TBC Bank Group PLC

Thank you, everybody, for joining our first quarter results call this afternoon. As usual, I'm joined on the call by our CEO, Vaktan Butskirikidze, and our CFO, Georgi Megrelishvili. And we'll also be joined today by our head of international, Oliver Hughes, who'll join for the Q&A part of the call. As usual, we'll have a presentation, first of all, and then we'll move to Q&A. And with that, I'll hand over to Vaktan. Thank you.

Thank you, Andrew. Good afternoon, everyone, and thanks for joining our first quarter financial results conference call. I'm happy to start our call with some good news. Our board has approved quarterly dividend distributions to enhance shareholder value through more regular terms. As a result, the board has declared an interim dividend of 1.5 lari per share for the first quarter of 2025. Moving to our quarterly results, slide 4 presents some of the key financial and operations highlights from the first quarter of this year. I am pleased to report a strong start of 2025, which is particularly welcome given the uncertain global backdrop. Our net profit reached 319 million Lari, up by 7% year-on-year. At the same time, the Group's return of equity in the first quarter was about 23% in line with our medium-term guidance. In Georgia, we maintained a high profitability with an excellent return of equity of 23.3%. Double GDP growth in our loan book was to maintain a solid capital position during the volatile times. Over the same period, Uzbekistan's loans and operating income both more than doubled year on year and I am delighted to report that as of April, we have more than 20 million unique registered users there, which is more than a half of Uzbekistan's population. In the first quarter in TBC Uzbekistan recorded a non-recurring impairment charge of 24.6 million Lari, relating to a market-wide data integrity issue affecting our borrower income verification processes. Without this, Uzbekistan's profit and the return of equity would have been 42 million Lari and 26.6% respectively. I think it is important to say that we spotted this issue quickly, have adjusted our underwriting and anti-fraud processes, and move on, and we are expecting a stronger second quarter. I also want to highlight that we are very pleased with our robust new digital product pipeline in both geographies, with very strong issuance of TBC cards in Georgia and Salom and Osman cards in Uzbekistan, as well as the recent launch of MSME lending in Uzbekistan. Now shifting focus on Georgia, let's examine the broader macroeconomic environment. Georgia's economy remains extremely robust at 9.3% real GDP growth in the first quarter, with inflation at 3.5%, slightly above the target of 3%. International organizations such as the World Bank and Monetary Fund expect economic outlook to fall this year around 6%, which is broadly in line with our in-house projections provided by our macro team in TVS Capital. On the next slide, we can see our solid balance sheet growth in Georgia in the first quarter. Our gross loans increased by 13%. In the retail space, we have been reengineering all aspects of our fast consumer loan offerings, and we have seen a 52% year-on-year increase in the first quarter. Over the same period, our total customer deposits grew by 9%. Next slide shows the growing trend of our digital engagement within our retail customer base in Georgia. As of March, our digital monthly users reached 1.1 million. At the same time, our daily active users to monthly active users ratio stood at 47%, up by 3 percentage points year-on-year. I'm also pleased to highlight the ongoing long-term trend of increasing digitalization within our Georgian business. Our customers are highly engaged with our digital channels, as evidenced by the growing share of fully digitally issued consumer loans and retail deposits, which stood at 79% and 68% respectively, both continuing to show a strong upward trajectory. Next slide gives an update on our new TBC card launched in the last quarter of the last year. With the help of this new flagship daily banking product, our number of issued debit cards almost tripled year on year, and it helped to add 100,000 new debit card holders in our user base in the first quarter. Now let's move to our Uzbekistan business and its economy. The Uzbek economy also remains very strong with a real GDP growth of 6.8% in the first quarter and international organizations forecasting around 6% GDP growth in this year. Inflation remains elevated at 10.3% as of March and it will take time to reduce this to the target level of 5%. Next slide shows our performance in Uzbekistan. As I mentioned earlier, we now top 20 million unique registered users, of which more than 6 million are monthly active users, adding an incredible 1.4 million monthly active users year-on-year. Our loan book more than doubled year-on-year, reaching more than $770 million, while our deposit increased by 85%, totaling $440 million. Our operating income grew exceptionally strongly, reaching $57 million in the first quarter, which represents a 118% year-on-year increase. Net profit came at $8 million, or $15 million, adjusted for the one-off charge. Now let's turn to the new products. Our Salon card daily banking product and Osman credit card have both seen strong early success that has exceeded our expectations, with more than 220,000 Salon and up to 50,000 Osman credit cards issued by the end of the first quarter. We have also recently extended our MSME digital banking offering as we took to develop the huge untapped opportunity within the MSME sector in the country. I'd like to add that at the end of April, the Central Bank of Uzbekistan announced plans to phase in, until 2029, regulatory changes that will limit the respective share of microloans, credit cards and car loans in the bank's credit portfolios to 25% for each segment. We do not see this impacting either our this year guidance or our long-term growth and profitability plans. We now have a diversified product offerings including our core instant cash loans, credit cards, POS and BNPL loans and MSME lending and we remain excited about the huge growth opportunities ahead in Uzbekistan. Next slide shows how we continue to gain market share. By the end of the first quarter, we held more than 17% market share in unsecured consumer lending, and over the same period, our market share in retail deposits reached 4%. Next slide shows how TBC Uzbekistan is becoming more and more material contributor to the group, in particular contributing over 20% of the group's operating income in the first quarter. I'd also like to highlight another important milestone achieved in the first quarter, with the creation of the new hold in Uzbekistan, TBC Digital, in which TBC Group owns 80% and our IFI partner 20%. Through this process, we folded our two businesses, TBC Use and PayMe, into a single shareholding structure, enabling us to more effectively unlock synergies and increase shareholder value in Uzbekistan. With that, I pass the floor over to Georgi.

