Earnings call transcript: TBC Bank Q2 2025 sees 5% profit growth, stock dips

TBC Bank Group PLC reported its financial results for the second quarter of 2025, showing a 5% year-on-year increase in net profit to $346 million. Despite the positive earnings, the company’s stock fell by 7.59% to 4,685 pence in pre-market trading, following the announcement. The earnings per share (EPS) came in at $6.07, while revenue reached $834.63 million. According to InvestingPro data, the stock is currently trading at an attractive P/E ratio of 7.16x relative to its near-term earnings growth, suggesting potential value for investors. The market’s reaction suggests investor concerns, possibly due to external factors or unmet expectations.

Key Takeaways

• TBC Bank’s net profit rose by 5% year-on-year to $346 million.
• The stock price fell by 7.59% following the earnings announcement.
• The bank launched innovative digital products and services in new markets.
• TBC Bank’s return on equity (ROE) remains strong at 24%.
• The company targets significant market share growth in Uzbekistan.

Company Performance

TBC Bank demonstrated solid performance in Q2 2025, with net profit increasing by 5% compared to the previous year. The bank has been expanding its digital footprint, particularly in Uzbekistan, and continues to maintain robust profitability metrics, including a return on equity of 24%. InvestingPro analysis reveals impressive YTD returns of 68.07% and strong revenue growth of 18.3%, though it notes the company is quickly burning through cash. The company’s focus on innovation and digital services is evident in its recent product launches and acquisitions.

Financial Highlights

• Revenue: $834.63 million, demonstrating strong top-line growth of 23% year-on-year.
• Earnings per share: $6.07, reflecting the company’s ongoing profitability.
• Net interest income: Increased by 27%, highlighting strong lending activities.
• Non-interest income: Up 15%, driven by fee and commission income growth of 26%.

Market Reaction

Despite the positive financial results, TBC Bank’s stock experienced a significant decline of 7.59%, closing at 4,685 pence. This movement contrasts with the company’s 52-week high of 5,070 pence. The decline may reflect investor concerns over external factors or future growth prospects, despite the company’s solid performance metrics. InvestingPro subscribers have access to 12 additional key insights about TBC Bank, including detailed analysis of its financial health, which currently receives a "GREAT" overall score. Get access to comprehensive Pro Research Reports covering what really matters about 1,400+ top stocks through intuitive visuals and expert analysis.

Outlook & Guidance

Looking forward, TBC Bank aims to capture an 8-10% market share in Uzbekistan within the next 3-5 years. The bank expects its net interest margin to remain around 7% at the group level and is targeting a mid to high 20s return on equity in Uzbekistan, with a long-term target of over 30%. These strategic goals highlight the company’s focus on expanding its presence in emerging markets.

Executive Commentary

CEO Vaktang Butskoye Rykidze stated, "We are well on track to meet our group’s net income target for this year." CFO Georgi Megrelisvili added, "We continue to generate very strong profitability, have high capital positions, and are giving capital back to shareholders." These statements underscore the management’s confidence in the bank’s financial health and strategic direction.

Risks and Challenges

• Regulatory changes in payment services could impact operational efficiency.
• Market saturation in Georgia may limit further growth opportunities.
• Macroeconomic pressures, such as inflation rates in Georgia (4%) and Uzbekistan (8.7%), could affect profitability.
• Increased competition in the digital banking sector may challenge market share growth.
• Dollarization trends could influence currency risk management strategies.

Q&A

During the earnings call, analysts inquired about regulatory changes affecting payment services and the dynamics of the cost of risk. The management addressed these concerns by explaining strategies to mitigate risks and capitalize on new market segments. The discussion also touched on the company’s approach to managing dollarization trends, which remain a critical focus for maintaining financial stability.

Full transcript - TBC Bank Group PLC (TBCG) Q2 2025:

Andrew, Moderator/Host, TBC Bank: Thanks very much, Carla. Hello, everybody. It’s great to welcome you to our second quarter first half twenty twenty five results call. As usual, I’m joined on the call by our CEO, Vaktang Butskoye Rykidze and our CFO, Georgi Megrelisvili. We’ll start with a presentation, and then we’ll move to Q and A.

And with that, I’ll hand over to Vaktang. Thank you.

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yes. Thank you, Andrew. Hello, everyone, and thank you for joining us today. I am pleased to present another strong set of results for the second quarter. As you can see, our gross net profit reached $346,000,000, up by 5% year on year, while return of equity was about 24%.

In Georgia, we maintained high profitability with double digit growth in our loan book and operating income, whilst maintaining a solid capital position. Over the same period, Uzbekistan’s operating income increased by an excellent 86% while our loan book more than doubled year on year. We also surpassed 20,000,000 registered users, a great achievement. We continue to build out a digital ecosystem in Uzbekistan. In the second quarter, we launched the country’s first fully digital insurance service.

