9 Dec 2013 07:00
TCS GROUP HOLDING PLC
ANNOUNCES IFRS RESULTS FOR THIRD QUARTER AND FIRST NINE MONTHS OF 2013
Moscow, Russia - 9 December, 2013. TCS Group Holding PLC (TCS LI) (the "Group"), including "Tinkoff Credit Systems" Bank ("TCS Bank"), Russia's leading provider of online retail financial services, today announces its unaudited IFRS financial results for the third quarter and nine months ended September 30, 2013.
KEY FINANCIAL HIGHLIGHTS
3Q 2013
· Net interest income up by 59% year-on-year to USD 217 mln (Q3 2012: USD 136 mln)
· Profit before tax increased by 22% year-on-year to USD 61 mln (Q3 2012: USD 50 mln)
· Net profit up by 22% year-on-year and amounted to USD 47 mln (Q3 2012: USD 39 mln)
· Net interest margin: 37.8% (Q3 2012: 43.0%)
9M 2013
· Net interest income increased by 77% year-on-year to USD 610 mln (9M 2012: USD 344 mln)
· Profit before tax up by 39% year-on-year to USD 164 mln (9M 2012: USD 118 mln)
· Net profit increased by 39% year-on-year to USD 126 mln (9M 2012: USD 91 mln)
· Net interest margin stood at 39% (9M 2012: 43.7%)
· Cost of risk was at 13.7% (9M 2012: 9.9%)
· Total assets increased by 25% to USD 2.7 bn (2012FY: USD 2.2 bn)
· Gross loans and advances to customers up by 41% to USD 2.4 bn (2012FY: USD 1.7 bn)
· Share of non-performing loans (NPLs) increased to 6.3% at the end of 9M 2013 (2012FY: 4.7%)
· Total customer accounts increased by 30% to USD 1.1 bn (2012FY: USD 878 mln)
· Total equity up by 37% to USD 409 mln (2012FY: USD 298 mln)
KEY HIGHLIGHTS POST Q3
· The Group's IPO on the LSE raised a total of USD 1.09 bn, including USD 175 mln in primary funds (October 2013)
· KupiVKredit POS loans programme expanded, including the offer of online shopping in the US through a new partner (November 2013)
· Tinkoff Mobile Wallet launched (November 2013)
· The prestigious 'Bank of the Year in Russia' award given by The Banker (November 2013)
· USD 45 mln of RUB bonds issued in November 2010 redeemed (November 2013)
· As of December 2013, 4 mln cards issued
Oliver Hughes, CEO of TCS Bank, said: "We are very pleased with our financial results for the first nine months of 2013. We continued to demonstrate strong growth in our credit card loan portfolio and net interest income, while reducing our cost of capital and stabilising the cost of risk. Our net interest income was up by nearly 80% year-on-year, boosted by the increase in our gross credit card portfolio to USD 2.4 bn. We closely monitor the quality of our loan portfolio and ensure adequate provisioning following the move in the last few years into online and mobile customer acquisition channels. We maintained a solid balance sheet with total assets growing by a quarter from the start of the year to USD 2.7 bn. We remain on track with respect to our year-end net income and loan portfolio targets, and maintain a strong capital base after the IPO."
FINANCIAL AND OPERATIONAL REVIEW
USD mln | 3Q 2013 | 3Q 2012 | Change | 9M 2013 | 9M 2012 | Change |
Credit cards issued ('000 pcs) | 296 | 247 | +20% | 965 | 836 | +15% |
Credit cards transactions | 744 | 511 | +46% | 2,184 | 1,419 | +54% |
USD mln | 3Q 2013 | 3Q 2012 | Change | 9M 2013 | 9M 2012 | Change |
Net interest income | 217 | 136 | +59% | 610 | 344 | +77% |
Net interest income after loan impairment | 145 | 97 | +49% | 398 | 267 | +49% |
Profit before tax | 61 | 50 | +22% | 164 | 118 | +39% |
Net profit | 47 | 39 | +22% | 126 | 91 | +39% |
USD mln | 30 September 2013 | 31 December 2012 | Change |
Total Assets | 2,711 | 2,173 | +25% |
Net Loans and advances to customers | 2,160 | 1,573 | +37% |
Cash and cash equivalents | 368 | 457 | -19% |
Total Liabilities | 2,302 | 1,875 | +23% |
Customer accounts (deposits) | 1,138 | 878 | +30% |
Debt securities in issue | 839 | 786 | +10% |
Total Equity | 409 | 298 | +37% |
ROE | 48.6% | 59.7% | |
Tier 1 capital ratio | 15.5%* | 14.0% | |
Total capital | 23.2%* | 20.1% | |
CBR N1 (capital adequacy ratio) | 14.6% | 17.4% |
* Bank's estimates (unaudited)
The Group generated solid results in 3Q and for the first nine months of 2013 driven by growth in net interest income of 59% year-on-year and 77% year-on-year, respectively. The strong growth in net interest income resulted largely from an increase in credit card lending, as well as rolling out new lending products. The Group pays close attention to carefully evaluating and effectively controlling the credit risk of individual customers.
