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.