Covid adjustments take TBC Bank into loss for first quarter
TBC Bank Group
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16:40 18/04/24
TBC Bank reported a first quarter profit of GEL 152.4m (£38.66m) before the impact of the Covid-19 coronavirus pandemic on Wednesday, up from GEL 133.3m year-on-year.
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The FTSE 250 company said modifications of GEL 30.6m were made for losses incurred on loans and advances to customers and investments in leases, to reflect the decrease in the present value of cash-flows resulting from the three month grace period granted to borrowers due to the pandemic.
At the same time, a front-loaded, extra сredit loss allowance was created, of GEL 215.7m, to prepare for the potential impact of Covid-19 on the Georgian economy, resulting in an additional 1.7% cost of risk for the first quarter.
That made for a reported loss for the first quarter of GEL 57m, compared to a profit of GEL 133.3m a year earlier.
It said its return on average equity, without the Covid-19 impact, stood at 22.4%, down from 23.8%, while its return on average assets without the impact of the pandemic stood at 3.3%, down from 3.6%.
The company’s pre-provision return on equity stood at 28.7%, slipping from 29.7%, while TBC Bank’s cost to income was 36.5%, down from 37.7%.
Its standalone cost to income ratio of the bank was 31.5%, falling from 34.8%.
TBC Bank said its cost of risk without the Covid-19 impact stood at 0.9%, down from 1.4% year-on-year, while the Covid-19 related cost of risk stood at 1.7% on a non-annualised basis.
The company’s net interest margin was 5.1%, down from 6.2%, with its risk-adjusted net interest margin coming in at 4.2%, down from 4.8%.
“In light of the Covid-19 pandemic, we have reviewed our strategic priorities given increased pressure on capital and people as well as emerging new opportunities,” said chief executive officer Vakhtang Butskhrikidze.
“We have refreshed our strategic priorities for the next three years.
“While the main themes have not changed, we have prioritized digital channels, customer centricity, data analytics and international expansion.”
Butskhrikidze said that at the same time, the bank would be concentrating on prudent management of its capital and liquidity positions, leveraging its “robust” risk management system to closely monitor and proactively manage asset quality.
At the same time, it would be focusing on cost optimisation, with the aim of keeping the bank's cost-to-income flat for 2020 compared to 2019, despite the pressure on revenues and the currency depreciation.
In this regard, he said management had decided to forgo their entire bonuses for 2020, and long-term investment plan grants for the 2020 cycle.
“The crisis has provided a strong validation of our digital strategy and has also revealed a number of opportunities that we will be exploring to further enhance our operational model.
“I feel confident that we are well positioned to achieve sustainable growth and to deliver superior results to our shareholders in the medium-term, despite the short-term challenges caused by Covid-19.
“Therefore, I would like to reiterate our medium-term targets - return on equity of above 20%, cost to income ratio below 35%, dividend pay-out ratio of 25-35% and loan book growth of around 10-15%.”
At 0915 BST, shares in TBC Bank Group were down 2.24% at 742p.