Page 71 - RusRPTJan22

Tinkoff launched its “buy now, pay later” (BNPL) service in April. There are more than 100 partner merchants currently, and this number should increase.
Profitability
TCS Group continues to use 30% as its hurdle rate for loan NPVs in all segments except for BNPL, which is seen as a customer acquisition tool.
Home equity loans generate the highest ROE for Tinkoff thanks to low regulatory risk weights and low customer acquisition costs per ruble issued. The ROE for home equity loans is c. 12% above that for credit cards.
ROEs for car loans and cash loans are c. 20% and c. 30% below that for credit cards, respectively, due to their lower respective average gross yields of 14% and 17% (vs. 33% for credit cards).
CBR rate hikes could allow Tinkoff to raise interest rates on some of its unsecured loans, as they are currently limited by regulatory interest rate caps linked to CBR’s key rate. However, the respective positive impact on revenue could at least partially be offset by higher funding costs.
Risk management
Tinkoff analyzes 95% of credit applicants using internal data due to its huge customer base.
The bank’s underwriting tech uses more than 350 variables, including behavioral ones, to score the client.
The recovery rate on credit cards is 50%.
Management no longer provides a formal normalized cost-of-risk guidance, which was at c. 10% two to three years ago for credit cards. However, the current hunch from management is that cost of risk could be in the mid-to-high single digits. The current leading indicators for loan quality are “stable, if not improving”.
Growth plans
The metric that management used to illustrate the company’s room for further growth is the total addressable market as net revenue from retail loans. This is expected to reach $18.6bn in 2023 vs. $1.3bn for TCS Group over the 12 months ending 30 October. Based on this,
71 RUSSIA Country Report January 2022 www.intellinews.com