We also agreed to acquire Builts, which is Uzbekistan’s leading SaaS platform for businesses serving the retail sector, thus strengthening our business banking proposition. In addition, I am proud to share that Tbilisi Uzbekistan became the first and the only business from Uzbekistan and Central Asia to be included the world’s top fintech companies list of twenty twenty five by CNBC and Statista, which is excellent recognition for what Nika Oliver and the team are building. Thanks to our strong profits and a solid capital position, the Board has declared the second quarterly dividend of 1.75 per share, bringing the total first half twenty twenty five dividend to LAR 3.25. We have also announced a 75,000,000 lari share buyback, which reflects our commitment to returning excess capital to shareholders. Now turning to Georgia.

Georgia’s economy continues to perform very well. Real GDP growth reached 7.1% in the second quarter, bringing first half of growth to 8.3%. And our macro team has upgraded its 2025 GDP growth forecast to 7.1. The inflation rate reached 4% in June, surpassing the MPG’s 3% target. Even so, is expected to ease over the next few months.

On the next slide, I want to highlight the consistent and high profitability that our Georgian business delivers quarter after quarter. Over the past three years, average return of equity has been about 25% with the loan book growing in average at 17%. As we see on the Slide eight, we continue to be a leader player in Georgia. In the second quarter, our gross loss increased by 11 year on year, and I’d like to highlight the excellent progress we are making in one of our key focus areas of unsecured consumer lending. As our first consumer loans increased by 45% year on year in the second quarter, and we continue to gain market share in this segment.

Over the same period, our total customer deposits grew by 10% year on year. We continue to hold the strong positions across both lending and deposits, and we are consistently improving the way we sell individuals and the businesses. This leads nicely on to slide nine, which shows the growing trend of digital engagement within our retail customer base in Georgia. As of June, our digital monthly users exceeded 1,100,000 with 66% penetration in our active customers. Over the same period, our daily active users to monthly active users ratios stood at a very decent 47%.

I’d also like to highlight that our monthly active users have been consistently growing by around 50,000 quarter over quarter over the past year. Our growing share of a fully digitally issued consumer loans and retail deposits show that our customers are highly engaged with our digital channels. Digital customer loans issuance surpassed 80%, while deposit offloading reached 70%, respectively. Now Slide 10. On this Slide 10, I’m pleased to share that TBC Bank has been recognized as the best digital bank in Georgia by every money, reflecting our ongoing commitment to innovation and digital excellence.

For example, in the second quarter, we introduced a number of improvements to our mobile bank application focused on personalization, seamless onboarding, smarter financial tools of PFM and Robo advisory, and improved user accept accessibility across key digital banking services. Now let’s move to our Uzbekistan business and its economy. Like Georgia, the Uzbek economy also remained very strong with real GDP growth of 7.5% in the second quarter, bringing the 2025 growth to 7.2%. Inflation is also easing, dropping to 8.7% in June, supported by tighter monetary policy. Slide 13 provides an excellent snapshot of the great progress we have made over the past few years in Uzbekistan across all the major metrics.

We have now over 20,000,000 unique registered users, out of which almost 6,000,000 are monthly active users. Our loan book has more than doubled year on year and now tops $900,000,000 while our deposit increased by 86%, reaching almost $500,000,000 Our operating income reached a record $62,000,000 in the second quarter, doubled year on year in the first half, which is testament of the strength of our core business. Net profit came in at $12,000,000 up over 35% year on year. Now let’s turn to some of our recent achievements in Uzbekistan. The uptake of our core daily banking product, Salon card, has been excellent with over half a million card issued since its launch last November.

At the same time, we have issued around 70,000 Osman credit cards as we roll out the new and innovative product for the Uzbek market. In the second quarter, we also launched a fully digital insurance offering, starting with the credit life insurance, and we plan to expand the portfolio to introduce a comprehensive suit of a personal insurance products. To date, we have issued over 180,000 policies. Another major recent milestone was partnership with Builds. Uzbekistan’s leading b to b SaaS platform for businesses serving the retail sector, serving more than 4,000 merchants.

This will further strengthen our business banking proposition. And finally, Slide 15 shows how our business in Uzbekistan continues to gain market share and is now a material contributor to the group. By the end of the second quarter, we held over 5% in the retail loans and over 4% in the retail deposits. Uzbekistan also generated 20% of the operating income and 9% of the group’s net profit in the second quarter. With that, I I want to pass to Georgi, please.

Georgi Megrelisvili, CFO, TBC Bank: Thanks, Waktank, and thanks all for joining our q two and h one call today. So I will go through our financials, and if we can move to the next slide, I’ll start with slide 17. As you can see, it has been another very strong quarter from the profitability side. Our net profit has been 346,000,000, up by 5% year on year. And this growth is particularly notable because if you remember last year, we had few elevated income, for example, for FX when the FX was quite actually volatile and also 10,000,000 recovery from the provision.

