Earnings call transcript: TBC Bank’s Q4 2024 results show strong growth

TBC Bank Group PLC reported strong financial performance for the full year of 2024, with net profit rising 15% year-on-year to $335 million. The bank’s operating income increased by 19% to 800 million lari, driven by significant growth in net interest and fee income. The company’s shares surged 10.69% following the announcement, reflecting positive investor sentiment. According to InvestingPro data, TBC Bank has demonstrated impressive revenue growth of 15.57% over the last twelve months, with a market capitalization of $2.8 billion.

Key Takeaways

• Full year net profit rose 15% to $335 million.
• Operating income increased 19% to 800 million lari.
• Stock price jumped 10.69% post-announcement.
• Strong growth in Uzbekistan operations.
• Projected continued growth in 2025 with ambitious targets.

Company Performance

TBC Bank demonstrated robust performance in 2024, with substantial increases in both net interest income and net fee and commission income, which grew by 16% and 26% respectively. The bank maintained a strong return on equity (ROE) of 25.6% for the year, underscoring its profitability and efficient management. TBC Bank’s strategic expansion in Uzbekistan and its digital transformation initiatives in Georgia contributed significantly to its growth.

Financial Highlights

• Revenue: 800 million lari, up 19% year-on-year.
• Net profit: $335 million, a 15% increase from the previous year.
• Net interest income: Up 16%.
• Net fee and commission income: Up 26%.
• Return on Equity (ROE): 25.6% for the full year.

Market Reaction

Following the earnings announcement, TBC Bank’s stock price surged by 10.69%, reflecting strong investor confidence. The stock closed at 3,695, nearing its 52-week high. InvestingPro analysis shows the stock has delivered remarkable returns of 34.77% over the past six months and 38.29% over the last year. Trading at a P/E ratio of 6.24 and offering a dividend yield of 5.43%, TBC Bank appears attractively valued based on InvestingPro’s Fair Value assessment. Subscribers can access 12 additional ProTips and comprehensive valuation metrics on the platform.

Outlook & Guidance

Looking ahead to 2025, TBC Bank has set ambitious targets, including a net profit guidance of 1.5 billion lari and double-digit loan book growth. The bank aims to maintain a return on equity in the mid-20% range and expects a 15% compound annual growth rate (CAGR) in its Uzbekistan loan growth. InvestingPro data reveals the bank maintains a strong Financial Health Score of 3.69 (rated as GREAT), supporting its growth ambitions. The platform’s detailed Pro Research Report provides comprehensive analysis of TBC Bank’s growth strategy and financial position. Additionally, the bank projects a net profit of 200 million lari from its Uzbekistan operations.

Executive Commentary

CEO Vakhtang Butskereskice emphasized the bank’s strong regional presence, stating, "We are a leading regional financial institution combining market dominance in Georgia with high growth expansion in Uzbekistan." CFO Giorgi Mebrylischvili expressed confidence in achieving the bank’s profit targets, saying, "We guide 1,500,000,000 net profit and we are very confident to deliver."

Risks and Challenges

• Potential interest rate cuts could impact net interest margins.
• Political instability in Georgia may pose challenges.
• Inflation in Uzbekistan, at 9.8% at the end of 2024, could affect purchasing power.
• Operational expenses increased by 25% in 2024, driven by expansion costs.
• Competitive pressures in the banking sector may affect market share.

TBC Bank’s strategic initiatives and strong financial performance position it well for continued growth in 2025. However, the bank must navigate potential risks and challenges to maintain its momentum.

Full transcript - TBC Bank Group PLC (TBCG) Q4 2024:

Emily, Call Coordinator, TBC Bank: Hello, everyone, and a warm welcome to TBC Bank’s fourth quarter and full year twenty twenty four results conference call. My name is Emily, and I’ll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can either do so by raising your hand or by typing any questions into the q and a chat box if you have joined us on Zoom (NASDAQ:ZM). I will now hand over to Andrew Keeley, director of investor relations to begin. Please go ahead, Andrew.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks very much, Emily, and welcome everybody to TBC’s fourth quarter and full year twenty twenty four results call. Thank you very much for joining us today. As usual, I’m joined on the call by Vaktan Wutskereskice, our CEO, and Georgi Mebrylischvili, our CFO. So we’ll start off with a presentation, and then we’ll have time for Q and A. And with that, I’ll hand over to Vaktan.

Thank you.

Vakhtang Butskereskice, CEO, TBC Bank: Yes. Thank you, Andrew. Good afternoon, everyone, and thank you for joining our fourth quarter and full year financial conference call. Before discussing our results, I’d like to briefly address the current situation in Georgia. As you review, protests related to the elections are ongoing.

