channels. Although there has been a noticeable increase in phishing attempts against employees, there have been no major incidents. The Security Operation Center and Threat Hunting teams have successfully adopted effective remote collaboration and communication tools and practices.

 

10. External and internal fraud risks are part of the operational risk inherent in the Group's business. Considering the increased complexity and diversification of operations, together with the digitalisation of the banking sector, fraud risks are evolving. Unless proactively managed, fraud events may materially impact the Group's profitability and reputation

 

Risk description

External fraud events may arise from the actions of third parties against the Group, most frequently involving events related to banking cards, loans and client phishing. Internal frauds arise from actions committed by the Group's employees, and such events happen less frequently. None of these cases had a material impact on the Group's profit and loss statement. As a result of the COVID-19 pandemic, the threat of fraud and the rapid growth in digital crime have been exacerbated and fraudsters are adopting new techniques and approaches to exploit various possibilities to illegally obtain funds. Therefore, unless properly monitored and managed, the potential impact can become substantial.

 

Risk mitigation

The Group actively monitors, detects and prevents the risks arising from fraud events and permanent monitoring processes are in place to detect unusual activities in a timely manner. The risk and control self-assessment exercise focuses on identifying residual risks in key processes, subject to the respective corrective actions. Given our continuous efforts to monitor and mitigate fraud risks, together with the high sophistication of our internal processes, the Group ensures the timely identification and control of fraud-related activities.

 

11. The Group remains exposed to some reputational risk

 

Risk Description

There are reputational risks to which the Group may be exposed, such as risks related to the COVID-19 pandemic, and increased cases of cybercrimes (cyberattack, phishing). The upcoming elections in October 2021 make all banks a target for popular resentment as some politicians use anti-bank narratives during their pre-election campaigns.

However, none of the aforementioned risks are unique to the Group; instead, they are issues faced by the entire banking sector.

 

Risk Mitigation

To mitigate the possibility of reputational risks, the Bank has all of the necessary safeguards in place, including preventive measures, contingency plans and crisis response scenarios. The Bank works continuously to maintain strong brand recognition among its stakeholders, actively monitoring its brand value and media coverage by receiving feedback from stakeholders on an ongoing basis. The Bank closely monitors and reports on any negative publicity about TBC.  The Group tries to identify early warning signs of potential reputational or brand damage in order to both mitigate and elevate it to the attention of the Board before escalation. Dedicated internal and external marketing and communications teams are in place that monitor risks, develop response scenarios and respective action plans.

 

12. The Group faces the risk that its strategic initiatives do not translate into long-term sustainable value for its stakeholders

The Group's business strategy may not adapt to the environment of ever changing customer needs.

 

Risk Description

The Group may face the risk of developing a business strategy that does not safeguard long-term value creation in an environment of changing customer needs, competitive environment and regulatory restrictions. In addition, the Group may be exposed to the risk that it will not be able to effectively deliver on its strategic priorities and thereby compromise its capacity for long-term value creation. With the emergence of COVID-19, the Group has strengthened further its focus on the main strategic pillars: customer centricity, digital capabilities, data analytics, agility and international expansion. As such, given that the strategic review has been a regular exercise in the past, these strategic themes have not shifted significantly.

 

However, increased uncertainty together with the major economic and social disruptions caused by the COVID-19 pandemic may hamper the Group's ability to effectively develop and execute its strategic initiatives in a timely manner.

Risk Mitigation

The Group conducts annual strategic review sessions involving the Bank's top and middle management in order to ensure that it remains on the right track and assess business performance across different perspectives, concentrating analysis on key trends and market practices, both in the regional and global markets. In addition, the Bank continuously works with the world's leading consultants in order to enhance its strategy. Further, the Group conducts quarterly analysis and monitoring of metrics used to measure strategy execution, and in case of any significant deviations, it ensures the development of corrective or mitigation actions.

 

 

13. The Group is exposed to risks related to its ability to attract and retain highly qualified employees

A strong employee base is vital to the success of the Group.

 

Risk Description

The Group faces the risk of losing of key personnel or the failure to attract, develop and retain skilled or qualified employees. In particular, the strategic decision to transform into a digital company entails increased demands on high calibre IT professionals across the Group. In addition, in order to adapt to the fast changing business environment, the Group needs to foster an "Agile" culture and equip employees with the necessary skills. In addition, the COVID-19 pandemic has created additional HR challenges in relation to safeguarding employees' health and wellbeing, maintaining high efficiency levels, strong internal communication and a strong corporate culture.

 

Risk Mitigation

The Group pays significant attention to human capital management strategies and policies, which include approaches to the recruitment, retention and development of talent, and offers competitive reward packages to its employees. The Group has also developed and implemented an "Agile" framework that aims to increase employee engagement and satisfaction. Moreover, the Bank set up an IT and Risk academy to attract and train young professionals. The best students are offered employment at the Bank. In addition, the Bank has an in-house academy that provides various courses for the employees in different fields.

 

In response to the COVID-19 pandemic, the Bank promptly moved back-office employees to a remote working practice by equipping them with all of the necessary IT infrastructure. To ensure the maintenance of an effective internal communication system, we enhanced different digital channels to engage with our employees. Regular management meetings are conducted with staff in order to keep them updated with the Group's strategic initiatives and financial position as well as address their concerns during this highly uncertain period. In order to further promote and enhance our corporate culture, the Bank's internal Facebook group has become more active by, for example, posting employee profiles and sharing success stories. Additionally, the new remote working policy adopted by the Bank gives the possibility to attract new talent from beyond Georgia.

 

 

Emerging Risks

Emerging risks are those that have large unknown components and may affect the performance of the Group over a longer time horizon. We believe the following are risks that have the potential to increase in significance over time and could have the same impact on the Group as the principal risks.

 

1. The Group is exposed to the risks inherent in international operations

Our subsidiary, TBC Bank in Uzbekistan, obtained a banking license in April 2020 and launched its operations in Uzbekistan in October 2020 to wider public. We have already invested US$ 22 million into the charter capital of the Bank and have secured interest from our potential partners: EBRD, IFC and the Uzbek-Oman Investment Company. Our plans foresee a minimum 51% shareholding. This investment exposes the Group to Uzbekistan's macro-economic, political and regulatory environments, including, but not limited to, exposure to risks arising from credit, market, operational and capital adequacy risks as well as risks related to the COVID-19 pandemic in Uzbekistan.

 

Currently, the Group's business activities are mainly concentrated in Georgia, but international activities are expected to contribute to around 10%-15% of the Group's net profit over the medium to long-term.

 

Risk description

The risk posed by the operating environment in Uzbekistan may change the Group's risk profile.

 

The Uzbekistani economy is well diversified with no major reliance on a particular industry. It has one of the lowest public debts as a percentage of GDP in the region and high international reserves, implying macroeconomic stability as well as room for high future growth. The government of Uzbekistan plans to reform the economy and open it up to foreign investment. While the operational environment in Uzbekistan can be assessed as attractive, there are important risks that could materially affect the Group's performance in the country. These risks include, but are not limited to, political instability, the slow pace of reforms, adverse developments in inflation and fluctuations in the exchange rate.

 

Despite the impact of the COVID-19 pandemic, Uzbekistan's economy grew by 1.6% in 2020. According to the latest World Bank's forecasts[31] for 2021-2022, real GDP growth is expected to accelerate to 4.8% and 5.5%, respectively.

 

Risk mitigation

The Group's strategy is to follow an asset-light, limited capital investment approach with a strong focus on digital channels and to invest in stages, to make sure that we are comfortable with the results and the operating environment before committing additional investment. The Group plans to serve retail and MSME customers, which will in turn lead to a non-concentrated portfolio and to lower credit risk. The Group will partner with international financial institutions that intend to take a shareholding in the Uzbek bank in order to ensure the funding of our business plan and sufficient flexibility across our operations in Uzbekistan.

 

Overall, from the Group's perspective, international expansion will result in the diversification of business lines and revenue streams, balancing the overall risk profile of the Group.

 

 

2. The Group is exposed to the risks arising from climate change

 

Risk description

The risks associated with climate change have both a physical impact arising from more frequent and severe weather changes and a transitional impact that may entail extensive policy, legal and technological changes to reduce the ecological footprint of households and businesses. For the Group, both of these risks can materialize through the impairment of asset values and the deteriorating creditworthiness of our customers, which could result in a reduction of the Group's profitability. The Group may also become exposed to reputational risks as a result of its lending to, or other business operations with, customers deemed to be contributing to climate change.

 

Risk mitigation

The Group's objective is to act responsibly and manage the environmental and social risks associated with its operations in order to minimize negative impacts on the environment. This approach enables us to reduce our ecological footprint by using resources efficiently and promoting environmentally friendly measures in order to mitigate climate change.

 

The Group has in place an Environmental Policy, which governs its Environmental Management System ("EMS") and ensures that the Group's operations adhere to the applicable environmental, health and safety and labour regulations and practices. We take all reasonable steps to support our customers in fulfilling their environmental and social responsibilities. The management of environmental and social risks is embedded in the Group's lending process through application of the EMS. The Group has developed risk management procedures to identify, assess, manage and monitor environmental and social risks. These procedures are fully integrated in the Group's credit risk management process.

