TBC Bank Group PLC

Good afternoon and welcome to the TPC Bank Group PLC H1 Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated in the right-hand corner of your screen. Simply click Q&A, scroll to the bottom, type your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company reviewed all questions submitted today and will publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to the executive management team of TBC Bank Group PLC. Good afternoon. Good afternoon.

Thank you all. Thank you for joining our call. And I would like to start today's call with the announcement of an interim dividend of 2.5 larit per share payable in October in accordance with our updated dividend policy to pay semiannual payments as announced last year. I'd also like to inform you that the Board of Directors has approved a share buyback program of up to 75 million larit out of which 50 million will be cancelled and the rest will be transferred to the Employee Benefit Trust in due course. We believe this is a good decision at the current price levels. Now turning to our second quarter results, let me highlight our key achievements during the quarter. We continue to be the market leader in Georgia with robust profitability and strong growth supported by solid capital. We also continue strong progress, leveraging our international growth potential. In the second quarter, the group generated a return of equity of 24.1%, while our set one ratio stood at 15%, which is above the minimum required level by 2.9 percentage points. And we remain the best capitalized systemic bank in Georgia. Our portfolio growth in the quarter was 23%, which strongly outperformed our normalized growth of 15%. In the second quarter, we continued to deliver impressive business growth in Uzbekistan. As a result, our retail loan book reached 180 million lari, while retail deposits exceeded 230 million lari. I am also delighted to report that on the group's level, the number of digital daily active users reached 1 million in June, while the number of monthly active users amounted to 3 million for the same period. Now I'd like to review the recent macro developments briefly on the slide number five. In the first half of this year, GDP growth in Georgia reached 10.5% despite adverse impacts of the war in Ukraine. We expect the growth to stay at around the same level during the second half of the year, resulting in an estimated GDP growth of about 10% for the full year. Also, on a positive side, the larry continued to strengthen again the dollar. The next slide shows the drivers behind the strong GDP growth. Recovery in tourism further strengthened during the second quarter and even exceeded 2019 levels in July, supported by the immigration impact. Exports also remained strong on the back of countries other than Russia and Ukraine. Importantly, in terms of trade, measured at export prices over the import prices remained stable, indicating the reasonably balanced net effect of the highly volatile commodity prices. So inflation remained elevated and stood at 12.8% in June, and it is expected to moderate on the back of the stronger Larry and decline the commodity prices. Now let's move to the slide eight here. I'd like to reiterate the group's positioning and highlight our first growth potential. First of all, we are the market leader in Georgia with diversified business across all market segments. Second, we consistently deliver robust profitability and steady growth backed by strong capital. Third, we stand out with advanced omnichannel distribution with best-in-class digital customer proposition and largest ecosystem network. In addition, we have the fast-growing payment business in Georgia and Uzbekistan. And finally, our Uzbek operations give us a strategic advantage to deliver long-term growth and profitability. In line with our group's strong market position and growth strategy, we continue to increase the number of our customers every year, and at the end of June, we had 3.7 million active users in two geographies. Moving on to slide 9, we show our leading position in Georgia. As you can see from this slide, we hold leading positions across all segments. We study growth levels. These leading positions indicate resilience and diversity of our business model and allow us to extract significant cross-segment synergies and efficiency. On the next slide, I'd like to summarize our key financial results for the second quarter. As already mentioned, we generated strong results in the second quarter, with the return of equity standing at 24.1%, while the return of assets amounted to 3.7%. The year-on-year decrease in net profit was related to high base a year ago due to provision recoveries and one-off gain from the disposal of invested property. As expected, our cost of risk started to normalize and amounted to an annualized 0.9% in the second quarter. Over the same period, our cost-to-income ratio slightly improved and stood at 35.3%. On the slide 11, I'd like to share with you an update on our digital ecosystems. We have the largest digital ecosystem in Georgia that consists of four digital verticals, lifestyle, housing, auto, and e-commerce. We have 1.75 million unique visitors across all verticals, which is around 40% of the internet traffic among the Georgian websites. Our ecosystems allow us to leverage our large customer base and to data hub capabilities to first generate a net fee and commission income. Second, create leads for loans. Third, strengthen customer loyalty and locking. And finally, increase customer engagement. The following slide gives more details on the results of our digital ecosystems. Total gross merchandise volume is growing rapidly and as our users are becoming more engaged. Our main sales performance indicated GMV and GMV per user have increased by more than three times year-on-year. At the same time, number of lead generation has more than doubled year-on-year and a loan conversion rate grew to 8%. As a result, the loan disbursements reached to 22 million lari, accounting for 6% of our total retail loans disbursed during the quarter. Let's move to slide 13, which illustrates a strong growth of our Georgian payment business. In the second quarter, the volume of POS transactions and transactions conducted by TBC cards grew by around 30% year-on-year. It is important to highlight that our payment business is a significant contributor to our fee and commission income, accounting for around 30% of the total. On the slide 14, you can see our digitalization metrics, both in Georgia and on the group's level. We have strong progress in expanding our digital footprint on the group's level. As already mentioned, we have up to 3 million active digital users every month, while daily digital users exceeded 1 million in June of this year. Most importantly, our transaction offloading continues to be high at 99%. In consumer lending, we issue 60% of loans digitally, while 70% of our deposits are issued outside the branches. Now I'd like to update you about our continued progress in Uzbek Bank operations in more detail, starting on the slide 15. By the end of June, the number of downloads of our EBC UZ application increased to 2.4 million, while the number of registered users was 1.8 million. At the same time, we reached 236 million Lari in deposits and 181 million Lari in loans. As the business is growing successfully, we invested additional capital in TBCU's bank in the amount of $21 million, while our partners IFC and DBRD injected $7 million each to support our expansion plans. Finally, on the slide 16, I'd like to highlight the strong performance of our payment subsidiary PayMe, which is the second largest payment provider in Uzbekistan. In the second quarter, PayMe continued its rapid growth in all major metrics. The number of monthly active users doubled year on year and reached 2 million at the end of June, while the total payments volume increased by more than 50% year on year. Over the same period, the revenue and net profit continued impressive growth and reached 12 million lari and 7.1 million respectively. Now, I'd like to hand over to Georgi.

