TCS Group Holding PLC (TCS)
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
TCS Group Holding PLC reports record profit for the period in 3Q'21 and 9M'21
LIMASSOL, CYPRUS - 24 November 2021. TCS Group Holding PLC (LI: TCS, MOEX: TCSG) ("Tinkoff", "We", the "Group", the "Company"), a leading provider of online financial and lifestyle services via its Tinkoff ecosystem, today announces its consolidated IFRS results for the three months and nine months ended 30 September 2021.
Oliver Hughes, Co-CEO of Tinkoff Group, commented:
We saw robust performance across our business lines, fuelled by the cross-selling power of the Tinkoff ecosystem, now serving more than 18.5m customers and growing. Recognizing Tinkoff's quality and role in Russia's financial system, the Central Bank of Russia has included Tinkoff Bank in the list of the country's systemically important financial institutions.
Most recently, we have launched Tinkoff E-commerce to better serve the needs of online merchants. Under the direction of Ilya Kretov, who joined us as Director of E-commerce, Tinkoff E-commerce will create new synergies with Tinkoff Business, taking our offering for businesses of all sizes to a new level.
In September we unveiled Tinkoff Private to serve the needs of the modern affluent consumer. It is our 'Swiss banker in a mobile app' solution, available both via the Tinkoff super app and Tinkoff Investments app.
Tinkoff Investments, Russia's largest brokerage by the number of active customers, is going from strength to strength. Leveraging the power of retail investors, we launched ECM and DCM advisory services. Most recently, we helped Renaissance Insurance and online real estate classifieds platform CIAN go public.
Tinkoff Capital Management Company has been licensed as a professional securities management operator, allowing it to manage customer assets. To provide broader investment opportunities in segments enjoying strong growth, Tinkoff Capital has set up three new exchange-traded funds (ETFs): the Tinkoff Cybersecurity Fund, Tinkoff Emerging Markets Fund and Tinkoff ESG Leaders Fund.
In terms of our own ESG journey, Tinkoff analysed and published its greenhouse gas emissions inventory on the website for the entire value chain for 2019 and 2020 baseline years. Total carbon footprint of the Group is significantly lower than classical financial institutions and IT companies generally show. We are committed to developing sustainably and you can expect more news on this front in due course.
As we continue to harness vast profitable growth drivers in Russia and lay the groundwork for capturing new opportunities further afield, I am also thrilled to have our Board member Pavel Fedorov joining me as a co-CEO from December 1st. This appointment will allow us to leverage our complementary strengths as we take the Group together to the next chapter in its exciting growth and capitalisation story."
"I am excited to join Oliver, Stas and team Tinkoff as an executive. We have tremendous partnership culture within the Tinkoff Group, and I look forward to capturing many of the growth opportunities that we have in front of ourselves in Russia and expanding the business into new geographies.
While Tinkoff has already been recognized globally as one of fintech players that continuously raises the bar in terms of products, services, growth and profitability, we are just setting out on our journey of expansion to other geographies. Currently we are making a series of small sharply pointed moves to lay the groundwork for new opportunities and engaging the regulators in potentially attractive markets.
To succeed in capturing these growth opportunities in Russia and beyond we want to have sufficient dry powder for our medium-term plans. Our shareholders at the last AGM supported our ambition and have authorised the Board to have the right to approve potential further share capital issue of up to 5.0% of currently issued capital over the next three years.
Having these exciting opportunities in front of us with strong backing of our shareholders we will keep focusing on maintaining strong and growing profitability of the core Russian business, expanding into new geographies, developing new products and competences that enhance the customer experience and ultimately drive the value for our shareholders."
FINANCIAL AND OPERATING REVIEW
In 3Q'21, the Group's total revenue grew by 48% y-o-y to RUB 71.7 bn (3Q'20: RUB 48.3 bn). Gross interest income increased by 39% y-o-y to RUB 42.9 bn (3Q'20: RUB 31.0 bn), driven by the continued growth of our loan portfolio, customer base, and credit product range.
In 3Q'21, our interest expense rose by 37% y-o-y to RUB 7.3 bn (3Q'20: RUB 5.3 bn) due to significant growth of retail and SME current account customer base and slightly as a result of a securitisation deal. Our cost of borrowing declined from 3.9% in 3Q'20 to 3.6% in 3Q'21 helped by growing share of current accounts in the funding mix, while it has started to go up sequentially relative to 2Q'21 due to increasing rate environment.