Thank you, Vakhtang, and thanks all for joining our call today. Let's now move to the financial results for the first quarter 25. I am pleased to report that we delivered another quarter of consistent and strong profitability. Our net profit for the first quarter reached 319 million lari, up by 7% year-on-year, while the net profit, if we adjust for the one-off charge, was 330 million lari, with growth of 14% year-on-year. As you can see, ROE stood at a strong level, over 23%. Even given the stabilization in cost of risk and Georgian NIM and after the run of charge, it still remains aligned with our group's mid-term target of maintaining it above 23%. For the same period, the underlying ROE would have been 24.2%. Now let's look at our With income streamless performance, our total operating income grew by an excellent 25% year-on-year, reaching 774 million lari, with a very strong growth in both interest and non-interest income. In the first quarter, our net interest income stood at a record high level of 500 million lari, up by 20% year-on-year. Over the same period, our non-interest income reached 240 million lari, up by 38% year-on-year, including 42% growth in net fee and commission income. That is actually driven by our payment business in both Georgia and TBC Uzbekistan. Now, let's have a look at our margin dynamics. Also in Georgia, we saw a bit of NIM sliding down, mainly to the higher larifunding costs. We successfully maintained a stable NIM of 6.7% during Q125. Going forward, we would target to maintain NIM in Georgia around the current level for the next few quarters. Now let's move to the next slide that actually outlines our cost management approach. We are committed to maintaining disciplined cost control while also we would like to invest in a sustainable growth of our businesses in both countries. Our cost grew by 25% year-on-year in Q1, driven by the continued growth of our businesses. Meanwhile, cost growth in Georgia was only 11% year-on-year, even with newly introduced resolution fund charge of around $4.5 million in Q1. Without this charge, the cost growth in Georgia was 9%. As a result, the group's cost-to-income ratio stood at 37.2% in Q1, flat year on year. Georgia's cost-to-income ratio was 31.8%. Now let's have a look at our credit quality. As already mentioned, in the first quarter, we had a non-recurring impairment charge of 25 million lari, This was actually related, as Václav already mentioned, to an issue that had an effect on number of lenders and banks in the market, and it was driven by a borrower salary verification process. It is important for me to highlight that we spotted the problem quickly, adjusted our credit and article processes quickly, put measures in place to ensure that it doesn't repeat. We believe now we have closed the loophole, learned from it, and we can move on. The underlying risk cost in Uzbekistan also slightly ticked up on strong loan growth, which, as you know, would require a flat loading per IFRS, as well as our strategy of testing some riskier but more profitable new segments. As a result, let's say, the core without discharge would have been 8%, which is at higher end of 7% to 8% range we broadly expected. I'd like to highlight that underlying credit quality for both countries remains very healthy. Now moving to our balance sheet, growth here remains strong. As of March 25, our gross loans grew by 18% year-on-year on a constant currency basis, and total customer funding grew by 12%, over the same period on the same basis. Now let's turn again to our Uzbekistan business. Aside from the Vanuk charge, it was a great quarter on all other fronts. Adjusted net profit for the business reached 15 million lari, more than double Earonia, with ROE 26.6%. This was powered by 118% Earonia growth in the operating income with an excellent contribution brought from NII and fees. Now let's look at our Uzbekistan financials in more details. We continue to maintain high margins, with NIM is up by around 50 basis points and stands at 24.7% in Q1. As already mentioned, the asset quality remained healthy, with an adjusted core of 8%, and the NPL stood at 2.1%. Now, let's have a look at our capital position. I'm pleased to say that even post the final dividends, our capital positions remained very solid. And we continue to maintain strong capital buffers comfortably above the regulatory requirements in both countries. Now, finally, I would like to reiterate that we do remain committed to returning capital to our shareholders. We have decided to move to quarterly dividends to provide more timely returns. capital return to our shareholders, confirming the good visibility we have on the business and strong capital discipline. The Board has approved a quarterly dividend of 1.5 lari per share for the first quarter of 2025, and we continue to expect to pay out dividends at the top of our guided range for 2025, it means 35%. And on this note, thanks to all of you, and I will hand back to Vahdan for some final comments before we open for Q&A.