At TBC, we remain fully focused on our business and our customers, and I’d like to emphasize that we have not seen any material impact on our operations. As always, we continue to monitor developments closely and we remain confident in our ability to continue delivering strong results for our shareholders. On a more positive note, I am pleased to share that the Board has recommended a final dividend of LY 5.55 per share, subject to AGM approval. This brings our total dividend for the year to LY 8 point per share, up by 12% from the previous year, with 35% dividend payout ratio. Adding in our buyback, we have returned 39% of earnings to shareholders in 2024.

Turning to our results, Slide number four shows some of the key financial and operating highlights for the final quarter. I am very pleased to announce that we finished the year strongly with a net profit of BRL $335,000,000, up 15% year on year. At the same time, return of equity in the final quarter stood at 24.1%, supported by very solid loan growth. In Georgia, we maintained a high profitability with an excellent return of equity and very strong capital position. Meanwhile, Uzbekistan saw rapid expansion with record earnings and higher loan book growth.

In the final quarter, while unique registered users reached 18,000,000, accounting for almost half of Uzbekistan population. Slide five summarizes key takeaways for the past year as a whole. In 2024 was another year of strong profitability and growth for the group, with total operating income up by 19%, loan book growth of 18% and high return of equity of 25.6%. Our Uzbekistan business continued to scale rapidly and profitably, with total operating income almost doubling and its share in the group’s profit reaching 8%. In addition to investing in growth, we were also able to increase capital returns to shareholders, returning 39% of our net income to shareholders through dividends and buybacks.

Following on from the previous slide to Slide six, this means that we are well on a track meet to meet our 2025 targets as can be seen here. Next (LON:NXT), I’d like to reiterate how our 2024 results underpin TBC’s investment case. We are leading regional financial institution combining market dominance in Georgia with high growth expansion in Uzbekistan. We are building a world class digital proposition in Uzbekistan that already has a huge customer reach. In Georgia, we continue to deliver both strong profitability and growth.

We have a proven long term track record of impressive delivery since 2014 IPO. This can be seen in some of the financial outcomes we have been achieving, including 23% average return of equity over the past five years and in fact 26% if we strip out the COVID affected year, 15% annual growth in loans and consistently returning 25% to 35% of earnings to shareholders as dividends. Now moving to Georgia, let’s take a look at the broader macroeconomic environment. Economic growth in Georgia remained very strong at 9.5% in 2024, with inflation still low and below the target. The economic outlook for this year looks less certain, and while international organizations such as the World Bank and the Monetary Fund expect around 5.5% to 6% growth, our in house team at TBC Capital sees a base case of GDP growth coming in somewhat below that level.

However, we know that December GDP growth print came in at strong 6.7%. Slide 10 highlights how we will place we are to capitalize on a sound economic backdrop given our dominant market share in loans and deposits and the fact that we remain the top choice for a newly registered businesses. On this slide, we can see our very solid balance sheet growth in Georgia with the total loss increasing by 40% and the total deposits growing by 8% in 2024. Slide 12 show the growing digital engagement for our retail customer base. In the fourth quarter, our digital monthly users in Georgia surpassed 1,000,000 with a digital monthly active users penetration of 62%.

And I’m also pleased to highlight the continuing long term trend of increasing digitalization within our Georgian business. We can see here that the share for consumer loans issued fully digitally has increased strongly over the past year, which in turn has enabled us to cut average branch transactions by 25%. The next slide gives an overview of some of the main business achievements in Georgia in 2024. On the retail side, our loan growth was driven by fast consumer loans, while the launch of the redesigned TBC card greatly strengthens our payments proposition and has already has excellent take up. We also enhanced our mobile banking application with new features.

Incorporate, we streamlined credit processes, introduced new FX pricing solutions and hosted the first international Georgian Capital Market Conference. While in MSME, we launched digital MSME pre approved loans and more than doubled the maximum limit to L500000 for automatically approved loans. Now moving to our Uzbekistan business. The Uzbekistan economy also remained strong and steady with real GDP growth of 6.5% in 2024 and international organizations expecting around 6% growth in 2025. Inflation is high at 9.8% at the end of twenty twenty four, and it will take some time to bring this down to the targeted 5% level.