 

The full Environmental Policy is available at www.tbcbankgroup.com. In June 2021, the Group released its full-scale sustainability report for the year 2020 in reference to the Global Reporting Initiative (GRI) standards. The Global Reporting Initiative (GRI) helps the private sector to realise and understand its role and influence on sustainable development issues such as climate change, human rights and governance. The report is designed for all interested parties and groups in Georgia as well as abroad and aims to give them clear, fact-based information about the social, economic and environmental impact of our activities in 2020. It presents our endeavours to create value for our employees, clients, suppliers, partners and society as a whole. The Sustainability Report 2020 is available at www.tbcbankgroup.com.

We are in the process of introducing the Task Force for a Climate-related Financial Disclosure (TCFD) framework.

 

Governance:

·      The ESG strategy will be further refined and developed in order to integrate the following: environmental, social and governance factors related to climate change; our direct and indirect environmental impact, sustainable development across the Group, customers, employees, suppliers and society, financial inclusion, employee relations and talent management; and workplace diversity and inclusion.

·      A framework to ensure regular reporting of ESG matters to the Board and Risk Committee is in the process of development.

·      An ESG Committee has been established at the senior executive level, which takes responsibility for implementing the ESG strategy and overseeing the implementation of the TCFD framework. 

·      A working group has been established with strong focus on climate related matters.

Strategy:

·      The Group is in process of analysing actual and potential impacts of climate-related risks and opportunities on its business activities.

·      By the end of 2021, TBC Bank is planning full implementation of the Green Lending Framework within the Group, which will encourage our customers to run their businesses in more eco-friendly way. In the beginning of July 2021, TBC Bank received accreditation from Green Climate Fund that will enable the Bank to have direct access to GCF funding to finance projects for adaptation to, and mitigation of, climate change and play a leading role in supporting sustainable development in Georgia.

Risk Management

·      The Group is planning to undertake the specific risk analysis TCFD framework, which will allow us to better understand the climate risks and sector specific developments in order to further enhance our E&S risk management system.

Metrics and targets:

·      The Group is working on defining climate related targets for different time horizons and respective metrics within ESG strategy;

ESG KPIs linked to top management remuneration will be defined.

 

 

3. The Group's performance may be affected by Libor discontinuation and transition

 

Risk description

There are a number of different types of financial instruments on the Group's balance sheet, each of which carries interest rates benchmarked to the London Interbank Offered Rate ("LIBOR"). LIBOR is also used by the Group in its risk measurement, accounting and valuation processes. In 2017, the FCA announced that it has agreed with LIBOR panel banks to sustain LIBOR until the end of 2021 and called upon financial sector participants to start working towards the transition to other reference rates. As was disclosed in H1 2021, part indices will be discontinued by the end of 2021YE, while other indices will be discontinued by the end of H1 2023.  The discontinuation of LIBOR and the process of transition exposes the Group to execution, conduct, financial and operational risks, and may result in earnings volatility, customer complaints and legal proceedings, or have other adverse impact on the Group's business and operations.

Risk mitigation

The Group is in the process of identifying the implications of such a transition to other reference rates on its risk profile by analysing its execution, conduct, financial and operational risks and how such risks could be addressed. The Group is starting its efforts to raise awareness of the transition, both internally and externally, to ensure that staff have all the necessary knowledge and tools to facilitate the transition and that all of the Group's customers are treated fairly. As a first step in the transition process, the Bank started including fall-back clauses in new loan agreements, regulating the transition from LIBOR after its discontinuation. We actively monitor international as well as local transition-related developments to regulate and align the Group's transition process with market practice.

 

Statement of Directors' Responsibilities

 

Each of the Directors (the names of whom are set out below) confirm that to the best of their knowledge that:

·    The condensed consolidated interim financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting';

·    The interim management report herein includes a fair review of the information required by Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority (FCA), 4.2.7R and 4.2.8R namely:

o an indication of important events that have occurred during the six months ended 30 June 2021 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

o any related party transactions in the six months ended 30 June 2021 that have materially affected the financial position or performance of TBC Bank during that period and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or performance of TBC Bank in the six months ended 30 June 2021.

 

 

 

Signed on behalf of the Board by:

 

Vakhtang Butskhrikidze

 

CEO

 

17 August 2021

 

 

                                                                                    

TBC Bank Group PLC Board of Directors:

Chairman

 

Arne Berggren

 

Executive Directors

Non-executive Directors

Vakhtang Butskhrikidze (CEO)

Eran Klein

 

Maria Luisa Cicognani

 

Tsira Kemularia

Per Anders Fasth

Thymios P. Kyriakopoulos

Abhijit Akerkar

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TBC BANK GROUP PLC

 

Condensed Consolidated Interim Financial

Statements (Unaudited)

 

 

30 June 2021

 

 

 

 

Contents

 

 

Independent Review Report                                                                                                                                                                                56

 

Unaudited Condensed Consolidated Interim Financial Statements

 

Condensed Consolidated Interim Statement of Financial Position                                                                                                       58

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income                                                      59

Condensed Consolidated Interim Statement of Changes in Equity                                                                                                      61

Condensed Consolidated Interim Statement of Cash Flows                                                                                                                 62

 

                                    

Notes to the Condensed Consolidated Interim Financial Statements

 

1    Introduction

2    Significant Accounting Policies

3    Critical Accounting Estimates and Judgements in Applying Accounting Policies

4    New or Revised Standards and Interpretations and Accounting Pronouncements

5    Cash and Cash Equivalents

6    Due from Other Banks

7    Mandatory Cash Balances with the National Bank of Georgia

8    Loans and Advances to Customers

9    Investment Securities Measured at Fair Value through Other Comprehensive Income

10   Premises, Equipment and Intangible Assets

11   Due to Credit Institutions

12   Customer Accounts

13   Provisions for Performance Guarantees, Credit Related Commitment Liabilities and Charges

14   Debt Securities in Issue

15   Subordinated Debt

16   Share Capital

17   Share Based Payments

18   Earnings per Share

19   Segment Analysis

20   Interest Income and Expense

21   Fee and Commission Income and Expense

22   Other Operating Income

23   Administrative and Other Operating Expenses

24   Income Taxes

25   Financial and Other Risk Management

26   Contingencies and Commitments

27   Fair Value Disclosures

28   Related Party Transactions

29   Events after Reporting Period                                                                                                                121

 

 

Independent review report to TBC Bank Group plc

Report on the unaudited Condensed Consolidated Interim Financial Statements

 

Our conclusion

We have reviewed TBC Bank Group plc's unaudited condensed consolidated interim financial statements (the "interim financial statements") in the 2Q and 1H 2021 Financial Results of TBC Bank Group plc for the 6 month period ended 30 June 2021 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

What we have reviewed

The interim financial statements comprise:

·      the Condensed Consolidated Interim Statement of Financial Position as at 30 June 2021;

·      the Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income for the period then ended;

·      the Condensed Consolidated Interim Statement of Cash Flows for the period then ended;

·      the Condensed Consolidated Interim Statement of Changes in Equity for the period then ended;

·      the explanatory notes to the interim financial statements.

 

The interim financial statements included in the 2Q and 1H 2021 Financial Results  of TBC Bank Group plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

Responsibilities for the interim financial statements and the review

 

Our responsibilities and those of the directors

The 2Q and 1H 2021 Financial Results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the 2Q and 1H 2021 Financial Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the 2Q and 1H 2021 Financial Results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

 

 

 

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the 2Q and 1H 2021 Financial Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

PricewaterhouseCoopers LLP

Chartered Accountants

Edinburgh

17 August 2021

 

In thousands of GEL

 

Note

30 June 2021

(Unaudited)

31 December 2020

 

 

 

 

Assets

 

 

 

Cash and cash equivalents

5

1,414,414

1,635,405

Due from other banks

6

59,314

50,805

Mandatory cash balances with National Bank of Georgia

7

2,117,157

2,098,506

Loans and advances to customers

8

14,796,968

14,594,274

Investment securities measured at fair value through other comprehensive income

9

2,022,385

1,527,268

Bonds carried at amortised cost

 

10,069

1,089,801

Net investments in leases

 

245,261

271,660

Investment properties

 

33,407

68,689

Current income tax prepayment

 

14,966

69,888

Deferred income tax asset

 

6,747

2,787

Other financial assets

 

287,761

171,302

Other assets

 

311,218

266,960

Premises and equipment

10

371,909

372,956

Right of use assets

 

51,160

53,927

Intangible assets

10

284,555

239,523

Goodwill

 

59,964

59,964

Investments in associates

 

4,286

4,090

 

 

 

 

Total assets

 

22,091,541

22,577,805

 

 

 

 

Liabilities

 

 

 

Due to credit institutions

11

3,482,830

4,486,373

Customer accounts

12

12,870,418

12,572,728

Other financial liabilities

 

124,308

227,432

Current income tax liability

24

653

853

Deferred income tax liability

 

18,457

13,088

Debt securities in issue

14

1,445,614

1,496,497

Provisions for liabilities and charges

13

21,435

25,335

Other liabilities

 

101,265

87,842

Lease liabilities

 

53,755

58,983

Subordinated debt

15

635,981

672,740

 

 

 

 

Total liabilities

 

18,754,716

19,641,871

 

 

 

 

EQUITY

 

 

 

Share capital

16

1,682

1,682

Shares held by trust

 

(25,489)

(33,413)

Share premium

 

848,459

848,459

Retained earnings

 

2,680,951

2,281,428

Group reorganisation reserve

 

(162,167)

(162,167)

Share based payment reserve

17

(15,348)

(20,568)

Fair value reserve

 

170

11,158

Cumulative currency translation reserve

 

(5,199)

(2,124)

 

 

 

 

Net assets attributable to owners

 

3,323,059

2,924,455

 

 

 

 

Non-controlling interest

 