Thank you, Georgi. And to summarize this part of the call, I'd like to revisit our strategy targets. And I'm confident the group is well positioned to build on the solid start of the year, to deliver strong results for our shareholders in 2025, and that we remain firmly on a track to achieve all our strategic targets for this year. So many thanks for your attention and we are happy to answer your questions.

Thank you. Please use the raise hand button or the Q&A box to register a written question if you've joined on Zoom. If you joined us on the telephone line, please press star followed by one on your telephone keypad.

OK, thanks very much. Our first question comes from Stephen Payne of Peel Hunt. Stephen, please go ahead.

Thank you very much for the presentation. Three questions, if I may. First one, with regard to the non-recurring impairment charge in Uzbekistan, could you just give us a little bit more colour around exactly sort of what did happen there, just to help sort of reassure investors that this is an isolated incident and it's sort of completely closed out?

Yes, hello everybody. I think I'll take this one. You can hear me okay? Yeah, good. So just to give you a bit more color, and then if you want me to take in different directions so we can drill down, then please feel free to do so. So the high-level description of the situation. Firstly, this is a one-off. So we discovered it quickly. As soon as we understood exactly what was happening, we closed it quickly. And this happened in, it was localized to January and February. It was actually localized more or less to three regions in Uzbekistan. So we have a good handle on exactly what happened. And we've implemented measures. I can give you some code on those measures to make sure this doesn't happen again. So this is something which is now done and dusted and provisioned. So just to give you a few high-level numbers so you can get a better feel for what it was. So we've discovered around $11.4 million of fraud. Some of that is in a question mark zone. So it could or couldn't be fraud, and that will develop over time. But we've taken a conservative number. We think it's $11.4 million. And it was just shy of 5,000 customers. Just to put this in context straight away, that's around 1.3% of our total gross loan book. So it's a number, but it's small. And every day we disperse 9,000 to 10,000 cash loans. So the total number was less than 5,000. So it's less than a half a day's disbursement. So again, it's a number, but it's very manageable and not material to our yearly figures in any way. So $11.4 million of what we believe to be fraudulent loans. It's now down to $10.4 million. So we've already recovered a million dollars. So around 9% and we're recovering every day. These customers are contactable because most of them are legitimate customers. And I'll explain exactly how this scheme works in a second. We provisioned 80%. As I said, we've recovered 10%. We think we can recover more. If we need to provision a little bit more, then obviously we'll do that. But we took the hitting quarter one for the 80%. So what exactly was this fraud scheme? So all banks in Uzbekistan use the tax registry database in order to verify income. So we have different categories of customers. We have customers whose income we can verify. We have customers' income. We can't verify because it's not in the tax database, and that's actually quite a large part of the population of Uzbekistan. We can find them in the credit bureau. We can use transaction data. We have lots of different data sources. One of the important ones is obviously the tax registry. There's a fraudulent ring, so it's professional fraudsters on an industrial level who went around Uzbekistan focused in three regions, but it wasn't localized entirely to those three regions, and basically recruited people on the street or in companies, cultivated them over quite a long period of time, and by, through a variety of means, compromised the data in the tax registry for these people. And there's a few ways that this happened. It's a bit of a hydrant, unfortunately, which is what made this one of the rather difficult to detect earlier on. So I'll just describe a few. These individuals received fictitious salaries, which were loaded to the tax database. But the companies were not real companies. Non-operating, so the real companies, but these people were not employees. So these are fictitious employees. Non-operational companies that still have the ability to upload data to tax registry. Legitimate companies where people actually worked, but a person on the inside was colluding with the fraudsters to upload fraudulent information to the tax database. In some cases, the, for example, chief accountant's account was hacked and fraudulent information was uploaded to the tax registry that way. And legitimate employees