But, actually, despite that, we still delivered 5% growth in net income that translated very nicely into 24% plus ROAE. So if you go to the next slide to go through the key drivers, our top line growth is very strong, 23% year on year, and that’s driven by all revenue lines. Net interest income is up by 27%. Noninterest income by 15%. That’s driven by our very strong fee and commission income growth, 26% year on year, and that’s continuing to our payment businesses in both countries.

So if we go to next slide, slide 19, that shows another driver of our profitability growth. We see that NIM actually exceeded 7% level. It’s been a while since we see this level, and we do hope to remain at this level for a while in the foreseeable future. The 40 basis points quarterly growth was driven by two factors. One, of course, TBS, Uzbekistan, Shia is growing.

It’s all good portfolios that is much higher yield, higher margin loans. But on the other side, we’re also very pleased to see that NIM increased in Georgia as well. It was up by 40 basis points to 5.9% and set driven by how kind of increasing loan yields. Mentioned our consumer loans are going up. That’s one of the driver.

We are very happy to see our strategy working out. And also continuous management of our balance sheet. That also supports our new increase. Now if you go to the next slide, slide 20. So our cost problem dynamics remain quite stable.

We increased 22% year over year because we are scaling up business, both in Georgia in into TBC, Uzbekistan, 45% cost growth coming outside Georgia. But on the other hand, we are growing our revenues as well. Because as you can see, our cost to income ratio remained almost flat. Actually, it’s even slightly ticked down to 37.6. So if we go to the next slide, slide 21.

So, again, we are seeing so now I would like to discuss our cost of risk dynamics. In q two, our group’s cost of risk stood around 1.6%. It’s up by 20 basis points. But breaking down by the countries, Georgia, cost of risk remains stable on a quarterly basis, 80 basis points. No change.

Very stable. Very healthy level. Once the cost of risk in Uzbekistan stood at 9.9%, that’s obviously higher level that we actually expected, but that’s driven by a few factors. Over the past few quarters, we have been testing our new SINA files, less data rich customer segments in our core ICL products. As well, we actually also grew into our post merchant partners into the longer tail.

This is part of our data driven test and along approach. And, also, much of this new business is profitable. In h two, we will ease down a bit in some of the newer segments, and we’ll remain focused on profitable growth. We have also seen some, let’s say, operational issues around collections that’s mainly was due to telecoms capacity, which is basically a function of very strong loan growth. But we have sorted out this issue already.

Overall, we do expect our cost of risk to remain around to be around seven to 10% range over next few quarters, but we will ensure the business delivers high profitability. One thing I also would like to highlight that we are seeing now positive trends. Both first payment default, second payment defaults are coming down. July Dynamics, the initial numbers are also showing the better trend, and probably q three, we should expect to be lower than q two. So if I move to the next slide, here we see our portfolio dynamics.

Both loan and customer funding are growing very nicely. Loan is loan growth, 16% year on year. Customer deposits, 14%, both on constant currency basis. Probably if we go to next slide, Andrew, ’23. So I now will move back to TBS Uzbekistan.

Here, again, we see very strong performance. Our top line, is up, by 100%. Our operating income doubled. It is to 120,000,000 USD. Our net profit also grew very nicely.

It was up by 36%, maybe not as strong as 100%, but still very strong growth. See, difference is driven by provisions that we expect to, again, stabilize, quite shortly, and we do expect a very strong profitability growth over the next quarter or a few quarters. Our return on equity is 20%. And, again, we target to go our, like, mid 20 or higher 20 starting even from next quarter levels. So next slide.

I’ll continue also to this Uzbekistan slides. Like, the NIM was very healthy 23%, although slightly soft tent compared to the last quarter. There are few drivers. We have always kind of guided or communicated that maintaining into mid twenties is probably not realistic, but we do expect and are confident to remain 20% plus in territory. So the tick down is driven by general market dynamics that drives loan yields down.

And as well as we diversify into products more and more, we will see, like, our again is coming down. However, on the other hand, we are also see the funding cost coming down, customer volatility cost is coming down. So overall, this more or less offset each other. But, again, as I mentioned, probably it will continue coming down if you call 20% plus NIM coming down. I already covered risk side quite extensively, so I won’t stop here and move to the next slide.

On the loan side, another fundamental outcome, our loan book doubled year over year. It’s already 900,000,000 plus USD. As you remember, our target is 1,000,000,000 by year end. We are almost there, so we don’t have any, like, again, doubt achieving or, let’s say, even overachieving this target. So our growth continues very strongly.

And on the right hand side, it’s the first time we are showing this data, Our portfolio breakdown, our core product, how we started in Uzbekistan, is that cash loans still 78%. However, we are also seeing that other products are their share are also going up. Post lending, 11%. Very pleased to to see business lending is 7%, and credit cards, what I’ve already mentioned is now 4% around. So this trend will continue.

Our portfolio will shape, and we’ll show you the progress quarter over quarter. Now next slide, Andrew. So again, not much to say on the slides rather than we have very strong capital positions in both countries comfortably above regulatory limits. So we remain very well capitalized in both countries. And if you go to the slide, exactly, it is very strong capital positions combined with very high profitability that I have been talking throughout my presentation, allowed us to pay 75,000,000 share buybacks that will start in the August and also to declare 1.25 lari per share lari dividend.

