TBC BANK GROUP PLC ("TBC Bank")

2Q AND 1H 2024 UNAUDITED CONSOLIDATED FINANCIAL RESULTS

 

 

Forward-looking statements

 

This document contains forward-looking statements; such forward-looking statements contain known and unknown risks, uncertainties and other important factors, which may cause the actual results, performance or achievements of TBC Bank Group PLC ("the Bank" or "the Group") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future. Important factors that, in the view of the Bank, could cause actual results to differ materially from those discussed in the forward-looking statements include, among others: the achievement of anticipated levels of profitability; growth, cost and recent acquisitions; the impact of competitive pricing; the ability to obtain the necessary regulatory approvals and licenses; the impact of developments in the Georgian and Uzbek economies; the impact of Russia-Ukraine war; the political and legal environment; financial risk management; and the impact of general business and global economic conditions.

 

None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises, nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects are based are accurate or exhaustive or, in the case of the assumptions, entirely covered in the document. These forward-looking statements speak only as of the date they are made, and, subject to compliance with applicable law and regulations, the Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in the document to reflect actual results, changes in assumptions or changes in factors affecting those statements.

 

Certain financial information contained in this management report, which is prepared on the basis of the Group's accounting policies applied consistently from year to year, has been extracted from the Group's unaudited management accounts and financial statements. The areas in which the management accounts might differ from the International Financial Reporting Standards and/or generally accepted U.S. accounting principles could be significant; you should consult your own professional advisors and/or conduct your own due diligence for a complete and detailed understanding of such differences and any implications they might have on the relevant financial information contained in this presentation. Some numerical figures included in this report have been subjected to rounding adjustments. Accordingly, the numerical figures shown as totals in certain tables might not be an arithmetic aggregation of the figures that preceded them.

 

 

 

2Q and 1H 2024 consolidated financial results conference call details

 

TBC Bank Group PLC ("TBC PLC") has published its unaudited consolidated financial results for the 2Q and 1H 2024 on Friday, 9 August 2024 at 7.00 AM BST. The management team will host a conference call at 2.00 PM BST.

 

 

To participate in the conference call live video webinar, please register using the following link:

https://www.netroadshow.com/events/login?show=49b65e57&confId=69026

You will receive access details via email.

 

 

 

 

Contacts

 

 

 

Andrew Keeley Director of Investor Relations     E-mail:  [email protected] Tel:  +44 (0) 7791 569834 Web: www.tbcbankgroup.com

Anna Romelashvili                                              Head of Investor Relations     E-mail:  [email protected]  Tel:  +(995) 577 205 290 Web: www.tbcbankgroup.com

Investor Relations Department       E-mail:  [email protected]  Tel:  +(995 32) 227 27 27 Web: www.tbcbankgroup.com

Table of contents

 

2Q and 1H 2024 unaudited consolidated financial results announcement

 

Interim management report

Financial highlights

Operational highlights

Letter from the Chief Executive Officer

Economic overview

Unaudited consolidated financial results overview for 2Q 2024

Unaudited consolidated financial results overview for 1H 2024

Additional information

1)          Financial disclosures by business lines

2)          Glossary

3)          Ratio definitions and exchange rates

 

Risk management

Material Existing and Emerging Risks

Statement of Directors' Responsibilities

 

 

Condensed consolidated interim financial statements (unaudited)

Independent Review Report ..…………………………………………………………………....……….…………… 50

Condensed Consolidated Interim Statement of Financial Position……………………………………….….………... 52

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income…….…...……….... 53

Condensed Consolidated Interim Statement of Changes in Equity……………………....…………………..…….…. 54

Condensed Consolidated Interim Statement of Cash Flows…………………………………………..……….……… 55

Notes to the Condensed Consolidated Interim Financial Statements…………………………………………….. …... 56

2Q and 1H 2024 unaudited consolidated financial results

2Q 2024 profit of GEL 329 million, up by 12% YoY, with ROE at 27.1%.

1H 2024 profit of GEL 626 million, up by 14% YoY, with ROE at 26.0%.

 

European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation.

Financial highlights

Income statement

In thousands of GEL	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
Net interest income	458,111	442,844	399,338	14.7%	3.4%	900,955	766,129	17.6%
Net fee and commission income	123,398	104,303	105,636	16.8%	18.3%	227,701	198,074	15.0%
Other non-interest income	96,922	70,833	81,792	18.5%	36.8%	167,755	154,802	8.4%
Total operating income	678,431	617,980	586,766	15.6%	9.8%	1,296,411	1,119,005	15.9%
Total credit loss allowance	(31,565)	(45,131)	(33,934)	-7.0%	-30.1%	(76,696)	(87,102)	-11.9%
Operating expenses	(256,577)	(229,671)	(203,560)	26.0%	11.7%	(486,248)	(386,340)	25.9%
Profit before tax	390,289	343,178	349,272	11.7%	13.7%	733,467	645,563	13.6%
Income tax expense	(60,991)	(46,707)	(56,186)	8.6%	30.6%	(107,698)	(97,517)	10.4%
Profit for the period	329,298	296,471	293,086	12.4%	11.1%	625,769	548,046	14.2%

 

Balance sheet

In thousands of GEL	Jun'24	Mar'24	Jun'23	Change YoY	Change QoQ
Total assets	35,780,415	33,261,535	28,878,826	23.9%	7.6%
Gross loans	24,128,807	22,545,189	19,360,689	24.6%	7.0%
Customer deposits	21,464,578	20,838,768	18,992,492	13.0%	3.0%
Total equity	5,079,760	4,853,916	4,331,529	17.3%	4.7%
Number of ordinary shares	55,361,967	55,393,664	55,140,216	0.4%	-0.1%

 

Key ratios

	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
ROE	27.1%	25.1%	28.1%	-1.0 pp	2.0 pp	26.0%	26.7%	-0.7 pp
ROA	3.8%	3.6%	4.2%	-0.4 pp	0.2 pp	3.7%	3.9%	-0.2 pp
NIM	6.4%	6.5%	6.8%	-0.4 pp	-0.1 pp	6.4%	6.6%	-0.2 pp
Cost to income	37.8%	37.2%	34.7%	3.1 pp	0.6 pp	37.5%	34.5%	3.0 pp
Cost of risk	0.5%	0.8%	0.6%	-0.1 pp	-0.3 pp	0.6%	0.9%	-0.3 pp
NPL to gross loans	2.0%	2.2%	2.1%	-0.1 pp	-0.2 pp	2.0%	2.1%	-0.1 pp
NPL provision coverage ratio	75.5%	74.4%	89.3%	-13.8 pp	1.1 pp	75.5%	89.3%	-13.8 pp
Total NPL coverage ratio	141.9%	140.3%	153.7%	-11.8 pp	1.6 pp	141.9%	153.7%	-11.8 pp
Leverage (x)	7.0x	6.9x	6.7x	0.3x	0.1x	7.0x	6.7x	0.3x
EPS (GEL)	5.94	5.39	5.33	11.4%	10.2%	11.33	9.90	14.4%
Diluted EPS (GEL)	5.91	5.36	5.25	12.6%	10.3%	11.28	9.76	15.6%
BVPS (GEL)	90.32	86.11	78.21	15.5%	4.9%	90.32	78.21	15.5%
Georgia
CET 1 CAR	16.8%	16.6%	18.3%	-1.5 pp	0.2 pp	16.8%	18.3%	-1.5 pp
Tier 1 CAR	22.3%	18.8%	20.7%	1.6 pp	3.5 pp	22.3%	20.7%	1.6 pp
Total CAR	25.9%	21.5%	23.1%	2.8 pp	4.4 pp	25.9%	23.1%	2.8 pp
Uzbekistan
CET 1 CAR	12.6%	12.7%	17.8%	-5.2 pp	-0.1 pp	12.6%	17.8%	-5.2 pp
Tier 1 CAR	12.6%	12.7%	17.8%	-5.2 pp	-0.1 pp	12.6%	17.8%	-5.2 pp
Total CAR	16.4%	16.2%	18.6%	-2.2 pp	0.2 pp	16.4%	18.6%	-2.2 pp

Operational highlights

Customer base

In thousands	Jun'24	Mar'24	Jun'23	Change YoY	Change QoQ
Total unique registered users	19,051	17,884	14,260	34%	7%
Georgia	3,360	3,317	3,157	6%	1%
Uzbekistan	15,691	14,567	11,103	41%	8%
Total monthly active customers	6,378	6,331	4,996	28%	1%
Georgia	1,633	1,615	1,550	5%	1%
Uzbekistan	4,745	4,716	3,446	38%	1%
Total digital monthly active users (digital MAU)	5,695	5,646	4,295	33%	1%
Georgia	950	930	849	12%	2%
Uzbekistan	4,745	4,716	3,446	38%	1%
Total digital daily active users (digital DAU)	1,884	1,760	1,434	31%	7%
Georgia	441	413	381	16%	7%
Uzbekistan	1,443	1,347	1,053	37%	7%
Digital DAU/MAU	33%	31%	33%	0 pp	2 pp
Georgia	46%	44%	45%	1 pp	2 pp
Uzbekistan	30%	29%	31%	-1 pp	1 pp

Uzbekistan - key highlights

In thousands of GEL	Jun'24	Mar'24	Jun'23	Change YoY	Change QoQ
Gross loans and advances to customers	1,122,400	928,553	526,843	113.0%	20.9%
Customer accounts	721,632	657,190	457,340	57.8%	9.8%

 

In thousands of GEL	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
Total operating income	91,081	74,045	48,291	88.6%	23.0%	165,126	88,373	86.9%
Profit for the period	23,779	18,437	12,505	90.2%	29.0%	42,216	25,212	67.4%
ROE, %	27.8%	23.7%	22.1%	5.7 pp	4.1 pp	25.7%	25.1%	0.6 pp

 

Letter from the Chief Executive Officer[1]

I am pleased to announce that in 2Q 2024 we have continued to build on the strong momentum from 1Q 2024. Consequently, we achieved a record quarterly net profit of GEL 329 million, marking a 12% increase compared to the previous year, with a return on equity of 27.1%.

For 1H 2024, our net profit reached GEL 626 million, up by 14% year-on-year, and our return on equity was 26.0%. Notably, our digital banking ecosystem in Uzbekistan contributed 7% of the Group's net profit, with its return on equity reaching 25.7%. At the same time, our digital monthly active users ("MAU") reached 5.7 million at the Group level, up by 33% year-on-year. We have also added almost half a million digital daily active users ("DAU") over the past year, which is a great testament to the increasing breadth, quality and convenience of digital financial services that our Group offers.

2Q 2024 total operating income up by 16% year-on-year

In 2Q 2024, our total operating income increased by 16% year-on-year, reaching GEL 678 million. This growth was driven by a 15% rise in net interest income and a 17% increase in net fee and commission income, while the Group's net interest margin stood at 6.4%.

Strong growth dynamics in both Georgia and Uzbekistan

Our financial services in Georgia continued their robust and profitable growth in 2Q 2024 with our loan book increasing by 19% year-on-year on a constant currency basis, with net profit up 9% year-on-year and 26.9% ROE.  During the same period, our deposits grew by 9% year-on-year on a constant currency basis.  At the same time, our capital positions remained strong with CET1, Tier 1 and Total Capital ratios standing at 16.8%, 22.3% and 25.9%, respectively, significantly above the regulatory limits by 2.2 pp, 5.4 pp and 5.9 pp. This robust capital position was supported by the issuance of USD 300 million AT1 capital notes in April 2024.

I am particularly pleased with the performance of our digital banking ecosystem in Uzbekistan which continues to deliver remarkable results. In 2Q 2024, Uzbekistan generated GEL 91 million in total operating income and GEL 24 million in net profit, up 89% and 90% year-on-year, respectively, and contributing 13% and 7% of the Group totals. Over the same period, the ROE of our Uzbek operations amounted to 27.8%. In terms of the balance sheet, TBC UZ's retail loans amounted to GEL 1.1 billion, up by 113% year-on-year and accounting for 44% of the Group's consumer loans with a micro loan market share^[2] of 15.8%. At the same time, TBC UZ retail deposits reached GEL 722 million, up by 58% year-on-year, representing 8% of the Group's retail deposits and capturing 3.3% retail deposit market share³.

To support the rapid development of our Uzbekistan business, we invested an additional USD 23 million into TBC UZ capital, while the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) each invested USD 7.6 million. These capital injections provide a great platform for further growth of our core lending products in 2H 2024 and beyond.

Interim dividend of GEL 2.55 per share declared

As we look ahead, we remain confident in our ability to continue delivering a strong financial performance and maintaining our leadership position in Georgia, as well as capturing the immense growth opportunities in Uzbekistan.

Finally, given our robust capital position, I am pleased to report that the Board has declared an interim dividend of GEL 2.55 per share, payable in November 2024. 

 

Vakhtang Butskhrikidze

CEO, TBC Bank Group PLC

 

Economic overview

Georgia

Economic growth stronger than expected

Economic activity accelerated in 2Q 2024, with real GDP increasing by 9.5%, following 7.5% growth in 2023 and 8.4% in 1Q 2024. One important driver of this growth has been tourism. Tourist revenues (excluding Russia, Ukraine and Belarus) increased by 13.8% YoY in 2Q 2024, while overall tourism including the migration impact, as estimated by the NBG, grew by 8.1%, given that migrants are gradually being counted as residents by the central bank and hence excluded from the tourism sector. Another positive driver has been remittances, which, according to the balance of payments (BOP) data increased by 14.9%[3] YoY in 1Q 2024 and by 16.2% in 2Q 2024, based on estimates.

On the other hand, the moderation in external sector activity continued in 2Q 2024, negatively affected by lower international commodity prices and reduced motor car re-exports, while domestic exports performed slightly better with a noticable recovery in ferro-alloys. Total exports of goods denominated in US dollars decreased by 4.4% YoY in 2Q 2024, with domestic exports reducing by 1.2%, while imports grew by 1.9% compared to the previous year. FDI in 1Q 2024 decreased by 64.5% YoY, however, this was primarily due to the base effect of one large transaction in the manufacturing sector last year.

Fiscal consolidation continues in 2Q

The government remains focused on fiscal consolidation by reducing the budget deficit relative to GDP. Following a sizable surplus in 1Q 2024, the cumulative budget balance[4] stood at 0.6% of GDP as of half year 2024. The government targets 2.5% deficit for the full year, similar to 2023.

Credit growth remains strong

Another driver of strong economic growth, bank credit growth remains very robust, increasing from 17.2% YoY as of March 2024 to 17.7% as of June 2024, at constant exchange rates[5]. At the same time, as low and stable inflation persisted, YoY growth in real credit also remained high at 15.2%. Credit growth remains stronger for legal entities, increasing by 20.5% YoY, while lending to individuals was up by 15.3% in 1Q 2024. The gradual dedollarization of bank lending continues, wth the share of FX loans slightly decreasing to 44.4% at the end of 2Q 2024, down from 45.0% at the end of 1Q 2024.

GEL recovering after brief weakening, while still low inflation slowly approaches the NBG target

Having remained stable throughout the first quarter and April 2024, worsened sentiment drove a slight GEL depreciation in May and June, with the USD/GEL exchange rate increasing from 2.7 at the end of March to 2.81 at the end of June 2024. However, while the NBG sold around USD 220 million on the FX market in May and June to curb excess volatility, the GEL also remained supported by strong foreign currency inflows, resulting in improved sentiment and the GEL returning to 2.7 GEL per USD level in mid-July.

CPI inflation is gradually approaching the NBG's 3% target, standing at 2.2% YoY in June, with relative acceleration evident in domestic and service inflation measures. Nevertheless, still low though increasing overall inflation led the NBG to deliver only one 25 pp rate cut in the second quarter, reducing the monetary policy rate (MPR) to 8.0%.

Uzbekistan

Continued strong economic performance

Strong expansion in economic activity was also evident in Uzbekistan, with 6.6% real GDP growth in 2Q 2024, following 6.2% growth in 1Q 2024. As for external trade, exports of goods in 2Q decreased by 8.8%[6] YoY due to high base effect of gold exports, while imports of goods increased by 15.1% boosted by higher energy imports. Retail credit growth continued to decelerate, driven by cooling growth in non-mortgage loans, although it still remained robust at 30%⁶ YoY at the end of March, with mortgage credit expanding by 21% and non-mortgage credit by 36%.

Annual inflation in Uzbekistan increased from 8.0%⁶ in March to 10.6% in June 2024, while the CBU kept its monetary policy rate unchanged at 14.0% (but has subsequently reduced the rate to 13.5% in July). The UZS stood at 12,555⁶ relative to the USD at the end of June 2024, appreciating by around 0.5% in 2Q 2024, supported by slower credit growth, the CBU's tight stance to bring inflation down and higher gold prices.

Upgrading economic growth forecasts

Given the strong start to 2024 and even stronger second quarter, we recently upgraded our forecast for real GDP growth in Georgia to 7.4% (from 6.4%), while our projection for Uzbekistan now stands at 6.1% (instead of 5.6%).

More information on the Georgian economy and financial sector can be found at www.tbccapital.ge.

 

Unaudited consolidated financial results overview for 2Q 2024

This statement provides a summary of the business and financial trends for 2Q 2024 for TBC Bank Group plc and its subsidiaries. The financial information and trends are unaudited.

Please note that there might be slight differences in previous periods' figures due to rounding.