of legitimate companies whose income data was inflated. So as you can see, a variety of different ways done over a long period of time. It may sound strange, this particular scheme, because you would imagine that this would trigger a tax liability in the tax registry. But this is actually a legitimate tool or feature that legitimate companies use because, you know, things change. Sometimes mistakes have been made in reporting. So there's a feature which allows companies to go into the tax registry and change income data for their employees. And it was this loophole that was exploited by the forces, as I say, often with people on the inside and some of the employers. So it wasn't just a case of, you know, there's been a change to a tax record, therefore it's a bad customer because the overwhelming use case is legitimate. And I was saying that this sounds a little bit strange because it creates a tax liability that the actual change does not create a new tax burden. And actually in these cases, the fraudsters will then go back and change the information in the tax registry after the event. So we discovered this by not when we saw a spike in our first payment defaults, But earlier, so we have some offline locations, actually quite a few of them, over 200. And we saw some unusual people coming to these, we call them customer acquisition points. They're often in retail centres or busy areas. And so this signal went up to the fraud investigation team. who started investigating and started discovering these patterns and we started implementing measures to make sure that this didn't occur as soon as we understood the pattern. So what are the measures that we've implemented to make sure this doesn't occur? So as I said, just to reiterate, we've understood the pattern We isolated this within our portfolio to understand the quantum. It's now done and dusted. It's closed. But to make sure that this doesn't happen in the future, and also even if it morphs, because obviously for us it's a doubt, to make sure it doesn't happen in the future, I'm going to explain what we've done. So we've implemented a bunch of rules to make sure that when we're using tax agency data, we can identify fraudulent information that's been uploaded to the Bureau and we look at recency to make sure that it gets a higher weight in the fraud scoring. We're implementing a new anti-fraud in-house service which looks at employer velocity, it looks at behavioural patterns and analysis of employers themselves, basically it's employer scoring. Within the income fraud portfolio, we've identified some demographics and some regions which are high risk. As I mentioned a couple of times, this was mainly concentrated in three regions. So they get special treatments in terms of fraud monitoring and scoring. We're just about to implement cross checks with a pension database. And we have stepped up our verification. So we had a minimal manual verification process, but now we'll be, as soon as some trigger or some threshold is reached, we'll be routing that to manual verification. And we believe that this will make sure that we never have a repeat of this kind of frauds in the future, industrial level fraud. So that's, oh, maybe I should also say on the collection side, that we're working hard on collecting as much of this as possible. So a lot of these, because they were legitimate customers who worked in collusion with the fraudsters, they took a cut from the loan that they received. These were customers who had a verifiable income, but as it turns out, income that had been tampered with or fraudulently uploaded, but they didn't have a credit bureau history. So we're working with these people. We've launched mass litigation We've launched special collections processes, and we are still collecting, as you can see from the recovery rate of around 10% and growing. So we will continue to work very hard on that front to make sure we recover as much as possible. Andrew, Georgi, I'm not sure if you wanted to add anything to that, but that is basically a fairly detailed description of the situation.

You call it to the full, Oliver.

Stephen, do you have any follow-ups or other questions?

Yeah, thank you very much. That was a very detailed explanation. Okay, I think that gives us a lot more clarity. I mean, maybe the second question, maybe I'll just touch on the, again, in Uzbekistan, the regulatory change that we've seen come through from the central bank, which I know sort of Moody's actually welcomed recently. uh in terms of limiting the micro loans to individuals to 25 of the total loan portfolio um just trying to say what sort of proportion of the portfolio they account for currently and how you see that sort of panning out through to the dates in 2029 sure so um this is something which has been uh on the on the agenda the discussion agenda for a few months

