28 Nov 2014 12:15
TCS GROUP HOLDING PLC
ANNOUNCES 3Q AND 9M 2014 IFRS RESULTS,
INTENDS TO PAY CASH DIVIDEND IN 2014
Moscow, Russia - 28 November 2014. TCS Group Holding PLC (TCS LI) (the "Group"), Russia's leading provider of online retail financial services, including "Tinkoff Credit Systems" Bank ("TCS Bank") and Tinkoff Online Insurance, today announces its interim condensed consolidated IFRS results for the third quarter and for the first nine months ended 30 September 2014.
KEY FINANCIAL HIGHLIGHTS
3Q 2014
· Net interest income up by 2.4% q-o-q to RUB 7.9 bn (2Q14: RUB 7.8 bn)
· Profit before tax amounted to RUB 1.5 bn (2Q14: RUB 1.8 bn)
· Net profit at RUB 1.1 bn including the loss from FX revaluation of RUB 0.6 bn (2Q14: RUB 1.3 bn)
· Net interest margin increased to 37.0% (2Q14: 34.6%)
· Cost of risk decreased to 16.2% (2Q14: 18.7%)
9M 2014
· Net interest income increased by 20% y-o-y to RUB 23.1 bn (9M13: RUB 19.3 bn)
· Profit before tax amounted to RUB 3.8 bn (9M13: RUB 5.2 bn)
· Net profit totaled RUB 2.8 bn (9M13: RUB 4.0 bn)
· Net interest margin at 34.9% (9M13: 36.8%)
· Gross loans and advances to customers up by 12.4% YTD to RUB 93.7 bn (YE2013: RUB 83.4 bn)
· Share of non-performing loans (NPLs) at 14.2% (YE2013: 7%)
· Customer accounts amounted to RUB 41.3 bn (YE2013: RUB 43.2 bn)
· Total assets at RUB 96.5 bn (YE2013: RUB 98.9 bn)
· Total equity up by 14% YTD to RUB 23.3 bn (YE2013: RUB 20.6 bn)
DIVIDEND
· The Group intends to pay a cash dividend of RUB 3 bn to its shareholders by the end of 2014. The directors are expected to cast their votes to approve the resolution shortly
KEY HIGHLIGHTS FOR 9M AND POST 3Q 2014
· From 1 January 2015, Tinkoff Credit Systems Bank and Tinkoff Online Insurance will be renamed as Tinkoff Bank and Tinkoff Insurance respectively
· As of 1 November 2014, over 4.8 mln credit cards issued
· For the first 9M 2014, over 500,000 new active customers acquired
· In November 2014, Tinkoff Online Insurance launched motor insurance
· In October and November 2014, TCS launched a number of new cobranded products, including credit cards with eBay; Kanobu, one of Russia's largest online portals for gamers, and Afimall, one of Moscow's largest shopping malls
· Since the launch in June 2014, the Traffic Fines mobile app used for the online payment of fines for traffic violations has had over 600,000 downloads
· In November 2014, the new 'any-card-to-card transfer' mobile app was launched
· In November 2014, TCS Bank has completed the pilot launch of its payroll programme and is now preparing for a mass roll-out
· In September and October 2014, the Group retained its 'B2' rating with Moody's and 'B+' with Fitch respectively, both with a stable outlook
· In October 2014, TCS Bank won the Banker's 'Technology Project of the Year' award in the Customer Service category. TCS was the first Russian bank to implement the Real-Time Voice Authentication System in its call centre. The system has greatly reduced the verification time of clients calling the call centre
Oliver Hughes, CEO of TCS Bank, commented: "I am pleased that the Group has reported another strong set of results against the increasingly challenging economic backdrop.
In 3Q14, we delivered robust underlying net profit of RUB 1.13 bn, thus taking our 9M14 net profit to RUB 2.8 bn and demonstrating strong profitability with ROE of 20%.
The operational, financial and cost-saving measures which we have implemented since the beginning of 2014 have had a demonstrable impact in the third quarter. Specifically, we were able to secure a q-o-q decrease in customer acquisition costs, and general and administrative costs.
We have continued to improve our loan portfolio's risk profile with the cost of risk reducing further to 16.2% in 3Q14 from 18.7% in 2Q14.
The improved profitability and cost of risk demonstrate the resilience of our business model, the effectiveness of our credit risk management systems, and our continued strategic focus on profitable business.
Despite the overall slowdown of the Russian retail loan market, the Group continued to maintain a strong competitive position in the credit card market with a stable rate of portfolio growth. In the first nine months of 2014, we registered over 500,000 new active customers. We also maintained a strong capital position and ample liquidity.
In 3Q14, we continued to extend and optimize our product offering: we launched new credit card and insurance products which provide significantly improved value for clients and help us expand our product offering to new customer segments.