In 3Q'21, net margin grew by 38% y-o-y to RUB 34.9 bn (3Q'20: RUB 25.2 bn), primarily as a result of solid y-o-y net loan portfolio growth.
Cost of risk fell to 4.2% in 3Q'21 from 6.5% in 3Q'20. Our risk-adjusted net interest margin decreased from 14.2% in 2Q'21 to 13.1% in 3Q'21 (3Q'20: 12.6%).
Our non-credit business lines continue to deliver an increasing share of our revenue and bottom line thanks to growth of the customer base, our widened range of product offerings and continued monetisation efforts. In 3Q'21 non-credit revenue represented 45% of the Group's revenue and 21% of the Group's profit before tax.
At the end of 3Q'21, the Group had:
In 3Q'21, operating expenses increased 79% y-o-y to RUB 25.4 bn (3Q'20: RUB 14.2 bn) driven by continued investment in marketing and advertising for our new, growing business lines, as well as hiring of IT talent.
The Group reported a healthy quarterly net profit of RUB 16.5 bn in 3Q'21 (3Q'20: RUB 12.6 bn), supported by new customer acquisition and monetisation. As a result, ROE for 3Q'21 stood at 42.6% (3Q'20: 45.0%).
In 3Q'21, the Group continued to maintain a healthy balance sheet with total assets growing by 28% since the end of 2020 to RUB 1.1 trillion (31 Dec'20: RUB 859 bn).
The Group's gross loan book grew by 41% since the end of 2020 to RUB 631 bn (31 Dec'20: RUB 447 bn), while the net loan book increased by 47% to RUB 556 bn (31 Dec'20: RUB 377 bn).
The Group's NPL ratio decreased to 8.6% (31 Dec'20: 10.3%), while our loan loss provision coverage stood at 1.38x non-performing loans.
The Group's customer accounts increased by 24% since the end of 2020 to RUB 777 bn (31 Dec'20: RUB 627 bn).
Tinkoff's total equity rose by 28% to RUB 163 bn at the end of 3Q'21 (31 Dec'20: RUB 127 bn). As of 1 October 2021, the Group's statutory N1.0 ratio stood at 11.5%, its N1.2 ratio stood at 11.5%, and the N1.1 ratio stood at 10.0%.
GUIDANCE FOR FY'21 CONFIRMED AND UPDATED:
Tinkoff management confirms the previously communicated guidance for the financial year of 2021 under the assumption of a gradual recovery in economic activity, updating it with respect to solid asset quality dynamics:
3Q'2021 AND POST-REPORTING PERIOD OPERATING HIGHLIGHTS
Customer base and engagement growth has led to increased market share
Superior and innovative product offering combined with targeted marketing activities secure Tinkoff's place as a leading fintech brand
Market and industry associations recognised Tinkoff's strong performance
Corporate governance enhancements and new management appointments
Other corporate and ESG developments
This announcement is released by TCS Group Holding plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal Act) 2018 ("UK MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of UK MAR.
CONFERENCE CALL INFORMATION
The Tinkoff management team will host an investor and analyst conference call at 13:00 UK time (16:00 Moscow time, 8:00 US Eastern Time), on Wednesday, 24 November 2021.
The press release, presentation and financial statements will be available on the Tinkoff website at https://www.tinkoff.ru/eng/ir/financials/quarterly-earnings/
To participate in the conference call, please use the following access details:
Please register approximately 10 minutes prior to the start of the call.
About Tinkoff Group
TCS Group Holding PLC is an innovative provider of online retail and SME financial services. It includes Tinkoff Bank, its mobile virtual network operator Tinkoff Mobile, Tinkoff Insurance, its asset 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 over 18.5m customers and forms the core of the Tinkoff ecosystem. Tinkoff is the 3rd largest retail bank in Russia in terms of active client-base.
Tinkoff Bank is the second largest player in the Russian credit card market, with a share of 14.5%. The 3Q'21 IFRS net profit of TCS Group Holding PLC amounted to RUB 16.5 bn. The ROE was 42.6%.
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 10,000 representatives.
Global Finance named Tinkoff Bank the world's Best Consumer Digital Bank in 2020 and 2018, and the Best Consumer Digital Bank in Russia in 2020, 2019, 2018, 2016 and 2015. Tinkoff was also named the Best European Retail Bank of the Year by Retail Banker International in 2020. In 2021, the Banker recognised Tinkoff Bank as Russia's Best-Performing Bank. 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).
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.
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