13,766

11,479

Total equity

 

3,336,825

 2,935,934

Total liabilities and equity

 

22,091,541

 22,577,805

 

The condensed consolidated interim financial statements on pages 62 to 121 were approved by the Board of Directors on 17 August 2021 signed on its behalf by: 

 

                                                                           
                                                                                 
___________________________                            

Vakhtang Butskhrikidze                                            

Chief Executive Officer                                               

 

 

 

 

Six months ended

 

 

30 June 2021

30 June 2020

In thousands of GEL

Note

(Unaudited)

(Unaudited/restated*)

 

 

 

 

Interest income

20

899,185

787,893

Interest expense

20

(444,436)

(408,091)

Net interest gains on currency swaps

20

13,149

12,522

 

 

 

 

 

 

 

 

Net interest income

 

467,898

392,324

 

 

 

 

 

 

 

 

Fee and commission income

21

186,153

138,752

Fee and commission expense

21

(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)

 

 

 

 

 

 

 

 

Insurance profit

 

9,873

10,281

 

 

 

 

 

 

 

 

Net gains from currency derivatives, foreign currency operations and translation

 

60,184

47,759*

Net gains/(losses) from disposal of investment securities measured at fair value through other comprehensive income

 

7,041

(1,202)

Other operating income

22

37,483

7,977

Share of profit of associates

 

596

90

 

 

 

 

 

 

 

 

Other operating non-interest income

 

105,304

54,624

 

 

 

 

 

 

 

 

Recovery of/(charges to) credit loss allowance for loan to  customers

8

32,563

(249,216)

Credit loss allowance for investments in leases

 

(2,515)

(4,278)

Recovery of/(charges to) credit loss allowance for performance guarantees and credit related commitments

13

1,930

(797)

Credit loss allowance for other financial assets

 

(5,326)

(4,222)

Recovery of/(charges to) credit loss allowance for financial assets measured at fair value through other comprehensive income

 

1,842

(538)

Net impairment of non-financial assets

 

(447)

(625)*

 

 

 

 

 

 

 

 

Operating profit after expected credit and non-financial asset impairment losses

 

719,423

280,622*

 

 

 

 

 

 

 

 

Losses from modifications of financial instruments

8

(1,591)

(34,170)

 

 

 

 

 

 

 

 

Staff costs

 

(148,071)

(114,006)

Depreciation and amortisation

10

(36,701)

(32,215)

(Charges to)/recovery of provision for liabilities and charges

 

(9)

77

Administrative and other operating expenses

23

(72,147)

(55,391)*

 

 

 

 

 

 

 

 

Operating expenses

 

(256,928)

(201,535)*

 

 

 

 

 

 

 

 

Profit before income tax

 

460,904

44,917

 

 

 

 

 

 

 

 

Income tax (expense)/credit

24

(57,525)

24,283

 

 

 

 

 

 

 

 

Profit for the period

 

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 (expense)/income for the period

 

(14,057)

6,149

 

 

 

 

 

 

 

 

Total comprehensive income for the PERIOD

 

389,322

75,349

 

 

 

 

 

*Certain amounts do not correspond to the 30 June 2020 condensed consolidated interim financial statements as they reflect the adjustments made due to the changes in classification, as described in Note 2.
 

 

 

 

Six months ended

 

 

30 June 2021

30 June 2020

In thousands of GEL

Note

(Unaudited)

(Unaudited/restated*)

 

 

 

 

Profit is attributable to:

 

 

 

- Shareholders of TBCG

 

399,168

67,625

- Non-controlling interest

 

4,211

1,575

 

 

 

 

Profit for the period

 

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

 

 

 

 

 

 

 

 

Earnings per share for profit attributable to the owners of the Group:

 

 

 

- Basic earnings per share

18

7.33

1.24

- Diluted earnings per share

18

7.24

1.23

 

 

 

 

         

 

*Certain amounts do not correspond to the 30 June 2020 condensed consolidated interim financial statements as they reflect the adjustments made due to changes in classification, as described in Note 2.
 

 

In thousands of GEL

Note

 

 

 

 

 

 

 

Share

capital

Shares held by trust

Share pre-mium

Group reorganisation reserve

Share based payments reserve

Fair value reserve

Cumulative currency translation reserve

Retained

earnings

Total

Non-control-ling interest

Total

equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 1 January 2020

 

1,682

(27,517)

848,459

(162,166)

(17,803)

(6,476)

(6,850)

1,961,172

2,590,501

8,589

2,599,090

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the six months ended 30 June 2020 (unaudited)

 

-

-

-

-

-

-

-

67,625

67,625

1,575

69,200

Other comprehensive income for six months ended 30 June 2020 (unaudited)

 

-

-

-

-

-

4,984

1,184

-

6,168

(19)

6,149

Total comprehensive income for six months ended 30 June 2020 (unaudited)

 

-

 

-

-

-

-

4,984

1,184

67,625

73,793

1,556

75,349

 

 

 

 

 

 

 

 

 

 

 

 

 

Share based payment expense

17

-

-

-

-

6,063

-

-

-

6,063

(28)

6,035

Delivery of shares to employees under SBP scheme

 

-

18,559

-

-

(20,068)

-

-

-

(1,509)

-

(1,509)

Share buy-back

 

-

(25,493)

-

-

-

-

-

-

(25,493)

-

(25,493)

Other movements

 

-

-

-

-

-

-

(19)

748

729

(796)

(67)

Balance as of 30 June 2020 (unaudited)

 

1,682

(34,451)

848,459

(162,166)

(31,808)

(1,492)

(5,685)

2,029,545

2,644,084

9,321

2,653,405

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 31 December 2020

 

 1,682

 (33,413)

 848,459

 (162,167)

 (20,568)

 11,158

 (2,124)

 2,281,428

 2,924,455

 11,479

 2,935,934

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the six months ended 30 June 2021 (unaudited)

 

 -

 -

 -

 -

 -

 -

 -

 399,168

 399,168

 4,211

 403,379

Effect of change in business model*

 

 -

 -

 -

 -

 -

 26,062

 -

 -

 26,062

 -

 26,062

Other comprehensive income for six months ended 30 June 2021 (unaudited)

 

-

-

-

-

-

(37,047)

(3,063)

-

 (40,110)

(9)

 (40,119)

Total comprehensive income for six months ended 30 June 2021 (unaudited)

 

-

-

-

-

-

(10,985)

(3,063)

399,168

 385,120

4,202

 389,322

 

 

 

 

 

 

 

 

 

 

 

 

 

Share based payment expense

17

-

-

-

-

14,258

-

-

238

14,496

(3)

14,493

Delivery of shares to employees under SBP scheme

 

-

7,924

-

-

(9,038)

-

-

-

(1,114)

-

(1,114)

Dividends paid to non-controlling interest

 

 

 

 

 

 

 

 

 

-

(1,741)

(1,741)

Other movements

 

-

-

-

-

-

(3)

(12)

117

102

(171)

(69)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 30 June 2021 (unaudited)

 

 1,682

 (25,489)

 848,459

 (162,167)

 (15,348)

 170

 (5,199)

 2,680,951

 3,323,059

 13,766

 3,336,825

                             

 

* Changes in business model in late 2020 resulted in reclassification of bonds carried at amortised cost to investment securities measured at fair value through other comprehensive income, which takes effect from 1 January 2021.

 

 

 

 

Six months ended

 

In thousands of GEL

Note

30 June 21 (Unaudited)

30 June 20 (Unaudited/restated*)

 

 

 

 

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 institution

 

 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 from/(used in) 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/disposal 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

10

 (91,993)

 (74,550)

Proceeds from disposal of premises, equipment and intangible assets

10

 6,334

 24,172

Proceeds from disposal of investment property

 

 20,210

 3,128

Acquisition of subsidiaries and associates

 

  - 

 936

 

 

 

 

 

 

 

 

Net cash from/(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

14

  - 

 171,531

Redemption of debt securities in issue

14

  - 

 (12,569)

Dividends paid

 

 (1,741)

-

 

 

 

 

 

 

 

 

Net cash flows (used in)/from financing activities

 

 (998,491)

776,319*

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 (35,609)

7,797

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 (220,991)

(21,780)

Cash and cash equivalents at the beginning of the period

5

 1,635,405

1,003,583

 

 

 

 

Cash and cash equivalents at the end of the period

5

 1,414,414

981,803

 

 

 

 

*Certain amounts do not correspond to the 30 June 2020 condensed consolidated interim financial statements as they reflect the adjustments made due to changes in classification, as described in Note 2. 

1       Introduction

Principal activity.  TBC Bank Group PLC ("TBCG" or "Group") is a public limited company, incorporated in England and Wales. TBCG held 99.88% of the share capital of JSC TBC Bank (hereafter the "Bank") as at 30 June 2021 (31 December 2020: 99.88%), thus representing the Bank's ultimate parent company. The Bank is a parent of a group of companies incorporated in Georgia, Azerbaijan and Uzbekistan and its primary business activities include providing banking, leasing, brokerage and card processing services to corporate and individual customers. The Group's list of subsidiaries is provided below.

The shares of TBCG ("TBCG Shares") were admitted to the Premium Listing segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange PLC's main market for listed securities effective on 10 August 2016 (the "Admission", Note 16). TBC Bank Group PLC's registered legal address is Elder House St Georges Business Park, 207 Brooklands Road, Weybridge, Surrey, KT13 0TS. Registered number of TBC Bank Group PLC is 10029943. The Bank is the Group's main operating unit and it accounts for most of the Group's activities.

