TBC Bank Group PLC

Recording in progress. Welcome everyone to the TBC Group First Quarter 2026 IFRS Results Conference Call. My name is Lucy and I'll be your moderator today. If you wish to ask a question during the webinar, please use the raise hand button if you've joined up the call via Zoom. If you've joined us on the phone, please press star followed by one on your telephone keypad. Alternatively, you can use the Q&A chat box to submit a text question. It is now my pleasure to hand over to Andrew Keeley, Director of Investor Relations, to begin. Please go ahead.

Thanks very much, Lucy, and thank you, everybody, for joining our first quarter results call today. As usual, I'm joined on the call by our group CEO, Vakhten Boutskere-Kidze, our group CFO, Georgi Magrilishvili, and our head of international, Oliver Hughes. We'll start with a presentation, and then we'll go to Q&A. And with that, I'll hand over to Vakhten. Thank you.

Thank you, Andrew. Hello everyone and thank you for joining us today. I am pleased to present our results for the first quarter. We made a good start to the year delivery. Group's net profit of €365 million up by 15% year-on-year, with return of equity of 23.4%. Georgia had another strong and consistent quarter, with net profit of €362 million up by 14% year-on-year, and return of equity of 24.1%, helped by a decent start to the year in lending as loans rose by 2% year-on-year. In Uzbekistan, as we had previously guided, we continued to recalibrate our loan book in the first quarter, which impacted our revenues and overall profitability, but that profit was still up by 14% year-on-year, with double-digit return of equity. But we continue to successfully diversify our loan book, including building out our business lending with more than $150 million portfolio and it is a very good momentum across our core verticals and product pipeline. Overall, following the first quarter, I believe our growth outlook for the full year remains on track. Turning now to Georgia. Georgia's economy continues to post dynamic growth, with real GDP growth accelerating to 9.5% in the first quarter. As elsewhere in the world, the Middle East conflict has impacted inflation, which has ticked up to 4.3% in March. In response to today, the National Bank of Georgia has raised the refinance rate by 25 bps to 8.25%. Reflecting the strong start to the year for the Georgian economy, we can revise upwards our GDP growth outlook to 7.4%. Slide 7 simply highlights the consistently high profitability that our Georgian venture generates, with many serial quarters of return of equity around the mid-20s. One additional observation is that you can see the first quarter is typically a bit softer than following quarters, which is something we expect to see this year as well. We continue to be a leading player across most key banking segments in Georgia with 37% share of both loans and deposits. The first quarter saw decent growth with gross loss up by 2% quarter on quarter and rising by 12% year on year. Cash loss continued to show strong growth while we also had a very decent 15% year on year growth in CIB business. Meanwhile, our customer deputies are up by 40% year on year. Slide 9 shows how digital engagement among our retail customers in Georgia continues to grow. With digital monthly active users up by 90% year-on-year, and our Dow-to-Mow ratio now standing at around 50%, a good achievement as more of our customers interact with us on a daily basis. We also continue to see the high share of unsecured consumer loans and retail deposits issued fully digitally. Now I am pleased to share that we have been received increasing recognition from our innovation, technology and digital customer experience, including recent awards from The Banker, Global Finance, Euromoney and The Digital Banker. These awards reflect the efforts we have made to provide the best possible customer experience for our customers. Now let's turn to our Uzbekistan business. to post remarkable growth, with real GDP growth of 8.7% in the first quarter. Inflation moderated to 7.1% also as of March. However, recent increases in global commodity prices are likely to push inflation in the near term. On the slide 17, we continue to see very strong traction across the businesses. Our daily banking project continues to scale. We sell our card issuance now at about $1 million, and those from credit card issuance at about $180,000. We see high activation rates across both projects, and both are starting to become more material contributors to our deposits and loan books. Payments' total value in the first quarter reached $2.6 billion, up by 40% year-on-year, as more customers use PayMe and TBC for a range of daily payment activities. Indeed, we now have 1.1 million active customer subscriptions across TBC Plus and PayMe Plus. On the lending side, our loan book is diversifying and business lending is becoming a larger part of the portfolio, with over 185,000 business loans issued to date, and business loans now representing 18% of the total loan book. We expect this year to continue growing, helped by the upcoming launch of collateralized loans in the next few months. On this slide 14, we see that the strong momentum across our core verticals is supported by an active project development pipeline. In the first quarter, we launched TBC business application and this slide also sets out several planned launches in the coming months, including collateralized loans and auto loans. We have also rolled out new features in Payme, including BMPL for Payme travel. We continue to build out a proprietary AI infrastructure with the recent launch of AI assistant Lola inside the TBC Bank mobile application. This launch led the foundation for the further development and intelligent financial services. And there will be more to come in the coming months as we expand Lola's capabilities. Now, my final slide looks at some of the key core metrics of our Uzbek business over the past three years. As you can see, while user numbers remain very impressive, long growth and profitability have taken a hit over the past couple of quarters as we have adapted the business to regulatory changes around the consumer lending. While this process has not been easy, it is laying the foundation for a well-diversified business over the next few years. As we also expect to see, long growth is recovering in the second half of the year, which should be good to see. Thank you very much for your attention, and I will now hand over to Giorgi.

