Release Date: November 06, 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 net profit of GEL347 million for the third quarter, with a return on equity exceeding 26%.
- The company's digital customer base is approaching 6 million monthly active users, indicating strong digital growth.
- The Georgian economy remains robust, with a revised GDP growth forecast of 9.4% for 2024, supporting TBC's business environment.
- TBC's Uzbekistan operations are performing exceptionally well, with a net profit of $12 million and total operating income of $41 million in Q3, both more than doubling year-on-year.
- The company maintains a strong capital position, with capital ratios comfortably above the minimum regulatory requirements in both Georgia and Uzbekistan.
Negative Points
- There is a noted margin pressure, although net interest income was up by 15% year-on-year.
- Operating expenses increased by 29% year-on-year, primarily due to scaling up operations in Uzbekistan.
- The cost of risk in Uzbekistan is relatively high at 5.7%, reflecting the unsecured consumer loan business model.
- The company has discontinued providing specific guidance on TNET GMV growth, indicating a shift in strategic focus.
- There is a potential need for additional funding for the Uzbekistan operations to support ambitious growth targets.
Q & A Highlights
Q: Can you comment on the lending growth outlook for Georgia and Uzbekistan, especially after the Georgian elections and the strong macroeconomic environment?
A: Lending growth has been strong, driven by Georgia's exceptional macro performance. We expect continued strong growth in Q4, likely above 15% year-on-year, and similar growth into 2025. In Uzbekistan, cost growth is high due to scaling up, but revenue growth is outpacing costs. We plan to surpass our GEL1 billion target, with profitability and ROE as key focuses. - Giorgi Megrelishvili, CFO
Q: How do you foresee the cost of risk evolving in Uzbekistan and at the Group level, given new product launches?
A: In Georgia, we guide a normalized cost of risk of 1% through the cycle, though we expect to be below this in the near term. In Uzbekistan, the cost of risk has been below 6%, but we anticipate it to normalize between 7% and 8% due to business growth and new product launches. Our focus remains on risk-adjusted NIM. - Giorgi Megrelishvili, CFO
Q: Could you provide insights into the funding strategy for Uzbekistan's operations and any expected equity injections?
A: Uzbekistan's retail funding share is over 3%, and we expect deposit growth. We are leveraging relationships with DFIs and IFIs for funding and are working on local private placement bonds. We may consider capital markets in the future as the business scales. - Giorgi Megrelishvili, CFO
Q: With the improvement in capital ratios, is there potential to increase the dividend payout ratio this year?
A: We are at the higher end of our 30%-50% dividend payout policy, and we see no reason to change this given our strong capital position. We ensure efficient use of surplus capital, as demonstrated by our recent buyback. - Giorgi Megrelishvili, CFO
Q: What impact might the recent U.S. elections have on your business, particularly in Georgia and Uzbekistan?
A: The U.S. is a strategic partner to Georgia, and we expect this partnership to continue, providing stability and potential upside. We foresee no significant impact on our Uzbekistan operations. - Vakhtang Butskhrikidze, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