Consolidated income statement and other comprehensive income

In thousands of GEL	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ
Interest income	878,549	840,354	711,820	23.4%	4.5%
Interest expense	(420,438)	(397,510)	(312,482)	34.5%	5.8%
Net interest income	458,111	442,844	399,338	14.7%	3.4%
Fee and commission income	200,874	179,488	161,729	24.2%	11.9%
Fee and commission expense	(77,476)	(75,185)	(56,093)	38.1%	3.0%
Net fee and commission income	123,398	104,303	105,636	16.8%	18.3%
Net insurance income	9,100	7,803	6,184	47.2%	16.6%
Net gains from currency derivatives, foreign currency operations and translation	85,647	61,469	61,127	40.1%	39.3%
Other operating income	2,029	1,602	14,213	-85.7%	26.7%
Share of profit/(loss) of associates	146	(41)	268	-45.5%	NMF
Other operating non-interest income	96,922	70,833	81,792	18.5%	36.8%
Credit loss allowance for loans to customers	(27,665)	(43,900)	(29,384)	-5.9%	-37.0%
Credit loss allowance for other financial items and net impairment for non-financial assets	(3,900)	(1,231)	(4,550)	-14.3%	NMF
Operating income after expected credit losses	646,866	572,849	552,832	17.0%	12.9%
Staff costs	(135,653)	(126,563)	(108,724)	24.8%	7.2%
Depreciation and amortisation	(35,614)	(34,108)	(29,587)	20.4%	4.4%
Administrative and other operating expenses	(85,310)	(69,000)	(65,249)	30.7%	23.6%
Operating expenses	(256,577)	(229,671)	(203,560)	26.0%	11.7%
Profit before tax	390,289	343,178	349,272	11.7%	13.7%
Income tax expense	(60,991)	(46,707)	(56,186)	8.6%	30.6%
Profit for the period	329,298	296,471	293,086	12.4%	11.1%
Profit attributable to:
- Shareholders of TBCG	324,595	292,805	288,791	12.4%	10.9%
- Non-controlling interest	4,703	3,666	4,295	9.5%	28.3%
Other comprehensive income:
Other comprehensive (expense)/income for the period	(41,840)	7,676	7,178	NMF	NMF
Total comprehensive income for the period	287,458	304,147	300,264	-4.3%	-5.5%

 

Consolidated balance sheet

In thousands of GEL	Jun'24	Mar'24	Change QoQ
ASSETS
Cash and cash equivalents	3,688,366	3,147,389	17.2%
Due from other banks	20,742	24,296	-14.6%
Mandatory cash balances with the NBG and the CBU	1,511,508	1,557,221	-2.9%
Loans and advances to customers	23,757,851	22,183,529	7.1%
Investment securities measured at fair value through other comprehensive income	4,110,036	3,875,799	6.0%
Bonds carried at amortised cost	103,070	73,098	41.0%
Finance lease receivables	468,395	411,386	13.9%
Investment properties	14,506	15,921	-8.9%
Investments in associates	3,871	3,493	10.8%
Current income tax prepayment	1,704	5,446	-68.7%
Deferred income tax asset	990	4,371	-77.4%
Other financial assets	306,561	311,427	-1.6%
Other assets	1,203,426	1,098,750	9.5%
Intangible assets	529,425	489,445	8.2%
Goodwill	59,964	59,964	0.0%
TOTAL ASSETS	35,780,415	33,261,535	7.6%
LIABILITIES
Due to credit institutions	4,846,332	3,702,517	30.9%
Customer accounts	21,464,578	20,838,768	3.0%
Other financial liabilities	683,382	636,939	7.3%
Current income tax liability	4,350	11,946	-63.6%
Deferred income tax liability	52,882	53,315	-0.8%
Debt Securities in issue	1,849,800	1,501,651	23.2%
Other liabilities	226,562	236,942	-4.4%
Subordinated debt	1,152,841	1,050,191	9.8%
Redemption liability	419,928	375,350	11.9%
TOTAL LIABILITIES	30,700,655	28,407,619	8.1%
EQUITY
Share capital	1,689	1,690	0.1%
Shares held by trust	(66,982)	(45,675)	46.6%
Share premium	292,734	295,605	-1.0%
Retained earnings	4,796,051	4,470,376	7.3%
Other reserves	(101,634)	(8,188)	NMF
Equity attributable to owners of the parent	4,921,858	4,713,808	4.4%
Non-controlling interest	157,902	140,108	12.7%
TOTAL EQUITY	5,079,760	4,853,916	4.7%
TOTAL LIABILITIES AND EQUITY	35,780,415	33,261,535	7.6%

 

Ratios

Ratios (based on monthly averages, where applicable)	2Q'24	1Q'24	2Q'23
Profitability ratios:
ROE1	27.1%	25.1%	28.1%
ROA2	3.8%	3.6%	4.2%
Cost to income3	37.8%	37.2%	34.7%
NIM4	6.4%	6.5%	6.8%
Loan yields5	12.6%	12.7%	12.8%
Deposit rates6	5.2%	5.4%	4.9%
Cost of funding7	6.0%	6.0%	5.6%
Asset quality & portfolio concentration:
Cost of risk9	0.5%	0.8%	0.6%
PAR 90 to gross loans9	1.4%	1.2%	1.2%
NPLs to gross loans10	2.0%	2.2%	2.1%
NPL provision coverage11	75.5%	74.4%	89.3%
Total NPL coverage12	141.9%	140.3%	153.7%
Credit loss level to gross loans13	1.5%	1.6%	1.8%
Related party loans to gross loans14	0.1%	0.1%	0.1%
Top 10 borrowers to total portfolio15	5.9%	5.9%	5.8%
Top 20 borrowers to total portfolio16	8.7%	8.8%	8.7%
Capital & liquidity positions:
Net loans to deposits plus IFI funding17	100.0%	96.7%	90.6%
Leverage (x)18	7.0x	6.9x	6.7x
Georgia
Net stable funding ratio19	118.2%	114.8%	129.8%
Liquidity coverage ratio20	118.1%	114.6%	124.5%
CET 1 CAR21	16.8%	16.6%	18.3%
Tier 1 CAR22	22.3%	18.8%	20.7%
Total 1 CAR23	25.9%	21.5%	23.1%
Uzbekistan
CET 1 CAR24	12.6%	12.7%	17.8%
Tier 1 CAR25	12.6%	12.7%	17.8%
Total 1 CAR26	16.4%	16.2%	18.6%

Funding and liquidity in Georgia

	Jun'24	Mar'24	Change QoQ
Minimum net stable funding ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Net stable funding ratio as defined by the NBG	118.2%	114.8%	3.4 pp
Minimum total liquidity coverage ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Minimum LCR in GEL, as defined by the NBG	75%	75.0%	0.0 pp
Minimum LCR in FC, as defined by the NBG	100.0%	100.0%	0.0 pp
Total liquidity coverage ratio, as defined by the NBG	118.1%	114.6%	3.5 pp
LCR in GEL, as defined by the NBG	100.0%	114.8%	-14.8 pp
LCR in FC, as defined by the NBG	129.5%	114.4%	15.1 pp

Regulatory capital

The quarterly increase in Tier 1 and total capital ratios was related to the issuance of USD 300 million AT1 capital notes in April 2024.

Georgia

In thousands of GEL	Jun'24	Mar'24	Change QoQ
CET 1 capital	4,344,472	4,096,919	6.0%
Tier 1 capital	5,749,522	4,635,979	24.0%
Total capital	6,671,739	5,290,327	26.1%
Total risk-weighted assets	25,791,645	24,607,358	4.8%
Minimum CET 1 ratio	14.6%	14.5%	0.1 pp
CET 1 capital adequacy ratio	16.8%	16.6%	0.2 pp
Minimum Tier 1 ratio	16.9%	16.8%	0.1 pp
Tier 1 capital adequacy ratio	22.3%	18.8%	3.5 pp
Minimum total capital adequacy ratio	20.0%	19.9%	0.1 pp
Total capital adequacy ratio	25.9%	21.5%	4.4 pp

 

Uzbekistan

 

TBC UZ received USD 11.7 million capital injection in June 2024, which is reflected in the capital adequacy ratios below. In July 2024, additional USD 26.5 million was injected, which makes a total of USD 38.2 million YTD.

 

	Jun'24	Mar'24	Change QoQ
Minimum CET 1 ratio	8.0%	8.0%	0.0 pp
CET 1 capital adequacy ratio	12.6%	12.7%	-0.1 pp
Minimum Tier 1 ratio	10.0%	10.0%	0.0 pp
Tier 1 capital adequacy ratio	12.6%	12.7%	-0.1 pp
Minimum total capital adequacy ratio	13.0%	13.0%	0.0 pp
Total capital adequacy ratio	16.4%	16.2%	0.2 pp

Loan portfolio

As of 30 June 2024, the gross loan portfolio reached GEL 24,128.8 million, up by 7.0% QoQ, or up by 4.9% QoQ on a constant currency basis.

In 2Q 2024, our Georgian financial services loan portfolio increased by 6.4% on a QoQ basis and reached GEL 22,983.0 million, with 4.4% QoQ growth on a constant currency basis. Over the same period, our Uzbek portfolio increased by 20.9% QoQ or 15.6% on a constant currency basis.

In thousands of GEL Gross loans and advances to customers	Jun'24	Mar'24	Change QoQ
Georgian financial services (Georgia FS)*	22,983,036	21,594,026	6.4%
Retail Georgia	8,137,555	7,682,858	5.9%
CIB Georgia	9,082,113	8,419,450	7.9%
MSME Georgia	5,778,382	5,506,736	4.9%
Uzbekistan	1,122,400	928,553	20.9%
Total gross loans and advances to customers**	24,128,807	22,545,189	7.0%

* Georgian FS includes sub-segment eliminations
** Total gross loans and advances to customers include Azerbaijan loan portfolio

	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ
Loan yields	12.6%	12.7%	12.8%	-0.2 pp	-0.1 pp
GEL	13.7%	14.1%	15.4%	-1.7 pp	-0.4 pp
FC	8.5%	8.6%	8.4%	0.1 pp	-0.1 pp
UZS	44.2%	43.2%	43.0%	1.2 pp	1.0 pp
Georgia FS	11.1%	11.4%	12.0%	-0.9 pp	-0.3 pp
GEL	13.7%	14.1%	15.4%	-1.7 pp	-0.4 pp
FC	8.5%	8.6%	8.4%	0.1 pp	-0.1 pp
Uzbekistan	44.2%	43.2%	43.0%	1.2 pp	1.0 pp
UZS	44.2%	43.2%	43.0%	1.2 pp	1.0 pp
Total loan yields*	12.6%	12.7%	12.8%	-0.2 pp	-0.1 pp

* Total loans yields include Azerbaijan

Loan portfolio quality

PAR 90	Jun'24	Mar'24	Change QoQ
Georgia FS*	1.3%	1.2%	0.1 pp
Retail Georgia	0.7%	0.8%	-0.1 pp
CIB Georgia	0.9%	0.7%	0.2 pp
MSME Georgia	2.9%	2.5%	0.4 pp
Uzbekistan	2.5%	2.1%	0.4 pp
Total PAR 90**	1.4%	1.2%	0.2 pp

* Georgian FS includes sub-segment eliminations
** Total PAR 90 includes Azerbaijan

In thousands of GEL Non-performing Loans (NPL)	Jun'24	Mar'24	Change QoQ
Georgia FS*	462,500	466,110	-0.8%
Retail Georgia	112,924	125,625	-10.1%
CIB Georgia	137,804	137,849	0.0%
MSME Georgia	211,772	202,636	4.5%
Uzbekistan	27,699	19,222	44.1%
Total non-performing loans**	491,068	486,058	1.0%

* Georgian FS includes sub-segment eliminations
** Total non-performing loans include Azerbaijan NPLs

 

NPL to gross loans	Jun'24	Mar'24	Change QoQ
Georgia FS*	2.0%	2.2%	-0.2 pp
Retail Georgia	1.4%	1.6%	-0.2 pp
CIB Georgia	1.5%	1.6%	-0.1 pp
MSME Georgia	3.7%	3.7%	0.0 pp
Uzbekistan	2.5%	2.1%	0.4 pp
Total NPL to gross loans**	2.0%	2.2%	-0.2 pp

* Georgian FS includes sub-segment eliminations
** Total NPL to gross loans include Azerbaijan NPLs

	Jun'24		Mar'24
NPL Coverage	Provision Coverage	Total Coverage***	Provision Coverage	Total Coverage***
Georgia FS*	68.2%	138.4%	68.1%	136.6%
Retail Georgia	133.1%	195.6%	121.3%	183.6%
CIB Georgia	44.1%	108.8%	44.0%	105.2%
MSME Georgia	49.2%	127.2%	51.5%	128.8%
Uzbekistan	192.8%	192.8%	220.8%	220.8%
Total NPL coverage**	75.5%	141.9%	74.4%	140.3%

* Georgian FS includes sub-segment eliminations
** Total NPL coverage include Azerbaijan loans coverage
*** Total NPL coverage ratio includes provision and collateral coverage

The Georgia FS cost of risk improved both QoQ and YoY due to strong asset quality across all segments as well as a one-off recovery in the amount of GEL 9.3 million.

Cost of risk (CoR)	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ
Georgia FS*	0.3%	0.7%	0.5%	-0.2 pp	-0.4 pp
Retail Georgia	0.4%	1.1%	0.5%	-0.1 pp	-0.7 pp
CIB Georgia	-0.1%	0.4%	0.1%	-0.2 pp	-0.5 pp
MSME Georgia	0.5%	0.7%	0.9%	-0.4 pp	-0.2 pp
Uzbekistan	5.5%	5.5%	6.6%	-1.1 pp	0.0 pp
Total cost of risk**	0.5%	0.8%	0.6%	-0.1 pp	-0.3 pp

* Georgian FS includes sub-segment eliminations
** Total cost of risk includes Azerbaijan CoR

Deposit portfolio

As of 30 June 2024, deposit portfolio reached GEL 21,464.6 million, up by 3.0% QoQ, or up by 1.0% QoQ on a constant currency basis.

In 2Q 2024, our Georgia FS deposit portfolio increased by 3.2% on a QoQ basis and reached GEL 20,867.5 million, with 1.3% QoQ growth on a constant currency basis. Over the same period, our Uzbek portfolio increased by 9.8% QoQ or 5.0% on a constant currency basis.

In thousands of GEL Customer accounts	Jun'24	Mar'24	Change QoQ
Georgia FS*	20,867,540	20,219,932	3.2%
Retail Georgia	7,830,406	7,498,419	4.4%
CIB Georgia	10,417,043	9,833,975	5.9%
MSME Georgia	1,960,795	1,869,140	4.9%
MOF	765,096	1,110,024	-31.1%
Uzbekistan	721,632	657,190	9.8%
Total customer accounts**	21,464,578	20,838,768	3.0%

* Georgian FS includes sub-segment eliminations
** Total customer accounts are adjusted for eliminations

	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ
Deposit rates	5.2%	5.4%	4.9%	0.3 pp	-0.2 pp
GEL	7.6%	8.0%	8.3%	-0.7 pp	-0.4 pp
FC	1.3%	1.3%	0.8%	0.5 pp	0.0 pp
UZS	24.8%	25.5%	25.0%	-0.2 pp	-0.7 pp
Georgian financial services	4.6%	4.8%	4.5%	0.1 pp	-0.2 pp
GEL	7.6%	8.0%	8.4%	-0.8 pp	-0.4 pp
FC	1.3%	1.3%	0.8%	0.5 pp	0.0 pp
Uzbek business	24.8%	25.4%	24.9%	-0.1 pp	-0.6 pp
UZS	24.8%	25.5%	25.0%	-0.2 pp	-0.7 pp
FC	2.3%	3.7%	4.7%	-2.4 pp	-1.4 pp
Total deposit rates*	5.2%	5.4%	4.9%	0.3 pp	-0.2 pp

* Total deposits rates include MOF deposits

 

Unaudited consolidated financial results overview for 1H 2024

This statement provides a summary of the business and financial trends for 1H 2024 for TBC Bank Group plc and its subsidiaries. The financial information and trends are unaudited.

Please note that there might be slight differences in previous periods' figures due to rounding.

Consolidated income statement and other comprehensive income

In thousands of GEL	1H'24	1H'23	Change YoY
Interest income	1,718,903	1,383,970	24.2%
Interest expense	(817,948)	(617,841)	32.4%
Net interest income	900,955	766,129	17.6%
Fee and commission income	380,362	313,530	21.3%
Fee and commission expense	(152,661)	(115,456)	32.2%
Net fee and commission income	227,701	198,074	15.0%
Net insurance income	16,903	12,402	36.3%
Net gains from currency derivatives, foreign currency operations and translation	147,116	121,728	20.9%
Other operating income	3,631	20,130	-82.0%
Share of profit of associates	105	542	-80.6%
Other operating non-interest income	167,755	154,802	8.4%
Credit loss allowance for loans to customers	(71,565)	(79,424)	-9.9%
Credit loss allowance for other financial items and net impairment for non-financial assets	(5,131)	(7,678)	-33.2%
Operating income after expected credit and non-financial asset impairment losses	1,219,715	1,031,903	18.2%
Staff costs	(262,216)	(212,150)	23.6%
Depreciation and amortisation	(69,722)	(57,948)	20.3%
Administrative and other operating expenses	(154,310)	(116,242)	32.7%
Operating expenses	(486,248)	(386,340)	25.9%
Profit before tax	733,467	645,563	13.6%
Income tax expense	(107,698)	(97,517)	10.4%
Profit for the period	625,769	548,046	14.2%
Profit attributable to:
- Shareholders of TBCG	617,400	537,459	14.9%
- Non-controlling interest	8,369	10,587	-21.0%
Other comprehensive income:
Other comprehensive (expense)/income for the period	(34,164)	10,048	NMF
Total comprehensive income for the period	591,605	558,094	6.0%

 

Consolidated balance sheet

In thousands of GEL	Jun'24	Jun'23	Change YoY
ASSETS
Cash and cash equivalents	3,688,366	2,940,359	25.4%
Due from other banks	20,742	52,550	-60.5%
Mandatory cash balances with NBG and the CBU	1,511,508	1,706,981	-11.5%
Loans and advances to customers	23,757,851	19,002,657	25.0%
Investment securities measured at fair value through other comprehensive income	4,110,036	2,942,679	39.7%
Bonds carried at amortised cost	103,070	87,213	18.2%
Finance lease receivables	468,395	338,203	38.5%
Investment properties	14,506	20,741	-30.1%
Investments in associates	3,871	3,667	5.6%
Current income tax prepayment	1,704	3,005	-43.3%
Deferred income tax asset	990	12,573	-92.1%
Other financial assets	306,561	266,969	14.8%
Other assets	1,203,426	1,022,797	17.7%
Intangible assets	529,425	418,468	26.5%
Goodwill	59,964	59,964	0.0%
TOTAL ASSETS	35,780,415	28,878,826	23.9%
LIABILITIES
Due to credit institutions	4,846,332	2,448,662	97.9%
Customer accounts	21,464,578	18,992,492	13.0%
Other financial liabilities	683,382	387,595	76.3%
Current income tax liability	4,350	27,559	-84.2%
Deferred income tax liability	52,882	112,095	-52.8%
Debt Securities in issue	1,849,800	1,392,872	32.8%
Other liabilities	226,562	199,930	13.3%
Subordinated debt	1,152,841	639,048	80.4%
Redemption liability	419,928	347,044	21.0%
TOTAL LIABILITIES	30,700,655	24,547,297	25.1%
EQUITY
Share capital	1,689	1,682	0.5%
Shares held by trust	(66,982)	(75,470)	-11.2%
Share premium	292,734	272,930	7.3%
Retained earnings	4,796,051	3,984,493	20.4%
Other reserves	(101,634)	40,656	NMF
Equity attributable to owners of the parent	4,921,858	4,224,291	16.5%
Non-controlling interest	157,902	107,238	47.2%
TOTAL EQUITY	5,079,760	4,331,529	17.3%
TOTAL LIABILITIES AND EQUITY	35,780,415	28,878,826	23.9%

 

Ratios

Ratios (based on monthly averages, where applicable)	1H'24	1H'23
Profitability ratios:
ROE1	26.0%	26.7%
ROA2	3.7%	3.9%
Cost to income3	37.5%	34.5%
NIM4	6.4%	6.6%
Loan yields5	12.6%	12.6%
Deposit rates6	5.3%	4.9%
Cost of funding7	5.9%	5.5%
Asset quality & portfolio concentration:
Cost of risk9	0.6%	0.9%
PAR 90 to gross loans9	1.4%	1.2%
NPLs to gross loans10	2.0%	2.1%
NPL provision coverage11	75.5%	89.3%
Total NPL coverage12	141.9%	153.7%
Credit loss level to gross loans13	1.5%	1.8%
Related party loans to gross loans14	0.1%	0.1%
Top 10 borrowers to total portfolio15	5.9%	5.8%
Top 20 borrowers to total portfolio16	8.7%	8.7%
Capital & liquidity positions:
Net loans to deposits plus IFI funding17	100.0%	90.6%
Leverage (x)18	7.0x	6.7x
Georgia
Net stable funding ratio19	118.2%	129.8%
Liquidity coverage ratio20	118.1%	124.5%
CET 1 CAR21	16.8%	18.3%
Tier 1 CAR22	22.3%	20.7%
Total 1 CAR23	25.9%	23.1%
Uzbekistan
CET 1 CAR24	12.6%	17.8%
Tier 1 CAR25	12.6%	17.8%
Total 1 CAR26	16.4%	18.6%

Funding and liquidity in Georgia

	Jun'24	Jun'23	Change YoY
Minimum net stable funding ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Net stable funding ratio as defined by the NBG	118.2%	129.8%	-11.6 pp
Minimum total liquidity coverage ratio, as defined by the NBG	100.0%	100.0%	0.0 pp
Minimum LCR in GEL, as defined by the NBG	75%	75.0%	0.0 pp
Minimum LCR in FC, as defined by the NBG	100.0%	100.0%	0.0 pp
Total liquidity coverage ratio, as defined by the NBG	118.1%	124.5%	-6.4 pp
LCR in GEL, as defined by the NBG	100.0%	130.4%	-30.4 pp
LCR in FC, as defined by the NBG	129.5%	119.2%	10.3 pp

Regulatory capital

The quarterly increase in Tier 1 and total capital ratios was related to the issuance of USD 300 million AT1 capital notes in April 2024.