JSC TBC Bank was incorporated on 17 December 1992 and is domiciled in Georgia. The Bank is a joint stock company limited by shares and was arranged in accordance with Georgian regulations. The Bank's registered address and place of business is 7 Marjanishvili Street, 0102 Tbilisi, Georgia.

The Bank's principal business activity is universal banking operations that include corporate, small and medium enterprises, retail and micro operations within Georgia. The Bank has been operating since 20 January 1993 under a general banking license issued by the National Bank of the Georgia ("NBG"). In 2018, the Bank launched fully digital bank, Space.

The Group had 151 branches and 8,937 employees mainly within Georgia as at 30 June 2021 (The Group had 156 branches and 7,854 employees mainly within Georgia as at 30 June 2020).

As at 30 June 2021 and 31 December 2020, the following shareholders directly owned more than 3% of the total outstanding shares of the Group. Other shareholders individually owned less than 3% of the outstanding shares. As at 30 June 2021 and 31 December 2020, the Group had no ultimate controlling party. Other includes individual as well as corporate shareholders.

 

 

Shareholders

30 June 2021 ownership interest

31 December 2020 ownership interest

European Bank for Reconstruction and Development

5.05%

5.05%

Dunross & Co.

7.42%

7.42%

Schroder Investment Management

3.27%

3.12%

JPMorgan Asset Management

3.45%

4.56%

Creation Investments Capital Management

3.22%

3.22%

Allan Gray Investment Management

5.33%

4.26%

Founders*

14.61%

14.64%

Other**

57.65%

57.73%

Total

100.00%

100.00%

* Includes effective ownership of Mamuka Khazaradze and Badri Japaridze.

** Other includes individual as well as corporate shareholders.

 

 

1       Introduction (Continued)

The condensed consolidated interim financial statements ("financial statements") include the following principal subsidiaries:

 

Subsidiary Name

Proportion of voting rights and ordinary share capital

 

 

 

30 June 2021

31 December 2020

Principal place of business or incorporation

Year of incorpo-ration

Industry

 

 

 

 

 

 

JSC TBC Bank

99.88%

99.88%

Tbilisi, Georgia

1992

Banking

United Financial Corporation JSC

99.53%

99.53%

Tbilisi, Georgia

2001

Card processing

TBC Capital LLC

100.00%

100.00%

Tbilisi, Georgia

1999

Brokerage

TBC Leasing JSC

100.00%

100.00%

Tbilisi, Georgia

2003

Leasing

TBC Credit LLC

100.00%

100.00%

Baku, Azerbaijan

1999

Non-banking credit institution

TBC Pay LLC

100.00%

100.00%

Tbilisi, Georgia

2008

Processing

TBC Invest LLC

100.00%

100.00%

Ramat Gan,Israel

2011

PR and marketing

Index LLC

100.00%

100.00%

Tbilisi, Georgia

2009

Real estate management

JSC TBC Insurance

100.00%

100.00%

Tbilisi, Georgia

2014

Insurance

Redmed  LLC

100.00%

100.00%

Tbilisi, Georgia

2019

Insurance

TBC Ecosystem companies LLC[32]

100.00%

100.00%

Tbilisi, Georgia

2019

Asset management

Swoop JSC

100.00%

100.00%

Tbilisi, Georgia

2010

Retail trade

Online Tickets LLC

55.00%

55.00%

Tbilisi, Georgia

2015

Computer and software services

TKT UZ

75.00%

75.00%

Tashkent, Uzbekistan

2019

Retail trade

My.Ge LLC

65.00%

65.00%

Tbilisi, Georgia

2008

E-Commerce

Mypost LLC

100.00%

100.00%

Tbilisi, Georgia

2019

Postal service

Billing Solutions LLC

51.00%

51.00%

Tbilisi, Georgia

2019

Software services

Vendoo LLC (Geo)

100.00%

100.00%

Tbilisi, Georgia

2018

Retail leasing

Allproperty.ge LLC

90.00%

90.00%

Tbilisi, Georgia

2013

Real estate management

F Solutions LLC

100.00%

100.00%

Tbilisi, Georgia

2016

Software services

TBC Connect

100.00%

100.00%

Tbilisi, Georgia

2020

Software services

Inspired LLC

51.00%

51.00%

Tashkent, Uzbekistan

2011

Processing

VENDOO LLC (UZ Leasing)

100.00%

100.00%

Tashkent, Uzbekistan

2019

Retail leasing

TBC Concept LLC

100.00%

100.00%

Tbilisi, Georgia

2020

Food and beverage

TBC Bank UZ

100.00%

100.00%

Tashkent, Uzbekistan

2020

Banking

TBC Group Support LLC

100.00%

100.00%

Tbilisi, Georgia

2020

Risk monitoring

SABA LLC

85.00%

N/A

Tbilisi, Georgia

2012

Education

Artarea.ge LLC

100.00%

N/A

Tbilisi, Georgia

2012

PR and marketing

TBC Art Gallery LLC

100.00%

N/A

Tbilisi, Georgia

2012

PR and marketing

Space International JSC

100.00%

N/A

Tbilisi, Georgia

2021

Software services

 

 

 

 

 

 

 

The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries.

 

The Group has investments in the following associates:

 

Associate name

30 June 2021

31 December 2020

Principal place of business or incorporation

Year of incorporation

Principal activities

Credit Info Georgia JSC

21.08%

21.08%

Tbilisi, Georgia

2005

Financial intermediary

Tbilisi Stock Exchange JSC

28.87%

28.87%

Tbilisi, Georgia

2015

Finance, Service

Georgian Central Securities Depository JSC

22.87%

22.87%

Tbilisi, Georgia

1999

Finance, Service

Georgian Stock Exchange JSC

17.33%

17.33%

Tbilisi, Georgia

1999

Finance, Service

Kavkasreestri JSC

10.03%

10.03%

Tbilisi, Georgia

1998

Finance, Service

 

 

 

 

 

 

 

 

 

1       Introduction (Continued)

The Group's corporate structure consists of related undertakings not accounted for due to immateriality. A full list of these undertakings, the country of incorporation is set out in appendix A below.

 

Company Name

Proportion of voting rights and ordinary share capital

 

 

 

30 June

2021

31 December 2020

Principal place of business or incorporation

Year of incorpo-ration

Industry

 

 

 

 

 

 

TBC Invest International Ltd

100.00%

100.00%

Tbilisi, Georgia

2016

Investment Vehicle

University Development Fund

33.33%

33.33%

Tbilisi, Georgia

2007

Education

Natural Products of Georgia LLC

25.00%

25.00%

Tbilisi, Georgia

2001

Trade, Service

Mobi Plus JSC

14.81%

14.81%

Tbilisi, Georgia

2007

Data Monitoring and Processing

JSC Givi Zaldastanishvili American Academy in Georgia

14.48%

14.48%

Tbilisi, Georgia

2001

Education

Banking and Finance Academy of Georgia

16.67%

16.67%

Tbilisi, Georgia

1998

Education

Tbilisi City JSC

1.80%

1.80%

Tbilisi, Georgia

1996

Education

TBC Trade

100.00%

100.00%

Tbilisi, Georgia

2008

Trade, Service

Mineral Oil Distribution Corporation JSC

9.90%

9.90%

Tbilisi, Georgia

2009

Data Monitoring and Processing

TBC Capital Asset Management LLC

100.00%

N/A

Tbilisi, Georgia

2021

Asset Management

Freeshop.ge LLC

100.00%

100.00%

Tbilisi, Georgia

2010

Retail Trade

The.ge LLC

100.00%

100.00%

Tbilisi, Georgia

2012

Retail Trade

Operating environment of the Group. Georgia, where Group's most activities are located, displays certain characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations (Note 26). Starting from Q2 2021, the Georgian economy is rebounding faster than expected after contracting sharply in 2020. However, Georgia continues to face downside risks to economic growth due to prolongation of the pandemic, internal and external political tensions as well as undesirable side effects of the Fed's sooner-than-expected rate hike. 

After declining in early 2021, daily new COVID-19 cases accelerated alongside the emergence of new variants and increased population mobility. Georgia, among other region countries, faces vaccination process challenges, lagging behind the world average. Thus, the probability of reintroduction of restrictive measures is considerable. These measures, among other things, could severely restrict economic activity in Georgia, negatively impacting business environment and clients of the Group, however, likely only temporarily.

 

Management is taking necessary measures to ensure sustainability of the Group's operations and support its customers and employees. Furthermore, in response of the deteriorated economic situation, the Management took additional measures to identify inefficient processes and through optimising them further support the financial condition of the Group.

 

The future effects of the current economic situation and the above measures are difficult to predict and management's current expectations and estimates could differ from actual results.

For the purpose of measurement of expected credit losses ("ECL") the Group uses supportable forward-looking information, including forecasts of macroeconomic variables. As with any economic forecast, however, the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different from those projected. Note 25 provides more information of how the Group incorporated forward-looking information in the ECL models.

Climate Impact

Although, global market conditions have affected market confidence and consumer spending patterns, the Group remains well placed to continue displaying strong financial results through investing in local and Uzbekistan markets. The Group has reviewed its exposure to climate-related and other emerging business risks, but has not identified any risks, that could significantly impact the financial performance or position of the Group as at 30 June 2021.

2       Significant Accounting Policies

2.1 Basis of preparation

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. TBC Bank Group PLC and its subsidiaries (together referred to as the "Group") transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.