Slide 60 shows how exceptionally well our Uzbek business continues to perform. We now have over 18,000,000 unique registered users, with almost 6,000,000 monthly active users, an increase of over 1,500,000 in 2024. I also want to highlight that our Uzbekistan mass selected users increased by 1,000,000 in the final quarter, a tremendous achievement that shows how we are now successfully converting more than our 18,000,000 customer base into regular users as we expand the range of products and services that we offer. Our loan book more than doubled year on year to $626,000,000 while our deposit rose over 80% to $376,000,000 And crucially, we are scaling up profitability as both our revenues and profitability showed very strong growth, with net profit of $13,000,000 and total operating income of $15,000,000 in the fourth quarter, both record numbers. 2024 was a year of the major progress in Uzbekistan on many different fronts.

We continued to build out a world class and a highly international team, with talent made up to 25 nationalities. Strong shareholder confidence drove $75,000,000 in capital injections, while we diversified funding with $105,000,000 in wholesale financing and one of Uzbekistan’s largest corporate bond issues to date. We also made huge progress in AI, which is now heavily used in collections, and in January, we deployed Uzbek language element for sales. We plan to extend its use to customer support and other areas later during the year. We also launched a proprietary processing center and struck partnership with Visa (NYSE:V) and Mastercard (NYSE:MA).

On the next slide, you can see some of the core products that we launched in 2024, including our flagship daily banking product, Salomcard, our first revolving credit card or Smoocard and Uzbekistan’s First fully digital MSME banking proposition. Logix’s three major products verticals in a single year is an impressive achievement and we are incredibly proud of it. On the Slide 19, you can see how far we have come since 2020. In just four years, we have already became a big player in Uzbekistan in the retail banking space. Slide 20 highlights the growing contribution of Uzbekistan to the group’s overall performance.

Uzbekistan already accounts for half of the total unsecured consumer loans, 11% of the group’s retail deposits portfolio, 15% of the total operating income and 8% of the net profit for the full year of 2024. And with that, I’d like to hand over to Giorgi.

Giorgi Mebrylischvili, CFO, TBC Bank: Thank you, Huwakhtang, and thanks all for joining our call today. Now I’m going to take you through our fourth quarter and full year results, and I’ll start with Slide 22. I am very pleased to report that we delivered another year of very strong profitability. Net profit for the full year was over SEK 1,300,000,000.0 that implies 15% year on year growth and record earnings. In the first quarter, we achieved a net profit of 335,000,000 lari or 344,000,000 if we adjust for around 10,000,000 lari of net requiring provision of the plant sales of our TBC credit, our subsidiary into, let’s say, our into, let’s say, Azerbaijan.

We hope to close this deal in the first half of the year subject to completing paperwork and reg approval, which will leave TBC with a cleaner footprint focused on our key markets. This translated into a very strong ROI of 25.6% for the full year and 24.1% for the Q4. On adjusted basis, Q4 ROI was 24.8%. Now I would like to turn to slide 23 to discuss our revenue performance. Both net interest and non interest income posted very strong year on year growth for full year, which totaled up by 19% year on year, reaching 800,000,000.0 lari.

The growth was actually well distributed across the board. Net interest income was up by 16% year on year, while our net fee and commission income grew by 26% year on year. And for Q4, we reached a record BRL $784,000,000 of operating income, up by 23 year on year. Now let’s move on Slide 24 to look at our margin dynamics. And despite seeing quite a bit NIM compression in Georgia, if we call 5.7% squeeze, we successfully maintained a stable level of NIM 6.7% for full year, which was helped by the increased contribution of our Uzbek business.

Going forward, we would aim to maintain NIM more or less at the same level for the next few quarters. Now I’ll move to Slide 25 to look at our costs. We remain committed to the disciplined cost management, while at the same time, we invest into sustainable growth of our businesses in both countries. OpEx grew by 25% in 2024 compared to last year due to our continued scale up of our businesses, particularly into Uzbekistan, which accounted for around 50% of the increase. Georgian cost growth was 14% year on year.

As a result, the group’s cost to income ratio stood at 37.9% in 2024 with Georgia’s cost of income at 32.7%. Now let’s move to Slide ’26 to look at our asset quality that remains very solid with low NPL levels and healthy cost of risk. NPLs were stable at 2.2% while cost of risk stood at 1% for the Q4 that reflects the strong quality of our loan book. For Zifulya, our cost of risk remained flat at 80 basis points. Our balance sheet also continued its strong growth trajectory as you can see from slide 27.

Gross loans were up by 18% year on year on a constant currency basis, and the total customer funding was up by 10% over the same period on the same basis. Now let’s turn to Slide ’28 to our Uzbekistan business that really developed very strongly on many fronts in 2024. For the full year, our net profit reached USD 41,000,000, up by 86% year on year, while return on equity remained at a very strong 26.9% level, highlighting how we are scaling up this business profitable. And now look into more financial details. We continue to maintain our high end our highlights margins with NIM being above 24% for both final quarter and full year.