The central bank has been talking to the banking sector and including themselves obviously as a leading consumer lender. So the reason why they've done this is firstly to rebalance, as they say, the national loan book. And they want to put a lot more emphasis on the growth of MSME. So they would like to see, over time, banks putting effort into growing SME lending. And the second reason is that there's absolutely no signs of distress in the national loan book or in our loan book, and there's no cycle in Uzbekistan. It's still a very low level of credit to GDP, so it's around 12%, 13%. And microloans is an even smaller share of that, obviously, so it's 3% or 4%. But they want to make sure that nothing gets out of shape in terms of the national loan book. There's no distortions in the market, no overheating or abstention of credit. So they want to slow it down over time, gradual change, hence the long adaptation period to make sure that there's no bubble created and problems down the road. So those are reasons why they've been discussing why they made this change. As Vajo said, it applies to microloans, which is unsecured personal loans. That's what they call it in Uzbekistan, to credit cards. And auto loans has already been capped at 25% for a couple of years now. So the cap was introduced from the 1st of January, 2029, at 25%. Right now, we're obviously mainly what used to be called a monoline. So on the asset side, 90% or so of our loan book is microloans. But we have a very well-communicated product development roadmap. We were obviously medium-term planning to diversify our loan book and launch new products, which we've been doing, as you know, very active recently. So we launched credit cards in the autumn of last year, and that's growing nicely. We were due to launch MSME loans a little bit later this year, but we accelerated this in the light of our conversations with the regulator, knowing what was probably coming down the tubes, which has now been published. So we'll, if you think about our business, we'll still be growing our consumer loans, microloans, up quite a trot. But that will be growing over time at a lower rate than other products that will be launching our public development roadmap. Credit cards, which are capped separately, so they don't come with a microloan cap. They've got their own separate cap of 25% in the portfolio. That will be a large part of our business going forward. Point of sale loans or installment lending, that is not capped and that doesn't come with a credit card or the microloan cap. and that's already 10% of our business if you look at a group level and that will continue to grow. We have big plans for that as we've talked to investors about many times. SME will be a material part of our loan book by the end of this year and obviously over time will become a very big number in terms of our loan book if you think four years out. So The CB has given us a long adaptation period. The whole of the market is long adaptation period, but it overlays nicely on what we were planning to do anyway. So we've had to reject things a little bit in terms of sequencing, but it makes no difference to us in the longer run. We have reiterated that we will deliver on our guidance this year. And in the longer run, we've been explaining to the market how we think in terms of the opportunity set in Uzbekistan, say $2.5 billion worth of loan book. And that is something we stand by as well. So this is all achievable with all of the different products that we'll be launching. Just to finish this off, we will be moving into secured lending as well. So auto loans is something we've been thinking a lot about. and maybe other forms of secure lending, certainly on the MSME side. So this will also be something that will come into the loan book over time, change the loan mix, and will help us achieve these longer-term soft guidance we've been talking about.

But what is Oliver saying? Opel has set these regulations in line with our lockdown strategy in Uzbekistan, as Oliver said already, because To remember you from the middle of the last year, we already began to work on the credit cards and we launched already in the first quarter. We mentioned in our presentation today that we launched already in mid-September. The long-term business plan, which we had already, is exactly approximately the same. We made very tiny changes in our existing long-term plan, but it's exactly the same what we want to achieve in 2027 to 2028.

And if I could just maybe add just one other thought here. So regulation obviously always requires a bit of adaptation. It goes without saying. And smart players and good quality players know how to adapt. But the more regulation there is in consumer lending, the safer the market for everybody. So it means we have PTI, which is rigorously enforced in Uzbekistan. We have rate caps. We have now portfolio caps. with this long adaptation period. We have a ban on FX lending to consumer. We have risk weights, which are actively managed up and down. And so this makes it a well-regulated market. with a lot of the regulation you would expect to come at a later stage, given the level of development of the market at an early stage. And it means that the likelihood that someone is going to overextend credit or compete irresponsibly and extend credit to our customers and blow our customers up in our portfolio is drastically reduced. So obviously it makes a much healthier environment to work in, which is great.

Stephen, that's answered your questions, yeah? Stephen, I think you're on mute.

Sorry. Yes, that's brilliant. Thank you. Maybe just one quick last one on Georgia. I mean, clearly the economy was very strong in the first quarter, and that's where the bulk of the operations are. Just in terms of the momentum that you're seeing in the business sort of moving into the second quarter?

I think this momentum which we had in the first quarter will be continued also in the second quarter and we more or less know what happened already in April and probably the growth will be approximately on the same level we know already in April and it will be approximately on the same level what was in the first quarter and our internal forecast that for the economy growth will be delayed, just a minimal delay. Just today there was a meeting with the Minister of Economy and they forecasted a minimum GDP growth of 6.65% and I mentioned in my presentation that the Monetary Fund and the World Bank forecasted a minimum 6.56%. So, these are the realistic assumptions and we believe that also the second quarter has to be very strong for TBC and GEOGEN operations.

