TCS Group Holding PLC (TCS)
TCS Group Holding PLC reports robust net income growth for 2Q and 1H'19
LIMASSOL, CYPRUS - 20 August 2019. TCS Group Holding PLC (TCS LI) ("Tinkoff", "We", the "Group", the "Company"), Russia's leading provider of online financial and lifestyle services via its Tinkoff ecosystem, today announces its interim condensed consolidated IFRS results for the six months ended 30 June 2019.
Oliver Hughes, CEO of Tinkoff, commented:
"We've continued to deliver robust growth in the second quarter and first half of 2019 thanks to the momentum of our core credit business and ever-increasing revenue contributions from non-credit business lines, as well as significant development efforts across the entire Tinkoff ecosystem. In particular, for the first half of 2019, our net loan portfolio has demonstrated growth of 46.3% YTD, driven by new credit business lines, such as personal loans, POS loans, car loans and home equity loans. This translated into a 31% year-on-year increase in net income to RUB 15.4 bn in 1H'19.
To seize the current profitable growth opportunity and to maintain ample capital buffers in the future, we successfully raised $300 mn gross in capital in July through an SPO that was highly oversubscribed and saw significant interest from investors across a variety of regions. These funds will enable us to continue to deliver the growth that the investment community has come to expect from Tinkoff Group.
Our revenue continues to become more balanced between credit and fees and commissions income, with our transactional and servicing business lines generating more than 30% of revenue despite rapid growth of the credit business for the past two quarters. We remain relentlessly focused on customer growth, and we have already begun to reap the rewards as we reached nearly 6 million current accounts customers in the second quarter and saw excellent results across our SME, Tinkoff Insurance and brokerage businesses."
FINANCIAL AND OPERATING REVIEW
In 2Q19, gross interest income grew by 52% y-o-y to RUB 27.4 bn (2Q'18: RUB 18.0 bn). This strong trend was underpinned by the growth of our customer base and the expansion of our product range, and despite a gradual decline in the loan book's gross interest yield, which amounted to 33.5% in 2Q'19 due to increase of the non-credit card share of our portfolio. Meanwhile, the interest yield on the Group's securities portfolio rose to 6.9% (2Q'18: 6.8%).
In 2Q'19, interest expense grew by 50% y-o-y to RUB 5.4 bn (2Q'18: RUB 3.6 bn), driven by both significant growth of customer base and review of salary costs so that they can be included in the effective interest rate rather than acquisition cost. At the same time, our cost of borrowing remained at a comfortable level of 6.1% in 2Q'19 thanks to strong inflows of customer accounts.
In 1H'19, net margin grew by a remarkable 41% y-o-y to RUB 39.7 bn (1H'18: RUB 28.2 bn), primarily as a result of solid net loan growth.
We continue to focus on controlling the Group's cost of risk and efficiently managing the quality of our portfolio. Cost of risk rose to 8.2% in 1H'19 (1H'18: 7.0%) due to the significant increase in the loan portfolio in 1H'19 combined with IFRS 9 requirement to recognize provisions earlier. Meanwhile, our risk-adjusted net interest margin decreased to 15.9% in 1H'19 (1H'18: 19.2%) due to the continued product diversification of our loan portfolio.
We have further developed and expanded our new non-credit business lines, all of which are delivering exceptional performance thanks to customer base growth, and now represent over 30% of the Group's revenue. In 2Q'19, the Group's fee and commission income increased by 36% y-o-y to RUB 8.6 bn (2Q'18: RUB 6.3 bn). In 2Q'19, Tinkoff Insurance doubled its income to RUB 2.9 bn (2Q'18: RUB 1.4 bn).
As at the end of 1H'19, the Group had
In 2Q'19 operating expenses increased by 39% year-on-year to RUB 12.0 bn (2Q'18: RUB 8.6 bn) mainly due to rise in customer acquisition cost. The cost-to-income ratio decreased to 39.7% in 2Q'19 (2Q'18: 42.8%).
The Group reported net income of RUB 15.4 bn in 1H'19 (1H'18: RUB 11.7 bn). As a result, ROE for the reporting period reached 64.3% (1H'18: 69.3%).