Asset quality remained very healthy. However, I’d like to spend a moment on the pickup of the cost of risk in q four. This was due to annual recalibration of the models based on the recent historical data in December that we also guided during q three call that doesn’t actually reflect any worsening in our asset quality. This can also be seen by strong pickup in coverage ratio in Q4 that was 230% with NPLs being at very healthy 2%. Now let’s move to slide 30 to look at our capital that remains very solid.

We continue to maintain the strong capital buffers comfortably above regulatory requirements in both countries. And finally, on slide 31, I’d like to reiterate that we remain committed to return capital to our shareholders. As already mentioned, the Board has recommended a final dividend of LE 5.55 per share. That brings our full year dividend per share to 8.1 lari, up 12% year on year. And that translates into 35% dividend payout ratio, the top of our guided range for the second consecutive year.

With the 50,000,000 lari buyback, overall capital distribution to shareholders was 39% of the full year net profit. And on that note, I’d like to thank you. And now we are ready to answer any questions you may have.

Emily, Call Coordinator, TBC Bank: Thank you. As a reminder, if you would like to ask a question today, please do so now either by raising your hand or typing any questions into the q and a chat box if you have joined us on Zoom. Or

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks very much. Okay. I think the first question comes from Robert Sage of Peel Hunt. Robert, please go ahead. Hi, Robert.

Can you hear me?

Robert Sage, Analyst, Peel Hunt: Sorry. Can you can you hear me now?

Andrew Keeley, Director of Investor Relations, TBC Bank: Yes. All good.

Robert Sage, Analyst, Peel Hunt: Okay. Apologies. I’ve got a couple of questions relating to the very strong growth in Uzbekistan, and they’re probably two parts of the same point, to be honest. But the first question, I think that Vactang pointed this out on the way through that the growth in digital monthly active users was very strong. And in particularly, it picked up, I think by over 20% in the fourth quarter.

And I was wondering if there’s anything specific about that surge in the active users numbers and perhaps how we should think about this number moving into 2025 given the fact you’ve already significantly exceeded your N25 target by the end of twenty twenty four. The second question, which is kind of related to that, I guess, relates to the lending growth in Uzbekistan. You gave a three year CAGR of 80% plus and you did more than 130% in year one, 112% in 2024. And I was wondering how we should think about 2025. I’m presuming there’s gonna be a lower percentage increase if only because mathematically you you start from a higher starting point, but any sort of kind of feel for how this might grow again in the coming year, I’d be very interested in.

Vakhtang Butskereskice, CEO, TBC Bank: I will try to answer your thank you, Robert. First of all, I I will try to answer the first question, and Gilbert will answer the second question. So, I agree with you. So we have a very good result. Monthly ad users grows by around 1,000,000 in the first quarter in Uzbekistan.

There are a few reasons. As I have already mentioned in the presentation, we brought three big new products in Uzbekistan. This is a new type of the debit card, salon card. We brought the credit card and also MSME products. So this also has a fullness on the MOW for the our Uzbek operations.

In addition of that also in payment business also we are doing a lot of things, which also helps us to increase MOW. And also in the consideration, we have to have that first quarter is very active quarter to increase the monthly active users as a customer. So to summarize everything, on the one hand, the new products which are bringing in a business payment business in the bank in Uzbekistan and also seasonality.

Giorgi Mebrylischvili, CFO, TBC Bank: Okay. Thanks. And Robert, to cover, I think I need to refer to our 25 guidance that sets out slight, I would say, for Uzbekistan net profit and loan growth. So we guided for $200,000,000 loan growth and on the sorry, this

Vakhtang Butskereskice, CEO, TBC Bank: Louded because we don’t hear you well.

Giorgi Mebrylischvili, CFO, TBC Bank: Sorry. Can you hear me better?

Vakhtang Butskereskice, CEO, TBC Bank: Yes.

Giorgi Mebrylischvili, CFO, TBC Bank: Yeah. So what I was saying, I need to refer to our 25 guidance that sets out our post cross loans and net profits. As you know, we guided market 15% CAGR for loans that translates into a 1,000,000,000 loan. So we reached just above 600,000,000. And for the net profit side, again, we are very confident to reach 200,000,000 lari.

I just cover both our guidance points in this question.

Robert Sage, Analyst, Peel Hunt: Thank you very much.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks, Robert. Next up, we have Gustavo Campos. Gustavo, please go ahead.