Okay, great.

Thank you very much. Thanks very much, Stephen. And the next question comes from Augusto Uribe. Augusto, please go ahead. I think you're on mute, Augusto. You need to unmute. Hello?

Maybe try changing the queue and go back to Augusto later on.

Yeah.

Thank you. We do have a question on the telephone line from Rahim Karim with Investec. Rahim, your line is open. Please go ahead.

Good afternoon. I'd like to ask a question on cost of risk. I appreciate some of the comments that were made on an underlying basis around the move in Uzbekistan about April. in the quarter. Be helpful just to get a bit more colour on how you see that evolving and appreciate the impact from product innovation and the desire to try and broaden the product mix out. If you could just help us think about how that evolves for the rest of 2025 and possibly into the medium term. A second question was just around the outlook for NIM in Georgia into the next couple of quarters. Feels like base rates might be coming down. I don't know if it would be useful to get your sense on that, but how we should think that evolved. It felt pretty solid in the first quarter. So how you think that might evolve would be helpful. And then finally, just any comments you might have around cost-to-income ratios for 25 across both businesses if possible. Thank you.

Let's start with cost of risk in Uzbekistan. Thanks for the question, Avakim. So we, as you quite rightly say, adjusted for the fraud, which happened in quarter one. We came out around 8%, which is the kind of higher end of where we've been soft guiding to. So we've been saying we're going to tick up our risk. to the seven to eight percent area um and i'll explain why that's happening so we've been doing obviously a lot of growth as you know um we've been doing a lot of testing we've been testing new segments uh to understand well basically you have to test together data build your models we also have to test to understand where the interesting segments are in terms of mpb And so tests have a cost because they have a risk associated with them. That's one of the reasons. The second reason for the cost of risk going up is front loading from high growth under IFRS 9. And we grew by 24% quarter and quarter in the first quarter of 2025. And so, you know, some very strong growth continuing. And the third reason is that we have some operational stuff going on. We have some of it seasonal. So this means that our cost of risk has been drifting up a little bit. It may go up a little bit more as we go into quarter two, but the underlying credit quality and the underlying portfolio metrics that we see, also NPLs and first payment default, they're more or less where we'd expect them to see. So we expect to finish the year probably in the same corridor of around 7% to 8%. So fundamentally nothing changing. There's certainly no cycle. There's no signs of any stress in the portfolio. This is all planned stuff as we look for the various segments that we can enter. If you just think of, for example, one of the big tests is in-file customers. And so we started our lines in Uzbekistan, tackling more the income segments and segments with credit histories. And then we expand it into other segments. We use telco data to do that. We use the transactional data to do that. And some of them are not just thin file, but no-file customers. In order to gather data on them to understand whether we can do business there and what happens with our models to gather the data to build those models, we have to move into them. And obviously, it's higher risk in those no-file segments. And another area is in point-of-sale lending, so PayMeNASIA. We've been going to the long tail of merchants. So we started with the top merchants, then moved to the next level of the top, next 20, top 20 merchants. And then we moved into long tail where the risks are a lot higher. So we gather the data and I'll build our models. We'll switch them off. We'll continue to work with some. So this is absolutely normal growth stuff. As I say, we're very happy with the underlying credit quality. apart from the fraud that we held in the first quarter. So you should still think of the seven to eight range going towards the end of this year and then probably moving into next year.

