TCS Group Holding PLC (TCS)
TCS Group Holding PLC reports robust profit in 1Q'20; announces 2nd 2020
interim dividend
13-May-2020 / 10:20 MSK
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
TCS Group Holding PLC reports robust profit in 1Q'20; announces 2nd 2020
interim dividend
- Net margin up 40% year-on-year to RUB 25.3 bn in 1Q'20 (1Q'19: RUB 18.1
bn)
- Net income of RUB 9.0 bn in 1Q'20
- 1.0 mn new credit accounts added in 1Q'20
- Return on equity of 37.5%
LIMASSOL, CYPRUS - 13 May 2020. TCS Group Holding PLC (LI: TCS, MOEX: TCSG)
("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 three
months ended 31 March 2020.
Oliver Hughes, CEO of Tinkoff Group, commented:
"The first quarter of 2020 was a strong one for us, despite the
unprecedented challenges facing Tinkoff customers and consumers in Russia as
a result of the COVID-19 pandemic. Our net income rose by 26% to RUB 9.0 bn,
aided by a RUB 3.4bn pre-tax gain from disposals of debt securities, and
despite a RUB 5.9bn pre-tax impact from adjusting our IFRS9 provisioning
models in light of the COVID-19 outbreak.
Importantly, we saw 1.0mn new Tinkoff Black current accounts opened in the
first three months of the year - this is a record for us, and this strong
growth has continued through the current crisis. The growth of Tinkoff Black
was given a further boost by the migration of Rocketbank customers to
Tinkoff. As a result, more than 50,000 customers have moved to Tinkoff and
this will continue as Rocketbank winds down its operations.
As a branchless, online provider of banking, investment, insurance and other
lifestyle services, we are able to continue offering best-in class service
to customers undisrupted by the current COVID-related problems in the
face-to-face world. We are also leveraging our ability to innovate and adapt
quickly, and we see opportunities in the current challenging situation. We
have expanded cashback offers for Tinkoff Black and made them more tailored
to current online shopping needs. Tinkoff Bank launched an offer called
'Surviving Quarantine', which allows customers to benefit from discounts on
popular digital services and subscriptions, such as film streaming, home
fitness, audio books and online courses.
As a responsible lender who is committed to long-term relationships with its
customers, the Group launched a range of flexible repayment restructuring
programmes for customers adversely impacted by the current crisis (these
programmes supplement and work in parallel with the Government-backed
options).
Tinkoff Investments is going from strength-to-strength. We launched a new
process to onboard new customers through the mobile app, without the need
for an in-person meeting; we redesigned and enhanced our web terminal; we
launched six new currencies that can be traded at the interbank rate; and we
established a series of online events and webinars for Tinkoff Investments
customers. All of these efforts and a lot more fuelled the opening of more
than 600,000 brokerage accounts year-to-date (reaching 2.0 mn) and record
inflows in April (RUB 23 bn). The average balance of a Tinkoff Investments
account rose by 12% YTD. More than 250,000 customers are currently using
Pulse, our social network for investors. I am pleased to report that Tinkoff
Investments has been the #1 retail brokerage on MOEX by number of active
customers for the fifth consecutive month in April.
We are also paying close attention to the needs of our SME banking
customers, as Tinkoff Business remains a very important business line for
us. To help these customers, Tinkoff Business launched a service that
enables self-employed customers to register with the tax authorities and
gives them a convenient way to manage their tax returns. We are assisting
small offline businesses to move to online and we also lowered merchant
servicing fees for online acquiring.
Tinkoff Mobile now allows customers to open virtual SIM cards. We also
implemented a service that allows customers to delay payment of mobile
services by up to two weeks without penalties, waive roaming fees for
customers who aren't able to return to Russia due to lockdown and to use
unlimited data for remote working apps including Zoom, Skype and Slack.
We adopted a conservative stance on lending from early March. We are
managing the portfolio and credit limits very tightly and have shifted
resources to our cloud-based pre-collection and collection teams. We will
see how the situation develops from here and make further adjustments if
necessary.
While continuing to innovate and work flexibly in response to the current
circumstances, as always, we remain focused on profitability. Our ROE was
37.5% in the first quarter of this year, one of the highest ROEs in the
world, even as we created significant prudent provisioning cushions.
The business environment remains fluid. We understand the need to be
sensible about capital returns in this uncertain environment. We have no
plans to alter our dividend policy of paying up to 30% of quarterly net
income, but we will prioritise the capital needs of the business ahead of
dividends if the situation demands it."