Georgia

In thousands of GEL	Jun'24	Jun'23	Change YoY
CET 1 capital	4,344,472	3,920,004	10.8%
Tier 1 capital	5,749,522	4,443,544	29.4%
Total capital	6,671,739	4,947,830	34.8%
Total risk-weighted assets	25,791,645	21,452,808	20.2%
Minimum CET 1 ratio	14.6%	14.4%	0.2 pp
CET 1 capital adequacy ratio	16.8%	18.3%	-1.5 pp
Minimum Tier 1 ratio	16.9%	16.8%	0.1 pp
Tier 1 capital adequacy ratio	22.3%	20.7%	1.6 pp
Minimum total capital adequacy ratio	20.0%	19.9%	0.1 pp
Total capital adequacy ratio	25.9%	23.1%	2.8 pp

 

Uzbekistan

The YoY decrease in our capital ratios for Uzbek Bank was driven by the rapid growth in the loan book.

TBC UZ received USD 11.7 million capital injection in June 2024, which is reflected in the capital adequacy ratios below. In July 2024, additional USD 26.5 million was injected, which makes a total of USD 38.2 million YTD.

 

	Jun'24	Jun'23	Change YoY
Minimum CET 1 ratio	8.0%	8.0%	0.0 pp
CET 1 capital adequacy ratio	12.6%	17.8%	-5.2 pp
Minimum Tier 1 ratio	10.0%	10.0%	0.0 pp
Tier 1 capital adequacy ratio	12.6%	17.8%	-5.2 pp
Minimum total capital adequacy ratio	13.0%	13.0%	0.0 pp
Total capital adequacy ratio	16.4%	18.6%	-2.2 pp

Loan portfolio

As of 30 June 2024, the gross loan portfolio reached GEL 24,128.8 million, up by 24.6% YoY, or up by 21.2% YoY on a constant currency basis.

In 1H 2024, our Georgia FS loan portfolio increased by 22.1% on a YoY and reached GEL 22,983.0 million, with 18.5% YoY growth on a constant currency basis. Over the same period, our Uzbek portfolio increased by 113.0% or 116.9% on a constant currency basis.

In thousands of GEL Gross loans and advances to customers	Jun'24	Jun'23	Change YoY
Georgian financial services (Georgia FS)*	22,983,036	18,816,052	22.1%
Retail Georgia	8,137,555	6,945,911	17.2%
CIB Georgia	9,082,113	6,928,632	31.1%
MSME Georgia	5,778,382	4,949,878	16.7%
Uzbekistan	1,122,400	526,843	113.0%
Total gross loans and advances to customers**	24,128,807	19,360,689	24.6%

* Georgian FS includes sub-segment eliminations
** Total gross loans and advances to customers include Azerbaijan loan portfolio

	1H'24	1H'23	Change YoY
Loan yields	12.6%	12.6%	0.0 pp
GEL	13.9%	15.2%	-1.3 pp
FC	8.6%	8.3%	0.3 pp
UZS	43.7%	43.1%	0.6 pp
Georgia FS	11.3%	11.9%	-0.6 pp
GEL	13.9%	15.2%	-1.3 pp
FC	8.5%	8.3%	0.2 pp
Uzbekistan	43.7%	43.1%	0.6 pp
UZS	43.7%	43.1%	0.6 pp
Total loan yields*	12.6%	12.6%	0.0 pp

* Total loans yields include Azerbaijan

Loan portfolio quality

PAR 90	Jun'24	Jun'23	Change YoY
Georgia FS*	1.3%	1.1%	0.2 pp
Retail Georgia	0.7%	0.9%	-0.2 pp
CIB Georgia	0.9%	0.6%	0.3 pp
MSME Georgia	2.9%	2.3%	0.6 pp
Uzbekistan	2.5%	2.2%	0.3 pp
Total PAR 90**	1.4%	1.2%	0.2 pp

* Georgian FS includes sub-segment eliminations
** Total PAR 90 includes Azerbaijan

In thousands of GEL Non-performing Loans (NPL)	Jun'24	Jun'23	Change YoY
Georgia FS*	462,500	387,626	19.3%
Retail Georgia	112,924	127,833	-11.7%
CIB Georgia	137,804	98,374	40.1%
MSME Georgia	211,772	161,419	31.2%
Uzbekistan	27,699	11,646	137.8%
Total non-performing loans**	491,068	400,989	22.5%

* Georgian FS includes sub-segment eliminations
** Total non-performing loans include Azerbaijan NPLs

NPL to gross loans	Jun'24	Jun'23	Change YoY
Georgia FS*	2.0%	2.1%	-0.1 pp
Retail Georgia	1.4%	1.8%	-0.4 pp
CIB Georgia	1.5%	1.4%	0.1 pp
MSME Georgia	3.7%	3.3%	0.4 pp
Uzbekistan	2.5%	2.2%	0.3 pp
Total NPL to gross loans**	2.0%	2.1%	-0.1 pp

* Georgian FS includes sub-segment eliminations
** Total NPL to gross loans include Azerbaijan NPLs

	Jun'24		Jun'23
NPL Coverage	Provision Coverage	Total Coverage***	Provision Coverage	Total Coverage***
Georgia FS*	68.2%	138.4%	85.3%	150.9%
Retail Georgia	133.1%	195.6%	141.8%	192.4%
CIB Georgia	44.1%	108.8%	49.4%	110.5%
MSME Georgia	49.2%	127.2%	62.6%	142.7%
Uzbekistan	192.8%	192.8%	180.0%	180.0%
Total NPL coverage**	75.5%	141.9%	89.3%	153.7%

* Georgian FS includes sub-segment eliminations
** Total NPL coverage include Azerbaijan loans coverage
*** Total NPL coverage ratio includes provision and collateral coverage

In the first half of 2024, Georgia FS cost of risk improved YoY mainly due to strong asset quality across retail and micro sub-segments as well as a one-off recovery in the amount of GEL 9.3 million.

Cost of risk (CoR)	1H'24	1H'23	Change YoY
Georgia FS*	0.5%	0.8%	-0.3 pp
Retail Georgia	0.8%	1.0%	-0.2 pp
CIB Georgia	0.1%	0.0%	0.1 pp
MSME Georgia	0.6%	1.5%	-0.9 pp
Uzbekistan	5.5%	6.1%	-0.6 pp
Total cost of risk**	0.6%	0.9%	-0.3 pp

* Georgian FS includes sub-segment eliminations
** Total cost of risk includes Azerbaijan CoR

Deposit portfolio

As of 30 June 2024, deposit portfolio reached GEL 21,464.6 million, up by 13.0% YoY, or up by 9.7% YoY on a constant currency basis.

In 1H 2024, our Georgia FS deposit portfolio increased by 12.0% on a YoY and reached GEL 20,867.5 million, with 8.5% YoY growth on a constant currency basis. Over the same period, our Uzbek portfolio increased by 57.8% YoY or 60.6% on a constant currency basis.

In thousands of GEL Customer accounts	Jun'24	Jun'23	Change YoY
Georgia FS*	20,867,540	18,639,911	12.0%
Retail Georgia	7,830,406	6,985,211	12.1%
CIB Georgia	10,417,043	9,144,331	13.9%
MSME Georgia	1,960,795	1,641,639	19.4%
MOF	765,096	967,133	-20.9%
Uzbekistan	721,632	457,340	57.8%
Total customer accounts**	21,464,578	18,992,492	13.0%

* Georgian FS includes sub-segment eliminations
** Total customer accounts are adjusted for eliminations

	1H'24	1H'23	Change YoY
Deposit rates	5.3%	4.9%	0.4 pp
GEL	7.8%	8.5%	-0.7 pp
FC	1.3%	0.7%	0.6 pp
UZS	25.2%	25.1%	0.1 pp
Georgian financial services	4.7%	4.5%	0.2 pp
GEL	7.8%	8.6%	-0.8 pp
FC	1.3%	0.8%	0.5 pp
Uzbek business	25.1%	25.0%	0.1 pp
UZS	25.2%	25.1%	0.1pp
FC	2.9%	4.8%	-1.9 pp
Total deposit rates*	5.3%	4.9%	0.4 pp

* Total deposits rates include MOF deposits

 

 

Additional information

1)   Financial disclosures by business lines

Business line definitions

The operating segments are defined as follows:

·      Georgian financial services (GFS) - include JSC TBC Bank with its Georgian subsidiaries and JSC TBC Insurance with its subsidiary. The Georgia financial service segment consists of three major business sub-segments, while the treasury, leasing and insurance businesses are combined into the corporate and other sub-segments:

o  Corporate and investment banking (CIB) - a legal entity/group of affiliated entities with an annual revenue exceeding GEL 20 million or which has been granted facilities of more than GEL 7.5 million. Some other business customers may also be assigned to the CIB segment or transferred to the micro, small and medium enterprises segment on a discretionary basis. In addition, CIB includes Wealth Management private banking services to high-net-worth individuals with a threshold of USD 250,000 on assets under management (AUM), as well as on discretionary basis;

o  Retail - non-business individual customers;

o  Micro, small and medium enterprises (MSME) - business customers who are not included in the CIB sub-segment.

·      Uzbekistan - TBC Bank Uzbekistan with respective subsidiaries and Payme (Inspired LLC).

·      Other - includes non-material or non-financial subsidiaries of the group and intra-group eliminations.

Georgian financial services

Profit and loss statement

In thousands of GEL	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
Interest income	752,671	736,833	653,209	15.2%	2.1%	1,489,504	1,277,525	16.6%
Interest expense	(364,481)	(351,165)	(285,241)	27.8%	3.8%	(715,646)	(565,246)	26.6%
Net interest income	388,190	385,668	367,968	5.5%	0.7%	773,858	712,279	8.6%
Fee and commission income	164,483	148,492	136,481	20.5%	10.8%	312,975	266,221	17.6%
Fee and commission expense	(66,562)	(67,249)	(49,501)	34.5%	-1.0%	(133,811)	(104,820)	27.7%
Net fee and commission income	97,921	81,243	86,980	12.6%	20.5%	179,164	161,401	11.0%
Net insurance income	9,290	7,976	6,362	46.0%	16.5%	17,266	12,760	35.3%
Net gains from currency derivatives, foreign currency operations and translation	88,170	64,629	70,405	25.2%	36.4%	152,799	133,319	14.6%
Other operating income	1,917	1,552	11,344	-83.1%	23.5%	3,469	16,233	-78.6%
Share of profit/(loss) of associates	146	(41)	268	-45.5%	NMF	105	542	-80.6%
Other operating non-interest income	99,523	74,116	88,379	12.6%	34.3%	173,639	162,854	6.6%
Credit loss allowance for loans to customers	(14,103)	(36,825)	(22,054)	-36.1%	-61.7%	(50,928)	(67,252)	-24.3%
Credit loss allowance for other financial items and net impairment for non-financial assets	(2,792)	(590)	(3,763)	-25.8%	NMF	(3,382)	(5,876)	-42.4%
Operating income after expected credit and non-financial asset impairment losses	568,739	503,612	517,510	9.9%	12.9%	1,072,351	963,406	11.3%
Staff costs	(105,855)	(101,240)	(90,862)	16.5%	4.6%	(207,095)	(177,469)	16.7%
Depreciation and amortisation	(30,013)	(29,265)	(25,706)	16.8%	2.6%	(59,278)	(50,293)	17.9%
Administrative and other operating expenses	(51,998)	(44,764)	(47,538)	9.4%	16.2%	(96,762)	(86,412)	12.0%
Operating expenses	(187,866)	(175,269)	(164,106)	14.5%	7.2%	(363,135)	(314,174)	15.6%
Profit before tax	380,873	328,343	353,404	7.8%	16.0%	709,216	649,232	9.2%
Income tax expense	(57,166)	(43,704)	(54,942)	4.0%	30.8%	(100,870)	(95,958)	5.1%
Profit for the period	323,707	284,639	298,462	8.5%	13.7%	608,346	553,274	10.0%

Balance sheet highlights

In thousands of GEL	Jun'24	Mar'24	Jun'23	Change YoY	Change QoQ
Cash & NBG mandatory reserves	5,000,618	4,521,806	4,569,805	9.4%	10.6%
Due from other banks	20,708	24,268	52,523	-60.6%	-14.7%
Loans and advances to customers	22,667,567	21,276,764	18,485,251	22.6%	6.5%
Investment securities measured at fair value through OCI	4,110,036	3,875,799	2,942,679	39.7%	6.0%
Intangible assets and Goodwill	406,942	396,070	358,114	13.6%	2.7%
Other assets	1,877,077	1,753,261	1,618,366	16.0%	7.1%
TOTAL ASSETS	34,082,948	31,847,968	28,026,738	21.6%	7.0%
Due to credit institutions	4,675,711	3,601,828	2,417,293	93.4%	29.8%
Customer accounts	20,867,540	20,219,932	18,639,911	12.0%	3.2%
Subordinated debt and debt securities in issue	2,682,703	2,337,185	1,862,767	44.0%	14.8%
Other liabilities	902,091	972,875	665,864	35.5%	-7.3%
TOTAL LIABILITIES	29,128,045	27,131,820	23,585,835	23.5%	7.4%
Equity attributable to shareholders	4,954,687	4,715,946	4,440,718	11.6%	5.1%
Non-controlling interest	216	202	185	16.8%	6.9%
TOTAL EQUITY	4,954,903	4,716,148	4,440,903	11.6%	5.1%
TOTAL LIABILITIES AND EQUITY	34,082,948	31,847,968	28,026,738	21.6%	7.0%

Key ratios

Georgian financial services	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
Profitability ratios:
ROE1	26.9%	24.0%	27.8%	-0.9 pp	2.9 pp	25.4%	25.7%	-0.3 pp
ROA2	3.9%	3.6%	4.5%	-0.6 pp	0.3 pp	3.8%	4.1%	-0.3 pp
Cost to income3	32.1%	32.4%	30.2%	1.9 pp	-0.3 pp	32.2%	30.3%	1.9 pp
NIM4	5.6%	5.9%	6.5%	-0.9 pp	-0.3 pp	5.7%	6.3%	-0.6 pp
Loan yields5	11.1%	11.4%	12.0%	-0.9 pp	-0.3 pp	11.3%	11.9%	-0.6 pp
Deposit rates6	4.6%	4.8%	4.5%	0.1 pp	-0.2 pp	4.7%	4.5%	0.2 pp
Cost of funding7	5.4%	5.4%	5.2%	0.2 pp	0.0 pp	5.4%	5.2%	0.2 pp
Asset quality & portfolio concentration:
Cost of risk8	0.3%	0.7%	0.5%	-0.2 pp	-0.4 pp	0.5%	0.8%	-0.3 pp
PAR 90 to gross loans9	1.3%	1.2%	1.1%	0.2 pp	0.1 pp	1.3%	1.1%	0.2 pp
NPLs to gross loans10	2.0%	2.2%	2.1%	-0.1 pp	-0.2 pp	2.0%	2.1%	-0.1 pp
NPL provision coverage11	68.2%	68.1%	85.3%	-17.1 pp	0.1 pp	68.2%	85.3%	-17.1 pp
Total NPL coverage12	138.4%	136.6%	150.9%	-12.5 pp	1.8 pp	138.4%	150.9%	-12.5 pp

For the ratio definitions and exchange rates, please refer to appendix 3.

