Page 79 - RusRPTDec20

TCS Group published 3Q20 IFRS results and held a conference call.
Net income in 3Q20 was a very strong R12.6 bln, up 30% y-o-y, with 45% ROE, well ahead of us and the consensus. In 9m20, net income was R31.9 bln, up 27% y-o-y with 41% ROE. The beat in 3Q20 was driven primarily by lower than expected provisions, although fee income was also strong and funding cots fell below 4%. But on the negative side, loan yields saw strong contraction. The management upgraded 2020 earnings guidance to more than R42 bln, with 10-11% cost of risk, funding costs around 4% and around 10% net loan growth. It flagged on the call the rollout of Tinkoff Pro, a new subscription service offering various discounts and benefits for R199 per month.
NII was weaker than expected, down 6% Q-o-Q as loan yields fell 310 bps, driven by a variety of factors including: improvement in credit risk, such as lower penalties for delinquent loans, which accounted for an around 110 bp decline in the gross yield and a similar 110 bp decline in cost of risk; stronger growth in lower yield products, and lower credit card yields (a -150 bp impact); and faster growth in products like car loans (which grew 25% Q-o-Q) and POS with front-loaded fees to dealers/merchants (-50 bps), which can be more or less seen as a one-off. The CFO added that loan yields had been stable through 1H20, so some drop was expected in 3Q20. He also guided that he expects 40-70 bps per quarter of yield compression over the next few years, but this tends to be lumpy.
Meanwhile F&C income was up 15% Q-o-Q, as retail brokerage revenues rose 42% Q-o-Q to R2.1 bln and contributed 16% of gross F&C, while debit card interchange rocketed up from R0.5 bln in 2Q20 to R1.2 bln in 3Q20, a function of post-lockdown activity picking up and customer number growth. Elsewhere, SME also recovered nicely, up 27% Q-o-Q, and acquiring was up 18% Q-o-Q. The management pointed to some slowdown in transaction activity in 4Q20 on the Covid second wave.
Gross loans rose by 5% in 3Q20, with CCs up 3% Q-o-Q and car loans up 25%. Customer acquisition remained strong, with total customers hitting 12 mln. TCS added about 1.4 mln current account customers in 3Q20, as well as 30k SME and about 500k brokerage customers (now more than 2.4 mln).
Cost of risk was much lower than expected at 6.5%, while Stage 3/POCI loans were up from 12.9% to 13.3% with coverage down from 139% to 128%, which is still decent. Opex missed expectations, as customer acquisition costs rose 33% Q-o-Q to R5.5 bln on strong growth across customer numbers. Overall 3Q20 costs rose 25% y-o-y,
79 ​RUSSIA Country Report​ December 2020 www.intellinews.com