TCS Group Holding PLC (TCS)
TCS Group Holding PLC reports strong financial performance in 2Q'20 and
1H'20; announces 3rd 2020 interim dividend
06-Aug-2020 / 10:00 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 strong financial performance in 2Q'20 and
1H'20; announces 3rd 2020 interim dividend
- Net margin up 19% year-on-year to RUB 26.1 bn in 2Q'20
- Net income of RUB 10.2 bn in 2Q'20
- 1.7 mn new credit accounts and 1 mn brokerage accounts added in 1H'20
- Return on equity of 40.0% in 2Q'20
LIMASSOL, CYPRUS - 6 August 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 and six months ended 30 June 2020.
Oliver Hughes, CEO of Tinkoff Group, commented:
"Tinkoff's resilient, fully online business model enabled us to deliver good
performance in a period of unprecedented uncertainty due to the global
COVID-19 pandemic and against a difficult economic backdrop. We adapted
quickly to the changing business environment, while remaining focused on
innovation for customers and profitability for shareholders. As a result,
net income rose 25% year-on-year to RUB 10.2 bn in 2Q'20. Meanwhile, our ROE
remained at a respectable 40.0%.
On the lending side of the business, we adopted a conservative stance
starting in mid-March, implementing a range of cautious measures in credit
limit management, sectoral scoring and deep verification. While this
remained largely intact in 2Q'20, we saw the economic situation steadily
improve towards the end of the quarter and we gradually increased our
approval rates back to pre-COVID-19 levels.
Our Tinkoff Black product demonstrated good growth in the second quarter,
bringing 1.2 mn new current account customers into the Tinkoff ecosystem.
During the period, we rolled out a new pre-paid Tinkoff Black product that
can be opened without a physical KYC meeting. This virtual card converts to
a fully-fledged Tinkoff Black debit card once the customer has been taken
through the identification process by one of our 'smart couriers'. This has
proven an extremely timely product innovation and we are confident it will
further accelerate Tinkoff Black customer acquisition.
Tinkoff Investments continues to fire on all cylinders, adding over 1
million new brokerage customers since the start of the year. Assets under
custody have grown fivefold. We have been investing heavily in growth of the
customer base and engagement, while expanding the educational resources
available to our customers. In June, we launched a new micro-investment
service called Investment Box, which allows customers to set up regular
top-ups of their investment account from their Tinkoff Black card. With
nearly 1.9 million brokerage customers, we are the #1 retail brokerage on
MOEX by number of active customers.
A crucial part of our ecosystem's success is the Tinkoff Superapp, and we
are proud of the many developments that have been made in the second
quarter. At a time when many customers were limited in their mobility, the
Tinkoff Superapp played an important role in supporting their daily
purchases, transfers, payments, entertainment, fitness and other home-based
activities. The Superapp's monthly active users (MAU) increased by 50%
year-on-year during the second quarter, as we rolled out a new partnership
with goods.ru, a marketplace that brings together Russia's leading online
stores.
Tinkoff's CoronaIndex shows us that business activity is quickly returning
to pre-COVID-19 levels in Russia. Consumer spending and SME revenues have
improved steadily since the beginning of the second quarter. Looking
forward, we expect the autumn will be a critical time to see the shape of
the medium-term recovery.
Tinkoff Group has weathered another storm and proven yet again the
flexibility and resilience of its business model. We remain in a strong
position today to capture the opportunities to disrupt and grow."
FINANCIAL AND OPERATING REVIEW
RUB bn 2Q'20 2Q'19 Change 1H'20 1H'19 Change
Credit accounts 0.7 1.1 -37% 1.7 2.2 -23%
acquired (mn pcs)
Net margin 26.1 22.0 +18.6% 51.4 40.0 +28.3%
Net margin after 13.5 15.3 -11.8% 23.1 28.5 -19.1%
provisions
Profit before tax 13.1 10.4 +25.8% 24.8 19.7 +25.7%
Net income 10.2 8.2 +24.7% 19.3 15.4 +25.1%
Return on equity 40.0% 64.7% -24.7 p.p. 38.4% 64.3% -25.8 p.p.
Net interest 19.0% 23.5% -4.5 p.p. 19.3% 22.5% -3.2 p.p.
margin
Cost of risk 12.5% 8.9% +3.6 p.p. 14.3% 8.2% +6.0 p.p.
RUB bn 30 Jun 2020 31 Dec Change
2019
Total assets 669.2 579.5 +15.5%
Net loans and advances to 324.2 329.2 -1.5%
customers
Share of NPLs 10.8% 9.1% +1.7
p.p.
Cash and treasury portfolio 288.5 193.0 +49.5%
Total liabilities 561.2 483.4 +16.1%
Customer accounts 473.9 411.6 +15.1%
Total equity 108.1 96.1 +12.5%
Tier 1 capital ratio 19.0% 19.1% -0.1pp
Total capital ratio 19.0% 19.1% -0.1pp
CBR N1.0 (capital adequacy 12.4% 12.1% +0.3pp
ratio)
In 2Q'20, the Group's total revenue grew by 21% y-o-y to RUB 49.1 bn (2Q'19:
RUB 40.4 bn). Gross interest income increased by 14% y-o-y to RUB 31.9 bn
(2Q'19: RUB 27.9 bn), driven by the continued growth of our loan portfolio,
customer base, and credit product range.