Uzbekistan business

Profit and loss statement

In thousands of GEL	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
Interest income	123,740	101,324	56,989	NMF	22.1%	225,064	103,255	NMF
Interest expense	(56,729)	(47,028)	(27,228)	NMF	20.6%	(103,757)	(50,366)	NMF
Net interest income	67,011	54,296	29,761	NMF	23.4%	121,307	52,889	NMF
Fee and commission income	34,861	28,073	24,978	39.6%	24.2%	62,934	45,841	37.3%
Fee and commission expense	(10,771)	(7,899)	(6,467)	66.6%	36.4%	(18,670)	(10,472)	78.3%
Net fee and commission income	24,090	20,174	18,511	30.1%	19.4%	44,264	35,369	25.1%
Net gains from currency derivatives, foreign currency operations and translation	(30)	(426)	15	NMF	-93.0%	(456)	83	NMF
Other operating income	10	1	4	NMF	NMF	11	32	-65.6%
Other operating non-interest (expense)/income	(20)	(425)	19	NMF	-95.3%	(445)	115	NMF
Credit loss allowance for loans to customers	(14,050)	(11,753)	(7,641)	83.9%	19.5%	(25,803)	(12,882)	NMF
Credit loss allowance for other financial items and net impairment for non-financial assets	(1,029)	(523)	(692)	48.7%	96.7%	(1,552)	(1,301)	19.3%
Operating income after expected credit and non-financial asset impairment losses	76,002	61,769	39,958	90.2%	23.0%	137,771	74,190	86%
Staff costs	(15,028)	(12,974)	(9,310)	61.4%	15.8%	(28,002)	(18,300)	53.0%
Depreciation and amortisation	(3,153)	(2,759)	(2,120)	48.7%	14.3%	(5,912)	(4,230)	39.8%
Administrative and other operating expenses	(30,181)	(24,635)	(14,711)	NMF	22.5%	(54,816)	(24,825)	NMF
Operating expenses	(48,362)	(40,368)	(26,141)	85.0%	19.8%	(88,730)	(47,355)	87.4%
Profit before tax	27,640	21,401	13,817	100.0%	29.2%	49,041	26,835	82.8%
Income tax expense	(3,861)	(2,964)	(1,312)	NMF	30.3%	(6,825)	(1,623)	NMF
Profit for the period	23,779	18,437	12,505	90.2%	29.0%	42,216	25,212	67.4%

Balance sheet highlights

In thousands of GEL	Jun'24	Mar'24	Jun'23	Change YoY	Change QoQ
Cash & CBU mandatory reserves	207,848	190,926	72,114	NMF	8.9%
Loans and advances to customers	1,068,992	886,119	505,878	NMF	20.6%
Intangible assets and Goodwill	60,633	33,990	24,828	NMF	78.4%
Other assets	228,993	185,619	153,768	48.9%	23.4%
TOTAL ASSETS	1,566,466	1,296,654	756,588	NMF	20.8%
Due to credit institutions	331,137	183,940	29,083	NMF	80.0%
Customer accounts	721,632	657,190	457,340	57.8%	9.8%
Subordinated debt and debt securities in issue	46,869	43,151	-	NMF	8.6%
Other liabilities	78,852	91,471	39,059	NMF	-13.8%
TOTAL LIABILITIES	1,178,490	975,752	525,482	NMF	20.8%
Equity attributable to shareholders	387,976	320,902	231,106	67.9%	20.9%
TOTQL EQUITY	387,976	320,902	231,106	67.9%	20.9%
TOTAL LIABILITIES AND EQUITY	1,566,466	1,296,654	756,588	NMF	20.8%

Key ratios

Uzbekistan business	2Q'24	1Q'24	2Q'23	Change YoY	Change QoQ	1H'24	1H'23	Change YoY
Profitability ratios:
ROE1	27.8%	23.7%	22.1%	5.7 pp	4.1 pp	25.7%	25.1%	0.6 pp
ROA2	6.9%	6.5%	7.1%	-0.2 pp	0.4 pp	6.7%	8.0%	-1.3 pp
Cost to income3	53.1%	54.5%	54.1%	-1.0 pp	-1.4 pp	53.7%	53.6%	0.1 pp
NIM4	24.4%	23.6%	20.1%	4.2 pp	0.7 pp	24.0%	20.1%	3.7 pp
Loan yields5	44.2%	43.2%	43.0%	1.2 pp	1.0 pp	43.7%	43.1%	0.6 pp
Deposit rates6	24.8%	25.4%	24.9%	-0.1 pp	-0.6 pp	25.1%	25.0%	0.1 pp
Cost of funding7	23.1%	24.1%	24.5%	-1.4 pp	-1.0 pp	23.6%	24.6%	-1.0 pp
Asset quality & portfolio concentration:
Cost of risk8	5.5%	5.5%	6.6%	-1.1 pp	0.0 pp	5.5%	6.1%	-0.6 pp
PAR 90 to gross loans9	2.5%	2.1%	2.2%	0.3 pp	0.4 pp	2.5%	2.2%	0.3 pp
NPLs to gross loans10	2.5%	2.1%	2.2%	0.3 pp	0.4 pp	2.5%	2.2%	0.3 pp
NPL provision coverage11	192.8%	220.8%	180.0%	12.8 pp	-28.0 pp	192.8%	180.0%	12.8 pp
Total NPL coverage12	192.8%	220.8%	180.0%	12.8 pp	-28.0 pp	192.8%	180.0%	12.8 pp

For the ratio definitions and exchange rates, please refer to appendix 3.

2)   Glossary

Terminology	Definition
BVPS	Book value per share
CBU	Central Bank of Uzbekistan
Consumer loans	Unsecured loans to individuals
Digital daily active users (Digital DAU)	The number of retail digital users, who logged into our digital channels at least once per day
Digital monthly active users (Digital MAU)	The number of retail digital users, who logged into our digital channels at least once a month
EPS	Earnings per share
Gross merchandise value (GMV)	GMV equals the total value of sales over the given period, including auctions through housing and auto platforms, as well as listing fees
Monthly active customers (MAC)	For Georgian business, an individual user who has at least one active product as of the reporting date or performed at least one transaction during the past month. For Uzbek business, an individual user who logged into the digital application at least once during the month
NBG	National Bank of Georgia

3)   Ratio definitions and exchange rates

Ratio definitions

1. Return on average total equity (ROE) equals profit attributable to owners divided by the monthly average of total shareholders' equity attributable to the PLC's equity holders for the same period; annualised where applicable.

2. Return on average total assets (ROA) equals profit of the period divided by monthly average total assets for the same period; annualised where applicable.

3. Cost to income ratio equals total operating expenses for the period divided by the total revenue for the same period. (Revenue represents the sum of net interest income, net fee and commission income and other non-interest income).

4. Net interest margin (NIM) is net interest income divided by monthly average interest-earning assets; annualised where applicable. Interest-earning assets include investment securities (excluding CIB shares), net investment in finance lease, net loans, and amounts due from credit institutions.

5. Loan yields equal interest income on loans and advances to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

6. Deposit rates equal interest expense on customer accounts divided by monthly average total customer deposits; annualised where applicable.

7. Cost of funding equals sum of the total interest expense and net interest gains on currency swaps (entered for funding management purposes), divided by monthly average interest-bearing liabilities; annualised where applicable.

8. Cost of risk equals credit loss allowance for loans to customers divided by monthly average gross loans and advances to customers; annualised where applicable.

9. PAR 90 to gross loans ratio equals loans for which principal or interest repayment is overdue for more than 90 days divided by the gross loan portfolio for the same period.

10. NPLs to gross loans equals loans with 90 days past due on principal or interest payments, and loans with a well-defined weakness, regardless of the existence of any past-due amount or of the number of days past due divided by the gross loan portfolio for the same period.

11. NPL provision coverage equals total credit loss allowance for loans to customers divided by the NPL loans.

12. Total NPL coverage equals total credit loss allowance plus the minimum of collateral amount of the respective NPL loan (after applying haircuts in the range of 0%-50% for cash, gold, real estate and PPE) and its gross loan exposure divided by the gross exposure of total NPL loans.

13. Credit loss level to gross loans equals credit loss allowance for loans to customers divided by the gross loan portfolio for the same period.

14. Related party loans to total loans equals related party loans divided by the gross loan portfolio.

15. Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers divided by the gross loan portfolio.

16. Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers divided by the gross loan portfolio.

17. Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus borrowings received from international financial institutions.

18. Leverage equals total assets to total equity.

19. Net stable funding ratio equals the available amount of stable funding divided by the required amount of stable funding as defined by NBG in line with Basel III guidelines. Calculations are made for TBC Bank standalone.

20. Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash outflow amount as defined by the NBG. Calculations are made for TBC Bank standalone.

21. CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with requirements of the NBG Basel III standards. Calculations are made for TBC Bank standalone.

22. Tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. Calculations are made for TBC Bank standalone.

23. Total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the NBG Basel III standards. Calculations are made for TBC Bank standalone.

24. CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in accordance with requirements of the CBU in national accounting standards. Calculations are made for TBC UZ Bank standalone.

25. Tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in accordance with the requirements of the CBU in national accounting standards. Calculations are made for TBC UZ Bank standalone.

26. Total CAR equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the CBU in national accounting standards. Calculations are made for TBC UZ Bank standalone.

Exchange rates

To calculate the QoQ growth of the balance sheet items without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6953 as of 31 March 2024. To calculate the YoY growth without the currency exchange rate effect, we used the USD/GEL exchange rate of 2.6177 as of 30 June 2023. As of 30 June 2024, the USD/GEL exchange rate equalled 2.8101. For P&L items growth calculations without the currency effect, we used the average USD/GEL exchange rate for the following periods: 1Q 2024 of 2.6713 and 2Q 2023 of 2.5586. As of 2Q 2024, the USD/GEL exchange rate equalled 2.7396, 1H 2024 of 2.7054, 1H 2023 of 2.5975.

Risk management

Overview

The Group operates a strong, independent, business-minded risk management system. Its main objective is to safeguard the sustainable earnings capacity of the balance sheet on the basis of risk-adjusted returns through the implementation of an efficient risk management system. The Group has adopted four primary risk management principles to better accomplish its major objectives:

·      Govern risks transparently to ensure cross-functional, harmonised understanding and trust. Consistency and transparency in risk-related processes and policies are preconditions for gaining the trust of multiple stakeholders. Communicating risk goals and strategic priorities to governing bodies and providing a comprehensive follow-up in an accountable manner are key priorities for the staff responsible for risk management;

·      Manage risks prudently to promote sustainable earnings growth and resilience. Risk management acts as a backstop against unrewarded or even excessive risk-taking. Strong risk management with a well established, forward-looking stress testing framework ensures the Group's sustainability and resilience;

·      Ensure that risk management underpins the implementation of strategy. Staff responsible for risk management provide assurance on the feasibility of achieving objectives through risk identification and management. The risk management function provides a framework under which stakeholders are empowered to make risk-based decisions by identifying, quantifying, and adequately pricing risks.  It also creates the conditions for formulating risk mitigation actions, thus supporting the long term generation of desired returns and the achievement of planned targets;

·      Use risk management to gain a competitive advantage. Providing tools for faster decision-making and supporting business operations, ensuring the sustainability and resilience of the business model, establishes risk management as a core component of the Group's competitive strategy.

Risk management framework

The Group employs a comprehensive enterprise-wide Risk Management Framework, placing a strong emphasis on cultivating a robust risk culture throughout the organisation. This framework is strategically designed to ensure that effective governance capabilities and methodologies are in place, facilitating sound risk management and informed decision-making.

Aligned with the Group's overarching strategic objectives, the risk management framework establishes standards and objectives while delineating roles and responsibilities. The Group's principal risks, as detailed in this section, are systematically controlled and managed within the framework, promoting consistency across the organisation and its subsidiaries.

Led by the Chief Risk Officer and developed by the Group's independent Risk function, the framework undergoes an annual review and approval process by the Board. It encompasses risk governance through the Group's three lines of defence operating model.

The Group's risk appetite, supported by a robust set of principles, policies, and practices, defines acceptable levels of tolerance for various risks. This structured approach guides risk-taking within established boundaries, ensuring a proactive and disciplined risk management stance.

The Group operates under the principle that all teams share responsibility for managing risk, with a particular emphasis on those facing the client. However, the Risk function assumes a crucial role in overseeing and monitoring risk management activities. This includes development of the framework and ensuring adherence to supporting policies, standards, and operational procedures. The Chief Risk Officer regularly reports to the Board Risk Committee on the Group's risk profile and performance as well as on the effectiveness of the Group's system of internal control.

Moreover, the Group has instituted a rigorous process to identify and manage material and emerging threats. These threats, which are deemed to potentially adversely affect the Group's ability to meet its strategic objectives, are regularly reported to the Board. The Group's applied, comprehensive approach considers the interdependence of material and emerging threats, enhancing the overall risk intelligence provided to stakeholders.

Governance

The Group's risk governance structure is crafted to ensure robust oversight and strategic decision-making within risk management. At its core, risk-focused committees and risk functions assume pivotal roles in orchestrating effective risk management practices within the Group as a whole and its individual subsidiaries.

At the Supervisory Board level, while the boards are responsible for overseeing risk management, in some instances, activities within risk management and control are delegated to risk committees for effective handling. Responsibilities encompass aligning risk practices with strategic goals, setting risk appetite, discussing and approving risk policies, fostering a culture of responsible risk-taking, and monitoring risk identification and assessment processes. The committees are tasked with overseeing regular assessments of emerging and principal risks that could impact the business model, performance, solvency, and liquidity. Their leadership is critical for effective risk management and the long-term viability of the Group.

At the management board level, committees assume a crucial role in steering effective risk management within subsidiaries. Whether through a single risk committee or multiple committees with more granular scopes (e.g. financial risks, reputational risk, or information security), their responsibilities include closely overseeing risk exposures and making key decisions on risk mitigation and control. While specific duties may differ, the overall mission remains consistent: aligning risk management practices with regulatory requirements and risk tolerance. In cases where Group companies are of a smaller scale, risk committees may not be present, and the management board itself assumes these responsibilities.

Risk culture and three lines of defence

At the core of the Group's Risk Management Framework and practices is a robust risk culture that underscores the institution's commitment to prudent and strategic risk-taking. The Group expects its leaders to demonstrate strong risk management behaviour, providing clarity on the desired level of risk taking, developing their respective capabilities and frameworks , and motivating employees to ensure risk-minded decision making.

The key principles governing risk culture across all the Group's subsidiaries include: Board leadership (the Board sets the tone and establishes a foundation for a risk-aware culture throughout the organization); employee understanding and accountability (the Group ensures that employees at every level understand the institution's approach to risk and there is a clear understanding that individuals are accountable for their actions concerning risk-taking behaviors aligned with the Group's standards); communication (open, transparent, and effective communication is fundamental to the Group's risk culture); and remuneration incentives (the Group reinforces its risk culture by aligning remuneration incentives with sound risk management practices).

This holistic approach to risk culture ensures that the Group and its subsidiaries are equipped with a resilient and proactive mindset, where risk management is ingrained in the organisational DNA.

To comprehensively manage risks, the Group ensures adherence to the three lines of defence model:

·      First Line of Defence: Business lines, as frontline defenders, engage in risk-taking activities with awareness of their impact on risks that may contribute to or hinder the achievement of the Group's objectives. A well established risk culture is a foundation for risk-taking decisions.

·      Second Line of Defence: Risk management functions ensure effective risk management and controls by consolidating expertise, identifying, measuring, and monitoring risks, and assisting the first line. They act independently from the business lines and provide frameworks and tools for effective risk management.

·      Third Line of Defence: The internal audit function provides assurance to the Board of Directors that the risk management and control efforts of both the first and second lines of defence meet the expectations set by the Board of Directors.

Risk appetite

Risk appetite is defined as the set of acceptable limits that shape the combinatory level of risk that the Group or its key subsidiaries are prepared to accept in pursuit of return and value creation consistent with the approved strategy. The Group's Risk Appetite Framework, which governs enterprise risk management, establishes the extent and process of permissible risk-taking to guide the Group's business outcomes.

Considering the ever-changing risk profile of the Group, the risk appetite frameworks of the Group and its key subsidiaries are regularly reviewed, updated, and approved by the Board to make sure they remain aligned with the Group's desired level of risk-taking.

Risk identification

The identification of risks serves as the foundational step in the Group's risk management process. This process systematically recognises and documents any potential direct or indirect risks that could impact the achievement of organizational objectives. It is imperative that this identification leverages input from the Group's lines of defence within the organisation as well as external stakeholders to ensure a comprehensive and anticipatory definition.

The risk identification process within the Group is governed by the Risk Registry Framework. Regular reviews and adjustments of the Risk Registry are undertaken to ensure its consistent relevance and effectiveness.

Risk measurement

The Group places significant emphasis on a comprehensive approach to risk measurement, aligning with its commitment towards proactive risk management practices. Each identified risk direction is accompanied by tools for quantitative and qualitative measurement. The process is dynamic, continuously adapting to changes in the financial landscape and regulatory environment. Regular reviews and assessments ensure the effectiveness of the risk measurement tools and methodologies.

Risk mitigation

Risk mitigation is a proactive approach aimed at minimizing the potential negative consequences of risks. To proactively approach every material risk, the Group develops and implements harmonised risk policies and frameworks, which play a key role by:

·      Setting standards and guidelines - risk policies outline the standards and guidelines for how risks should be managed within the organisation and provide a structured approach to addressing risks, ensuring consistency and compliance with regulatory and internal requirements.

·      Defining roles and responsibilities - risk policies clarify the roles and responsibilities of different individuals and departments in the risk mitigation process.

·      Establishing procedures - risk policies provide a guiding framework for developing procedures for risk mitigation activities.

All policies are subject to regular reviews and updates to adapt to new challenges and refine its risk management strategies over time.

Risk monitoring and reporting

Risk reporting stands as a cornerstone within the Group's robust risk management framework. The Group and its subsidiaries are mandated to establish robust risk reporting processes. These processes are designed to regularly communicate material risk exposures and the overall risk profile to the Supervisory and Management Boards as well as senior management.

Regular monitoring is essential to ensure compliance with established risk appetite and regulatory limits. It serves as a proactive measure to observe the evolution of the prevailing risk environment. The Group emphasises a structured approach to risk reporting, encompassing monitoring, to effectively capture, assess, and communicate risks. This ensures the provision of clear and timely information, fostering accountability among stakeholders in managing and addressing risks.

In addition to routine reporting, ad-hoc reporting can be triggered by key vulnerabilities, significant risk identification, or deviations from the targeted risk profile. This agile approach ensures that the risk reporting mechanism remains responsive to emerging risks and evolving circumstances.

Internal control

TBC Group is introducing its streamlined Integrated Control Assurance Framework, seamlessly aligning risk, control, compliance, and internal audit functions for integrity, efficiency, and regulatory compliance. This comprehensive framework ensures meticulous adherence to policies and procedures, catering to the diverse needs of our products and services. The integrated view enables a collective audit asset database that is generated across first, second, and third lines of defence as well as regulatory and legal, reflecting our commitment to transparency and accountability.

The Internal Control Framework extends to the evaluation, testing, and follow-up of high and critical-risk processes, while simultaneously focusing on enhancing risk awareness and refining internal controls. Continuous monitoring and improvement initiatives are integral components, enhancing operational effectiveness within the framework. This approach fosters a culture of internal control, showcasing our dedication to excellence in managing internal controls and risks.