In the first nine months of 2013, the number of credit cards issued was up by 15% year-on-year to 965,000, while the volume of credit cards transactions increased by 54% year-on-year to USD 2.2 bn.
During the first nine months of 2013, net interest income after provisions for loan impairment was up 1.5 times relative to the comparable period in 2012. Net interest margin decreased to 39% but it is still providing the Group with substantial profitability and robust loss absorption capacity.
Net profit was up by 22% year-on-year in the 3Q and by 39% year-on-year for the first nine months of 2013.
Costs increased in large part due to the growth of the customer base and loan portfolio. During the first nine months of 2013, the Group continued to invest in mass customer acquisition. Following a seasonal nationwide through-the-line advertisement campaign in the spring of this year in over 300 cities across Russia the Group did not run any further TV advertising campaigns in 3Q 2013. Since most of the Group's costs are variable, service fees and especially administrative costs grew quickly, driven by the growth of business volumes. As a result, administrative costs increased by 70% year-on-year to USD 133 mln for the first nine months 2013. This growth was mainly driven by an increase in salaries, VAT and other taxes and telecom expenses. These three cost items combined accounted for 76% of the Group's administrative expenses for the nine month period.
As the Group's business grows, it continues to realise additional economies of scale reflected in its cost to income ratio (including acquisition costs) which decreased to 38% in the first nine months of 2013 from 42% at 2012 year-end.
The Group's cost of risk declined after 9M 2013 to 13.7%, compared to 14.4% in 1H 2013 as credit risk measures, including a decrease in approval rates, started to produce results.
The Group's financial position has grown significantly in the first nine months of 2013 with total assets up by nearly 25% to USD 2.7 bn and by 12% in 3Q 2013. This increase was achieved through growth in the loan portfolio which was up by 37% on a net basis to USD 2.2 bn and by 11% in 3Q 2013 alone. At 30 September 2013, net loans accounted for 80% of total assets, compared to 72% at the end of 2012.
The Group maintained more than adequate liquidity with cash and cash equivalents of USD 368 mln, accounting for 13.5% of its total assets and 32% of its customer deposits, in accordance with the Group's policy of keeping sufficient cash balances for upcoming financing needs, while maintaining a minimum ring fenced cash cushion of 15% of retail deposits.
The decrease in cash and equivalents from USD 457 mln at the end of 2012 was due to the use of proceeds from the Eurobond issue which took place in late 2012 to grow the loan portfolio and the early redemption of the Group's SEK-denominated bonds. Cash and cash equivalents increased by almost USD 80 mln, compared to 1H 2013 mainly due to receiving debt proceeds under a European Commercial Paper programme and the growth in retail deposits.
The level of non-performing loans in total gross loans increased to 6.3% as of the end of the nine month period in 2013 from 4.7% at the close of 2012. As a result, the Group increased loan loss provisioning ratio from 8.1% at the end of 2012 to 10.3%. The Group continues to closely monitor the quality of its loan portfolio given its high growth, increased provisioning rates following the shift into online and mobile customer acquisition channels and the increased retention of overdue loans in the portfolio under the installment loan repayments programme, as well as its court enforcement collection strategies which allow for higher recoveries relative to the sale of bad debts. The Group maintains robust provisioning coverage for non-performing loans at 160% - 170%.
At 30 September 2013, debt securities increased to USD 839 mln, compared to USD 762 mln at the end of 2012, following a series of debt issues. The proceeds from this debt issuance were offset by the early redemption of the Group's SEK-denominated bonds in June 2013, and the full repayment of two early stage RUB-denominated bond issues in July and September, respectively.
At 30 September 2013, customer accounts stood at USD 1.1 bn, up by 30% from USD 878 mln as at the end of 2012. The share of customer accounts in total liabilities increased to 49% from 46% for the same period.
Total equity of the Group grew by 37% to almost USD 410 mln as at 30 September 2013 from USD 298 mln at the end of 2012 due to strong growth in retained earnings. The devaluation of the Ruble during the first nine months of 2013 had a negative impact on total equity as accumulated loss on translation increased to USD 27 mln.
The Group's statutory N1 capital adequacy ratio declined to 14.6% at the end of the reporting period from 17.4% at the end of 2012 due to the strong growth of the loan portfolio, increased CBR-mandated risk-weights on unsecured consumer loans and higher operating risk coefficients. The annualised return on average equity based on 9 months 2013 results was 48.6%, while return on assets stood at 7.3%.