Gross interest yield remained firm at 32.1% in 2Q'20 due to our stable asset
mix. The interest yield on the Group's securities portfolio decreased to
5.4% (2Q'19: 6.9%), primarily due to declining interest rates.
In 2Q'20, despite the 42% y-o-y increase in our funding base as we continued
to grow our customer base and account balances, interest expense rose only
by 2% y-o-y to RUB 5.6 bn (2Q'19: RUB 5.5 bn).This was driven by a continued
decline in our cost of borrowing from 6.2% in 2Q'19 to 4.4% in 2Q'20,
following a gradual decrease in deposit rates, and the reduction in the
deposit insurance fees.
In 2Q'20, net margin grew by 19% y-o-y to RUB 26.1 bn (2Q'19: RUB 22.0 bn),
primarily as a result of solid y-o-y net loan portfolio growth, gross
interest yield resilience, and declining funding costs.
Cost of risk rose y-o-y to 12.5% in 2Q'20 (2Q'19: 8.9%), but declined q-o-q
from 15.9% in 1Q'20. Relative to 2Q'19, the increase was driven by the
challenges posed by the COVID-19 outbreak. At the same time, the q-o-q
decline was driven by the front-loading of loan provisions in 1Q'20 in
accordance with IFRS9. Our risk-adjusted net interest margin remained
comfortably positive at 9.8% in 2Q'20 (2Q'19: 16.3%).
Our non-credit business lines continue to deliver robust performance thanks
to customer base growth and continued monetisation efforts, now representing
37% of the Group's revenue. In 2Q'20, fee and commission revenue rose by 19%
y-o-y to RUB 10.2 bn (2Q'19: RUB 8.6 bn) and remained flat q-o-q despite the
challenges posed by the COVID-19 outbreak. Tinkoff Investments had a stellar
performance in 2Q'20, with revenue growth of 10.5x y-o-y and 87% q-o-q to
RUB 1.6 bn (2Q'19: RUB 0.15 bn, 1Q'20: RUB 0.8bn), accounting for 14% of
total fee and commission revenue.
At the end of 2Q'20, the Group had:
? over 9.3 mn current account customers with a total balance of RUB 270.1
bn across all accounts
? over 565k SME customers, with a total current account balance of RUB
57.4 bn
? 1.9 mn Tinkoff Investments brokerage customers.
In 2Q'20, operating expenses increased 7% y-o-y to RUB 12.9 bn (2Q'19: RUB
12.1 bn) driven by continued investment in new, growing business lines.
Despite this, the cost-to-income ratio decreased to 32.3% in 2Q'20 (2Q'19:
39.8%).
The Group reported robust quarterly net income of RUB 10.2 bn in 2Q'20
(2Q'19: RUB 8.2 bn). As a result, ROE for 2Q'20 stood at 40.0% (2Q'19:
64.7%).
In 2Q'20, the Group continued to maintain a healthy balance sheet with total
assets growing by 15% since the end of 2019 to RUB 669.2 bn (31 Dec'19: RUB
579.5 bn).
Given the more conservative lending stance taken in 2Q'20, the Group's gross
loan book grew by 3% as at the end of 2Q'20 to RUB 395.0 bn (31 Dec'19: RUB
383.9 bn), while the net loan book decreased by 2% to RUB 324.2 bn (31
Dec'19: RUB 329.2 bn).
The Group's NPL ratio rose to 10.8% (31 Dec'19: 9.1%) due to the
consequences of the COVID-19 outbreak and the denominator effect as loan
book growth slowed in 2Q'20, while our loan loss provision coverage stood at
1.7x non-performing loans.
The Group's customer accounts increased by 15% to RUB 473.9 bn (31 Dec'19:
RUB 411.6 bn).
Tinkoff's total equity rose 12% in 1H'20 to RUB 108.1 bn (31 Dec'19: RUB
96.1 bn) despite the payment of two 2020 interim dividends (total of
$0.35/GDR), and thanks to the strong net income result. As of 1 July 2020,
the Group's statutory N1.0 ratio amounted to 12.4%, its N1.2 ratio rose to
12.1%, and N1.1 ratio rose to 10.1%.
GUIDANCE FOR 2020
While some uncertainty remains, we believe we have enough visibility to
reintroduce 2020 guidance under the assumption of a gradual recovery in
economic activity:
? We expect our net loan portfolio to return to steady growth in 2H20
? We expect cost of risk to be in the 12% area
? We expect cost of borrowing to be in the 5% area
? We expect net income to be RUB 30-35bn
Third 2020 Interim Dividend Announcement
In line with the Group's dividend policy, the Group's Board of Directors has
approved a third 2020 interim gross cash dividend of USD 0.20 per share/per
GDR (with each GDR representing one class A share) with a total amount
allocated for dividend payment in relation to 2Q of around USD 39.9 mn.