Stress testing and contingency planning

It is essential for the Group to examine its financial performance under conditions that diverge from baseline expectations. For that reason, the Group subjects itself to various stress scenarios with the intent to identify vulnerabilities, quantify potential losses, and assess the sufficiency of risk mitigation measures. Currently, JSC TBC Bank has established its own comprehensive stress testing framework, which encompasses a range of scenarios to assess its resilience. This includes scenarios related to capital, liquidity, credit, cyber and other risk factors relevant to the prevailing risk environment. Stress testing is crucial to evaluate the ability to withstand adverse conditions, such as economic downturns, market volatility, and unforeseen events. Regular reviews and adjustments are essential to ensure the consistent relevance and effectiveness of the stress testing frameworks.

The Bank regularly performs stress test exercises. Stress tests are conducted either within predefined frameworks such as ICAAP, ILAAP and Recovery Planning,  or/and  on an ad-hoc basis to assess the impact of certain system-wide or idiosyncatic events on the Bank's capital, liquidity, and financial positions. Although the overall stress testing approach is consistent, the severity of the stress scenarios differ according to the relevant framework.

In addition to stress testing analysis, the Recovery Plan serves as a strategic blueprint for both the Supervisory Board and the management to ensure readiness for specific stress conditions. The Recovery Plan provides clear recovery options with specific steps to be undertaken including transparent and timely communication to internal and external stakeholders. The framework is subject to regular reviews and adjustments to ensure its consistent relevance and effectiveness.

The Bank also has a Business Continuity Plan in place. This plan ensures that the organisation is prepared to respond effectively to disruptions. By outlining strategies to maintain revenue streams and minimize financial losses during disruptions, these practices help to safeguard the organisation's financial stability and long-term viability.

Material Existing and Emerging Risks

Risk Management is a critical pillar of the Group's strategy. It is essential to identify emerging risks and uncertainties that could adversely impact the Group's performance, financial condition, and prospects. This section analyses the material principal and emerging risks and uncertainties that the Group faces. However, we cannot exclude the possibility of the Group's performance being affected by risks and uncertainties other than those listed below.

The Board has undertaken a robust assessment of both the principal and emerging risks facing the Group and the long-term viability of the Group's operations, in order to determine whether to adopt the going concern basis of accounting.

PRINCIPAL RISKS AND UNCERTAINTIES

Specific focus in 1H 2024

1. The Group's performance may be compromised by internal political instability or adverse developments in the region, in particular the war in Ukraine, the possible spread of the geopolitical crisis and/or the potential outflow of migrants from Georgia as well as further military escalation in the middle east, which could have a material impact on the operating environment in Georgia and Uzbekistan.

Risk description

The Group's performance is highly vulnerable to geopolitical developments in its two major operation markets - Georgia and Uzbekistan.

Although inflows to the Georgian economy are quite diversified, the country is still vulnerable to geopolitical and economic developments in the region. In particular, the Russian invasion of Ukraine, the consequent sanctions imposed on Russia and the resulting elevated uncertainties may have an adverse impact on the Georgian economy. The country is also exposed to the risks of renewed military conflicts in its breakaway regions occupied by Russia and potential political instability related to the 2024 parliamentary elections, while some relatively distant conflicts, such as the escalation in the Middle East, might affect the Georgian economy through a stronger USD, higher oil prices, migration flows, etc.

While the migration effect continues to make an important contribution to economic activity, any sizeable outflow could lead to a deterioration in the business environment. The reverse would probably be the case in any rapid conflict resolution scenario, which would create positive economic spillovers as well, such as the likely stronger rebound of growth in Russia and Ukraine.

Moreover, the Russian invasion of Ukraine and related economic policy and geopolitical uncertainties pose a risk to the business environment in Uzbekistan, including but not limited to the geopolitical tensions in Central Asia.

Materialisation of these risks could severely hamper economic activity in Georgia and Uzbekistan, and negatively impact the business environment and client and customer base of the Group.

Risk mitigation

The Group actively employs stress testing and other risk measurement and monitoring tools to ensure that early triggers are identified and translated into specific action plans to minimise any negative impact on the Bank's capital adequacy, liquidity, and portfolio quality. In extreme stress cases, where regulatory requirements may be breached, the Bank has a Recovery Plan in place, which helps to  guide the Board and the management through the process of recovery of the capital and/or liquidity positions within a prescribed timeframe.

2. The Group's operating region introduces financial crime risk.

Risk description

Financial crime risk covers money laundering, terrorist financing, bribery and corruption, and sanctions risks. The risks associated with sanctions have increased, particularly in recent years. Therefore the Group's specific focus in 2024 remained on managing sanctions risk.

Historically, Georgia has enjoyed close business relations with Russia and Ukraine. The aggression launched by the Russian Federation against Ukraine on the 24th of February 2022 resulted in a vigorous international response, which included the imposition of tough economic sanctions by the US, the EU, the UK and other countries. As a consequence, Russian and Belarusian members of legislative and government agencies, oligarchs, businessmen, state-owned companies, financial institutions and other legal entities have been directly sanctioned, while numerous economic restrictions and trade prohibitions have been enforced on specific sectors of activity and categories of goods and services in Russia, Belarus, Crimea, and other occupied territories. Leading countries are tightening and expanding the sanctions programme by extending some restrictions and adding new entities and individuals to their list. Moreover, as a consequence of the conflict, many Russian citizens have relocated to Georgia. Considering the level of interaction between the Group, Russia and Russian citizens, and the breadth of the sanctions' prohibitions and restrictions, the risk of being involved in attempts to circumvent sanctions has substantially increased.

The executive order of December 2023 by US's sanctioning authority OFAC has caused Georgian financial institutions to conduct their operations responding to the requirements of the decree. Namely, in accordance with this restriction, the transactions involving Russian entities operating in main fields of Russian economy or somehow connected to Russian Military-Industrial bases are now  falling under the increased scrutiny from the Bank.

In addition to the sanctions risk related to Russia, a significant increase in international shipping costs and the crisis in the Red Sea have led to a surge in freight shipping from China instead of sea routes. This situation has exposed Georgia to the risk of financing transshipments via Iran for its import and export activities with Asian countries, a practice prohibited by the US government. Breaches of the US, EU and UK sanctions regime would expose the Group to fines and regulatory actions by the local regulator, the National Bank of Georgia, and by US, EU and UK authorities and enforcement agencies. In addition to the regulatory risk, the Group also faces a reputational risk, mainly with its correspondent banks and other financial third party relationships.

Risk mitigation

The Group has a zero tolerance stance towards any prospect of breaching or facilitating the breach or avoidance of UN, UK, US and EU sanctions. The Group is committed to avoiding any deals or transactions with direct or indirect sanctioned parties or goods or services.

The Group has adopted a Group-wide Financial Crime Policy that sets requirements in the following key risk areas: money laundering, terrorist fianancing, bribery, corruption, and sanctions. The policy applies to all Group member companies, business activities and employees. Employees receive trainings on financial crime risk management. The employees are made aware of the Group's appetite for and approach to financial crime management  as well as the potential consequences following the failure to comply with the financial crime policy.

The Group aims to protect its customers, shareholders, and society from financial crime and any resulting threat. The Group is fully committed to complying with applicable international and domestic laws and regulations related to financial crime as well as relevant legislation in other countries where Group member financial institutions operate. It has a long-standing ambition to meet the respective industry best practice standards.

The Group has implemented internal policies, procedures and detailed instructions designed to prevent any association with money laundering, financing of terrorism, or any other unlawful activities such as bribery, corruption, sanctions or tax evasion. The Group's AML/CTF compliance programme, as implemented, comprises written policies, procedures, internal controls and systems including, but not limited to: policies and procedures to ensure compliance with AML laws and regulations; KYC and customer due diligence procedures; a customer acceptance policy; screening against a global list of terrorists, vessels, specially designated nationalities, relevant financial and other sanctions lists; regular staff training and awareness raising; and procedures for monitoring and reporting suspicious activities by the Bank's customers.

The Bank has dedicated material resources to sanctions risk management. It has:

·      Purchased software  and databases that assist the Bank on sanctions risk mitigation;

·      Engaged external advisers in to produce recommendations on improvements in sanctions risk management;

·      Engaged external audits to assess internal policies and procedures;

·      Empowered dedicated staff with the relevant, specific knowledge;

·      Made new arrangements within Compliance Departmanet, as part of which new human resources were added to the divisions.

As part of the second line of defence, the Bank's Compliance Department seeks to manage risk in accordance with the risk appetite defined by the Group and promotes a strong risk culture throughout the organisation.The Group has a sophisticated, artificial intelligence-based AML solution in place to enable AML Officers to monitor clients' transactions and identify suspicious behaviour. Using data analytics and machine learning, the Group developed an anomaly detection tool to bring very complex cases to the surface, using client network analysis to identify organized money laundering cases and enriched pre-defined patterns to create an automated system. This approach has an immense business value as it uncovers cases in ways that would otherwise be prohibitively expensive, since manual analysis of these transactions is an extremely time-consuming process for AML officers. The tool compiles all these incidents into dashboards and presents them to AML officers for further action.

The Bank's Compliance Department works on constantly improving the software to increase operational efficiency and decrease false-positive alerts, in light of which the new external consultant company was hired. The Bank performs an enterprise-wide AML/CTF/Sanctions Risk Assessment annually, in line with the approved methodology. Overall Group-wide residual risks for the year 2023 were assessed as medium. The Bank's Compliance Department addresses areas of attention in a timely and proper manner. In response to the ever emerging challenges in sanctions compliance, the new divison of Sanctions Control has been established within the Compliance Department, which is hiring new staff in order to better address  threats of sanctions circumvention.

FINANCIAL RISKS

1. The majority of the Group's earnings capacity is generated via credit risk bearing asset side elements.

Risk description

Credit risk is the greatest material risk faced by the Group, given that the Group is principally engaged in traditional lending activities. It is the risk of losses due to the failure of a customer or counterparty to meet their obligations to settle outstanding amounts in accordance with agreed terms. The Group's customers include legal entities as well as individual borrowers. Due to the high level of dollarisation in Georgia's financial sector, currency-induced credit risk is a component of credit risk, which relates to risks arising from foreign currency-denominated loans to unhedged borrowers in the Group's portfolio. Credit risk also includes concentration risk, which is the risk related to credit portfolio quality deterioration as a result of large exposures to single borrowers or groups of connected borrowers, or loan concentration in certain economic industries. Losses incurred due to credit risk may be further aggravated by unfavourable macroeconomic conditions.

Currency-induced credit risk (CICR) - While the Group's banking business in Uzbekistan is focused on lending in the local currency, the banking business in Georgia has a significant credit portfolio in foreign currencies. A potential material GEL depreciation is one of the most significant risks that could negatively impact credit portfolio quality. As of 30 June 2024, 51.2% of the Group's total gross loans and advances to customers (before provision for loan impairment) was denominated in foreign currencies. The income of many customers is directly linked to foreign currencies via remittances, tourism or exports. Nevertheless, customers may not be protected against significant fluctuations in the GEL exchange rate against the currency of the loan. The GEL remains in free float and is exposed to a range of internal and external factors that, in some circumstances, could lead to its depreciation. In the first half of 2024, the average US$/GEL currency exchange rate depreciated by 4.2% year-on-year.

Concentration risk - Although the Group is exposed to single-name and sectoral  concentration risks, the Group's portfolio is well diversified both across sectors and single-name borrowers, resulting in only a moderate vulnerability to concentration risks. However, should exposure to common risk drivers increase, the risks are expected to amplify accordingly. At a consolidated level, the Group's maximum exposure to the single largest industry (real estate) stood at 11% of the loan portfolio as of 30 June 2024. At the same time, exposure to the 20 largest borrowers stood at 8.7% of the loan portfolio.

In addition, credit risk also includes counterparty credit risk, as the Group engages in various financial transactions with both banking and non-banking financial institutions. Through performing banking services such as lending in the interbank money market, settling a transaction in the interbank foreign exchange market, entering into interbank transactions related to trade finance or investing in securities, the Group is exposed to the risk of losses due to the failure of a counterparty bank to meet its obligations.

Risk mitigation

A comprehensive Credit Risk Assessment Framework is in place with a clear division of duties among the parties involved in the credit analysis and approval process. The credit assessment and monitoring processes differ by segment and product type to reflect the diverse nature of these asset classes. The Group's credit portfolio is highly diversified across customer types, product types and industry segments, which minimises credit risk at the Group level. As of 30 June 2024, the retail segment represented 38.4% of the total portfolio, which was comprised of 53.7% mortgage and 46.3% non-mortgage exposures. No single business sector represented more than 11% of the total portfolio as of 30 June 2024.

Credit approval

The Group focuses on robust credit-granting by establishing clear lending criteria and efficient credit risk assessment processes, including CICR and concentration risk.

Credit assessments vary by segment and product, reflecting the characteristics of the different asset classes. Decisions are either automated or manually assessed, following segment-specific guidelines. Automated decisions use internal credit risk scorecards, aiming for increased automation to enhance decision speed and competitive advantage. For loans needing manual review or unsuited to automation, credit committees decide, based on the client's indebtedness and risk profile, in legal compliance. These committees, structured in multiple tiers, review and approve loans, differing by size and risk of the credit product.

To address the CICR, the client's ability to withstand a certain amount of exchange rate depreciation is incorporated into the credit underwriting standards, which also include significant currency depreciation buffers for unhedged borrowers.

Credit monitoring

The Group emphasizes proactive risk management, with credit risk monitoring as a core element. We use a robust system to quickly respond to macro and micro changes, identifying vulnerabilities in our credit portfolio to make informed decisions. Our risk resilience involves regular monitoring of concentration risk, CICR, and other credit risk factors. We employ a portfolio supervision system to detect weaknesses in credit exposures, analyse risk trends, and recommend actions against emerging risks. Particular attention is paid to currency-induced credit risk, due to the high share of loans denominated in foreign currencies in the Bank's portfolio. The vulnerability to exchange rate depreciation is monitored in order to promptly implement an action plan, as and when needed. Given the experience and knowledge built through recent currency volatility, the Bank is in a good position to promptly mitigate exchange rate depreciation risks.

Tailoring monitoring to segment specifics, we focus on individual credit exposures, portfolio performance, and external trends affecting risk profiles. Our vigilant stance includes early-warning systems to identify financial deterioration or fraud in clients' positions. These systems track signs like overdue days, refinancing, LTV changes, or tax liens. Large overdue exposures receive individual monitoring to assess clients' loan servicing capabilities.

In fraud prevention, we monitor first payment defaults across credit experts, bank branches, or companies employing our clients. Our institutions have credit monitoring and reporting processes for their Supervisory and Management Boards or risk committees, ensuring transparency and informed decision-making.

In addition to our underwriting and monitoring efforts, relevant buffers are built into our capital adequacy requirements to ensure that our banks are sufficiently capitalised to cover CICR, concentration risk, and credit risk in general. We utilize stress testing and sensitivity analysis to assess our credit portfolio's resilience, preparing for different economic conditions and evolving client needs.

Credit risk appetite

The credit risk appetite of the Group is defined by the Risk Appetite Frameworks of the Group and its financial institution subsidiaries, guiding credit risk-taking. These frameworks offer qualitative guidance and quantitative limits to set acceptable credit risk levels. Key quantitative metrics include NPL proportion, cost of risk, and NPL coverage. Risk appetite frameworks also set strict limits and ensure close monitoring of Currency-Induced Credit Risk and Concentration Risk, covering sectoral and single-name concentrations.

Credit ratings are essential in determining credit risk tolerance. They provide a thorough assessment of a borrower's creditworthiness, which is crucial for understanding their ability to fulfill their financial commitments. These ratings are fundamental in establishing guidelines for acceptable risk levels and are integrated into our risk management framework. They enhance our ability to define and manage credit risk, allowing for a detailed understanding of borrower creditworthiness, leading to informed decision-making and appropriate risk threshold setting.

We approach credit risk by combining comprehensive risk appetite frameworks with the strategic use of credit ratings. This integrated approach enables the Group to effectively navigate the changing credit risk landscape with resilience and agility.

Collateral management

In our Georgian bank, collateral is a key factor in mitigating credit risk, forming a large part of loan portfolios, while in our Uzbekistan bank, the loan portfolio is solely unsecured. The Georgian bank accepts diverse collaterals like real estate, cash deposits, vehicles, equipment, inventory, precious metals, securities, and third-party guarantees, according to credit product type and the borrower's credit risk. Real estate is a major collateral component, while a centralised unit oversees collateral management, ensuring its adequacy in credit risk mitigation.

The Collateral Management Framework includes policy-making, independent valuation, a haircut system during underwriting, monitoring (revaluations, statistical analysis), and portfolio analysis. The Bank's Collateral Management and Appraisal Department defines collateral management policies and procedures, which are approved by the Board. The department aligns appraisal services with International Valuation Standards, acting regulations of the National Bank of Georgia and internal rules, authorizes appraisal reports, and manages the collateral monitoring process. High-value assets are revaluated annually, while low-value collaterals undergo statistical monitoring.

The Collateral Management and Appraisal Department's quality checks for valuations involves internal staff reviews and external company assessments. Collateral management activities are largely automated through a web application, with support from market research from the Real Estate Market laboratory project.

Collections and recoveries

In managing credit risk, the Group activates collection and recovery procedures when clients miss payments or their financial standing deteriorates, threatening exposure coverage. This process begins after failed attempts at restructuring non-performing exposures. Specialised teams in each segment handle overdue exposures, creating loan recovery plans tailored to clients' specific situations and adhering to our ethical code.

Our collections processes involve supporting clients struggling to meet their obligations. The strategies depend on exposure size and type, with customised plans for different customer subgroups based on their risk levels. The goal is to negotiate with clients to secure cash recoveries through revised payment schedules as the primary repayment source. If acceptable terms are not reached, recovery may involve selling assets or repossessing collateral. Foreclosure may be initiated through legal processes if negotiation fails. Additional recovery strategies include sale of the unsecured portfolio to third parties (debt collection agencies)..

These measures reflect our commitment to responsible credit risk management, safeguarding financial stability, and maintaining ethical standards within the Group.

Counterparty risk

To manage counterparty risk, the Group defines limits on an individual basis for each counterparty, while on a portfolio basis it limits the expected loss from both treasury and trade finance exposures. As of 30 June 2024, the Bank's interbank exposure was concentrated with banks that external agencies, such as Fitch, Moody's and Standard and Poor's, have assigned high A-grade credit ratings.