Thanks, Vakhtang, and thanks all for joining our call today. I'll take you through the financial performance of the Q1, and then we'll move to slide 17. It was a solid start of the year, as you can see. The net profit was $365 million, up by 15% year-on-year. The quarterly decline is just normal, let's say, seasonality versus Q4, and the return on equity was 26.4%, above our 26% target. So, overall, I would like to reiterate Vakhtar's comments that we feel confident that this first quarter provides a very good foundation to meet our strong growth targets. Now, we move to slide 18 to discuss the key drivers of our profitability. Top line was up by more than 10%, as you can see, WG to 859 million lari. That was mainly fueled by net interest income of 17%. Non-interest income growth was at the softer side, as we guided. It was slightly down year-on-year, and it's mainly driven by Georgia business. As we continue to build our PPC card, but with lower bonuses and cashbacks from our schemes this year. We do expect Georgia fee and commission income to be flexed this year, with year-on-year growth to pick up latest from H2O. Strong take-up of TBC card is actually feeding into cross-sell, as you can see, such as consumer loans or cashless accounts, and that drives our strong net internet income. Overall, we do expect to have a double-digit top-line growth this year. Also, I am very pleased to see that group name virtually remained at 7% level. Georgia was up by 20 basis points on quarter-on-quarter. That was driven by strong loan growth into consumer loans, as I mentioned already, and the robust balance sheet-less management. Our Uzbekistan mean ticked down slightly as we guided. That was only because of higher liquidity as we're still getting funds from our clients and the lower loan yields. If we move to slide 19, Our course grew by 20% year-on-year. This was mainly driven by a lower course base in Q1 last year, as you clearly see from the charts. Also, we had some new launchable bonus schemes and the normal business growth. So, we do expect Georgia cost growth to actually stabilize to low teens, and that will translate into returning to our cost-to-income ratio that we have seen last few quarters, around 37%, maybe less, 8%. Now, please, let's move to the next slide. Slide 20, to our asset quality. Our cost of risk was up by 10 basis points. compared to last year, however Georgia, of course, remains very healthy at 60 basis points. But we saw the pickup in our TBC Uzbekistan business, as we also guided, that was mainly driven by some seasonality, also some residual provisioning of the bank book cash loans and the contraction of the loan book. Now if we turn to the next slide, slide 21, to have a look at our balance sheet growth, The portfolio growth was strong. We were up double-digit spots for customer funding and gross loans, and we do expect to continue strongly. So not much to say on this slide. If we move to slide 22. Again, I'm not going to spend too much time on this slide, as little has changed. We have a comfortable capital buffer, without regulatory minimum requirements. Now if we move to slide 23. So our strong power as capital position, our profitability actually allows us to continue to pay dividend. This quarter, we will be paying 1.75 Lari per share, that will be paid in September. And if we move to the last slide, 24, and finally, I would like to reiterate our three years group financial targets that we laid out at our strategy day in late February, and we remain committed to meet those targets. So those are to grow our loan book 50% plus, deliver ROE 30% plus, and our payout ratio to be between 25% and 45%. So on this note, I'd like to open for a Q&A.