***
The management team will host an investor and analyst conference call today at 14.00 UK time (18.00 Moscow time, 09.00 U.S. Eastern Daylight Time).
To participate in this conference call, please use the following access details:
Confirmation Code: | 17263989 |
NAME | TCS GROUP Q3 2013 FINANCIAL RESULTS |
Participant Toll Free Telephone Numbers: | |
UK Free Phone | 0800 694 0257 |
Russia Free Phone | 8108 002 097 2044 |
USA Free Phone | 1866 966 9439 |
Standard International Call | +44 (0) 1452 555 566 |
Financial results for the third quarter and nine months ended September 30, 2013 are available on the Group's website at https://www.tcsbank.ru/
A live webcast of the presentation will be available at
https://webconnect.webex.com/webconnect/onstage/g.php?t=a&d=661432471
For enquiries:
"Tinkoff Credit Systems" Bank
Elena Shushunova, PR department
+ 7(495) 648 1000 (ext. 2244), +7 (916) 804 3276
e.shushunova@tcsbank.ru
FTI Consulting London
Larisa Millings
+44 (0)20 7269 7153
FTI Consulting Moscow
Maria Shiryaevskaya
+7 495 795 06 23
About the Group
TCS Group Holding PLC is an innovative provider of online retail financial services operating in Russia through a high-tech branchless platform. In order to support its branchless platform, the Group has also developed a "smart courier" network covering almost 600 cities and towns in Russia which allows next day delivery to many customers.
Since its launch in 2007 by Mr. Oleg Tinkov, one of the best known Russian entrepreneurs with a long track record of creating successful businesses, the Group has grown into a leader in the Russian credit card market, with the third largest credit card loan portfolio and a market share of 7.5% based on non-delinquent receivables (according to Central Bank of Russia ("CBR") data, as of 1 October 2013). As of December 2013, the Group had issued over 4 mln credit cards.
In addition to a market-leading credit card offering, the Group has developed a successful online retail deposits programme and added Tinkoff Mobile Wallet to its portfolio of innovative online products and services for Russian consumers, including mobile financial services, payment solutions and insurance.
As of 30 September 2013, the Group's total assets amounted to USD 2.7 bn, net loans and advances to customers stood at USD 2.2 bn and customer accounts (deposits) amounted to USD 1.1 bn. In the nine months ended 30 September 2013, the Group generated a net profit of USD 126 mln and net interest income of USD 610 mln.
The Group is well capitalised with the CBR N1 capital adequacy ratio of 14.6% as of 30 September 2013, and its total capital ratio and Tier 1 capital ratio of 23.2%* and 15.5%*, respectively.
The Group's class A shares, in the form of Global Depositary Receipts, have been trading on the London Stock Exchange since October 2013. TCS Group Holding PLC's share capital consists of 89,044,396 Class A shares and 92,144,679 Class B shares.
* Bank's estimates (unaudited)
Forward-looking statements
Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of the Group and TCS Bank. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might", the negative of such terms or other similar expressions. The Group and TCS Bank wish to caution you that these statements are only predictions and that actual events or results may differ materially. The Group and TCS Bank do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group and TCS Bank, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries the Group operates in, as well as many other risks specifically related to the Group, TCS Bank and their respective operations.
Consolidated Condensed Interim Statement of Financial Position
AS AT 30 SEPTEMBER 2013
In millions of USD | 30 September 2013 (Unaudited) | 31 December 2012 |
ASSETS | ||
Cash and cash equivalents | 367.7 | 457.4 |
Mandatory cash balances with the CBRF | 29.9 | 22.6 |
Loans and advances to customers | 2,160.3 | 1,573.3 |
Financial derivatives | 15.7 | 0.8 |
Deferred income tax assets | 13.0 | 11.4 |
Guarantee deposits with payment systems | 48.2 | 33.6 |
Fixed assets | 18.9 | 18.0 |
Intangible assets | 14.1 | 13.5 |
Other financial assets | 26.3 | 39.0 |
Other non-financial assets | 16.4 | 4.1 |
TOTAL ASSETS | 2,710.5 | 2,173.5 |
LIABILITIES | ||
Due to banks | 32.5 | 16.9 |
Customer accounts | 1,137.6 | 878.1 |
Debt securities in issue | 839.3 | 762.4 |
Subordinated debt | 206.4 | 123.9 |
Financial derivatives | 1.4 | 11.9 |