2. The Bank underwrites the responsibility to adhere at all times to minimum regulatory requirements on capital, which may compromise growth and strategic targets. Additionally, adverse changes in FX rates may impact capital adequacy ratios.

Risk description

Capital risk is a significant focus area for the Group. Capital risk is the risk that a bank may not have a sufficient level of capital to maintain its normal business activities, and to meet its regulatory capital requirements under normal or stressed operating conditions. The management's objectives in terms of capital management are to maintain appropriate levels of capital to support the business strategy, meet regulatory and stress testing-related requirements, and safeguard  the Group's ability to continue as a going concern.

The Group's ability to comply with regulatory requirements can be affected by both internal and external factors. Some key concerns include the deterioration of asset quality leading to losses, reductions in income, rising expenses, and potential difficulties in raising capital.

Local currency volatility has been and remains a significant risk for the JSC TBC Bank's capital adequacy. A 10% GEL depreciation would translate into a 0.8pp, 0.6pp and 0.5pp drop in JSC TBC Bank's excess CET 1, Tier 1 and Total regulatory capital, respectively.

Risk mitigation

The Group's entities undertake stress testing and sensitivity analysis to quantify extra capital consumption under different scenarios. Such analyses indicate that the Bank holds sufficient capital to meet the current minimum regulatory requirements. Capital forecasts, as well as the results of stress testing and what-if scenarios, are actively monitored with the involvement of the Bank's Executive Management and the Risk Committee of the Supervisory Board to help ensure prudent management and timely action, when needed.These analyses are used to set appropriate risk appetite buffers internally, on top of the regulatory requirements.

The Bank regularly performs stress tests serving multiple purposes. They are performed routinely, either under the frameworks listed or on an ad-hoc basis, to assess the magnitude of certain stressful environments. Stress tests are performed for the Internal Capital Adequacy Assessment Process (ICAAP), regulatory stress tests and the Recovery Plan, among other purposes.

The key objective of the regulatory stress test is to define the net stress test buffer under the capital adequacy minimum requirement framework. Starting from 2018, regulatory stress tests are performed and submitted to the regulator upon their request.

The purpose of the ICAAP is to identify all the material risks faced by the Bank and to have an internal view of the capital needed to cover those risks. The objective of the ICAAP is to contribute to the Bank's continuity from a capital perspective by ensuring that it has sufficient capital to bear its risks, absorb losses and follow a sustainable strategy, even during a stress period.

Stress testing under the Recovery Plan assumes more severe stress scenarios, specifically aimed at breaching regulatory requirements and assessing the Bank's ability to recover the capital position with the help of viable recovery options within a reasonable timeframe.

Under the risk appetite and the capital planning process, the Bank sets aside capital as a buffer to withstand certain amount of local currency fluctuation.

3. The Group inherently is exposed to funding and market liquidity risks.

Liquidity risk is the risk that the Group either may not have sufficient financial resources available to meet all its obligations and commitments as they fall due, or may only be able to access those resources at a high cost.

Liquidity risk is categorised into two risk types: funding liquidity risk and market liquidity risk.

a.     Funding liquidity risk is the risk that the Group will not be able to efficiently meet both expected and unexpected current and future cash flows without affecting either its daily operations or its financial condition under both normal conditions and during a crisis. 

b.     Market liquidity risk is the risk that the Group cannot easily offset or eliminate a position at the then-current market price because of inadequate market depth or market disruption.

While the Group currently has sufficient financial resources available to meet its obligations as they fall due, liquidity risk is inherent in banking operations and can be heightened by numerous factors. These include an over-reliance on, or an inability to access, a particular source of funding, as well as changes in credit ratings or market-wide phenomena. Access to credit for companies in emerging markets is significantly influenced by the level of investor confidence and, as such, any factors affecting investor confidence (e.g. a downgrade in credit ratings, central bank or state interventions, or debt restructurings in a relevant industry) could influence the price or the ability to access the funding necessary to make payments in respect of the Group's future indebtedness.

Both funding and market liquidity risks can emerge from a number of factors that are beyond the Group's control. There is adequate liquidity to withstand significant withdrawals of customer deposits, but the unexpected and rapid withdrawal of a substantial number of deposits could have a material adverse impact on the Group's business, financial condition, and results of operations and/or prospects.

Risk mitigation

The Group's liquidity risk is managed though the Board's Group Liquidity Risk Management Policy. The Assets and Liabilities Management Committee (ALCO) is the core asset-liability management body ensuring that the principal objectives of the Group's Liquidity Risk Management Policy are met on a daily basis. The approved Liquidity Risk Management Framework ensures the Group meets it payment obligations under both normal and stress situations.

To mitigate the liquidity  risk, the Group holds a solid liquidity position by maintaining comfortable buffers over the regulatory minimum requirements. All regulatory ratios are monitored regularly, with an early-warning system in place to detect potential adverse liquidity events. This is facilitated by the Risk Appetite Frameworks of the Group's relevant financial institutions, which set buffers over the regulatory limits, ensuring early detection of potential liquidity vulnarabilities. The liquidity risk position and compliance with internal limits are closely monitored by the ALCOs of JSC TBC Bank and JSC UZ TBC Bank.

JSC TBC Bank's liquidity risk is managed by the Balance Sheet Management division and Treasury department and is monitored by the Management Board and the ALCO, within their pre-defined functions. The Financial Risk Management (FRM) division is responsible for developing procedures and policy documents and setting risk appetites on funding and market liquidity risk management. In addition, the FRM performs  liquidity risk assessments and communicates the results to the Management Board and the Risk Committee of the Supervisory Board on a regular basis.

The Bank maintains a diversified funding structure to manage the respective liquidity risks. The Bank's principal sources of liquidity include customer deposits and accounts, borrowings from local and international banks and financial institutions, subordinated loans from international financial institution investors, local interbank short-duration term deposits and loans, proceeds from the sale of investment securities, principal repayments on loans, interest income, and fee and commission income. The Bank relies on relatively stable deposits from Georgia as its main source of funding. The Bank also monitors the deposit concentration for large deposits and sets limits for deposits by non-Georgian residents in its deposit portfolio.

To maintain and further enhance its liability structure, the Bank sets targets for deposits and funds received from international financial institution investors in its risk appetite via the respective ratios. The loan to deposit and IFI funding ratio (defined as the total value of gross loans divided by the sum of the total value of deposits and funds received from international financial institutions) stood at 100.0%, 90.6% and 97.7%, as at 30 June 2024, 2023 and 2022, respectively.

The management believes that, in spite of a substantial portion of customers' accounts being on demand, the diversification of these deposits by the number and type of depositors, coupled with the Bank's past experience, indicates that these customer accounts provide a long-term and stable source of funding for the Bank. Moreover, the Bank's liquidity risk management includes the estimation of maturities for its current deposits. The estimate is based on statistical methods applied to historic information about the fluctuations of customer account balances.

Stress testing is a major tool for managing liquidity risk. Stress testing exercises are performed within the ILAAP and Recovery Plan Frameworks as well as on an ad hoc basis, when there is a significant change in the prevailing risk environment. The former assesses the adequacy of the liquidity position and relevant buffers and whether they can sustain plausible severe shocks, while the latter provides a set of possible actions that could be taken in the unlikely event of regulatory requirement breaches to support a fast recovery in the liquidity position. The recovery plan encompasses a Liquidity Contingency Funding Plan which, along with the risk indicators and mitigation actions, outlines the roles and responsibilities of those involved in executing the plan. Both the ILAAP and the Recovery Plan are performed by the Bank on an annual basis.

4. Market risk arises from optimising capital allocation and asset liability management operations.

Risk description

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, and equity prices.

Foreign exchange (FX) risk arises from the potential change in foreign currency exchange rates, which can affect the value of a financial instrument. This risk stems from the open currency positions created due to mismatches in foreign currency assets and liabilities. The Group identifies, assesses, monitors, and communicates the risk arising from exchange rate movements and the factors that influence this risk.

Interest rate risk arises from potential changes in market interest rates that can adversely affect the value of the Group's financial assets and liabilities. This risk can arise from maturity mismatches between assets and liabilities, as well as from the re-pricing characteristics of such assets and liabilities.

The biggest share of the Bank's deposits and part of the loans are at fixed interest rates, while major part of the Bank's borrowings is at a floating interest rate. In addition, the Bank actively uses floating and combined  interest rate structures in its loan portfolio. Since the assets and liabilities have different repricing characteristics, their corresponding interest margins may increase or decrease as a result of market interest rate changes potentially entailing negative effect on net interest income.

Risk Mitigation

The Group's market risk is governed through the Board's Group FX Risk Management and Group Interest Rate Risk Management policies.

FX Risk: To mitigate FX Risk, the Group sets risk appetite and operational limits on the level of exposure by currency as well as on aggregate exposure positions that are more conservative than those set by the regulators. Compliance with the limits is closely monitored by the respective ALCOs of JSC TBC Bank and JSC UZ TBC Bank. Compliance with these limits is also reported periodically to the Management Board and to the Supervisory Board and its Risk Committee.

In addition, the treasury department and financial risk management division separately monitor JSC TBC Bank's compliance with the set limits daily. In order to safeguard against the inherent volatility in the foreign exchange market, the Bank employs a risk management process aimed at mitigating FX risk. This involves the strategic use of spot, forward, and swap transactions.

To assess currency risk, JSC TBC Bank performs a VAR sensitivity analysis on a regular basis. This analysis calculates the effect on the Group's income determined by the worst possible movements of currency rates against the Georgian Lari, with all other variables held constant. During the years ended 30 June 2024 and 2023, this sensitivity analysis did not reveal any significant potential effect on the Group's equity: as of 30 June 2024, the maximum loss with a 99% confidence interval was equal to GEL 11.7 million, compared to a maximum loss of GEL 3.7 million as of 30 June 2023.

Interest Rate Risk: To mitigate interest rate risk, JSC TBC Bank considers numerous stress scenarios, including different yield curve shifts and behavioural adjustments to cash flows (such as deposit withdrawals or loan prepayments), to calculate the impact on one year profitability and the enterprise value of equity. In addition, appropriate limits on both net interest income (NII) and economic value of equity (EVE) sensitivities are set within the Risk Appetite Framework approved by the Supervisory Board. Please see details in Interest Rate Risk in Note 22.

Interest rate risk in JSC TBC Bank is managed by the Balance Sheet Management division and the Treasury department and is monitored by the ALCO. The ALCO decides on actions that are necessary for effective interest rate risk management and follows up on their implementation. The Financial Risk Management division is responsible for developing guidelines and policy documents and setting the risk appetite for interest rate risk. The major aspects of interest rate risk management development and the respective reporting are periodically provided to the Management Board, the Supervisory Board, and the Risk Committee.

To minimize interest rate risk, the Bank regularly monitors interest rate (re-pricing) gaps by currencies and, in case of need, decides to enter into interest rate derivatives contracts.

Furthermore, many of the Bank's loans to customers contain a clause allowing it to adjust the interest rate on the loan in case of adverse interest rate movements, thereby limiting exposure to interest rate risk. The management also believes that the Group's interest rate margins provide a reasonable buffer to mitigate the effect of a possible adverse interest rate movement.

5. Any decline in the Group's net interest income or net interest margin (NIM) could lead to a reduction in profitability, impacting the accumulation of organic capital.

Risk description

Net interest income accounts for most of the Group's total income. Potential new regulations, along with  a high level of competition in Georgia and Uzbekistan, may negatively impact the Group's net interest margin. At the same time, the cost of funding is largely exogenous to the Group and is derived from both local and international markets.

In 1H 2024, NIM amounted to 6.4%, a decrease of 0.2pp YoY, primarily due to a reduction in loan yields in GEL because of the impact of the monetary easing policy and FX funding composition. However, Uzbekistan continues to contribute positively to the Group NIM.

Risk mitigation

The Group continues to focus on the growth of fee and commission income, driven by increased efforts towards customer experience-related initiatives and innovative products in both the Georgian and Uzbekistan markets. This safeguards the Group from potential margin compressions on lending and deposit products in the future. Additionally, the scale-up of operations in Uzbekistan prevents a decrease in NIM on a Group level and ensures the diversification of income streams, aligning with the Group's profitability goals in compliance with the strategy and medium-term targets.

To meet its asset-liability objectives and manage the interest rate risk, the Group uses a high-quality investment securities portfolio, long-term funding, and derivative contracts.

6. The Group's performance may be compromised by adverse developments in the economic environment.

Risk description

A potential slowdown in economic growth in Georgia or Uzbekistan will likely have an adverse impact on the repayment capacity of borrowers, restraining their future investment and expansion plans. Negative macroeconomic developments could compromise the Group's performance in various ways, such as exchange rate depreciation, a sizable decline in gold prices, a spike in interest rates, rising unemployment, a decrease in household disposable income, falling property prices, worsening loan collateralisation, or falling debt service capabilities of companies as a result of decreasing sales. Potential political and economic instability in Georgia's or Uzbekistan's neighbouring countries and main trading/economic partners could negatively affect their economic outlook through worsening current and financial accounts in the balance of payments (e.g. decreased exports, tourism inflows, remittances and foreign direct investments).

After two years of consecutive double-digit expansion, Georgia's economic growth moderated somewhat, though, remained still strong at 7.5% in 2023. The trend of only gradual moderation of record-high currency inflows driven by the post-pandemic recovery, commodity price shocks, and redirection of trade and migration flows due to the Russian-Ukrainian war appears to be persisting in 2024 as well. At the same time, while external trade slightly moderated, the domestic demand and conventional tourism remained resilient, while migration-related spending stabilized, the combination of these factors resulting in a very strong 9.0% average annual economic growth in the first half of 2024. As the disinflationary pass-through from international markets gradually dried up and import prices stabilized, the consumer price dynamics became more domestically driven, causing the tamed CPI inflation to start normalizing towards the NBG target, standing at 2.2% YoY in June 2024. Broadly resilient inflows enabled the GEL to remain stable throughout the most of the first half of the year, allowing the NBG to purchase USD 287 million from the FX market in the January-April period. However, starting from May, mostly driven by the worsened sentiments, the GEL depreciated slightly, standing at 2.81 GEL per USD as of June 30. Curbing the excess volatility, the NBG supplied around USD 220 million to the market in May and June. The gross international reserves as of June 2024 stood at USD 4.6 billion. At the same time, the central bank delivered three rate cuts throughout the first half of 2024, decreasing the monetary policy rate from 9.5% to 8.0%.

Uzbekistan, the second country of the Group's operations, also demonstrated solid economic activity, with 6.4% real GDP growth in the first half of 2024. As in Georgia, the annual inflation started to accelerate in Uzbekistan, increasing from 8.8% in December 2023 to 10.6% in June 2024, while the CBU kept its monetary policy rate unchanged at 14.0% throughout the period. External trade growth has moderated as exports of goods increased by 0.4% and imports by 8.0% YoY. After dropping from the high levels of 2022 in the last year, remittances to Uzbekistan increased by 25% YoY according to the CBU, while the share of Russia notably moderated. The USD/UZS maintained its slight depreciation trend until around the middle of May, when it started appreciating and then stabilized at broadly the same level, standing at 12,555 at the end of June 2024. In terms of REER against Uzbekistan's main trade partners' currencies the UZS only marginally, though, still gained some value in the first half of the year.

Risk mitigation

To decrease its vulnerability to economic cycles, the Group identifies cyclical industries and proactively manages its underwriting approach and clients within its Risk Appetite Framework. The Group has in place a macroeconomic monitoring process that relies on close, recurrent observation of the economic developments in Georgia and neighbouring countries to identify early warning signals indicating imminent economic risks. This system allows the Group to promptly assess significant economic and political events and analyse their implications for the Group's performance. These implications are duly translated into specific action plans with regards to reviewing underwriting standards, risk appetite metrics and limits, including the limits for each of the most vulnerable industries. Additionally, the stress testing and scenario analysis conducted during the credit review and portfolio-monitoring processes enable the Group to evaluate the impact of macroeconomic shocks on its business in advance. Resilience towards a changing macroeconomic environment is incorporated into the Group's credit underwriting standards. As such, borrowers are expected to withstand certain adverse economic developments through prudent financials, debt-servicing capabilities and conservative collateral coverage.

Taking into account the regional crisis, the Group adjusted its Risk Management Framework, leveraging its pre-existing stress testing practices. This included more thorough and frequent monitoring of the portfolio as well as stress testing, to ensure close control of changes in capital, liquidity, and portfolio quality in times of increased uncertainty.

NON-FINANCIAL RISKS

1. The Group is exposed to regulatory and enforcement action risk.

Risk description

The Group's activities are highly regulated and thus face regulatory risk. In Georgia, the NBG sets lending limits and other economic ratios (including, but not limited to, lending, liquidity, and investment ratios) along with the mandatory capital adequacy ratio. In addition to complying with the minimum reserves and financial ratios, the Bank is required to submit periodic reports. It is also subject to the Georgian tax code and other relevant laws.

 As a consequence of the Company's listing on the London Stock Exchange's premium segment, the Group became subject to increased regulations from the UK Financial Conduct Authority. In addition to its banking operations, the Group also offers other regulated financial services products, including leasing, insurance, and brokerage services. As a result of its expansion into Uzbekistan, the Group's regulatory compliance requirements have increased. Uzbekistan has a highly regulated banking environment.

The Group is also subject to financial covenants in its debt agreements. For more information, see the Group's Audited Financial Statements.

Risk mitigation

The Group has established systems and processes to ensure full regulatory compliance, which are embedded in all levels of the Group's operations. The Group's "three lines of defence" model defines the roles and responsibilities for risk management.

The first line of defence is responsible for compliance risk, strongly supported by the Bank's compliance department as the second line of defence. The Chief Compliance Officer oversees compliance within the Bank and reports quarterly to the relevant committee of the Supervisory Board, with a managerial reporting line to the CEO. The Group's Audit Committee is responsible for ensuring regulatory compliance at the Board level.

The Bank's compliance programme provides compliance policies, trainings, risk-based oversight and ensures compliance with regulatory requirements.

The Bank's Compliance Department manages regulatory risk  by:

·      ensuring that applicable changes in laws and regulations are implemented by the process owners in a timely manner;

·      participating in the new product/process risk approval process;

·      conducting analysis of customer complaints, the operational risk event database, internal audit findings and litigation cases to proactively reveal process weaknesses; and

·      conducting an annual compliance risk assessment (RCSA) of internal processes.

The Bank's Compliance Department ensures that all outcomes of the above mentioned analysis and processes are addressed in a timely and appropriate manner. Additionally, as a second line of defence the Compliance Department defines the risk metrics and monitors them at the frequencies defined by the Bank's Risk Appetite Framework. The Compliance Department is responsible for escalating breaches of defined limits to the relevant boards.