Gustavo Campos, Analyst: Hi. Thank you very much for the presentation. Congratulations on the results. Yeah. A few few questions from my side.

I guess the first one, I would like to understand the dynamic in in the overall deposits. We I’ve seen that they’ve been broadly stable, but although these are like end of the quarter figures. If you could please elaborate a bit as far as any dollarization trends you’ve noticed through the quarter, any if you could disclose like maybe trough conditions of where these deposits reached during the quarter and any trends after the reporting period? That would be my first question here. Thank you.

Giorgi Mebrylischvili, CFO, TBC Bank: Thank you very much. So on the deposit side, we have a very nice growth, 8% on full year basis. As you noticed and there is a second question in Q and A, I would also kind of combine with this on the deposit side. So as I mentioned, it was very, very strong growth. On the dollarization side, we indeed observed increase due to our dollarization, particularly during the election period that was short lived.

That slightly changed our realization structure as of price, I remember, by three percentage points. So we are around 54% on, let’s say, dollar side. But that trend now has fully stopped. We don’t see any more trends. That was mainly driven by the large corporate customers less of on the retail side.

But on the other hand, that creates very significant ethics buffer into the, let’s say, system. So at the moment, we have a lot of ethics buffers that probably the system doesn’t need. At some point, we need to expect reversal losses because corporates need to pay salaries, pay taxes in salary. So that would be a kind of our expectations for the future period.

Gustavo Campos, Analyst: Perfect. Yeah. That that’s very clear. Thank you. Thank you very much.

I was also wondering, if you if if you had any in house, expectations or views on the trajectory of the Larry, through 2025, that would be very helpful. Thank you.

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. It’s, quite difficult to answer, but if you observe Larry, despite all that what’s going, it’s actually remained quite stable, just few percentage points devaluation. It stands around, I would say, two eight, two 80 two. We don’t expect any material movement from from that side. Maybe if you press these points up and down, but around two, two eighty five level would be our kind of current guess.

Gustavo Campos, Analyst: Understood. Yeah. That’s very helpful as well. Thanks very much. And, I was, I was looking at your guidance around the 23%, return on equity, stronger profitability and continuing profitability growth.

I was, I was wondering if you could please elaborate here, like, what are your underlying assumptions here for, for the LARRY? Is, is it assuming that the LARRY will, will remain stable? And is there like, what are the main sources of growth that will, drive, you know, stronger results in 2025 that you that you see? Thank you.

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. Thanks. So to start, first of all, actually, return on equity doesn’t too much dependent on lari because mainly of personal income and capital in lari. So we guide 1,500,000,000 net profit as well. Depak it on the fixed, it may vary, but like I said, what we target, what we guided market, that’s what we are going to actually deliver.

So what are the key points? Like it spread across all P and L lines. We Georgian economy grows very nicely again. We expect our loan book to grow double digits Despite NIM probably in Georgia remaining more or less stable in mid five levels, we don’t expect any kind of upside or significant downside, maybe some volatility, but loan growth will be very healthy. Second point, we also increased very like expect a very nice growth into net fee and commission income.

Obviously, there is no interest income side overall that we have been delivering over the past few years. We expect at least 15% plus, maybe stretching to 20%, and it’s driven by different factors, macro growth, lot of products. Actually, we are going to launch new business lines. Our cost of risk remains very stable. We usually guide 1% cost of risk.

We usually land below of that in Georgia. Probably, we continue to be below that maybe marginally, but still. And all that creates very healthy profits for Georgia that we have been delivering as what that measured for the last ten years and before then after IPO. That will be also supplemented very strong profitable growth from Uzbekistan because we guide a significant increase into loan book, but we guide this growth also very profitably as kind of as we guide it, we landed around 110,000,000 lari net profit, but in Uzbekistan, we guide 200,000,000 lari. So significant upside will be coming from that front as well.

So overall, we are very confident at 23% plus. Probably, we have not been to that low level for a few quarters. We target to be mid twenties around that level. And again, we are very confident to deliver our $1,500,000,000 in net profit.

Gustavo Campos, Analyst: Understood. Yeah. Thank you very much. Just very quick last question for me. How many how much in capital injections are you expecting, to deploy on the Uzbekistan business in 2025?

Thanks again.

Giorgi Mebrylischvili, CFO, TBC Bank: Exactly. We generally don’t provide exact NovoDOT guide, but the first thing, we will provide as much capital as it needs. Group has, like all the muscles to do so. Second, probably Uzbekistan become profitable. There has been change in capital treatment, and we don’t expect any material injection, anything like close or what we injected so far.

