Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TBC Bank Group PLC (FRA:LR6, Financial) reported a record quarter of earnings with a return on equity of 27%, showcasing strong profitability.
- The digital consumer base continues to grow, with 5.7 million digital monthly active users, indicating successful digital engagement.
- Loan growth remains robust in both Georgia and Uzbekistan, with Uzbekistan now accounting for 7% of the Group's earnings.
- The Georgian economy is performing well, with a revised GDP growth forecast of 7.4% for 2024, driven by tourism and remittances.
- The Uzbek business is expanding rapidly, with a loan book that more than doubled year-on-year and a strong market share in micro loans.
Negative Points
- The net interest margin (NIM) in Georgia decreased by 10 basis points quarter-on-quarter, indicating margin pressure.
- Operating expenses grew by 26% year-on-year, driven by investments in technology and the expansion in Uzbekistan.
- The Uzbek digital lifestyle ecosystem, TNET, saw a slight decline in GMV year-on-year due to strong prior year comparisons.
- There are concerns about political volatility in Georgia, which could impact economic stability and cost of risk.
- High deposit rates in Uzbekistan, around 25-27%, indicate a challenging funding environment despite strong loan yields.
Q & A Highlights
Q: Can you provide insights on the net interest margins in Georgia and Uzbekistan, and how the lower risk weightings for new consumer lending in Uzbekistan might affect these margins?
A: In Georgia, we expect the net interest margin (NIM) to stabilize around 5.5% in the medium term, with minor fluctuations. In Uzbekistan, despite the lower capital requirements, we anticipate maintaining our current NIM levels, as the reduced capital intensity will not necessitate a decrease in pricing. (Giorgi Megrelishvili, CFO)
Q: With the political situation in Georgia, how do you assess the current cost of risk, and what are your expectations for the full year 2024?
A: Despite political volatility, Georgia's economic fundamentals remain strong, with a revised GDP growth forecast of 7.4% for 2024. We do not foresee an increase in the cost of risk for the remainder of the year, maintaining a through-the-cycle cost of risk at around 1%. (Vakhtang Butskhrikidze, CEO; Giorgi Megrelishvili, CFO)
Q: Could you elaborate on the competitive landscape in Uzbekistan, particularly in consumer lending?
A: Uzbekistan's market is underpenetrated, allowing for significant growth opportunities. While new players like OTP Group have entered, TBC remains a leader, continuously increasing market share and introducing new products like credit cards. We anticipate continued growth in the coming years. (Vakhtang Butskhrikidze, CEO)
Q: How do you manage macro risks and potential impacts on funding or net interest margins in Georgia?
A: Currently, we observe no significant changes in funding conditions or counterparty behavior. We maintain robust scenarios for potential macroeconomic shifts, but no immediate concerns have arisen. (Giorgi Megrelishvili, CFO)
Q: What drove the strong non-interest income in the quarter, and how sustainable is this trend?
A: The increase in non-interest income was primarily due to higher FX-related income driven by volume growth and market volatility. We expect continued growth in non-interest income compared to 2023 levels. (Giorgi Megrelishvili, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
