• Net Profit: Increased by 12% year-on-year to nearly GEL300 million in Q2.

• Return on Equity (ROE): Achieved 27.1% in Q2.

• Gross Loan Portfolio Growth: Increased by 21% year-on-year.

• Total Operating Income: Up by 16% year-on-year, reaching nearly GEL680 million.

• Net Interest Income: Rose by 15% year-on-year.

• Net Fee and Commission Income: Increased by 17% year-on-year.

• Net Interest Margin (NIM): Decreased by 10 basis points quarter-on-quarter to 6.4%.

• Cost-to-Income Ratio: Stood at 37.8% in Q2 2024.

• Non-Performing Loan (NPL) Ratio: Declined to 2%.

• Customer Deposits Growth: Grew by 10% year-on-year on a constant currency basis.

• Uzbekistan Business Net Profit: Earned $9 million in Q2.

• Uzbekistan Business Total Operating Income: Generated $33 million in Q2.

• Interim Dividend: Declared GEL2.55 per share payable in November.

• Warning! GuruFocus has detected 2 Warning Signs with TLSRP.PFD.

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) 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.

This article first appeared on GuruFocus.