So it will be very immaterial amount, if any.

Gustavo Campos, Analyst: Understood. Thanks again, and congrats on the results.

Vakhtang Butskereskice, CEO, TBC Bank: Thank you.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks, Gustavo. Next up is Jan Demir. Jan, please go ahead. Thank you.

Jan Demir, Analyst: Yes. Yes. Good afternoon. Thank you for taking my questions, Jan Demir. So my question is on the Georgian net interest margin.

It’s been I mean, it’s been more resilient than previous years, but it’s been coming down a bit. So I was wondering what your thoughts would be for the long term margin outlook also incorporating higher for longer scenarios and things like that? What would you think?

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. So we already guided about medium term around mid five. For longer term, it’s difficult to say. But at the moment, what we are seeing is the macro parameters, the quantitative easing period has started, but posted for a period. But actually, next of our guidance, let’s say, are looking all the options and depending on the scenario.

So our expectation is the quantitative easing will continue, probably, like, always in long term given how macro is performing. And that’s probably a bit, puts additional pressure on Georgian Lim. However, there are other means that we can deploy, like, again, changing our portfolio structure, linearization increase. So even in a longer term, we don’t foresee, in the longer term, I mean, like, few years down the road to fall below 5% that we booked. I can’t say much, let’s say, difficult to say, but 5% plus the level.

But as I mentioned, our medium term, like, middle 5% is something we expect to actually retain.

Jan Demir, Analyst: And this is for the whole group, for for

Giorgi Mebrylischvili, CFO, TBC Bank: for for for the whole group, we kind of expect to retain 6% very long time. Like, we are 6.7 around that level for the next few quarters, as I mentioned. If not higher, that’s the level we are going because Uzbekistan business has very healthy NIM. Each year of, is the portfolio is going up, so it has very positive impact on the NIM and profitability of the overall group.

Jan Demir, Analyst: Got it. Thank you very much.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks, Jan. Next up is Dan Kailov. Dan, please go ahead. Your line is open. Thank you.

Dan Kailov, Analyst: Hi, Jan. First of all, congratulations on a stellar set of results. Just two questions. The first one is on your provisioning. From the reporting, it’s you report BRL25.7 billion of gel loans net and the gross loans is about 26,700,000,000.0 in your reporting.

That implies your provision has doubled in absolute amounts and in relative amounts as a percentage of gross loans quarter on quarter. I was wondering if you could explain what the rationale behind this extra level of provisioning has been and kind of where it come where it comes from both of segment side and stage side.

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. Probably, it’s like I need to look at because of because our cost of risk ratio is like in Georgia was 60 basis points. If you look, in Uzbekistan, it’s 1%. Our sales have been started around like it has not been anything like this. So for credit risk quality perspective, again, we have quite a low cost of risk versus our, like, the provisions versus our, let’s say, guided levels.

Because there hasn’t been anything in proof for us that we booked. It’s all in our kind of in all in our P and L.

Dan Kailov, Analyst: No. I understand. Yeah. It seems a bit like there’s been a transfer of provisioning from somewhere because it’s not showing up in the cost of risk. But the difference

Giorgi Mebrylischvili, CFO, TBC Bank: I mentioned the level of agent sales. Yes. If we look at, let’s say, overall provision level, Azerbaijan subsidiary sale and loss for it was actually a 42% provision line. That is not cost of risk. It’s a provision for the anticipated sale, as I mentioned.

So that’s quite sizable number, 10,000,000

Dan Kailov, Analyst: Lovely. Thank you so much. And my last question just on the macro side, in your economic forecast, how what is of your rate expectation for both, Georgia and Uzbekistan? Thank you.

Vakhtang Butskereskice, CEO, TBC Bank: So as I mentioned in my part of the presentation, World Bank Monetary Fund’s, the international organization forecasting real GDP growth in Georgia six percent plus and our internal team, they are forecasting or moderate growth in the range of 4.5% to 5%. But moving to Uzbekistan, the growth that we are forecasting around 6%.

Dan Kailov, Analyst: Thank you. Sorry. I meant not on the GDP growth, but on the policy on the interest rate on the interest rates. How many cuts or if any are you expecting in Uzbekistan and Georgia?

Vakhtang Butskereskice, CEO, TBC Bank: You mean the benchmark rates?

Raheem Karim, Analyst, Investec (LON:INVP): Yeah.

Dan Kailov, Analyst: The benchmark rates. Yes.