ZethSpring’s total

Vaktang Butskoye Rykidze, CEO, TBC Bank: 75. 1.75.

Georgi Megrelisvili, CFO, TBC Bank: 1.75. Sorry. ZethSpring’s our overall lari like, our dividend for h one is $3.25. So it’s significant increase compared to h one last year. So we continue to generate, like, a very strong profitability, have high capital positions, and giving capital back to our, let’s say, shareholders.

So on this note, I will hand back to Vatank for some final comments before we open for q and a.

Vaktang Butskoye Rykidze, CEO, TBC Bank: And to conclude the part of the call, I’d like to revisit our strategy targets. I’m confident that we are well on track to meet our group’s net income target for this year. As for the Uzbekistan, it remains our plan to end the expectation that we will hit our earnings target. As our top line growth shows, it is to a very good operating environment in Uzbekistan. That said, the developments in the first half now around the regulatory headwinds and cost of risk with the fraud in the first quarter and the software’s number in the second quarter make it more difficult to meet our earnings target, but I can assure you that team is working extremely hard to achieve this.

And I’d also like to mention that we plan to outline our future plans and the new strategic targets for the next few years at our strategy day in early twenty twenty six following the release of our full year 2025 results. Thank you for your attention, and we are happy to answer your questions.

Carla, Call Coordinator, TBC Bank: Thank you. If you’d like to ask a question and have joined the call via Zoom, please press the raise hand icon on your screen. Alternatively, you can use the Q and A chat box to submit a written question.

Andrew, Moderator/Host, TBC Bank: Thanks very much, Carla. So first question comes from Rahim at Investec. Rahim, please go ahead. Your line is open. I think you need to unmute yourself, right?

Rahim, Analyst, Investec: Good afternoon. Hopefully, you can hear me. Three questions, if I may. The first was just to try and get some guidance on the outlook for NIM. That’s obviously a source of strong performance in the quarter.

Just to help us understand what the full year outlook might be would be helpful. The second was, I guess, the you know, a little bit on the flip side was just the outlook for cost of risk. Obviously, Georgia’s been quite quite stable. But, you know, should we how should we be thinking about, you know, Uzbekistan given the the the the test and learn processes that’s been going on there? And then finally, just staying with Uzbekistan, obviously, the move into insurance is obviously quite an interesting one.

Just your initial take on how that’s being, you know, received by clients and, you know, what what the source of kind of upside is in terms of the medium term and what we should be looking for next in in that regard? Thank you.

Georgi Megrelisvili, CFO, TBC Bank: Yes. Thanks. I’ll take the first two questions on the NIM and cost of risk and what that will cover the insurance business bit. So to start with outlook for NIM, as I mentioned, we to target to remain at 7% plus and that’s a group level. In Uzbekistan, we are at 23%.

There will be some decline. It will be gradual, not too immediate. Probably, we truly as I mentioned, we are confident to be 20% plus, maybe few pluses. It depends on the quarter, not very quickly as well. In Georgia, we landed 5.9.

Generally, in the medium term, we are comfortable mid five levels. Next few quarters, it can easily be high fives. So our expectation would be, again, higher fives. That’s on the NIM side. And we do expect nice growth into net interest income both in Georgia and Uzbekistan net group level.

So if I go to the cost of risk outlook in Georgia, the portfolio is very stable. We have very robust and decent credit quality. Again, as we guide somewhere between 8,100 basis points is our, let’s say, normalized cost of risk, and we do expect to, like, to stay at this level, sometimes maybe a bit lower. On Uzbekistan, of course, obviously, a few moving parts, and I just would like to take some time to cover that because probably some of you may questions and to kind of clear out this topic. First of all, I would like to highlight that it’s a gross business in frontier market.

And we have been coming to this point without any banks, but, again, it’s frontier market. We need to grow business into new less data rich segments. Once again, I would like to say highlight how, like, for example, two sorts of things, Pakistan population have never taken a loan. So in credit bureau, we only have one third of the population. So, therefore, we need to understand which segments are profitable.

We are we can go gather the data. That’s exactly our test and loan approach that we are taking, and that helps us to gather data, determine most profitable segments that fool our growth profitably. We have done a lot of tests to understand which segments now we can do good business. We have quite a clear idea. Of course, these tests have a cost, and that’s exactly the cost we are coming through, but they also have benefits that will be coming through, like, next few quarters or actually in the longer period.

The bulk of the business, also, we booked this profitably just immediate short term pains that we are taking at the moment. We have done our job, and now we are slowing down a bit also in some newer segments a bit. Also and we will focus on the kind of to continue our profitable growth. Now also, it means that we are continuing the strategy in a disciplined data driven and risk area lending strategy, And we will continue expanding into new segments to integrate new data sources, understand new customers. And as I mentioned, we are already seeing our first payment defaults coming down.

