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TBC shrugs off Turkish concerns

The banking group also improved medium-term cost-to-income guidance
August 21, 2018

The Turkish economy may be going haywire, but management at Georgia’s largest banking group, TBC Bank (TBCG), doesn’t expect it to substantially hold back growth in the accelerating domestic economy. It reckons the downturn in the neighbouring economy should have a negative impact equivalent to around 0.5 per cent of GDP this year, but that’s against an annual forecast of around 5.5 per cent growth by the National Bank of Georgia. The backdrop seems positive judging by TBC’s first-half performance, with the group posting a robust 23 per cent underlying return on equity, up 50 basis points on the prior year.

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Customer lending was up a fifth, led by the retail business, where mortgage lending grew by a quarter to GEL4.12bn (£1.26bn). The yield on retail loans stood at 14.7 per cent by the end of June, up from 14.2 per cent a year earlier and helping improve the group’s net interest margin by 30 basis points to 7 per cent. However, higher growth in that business also meant the cost of risk – impairments as a proportion of gross customer loans – increased to 1.6 per cent, from 1.1 per cent.

A reduction in staff and administrative expenses helped reduce the cost-to-income ratio from 42.8 per cent to 36.8 per cent. That prompted management to improve medium-term guidance from 40 per cent to below 35 per cent.

Analysts at house broker Peel Hunt expect adjusted net assets of GEL39.6 for the year to December 2018, from GEL35.9 in the prior year.

TBC BANK (TBCG)   
ORD PRICE:1,648pMARKET VALUE:£893m
TOUCH:1,642-1,648p12-MONTH HIGH:1,930pLOW: 1,508p
DIVIDEND YIELD:3.4%PE RATIO:8
NET ASSET VALUE:GEL3.57LEVERAGE:7.4
Half-year to 30 JunNet interest income (GELm)Pre-tax profit (GELm)Earnings per share (tetri)Dividend per share (tetri)
20172921913.31142
20183642403.70164
% change+25+26+12+15
Ex-div:17 May   
Payment:22 Jun   
£1-GEL3.26