Thanks. Thank you. If you would like to ask a question and have joined via Zoom, please press the raise hand icon on your screen. If you've joined the call on the phone, please press star followed by one on your telephone keypad. Alternatively, you can use the Q&A chat box to submit a text question.

Thank you, Lucy. Our first question is from Alex Kantorovich of Roma. Alex, please go ahead. I think you're muted.

Can you hear me now? Yeah, all good. Yes. Seems like very robust performance in Georgia. That's great. In Uzbekistan, I'm looking at the quarterly loan intake numbers, and I'm seeing that in the business loans or SME loans, I presume these are the same, we have a sharp drop. in new net loans in Q1 26. If I took your split for gross loans, it appears that in Q1 SME loans increased by just 5.4 million laris, which is a massive drop from Q4. Credit cards also increased We're just half of a new loan intake from Q4. So I would like to get some guidance. What should we expect in the remaining three quarters for the year so I can do some number crunching? Thank you.

Hi, Alex. We'd be happy to help you understand the numbers offline, so please feel free to reach out after this call. But just to give you the high-level view here. So there are basically two parts to the business loan portfolio. So you're right, the SME, we use the words SME and business lending interchangeably. So there are business cash loans, BCL, which we disbursed to self-employed people in Uzbekistan. And that loan book is very similar to the instant cash loan, ICL loan book that we've had for five, six years, which is our most mature business. And that's part of the sales funnel for the cash lending business. So when we basically slowed down to a trot and actually stopped our a cash lending business in December and January due to the regulatory changes. I remember that we had less leads coming at the top of the funnel for business loans, the BCL side as well. And so that explains the slowdown in business cash loan lending, which is now resumed. The second part of our business loan book is MSME. So there we have micro and small loans and we have some larger loans let's say medium-sized SMEs. And that's been growing nicely. It's obviously a very early stage for us, but that's something that, as you know, we're putting a lot of emphasis on because that was something that was in our product development roadmap. But also we need to do a lot more of this in order to rebalance our portfolio for future regulatory changes. So that explains a little bit about what's been going on in quarter four, quarter one, which are the dynamics that you've picked up on. you should expect to see the business cash loan book increasing, as well as the MSME lending book as well. In terms of the loan dynamics for the year, Bhaktang referred to this in his introductory presentation. We are seeing a contraction in the loan book in quarter one. We believe that quarter two will bottom out. And we actually, if you look at the leading indicators, you can see that we are booking more customers now. So in terms of numbers of customers, the loan book is growing. But in terms of balances, it's still declining a little bit. But as I say, we expect it to bottom out towards the end of quarter two. And then we'll go back into growth, cautious growth, in quarters three and four. So that's where we expect to be. It's difficult to give numbers due to low visibility at the moment. But by the time we get to quarter three, when we're giving the quarter two results, we'll be able to give you a lot more clarity in terms of the loan growth outlook.

Okay, yes, I appreciate it. We can discuss it offline. And just a second question. We before mentioned margin stabilization at near low 20s or 20%. Could you please confirm this?

Sure, yeah.

Interest margin, yes.

Yep. So let me just explain a little bit more about what's happening to the NIMS. So we had NIMS in the low 20s a year or so ago. They ticked down as the loan book mix started to change. But more importantly, in quarter three, quarter four, and going into quarter one, as we had to reduce our higher margin lending businesses, due to the regulatory changes that I think everybody understands, but I can remind you just in case you need reminding. So that meant that we were doing more business loans, which are lower yielding, and a lot less, in fact, virtually no cash loan business, which is the higher yielding numbers. There was also a backdrop of, let's say, soft regulation, where the regulator was talking down headline rates and therefore the yields are going down on our loan book. And that explains why we dipped down to 17% thereabouts for quarter one. We now expect that downward trend to stop. We expect it to pick up as we go into quarter three and quarter four. And the reason for that is because we have restarted our cash lending business on the MFO. As I mentioned earlier, we're now doing a lot more business cash loans, which is part of the overall cash loan funnel. We're obviously still doing SME loans, which is a business we want to grow, and that's lower margin. But we also have credit cards, which are now bigger parts of the mix. That's already 9% of our total loan book, and that's growing, and they're high margin as well. So we expect the margins to recover, and just to reiterate, we believe that we can recover to the region of 20% NIM by the time we get to the end of the year.