Current income tax liabilities | 2.7 | 2.8 |
Other financial liabilities | 75.2 | 70.6 |
Other non-financial liabilities | 6.6 | 8.5 |
TOTAL LIABILITIES | 2,301.6 | 1,875.2 |
EQUITY | ||
Share capital | 6.8 | 6.8 |
Share premium | 114.3 | 118.7 |
Treasury shares | (0.1) | (0.1) |
Share-based payment | 18.9 | 11.0 |
Retained earnings | 296.3 | 169.9 |
Accumulated loss on translation | (27.3) | (8.1) |
TOTAL EQUITY | 408.9 | 298.3 |
TOTAL LIABILITIES AND EQUITY | 2,710.5 | 2,173.5 |
Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income
FOR the 3rd quarter and 9 months ended 30 September 2013
In millions of USD | Nine-Months period ended 30 September 2013 (Unaudited) | Three-Months period ended 30 September 2013 (Unaudited) | Nine-Months period ended 30 September 2012 (Unaudited) | Three-Months period ended 30 September 2012 (Unaudited) |
Interest income | 796.8 | 277.3 | 448.8 | 177.3 |
Interest expense | (186.8) | (60.8) | (104.9) | (40.9) |
Net interest income | 610.1 | 216.5 | 343.9 | 136.4 |
Provision for loan impairment | (211.8) | (71.4) | (77.4) | (39.4) |
Net interest income after provision for loan impairment | 398.3 | 145.1 | 266.5 | 97.0 |
Customer acquisition expenses | (98.3) | (29.4) | (62.9) | (16.1) |
Fee and commission expenses | (7.5) | (2.3) | (5.7) | (2.3) |
(Losses less gains) from operations with foreign currencies | (9.8) | (8.3) | (4.9) | (1.4) |
Gain from sale of bad debts | 7.9 | 1.2 | 2.6 | 1.8 |
Insurance agency fee | 2.0 | 0.9 | - | - |
Other operating income | 4.7 | 4.5 | 0.4 | 0.1 |
Administrative and other operating expenses | (133.3) | (50.6) | (78.5) | (29.0) |
Profit before tax | 164.0 | 61.1 | 117.6 | 50.1 |
Income tax expense | (37.5) | (14.0) | (26.6) | (11.3) |
Profit for the period | 126.4 | 47.1 | 91.0 | 38.8 |
Other comperehensive (loss)/income: | ||||
Exchange differences on translation to presentation currency | (19.2) | 5.1 | 5.6 | 13.2 |
Other comprehensive loss for the period | (19.2) | 5.1 | 5.6 | 13.2 |
Total comprehensive income for the period | 107.2 | 52.2 | 96.6 | 52.0 |
Consolidated Condensed Interim Statement of Cash Flows
FOR the 9 months ended 30 September 2013
In millions of USD | Nine-months period ended 30 September 2013 (Unaudited) | Nine-months period ended 30 September 2012 (Unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Interest received | 693.7 | 381.7 |
Interest paid | (185.2) | (107.3) |
Customers acquisition expenses paid | (73.9) | (56.0) |
Cash received from trading in foreign currencies | 5.4 | 4.5 |
Cash received from sale of bad debts | 10.9 | 2.6 |
Fees and commissions paid | (5.9) | (5.5) |
Other operating income received | 1.4 | 0.3 |
Administrative and other operating expenses paid | (70.2) | (37.1) |
Income tax paid | (37.1) | (30.5) |
Cash flows from operating activities before changes in operating assets and liabilities | 339.1 | 152.7 |
Changes in operating assets and liabilities | ||
Net increase in Central Bank mandatory reserves | (8.9) | (11.0) |
Net decrease in due from banks | - | 2.2 |
Net increase in loans and advances to customers | (807.0) | (631.1) |
Net increase in Guarantee deposits with payment systems | (17.1) | (6.6) |
Net increase in other financial assets | 10.5 | 7.2 |
Net decrease/(increase) in other non-financial assets | (12.8) | 2.7 |
Net increase in due to banks | 16.9 | 18.4 |
Net increase in customer accounts | 274.9 | 350.4 |
Net increase/(decrease) in other financial liabilities | (4.5) | 9.5 |
Net increase in other non-financial liabilities | 0.4 | 0.5 |
Net cash used in operating activities | (208.6) | (105.0) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition of tangible fixed assets | (5.7) | (15.0) |
Acquisition of intangible assets | (1.9) | (7.0) |
Consideration paid for insurance company net of cash acquired | (1.0) | - |
Net cash used in investing activities | (8.5) | (22.0) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from debt securities in issue | 283.2 | 379.8 |
Repayment of debt securities in issue | (194.0) | (29.8) |
Proceeds from subordinated debt | 71.5 | - |
IPO costs | (3.3) | - |
Proceeds from issue of shares | - | 37.5 |
Net cash from financing activities | 157.3 | 387.6 |
Effect of exchange rate changes on cash and cash equivalents | (30.0) | (9.1) |
Net increase/(decrease) in cash and cash equivalents | (89.7) | 251.5 |
Cash and cash equivalents at the beginning of the period | 457.4 | 163.2 |
Cash and cash equivalents at the end of the period | 367.7 | 414.7 |