Subject to London Stock Exchange regulations, indicatively the dividend will
be payable on 24 August 2020 to those shareholders on the register as at the
record date of 21 August 2020. The ex-dividend date will be 20 August 2020.
According to the terms of the GDR deposit agreement, holders of the Group's
GDRs should receive their dividends approximately 5 business days after the
payment date.
2Q'2020 AND POST-REPORTING PERIOD OPERATING HIGHLIGHTS
Customer base and engagement growth has led to increased market share
? The Group had over 9.3 mn current accounts customers as at 1 July 2020
? As of 1 July 2020, the Tinkoff app had over 20 mn installs, MAU stood at
6.1 mn, DAU stood at 2.0 mn
? Tinkoff Bank's credit card market share increased to 13.5% as of 1 July
2020, further solidifying its position as Russia's second largest credit
card issuer
Superior and innovative product offering combined with targeted marketing
activities secure Tinkoff's place as a leading fintech brand
? Tinkoff was named European Retail Bank of the Year at the Retail Banking
International Awards 2020, in recognition of the outstanding growth,
profitability, and success of the business and its financial and lifestyle
ecosystem.
? Tinkoff has once again been named as one of Europe's top 50 merchant
acquirers for 2019 and one of the top 45 acquiring banks by card payments
from merchants, according to the annual electronic banking survey
conducted by The Nilson Report. Tinkoff is also one of the top 5 Russian
banks included in the ranking.
? In June, Tinkoff Investment launched its new Investment Box function -
Russia's first micro-investment service. This service allows customers to
set up regular top ups of their investment account from their Tinkoff
Black card. This can be done by rounding up transaction values,
reinvesting cashback, reinvesting the interest earned on the current
account, or setting up a monthly or weekly automatic investment.
? In June, Tinkoff Education launched free online IT lectures. Tinkoff
Education is the business through which we provide educational material
for students and graduates. These free IT online lectures focus on the
building blocks of IT companies and overviews of the various jobs and
roles within Tinkoff. So far, four courses have been made available on
information security, systems analysis, design, and product analytics.
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 vital employees remain in the office, and
its smart couriers continue to deliver products safely 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. Employees are not expected to return to the office at
least until September 1, as we continue to prioritise the health and
safety of our employees.
? Tinkoff is proactively assisting troubled borrowers by offering both
government and proprietary restructuring programs. In the period between
March 20 and July 31, Tinkoff restructured a total of 248k loans, 3.5k of
which were restructured according to the government programme. As of July
31, 92k loans remained restructured, amounting to RUB 17.7bn, or 4.5% of
the total loan book.
? 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 organisation) 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% 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 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.
Commitment to further improving our ESG and sustainability disclosure and
practices
? In June, Tinkoff Group published our latest 2019 sustainability report
[1]. In this year's edition, among many other things, we discuss in more
detail our COVID-19 response, our recruitment philosophy, our responsible
lending approach, our data security framework, and minorities' protection
under the current corporate governance structure.
? Tinkoff's ESG score from Refinitiv recently improved from D+ to C+, with
improvements across environmental, social, and governance metrics.
? The Tinkoff IR team invites feedback from the investor community and
other stakeholders regarding the Group's ESG initiatives and disclosures.
The IR team's contact information can be found at the end of this release.
Other corporate developments
? Tinkoff signed a long-term contract with AFI Development to rent the AFI
Square business centre in Moscow, currently under construction, to become
Tinkoff's new headquarters. The 90,000 m2 office building is scheduled to
be completed in the first half of 2022. The new HQ in AFI Square would
have capacity for more than 6,000 people. The office will feature an
ultra-modern workspace, well-equipped for tech professionals. It will also
have spacious seating areas, and comfortable recreational areas. The
office will accommodate the projected growth in staff levels, but also
take into account projected changes in working practices such as remote
working and 'hot desks'. Tinkoff employees voted to name the new office
"Tinkoff Space".
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 Thursday, 6 August 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/ [2]
To participate in the conference call, please use the following access
details:
Conference ID 3006672
Russian Federation +7 495 646 9190
Toll-free 8 10 800 2867 5011
United Kingdom +44 (0) 330 336 9411
Toll-free 0800 279 7204
United States of America +1 720-543-0214
Toll-free 888-256-1007
A live webcast of the presentation will be available at:
https://webcasts.eqs.com/tcsgroup20200806
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 11 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 13.5%. The 2Q 2020 IFRS net income of TCS Group Holding PLC
amounted to RUB 10.2 bn. The ROE was 40.0%.
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: IR
TIDM: TCS
LEI Code: 549300XQRN9MR54V1W18
Sequence No.: 80271
EQS News ID: 1111459
End of Announcement EQS News Service
1: https://acdn.tinkoff.ru/static/documents/TCSGH%20Sustainability%20Report%20(Non-Financial%20Information%20and%20Diversity%20Statement)%202019.pdf
2: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=7621881e2aa226803a4aac95ac2386f3&application_id=1111459&site_id=vwd&application_name=news
3: mailto:ir@tcsbank.ru
(END) Dow Jones Newswires
August 06, 2020 03:00 ET (07:00 GMT)