Okay, that's very good. And my last question, given this somewhat uneven revenue dynamics, what should we expect in terms of operating costs for Uzbekistan? Will it be sort of comparable to Q1? Is this the run rate? Or will you add capacity, people, what have you?

Sure. So, again, it's very difficult to give you any meaningful to medium term numbers because things are still moving around a little bit. But as I say, we'll have more clarity in quarter three as we look back to quarter two when we give those results to the market. But we're obviously trying to keep very tight costs because the revenue has gone down as a result of the loan book rebalancing. However, so we're now investing in growth again. As I said, we think we're going to bottom out in quarter two and the loan book should resume growth as we go into quarter three, quarter four. And to do that, we also have to invest in people and acquisition cost, basically marketing. So you should expect the room rate to be similar, but maybe go up a little bit.

Okay. Okay. That makes sense. Thank you, Oliver. That's all from me. Yeah.

Thanks, Alex. Next question from Piers at Investec. Piers, please go ahead. Piers, I think maybe you're muted.

We still can't hear you.

Okay, maybe you can try again, Piers, because we can't hear you. Okay, Lucy, can we go to the next question, which is coming from Dimitri from Wood.

Thank you very much, and congrats on the results. I have a few questions, please. Yeah, just the first one on cost-to-income ratio, specifically in Georgia. Yes, we saw a bit of an uptick, and you mentioned during the conference call that on a group level, it will normalize in the coming quarters towards the 37% level. I'm just wondering specifically in Georgia, did you see an inflation uptick? How difficult would it be to reverse it in this region? That's the first question. The second one is on fees and commission. It's clear that it will be flat-ish in the 2026. I was just wondering what sort of growth you expect later, maybe in 2027. And just to finally follow up on what Alex was asking for the Uzbek business, previously you mentioned that you expect around 20% growth year-over-year, and looking at the first quarter so far, do you still expect it, or do you expect it to be a bit lower than that? Thank you.

Thank you, Oliver. On cost-to-income ratio, as I mentioned on the call for Georgia, we do expect low teen growth, so it will stabilize, we don't expect much growth. And allow Georgia cost-to-income to be at the same level we have seen last few quarters, again, if you look at 2.1, low 30s. So we don't expect any pressure or any abnormality on the Georgia cost side. So it's just Q1 was, let's say, outlier, I would say. So nothing to worry about. On PM commission income, as I mentioned, we, sorry, on Q1, we expect to pick up from H2 at 27 and 28. We do think already to have a double-digit growth in PM commission income as well. So the growth will resume starting over at the H2 and double-digit 27 and 28.

On the Uzbek question, so let me just take a step back from your question just for a second just to make sure that everybody's on the same page. So the backdrop is that the regulator has basically took a different view to what was previously the case, the previous course regulation. and decided to reduce the money supply or control the money supply and one of the ways of doing that was through consumer lending and making sure that a they're able to meet their inflationary targets b control the money supply by let's say reducing the growth rate of consumer lending and c managing the micro risk builder for overtime and they as a result of this, introduced two things. The first were portfolio caps, which meant that different asset classes were capped at 25%, effective from the 1st of January 2029, although the central bank wanted this to happen earlier. And the second was the reintroduction, basically, of risk weights for consumer lending, different asset classes. And so as a result of the agreement that we struck with the central bank and as a result of the introduction of much higher risk weights for unsecured consumer loans from the 1st of July this year, we had to climb into this new structure of Alport Fogger. And in order to do that, there are two things. It's a function of two things. The first is the speed with which we can reduce our microloan book, which is cash loans. That's what it's called in Uzbekistan. And the second is the speed with which we can ramp up other businesses which would sit in different portfolio caps, different buckets. And obviously we're ramping up credit cards. We're ramping up business loans. We're soon to launch auto loans basically next month. And we're actually testing at the moment And we'll be launching secured loans, collateralized loans for SMEs in mid-year. And that means that we'll be speeding up the diversification of the balance sheet. But on the other hand, we have to do something with our cash loans because they have to fall below basically 50% at the end of this year. They already fell from 80% of our loan book on the bank's balance sheet. at the end of quarter three last year to 66% at the end of quarter one this year. So you can see that progress is good on that front. But this obviously means that the loan book dynamic is negative and it has been continuing to fall as we went into quarter two. As I said earlier, we believe that's now going to bottom out because we've resumed cash loans on the MFO balance sheet, the microfinance organisation. We'll see where this all takes us. We said that we believe we can maybe get to 20% growth for the year, in terms of the total balance sheet for Uzbekistan, the Chiefs of Uzbekistan's group. But we'll see. So we're seeing things changing in quarter two. We'll be able to give you much more clarity on that as we get into the results for quarter two when we give it in August.