Second payment defaults are coming down, and we are carefully looking at the profitability level. So generally, as I said, like, probably somewhere seven to 10% next few quarters is the right level to think about, and we need to see how business evolves. But our key forecast will be, as I mentioned, next few quarters to kind of go back to mid to high 20 return on equity, that’s high profitability. On a longer term stabilized basis, 30% plus return on equity for this business remains untouched. So that’s the level we we target we’re targeting.

So that’s about the cost of risk. And I hand back now to Wolfgang for the for the third part.

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yes. As we mentioned already in our presentation, just we began our insurance business just listen to a few months ago, and we are in the beginning of our journey. So we sell only the credit life insurance product, but we have plans how to to bring the new type of insurance product as we already micro and the semi businesses in addition to other products in in the bank. But till now, it’s a beginning. So I I mentioned in my part of the presentation, we sold only 180,000 insurance products to the market.

But as this department growing up, so it’s a huge potential for us. And not only insurance product, but also as we mentioned in the presentation, we have more than 500,000 debit card, salon card. We have more than 70,000 credit cards and the business are growing up. There is a huge potential in a fee and commission income. And probably in the coming quarters, we will see high growth fee and commission income from the interest and from the other type of the fee income.

But more details and the long term views will will will bring on our investor day, what I mentioned in the beginning or in the first quarter of the next year.

Rahim, Analyst, Investec: That’s great. Thank you both very much.

Andrew, Moderator/Host, TBC Bank: Thanks, Raheem. Next question comes from Tija Boy. Tija, please go ahead. Your line is open.

Tija Boy, Analyst, Unknown: Hi. Good morning from The US, and thank you so much for the call. I have a question on Uzbekistan. I saw you you shared a chat of your market share in retail loans. Can you just clarify what is included in your definition of of retail loans?

Is that does that include both secured and unsecured and personal loans, credit card? Just a little bit more color on how you define retail loans would be helpful, and I have a follow-up after that.

Georgi Megrelisvili, CFO, TBC Bank: Yes. Maybe I could it’s all the loans that retail customers take. It’s credit card, secured mortgages as well. That makes 5% even more, I would say, impressive because we don’t have any mortgage businesses or secured businesses at the moment. We are just have ICL and credit cards, and we are already at 5%.

Tija Boy, Analyst, Unknown: Okay. And so you intend to to go into mortgages at some point?

Georgi Megrelisvili, CFO, TBC Bank: Not in the immediate future. At the moment, we are happy what we are doing. We see our product suit. Like, after long period, who knows what happens, but it’s not our focus.

Vaktang Butskoye Rykidze, CEO, TBC Bank: Okay. $20.26 minimum.

Tija Boy, Analyst, Unknown: Okay. And then car loans, do you does that loans include car loans for you?

Vaktang Butskoye Rykidze, CEO, TBC Bank: We have Like

Tija Boy, Analyst, Unknown: auto loans?

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yeah. Yeah. Auto loans, we we have it, but very small part. It’s not a material in the portfolio of those.

Tija Boy, Analyst, Unknown: So it’s overwhelmingly unsecured loans?

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yeah.

Tija Boy, Analyst, Unknown: Okay. And then and and what about microloans, SMEs? That is classified separately. Right? Or is that part of?

Vaktang Butskoye Rykidze, CEO, TBC Bank: Mhmm. It’s separate.

Tija Boy, Analyst, Unknown: It’s separate. Okay. And what what do you think is a realistic so you’re at 5% share of loans today. What do you think is realistic market share that you can gain that you can have in in Uzbekistan and loans, say, three five three to five years from now?

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yeah. So thank you for this question. But as we mentioned already, we want to bring that next few years, mean, three to five years plans what we want to achieve in Georgia and Uzbekistan in probably February, March on the investor day. But our we we will have very ambition plans. Minimum, we will target minimum to go to eight to 10%, but more more detailed and clear plans will bring in the 2026.

Tija Boy, Analyst, Unknown: Okay. Thank you. And and can I can I ask another question? Do I have okay. Of course.

Yeah. So some of the I’m still learning about the Uzbekistan banking sector. But one of the things that struck me was that liquidity is seem like a challenge from from a system wide point of view. So you have system LDR that’s about sort of 28% based on the recent MF report that I see. And and correct me if I’m wrong, but that’s the number that I saw.

Which means that, you know, to sustain at the pace of growth that you’re in that you’re you’re delivering, you you, you know, you got you you have to continue to gain market share of deposits from from the incumbents because system wide liquidity is constrained. So, basically, do you agree with that hypothesis? And can you elaborate a little bit more on your deposit strategy? And does that as part of that in includes targeting deposits of, you know, established conventional banks?

Georgi Megrelisvili, CFO, TBC Bank: Thanks, and I’ll take that question. So to start with, I think there is a customer funding is one of the probably the areas we found a bit more constrained few years ago when we entered. But we one of the strategy we took, we started as a deposit taker in the country, and he says then we has been and then we had it launched. Since then, we have been growing really nicely. So we already have 4% market share as a digital bank.