These condensed consolidated interim financial statements for six months ended 30 June 2021 for the Group has been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority (FCA), and in accordance with UK-adopted International Accounting Standard (IAS) 34 'Interim Financial Reporting'. These condensed consolidated interim financial statements do not include all the notes, normally included in annual consolidated financial statements. Accordingly, this report is to be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2020, which were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

These condensed consolidated interim financial statements have been reviewed, not audited. Auditor's review conclusion is included in this report.

Going Concern. The Board of Directors of TBC Bank Group PLC have prepared these interim financial statements on a going concern basis. In making this judgement, management considered the Group's financial position, current intentions, profitability of operations and access to financial resources. Management is not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. In reaching this assessment, the directors have specifically considered the implications of the COVID-19 pandemic upon the Group's performance and projected funding and capital position and also taken into account the impact of further stress scenarios. On this basis, the directors are satisfied that the Group will maintain adequate levels of funding and capital and comply with the loan covenant requirements for the foreseeable future.

Presentation currency. These condensed consolidated interim financial statements are presented in thousands of Georgian Lari ("GEL thousands"), except per-share amounts and unless otherwise indicated.

Condensed consolidated interim financial statements. Subsidiaries are those investees, including structured entities, that the Group controls because it (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of investor's returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Group has power over another entity. For a right to be substantive, the holder must have practical ability to exercise that right when decisions about the direction of the relevant activities of the investee need to be made. The Group may have power over an investee even when it holds less than the majority of voting power in it. In such a case, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of investee's activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are consolidated from the date on which control is transferred to the Group, and are deconsolidated from the date on which control ceases. 

Accounting policies and relevant changes within. Except as described below, the same accounting policies and methods of computation were followed in the preparation of this condensed consolidated interim financial statements as compared with the annual consolidated financial statements of the Group for the year ended 31 December 2020.

Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period.

 

 

2       Significant Accounting Policies (Continued)

Changes in presentation of the net gains from currency derivatives, foreign currency operations and translation

To further foster clarity of the condensed consolidated interim financial statement of profit or loss and other comprehensive income, the Group has re-considered the presentation of the net gains from currency derivatives, foreign currency operations and translation. As a result of reclassification, management has combined "Net gains/(losses) from trading in foreign currencies",  "Net gains/(losses) from foreign exchange translation" and "Net gains/(losses) from derivative financial instruments", under one financial statement line item "Net gains from currency derivatives, foreign currency operations and translation". Management believes, that such presentation will allow the Group to present the results of foreign currency operations clearly and allow the users to understand the effectiveness of the Group's foreign currency management. June 2020 presentation is in accordance with 2020 year-end report updated policies. The presentation of comparative figures has been adjusted to confirm to the presentation of the current period amounts (detailed breakdown below represents before changes figures, while total represents current presentation):

in thousands of GEL

30 June 2021

30 June 2020

 

 

 

Net gains/(losses) from trading in foreign currencies

32,650

49,406

Net gains/(losses) from foreign exchange translation

27,230

(1,627)

Net gains/(losses) from derivative financial instruments

304

(20)

Total net gains from currency derivatives, foreign currency operations and translation

60,184

47,759

 

Changes in presentation of the cash flows from operating and financing activities

 

To further foster clarity and comparability of the condensed consolidated interim statements of cash flow, the Group made following changes: for condensed consolidated interim statements of cash flow, it has re-considered the presentation of acquisition of treasury shares from change in other financial assets (operating activity) and transferred it to "acquisition of treasury shares" (financing activity). For separate statement of cash flows, it has re-considered the presentation of acquisition of treasury shares from Income received from recharge agreement (investing activities) and transferred it to "acquisition of treasury shares" (financing activity).

Management believes, that reclassifications will enable the Group to enhance the presentation of the condensed consolidated interim statements of cash flow from operating, investing and financing activities. June 2020 presentation is in accordance with 2020 year-end report updated policies. The presentation of comparative figures for condensed consolidated interim statements of cash flow has been adjusted per 2020 annual report presentation changes reported:

Effect on consolidated statement of cash flows

in thousands of GEL

As originally presented

Reclassification

As restated at

30 June 2020

 

 

 

 

Cash flows from operating activities: change

   in other financial assets

(33,976)

25,493

(8,483)

Cash flows used in financing activities:

  acquisition of treasury shares

-

(25,493)

(25,493)

 

 

 

 

 

Changes in presentation of the impairment of non-financial assets

 

During 2021, the Group reclassified impairment/recovery of non-financial assets from "Administrative and other operating expenses" to "Impairment of other non-financial assets". Significant part of any impairment/recoveries recorded are related to repossessed assets and investment properties. Management believes, that those type of assets are not actively used in daily operations, but are primarily targeted for sale in future. Considering nature of those expenses/recovery such presentation is more appropriate and would increase understandibility  and clarity of the Group's financial statements. The presentation of comparative figures has been adjusted to confirm to the presentation of the current period amounts:

in thousands of GEL

As originally presented

at 30 June 2020

Reclassification

As restated at

30 June 2020

Impairment of other non-financial assets

-

(625)

(625)

Administrative and other operating expenses

(56,016)

                      625

(55,391)

2       Significant Accounting Policies (Continued)

Business model change

 

The Bank historically used Ministry of Finance (MoF) securities to invest the excess monetary resources and receive interest charges in return of the investment. In majority of the cases the securities were held till their maturity and the Bank has not been engaged in trading activities for profit making purposes. As a result, according to their business model such securities were classified under hold to collect category and were recorded as "Bonds carried at amortised cost" in the consolidated and separate statements of financial position.

 

From the end of 2020 Ministry of Finance has launched a new primary dealer platform to increase liquidity of the securities, further encourage the trading of Government notes and develop Georgian securities market. Third party dealers were established for trading between the Ministry of Finance and investors. The platform should expand investor data base and enhance liquidity of secondary market. TBC Bank will have a primary dealer status in the platform, that enable to act as an intermediary between investors and the Ministry of Finance by executing an order on behalf of investors.

 

As far as, secondary market became more active from the end of 2020, the Bank plans to stay alert on beneficial market opportunities and start selling Ministry of Finance securities in rare cases, if the action will not impact the liquidity position of the Bank and generate strong profit compared to collecting principal and interest till their maturity. As a result, treasury securities management practices for holding majority of Ministry of Finance securities till their maturity has changed and will depend on the market and liquidity condition of the Bank.

 

Respective change in Management's processes caused changes in existing business model from hold to collect to hold to collect and sell. Accordingly MOF securities has been re-classified from "Bonds carried at amortised cost" to "Investment securities measured at fair value through other comprehensive income" in the consolidated and separate statements of financial position, with respective effects also accounted in the statement of profit or loss and other comprehensive income. According to IFRS 9 requirement the change has been accounted for prospectively from the reclassification date. The reclassification date represents the first day of the first reporting period following the change in business model, that results in an entity reclassifying financial assets, which is 1 January 2021. Management believes that such presentation is more appropriate for the nature of the transactions.

 

Based on business model assessment performed, Management considers respective securities should be carried at fair value through other comprehensive income (FVTOCI). Internally performed test of solely payment of principal and interest ('SPPI') has shown, that those securities are held for collection of contractual cash flows and for selling, where those cash flows represent SPPI, and they are not designated at fair value through profit and loss (FVTPL).

 

Effects on respective periods are disclosed below:

in thousands of GEL

Balance as at

31 December 2020

Change in business model

Balance as at 1 January 2021

Fair value reserve

11,158

26,062

37,220

Bonds carried at amortised cost

1,089,801

(1,059,946)

29,855

Investment securities measured at fair value through other comprehensive income

                 1,527,268

1,086,008

2,613,276

 

3       Critical Accounting Estimates and Judgements in Applying Accounting Policies

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on the management's experience and other factors, including expectations of future events, that are believed to be reasonable under the circumstances. The management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:

 3       Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)

ECL measurement. Measurement of ECLs is a significant estimate that involves forecasting future economic conditions, longer the term of forecasts more management judgment is applied and those judgements may be the source of uncertainty. Details of ECL measurement methodology are disclosed in Note 25. The following components have a major impact on credit loss allowance: definition of default, definition of significant increase in credit risk (SICR), probability of default ("PD"), exposure at default ("EAD"), and loss given default ("LGD"), as well as models of macro-economic scenarios. The Group regularly reviews and validates the models and inputs to the models to reduce any differences between expected credit loss estimates and actual credit loss experience.

Significant increase in credit risk ("SICR"). The Bank applies both qualitative and quantitative indicators to determination of SICR considering all reasonable and supportable information available without undue cost and effort, on past events, current conditions and future behavioural aspects of particular portfolios. The Bank tries to identify indicators of increase in credit risk of individual instruments prior to delinquency and incorporates significant assumptions in the model in doing so. One of such judgement is determination of thresholds of significant increase in credit risk. The effects of respective sensitivity are described below:

In thousands of GEL

30 June 2021

31 December 2020

 

 

 

20% decrease in SICR thresholds

 

Increase credit loss allowance on loans and advances by GEL 1,734.

Increase credit loss allowance on loans and advances by GEL 2,543.

Change of the Bank's cost of credit risk ratio by 2 basis points.

Change of the Bank's cost of credit risk ratio by 2 basis points.

 

 

 

 

 

 

10% increase in Stage 2 exposures

Increase credit loss allowance on loans and advances by GEL 2,220.

Increase credit loss allowance on loans and advances by GEL 3,311.

Change of the Bank's cost of credit risk ratio by 3 basis points.

Change of the Bank's cost of credit risk ratio by 2 basis points.