In 9M14, insurance operations contributed almost RUB 0.6 bn to non-interest revenue primarily from the TCS Bank's existing client base. The Group sees further upside as we continue to rollout additional insurance services in the mass market.
These results illustrate a very strong underlying business performance and set us very clearly apart from all of our major competitors in consumer lending in Russia.
Finally, taking into account our strong capital position this year, the Group announces its intention to make a cash dividend payment of RUB 3 bn by the end of 2014. The decision of the Board of Directors is expected to be formalised shortly and the record date will be communicated separately. We believe a cash dividend payment is the most efficient way to distribute excess capital to our shareholders, which leaves the Group with a very strong capital position and with ample liquidity.
We reiterate our FY14 guidance for net profit in the range of RUB 2.9 bn to RUB 3.4 bn and cost of risk in the range of 19% to 21%. We expect cost of risk to be at the lower end of the range as a result of our strict underwriting and enhanced collections policy."
FINANCIAL AND OPERATIONAL REVIEW
RUB bn | 3Q 2014 | 3Q 2013 | Change | 9M 2014 | 9M 2013 | Change |
Credit cards issued ('000 pcs) | 235 | 296 | (21%) | 763 | 965 | (21%) |
Credit cards transactions | 22.8 | 24.4 | (6%) | 67.5 | 69.1 | (2%) |
RUB bn | 3Q 2014 | 3Q 2013 | Change | 9M 2014 | 9M 2013 | Change |
Net interest income | 7.9 | 7.8 | 2.4% | 23.1 | 19.3 | 20% |
Net interest income after loan impairment | 4.2 | 4.8 | (13%) | 10.9 | 12.6 | (17%) |
Profit before tax | 1.5 | 2.0 | (32%) | 3.8 | 5.2 | (38%) |
Net profit | 1.1 | 1.5 | (27%) | 2.8 | 4.0 | (30%) |
RUB bn | 30 September 2014 | 31 December 2013 | Change |
Total Assets | 96.5 | 99.0 | (3%) |
Net Loans and advances to customers | 74.7 | 74.0 | 1% |
Cash and treasury portfolio | 12.2 | 18.8 | (35%) |
Total Liabilities | 73.1 | 78.4 | (7%) |
Customer accounts (deposits) | 41.3 | 43.2 | (4%) |
Debt securities in issue | 16.7 | 26.2 | (36%) |
Total Equity | 23.3 | 20.6 | 14% |
Tier 1 capital ratio | 21.2% | 19.9% | 1.3 p.p. |
Total capital ratio | 26.6% | 25.0% | 1.6 p.p. |
CBR N1 (capital adequacy ratio) | 16.5% | 15.8% | 0.7 p.p. |
In 3Q14 and 9M14, the number of new credit cards issued was 235 thousand and 763 thousand respectively, while the volume of credit card transactions in 9M14 was RUB 67.5 bn remaining flat compared to 9M13.
The Group demonstrated robust results with sustainable profitability for the third quarter and for the first nine months of 2014 amid the challenging economic environment. The Group continued to further focus on the risk management and collections and worked on improving operating efficiency, while still looking toward future growth with new product launches.
In 9M14, the Group's gross interest income increased by 17% y-o-y but remained relatively flat compared to 2Q14. In 9M14, gross yield was down by 7 percentage points y-o-y primarily due to the retention of non-performing loans on the Group's balance.
In 9M14, the Group's net interest income increased by 20% y-o-y to RUB 23.1 bn compared to RUB 19.3 bn in 9M13 with a net interest margin before credit charge of 34.9%. Despite the increase in the cost of risk across Russia's consumer lending market, the Group was able to generate a solid 16.4% risk-adjusted net interest margin after provisions for loan losses.
In 9M14, the Group continued to focus on addressing the loan losses. In 3Q14, cost of risk, while still above the Group's long-term historic trend, decreased to 16.2% compared to 18.7% in 2Q14. Loan loss provision expense nearly doubled to RUB 12.3 bn in 9M14 compared to 9M13. This increase was driven by the overall growth in credit risk in the Russian consumer lending sector due to the general worsening of the Russian economy. The Group has been prioritising effective risk management and collections to ensure that the cost of risk is well-managed and to mitigate any further deterioration in Russia's consumer lending market.
In 3Q14, the Group's operating expenses remained flat y-o-y. The Group implemented significant cost-savings measures in the first nine months of 2014 while still attracting new customers and investing in the development of new products. As a result of the Group's cost-saving initiatives the cost-to-income ratio declined substantially in 9M14 to 29% compared to 38% in 9M13.
9M14 net profit amounted to RUB 2.8 bn and 3Q14 net profit of RUB 1.1 bn included the loss from FX revaluation of RUB 0.6 bn. The ROE stood at 19.9% in 3Q14.