Okay, thanks. I'll take the rest of the questions. Just one thing to add to what Oliver also mentioned is just if you look at Taiwan NIM because testing of these customers about higher risk also translates into higher like NIM and profitability. For example, as I mentioned, NIMKIC had topped by 50 basis points. Therefore, that is, I would say, net profit and draw is attractive over long term. So that's kind of one of those inputs into our profitability. Now coming to your questions, one was on NIM, the second one on cost to income. I'll start with cost to income, continuing with our TBC Uz business. So in TBC Uzbekistan at the moment, we do expect cost to income ratio to go down, but that's not our major focus at the moment, because business is growing. We are developing new products, technological capabilities. The key focus on us to create very strong ground for future growth and to hit our targets. So ultimately what we are committed is that we will deliver profitability. We will deliver the targets we communicated to the market. We are going to communicate new targets for the kind of around November this year at our Capital Markets Day that we will communicate in a dual course. But ultimately, we view cost as the support, how to drive the business profitability and growth. But again, we do expect cost-to-income to slightly start coming down. On Georgia, as I mentioned, the cost growth normalized. So we had 11% growth even with the newly introduced fund, the resolution fund. now actually exist in all other countries, it was 11%, we sold it 9%. But in Georgia we are also growing, we are also putting new products, automation, supercars, doing many other things, so we need to invest. However, the growth will be much lower, maybe kind of low teens and around that level, but we expect our income to grow at a higher pace. So at the group level, to translate it, we are going to stay more or less this year where we are, like around that level maybe, to some changes. We don't really like kind of anything below like mid to high 30s review is absolutely normal for our business. Now moving to our NIM, net interest margin, like at the moment we landed quarter 5.5%. That's probably the range we have been talking about. Mid-fives is something we will stay in a medium term, maybe some quarters a bit higher. Less likely to be a little lower, but it may happen, but not highly. So probably somewhere mid-fives. And as I mentioned in Q1, we also had higher large funding costs that was due to kind of large shortages in markets. We also higher, let's say, liquidity position because during this situation we prefer to have high buffers and now it's kind of at the moment we are going to actually deploy those buffers so in q2 we definitely don't expect to go down maybe higher but over let's say medium term as i mentioned mid five is the right level to think about that's very helpful thank you mike

Thanks, Rahim. Do you have any other questions on the phone line?

We have no other questions on the phone line at the moment, but please press star followed by one if you would like to.

Okay, we have Augusto is back with us. Augusto, please go ahead and unmute yourself.

Thank you. Thank you. Sorry for the technical difficulties earlier. I just have one quick question. Can you give us some color in the oil and gas exposure and export exposure of your loan book, both in Georgia and Uzbekistan, please? Thank you.

So, maybe I'll take. In Uzbekistan, we have consumer loans at the moment is zero. So, at the moment, I don't have any customers that I would say to work with oil gas companies, that's it. So we can consider zero. In Georgia also, Georgia is not oil, let's say, production country, we don't have any, like, maybe some petrol importers, so we can consider that we don't have much exposure from this perspective. Probably zero, closer to zero, yeah. Yes, and generally for other sectors, we have very strict mandate and scale policy. We manage our concentration risks generally. Here it's zero, but in all other segments, we don't kind of overload any particular, let's say, either sector or a segment. So that's part of our risk.

Thank you. Thanks, Augusto. Next question is from Dan Mikhailov. Dan, please go ahead. Can you open Dan's line? So, probably... Sorry Dan, we can't... Here we go.

Hi. First of all, thank you for the call. Congratulations on the results. I just had one question on the cost of risk in Georgia and how we should think about it going forward. We saw a sequential spike in retail cost of risk and CIB cost of risk as well as SMEs. What do you think is a sustainable level of cost of risk in Georgia going forward?

Thank you very much. So we have been guiding our normalized cost of risk around 1% through the cycle. And like 80 basis points is a very healthy level for our business. So there is some factor of seasonality as well in Q1. For example, if you compare to Q1 last year, it was 70 basis points. You mentioned CI because of this has been zero for a very long time. It can't be zero forever. We are doing business. We are in bank. We are kind of lending. So there is some cost of risk, but it's a very healthy level. So, we saw some small upsticks, but again, it's well below our kind of normalized risk profile. And generally, we do expect around 80 to 100 basis points on a, let's say, normalized basis. We don't expect to go beyond that in Georgia. Short-term quarters may be lower, for example, but that is the right level to think about. As I mentioned, particularly in SME segments, the seasonality Q1 also kind of impacts if you look at the statistics. But again, all credit parameters are very healthy, very strong in Georgia. We don't have any concerns whatsoever. Did I answer your question?

Yes, thank you. No more questions for me. Thanks, Darren.

Next is Parth. Parth, please go ahead.

Wonderful. Thanks, Andrew. And just one question for Oliver. I think many spoken past on a couple of occasions, we have the expectation setting that you want to hit 10% market share in Uzbekistan and the medium term beyond 2025. And now we have seen this portfolio weight regulation. So is it fair to presume that you would still hit that market share but on an overall portfolio basis? Number one and number two, is the profitability profile in the medium term less attractive than what it was a couple of quarters ago because now you have more fixed that's potentially name dilutive and your expectation of normalized cost of risk has gone up because i think ever since Uzbekistan business started gaining steam the understanding was the normalized cost of risk of 600 basis point which has now gradually moved up to 800 basis point So directionally, it seems like profitability seems like a headwind, of course, relative to what we expected three quarters ago, if you can unpack these couple of topics.