2. The Group is exposed to legal risk.

Risk description

Legal risk refers to the potential for loss, whether financial or reputational, resulting from penalties, damages, fines, or other forms of financial detriment, which impacts or could impact one or more entities of the Group and/or its employees, business lines, operations, products and/or its services, and results from the failure of the Group to meet its legal obligations, including regulatory, contractual or non-contractual requirements.

Risk mitigation

The legal function as a second line of defence is an independent function hierarchically integrated with all the Group's legal teams. The Group's businesses and lines have responsibility for identifying and escalating legal risk in their area to the legal function.

The legal function is entrusted with the responsibility of (a) managing (including prevention) legal risks; and (b) interpreting the laws and regulations applicable to the Group's activities and providing legal advice and guidance to the Group. The management of the legal risks includes defining the relevant legal risk policies, developing Group-wide risk appetite for legal risk, and oversight of the implementation of controls to manage and escalate legal risk. The advisory responsibility of the legal function is to provide legal advice to Executive Officers and the Board of Directors in a manner that meets the highest standards.

The senior management of the legal function oversees, challenges and monitors the legal risk profile and effectiveness of the legal risk control environment across the Group. The legal risk profile and control environment are reviewed by management through business risk committees and control committees. The Group Risk Committee is the most senior executive body responsible for reviewing and monitoring the effectiveness of legal risk management across the Group.

3. The Group's operational complexity generates operational risk that could in turn adversely impact profitability and reputation.

Risk description

One of the main risks that the Group faces is operational risk, which is the risk of loss resulting from internal and external fraud events, inadequate processes or products, business disruptions and systems failures, human error or damages to assets. Operational risk also implies losses driven by legal, compliance, or cybersecurity risks.

The Group is exposed to many types of operational risk, including: fraudulent and other internal and external criminal activities; breakdowns in processes, controls or procedures; and system failures or cyber-attacks from an external party with the intention of making the Group's services or supporting infrastructure unavailable to its intended users, which in turn may jeopardize sensitive information and the financial transactions of the Group, its clients, counterparties, or customers.

Moreover, the Group is subject to risks that cause disruption to systems performing critical functions or business disruption arising from events wholly or partially beyond its control, such as natural disasters, transport or utility failures, etc., which may result in losses or reductions in service to customers and/or economic losses to the Group.

The operational risks discussed above are also applicable where the Group relies on outsourcing services from third parties. Considering the dynamic environment and sophistication of both banking services and possible fraudsters, the importance of constantly improving processes, controls, procedures and systems is heightened to ensure risk prevention and reduce the risk of loss to the Group.

The increased complexity and diversification of operations, coupled with the digitalisation of the banking sector, mean that fraud risks are evolving. External fraud events may arise from the actions of third parties against the Group, most frequently involving events related to banking cards, loans, and client phishing. Internal fraud events arise from actions committed by the Group's employees, although such events happen less frequently. During the reporting period, the Group faced several instances of fraud, none of which had a material impact on the Group's profit and loss statement. The rapid growth in digital crime has exacerbated the threat of fraud, with fraudsters adopting new techniques and approaches to obtain funds illegally. Therefore, unless properly monitored and managed, the potential impact could become substantial.

Risk mitigation

To oversee and mitigate operational risk, the Group maintains an Operational Risk Management Framework, which is an overarching document that outlines the general principles for effective operational risk management and defines the roles and responsibilities of the various parties involved in the process. Policies and procedures enabling the effective management of operational risks complement the framework. The Management Board ensures a strong internal control culture within the Group, where control activities are an integral part of operations. The Board sets the operational risk appetite and compliance with the established risk appetite limits is monitored regularly by the Risk Committee of the Board.

The Group utillises the three lines of  defence principle, where the operational risk management department serves as a second line of defence, responsible for implementing the framework and appropriate policies and methodologies to enable the Group to manage operational risks.

The Group actively monitors, detects, and prevents risks arising from operational risk events and has permanent monitoring processes in place to detect unusual activities or process weaknesses in a timely manner. The risk and control self-assessment exercise (RCSA) focuses on identifying residual risks in key processes, subject to the respective corrective actions. Through our continuous efforts to monitor and mitigate operational risks, coupled with the high level of sophistication of our internal processes, the Group ensures the timely identification and control of operational risk-related activities.Various policies, processes, and procedures are in place to control and mitigate operational risks, including, but not limited to:

·      the Group's Risk Assessment Policy, which enables thorough risk evaluation prior to the adoption of new products, services, or procedures;

·      the Group's Outsourcing Risk Management Policy, which enables the Group to control outsourcing (vendor) risk arising from adverse events and risk concentrations due to failures in vendor selection, insufficient controls and oversight over a vendor and/or services provided by a vendor, and other impacts on the vendor;

·      The Risk and Control Self-Assessment (RCSA) Policy, which enables the Group to continuously evaluate existing and potential risks, establish risk mitigation strategies and systematically monitor the progress of risk mitigation plans. The completion of these plans is also part of the respective managers' key performance indicators;

·      The Group's Operational Risk Event Identification Policy, which enables the Group to promptly report on operational risk events, perform systematic root-cause analysis of such events, and take corrective measures to prevent the recurrence of significant losses. A unified operational loss database enhances further quantitative and qualitative analysis. The Operational Risk Event Identification Policy also oversees the occurrence of IT incidents and the respective activities targeted at solving the identified problems;

·      The Group's Operational Risk Awareness Programme, which provides regular trainings to the Group's employees and strengthens the Group's internal risk culture;

·      The Group also utilises risk transfer strategies, including obtaining various insurance policies to transfer the risks of critical operational  losses.

The Operational Risk Management Department has reinforced its risk assessment teams and methodologies to further fine-tune the existing control environment. The same applies to the set of actions aimed at homogenising operational risk management processes throughout the Group's member companies.

During the reporting period, one of the key operational risk management focus areas was the Risk and Control Self-Assessment (RCSA) exercise, under which the Group's top priority processes were reviewed and areas of improvement were identified.

Moreover, to further mitigate operational risks driven by fraudulent activities, the Group has introduced a sophiticated ditigal fraud prevention system, which analyses client behaviour to further minimise external fraud threats.

The Operational Risk Management Framework and its complementary policies were updated to ensure effective execution of the operational risk management programme. 

4. The Group's digitally oriented operational footprint faces a growing and evolving threat of cyber-attacks.

Risk description

The Group's rising dependency on IT systems increases its exposure to potential cyber-attacks. Given their increasing sophistication, potential cyber-attacks may lead to significant security breaches. Such risks change rapidly and require continued focus and investment.

No material cyber-security breaches have happened at the Bank in recent years, however, one of the bank's software suppliers faced a ransomware attack. We received timely information about the incident and responded in accordance with our incident response procedures. After conducting thorough analysis and investigations, we confirmed that there was no risk to the bank's infrastructure, software, or production services. While we investigated and responded to the incident, only some new feature development processes experienced delays. The development process was reinstated once we ensured that the vendors had fully resolved the incident and its root causes.

Risk mitigation

The Group has in place a comprehensive system in place to mitigate the risk of cyber-attacks, as described below.

Threat landscape

In order to adequately address the challenges posed by cyberattacks, we are continuously analysing the Group's cyber threat landscape and assessing all relevant threat scenarios and actors, considering their intentions and capabilities, as well as the tactics, techniques, and procedures they are using or may use during their campaigns. Our focus is to be prepared against Advanced Persistent Threats. Among the many different threat vectors we are covering and monitoring, the top four are below:

·      Attacks against internet facing applications and infrastructure;

·      Software supply chain attacks;

·      Phishing attacks against our customers;

·      Phishing attacks against our employees.

Our vision and strategic objectives

Information and cyber security are an integral part of the Group's governance practices and strategic development. The Group's cyber security vision and strategy is fully aligned with its business vision and strategy and addresses all the challenges identified during the threat landscape analysis.

Our vision is to strengthen our security in depth approach, enable secure and innovative businesses, and maintain a continuous improvement cycle. Our strategic objectives are:

·      To maintain our defence in depth approach by strengthening the team and implementing cutting-edge technologies, in order to maintain resilience against Advanced Persistent Threats, which may come from state-sponsored actors or organised cybercriminals;

·      To maintain compliance with industry leading information and cyber security standards, sustain a continuous improvement cycle for our information and business continuity management systems, and be one step ahead of regulatory requirements; and

·      To optimize and automate security processes, and provide security services seamlessly to the Group's business (where possible).

Our security in depth approach and cyber-resilience program 

In order to follow our vision and achieve our strategic objectives, we run effective information and cyber security programmes, functions and systems, as follows:

·      Layered preventive controls are in place, covering all relevant logical and physical segments and layers of the organisation and infrastructure in order to minimise the likelihood of successful initial access:

o  Data security controls

o  Identity and access controls

o  Endpoint security controls

o  Infrastructure security controls

o  Application security controls

o  Internal and perimeter network security controls

o  Physical security controls

·      A professional team is in charge of effectively implementing, assuring the effectiveness of, maintaining and fine-tuning the preventive controls mentioned above. The number and level of expertise of the team members is significant. Our team members hold industry leading certificates and work on a daily basis to strengthen and extend their professional skill sets.

·      Layers of preventive controls in conjunction with a comprehensive awareness programme provide the best combination in order to minimise the likelihood of successful attacks. Our robust awareness programme helps employees and customers to improve their cyber hygiene, understand the risks associated with their actions, identify cyberattacks they might face during day-to-day operations, and improve the overall risk culture. Our awareness program provides relevant materials to all key roles, from the Management Board to IT engineers and developers. It covers annual trainings and attestations for all employees, newcomer trainings and attestations, social engineering simulations, security tips and notifications for all employees, security awareness raising campaigns for customers, and more.

·      Since we believe that 100% prevention is not achievable, the Group has threat hunting capabilities and a security operations centre in place to monitor every possible anomaly in near real-time that is identified across the organisation's network in order to detect potential incidents and respond in a timely and effective manner to minimise the negative impact of possible attacks. To be up-to-date and track the techniques and tactics of our adversaries, we are elaborating cyber threat intelligence procedures according to industry best practices and following the MITRE ATTACK framework.

·      Information security governance and effective risk management processes ensure that the Bank has the correct guidance, makes risk-informed decisions in compliance with its risk appetite, complies with regulatory requirements and achieves a continuous improvement cycle. The Information Security Committee, which is chaired by the CEO, has the ultimate responsibility to assure that an appropriate level of security is maintained and a continuous improvement cycle of management processes is achieved. The Bank is in compliance with the NIST Cyber Security Management Framework and its Information Security Management System is ISO 27001 certified.

·      On top of all of the above, the Bank further strengthens its cyber resilience through an effective Business Continuity Management System and cyber insurance policy, in order to manage contingencies and recover from serious disruptions with minimum possible impact.

How we measure and assure an acceptable level of security

To assess and assure an acceptable level of information and cyber security, we rely on external/internal audit reports, red teaming exercise reports, and the results of penetration tests, which are conducted by our high professional internal team and reputable external third party partners.

·      On an annual basis we conduct:

o  An external audit of SWIFT Customer Protection Framework;

o  An external audit of the NBG's Cyber Security Framework, which is based on the NIST Cyber Security Management Framework;

o  External surveillance audits of ISO 27001;

o  Penetration tests against internet facing applications and critical infrastructure with help of our highly reputable partners.

·      Our internal team is in charge of continuous penetration tests of internal and external applications and infrastructure.

·      We conduct regular red and purple teaming exercises and assess our security capabilities against real world advanced threat actors.

5. The Group identifies risk in its growing dependence on data.

Risk description

In the domain of data management and data governance within the Group, two prominent risks are noteworthy, each presenting unique challenges to the preservation and efficacy of the Group's information assets. The first risk centres on the imperative need for data quality, a cornerstone for sound decision-making, regulatory compliance, and overall risk management. This challenge emanates from diverse sources, encompassing errors during data entry, the lack of standardised formats, and inconsistencies across data sources. The ramifications of compromised data quality include financial losses, operational inefficiencies, regulatory non-compliance, and reputational damage. The complexity is further heightened in dynamic market environments, necessitating robust mechanisms for data validation and cleansing.

Simultaneously, the Group confronts a second pivotal risk associated with outdated and sometimes obsolete infrastructure. Legacy systems, characterized by outdated hardware and software, present a formidable challenge by impeding the seamless flow of data and obstructing the adoption of cutting-edge technologies. The risk intensifies with the rapid pace of technological advancements, rendering legacy infrastructure susceptible to security vulnerabilities and compliance issues. Moreover, the limited scalability of outdated systems constrains the Group 's ability to process and analyse vast datasets efficiently, thereby impinging on the agility required for informed decision-making in the fast-paced financial landscape.

Risk mitigation

Mitigating these data risks requires a holistic and strategic approach tailored to the Group. To address the challenge of data quality, the Bank is adopting advanced data quality management systems, implementing data profiling techniques, and enforces stringent data governance policies. Strategic investments in technologies like machine learning and artificial intelligence can automate the detection and correction of data anomalies, fostering a proactive stance towards maintaining accurate and consistent data. Cultivating a data-driven culture within the organisation, along with clear data lineage and documentation practices, enhances transparency and traceability.

In tackling the risks associated with outdated infrastructure, the Group has embarked on a strategic and phased modernization approach. Investing in state-of-the-art technologies such as cloud computing and virtualization is imperative for increased flexibility, scalability, and security. A comprehensive assessment of the existing infrastructure, coupled with a roadmap for migration and upgrades, enables a systematic transition without disrupting critical operations. Embracing DevOps practices facilitates continuous integration and deployment, fostering a culture of agility and adaptability. Through these proactive measures, the Group is positioning itself to capitalise on emerging opportunities while effectively mitigating the risks associated with both compromised data quality and outdated technological foundations.

6. The Group is exposed to Model Risk.

Risk description

Statistical, machine learning and artificial intelligence models are increasingly used in key business processes due to the rapid adoption of big data technologies and advanced data modelling techniques. In line with regulatory guidance and best practices, the Group defines a model as a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates. The Group has also developed model identification standards to operationalise the model definition.

Increasing reliance on models increases the need for proactive model risk management. The Group defines model risk as a risk of adverse consequences (e.g., financial loss, reputational damage, etc.) arising from decisions based on incorrectly developed, implemented, or used models.

Risk mitigation

The Model Risk Management (MRM) function is the second line of defence and is responsible for identifying, measuring, and managing model risk in the Group. MRM is organized around two components - governance and validation. The governance component of MRM develops and implements the policy, risk appetite and standards that define the roles and responsibilities of the different stakeholders and encompass all phases of the model lifecycle, from planning and development to initial model validation, model use, model monitoring, ongoing model validation and model retirement. It is also responsible for managing the model inventory and keeping model risk within the risk appetite. The validation component of the MRM is responsible for conceptual and technical model validations in line with the policy and standards developed and implemented by the governance component.

To mitigate model risk, the MRM function uses a risk-based approach during model validation processes. Model risk is identified during initial and ongoing model validations. Countermeasures to mitigate model risk and keep it within the risk appetite depend on the nature of the identified risk and can include actions like increasing validation frequency and/or depth, and calibration or redevelopment of the model.

7. The Group remains exposed to reputational risk.

Risk description

There are reputational risks to which the Group may be exposed, such as country risks related to international sanctions imposed on Russia in response to the war in Ukraine, relations with correspondent banks and international financial institutions. There are risks of phishing, other cybercrimes, and temporary service interruptions, which can be viewed as reputational risks due to the increasing digitalisation of services that the Group provides. There may also be isolated cases of anti-banking narratives in the mass media, which particularly intensify in the run-up to elections. However, most of these risks are not unique to the Group as they apply to the entire banking sector.

Risk mitigation

To mitigate the possibility of reputational risks, the Group works continuously to maintain strong brand recognition among its stakeholders. The Group follows all relevant external and internal policies and procedures and prevention mechanisms to minimise the impact of direct and indirect reputational risks. The Group monitors its brand value through public opinion studies and surveys and by receiving feedback from stakeholders on an ongoing basis. Dedicated internal and external marketing and communications teams actively monitor mainstream media and social media coverage on a daily basis. These teams monitor risks and develop prevention policies, risk scenarios, and contingency plans. The Group tries to identify early warning signs of potential reputational or brand damage in order to mitigate and elevate them to the attention of the Board before they escalate. A special Task Force is in place at the top management level, comprised of the management, strategic communications, marketing and legal teams to manage reputational risks when they occur. Communications and cyber security teams conduct extensive awareness-raising campaigns on cyber security and financial literacy, involving the media, the Banking Association of Georgia and Edufin (TBC's inhouse financial education platform), aimed at mitigating and preventing cyber threats and phishing cases.

8. The Group faces the risk that its strategic initiatives do not translate into long-term sustainable value for its stakeholders.

Risk description

The Group may face the risk of developing a business strategy that ensures sustained value creation, adapting to evolving customer needs, heightened competition, and regulatory restrictions. Additionally, uncertainties from economic and social disruptions, such as the ongoing war in Ukraine and the developing market in Uzbekistan, may hinder the Group's timely execution of its strategy, potentially compromising its capacity for long-term value creation.

Risk mitigation

To mitigate the combined risks from a local and international perspective, the Group employs a multifaceted approach.

The formation of our strategic portfolio is primarily driven by the Group's strategy to broaden and diversify our business revenue streams. Thorough curation is conducted in the execution of strategy involving the Board, the executive management, and middle management. These sessions serve as crucial checkpoints to ensure alignment with our strategic long-term objectives and our company's guiding principles that steer our course.

Moreover, monitoring of the performance of strategic projects extends to quarterly analyses and tracking of metrics used to measure strategy execution. In cases of significant deviations, corrective or mitigation actions are promptly implemented.

9. The Group is exposed to risks related to its ability to attract and retain highly qualified employees.

Risk description

As the Group becomes increasingly digitally focused, it requires more IT professionals in its various departments. This shift accentuates the risk of potentially losing key personnel. In the highly competitive tech job market, this challenge extends not only to retaining these valuable employees but also to attracting, developing, and keeping new skilled workers. Ensuring these employees align with the Group's objectives is vital. The situation calls for strategic planning in human resources to effectively manage this risk while supporting the Group's digital evolution.

Risk mitigation

The aim of the Group is to adapt to the rapidly changing business environment, increase leadership capabilities, achieve a high level of engagement among employees, and equip them with the necessary skills. To this end, the Group actively monitors the labour market both in Georgia and abroad, proactively recruiting the best candidates and expanding its networks of key personnel. We create a robust international talent pipeline by regularly engaging with potential candidates, including passive job seekers with diverse profiles.  We work on building an attractive international hiring brand.The Group treats all employees equally and fairly, supporting and coaching them to succeed. 