Thank you, Oliver. That's very clear.

Thanks, Dima. Okay, Piers, should we try again?

Yeah. Hi, everybody. Can you hear me this time?

Yeah, all good.

Excellent. Great. Yeah, thanks for the questions. I've got just two strategy questions. The first one is just following on from what you were just talking about, Oliver, on the use Becassam pivot. I mean, could acquisitions be part of the solution here in terms of getting to a quicker rebalancing of the loan portfolio? That's the first question. And the second question is just also on Uzbekistan. You mentioned a potential IPO of the Uzbekistan business at the strategy day. Has there been any further developments or thinking on that option? Thank you.

Sure. I'll take the first one and then I don't know if you want to do the second. I'll do it. Okay. So, On acquisitions, this is a question which obviously we've been asked quite a few times. Our preference would be to do portfolio acquisitions, but in Uzbekistan there is nothing for sale, certainly not at the moment. So if we see portfolios of good quality, the right profile at the right price, then we will be acquisitive when it comes to acquiring portfolios which enable us to accelerate the rebalancing of our portfolio. But that's not something which is available today as an option. In terms of other acquisitions of banking institutions, that's not something which we're currently looking at. You know, we're in the market, we're also keeping our ear to the ground, we see what's around, but it doesn't look like something which is feasible for us and we believe in our ability to grow organically and to ramp up our business, diversify and build good product which customers want. That's what we do and that's what we continue to do as we go through this period of adjustment and pivoting, as you said. However, as you know, we announced the OLX deal and we're still working on that. We're making progress and There could be other small, let's say, incrementally attributive deals, which we look at in the market, which will enable us to build out our ecosystem. So we did the bills deal, for example, last year, which brought in lots of SME customers to whom we can lend, as well as building payments and additional services because it's a SaaS provider. And there may be other things of that nature which enable us to accelerate our ecosystem development. So that's something we're very much attuned to, but probably the answer to your question is no in terms of what you're asking about. And on the IPO, so this is a strategic option, which is something the group is thinking about. This is what we announced as an option during our strategy day in New York. There's nothing else to say. That was only a few months ago. So, you know, we have to go through this period of readjustment in Uzbekistan, make sure we get everything back on track and executing really well and diversifying and basically on track to achieve our ambition of $200 million or so by the time we get to 2030. And once we're on track, the trajectory is going in that direction, then we can return to the strategic option of thinking about IPO. But right now, it's just too early to talk about that.

Yeah, to add from my side on the second question, so I agree fully with Oliver in addition to that, this is one of the strategic options we are looking for. It was a very business, but to come to that, as Oliver said already, we need to grow our balance sheet, we need to grow our profitability, and we are looking at moving to that in the two to three years' time.

Okay, not very clear. Thank you.

Thanks, Piers. There's a question maybe for Georgi. Could we give some guidance on the tax rates trajectory through the year? What was the split between Uzbek tax credits and ECR-related deferred tax assets in driving lower effective tax rate in the first quarter? And what should we model as the full year 26 run rates?

Yes, there is no change in the tax rate. It was one-off. It was contained in Q1, maybe some very small change in Q2, but you should consider a normal ETF that we use in Pakistan. Okay, thank you.

I think, Lucy, you've got a question on the phone.

