Page 48 - GEORptSep21

2Q21 earnings of Georgia’s TBC Bank saw robust growth of 64% q/q
30 bps q/q at 4.8% and guided to be stable for H2 2021. Fee income was seen as particularly impressive in Q2 2021, up 74% y/y (albeit from a low base) and 18% q/q.
Balance sheet growth was robust as the economy recovered and gross loans increased 5.5% q/q in constant-currency terms, while deposits added 4.4%. There was a net provision release in Q2 2021 (-0.7%), driven by recoveries on corporate loans, bringing H1 2021 cost of risk to 0.2%. NPLs fell from 3.6% to 3.5%, with coverage at 73%.
Opex rose 16% y/y and 13% q/q in 2Q21 and 9% y/y in 1H21, with a 36% cost/income ratio in H1 2021.
The capital ratios improved in Q2 2021, helped by strong profitability, with CET1 up 130 bps at 12.5 % (from 11.2%), Tier 1 at 14.4% (from 13.3%) and total CAR at 19.1% (from 18.6%). The minimums are 11.5%, 13.4% and 17.7%, respectively.
The 2Q21 earnings of Georgia's FTSE-listed TBC Bank saw robust growth of 64% q/q to Georgian lari (GEL) 250mn, driven by a solid operating performance, a GEL 50mn net provision release and a GEL 26mn one-off gain from a property sale.
VTB Capital said: "The bank’s ROE was at 31.1%. However, normalized ROE remained at 22%, in our calculation, which is in line with TBC’s strategy and also BGEO’s performance in 2Q21. We also note the growth of the Uzbek business (+102% YoY growth in Payme total transactions volume to GEL 1.2bn). In our view, the results are positive and we leave our forecasts and 12-month Target Price of GBp 1,900 unchanged. Buy reiterated (51% ETR, including a 5% DY for interim dividend).
"NIM’s 47bp QoQ increase, driven by higher asset yields, helped NII to grow 7.8% QoQ. Net F&C income was up 39.1% QoQ, helped by the growth in domestic card and settlement operations and the contribution from the Uzbek Payme. Opex grew robustly on the back of the revival in economic activity and the growth of the Uzbek business. However, CIR stayed flat at 39%. The net loan loss provision recovery for GEL 50mn and one-off gain from selling the investment property sale for GEL 26mn pushed earnings up 64% QoQ to GEL 250mn, which implies 31.1% ROE. We estimate the normalized ROE at 21.8%, or in line with the Group’s strategy and 22.1% of Bank of Georgia Group."
The y/y growth of corporate and MSME loans accelerated to 15-16%, while retail mortgages had to balance the decline in consumer loans, VTB also noted, adding that customer accounts grew with the help of current accounts. VTB also commented: "A large corporate loan repayment and the good performance of some restructured loans pushed the share of NPLs 1.4pp QoQ to 3.4%. The GEL 50mn net provision release keeps 12mo rolling CoR at 39bp, or well below the guided FY21 level of 100-130bp.
"TBC’s CET1, T1 and Total CAR were 1.8-2.0pp above the NBG minimum requirement. Together with strong profitability, that offers comfort over the payment of a first interim dividend at GEL 1.48 (5% DY) on 17 September 2021 (cut-off date 20 August 2021)."
TBC’s performance was in line with the Group’s medium-term targets, while lower than expected CoR and the one-off gain imply upside risks to VTB's FY21 estimates. "We note the solid underlying operating performance and rapid growth of Uzbek operations (Payme’s total transaction volumes doubled YoY to GEL 1.2bn)," VTB said.
48 GEORGIA Country Report September 2021 www.intellinews.com