 

 

 

Risk parameters: Probability of default (PD) and Loss given default (LGD) parameters are one of the key drivers of expected credit losses. The effects of respective sensitivity are described below:

 

In thousands of GEL

30 June 2021

31 December 2020

 

 

 

10% increase (decrease) in PD estimates

 

Increase (decrease) credit loss allowance on loans and advances by GEL 19,928 (GEL 20,308).

Increase (decrease) credit loss allowance on loans and advances by GEL 24,901 (GEL 26,013).

Change of the Bank's cost of credit risk ratio by 26 (27) basis points.

Change of the Bank's cost of credit risk ratio by 18 (19) basis points.

 

 

 

 

 

 

10% increase (decrease) in LGD estimates

 

Increase (decrease) credit loss allowance on loans and advances by GEL 41,674 (GEL 44,199).

Increase (decrease) credit loss allowance on loans and advances by GEL 50,719 (GEL 53,813).

Change of the Bank's cost of credit risk ratio by 55 (58) basis points.

Change of the Bank's cost of credit risk ratio by 37 (39) basis points.

 

 

 

 

Macroeconomic scenarios: The Bank incorporates forward-looking information with three macro-economic scenarios to calculate unbiased and probability weighted ECL. They represent the Baseline scenario (most likely outcome) and two less likely scenarios, referred as the Upside (better than Baseline) and Downside (worse than Baseline).

In 2020, due to severity of the COVID-19 pandemic impact, the scenario probabilities were adjusted to reflect the management's expectations regarding their future realisation. The baseline, upside and downside scenarios were assigned probability weighing of 60%, 10% and 30%, respectively. Taking into account the prolongation of the pandemic, the weights remained unchanged.

 

3       Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)

The following table describes the key macroeconomic variables under each scenario for future 3-year period as at 30 June 2021. Macro assumptions are in line with the range of expected forecasted levels available from Group's macro team as well as external parties as of June 2021.

 

 

Baseline

 

Upside

 

Downside

Growth rates YoY, %

2021

2022

2023

 

2021

2022

2023

 

2021

2022

2023

GDP

6.5%

6.5%

5.0%

 

7.0%

7.4%

6.1%

 

5.2%

4.4%

2.3%

USD/GEL rate (EOP)

3.25

3.20

3.05

 

3.03

2.86

2.70

 

3.46

3.44

3.34

EUR/GEL rate (EOP)

3.90

3.74

3.66

 

3.55

3.26

3.02

 

4.26

4.30

4.28

RE Price (in USD)

2.5%

1.5%

2.3%

 

4.0%

3.7%

5.1%

 

0.3%

-1.8%

-1.9%

Employment

2.6%

1.0%

1.0%

 

2.9%

1.3%

1.3%

 

2.3%

0.7%

0.6%

                         

The Bank assessed the impact of changes in GDP growth and unemployment variables on ECL. These two macroeconomic variables were identified as most critical economic factors in ECL assessment. The sensitivity analysis was performed separately for each of the variable to show their significant in ECL assessment, but changes in those variables may not happen in isolation as various economic factors tend to be correlated across the scenarios. The variables were adjusted in all three macroeconomic scenarios. From the assessment of forward looking scenarios management is comfortable with the scenarios capturing the non-linearity of the losses.

 

The table below shows the impact of +/-20% change in GDP growth and unemployment variables across all scenarios on the Bank's ECL:

 

 

Change in GDP growth

 

Change in unemployment

in thousands of GEL

20%   increase

20%  decrease

 

20%   increase

20%  decrease

Impact on ECL

(4,150)

4,617

 

3,044

(2,790)

 

4       New or Revised Standards and Interpretations and Accounting Pronouncements

The following amended standards became effective from 1 January 2021:

Covid-19-Related Rent Concessions - Amendments to IFRS 16 (issued on 31 March 2021 and effective for annual periods beginning on or after 1 April 2021). 

In May 2020 an amendment to IFRS 16 was issued that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments due on or before 30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the practical expedient from 30 June 2021 to 30 June 2022. 

Management believes, that the amendment did not have any material impact on the Group. 

Interest rate benchmark (IBOR) reform - phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021). 

 

The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one.  The amendments cover the following areas:

●    Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform: For instruments to which the amortised cost measurement applies, the amendments require entities, as a practical expedient, to account for a change in the basis for determining the contractual cash flows as a result of IBOR reform by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9. As a result, no immediate gain or loss is recognised. This practical expedient applies only to such a change and only to the extent it is necessary as a direct consequence of IBOR reform, and the new basis is economically equivalent to the previous basis. Insurers applying the temporary exemption from IFRS 9 are also required to apply the same practical expedient. IFRS 16 was also

4       New or Revised Standards and Interpretations and Accounting Pronouncements (Continued)

amended to require lessees to use a similar practical expedient when accounting for lease modifications that change the basis for determining future lease payments as a result of IBOR reform.

●    End date for Phase 1 relief for non contractually specified risk components in hedging relationships: The Phase 2 amendments require an entity to prospectively cease to apply the Phase 1 reliefs to a non-contractually specified risk component at the earlier of when changes are made to the non-contractually specified risk component, or when the hedging relationship is discontinued. No end date was provided in the Phase 1 amendments for risk components.

●    Additional temporary exceptions from applying specific hedge accounting requirements: The Phase 2 amendments provide some additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships directly affected by IBOR reform.

●    Additional IFRS 7 disclosures related to IBOR reform: The amendments require disclosure of: (i) how the entity is managing the transition to alternative benchmark rates, its progress and the risks arising from the transition; (ii) quantitative information about derivatives and non-derivatives that have yet to transition, disaggregated by significant interest rate benchmark; and (iii) a description of any changes to the risk management strategy as a result of IBOR reform.

 

Libor is the most frequently used floating rate within the Group, as a result, below analysis is primarily concentrated on Libor change.

Libor change

On 5 March 2021, the IBA confirmed its intention to cease the publication of GBP, CHF, EUR, and JPY LIBOR (all tenors) and USD LIBOR (one week and two-month tenors) at the end of 2021. The remaining USD LIBOR tenors will be published by IBA until the end of June 2023.

 

Under these amendments, practical expedient exists for the changes to the basis for determining the contractual cash flows are reflected by adjusting the effective interest rate. No immediate gain or loss is recognised. These revisions of effective interest rate are only applicable when the change is necessary as a direct consequence of interest rate benchmark reform, and the new basis for determining the contractual cash flows is economically equivalent to the previous basis.

 

The Group has implemented a robust plan, that sets out the actions we will take in case LIBOR tenors ceases to exist or materially changes. According to this plan, the Group is taking the following steps:

 

(a) An impact assessment in relation to that affected benchmark will be performed;

(b) If it has not been feasible and appropriate to nominate an alternative benchmark, a proposal of actions to be taken in relation to the affected benchmark may be prepared. The proposal will take into account the impact assessment and shall consider, for example, the replacement of that benchmark with an alternative benchmark, seeking approval or notifying a regulatory body (where relevant), an amendment to contractual documentation, and notification to stakeholders;

(c) Once the proposal has been approved, internal stakeholders will work together to implement the proposal. For example, clients may be notified or their consent may be sought to change the benchmark, and contractual documentation may be amended.

 

In coordination with the regulator, international financial institutions, and other stakeholders, the Group is working on the transition process to avoid risking any disorderly cessation events. The Group also enhances its IT systems and internal processes to ensure a smooth transition from LIBOR to alternative benchmark interest rates.

 

Once alternative benchmark rates are agreed with the international financial institutions for the Group's borrowings, the Management will then assess and match the lending side to manage potential liquidity risks and any arbitrage differences between LIBOR and alternative rates.

 

New Accounting Pronouncements

The IASB has published a number of amendments some of which has not yet been endorsed for use in the EU. The Group has not early adopted any of the amendments effective after 30 June 2021 and it expects they will have an insignificant effect, when adopted, on the condensed consolidated interim financial statements of the Group.

 

4       New or Revised Standards and Interpretations and Accounting Pronouncements (Continued)

IFRS 17 "Insurance Contracts" (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023).

IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds.

The standard requires recognition and measurement of groups of insurance contracts at: a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Group expects to apply the standard to performance guarantees that it issues and is currently assessing the impact of the new standard on its financial statements. Potential impact on insurance products embedded in loans and similar instruments is also under consideration.

 

Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023).

IAS 1 was amended to require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendment provided the definition of material accounting policy information. The amendment also clarified that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to understand other material information in the financial statements.  The amendment provided illustrative examples of accounting policy information that is likely to be considered material to the entity's financial statements. Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not obscure material accounting policy information. To support this amendment, IFRS Practice Statement 2, 'Making Materiality Judgements' was also amended to provide guidance on how to apply the concept of materiality to accounting policy disclosures.

Deferred tax related to assets and liabilities arising from a single transaction - Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023).

The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and decommissioning obligations. In specified circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. Previously, there had been some uncertainty about whether the exemption applied to transactions such as leases and decommissioning obligations - transactions for which both an asset and a liability are recognised. The amendments clarify that the exemption does not apply and that entities are required to recognise deferred tax on such transactions.  The amendments require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences.  

Classification of liabilities as current or non-current - Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022).

These narrow scope amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management's expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. 'Settlement' is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity's own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. 