Thanks, Vakhtang. And as usual, I'll go over the financial performance, starting from the slide 18. And as Vakhtang mentioned, it shows very strong offset financial results. In Q2, our net profit is up by 5%, quarter on quarter, on the back of the very strong income generation, And our ROE stood, as I mentioned, 24.1% and ROA was 3.7%. On annual basis, our net profit decrease is due to high base a year ago, mainly actually related to the provisional recoveries and gain from disposal of a real estate property. Now turning to slide 19 that shows our growing and diversified revenue streams. Our NIM continued a very positive trend in Q2 and amounted to 5.8%, up by 20 basis points on quarter basis and by remarkable 80 basis points year-on-year basis. The strong growth in NIM was mainly driven by loan composition and loan yield effects. We also recorded 17% growth in non-interest income year on year and 29% increase on quarterly basis, which was mainly driven by strong FX gains and net fee and commission income. Now, as you can see from slide 20, we maintained our high efficiency levels. The cost growth in absolute terms was 29 million or around 21%, out of which circa 30% was due to our Uzbekistan expansion. However, we continued our positive cost-to-income job trend, and our cost-to-income ratio decreased both year-on-year and quarter-on-quarter basis, and stood at 35.3%. Now, slide 21, where I would like to present our strong asset quality. Our MPL decreased both on year-on-year on quarterly basis and stood at 2.3%. MPLs improved significantly on year-on-year basis due to resumed repayment of restructured loans in retail and MSME. Also, our total NPL coverage ratio remained very strong at 168%, comprised of 100% provision coverage and 68% collateral coverage. In Q2, the cost of risk started to normalize after the recoveries in 21, amounting to 90 basis points. The largest increase is coming from the retail due to the acceleration of consumer loans. Now going to slide 22 that provides a brief overview of our loan and deposit portfolio growth. We maintained our leadership position in both areas. Our loan book grew by 23% year-on-year on constant currency basis, while our deposit portfolio increased by 30% year-on-year without currency effect. Slide 23 shows our solid capital positions. CET1 ratio stood at 15% at the end of Q2, 2.9 percentage points above the minimum regulatory requirement. All other tiers were also comfortably above all regulatory requirements. One thing I would like to highlight here that you probably this audience not aware, these ratios on a local basis, and if you translate them on Basel III basis, they are around 250 to 300 basis, but it's more. Therefore, when I'm saying like 15%, it's more like 70 to 80% on the Basel basis. And based on these strong capital positions, we are happy to distribute interim dividend of 2.5 Lari per share and declare share buyback, as Vakhtang already mentioned. Now moving to slide 24, where I will conclude my presentation with funding and liquidity summary. As you can see on this slide, we have a well-balanced funding structure with high customer funding share of around 72%. Also, our NSFR and LCR ratios, we are comfortably above the minimum reg limit of 100%. Here also, those ratios are on local basis. Our LCR ratio on a Basel basis is around 223%. Now, I would like to hand back to Vakhtang, who will update you about our medium-term targets and future outlook. Now, up to you, Vakhtang.