FINANCIAL AND OPERATING REVIEW
RUB bn 1Q'20 1Q'19 Change
Credit accounts acquired (mn pcs) 1.0 1.1 -9%
Net margin 25.3 18.1 +40%
Net margin after provisions 9.6 13.3 -28%
Profit before tax 11.6 9.3 +26%
Net income 9.0 7.2 +26%
Return on equity 37.5% 64.4% -26.9 p.p.
Net interest margin 19.9% 21.5% -1.6 p.p.
Cost of risk 15.9% 7.5% +8.4 p.p.
RUB bn 31 Mar 2020 31 Dec Change
2019
Total assets 606.7 579.5 +4.7%
Net loans and advances to 335.8 329.2 +2.0%
customers
Share of NPLs 9.4% 9.1% +0.3
p.p.
Cash and treasury portfolio 209.6 193.0 +8.6%
Total liabilities 510.0 483.4 +5.5%
Customer accounts 419.6 411.6 +1.9%
Total equity 96.6 96.1 +0.5%
Tier 1 capital ratio 19.2% 19.1% +0.1
p.p.
Total capital ratio 19.2% 19.1% +0.1
p.p.
CBR N1.0 (capital adequacy 12.8% 12.1% +0.7
ratio) p.p.
In 1Q'20, the Group's total revenue grew by 38% y-o-y to RUB 47.1 bn (1Q'19:
RUB 34.0 bn). Gross interest income increased by 37% y-o-y to RUB 31.5 bn
(1Q'19: RUB 22.9 bn), driven by the continued growth of our balance sheet,
customer base, and credit product range.
Gross interest yield rose marginally to 32.2% in 1Q'20 due to our stable
asset mix. The interest yield on the Group's securities portfolio decreased
to 6.0% (1Q'19: 7.1%), primarily due to declining interest rates.
In 1Q'20, interest expense grew by 26% y-o-y to RUB 5.6 bn (1Q'19: RUB 4.5
bn), driven by significant growth of our customer base and account balances.
At the same time, our cost of borrowing decreased to 4.8% in 1Q'20 following
a gradual decrease in deposit rates.
In 1Q'20, net margin grew by 40% y-o-y to RUB 25.3 bn (1Q'19: RUB 18.1 bn),
primarily as a result of solid net loan growth.
Cost of risk rose to 15.9% in 1Q'20 (1Q'19: 7.5%), of which 6.0pp were due
to the adjustments made to our IFRS9 provisioning models in light of the
expected macroeconomic deterioration due to the decline in oil prices and
the COVID-19 outbreak. Absent these adjustments, our cost of risk would have
been 9.9%, a small deterioration y-o-y. Therefore, our risk-adjusted net
interest margin decreased to 7.6% in 1Q'20 (1Q'19: 15.8%).
Our non-credit business lines continue to deliver robust performance thanks
to customer base growth, and now represent 34% of the Group's revenue. Fee
and commission revenue rose by 33% y-o-y to RUB 8.9 bn in 1Q'20 (1Q'19: RUB
6.7 bn), accounting for 19% of total revenue, while Tinkoff Insurance more
than doubled its revenue y-o-y to RUB 4.8 bn (1Q'19: RUB 2.3 bn), accounting
for 10% of total revenue.
As at the end of 1Q'20, the Group had:
? over 8.1 mn current account customers with a total balance of RUB 225.2
bn across all accounts
? over 545k SME customers, with a total current account balance of RUB
50.9 bn
? 1,436k brokerage customers opened at MOEX through Tinkoff Investments.
? Tinkoff app had over 20 mn installs, MAU stood at 5.6 mn, DAU stood at
1.8 mn
? Tinkoff Bank's credit card market share stood at 13.3% as of 1 April
2020, confirming its position as Russia's second largest credit card
issuer
In 1Q'20, operating expenses increased by only 7% y-o-y to RUB 11.6 bn
(1Q'19: RUB 10.8 bn) mainly due to a slight decrease in customer acquisition
expenses. Despite this, the cost-to-income ratio decreased to 32.5% in 1Q'20
(1Q'19: 42.3%).
The Group reported solid quarterly net income of RUB 9.0 bn in 1Q'20 (1Q'19:
RUB 7.2 bn). As a result, ROE for 1Q'20 stood at 37.5% (1Q'19: 64.4%).
In 1Q'20, the Group continued to maintain a healthy balance sheet with total
assets growing by 4.7% since the end of 2019 to RUB 606.7 bn (31 Dec'19: RUB
579.5 bn).