In 3Q14, the Group maintained a strong balance sheet with total assets of RUB 96.5 bn (YE2013 RUB 99.0 bn). The Group deployed some excess cash into highly liquid CBR repo-able debt securities in order to decrease a negative carry on its borrowings while maintaining a high liquidity cushion with cash and securities representing 12.6% of assets and 29.5% of customer accounts. Gross loans grew by 14.1% in 9M14 to over RUB 93.7 bn, representing a deliberate slowing down of the Group's loan portfolio expansion and significant tightening of approval rates to address the current credit risk environment.
Due to the revised approach of retaining overdue and non-performing loans on the balance sheet for in-house collection which secures better recovery rates, the share of non-performing loans (NPLs, including loans in courts) in total gross loans grew to 14.2% from 7% at YE2013. The loan loss provisioning coverage ratio reduced accordingly to 1.4x NPLs. Balance sheet provisioning for impairment of loans grew to RUB 20.4 bn compared to RUB 9.4 bn as of YE2013. This is a result of the conservative provisioning policy that the Group maintains.
In 3Q14, the Group continued to maintain a low approval rate at 15%. As a result of this effort net loans remained flat during the first nine months of 2014, with the share of net loans in the Group's total assets having increased to 77.5%.
In 3Q14, the Group's liabilities increased by 0.7% to RUB 73.1 bn from RUB 72.7 bn as at the end of 1H14. Customer deposit volumes remained flat at RUB 41.3 bn and now account for 56% of total liabilities compared to 58% as of 1H14.
In 3Q14, the Group successfully redeemed its USD 20 mln Euro-Commercial Paper (ECP). The book value of the Group's debt securities increased due to the currency revaluation of the Eurobond. The Group continues to maintain a comfortable debt maturity profile, with scheduled repayments in the next four quarters amply covered by the Group's liquidity cushion. The Group remains well funded to meet its liquidity obligations and does not require additional external funding.
At the end of 3Q14, the Group maintained a robust capital position, with the statutory CBR N1 total capital ratio at 16.5%, substantially higher than the minimum capital ratio requirement of 13% set by debt covenants. N1 ratio decreased by 300 bps from 19.5% at the end of 1H14 as a result of the phase-in of Basel III and the related operational risk measures. In 9M14, the Group's equity grew by 14% to over RUB 23 bn as net earnings were reinvested into the business.
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The management team will host an investor and analyst conference call at 13.00 UK time (16.00 Moscow time, 08.00 U.S. Eastern Daylight Time), on Friday, 28 November 2014.
The IFRS report will be available on the TCS Bank website at https://www.tcsbank.ru/eng/investor-relations/results-and-reports/
To participate in the conference call, please use the following access details:
Confirmation Code: | 7151199 |
Participants, Local - London, United Kingdom: | +44(0)20 3427 1900 | |
Participants, National free phone - Russian Federation: | 8 800 500 9311 | |
Participants, National free phone - United States of America: | 1877 280 2342 | |
Participants, National free phone - United Kingdom: | 0800 279 4841 | |
Participants, Local - Geneva, Switzerland: | +41(0)22 592 7953 | |
Participants, Local - Stockholm, Sweden: | +46(0)8 5065 3938 | |
Participants, Local - Frankfurt, Germany: | +49(0)69 2222 10623 |
A live webcast of the presentation will be available at: http://event.on24.com/r.htm?e=886056&s=1&k=33F816B8F4591069C90C6F2A3545F6B2
Please register approximately 15 minutes prior to the start of the call.
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For enquiries:
Tinkoff Credit Systems Peter Russell, IR Director +44 20 3691 2049 ir@tcsbank.ru
| Tinkoff Credit Systems Darya Ermolina, Head of PR + 7(495) 648 1000 (ext. 2009) d.ermolina@tcsbank.ru
|
FTI Consulting London Larisa Millings +44 (0)20 3727 1364 | FTI Consulting Moscow Olga Lundquist +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, a renowned Russian entrepreneur with a long track record of creating successful businesses, the Group has grown into a leader in the Russian credit card market. As of 1 November 2014, the Group has issued over 4.8 mln credit cards.
In addition to a market-leading credit card offering, the Group has developed a successful online retail deposits programme. The Group's other innovative lines of business include Tinkoff Online Insurance, which enables the Group to underwrite and sell its own innovative online insurance products, and Tinkoff Mobile Wallet, mobile payment solutions and financial services for Russian consumers.
As of 30 September 2014, the Group's total assets amounted to RUB 96.5 bn, net loans and advances to customers stood at RUB 74.7 bn and customer accounts (deposits) amounted to RUB 41.3 bn. In 9M 2014, the Group generated a net profit of RUB 2.8 bn and net interest income of RUB 23.1 bn.
The Group is well capitalised with the total capital ratio and Tier 1 capital ratio of 26.6% and 21.2%, respectively, in accordance with Basel III methodology.
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.