Thank you. Thanks for the question, Parth. So on the market share, so we don't really think in terms of market shares. It's just a way of helping you get some of the numbers that we were thinking about in terms of the opportunity setting in Uzbekistan. We do not have market share targets and, you know, it's 5% or 15%, so it's kind of less important than what we actually have in terms of our loan book and the economics of that loan book, yeah? And also the rest of the business alongside it.

The way to jump today in microloans, we have 17% and the total retail loans more than 4%.

Exactly. So we're more interested in having a loan book irrespective of the composition of $2.5 billion plus, three, four years down the line. That's how we think about this. So there was never a plan to do two and a half billion or three billion dollars worth of microloans because that's probably not sustainable in the market. So we were always going to roll out other products and services which would help us to get that. So as I mentioned earlier, that's point of sale loans or instalment finance It's credit cards, it's probably going to be auto loans down the line, and it's definitely SME lending. And SME lending, we started with unsecured, but we'll also go down into secured over time as we learn this business. And who knows, maybe some other loan types, which we'll start looking at. For example, BNPL, we're starting to dabble in that, actually rather successfully given the early signs at the moment. So, the loan book makes, we have a rough idea to be communicated over time. And just to remind you that we'll have our CMD later this year, towards the end of the year, and we'll be giving three-year guidance and we'll be able to give you a little bit more detail about that in terms of, you know, how we think this mix will pan out. But we'd like to give a bit of flexibility. So, market share is not the name of the game. As Barco says, we're already at 17% in microloans and growing. But we're thinking of the other opportunities which will be driving the loan growth as well as we go along. And that feeds into probably my answer to the second question, which is that the loan book mix will change and you'll see it changing by the end of this year. It'll be a dynamic thing as we go along over the next three or four years. with different slices of different products contributing to the loan mix. And that changing loan mix will change the overall shape of our NIM. So I would expect, and you'll be seeing that playing out this year, the gross yield starting to come down and that's as we move into different products but also as we move into better quality segments. What does that mean? That means that we're going to be issuing loans to more affluent or mass affluent customers so they have bigger tickets lower risk, a lower margin. So that's already going to be changing the shape of our portfolio economics. So the gross yield will take down. Our funding costs will be ticking down. Medium term, we expect our NIMS still to be around 20%. Our ROEs, we've always said longer term, we believe we can get to 30% plus. And I think if you look at the adjusted numbers for this first quarter, you can already see that we're definitely still moving in that direction. As we achieve more economies of scale, obviously that helps propel us in that direction. And then lastly, on the cost of risk. So we've been ticking it up because we were taking too little risk. We needed to look into different areas. based on our NPV based approach to understand where we can do business in new segments, new products, new channels. And so that meant we were going to be ticking up to where we are now around 8% adjusted for the first quarter. Longer term, going back to the first point I made, as the loan mix changes, we'll be moving into better quality customers in our existing product lines. and moving into lower margin products as well, particularly secured when we get there. So that means that our blended cost of risk will move down over time as well. So just to wrap that up, it doesn't change the economics of our business and our predictions as to where this will take us in terms of ROE and ROA. So the yields will come down as low mix changes, the deposit, our funding costs will come down and our risks should tick down as well over time. I hope that answers your question.

Yeah, it does answer my question. I think my understanding was a couple of quarters ago with the credit cards mix going up in the portfolio, the gross fees were presumed to go up in the medium term, but it looks like you're now shifting much more faster towards secure and other products, which could potentially bring it back to the current level. No, this is helpful. That's what I'm alluding to.

We're not doing any secured lending at the moment. That's probably what we're doing at the moment. But we're moving into MSME loans. We're moving into a different type of borrow on the cash loan business.

Wonderful. That's helpful. And I think we'll have more stuff to talk about later this year. So thank you.

Thanks very much, Paul. Are there any other questions on the phone line?

We have no questions on the phone line.

Okay. doesn't look like we have any more questions on the call yep okay i think no further questions so um just to say thank you everybody for for joining this call We very much look forward to hosting you again in August when we publish our second quarter results. And, you know, please feel free to keep in touch and hope to speak to you soon. Thank you. Thank you. Thank you.

This concludes today's call. Thank you very much for joining. Your line will now be disconnected.