It’s very kind of we are one of the fastest growing bank into, let’s say, deposit market. Therefore, we are going to get, like, a big model actual market share. We don’t see any issues. And as the questions comes, how the market is developing and how the market will grow? And we see very nice.

It’s frontier market. It just started. People are learning on saving culture, and it’s and the regulator, the local government is, like, again, promoting this. And we do expect this trend to change and become better and better as time passes as we’ve seen in in many other countries. So to kind of summarize on on one front on deposit side, are expecting the deposit growth to actually accelerate in the country, and we to continue getting the big share.

On the other hand, the another question, so how we are going to fund? Because, obviously, our target growth, you know, like, can’t be really funded. I will be very frank and direct here only through customer funding. But we don’t see any issues here because we are very capable on wholesale funding. And there are few streams on this.

For example, in Georgia, we operate with every iFi econame, honestly. Probably, there’s another kind of none we did not work. And now we are working with iFi to fund Uzbekistan business, and we have already more than dozen deals with them. So it’s both in, like, local currency. And, again, the funds, this circle is going up and up and increasing.

Another thing is the wholesale fund, the capital markets. We just, like, printed 200,000,000 US to, let’s let’s say, let’s equivalent bond into some. We so far, it was a top option. So far, we only used 140,000,000. We still have 60,000,000 to be used.

So and if needed, used because that will become part of the capital markets. Therefore, we do have capacity capability to fund any gap. So I would say let’s say so let’s say let’s say wholesale funding. So we don’t foresee any challenges on that side.

Tija Boy, Analyst, Unknown: Thank you. I have I have another question, but I’ll go back to the queue so I can give other people an opportunity to ask that question.

Andrew, Moderator/Host, TBC Bank: It’s it’s fine, Tija. While you’re on, you can just ask.

Tija Boy, Analyst, Unknown: Okay. This will be fine than what I promised. And so, no, on on asset quality, so I do recognize there is a massive opportunity for consumer and lending in Uzbekistan. You mentioned the statistics that only about a third of households have have taken have taken credit. But one of the things that I read was that household credit has also expanded a lot over the last five years or so.

And and we are now starting to see signs. I mean, it might be like pockets, but we see signs of of stress. And you had an incident in in in in in in your last quarter. And then the the central bank, seems like it’s trying to restrain consumer credits, mean, certain segments. So what are you what are you learning in the cause of in the cause of the the the the point that you made earlier about going into certain sectors to sorry.

I’m I’m I’m missing the the frame of what I did use, but you you probably you were indicating that you are taking lessons to to be able to better serve the the the the the the individual borrower. So, what are the what are the key lessons that you’ve learned, about, credits in, in Kazakhstan in in terms of mitigating mitigating risks?

Georgi Megrelisvili, CFO, TBC Bank: Okay. Probably, I’ll take that question. To start with, there are a few bits, and I’ll try to break them down. So first with the like, it’s the prod you mentioned in q one. It was isolated.

One of incident has nothing to do overall credit quality of the country or cycle. It was very unfortunate event that we contained. We extensively discussed that in q one, and we are confident that we close those loopholes from this perspective. So I would just split that bit from the overall credit quality. So on the credit quality side, we don’t see any signs of the cycle.

So like as I mentioned in the few courses, yes, our cost of risk is ticking up, and also the regulator trying to put a cap on the consumer lending. So I’ll try again to split these two parts. From regulator perspective, putting 25% cap is more to try and to push and somehow facilitate SME lending. So their key focus is to increase the business and the MSRP business since we are their focus, and they want to see more activity into there. That’s one probably one intention.

Another one, as I mentioned, there’s no size. But in future, there may be some size. So for example, they are somehow trying to preempt event kind of, like, work, let’s say, in advance to ensure that it is managed and controlled growth within the sector. So these are the two aspects from regulator side. So, again, let’s not happen because they see any credit quality or cost of risk uptick.

On our side, I already mentioned it’s, again, we don’t see any issues in the high single digits we understand. It’s our test and learn approach. It’s lessons. It’s I’d say we are actually investing into this to understand where the pocket and profitable segments. We are to grow, how to grow, and we are on top of these things.

That’s it in a moment. And as I mentioned now, we are going to slow down in a few sectors that we found are not very profitable. We are going to grow into more, but some other segments we found to be very profitable. And you will see, again, our profit from our profitability numbers from the next few quarters and years to come.

Tija Boy, Analyst, Unknown: And then do you wanna highlight any specific sectors that, you know, you probably would wanna pull back from and sectors where you see more opportunities?

Georgi Megrelisvili, CFO, TBC Bank: It is all consumer in very specific internal credit risk segments. I don’t think it’s somehow very technical things, but we have our very technical detailed split of different customer centricity profile.

Tija Boy, Analyst, Unknown: Okay. Thank you. Thank you so much. I appreciate the time. Thank you.

