TINKOFF CREDIT SYSTEMS INTERIM REPORT FOR THE THIRD QUARTER 2008
Press release November 26, 2008
Business growth has been strong throughout the 9 months of 2008. The credit card portfolio has grown rapidly whilst risks have remained low, taking the bank to its break-even target (on a cash basis) by the end of 2008.
As of 30 September 2008 the Group total assets increased 2.4 times comparing to the year-end and comprised USD 249,928 thousand. The credit card portfolio has grown from USD 26,752 thousand on 31 December 2007 to USD 141,950 thousand on 30 September 2008, an increase of 5.3 times. New card issuance has been the main driver of portfolio growth, with total credit card issuance increasing from 48,000 on 31 December 2007 to 277,265 on 30 September 2008.
However, due to the recent fall in liquidity on financial markets and the practical closure of the capital markets for the forthcoming months, the Group has taken a decision to temporarily halt mailings and significantly reduce the issuance of new credit cards. TCS will closely manage the portfolio in ‘steady-state’ mode, and await the reopening of capital markets when it will resume borrowing to grow its credit cards portfolio further.
Portfolio quality was of a high quality throughout the 3rd quarter of 2008 despite the global financial crisis. The improvement in incoming vintages (and therefore in credit decisions) can be seen from the decrease in the number of customers who were delinquent 30 days or more on third statement achieved in 1st half of the year remained on the level of 6.3% on 30 September 2008. This risk indicator is on par with leading peer credit card issuers that have been in the market for 4-or-more years.
The average credit limit assigned to new customers was reduced from USD 1,398 on 31 December 2007 to USD 714 by 30 September 2008. The average current limit across the portfolio as of 30 September 2008 was USD 1,003. Average limit utilization increased from 71.7% in December 2007 to 78% in September 2008. The Group will continue to monitor closely client behaviour and is already reducing limits to manage both risk and liquidity in the final quarter of 2008.
The Group completed its third round of funding (previous rounds were a Rouble bond issue in October 2007 and a ‘Club’ loan in December 2007) in June 2008. A Eurobond for Euro 70m was placed successfully by the Group in Sweden through the investment bank Ohman. Goldman Sachs exercised its 5% option increasing its stake in Egidaco to 13.6% after dilution, and Vostok Nafta provided a USD 30 million bridge loan that was converted into equity in Egidaco on 1 September 2008 into 15% of shares of Egidaco.
In October 2008, over 90% of the outstanding Rouble bond issue was put by bondholders and as a consequence the Group settled USD 19,210 thousand. This reflects the overall trend in Russia over the last few months, whereby existing Rouble bonds have been returned to their issuers. This means that TCS has nothing to refinance until the Eurobond in June 2011, apart from the small remaining Rouble bond.
Total interest income from credit cards grew from USD 4,101 thousand in 2007 to USD 46 069 thousand at the end of the 9 months of 2008, giving an average monthly gross yield of 74.4%. Interest income from credit cards under IFRS grew from USD 2,218 thousand in 2007 to USD 34,466 thousand. Under IFRS the Group has to defer certain components of its interest income (such as cash withdrawal fee) for up to a year.
In Q3, the Group incurred a net loss which is explained by the start-up nature of the business.
Egidaco Investments Limited
For additional information
Oliver Hughes, President
tel: +7 495 648 1000
e-mail: o.hughes@tcsbank.ru
Ilya Pisemsky, CFO
tel: +7 495 648-1000
e-mail: i.pisemsky@tcsbank.ru
web: www.eginvestments.net/