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. It’s, again, difficult to say. Generally, it’s a general trend. Like, we can easily see low severance or as a medium to long period. So that’s probably the expectation.

Exactly how it will be phased out, difficult to say. But again, we would expect to see low severance at some point in medium term, if not sooner, quicker.

Vakhtang Butskereskice, CEO, TBC Bank: But sure, at the forecast that next six months, the rate will be changed. So we are forecasting to be on the same.

Andrew Keeley, Director of Investor Relations, TBC Bank: Okay. Thanks very much, Dan. Next is Stephen Payne. Stephen, please go ahead.

Stephen Payne, Analyst: Thank you. A couple of questions, if I may. I know that cost growth in 2024 was running ahead of income growth. I mean, clearly, as you are heavily investing in the growth in Uzbekistan, launching the three new verticals, just wondering, if we can expect cost growth to sort of moderate to be more in line with income growth going forward?

Giorgi Mebrylischvili, CFO, TBC Bank: It’s okay, Seq. So first of all, to start, we are going to launch and develop our businesses, particularly into Uzbekistan and Georgia. So we will expect some, again, material cost growth because that creates future foundation. But in 2025, we would expect that cost and less income will be more or less the same. So probably we may even see the positive jaws from that perspective.

But at the moment, our key focus is to develop the business to ensure we are hitting our SEK 1,500,000,000.0 plus net profit, deliver mid-twenty twenty return on equity and to ensure long term sustainability of our businesses.

Stephen Payne, Analyst: Okay, great. Thank you. And secondly, just wondering, I mean, given the dividend payout was right at the top of your range again and then we clearly had the buyback on top of that as well, all of that whilst funding this faster than expected growth in Uzbekistan. Just wondering whether we could assume, you know, should we be thinking about a higher level of capital distributions going forward above and beyond the 35%?

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. That’s actually you mentioned Wafonof’s unique strength that group has because it has very like fast growing business that we found from Job, but we also can pay the decent level of capital back to Zaleta shareholders. From that perspective, a, like, we guided 25 to 35% DPR ratio, all things being equal. We don’t expect our DPR to fall down. Also, by bit, at the moment, it’s not generally our in our formal guidance, but we look at our efficiencies of our capital.

So MC Group generates much surplus capital generally. At the moment, we are happy to keep a bit higher buffers than we usually do given the circumstances. But, again, once it starts to clear us out, the group may have capability again to conduct some biopsy twenty five, but we need to see.

Stephen Payne, Analyst: Okay. Great. Thank you very much.

Vakhtang Butskereskice, CEO, TBC Bank: Thank you.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks very much. Just while we wait to see if there’s any more or any questions coming through, we’ve got a couple on the chat from Brad Lubitsky. It’s still early, but can you comment on how the rollout of cards are going in Uzbekistan relative to your expectations? At what point will you update your targets for that business?

Vakhtang Butskereskice, CEO, TBC Bank: Very well. So just to begin, and we launched this new cart, salon cart recently just at the end of the first quarter. So it’s early to say, but what we have seen practically just during December and January, we did very well. And probably when we’ll have our first quarter results, I think we’ll update investors on that on this prototype. But till today, we are doing very well.

Giorgi Mebrylischvili, CFO, TBC Bank: So there’s one more question from Simon. What was driving the loan growth, like, particularly sort of Isaac? It’s like as you look to see macro performance strongly, like what Dag mentioned, GDP growth was 6.7% in 2.4%. So therefore, it’s translated into, like, very strong loan growth as well, which has, I would say, macro and strong economic performance driven.

Andrew Keeley, Director of Investor Relations, TBC Bank: And Georgi, there’s just a question come in about the rise in the provision coverage in Uzbekistan as well. What’s driven this change?

Giorgi Mebrylischvili, CFO, TBC Bank: Yes. So as I mentioned, we recalibrated our models that we kind of given the small size of the book to once a year. So that was kind of increased our cost of risk slightly and that resulted into additional provision. But I as I also highlighted, that doesn’t reflect any, I would say, deterioration in overall asset quality. Like the book is very well covered.

And we still guide that our kind of normalized cost of risk will be around 7% to 8%. And with 20% plus NIMS that provides very strong risk adjusted NIM is very higher ROI, let’s say, businessless model of Uzbekistan. High margins, high risk, high profitability.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thank you. Okay. I don’t think we have any further questions.

Emily, Call Coordinator, TBC Bank: We do have a question on the telephone lines.

Andrew Keeley, Director of Investor Relations, TBC Bank: Okay. Thank

Emily, Call Coordinator, TBC Bank: you. Our next question comes from Raheem Karim with Investec. Raheem, your line is now open.