Andrew, Moderator/Host, TBC Bank: Thanks, Tija. Jan from Wood, your line is open. Please go ahead. Hi, Jan. Can you hear us?

Jan, Analyst, Wood: Okay. Now I think I’m on unmuted.

Gustavo Kampus, Analyst, Jefferies: Oh.

Jan, Analyst, Wood: Okay. Thank you for this presentation. So on on Uzbekistan actually, all my questions are on Uzbekistan. Made the the And And And my first pleased question. And on NIM, then can you maybe talk about the yields on new products that you launch so we can maybe get an idea about how the spreads on those look like?

And finally, on cost of risk, I’m just trying to gauge how much of a correction you expect because the 7% to 10% range is pretty wide. So I was wondering if you could narrow it a bit for us for modeling purposes. Thank you.

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yeah. Thank you, Jim. Hi. So I will take first question, and Gioty will take the second question. So about the MAO, main reason of the of the MAO in Uzbekistan is the PayMe.

And in PayMe, the reason is the regulations. So regulations recently, we have changed requirement on the customer. So the like the banks requirement is to ask the customer’s IDs before just we are all the it’s for the total market, and before it was just the name and the mobile number. But if you look in the medium term, it’s better for us because we will know customers better. And we made already that changes, and we are making a lot of promotions, services, and now we are bringing good customers.

So and now we have already July figures and the situation in Pay Me stabilized And probably from the August, the growth will grow begin to grow up. So it was the main reason. To summarize, the reason was in Paymee, but in Bentebec, we continue to grow up the customers.

Jan, Analyst, Wood: Okay. Understood. Just just to clarify, Vaktang. So the regulator requires more information from

Vaktang Butskoye Rykidze, CEO, TBC Bank: Yeah. ID the customer ID. ID requirement came in the payment providers, which was Got wasn’t it before. Yeah. We were asking only name and the mobile number in the PIN.

But now

Jan, Analyst, Wood: Great. Thank you.

Georgi Megrelisvili, CFO, TBC Bank: Okay. Thanks. So I’ll cover second and third question. On the new side, probably it’s like a little cover these questions. Said, as I mentioned, for the new products, again, we just launched them.

It’s very early days. It’s about very premature because we are experimenting and trying kind of again to find the best set sweet spot. So I would say it’s very early to speak and guiding any kind of levels. Probably, we need to wait before year end. And somewhere early next year, our strategy, we will provide more details over the new products.

But in general level, some as I mentioned, twenty percent two plus is NIM in the short term, and 20% plus at least in the medium to long term is something we expect on this side. On cost of risk, again, as you say, it’s quite it’s I mentioned it’s a frontier market. It’s like many things are moving around, and we make decisions on a daily basis on a profitability and risk adjusted profitability basis. So it’s very difficult to say. And, like, we will make the the ones that we can assure as to our decisions are very data driven, very conscious, whatever is coming.

And whatever, like, within this range, we focus on profitability. So as I mentioned, mid to high twenties in the short term next few quarters. And overall, longer term, 30% plus, again, few pluses for the business is the right level to think that Cori is just one that’s input into this profitability.

Jan, Analyst, Wood: Understood. Thanks, Georgi.

Andrew, Moderator/Host, TBC Bank: Thanks, Jan. I think we have a couple of questions on the phone lines. Carla, I’ll hand over to you.

Carla, Call Coordinator, TBC Bank: Our first question from the phone lines comes from Simon G. Nellis with Citigroup.

Gustavo Kampus, Analyst, Jefferies: Can you hear

Simon G. Nellis, Analyst, Citigroup: me? Yes. Hello?

Andrew, Moderator/Host, TBC Bank: Hi. We can hear you.

Simon G. Nellis, Analyst, Citigroup: Yes. Actually, most questions have been answered. I just have one last technical one, which is the OCI was quite a large negative this quarter. If you could give some color on that.

Georgi Megrelisvili, CFO, TBC Bank: Which I

Simon G. Nellis, Analyst, Citigroup: received The other comprehensive income was a big negative.

Georgi Megrelisvili, CFO, TBC Bank: I can’t at the moment. Have to

Andrew, Moderator/Host, TBC Bank: The other comprehensive income, Simon. Yeah?

Simon G. Nellis, Analyst, Citigroup: Yeah. It was, like, a negative 52,000,000. I’m just wondering what was behind that. I guess it’s securities driven. But

Georgi Megrelisvili, CFO, TBC Bank: It’s maybe if it’s. It’s only. It is security. I need to again, I can’t get on my because I don’t recall such a magnitude number. It will be maybe I need to check this.

Andrew, Moderator/Host, TBC Bank: Yes. I can Yeah. I can We’ll check and get back to you on that.

Simon G. Nellis, Analyst, Citigroup: Thanks thanks very much. Okay. Thank you.

Carla, Call Coordinator, TBC Bank: The next question from the phone lines comes from Gustavo Kampus with Jefferies.