We equip our people with the tools and frameworks for continuous learning, supported by a constant feedback loop. We give our staff an opportunity to grow and expand internationally. We have a Succession Planning Framework developed for senior positions in order to ensure a smooth transition and to offer promotion opportunities to employees. In addition, we have launched a Talent Management Framework, ensuring the constant identification of talented staff and monitoring their development within the Group.

We monitor human capital risks and measure efficiency using the following metrics: Employee turnover and retention, Quality of hire, Mobility rate, Employee Net Promoter Score (ENPS) - engagement, Employee Pulse surveys, Key employee metrics, Performance management and Individual Development Plans (IDPs), Customer Net Promoter Score (NPS). In terms of compensation, we conduct multiple salary market studies to ensure we provide competitive conditions for our employees

The Group reviews and updates organizational policies to ensure they are inclusive and equitable. This includes flexible work arrangements, accommodations for diverse needs, and inclusive benefits packages.

Since its establishment in 2019, our internal IT Academy has been a hub for technological education, offering a diverse array of courses in front-end, back-end development, DevOps, test automation, and other critical topics. These courses are accessible at no cost to both our employees and potential candidates. Under the guidance of experienced staff and industry professionals, the Academy has successfully trained over 1,500 individuals from outside the organization and 1,700 within it. This initiative has resulted in the recruitment of 330 skilled professionals to TBC Group, thereby enhancing the overall IT ecosystem in the country.

In 2023, our IT Academy launched a collaborative project with USAID, focused on empowering women in the regional areas of Georgia. The project aims to train over 700 participants through nine newly designed courses, led by top industry experts, lecturers, and mentors. Additionally, the IT Academy has introduced an iOS Laboratory, providing students without access to Apple products the opportunity to study at no cost.

10. The Group is exposed to conduct risk.

Risk description

Conduct risk is defined as the risk of failing to achieve fair outcomes for customers and other stakeholders. The Bank's Code of Ethics serves as a moral compass for all staff and sets high ethical standards that each employee is required to uphold. The Bank's employees undertake and perform their responsibilities with honesty and integrity. They are critical to maintaining trust and confidence in its operations and upholding important values of trust, loyalty, prudence and care.

Additionally, the Bank's management understands that it bears responsibility for a diversified group of domestic and international investors, and needs to embrace the rules and mechanisms to protect customers and maintain the confidence of investors and financial markets. The Group's directors strive to establish the "tone from the top", which sets out the messages describing and illustrating the core components of good conduct.

Risk mitigation

In managing conduct risk, the Bank entrusts different departments and divisions with carrying out the task of managing, mitigating, and eliminating conduct risk across all of the Bank's operations with clients and other stakeholders. The Compliance, Human Capital and Operational Risk departments cooperate to create a unified conduct Risk Management Framework and assist business lines and departments, in the following ways:

1.     Developing and maintaining policies and procedures to ensure that individual employees and departments comply with regulatory provisions, best practices, the Code of Conduct, and the Code of Ethics;

2.     Maintaining liaison with the Compliance Department, administering policies and procedures in conjunction with the compliance department and investigating complaints about the conduct of the department, its manager, or its employees;

3.     The front-line employees of the organization should ensure that product information is accurate and complete, and is conveyed both in writing and orally in a simple, understandable manner, regardless of the level of sophistication of the client;

4.     Keeping records of client interactions and emails containing sensitive and sales-related information, such as information in relation to the acquisition of new clients and the formulation of complex product offers;

5.     By providing periodic training to all employees regarding evolving compliance standards within the Group, we ensure that new employees are educated regarding proper conduct;

6.     By creating a culture of openness that encourages employees to speak out without fear of punishment, we are preventing and detecting conflicts of interest, creating moral incentive programmes, creating bonuses, and achieving a risk-adequate incentive and disciplinary policy for the Group;

7.     Investing considerable time and effort in investigating, analysing, implementing, and monitoring sales and after-sales activities, and putting proper conduct into the required job skills, which ensures that conduct risk is not just managed by risk management units, including compliance departments.

EMERGING RISKS

The Group recognizes its exposure to risks arising from climate change.

Risk description

The risks associated with climate change have both a physical impact, arising from more frequent and severe weather changes, and a transitional impact that may entail extensive policy, legal, and technological changes to reduce the ecological footprint of households and businesses. For the Group, both risks could materialise through impaired asset values and the deteriorating creditworthiness of our customers, which could result in a reduction of the Group's profitability. The Group may also become exposed to reputational risks because of its lending to, or other business operations with, customers deemed to be contributing to climate change.

Risk mitigation

The Group has in place an Environmental and Climate Change Policy. The policy  governs its Environmental Management System ("EMS") and ensures that the Group's operations adhere to the applicable environmental, health, safety, and labor regulations and practices. We take all reasonable steps to support our customers in fulfilling their environmental and social responsibilities. The management of environmental and social risks is embedded in the Group's lending process through the application of the EMS. The Group has developed risk management procedures to identify, assess, manage, and monitor environmental and social risks. These procedures are fully integrated in the Group's credit risk management process. To identify, assess and manage risks associated with climate change, the Group introduced an overall climate risk assessment and conducted a general analysis to understand the maturity level of the climate-related framework. The general analysis process covered assessment of the existing policies and procedures, identification of areas for further development, and gap analysis. Based on the analysis, the main focus areas were identified and reflected in the climate action strategy, considering the Group's business strategy. Furthermore, our Environmental and Climate Change Policy is fully compliant with local environmental legislation and follows international best practices (the full policy is available at www.tbcbankgroup.com).

In order to increase our understanding of climate-related risks to the Bank's loan portfolio, the Bank performed a high-level sectoral risk assessment, since different sectors might be vulnerable to different climate-related risks over different time horizons. In 2022, we advanced our TCFD framework further, especially in strategic planning and risk management, and performed climate stress testing. In 2023, we reviewed our climate stress testing model in order to consider new approaches, where available. For more details, please see the Annual Report 2023, pages 140-164.

The Bank aims to increase its understanding of climate-related risks and their longer-term impacts over the coming years, which will enable it to further develop its approach to mitigation. Furthermore, the Group's portfolio has strong collateral coverage, with around 75% of the loan book collateralised with cash, real estate, or gold. Since the collateral evaluation procedure includes monitoring, any need to change collateral values arises from our regular collateral monitoring process.

In June 2024, the Group released its full-scale sustainability report for the year 2023 in accordance with the Global Reporting Initiative (GRI) standards. The Global Reporting Initiative (GRI) helps the private sector to understand and realise its role and influence on sustainable development issues such as climate change, human rights and governance. The report is designed for all interested parties and groups in Georgia and abroad and aims to give them clear, fact-based information about the social, economic, and environmental impact of our activities in 2023. It presents our endeavours to create value for our employees, clients, suppliers, partners, and society as a whole. The Sustainability Report 2023 is available at www.tbcbankgroup.com.

At the executive level, responsibility for ESG and climate-related matters is assigned to the ESG Steering Committee, which was established by the Management Board in March 2021 and is responsible for implementing the ESG and climate action strategy and approving detailed annual and other action plans for key projects. The ESG Committee meets on a quarterly basis.

In January 2022, the Group established an Environmental, Social and Governance (ESG) and Ethics Committee at the Board level, as well as at the Supervisory Board level in line with the Company's "mirror boards" structure. This reflects the importance of sustainability in TBC's corporate governance and allows Board members to dedicate more time and focus to ESG topics. The Committee provides strategic guidance on climate-related matters and reports to the Board, which has overall oversight. For more details about the management of ESG matters, please see our ESG strategy section on pages 38-40 of the Annual Report 2023.

Selected regulations on Financial Risks

Capital adequacy

The Group's objectives in terms of capital management are to maintain appropriate levels of capital to support the business strategy, meet regulatory and stress testing-related requirements, and safeguard the Group's ability to continue as a going concern.

The Group complied with all its internally and externally imposed capital requirements throughout the first half of 2024.

Georgian subsidiary - JSC TBC Bank

In December 2017, the NBG adopted amendments to the regulations relating to capital adequacy requirements. The changes include amendments to the regulation on capital adequacy requirements for commercial banks, and the introduction of new requirements (i) on additional capital buffer requirements for commercial banks within Pillar 2; (ii) on the determination of the countercyclical buffer rate; and (iii) on the identification of systematically important banks and determining systemic buffer requirements. The purpose of these amendments is to improve the quality of banks' regulatory capital and achieve better compliance with the Basel III framework.

In 2020-2022, the NBG developed the concept and changes for the transition to IFRS. In January 2023, in line with the finalisation of the IFRS transition process, the NBG adopted amendments to the regulations relating to capital adequacy requirements. According to the new amendments, commercial banks must comply with supervisory regulations with IFRS-based numbers and approaches. Under the IFRS transition process, the NBG introduced a credit risk adjustment (CRA) buffer. The CRA buffer was implemented as a Pillar 2 requirement and was fully set on CET 1 capital.

In January 2023, the NBG made amendments to the systemic risk buffer calculation methodology. According to the new methodology, the current systemic risk buffer for JSC TBC Bank amounts 2.5% and can be increased by 0.5% if the Bank's non-banking deposits market share in the previous three-month period exceeds 40%. The Bank must comply with the increased requirement in a 12-month period unless the average market share of the previous 12-month period falls below 40%.

In March 2023, the Financial Stability Committee of the NBG decided to set the neutral (base) rate of the countercyclical buffer at 1%. Banks are required to accumulate a countercyclical capital buffer according to a predetermined schedule: 0.25% by March 2024, 0.50% by March 2025, 0.75% by March 2026 and fully phased-in 1% by March 2027. The countercyclical buffer could be increased at times of strong credit activity and suspended during periods of stress.

In May 2023, The NBG introduced new requirement regarding eligible liabilities and own funds (MREL) under Bank Recovery and Resolution Framework. According to the new requirement, commercial banks will have to hold specific amounts of equity and subordinated debt, and of qualifying non-deposit senior debt that could be subject to bail-in in the event of bank failure. However, this should not affect risks for existing senior creditors because the bank resolution legislation in Georgia already provides a credible mechanism for the bail-in of senior obligations.  MREL implementation will be phased in gradually, starting from 10% of total liabilities and own funds (TLOF) on 1 January 2024, before increasing to 15% at end-2025, and 20% at end-2027. MREL-eligible instruments will include regulatory capital and senior unsecured non-deposit obligations with maturities of at least one year, subject to the National Bank of Georgia's approval.

In November 2023, the National Bank of Georgia introduced the concept of foreseeable dividend, which should be deducted from retained earnings. According to the regulation, foreseeable dividend is considered to be the amount of dividend approved or submitted for approval by the relevant entity defined by the charter of the commercial bank (Supervisory Board).

The following table presents the capital adequacy ratios and minimum requirements:

	Jun'24	Mar'24	Jun'23
CET 1 capital	4,344,472	4,096,919	3,920,004
Tier 1 capital	5,749,522	4,635,979	4,443,544
Tier 2 capital	922,217	654,348	504,286
Total regulatory capital	6,671,739	5,290,327	4,947,830
Risk-weighted exposures:
Credit Risk-weighted exposures	22,459,700	21,334,427	18,796,064
Risk-weighted exposures for Market Risk	83,580	24,566	20,085
Risk-weighted exposures for Operational Risk	3,248,365	3,248,365	2,636,659
Total Risk-weighted exposures	25,791,645	24,607,358	21,452,808
Minimum CET 1 ratio	14.6%	14.5%	14.4%
CET 1 capital adequacy ratio	16.8%	16.6%	18.3%
Minimum Tier 1 ratio	16.9%	16.8%	16.8%
Tier 1 capital adequacy ratio	22.3%	18.8%	20.7%
Minimum total capital adequacy ratio	20.0%	19.9%	19.9%
Total capital adequacy ratio	25.9%	21.5%	23.1%

GEL volatility has been and remains a significant risk to the Bank's capital adequacy. A 10% GEL depreciation would translate into a 0.8pp, 0.6pp and 0.5pp drop in the Bank's excess CET 1, Tier 1 and Total regulatory capital, respectively.

Uzbekistan subsidiary - TBC UZ

In the management of capital, the Bank has the following objectives: compliance with the capital requirements established by the Central Bank of Uzbekistan (CBU) and, in particular, the requirements of the deposit insurance system; ensuring the Bank's ability to function as a going concern; and maintaining the capital base at the level necessary to ensure the compliance of the capital adequacy ratio with the requirements of the CBU. The compliance with the capital adequacy ratio established by the CBU is monitored monthly through the forecast and actual data, which contain the relevant calculations and are verified and vetted by the Bank's management.

As at 30 June 2024, the Bank met the requirements to regulatory capital set by Regulation On the Requirements for the Adequacy of the Capital of Commercial Banks No. 2693 dated July 6, 2015.

Liquidity

The Group's objectives in terms of liquidity management are to maintain appropriate levels of liquidity to support the business strategy, meet regulatory and stress testing-related requirements, and safeguard the Group's ability to continue as a going concern.

The Group complied with all its internally and externally imposed liquidity requirements half year 2024.

Georgian subsidiary - JSC TBC Bank

The Bank assesses LCR and NSFR per NBG guidelines, whereby the ratios are implemented by the NBG have more conservative approaches than those set by Basel III standards. The LCR enhances short-term resilence. In addition to the total LCR limit set at 100%, the NBG defines limits per currency for the GEL and foreign currencies (FC). To promote larisation in Georgia, the NBG set a lower limit for  the GEL LCR than that for the FC LCR.

The NSFR is used for long-term liquidity risk management to promote resilience over a longer time horizon by creating additional  incentives for JSC TBC Bank to rely on more stable sources of funding on a continuing basis. The regulatory limit  is set at 100%.

As of 30 June 2024, the ratios were well above the  prudential limits set by the NBG, as follows:

Funding & Liquidity	Jun'24	Mar'24	Jun'23
Minimum net stable funding ratio, as defined by the NBG	100.0%	100.0%	100.0%
Net stable funding ratio as defined by the NBG	118.2%	114.8%	129.8%
Minimum total liquidity coverage ratio, as defined by the NBG	100.0%	100.0%	100.0%
Minimum LCR in GEL, as defined by the NBG	75%	75.0%	75.0%
Minimum LCR in FC, as defined by the NBG	100.0%	100.0%	100.0%
Total liquidity coverage ratio, as defined by the NBG	118.1%	114.6%	124.5%
LCR in GEL, as defined by the NBG	100.0%	114.8%	130.4%
LCR in FC, as defined by the NBG	129.5%	114.4%	119.2%

 

Uzbekistan subsidiary - TBC UZ

The regulatory framework established by the Central Bank of Uzbekistan (CBU) mandates specific liquidity ratios for financial institutions to uphold financial stability and mitigate potential risks. In compliance with these regulations, financial institutions are required to maintain a High Quality Liquid Assets/Total Assets ratio of 10%, ensuring a sufficient buffer of liquid assets to cover a proportion of their total assets.

Moreover, institutions are obligated to maintain a 25% Instant Liquidity Ratio, ensuring prompt liquidity availability for unforeseen financial obligations. Further reinforcing risk resilience, a Liquidity Coverage Ratio (LCR) of ≥100% is mandated, requiring sufficient high-quality liquid assets to offset potential liquidity shortfalls during stress periods.

Complementary to these measures, financial entities must sustain a Net Stable Funding Ratio (NSFR) of ≥100%, highlighting the need for a stable funding structure over an extended time horizon to mitigate liquidity risks effectively. As of 30 June 2024, the Bank met the requirements set by the Regulator.

Market risk

The Group's objectives in terms of market risk management are to support the business strategy, meet regulatory and stress testing-related requirements and safeguard the Group's ability to continue as a going concern.

The Group complied with all its internally and externally imposed market risk requirements half year 2024.

FX risk

JSC TBC Bank (Georgia) and TBC Bank Uzbekistan are required to maintain open currency positions in line with NBG's and CBU's limits respectively.

·      The NBG requires the Bank to monitor both balance sheet and total aggregate (including off-balance sheet) open currency positions and to maintain the later one within 20% of the Bank's regulatory capital.

·      CBU limits are set separately for aggregate OCP and for each foreign currency position at 15% and 10% of UZ TBC's regulatory capital respectively. 

Interest rate risk

JSC TBC Bank (Georgia) assess interest rate risk from both the NII and Economic Value of Equity (EVE) perspectives. As per regulatory requirements, the Bank assesses the impact of interest rate shock scenarios on EVE and NII. According to NBG guidelines, the NII sensitivity under parallel shifts of interest rate scenarios is maintained for monitoring purposes, while EVE sensitivity is calculated under six predefined stress scenarios of interest rate changes, with the limit applied to the result of the worst case scenario. As of 30 June 2024, TBC Bank's EVE ratio stood at 7.78%, comfortably below the regulatory limit (15%).

Statement of Directors' Responsibilities

The Directors are required to prepare the condensed consolidated financial statements on a going concern basis unless it is not appropriate. They are satisfied that the Group has the resources to continue in business for the foreseeable future and that the financial statements continue to be prepared on a going concern basis.

The Directors confirm that to the best of their knowledge:

·      the financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, and the Disclosure Guidance and Transparency Rules ('DTR') sourcebook of the UK's Financial Conduct Authority;

·      this Interim Report 2024 gives a true, fair, balanced and understandable view of the assets, liabilities, financial position and profit or loss of the Company; and

·      this Interim Report 2024 includes a fair review of the information required by:

o  DTR 4.2.7R, being an indication of: important events that have occurred during the first six months of the financial year ending 31 December 2024 and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

o  DTR 4.2.8R, being: related party transactions that have taken place in the first six months of the financial year ending 31 December 2024, which have materially affected the financial position or performance of TBC Bank during that period; and any changes in the related parties transactions described in the Annual Report and Accounts 2023 that could materially affect the financial position or performance of TBC Bank during the first six months of the financial year ending 31 December 2024.

 

Signed on behalf of the Board by:

Vakhtang Butskhrikidze

CEO

8 August 2024

 

TBC Bank Group PLC Board of Directors:

 

Chairman Arne Berggren
Executive Directors Vakhtang Butskhrikidze (CEO)	Non-executive Directors Eran Klein Tsira Kemularia Janet Heckman Per Anders Fasth Thymios Kyriakopoulos Nino Suknidze Rajeev Sawhney

 

 

TBC BANK GROUP PLC

 

Condensed Consolidated Interim Financial

Statements (Unaudited)

 

 

30 June 2024