The Group's gross loan book grew by 4.2% in 1Q'20 to RUB 399.9 bn (31
Dec'19: RUB 383.9 bn), while the net loan book grew by 2.0% to RUB 335.8 bn
(31 Dec'19: RUB 329.2 bn).
The Group's NPL ratio rose to 9.4% (31 Dec'19: 9.1%) primarily due to the
denominator effect as loan book growth slowed in 1Q'20, while our loan loss
provision coverage increased to 1.7x non-performing loans.
The Group's customer accounts increased by 1.9% to RUB 419.6 bn (31 Dec'19:
RUB 411.6 bn).
Tinkoff's total equity only rose a marginal 0.5% in 1Q'20 to RUB 96.6 bn (31
Dec'19: RUB 96.1 bn), due to the payment of the dividend for 4Q'19 and the
negative revaluation of our securities portfolio. As of 1 April 2020, the
Group's statutory N1.0 ratio had increased to 12.8%, and its N1.2 ratio had
declined to 11.2%. N1.1 stood at a comfortable 8.7%.
GUIDANCE FOR 2020 WITHDRAWN
Because of the current uncertain operating environment caused by the
COVID-19 pandemic, the Group is withdrawing its previously issued 2020
guidance, and will not issue new guidance for 2020 unless and until market
conditions stabilise.
Instead of formal guidance, below the Group provides some illustrative
performance indicators for the remainder of 2020. Although the business
environment in Russia remains fluid and may change quickly:
? We expect our gross loan portfolio will be in 'steady state' in 2020,
with the net loan portfolio being negatively affected by rising provisions
? We expect cost of risk to remain elevated in 2020, given the necessity
to frontload provisions and the expected migration of loans to Stages 2
and 3
? We expect the Group's cost of borrowing in 2020 to decline y-o-y
? We are confident the Group will remain profitable and can maintain
adequate capital ratios in 2020
Second 2020 Interim Dividend Announcement
In line with the Group's dividend policy, and given our confidence that the
Group will remain profitable and can maintain adequate capital ratios during
the year, the Group's Board of Directors has approved a second 2020 interim
gross dividend of USD 0.14 per share/per GDR (with each GDR representing one
class A share) with a total amount allocated for dividend payment in
relation to 1Q of around USD 28 mn. Subject to London Stock Exchange
regulations, indicatively the dividend will be payable on 1 June 2020 to
those shareholders on the register as at the record date of 29 May. The
ex-dividend date will be 28 May 2020. According to the terms of the GDR
deposit agreement, holders of the Group's GDRs should receive their
dividends approximately 3-5 business days after the payment date.
1Q'2020 AND POST-REPORTING PERIOD OPERATING HIGHLIGHTS
Superior and innovative offering combined with targeted marketing activities
secure Tinkoff's place as a leading fintech brand
? In February, Tinkoff announced plans to invest in a new venture project
to set up a fintech company providing a range of services to retail
customers in Europe (excluding CIS). The startup will offer non-credit
financial products. The project is due to launch in 2020, with Tinkoff as
its key seed investor. Tinkoff will have a controlling interest in the new
venture. Tinkoff's initial commitment is up to EUR 25 million, which will
be contributed in tranches as the venture develops
? In February, Tinkoff signed a title partnership agreement with the
Russian Football Premier League (RFPL) covering the 2019/2020, 2020/21 and
2021/22 football seasons
Resilience and investment in customer loyalty amid the global COVID-19
pandemic
? Tinkoff's first priority was to safeguard the health and safety of its
employees, while ensuring business continuity for all its customers. As a
testament to this swift and early response, Tinkoff has only had 19
confirmed COVID-19 cases among its 27,000 employees. By the second week of
March, over 95% of its office-based employees had successfully moved to
home working. Only around 200 critical employees remain in the office, and
its smart couriers continue to deliver products all over Russia. Tinkoff
has decided to reward the commitment and the dedication of other frontline
staff by increasing their remuneration by 15-20% during this difficult
period.
? Tinkoff is proactively assisting troubled borrowers by offering both
government and proprietary restructuring programs. Between March 20 and
May 12, Tinkoff restructured 2,2k loans according to Federal Law 106,
24,6k loans according to our own restructuring programmes, and provided 1
month temporary relief to 115.2k loans.
? Tinkoff Home Call Centre (HCC) has deployed its cloud-based HCC platform
to assist the Moscow City Government and the People's Social Front (a
consumer protection organization) in fielding calls from people
experiencing COVID-19 and related problems.
