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TCS Group Holding PLC (TCS) TCS Group Holding PLC: 3Q and 9M17 IFRS Results and Interim Dividends 20-Nov-2017 / 07:00 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. TCS Group Holding PLC Announces 3Q and 9M 2017 IFRS Results and Interim Dividends Moscow, Russia - 20 November 2017. TCS Group Holding PLC (TCS LI) (the "Group"), Russia's leading provider of online retail financial services via its Tinkoff.ru financial supermarket, today announces its interim condensed consolidated IFRS results for the third quarter and for the nine months ended 30 September 2017. KEY FINANCIAL HIGHLIGHTS 3Q 2017 - Net margin up 41% y-o-y to RUB 12.2 bn (3Q16: RUB 8.7 bn) - Profit before tax up 67% y-o-y to RUB 6.6 bn (3Q16: RUB 4.0 bn) - Net income up 75% y-o-y to RUB 5.0 bn (3Q16: RUB 2.9 bn) - ROE increased to 53.7% (3Q16: 43.4%) - Net interest margin at 25.1% (3Q16: 25 .5%) - Cost of risk at 6.0% (3Q16: 8.3%) 9M 2017 - Net margin grew by 37% y-o-y to RUB 33.1 bn (9M16: RUB 24.2 bn) - Profit before tax up 70% y-o-y to RUB 16.5 bn (9M16: RUB 9.7 bn) - Net income up 73% y-o-y to RUB 12.6 bn (9M16: RUB 7.3 bn) - ROE grew to 48.8% (9M16: 39.0%) - Net interest margin at 25.6% (9M16: 25.7%) - Total assets increased by 35% to RUB 236.0 bn (YE16: RUB 175.4 bn) - Gross loans and advances to customers up 27% to RUB 153.4 bn (YE16: RUB 120.4 bn) - Net loans and advances to customers up 30% to RUB 134.1 bn (YE16: RUB 102.9 bn) - Share of non-performing loans (NPLs) at 9.4% (YE16: 10.2%) - Customer accounts increased by 25% to RUB 155.7 bn (YE16: RUB 124.6 bn) - Total equity up by 33% to RUB 39.1 bn (YE16: RUB 29.5 bn) KEY HIGHLIGHTS FOR 9M 2017 - In 9M17 over 1.3M new active credit card customers were acquired, underpinning net loan growth of 30% YTD - In July 2017 Tinkoff Bank was named the most profitable bank in Central and Eastern Europe by The Banker magazine - In July 2017 Global Finance declared Tinkoff Bank the winner in two of the World's Best Consumer Digital Banks 2017 award categories - In August 2017 Tinkoff Bank started the gradual deployment of its own ATM network. There are now approximately 200 installed across Russia - In August 2017 Tinkoff mobile banking app was recognized as best in Russia by Markswebb Rank & Report in four nominations - apps for iPhone, Android and Windows smartphones and apps for iPads KEY HIGHLIGHTS POST 9M 2017 - As of 1 October 2017 Tinkoff Bank was the second largest credit card player in Russia with a market share of 11.6% - In October 2017, the Group acquired a 55% stake in CloudPayments, an innovative online payment solutions provider. The deal will enable Tinkoff to enhance its merchant acquiring business line as part of its growing SME offering - In November 2017, the Tinkoff mobile banking app was named as best in CIS by Markswebb Rank & Report Third 2017 Interim Dividend and Special Interim Dividend Announcements In line with the Group's dividend policy, the Board of Directors yesterday approved a third interim gross dividend for 2017 of USD 0.22 per share/GDR (with each GDR representing one share), with a total dividend payment of around USD 40.2 mn (RUB 2.4 bn). In addition to this, and due to the stronger than expected bottom-line result, the Board of Directors approved a special interim dividend of USD 0.18 per share/GDR (with each GDR representing one share), with a total dividend payment of around USD 32.9 mn (RUB 2.0 bn). Subject to London Stock Exchange regulations, indicatively the dividends will be payable around 6 December 2017, to those shareholders on the Group's register as at the record date of Friday, 1 December 2017. The ex-dividend date will be 30 November 2017. According to the terms of the GDR deposit agreement, holders of the Group's GDRs will receive their dividends approximately 5 business days after the payment date. GUIDANCE FOR 2018 Following strong underlying growth in the first nine months of 2017, the Group is pleased to reaffirm its FY17 performance guidance and provide the following guidance for FY18: - net income to be at least RUB 24 bn - net loan growth to be at least 25% - cost of risk to be around 7-8% - cost of borrowing to be around 7-8% NB. This guidance is based on IAS39 and not IFRS9. There may be some changes when Tinkoff moves to IFRS9 from 1 January 2018. Oliver Hughes, CEO of Tinkoff Bank, commented: "In 3Q 2017, the Group delivered another strong set of results, driven by significant loan growth, good credit quality, and the new business lines hitting break-even. We have posted net income of