Gustavo Kampus, Analyst, Jefferies: Congrats on the results. Yes, I had a few questions. Like first of all, like given the trajectory of the LARI, how you see the contribution of LARI deposits in your balance sheet? Do you expect more contribution of lower deposits compared to other currencies? Do you also expect it to maybe potentially to increase the percentage of dollars or euro loans in your loan portfolio?

How do you see these two things evolving in the short term? Thank you.

Georgi Megrelisvili, CFO, TBC Bank: That’s okay. I’ll take this as well. So probably if you see and if you observe over the, like, extended period, dollarization, personal loan and deposit side has been coming significantly. Like, few years ago, there have been times that it used to be 80%. Now it’s around 5050% loss on the deposit side.

And that’s a clear direction, intention, and target both for the bank and the regulator and for the system, So to decrease the in both areas. And as I mentioned, we are seeing very good progress. On loan side, it’s increasing. On the deposit side, we had some small changes in trend in the last quarter when you have a currency volatility, The US deposits increased. But now we are seeing the trend actually reversed, and now deposits are coming back and let me increase it.

So general direction, what we should expect is that will continue. Pace will increase. One thing we need to keep in mind is that Georgia is open at economy, so it can’t become zero. So, again, difficult to say which levels we should be. I don’t know.

Thirty, thirty five or whatever. It’s in we are at 50%. So over time, and it won’t be, like, overnight. It will be a journey taking over three extended time. You should expect polarization on both sides to continue.

Vaktang Butskoye Rykidze, CEO, TBC Bank: Also to add what is saying, you probably remember that recently, a regulator in Georgia increased the minimum requirement what could be disbursed in the local currency, and it up to 800,000 lives. And regulator in Georgia has a place also that threshold will grow up for in twenty twenty twenty six. And the totalization on the asset side, on the loan side also helps to the liability side. So in the medium term, we believe that the trend will be continued by a meaningful percentage points.

Gustavo Kampus, Analyst, Jefferies: Thank you very much. And just as a quick follow-up, from looking at your dollars and your euro loans, could you remind us if those are still like majority extended to companies, to SMEs with no no export revenues. Is that still the case?

Georgi Megrelisvili, CFO, TBC Bank: Let’s put it this way again. It was very sad, but when we are doing the underwriting, we, a, review as a match of the FX side. And if there is some discrepancies between the income and the loan, we do take sufficient, I would say, buffer for the potential FX debt evaluation that is factored in also, it was collateral. Therefore, what we can say is that from credit risk perspective, that’s probably the key driver is that LARI and FX loans have the same credit risk, and that was very well comfort and sold during COVID. On the retail side, there’s a lot of, let’s say, regulation, and I won’t go into details.

We covered it a few times. But also on the legal entity side, LARI devalued by 50%, we didn’t see any kind of differences between the delinquency rates between FX and LARI.

Gustavo Kampus, Analyst, Jefferies: Understood. Yes. Thank you for the color. My last question is on the total amount of like IFI loans you have that are maturing over the next twelve months. Like, could you could you please disclose the the overall amount if you if you can?

Georgi Megrelisvili, CFO, TBC Bank: Yes. Probably, it’s like it’s it’s not significant for what I can say. For example, last year, we repaid €300,000,000 bond without taking a new one. So we have a sufficient liquidity. We are very strong because we did not need.

We have a very strong pipeline with iFis. All all I can say is not very material amount, and we have a much larger pipeline already for the next year.

Gustavo Kampus, Analyst, Jefferies: Okay. Thank you very much.

Carla, Call Coordinator, TBC Bank: Thank you. We have no further questions in the queue.

Georgi Megrelisvili, CFO, TBC Bank: We have covered the q and a, Andrew. That’s correct?

Andrew, Moderator/Host, TBC Bank: Yeah. I think we don’t have any other questions at the moment. But just coming back to Simon’s question, I think it’s just purely a revaluation of the securities portfolio at fair value through, you know, other comprehensive income, and it was about 20,000,000, Larry, in the first half of the year. So nothing, I don’t know, nothing extraordinary there.

Georgi Megrelisvili, CFO, TBC Bank: Exactly. Because 52,000,000, I could not remember of such Yeah.

Andrew, Moderator/Host, TBC Bank: That’s that’s yeah.

Georgi Megrelisvili, CFO, TBC Bank: I put you down the

Andrew, Moderator/Host, TBC Bank: Yeah. That’s not the movement. Yeah.

Georgi Megrelisvili, CFO, TBC Bank: Okay. Right.

Andrew, Moderator/Host, TBC Bank: Okay. If there are no further questions, then, yeah, just to say thank you everybody very much for joining the call and following TBC and our story. And have a good summer. We look forward to seeing you in November with the third quarter results. And please keep in touch, reach out.

If you have any questions, you want to speak to us. We’re always around. So thank you very much, and thank you for joining the call. Goodbye. Thank you.

Carla, Call Coordinator, TBC Bank: Thank everyone. This concludes today’s call. You may now disconnect. Have a great day.

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