In 1H'19, the Group continued to maintain a healthy balance sheet with total assets growing by 20% since the start of 2019 to RUB 452.1 bn (31 Dec'18: RUB 375.5 bn).
The Group's gross loan book grew by 42% YTD to RUB 333.0 bn (31 Dec'18: RUB 234.7 bn), while the net loan book grew by 46.3% YTD to RUB 290.3 bn (31 Dec'18: RUB 198.5 bn).
The Group's NPL ratio fell to 7.4%. The Group's loan loss provision coverage stood at 1.7x non-performing loans.
The Group's customer accounts increased by 12% YTD to RUB 315.0 bn (31 Dec'18: RUB 280.9 bn).
Tinkoff's total equity increased by 29% YTD to RUB 54.5 bn (31 Dec'18: RUB 42.3 bn). As of 1 July 2019, the Group's statutory N1.0 ratio had decreased to 11.1%, and its N1.2 ratio had decreased to 10.4%. N1.1 stood at a sufficient 7.7%.
As announced on 11 June 2019, the Group will pay no dividend for the remainder of 2019.
UPDATED FINANCIAL GUIDANCE FOR FY2019
1H'2019 AND POST-REPORTING PERIOD OPERATING HIGHLIGHTS
Customer base and engagement growth has led to increased market share
Innovation and first-mover advantage cement our position as a fintech leader
Superior offering and targeted marketing activities galvanize loyalty to the Tinkoff brand
The investment community and industry associations recognize Tinkoff's strong performance
awards by Banki.ru, Russia's leading banking news portal. Tinkoff topped the
2018 list in the categories Investment Company of the Year, Online Mortgage
Application, The People's Ranking of banks and The People's Ranking for mobile operators (Tinkoff Mobile)
Focus on value-accretive opportunities to strengthen the Group
CONFERENCE CALL INFORMATION
The Tinkoff management team will host an investor and analyst conference call at 15:00 UK time (17:00 Moscow time, 10:00 U.S. Eastern Standard Time), on Tuesday, 20 August 2019.
The press release, presentation and financial statements will be available on the Tinkoff website at https://www.tinkoff.ru/eng/ir/financials/quarterly-earnings/
To participate in the conference call, please use the following access details:
A live webcast of the presentation will be available at: https://webcasts.eqs.com/tcsgroup20190820
Please register approximately 10 minutes prior to the start of the call.
About Tinkoff Group
TCS Group Holding PLC is an innovative provider of online retail financial services. It includes Tinkoff Bank, mobile virtual network operator Tinkoff Mobile, Tinkoff Insurance, management company Tinkoff Capital, Tinkoff Software DC, a network of development hubs in major Russian cities, and Tinkoff Education. The Group is currently developing Tinkoff ecosystem, which offers financial and lifestyle services.
The Group was founded in 2006 by Russian entrepreneur Oleg Tinkov and has been listed on the London Stock Exchange since October 2013.
The Group's key business is Tinkoff Bank, a fully online bank that serves over 9 mn customers and forms the core of the Tinkoff ecosystem.
Tinkoff Bank is the second largest player in the Russian credit card market, with a share of 13%. The 1H 2019 IFRS net income of TCS Group Holding PLC amounted to RUB 15.4 bn. The ROE was 64.3%.
With no branches, the Group serves all its customers remotely via online channels and a cloud-based call centre. The centre is staffed by over 10,000 employees, making it one of the largest in Europe. To ensure smooth delivery of the Group's products, the Group has a nationwide network of over 2,500 representatives.
In 2018, Global Finance named Tinkoff Bank the world's Best Consumer Digital Bank, and in 2019, 2018, 2016 and 2015, the Best Consumer Digital Bank in Russia. In 2017 and 2013, the Banker recognised Tinkoff Bank as the Bank of the Year in Russia. The bank's mobile app has been consistently praised by local and global independent experts as the best of its kind (in 2013, 2014, 2015, 2016 by Deloitte and in 2018 by Global Finance).
Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of the Group and Tinkoff Bank. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might", the negative of such terms or other similar expressions. The Group and Tinkoff Bank wish to caution you that these statements are only predictions and that actual events or results may differ materially. The Group and Tinkoff Bank do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group and Tinkoff Bank, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries the Group operates in, as well as many other risks specifically related to the Group, Tinkoff Bank and their respective operations.
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