5       Cash and Cash Equivalents

In thousands of GEL

30 June

2021

31 December 2020

 

 

 

Cash on hand

832,304

755,687

Cash balances with the National Bank of Georgia (other than mandatory reserve deposits)

166,365

102,522

Correspondent accounts and overnight placements with other banks

415,806

588,409

Placements with and receivables from other banks with original maturities of less than three months

12

188,867

 

 

 

 

 

 

Total gross amount of cash and cash equivalents

1,414,487

1,635,485

Less: Credit loss allowance

  (73)

(80)

Stage 1

  (73)

(80)

Stage 2

                      -

-

Stage 3

                      -

-

 

 

 

 

Total cash and cash equivalents

1,414,414

1,635,405

As 30 June 2021, 84% of the correspondent accounts and overnight placements with other banks was placed with OECD (The Organization for Economic Co-operation and Development) banking institutions (31 December 2020: 89%).

As 30 June 2021, there was no interbank placed term deposits neither in non-OECD, nor in OECD banks (As at 31 December 2020 GEL 25,030 thousand was placed on interbank term deposits with one non-OECD bank and GEL 163,838 thousand with one OECD bank).

 

6       Due from Other Banks

Amounts due from other banks include placements with original maturities of more than three months, that are not collateralised and do not represent past due amounts at the 30 June 2021 and 31 December 2020.

As at 30 June 2021 the Group had no placements, with original maturities of more than three months and with aggregated amounts above GEL 5,000 thousand (2020: GEL 5,000 thousand). The total aggregated amount of these placement was GEL nil (2020: GEL 2,012 thousand) or 0.0% of the total amount due from other banks (2020: 4.0%).

As at 30 June 2021 GEL 29,132 thousand (2020: GEL 11,744  thousand) were kept on deposits as restricted cash under an arrangement with a credit card company or credit card related services with other banks. Refer to Note 27 for the estimated fair value of amounts due from other banks.

 

For the purpose of ECL measurement due from other banks balances are included in Stage 1. The ECL for these balances at 30 June 2021 is GEL 7.4 thousand (2020: GEL 8 thousand).

 

7       Mandatory Cash Balances with the National Bank of Georgia

Mandatory cash balances with the National Bank of Georgia ("NBG") represent amounts deposited with the NBG. Resident financial institutions are required to maintain an interest-earning obligatory reserve with the NBG, the amount of which depends on the level of funds attracted by the financial institutions. The Group earned up to 9.5%, (0.25%) and (0.7%) annual interest in GEL, USD and EUR respectively on mandatory reserve with NBG in June 2021 (2020: 8.0%, (0.25%) and (0.7%) in GEL, USD and EUR respectively).

 

In February 2021, Fitch Ratings has affirmed Georgia's Long-Term Foreign and Local Currency Issuer Default Rating (IDRs) at 'BB'. The Outlook is Negative; The Country Ceiling Rating is affirmed at 'BBB-', short-term foreign and local-currency IDRs at 'B'.

 

 

 

 

8       Loans and Advances to Customers

In thousands of GEL

30 June 2021

31 December 2020

 

 

 

Corporate loans

5,851,634

 5,690,749

Consumer loans

 1,892,441

 2,011,585

Mortgage loans

 3,796,078

 3,942,102

Loans to micro, small and medium enterprises

 3,734,773

 3,556,084

Total gross loans and advances to customers at amortised cost

15,274,926

15,200,520

Less: credit loss allowance

(477,958)

(606,246)

Total loans and advances to customers at amortised cost

14,796,968

14,594,274

 

As at 30 June 2021, loans and advances to customers carried at GEL 935,836 thousand have been pledged to local banks or other financial institutions as collateral with respect to other borrowed funds (31 December 2020: GEL 889,353 thousand).

In 2021, the Group has reassessed its definition of segments as disclosed in Note 19. Wealth Management business with high net worth individuals has been transferred from retail to corporate segment due to changes in segment definitions. Other transfers between segments were primarily due to changes in client size and specifications compared to prior period.

The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans and advances to customers carried at amortised cost between the beginning and the end of the reporting periods. Major movements in the table are described below:

·      Transfers between Stage 1, 2 and 3 due to balances experiencing significant increase (or decrease) of credit risk or becoming defaulted in the period, and the consequent "step up" (or "step down") between 12-month and lifetime ECL. It should be noted, that:

Movement does not include exposures of loans, which were issued and repaid during the period;

For loans, which existed at the beginning of the period, opening exposures are disclosed as transfer amounts;

For newly issued loans, starting exposures are disclosed as transfer amount;

For the loan exposures which changed stage several times during the period, transfers between starting and ending stage is disclosed.

·      Newly originated or purchased gives us information regarding gross loans and corresponding expected credit losses issued during the period (however, exposures which were issued and repaid during the period and issued to refinance existing loans are excluded);

·      Derecognised during the period refers to the balance of loans and credit loss allowance at the beginning of the period, which were fully repaid during the period. Exposures which were issued and repaid during the period, written off or refinanced by other loans, are excluded;

·      Net repayments refers to the net changes in gross carrying amounts, which is loan disbursements less repayments;

·      Net write offs refer to write off of loans during the period, while net of written off and recoveries refer to already written off loans for ECL;

·      Foreign exchange movements refers to the translation of assets denominated in foreign currencies and effect to translation in presentational currency for foreign subsidiary;

·      Net re-measurement due to stage transfers and risk parameters changes refers to the movements in ECL as a result of transfer of exposure between stages or changes in risk parameters and forward looking expectations;

Re-segmentation refers to the transfer of loans from one reporting segment to another. For presentation purposes, amounts are rounded to the nearest thousands of GEL, which in certain cases is disclosed as nil.

 

 

 

8       Loans and Advances to Customers (Continued)

Total loans

Gross carrying amount

Credit loss allowance

 

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2021

11,860,556

 2,448,127

 891,837

 15,200,520

 130,226

 142,912

 333,108

 606,246

Movements with impact on credit loss allowance charge for the period:

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 805,405

 (805,405)

  - 

  - 

 36,456

 (36,456)

  - 

  - 

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (507,875)

 563,130

 (55,255)

  - 

 (9,269)

 32,399

 (23,130)

  - 

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 (70,295)

 (113,970)

 184,265

  - 

 (8,238)

 (20,480)

 28,718

  - 

 

 

 

 

 

 

 

 

 

New originated or purchased

 2,470,736

  - 

  - 

 2,470,736

 28,957

  - 

  - 

 28,957

Derecognised during the period

 (636,690)

 (86,633)

 (59,962)

 (783,285)

 (96)

 (5,552)

 (27,777)

 (33,425)

Net repayments

 (871,862)

 (133,469)

 (71,902)

 (1,077,233)

  - 

  - 

  - 

  - 

Net re-measurement due to stage transfers and risk parameters changes

  - 

  - 

  - 

  - 

 (62,587)

 (11,346)

 45,838

 (28,095)

 

 

 

 

 

 

 

 

 

Movements without impact on credit loss allowance charge for the period:

 

 

 

 

Net write-offs

  - 

  - 

 (107,321)

 (107,321)

  - 

  - 

 (92,338)

 (92,338)

Modification

 3,237

 1,068

 1,718

 6,023

  - 

  - 

  - 

  - 

Foreign exchange movements

 (344,723)

 (70,762)

 (23,864)

 (439,349)

 (808)

 (643)

 (1,936)

 (3,387)

Other movements

 297

 648

 3,890

 4,835

  - 

  - 

  -

-

At 30 June 2021

 12,708,786

 1,802,734

 763,406

 15,274,926

 114,641

 100,834

 262,483

 477,958

                   

 

Total loans

Gross carrying amount

Credit loss allowance

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2020

11,551,934

757,094

352,927

12,661,955

95,689

82,687

134,180

312,556

 

 

 

 

 

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 (1,284,853)

 1,313,249

 (28,396)

 -  

 (27,215)

 36,666

 (9,451)

 -  

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (53,073)

 (67,656)

 120,729

 -  

 (2,074)

 (10,526)

 12,600

 -  

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 103,973

 (103,709)

 (264)

 -  

 13,411

 (13,196)

 (215)

 -  

New originated or purchased

 1,579,595

 -  

 -  

 1,579,595

 58,395

 -  

 -  

 58,395

Derecognised during the period

 (511,370)

 (59,941)

 (8,921)

 (580,232)

 (2,709)

 (9,238)

 (4,735)

 (16,682)

Net repayments

 (461,982)

 (4,097)

 (15,890)

 (481,969)

 -  

 -  

 -  

 -  

Net Write-offs

 -  

 -  

 (41,673)

 (41,673)

 -  

 -  

 (34,200)

 (34,200)

Net re-measurement due to stage transfers and risk parameters changes

 -  

 -  

 -  

 -  

 37,170

 106,430

 52,858

 196,458

Modifications

 (21,392)

 (6,885)

 (847)

 (29,124)

 -  

 -  

 -  

 -  

Foreign exchange  movements

 427,657

 71,613

 17,875

 517,145

 3,468

 3,430

 5,980

 12,878

Other movements

 2,032

 (827)

 8,490

 9,695

 -  

 -  

 -  

 -  

At 30 June 2020

11,332,521

1,898,841

404,030

13,635,392

176,135

196,253

157,017

529,405

 

 

8       Loans and Advances to Customers (Continued)

 

Corporate loans

Gross carrying amount

Credit loss allowance

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2021

 4,700,871

 965,036

 165,964

 5,831,871

 54,160

 8,408

 46,489

 109,057

Movements with impact on credit loss allowance charge for the period:

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 129,211

 (129,211)

  - 

  - 

 785

 (785)

  - 

  - 

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (88,857)

 95,068

 (6,211)