We do, yes. The question is from Rahim Karim of Cavendish Capital Markets Ltd. The line is now open. Please go ahead.

Hi, good afternoon and thanks for the chance to ask questions, three if I may. The first was just to get your sense of the impact of the refi rate move in Georgia in terms of NIM guidance for 26. The second was just to get a bit more colour of facts on the the cost of risk in Uzbekistan and how you see that unfolding over the course of 26 as the recalibration of the loan book unfolds and whether we can get to 8-9% as I think is your medium term target by the end of the year. And then the third question was just looking at the trajectories of now and registered users in Uzbekistan, whether we see registered users kind of tracking up very nicely, but now seems to have kind of been stuck at around 6 million or so for the last year or so. Is there anything in particular there that is driving that divergence and how should we think about that growth and when growth might recover in terms of now for Uzbekistan? Thank you.

Yes, excellent. I'll start, take off and send over to you, Oliver. So all the new guides, probably we expect to stay around the level we are now. We don't expect any decrease. There may be even some small, say, upsides given change today that you have just seen, being associated with RAF rates. So probably at least flat and probably some small, say, upside in the next few quarters.

Sure. And thanks for the questions, Rahim. Cost of risk in Uzbekistan. So we came in around 10% in quarter one. We believe we'll be around the same number broadly in quarter two. And then going through the rest of the year, this really depends on what happens next. Because all things being equal, our risks would have trended downwards. as previously communicated. However, there's a few things moving around as usual. We're in a frontier market and things change. So on the one hand, the vintages with higher risk, which we booked in 2024, particularly the second half and going into the first half of 2025, they're still running off, they're going through. the stages and coming out to write-off, which is what you'll see in quarter one and going into quarter two. However, there is also a change which has been announced by the central bank at the request of the president of Uzbekistan, which is to auto collections. Just remind you, auto collections is where using the open banking API infrastructure The different banks in Uzbekistan can go and deduct funds from accounts. And the president has requested the central bank to look at this. So they're doing some work on this, basically to restrict it. And what we have already seen is that the two main payment systems in Uzbekistan, UzKard and Humo, have already put in place restrictions on auto collections. This may be the extent of it, we don't know, because the central bank is still working on this, and they'll come out with their position before August, which is when the president has asked for this to be implemented. So we'll see how this pans out. This will be a bit of a headwind in terms of cost of risk, We're obviously putting lots of mitigants in place, but we'll be able to give you more clarity on that as we go into quarter three, when we know what the impact is. We guided, previously gave a corridor of a soft guidance for cost of risk of 7% to 10%. We very much hope that we can still stay within that range, but we'll see how it pans out. And in terms of MAL, we're sticking around 6 million MAL in Uzbekistan and around 2 million down. So there are two things which are impacting this number and which is why it's been flattish basically over the last year, as you quite rightly pointed out. So the first reason is that some of that is driven by lending. And we're in the mass market lending through cashloans. And that slowed down and then slowed to a stop, basically at the end of last year going into the beginning of this year. And a lot of that is driven by, that drives the mal in terms of customers who come in and do transactional activity once they receive the funds. So that's part of the answer. The other part of the answer is that a lot of this is obviously driven by PayMe, which is our app for payments. So this is mobile top-up, there's transfers, P2P. And that was impacted by regulation which came out in the spring of last year, which required all payment apps to identify all customers for all payment activity and for re-onboarding, basically. So all of the payment apps had a bib, ourselves included, that then recovered in the second half of the year. But that's part of the dynamic as there's been regulatory tightening on the payment side of the market. We now see mail growth, we see very strong payments growth, so actually payment volumes have been growing very strongly by 40% year on year as you can see, so the payments business is very healthy and we hope that mail will follow that.

Thank you very much.

Thanks Rahim. last kind of chance for any further questions okay it doesn't look like we have any further questions coming through so I just say thank you very much for everybody for your interest and for joining this call and you know please feel free to reach out if you have any further questions And we will all meet again in August for the second quarter call. Thanks very much and goodbye. Thank you. Thanks.

This concludes today's call. Thank you all for joining. You may now disconnect.