Raheem Karim, Analyst, Investec: Thank you. Good afternoon and congratulations on the strong results. A couple of questions from the first with respect to Georgia, if I may. A very strong kind of FX and think emission performance in the period. I was wondering if you could perhaps give some guidance around how you expect that to unfold in 2025 and if there’s any seasonality that we should be aware of?

And then secondly, with respect to Uzbekistan, appreciate it’s been a very busy year, lots of products rolled out, but it’s obviously an ambitious team, sorry. So is there any indication of the pipeline or product that we can consider or expect next year as we move in ’25 to help further enhance the long term growth of that business?

Giorgi Mebrylischvili, CFO, TBC Bank: Thanks, Efe. I’ll start with the FX at Wakanda and Kolkan Kawasaki part. So I see I was, I would say we can consider ’24 FX profit as a run rate or like baseline that will can only grow from that point. So probably, our circuit will be at least double it’s a digit growth from FX 10% plus or even maybe higher. So it’s I would not consider any kind of one offs or anything.

That will bring it down next year.

Vakhtang Butskereskice, CEO, TBC Bank: Yes. On the to answer on the second question, so we will concentrate in Uzbekistan on the products which we launched in the first quarter of last year. This is the daily banking product, the salon card, the credit card, which we believe that will have a huge potential for a growth. And as last four, five years and this has seen the financials and we are doing very well in the consumer lending, we believe that also we can do in the micro and SME businesses. And as we launched the daily banking in SME businesses, now we’ll push more and more micro and SME lending from the 2025.

Raheem Karim, Analyst, Investec: Thank you very much, Georg. Can I just double check? Is there any seasonality in that?

Giorgi Mebrylischvili, CFO, TBC Bank: Sorry, I missed that part. Usually, Q1 is like, slowest generally given the like holiday season less of activities and Q4 is really strongest. So we should expect probably as I guided on full year basis, we should expect nice double digit growth, but probably Q1 will be lower than Q4 because of the less seasonality.

Raheem Karim, Analyst, Investec: That’s super helpful. Thank you both very much.

Andrew Keeley, Director of Investor Relations, TBC Bank: There are a couple of other questions in the chat. One is on the cost of risk in Georgia across the different segments and another is on the political instability and how we see that affecting our business in Georgia this year.

Giorgi Mebrylischvili, CFO, TBC Bank: I see. Okay. So if you look, as I mentioned, the Georgian cost of risk generally is very strong. If you look the distribution on incorporate, we are quite low, quite close to 0.2 around that level. Highest cost we have in MSME generally sets a business nature.

However, again, it’s at a very comfortable level. And over retail, we remain like a it’s as fast as I remember kind of remember, around just about 1% if I could recall correctly. But generally, it’s our are within, like, our risk appetite, which is expected. And within retail, I won’t go into details because it’s becoming too kind of narrow down. We have mortgage book.

We have a sale. Most of them have different cost of risk. But our key driver generally is that what is the profitability that this business actually, let’s say, can generate. So it’s not cost of risk. We can, like, take in certain cases higher cost of risk, as you said, in terms of Uzbekistan if business delivers high level profitability.

Yes. To

Vakhtang Butskereskice, CEO, TBC Bank: answer on the second question, how did politics improve the economy in Georgia? I think with the good example is December. We have seen the real GDP growth in December ’6 point ’7 percent and we have demonstrations in releases at time. So it’s less than in November of the last year when the real GDP growth was 7%. We have not the now we feel we have not the results of January.

We have not these real GDP growth numbers for January and February. But what internally we feel and what we see that probably January has to be better than in December. So it means that it had influence somehow, but taking in account that in 2024, the real GDP growth was 9.5%, while we are forecasting that. Putting everything together, our internal forecast, the real GDP growth in the range of 4.5% to 5%.

Andrew Keeley, Director of Investor Relations, TBC Bank: Thanks very much, Vakhtang and Georgi. Do we have Emily, do we have any other questions on the phone lines?

Emily, Call Coordinator, TBC Bank: We currently have no further questions registered.

Andrew Keeley, Director of Investor Relations, TBC Bank: Okay. I think we have no more questions. So just leaves me to say thank you very much everybody for joining this call today. Please keep in touch. We’re always around and happy to help out with any follow-up questions.

And we look forward to catching up with you again with our first quarter results in May. So thank you very much, and goodbye. Thank you very much.

Vakhtang Butskereskice, CEO, TBC Bank: Thank you. Goodbye.

Emily, Call Coordinator, TBC Bank: Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines.

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