  - 

 (1,388)

 1,883

 (495)

  - 

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 973

 (14,096)

 13,123

  - 

 9,034

 (267)

 (8,767)

  - 

New originated or purchased

 680,196

  - 

  - 

 680,196

 (2,352)

  - 

  - 

 (2,352)

Derecognised during the period

 (244,255)

 (2,570)

 (16,907)

 (263,732)

 (1,227)

 (47)

 (7,778)

 (9,052)

Net repayments

 (205,683)

 (63,554)

 (27,631)

 (296,868)

  - 

  - 

  - 

  - 

Net re-measurement due to stage transfers and risk parameters changes

  - 

  - 

  - 

  - 

 (12,726)

 (1,135)

 (7,955)

 (21,816)

 

 

 

 

 

 

 

 

 

Movements without impact on credit loss allowance charge for the period:

 

 

 

 

Re-segmentation

 90,053

 19,704

 1,865

 111,622

 322

 91

 1,865

 2,278

Net write-offs

  - 

  - 

 (1)

 (1)

  - 

  - 

 900

 900

Modification

 273

 563

 623

 1,459

  - 

  - 

  - 

  - 

Foreign Exchange movements

 (164,035)

 (45,374)

 (3,504)

 (212,913)

 (529)

 (113)

 (349)

 (991)

Other movements

  - 

  - 

  - 

  - 

  - 

  - 

 -

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2021

 4,898,747

 825,566

 127,321

 5,851,634

 46,079

 8,035

 23,910

 78,024

                     

 

 

Corporate loans

Gross carrying amount

Credit loss allowance

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2020

4,434,685

104,409

121,379

4,660,473

39,153

1,969

39,628

80,750

 

 

 

 

 

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 (363,236)

 366,356

 (3,120)

 -  

 (3,171)

 3,253

 (82)

 -  

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (32,464)

 (13,190)

 45,654

 -  

 (163)

 (1,305)

 1,468

 -  

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 11,288

 (11,288)

 -  

 -  

 166

 (166)

 -  

 -  

New originated or purchased

 469,844

 -  

 -  

 469,844

 9,512

 -  

 -  

 9,512

Derecognised during the period

 (99,799)

 (55)

 (2,862)

(102,716)

 (3,987)

 (11)

 (1,071)

 (5,069)

Net repayments

 (200,350)

 (3,037)

 (5,624)

(209,011)

 -  

 -  

 -  

 -  

Re-segmentation

 27,220

 -  

 -  

 27,220

 91

 -  

 -  

 91

Net Write-offs

 -  

 -  

 -  

 -  

 -  

 -  

 125

 125

Net re-measurement due to stage transfers and risk parameters changes

 -  

 -  

 -  

 -  

 4,870

 2,071

 11,011

 17,952

Modifications

 (2,091)

 (728)

 132

 (2,687)

 -  

 -  

 -  

 -  

Foreign exchange  movements

 196,905

 21,997

 8,538

 227,440

 2,043

 197

 2,951

 5,191

 

 

 

 

 

 

 

 

 

At 30 June 2020

4,442,002

464,464

164,097

5,070,563

48,514

6,008

54,030

108,552

 

 

 

 

8       Loans and Advances to Customers (Continued)

 

 

Loans to micro, small and medium enterprises

 

 

Gross carrying amount

 

 

Credit loss allowance

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2021

 2,661,786

 631,347

 262,951

 3,556,084

 24,490

 46,852

 88,567

 159,909

Movements with impact on credit loss allowance charge for the period:

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 243,352

 (243,352)

  - 

  - 

 12,810

 (12,810)

  - 

  - 

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (150,051)

 162,650

 (12,599)

  - 

 (1,342)

 6,061

 (4,719)

  - 

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 (20,344)

 (35,602)

 55,946

  - 

 (4,085)

 (5,521)

 9,606

  - 

New originated or purchased

 821,123

  - 

  - 

 821,123

 9,004

  - 

  - 

 9,004

Derecognised during the period

 (200,535)

 (35,251)

 (9,958)

 (245,744)

 (306)

 (1,409)

 (4,624)

 (6,339)

Net repayments

 (195,150)

 (17,612)

 (18,640)

 (231,402)

  - 

  - 

  - 

  - 

Net re-measurement due to stage transfers and risk parameters changes

  - 

  - 

  - 

  - 

 (18,909)

 (4,650)

 11,207

 (12,352)

 

 

 

 

 

 

 

 

 

Movements without impact on credit loss allowance charge for the period:

 

 

 

 

Re-segmentation

 (58,422)

 9,423

 (1,346)

 (50,345)

 (294)

 521

 (1,768)

 (1,541)

Net Write-offs

  - 

  - 

 (22,148)

 (22,148)

  - 

  - 

 (17,098)

 (17,098)

Modifications

 673

 210

 279

 1,162

  - 

  - 

  - 

  - 

Foreign exchange  movements

 (76,541)

 (13,331)

 (7,810)

 (97,682)

 (172)

 (179)

  (1,359)

  (1,710)

Other movements

 6

 131

 3,588

 3,725

  - 

  - 

 -

-

 

 

 

 

 

 

 

 

 

At 30 June 2021

 3,025,897

 458,613

 250,263

 3,734,773

 21,196

 28,865

 79,812

 129,873

Loans to micro, small and medium enterprises

 

 

 

Gross carrying amount

 

 

 

Credit loss allowance

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2020

2,650,261

204,699

93,319

2,948,279

18,341

18,593

29,211

66,145

 

 

 

 

 

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 (292,430)

 297,657

 (5,227)

 -  

 (3,762)

 5,231

 (1,469)

 -  

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (7,278)

 (22,749)

 30,027

        -

 (488)

 (2,831)

 3,319

 -  

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 32,938

 (32,938)

  -   

 -  

 3,287

 (3,287)

  -   

 -  

New originated or purchased

 476,744

  -   

  -   

 476,744

 11,170

  -   

  -   

 11,170

Derecognised during the period

(194,995)

(14,872)

 (2,663)

(212,530)

 (3,239)

 (1,155)

 (1,069)

 (5,463)

Net repayments

(69,938)

(2,812)

 (7,300)

(80,050)

  -   

  -   

  -   

 -  

Re-segmentation

 (28,301)

  -   

  -   

(28,301)

 (91)

  -   

  -   

 (91)

Net write-offs

  -   

  -   

 (8,725)

 (8,725)

  -   

  -   

 (5,504)

 (5,504)

Net re-measurement due to stage transfers and risk parameters changes

  -   

  -   

  -   

 -  

 14,058

 26,475

 12,839

 53,372

Modification

 (4,790)

 (1,350)

 (315)

 (6,455)

  -   

  -   

  -   

 -  

Foreign exchange movements

 90,073

 15,440

 4,542

 110,055

 876

 1,160

 1,058

 3,094

Other movements

 112

 46

 6,931

 7,089

  -   

  -   

  -   

  -   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2020

 2,652,396

443,121

 110,589

 3,206,106

40,152

44,186

 38,385

 122,723

 

 

 

 

 

 

 

 

 

                     

 

Consumer loans

Gross carrying amount

Credit loss allowance

 

In thousands of GEL

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

Stage 1

(12-months ECL)

Stage 2

(lifetime ECL for SICR)

Stage 3

(lifetime ECL for credit im-paired)

Total

 

 

 

 

 

 

 

 

 

At 1 January 2021

 1,499,148

 267,075

 187,328

 1,953,551

 48,240

 66,330

 126,984

 241,554

Movements with impact on credit loss allowance charge for the period:

 

 

 

 

Transfers:

 

 

 

 

 

 

 

 

- to lifetime (from Stage 1 and Stage 3 to Stage 2)

 109,255

 (109,255)

  - 

  - 

 16,828

 (16,828)

  - 

  - 

- to defaulted (from Stage 1 and Stage 2 to Stage 3)

 (103,770)

 121,644

 (17,874)

  - 

 (6,994)

 19,988

 (12,994)

  - 

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1)

 (24,762)

 (42,815)

 67,577

  - 

 (9,538)

 (13,084)

 22,622

  - 

New originated or purchased

 467,005

  - 

  - 

 467,005

 21,234

  - 

  - 

 21,234

Derecognised during the period

 (127,652)

 (13,609)

 (15,632)

 (156,893)

 (304)

 (3,282)

 (8,754)

 (12,340)

Net repayments

 (236,450)

 (29,243)

 (8,317)

 (274,010)

  - 

  - 

  - 

  - 

Net re-measurement due to stage transfers and risk parameters changes

  - 

  - 

  - 

  - 

 (24,439)

 650

 32,539

 8,750

 

 

 

 

 

 

 

 

 

Movements without impact on credit loss allowance charge for the period:

 

 

 

 

Re-segmentation

 (2,165)

 (1,003)

 (403)

 (3,571)

 (10)

 (25)

 (104)

 (139)

Net Write-offs

  - 

  - 

 (84,905)

 (84,905)

  - 

  - 

 (76,815)

 (76,815)

Modification

 1,378

 223

 627

 2,228

  - 

  - 

  - 

  - 

Foreign exchange movements

 (9,651)

 (984)

 (1,439)

 (12,074)

 (25)

 (166)

 (48)

 (239)

Other movements

 291

 517

 302

 1,110

  - 

  - 

 -

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2021

 1,572,627

 192,550

 127,264

 1,892,441

 44,992

 53,583

 83,430

 182,005

                   

 

Consumer loans

Gross carrying amount

Credit loss allowance

 

In thousands of GEL

Stage 1