TCS.L Regulatory News (TCS)

Tinkoff Bank Research: Slower Contraction in the Credit Card Market in 2016

Moscow, Russia - 20 February 2017 Today Tinkoff Bank publishes the findings of its research on the Russian credit card market in Q4 and FY 2016.

The research is based on the data of the Central Bank of Russia (CBR) and only takes into account loans that are not overdue (on demand loans and overdrafts to individuals).

FY results

According to the research, in 2016 the credit card market volume hit a three-year low of RUB 999 bn. The last time it fell short of RUB 1 tn was 1 January 2014, when the market totalled RUB 990 bn. In 2016, the rate of contraction of the credit card market slowed down for the first time in two years. As a result, the total credit cards market declined by RUB 33.8 bn in absolute terms stabilising at RUB 999 bn as at the end of 2016. This tendency mirrors the reduction in other non-secured loan portfolios. 

Credit card market concentration continued to grow throughout 2016. At the end of 2015 the five largest banks controlled 69.9% of the market, while at the end of 2016 their aggregate share reached 73.8%. The number of credit institutions holding portfolios worth over RUB 1 bn decreased to 34, with their market share totalling 98.8% at year-end.

In 2016, Sberbank the traditional market leader, boosted its share to 42.8% by expanding the portfolio against the backdrop of a declining market. In absolute terms, the bank's portfolio increased by RUB 20.8 bn reaching some RUB 427.7 bn.

Tinkoff Bank has the second largest share in the credit card market. In 2016, the Bank increased its portfolio by 19.6% boosting its market share by 2 p.p. to 10.3%. In absolute terms, Tinkoff Bank's portfolio grew by RUB 16.8 bn to RUB 102.5 bn.

Orient Express Bank delivered the highest relative growth among the Top 20 banks, with its portfolio increasing by 37.2% in 12 months. In absolute terms, the portfolio of Orient Express Bank grew by RUB 10 bn to RUB 36.8 bn.

In 2016, the portfolios of Russian Standard Bank, OTP Bank and B&N Bank Credit Cards saw the sharpest drops of RUB 23.4 bn, RUB 10.9 bn and RUB 9.9 bn, respectively.

With a portfolio reduction of 45.2% (from RUB 18.8 bn to RUB 10.3 bn), Trust Bank suffered the greatest relative contraction among the Top 20 banks.

Oliver Hughes, CEO of Tinkoff Bank, commented on the bank's portfolio growth as follows: "In 2016 Tinkoff Bank enjoyed consistent growth while retaining stringent risk controls. As a result, by the end of 2016, we reached a record issuance rate of 150,000 cards per month. We expect a 24% credit portfolio increase for the full year. In 2017, we will continue to grow and plan to expand our credit portfolio by a further 15-20%."

Q4 2016

In Q4 2016, the credit card market contracted by RUB 17.2 bn. The record drop of some RUB 22.9 bn happened in December 2016, as the market saw the usual seasonal effect of customers paying down their debts before the New Year.

In Q4 2016, only three players managed to increase their market share by more than 0.1 p.p. Those included Sberbank (0.9 p.p.), Tinkoff Bank (0.4 p.p.) and Orient Express Bank (0.2 p.p.). The banks that suffered a significant reduction in their market shares were Russian Standard Bank (0.4 p.p.), B&N Bank (0.4 p.p.), OTP Bank (0.2 p.p.), and Trust Bank (0.2 p.p.). 

Methodology:

The report was drafted by Tinkoff Bank's team.

For the purposes of this report, the Bank relied on CBR data. Tinkoff Bank's analysts use amounts in accounts 45502 (loans and other funds provided to resident individuals for a period of up to 30 days), 45508 (demand loans and other funds provided to resident individuals), 45509 (deposit account overdrafts provided to resident individuals), 45707 (demand loans and other funds provided to non-resident individuals), and 45708 (deposit account overdrafts provided to non-resident individuals).

Credit Card Market Report - 4Q 2016

About Tinkoff Bank

Tinkoff Bank is an innovative provider of online financial services operating in Russia through a high-tech branchless platform. The bank was founded in 2006 by a Russian entrepreneur Oleg Tinkov.

The bank's product range includes credit, debit and prepaid cards, deposits, co-branded cards, agent-based mortgage products and investment services. With its special focus on mobile business, the bank offers mobile applications both for its customer base (Mobile Bank) and beyond it (Traffic Fines, MoneyTalk, Card 2 Card instant money transfers).

The bank's five-year strategy has the ambition of becoming a financial supermarket where customers can shop not only for our products, but also for those of our partners.

As at 1 November 2016, the bank was the second largest player in the Russian credit card market, with a market share of 9.9%. The 9M 2016 IFRS net income of the parent company, TCS Group Holding PLC, which includes Tinkoff Bank and the insurance company Tinkoff Insurance, amounted to RUB 7.3 bn.

In October 2016 Tinkoff Bank was named the largest independent global direct bank by Frost & Sullivan. In 2016 and 2015, the Global Finance magazine named Tinkoff Bank as the Best Consumer Digital Bank in Russia. In 2016, the bank also won Global Finance's Best Integrated Consumer Bank Site award. In 2016, Tinkoff Bank was named the Best Digital Bank in the CEE by Euromoney. Its mobile application was recognised as the best in Russia by Markswebb Rank & Report in 2014, 2015 and 2016, and by Deloitte for four years in a row in 2013-2016. 

Tinkoff Bank is a member of the deposit insurance system (the system guarantees each depositor of member banks a payout of RUB 1.4 mln on deposits and current accounts, including interest income).