RUB 5.0 bn, bringing our total net income for nine months to RUB 12.6 bn. With continued robust net income performance, the Group reports an ROE of 48.8% for the year to date. "Our diversification process has continued to show impressive results, with non-credit businesses contributing increasingly to both the top and bottom lines. As of today over 22% of our top line result comes from non-credit business lines. Tinkoff Business broke even in June this year and doubled its customer base since the beginning of the year, and we plan to reach around 250,000 opened accounts by year-end. Tinkoff Mortgage is well on track to exceed our target of RUB 7 bn of mortgage loans disbursed by the end of the year. We now have 10 partner banks and expect this business line to break even by year-end. We continue to expand Tinkoff Investments, which now has almost 65,000 brokerage accounts opened. "At the same time, our core credit card business is having another excellent year. We added over 550,000 new credit cards activated in the third quarter, underpinning net loan growth of 30% year-to-date. Credit quality is good, the risk profile of incoming customers is stable and cost of risk is low at 6.0% for the second quarter in a row. Tinkoff's cost of borrowing stands at 7.7% after the placement of the USD 300 mn perpetual Tier 1 Eurobond in June. "We also continue to innovate our processes to continuously increase operational efficiency. For example, our use of voice recognition technology allows us to save around 720 hours of employee time per month, while using chat bots to field 20% of all of the incoming queries without connecting to an employee also helps keep costs down. "Thanks to the robust performance in 3Q, we can reiterate our guidance for net profit of over RUB 17 bn for the full year and give new guidance of at least RUB 24 bn for 2018. We are also delighted to announce that, in line with the Group's dividend policy, the Board of Directors has approved two dividends: the first is RUB 2.4 bn in line with the dividend policy; the second is a special interim dividend of RUB 2.0 bn which we are able to pay as a result of the stronger than expected bottom-line results." FINANCIAL AND OPERATING REVIEW RUB bn 3Q17 3Q16 Change 9M17 9M16 Change Credit cards issued ('000 735 334 2.2x 1,760 958 +84% pcs) Credit card 75.2 46.7 +61% 194.6 124.7 +56% transactions Net margin 12.2 8.7 +41% 33.1 24.2 +37% Net margin after loan 10.0 6.3 +59% 26.5 17.3 +53% impairment Profit before tax 6.6 4.0 +67% 16.5 9.7 +70% Net income 5.0 2.9 +75% 12.6 7.3 +73% RUB bn 30 September 31 Change 2017 December 2016 Total Assets 236.0 175.4 +35% Net loans and advances to 134.1 102.9 +30% customers Cash and treasury portfolio 76.9 49.5 +55% Total Liabilities 196.9 145.9 +35% Customer accounts 155.7 124.6 +25% Total Equity 39.1 29.5 +33% Tier 1 capital ratio 23.6% 14.8% +8.8pp Total capital ratio 23.9% 16.3% +7.6pp CBR N1.0 (capital adequacy 15.99% 11.13% +4.86pp ratio) The Group delivered another strong set of results for 3Q and 9M17 following accelerating growth of its core credit card business and the excellent performance of its new business lines. As a result, the Group reported a net income for 3Q17 and 9M17 of RUB 5.0 bn and RUB 12.6 bn respectively. This translated into ROE of 53.7% for 3Q17 and 48.8% for 9M17. In 9M17, the Group issued 1.76M credit cards, including 735,000 in 3Q17. The total volume of credit card transactions in 9M17 grew by 56% y-o-y to RUB 194.6 bn (9M16: RUB 124.7 bn). In 9M17, gross interest income grew by 23% y-o-y to RUB 42.9 bn (9M16: RUB 34.8 bn), while in 3Q17 it was up 30% y-o-y to RUB 15.8 bn (3Q16: RUB 12.2 bn), driven by growth in both the loan book and securities portfolio. Gross interest yield stayed at 40.0% in 3Q17, while the interest yield on the Group's securities portfolio stayed at 7.3%. Gross yield for 9M17 amounted to 39.5% (9M16: 40.0%). In 3Q17, interest expense grew by 2% y-o-y to RUB 3.45 bn (3Q16: RUB 3.4 bn). The cost of borrowing stayed at 7.7% in 3Q17 following declining retail deposit rates. In 3Q17, net margin grew by 41% y-o-y to RUB 12.2 bn (3Q16: RUB 8.7 bn), while in 9M17 it increased by 37% y-o-y to RUB 33.1 bn (9M16: RUB 24.2 bn). The net interest margin (NIM) stood at 25.1% in 3Q17 (3Q16: 25.5%) and at 25.6% in 9M17 (25.7% in 9M16). Due to lower cost of risk, the risk-adjusted net interest margin increased to 20.6% in 3Q17 (3Q16: 18.6%) and to 20.5% in 9M17 (9M16: 18.3%). The Group continues to focus on controlling its cost of risk and efficiently
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