? Tinkoff Business has launched a service allowing the self-employed to
register with the tax authorities and easily manage their income and
taxes. We are also assisting offline small business to relocate to the
cloud and have lowered online acquiring fees for purchases of several
essential products and services. We launched 0% loans to pay salaries in
partnership with the Russian Bank for SME support.
? Tinkoff Mobile has implemented functions allowing customers to open
accounts using virtual SIM cards, to delay payment of mobile services by
up to two weeks without charge, to waive certain roaming fees for
customers not able to return to Russia, to record and store voice calls,
and to use unlimited data for remote working apps like Zoom, Skype and
Slack
? Tinkoff introduced a cash-back offer called "Surviving Quarantine" which
gives customers discounts of up to 75% discounts on online services,
products, and subscriptions that are particularly in demand during
isolation (online cinema, home fitness, books, language courses, etc.)
? Tinkoff Black broadened its cashback offers and increased their
relevance for customers. Customers now have greater control over the
cash-back offers they can select through the mobile app.
? Tinkoff Black will migrate Rocketbank customers to Tinkoff while
carrying over their loyalty points. More than 50k customers have moved
over to Tinkoff as Rocketbank winds down its operations.
? Tinkoff agreed with key payment services Mastercard, Visa, and Mir to
delay the expiration of bank cards beyond March / April 2020 and
implemented a system to receive money back on items purchased using the
Fast Payment System's QR codes.
Focus on enhancements to corporate governance
? As part of Tinkoff's corporate governance roadmap, in April changes were
made to two of Tinkoff's three governing bodies: the Tinkoff Bank
Management Board and the Tinkoff Bank Board of Directors. Stanislav
Bliznyuk (SVP, Head of Business Development) stepped down from the Tinkoff
Bank Management Board and will be replaced, subject to approval from the
Central Bank of Russia, by Vyacheslav Tsyganov (Chief Information
Officer).
? Oleg Tinkov (Founder) stepped down from his role of Chairman of the
Tinkoff Bank Board of Directors to focus fully on his health and was
replaced by Stanislav Bliznyuk.
Focus on acquiring best talent to strengthen the Group
? In February 2020, Stanislav Bliznyuk (formerly COO) was promoted to SVP,
Head of Business Development
? In January 2020, Pavel Khristolyubov joined Tinkoff Group as the
company's new COO
CONFERENCE CALL INFORMATION
The Tinkoff management team will host an investor and analyst conference
call at 14:00 UK time (16:00 Moscow time, 09:00 US Eastern Daylight Time),
on Wednesday, 13 May 2020.
The press release, presentation and financial statements will be available
on the Tinkoff website at
https://www.tinkoff.ru/eng/ir/financials/quarterly-earnings/ [1]
To participate in the conference call, please use the following access
details:
Conference ID 494319
Russian Federation +7 495 705 9270
Toll-free 8 010 800 2796 5011
United Kingdom +44 (0) 330 336 9401
Toll-free 0800 279 4827
United States of America +1 929-477-0338
Toll-free 800-289-0462
A live webcast of the presentation will be available at:
https://webcasts.eqs.com/tcsgroup20200513 [2]
Please register approximately 10 minutes prior to the start of the call.
For enquiries:
Tinkoff Tinkoff
Artem Lebedev Larisa Chernysheva
PR Department IR Department
+ 7 495 648-10-00 (ext. 2202) + 7 495 648-10-00 (ext. 2312)
Alexandr Leonov Neri Tollardo
+ 7 495 648-10-00 (ext. 35738) +44 7741 078383
pr@tinkoff.ru ir@tinkoff.ru [3]
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
around 10 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 13.4%. The 1Q 2020 IFRS net income of TCS Group Holding PLC
amounted to RUB 9.0 bn. The ROE was 37.5%.
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).
Forward-looking statements
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.
ISIN: US87238U2033
Category Code: QRF
TIDM: TCS
LEI Code: 549300XQRN9MR54V1W18
Sequence No.: 63391
EQS News ID: 1043265
End of Announcement EQS News Service
1: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=7621881e2aa226803a4aac95ac2386f3&application_id=1043265&site_id=vwd&application_name=news
2: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=de922ff2dc4488e3fb6f30f531ddb588&application_id=1043265&site_id=vwd&application_name=news
3: mailto:ir@tcsbank.ru
(END) Dow Jones Newswires
May 13, 2020 03:13 ET (07:13 GMT)
