TBC Bank Group Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Strong profitability continued: Q2 net profit rose 12% year-over-year to GEL 386 million, with 23.6% ROE and total operating income up 10%. Management said this keeps TBC on track for its 23%+ ROE target through 2026–2028.
  • Positive Sentiment: Georgia remained the main growth engine: Loans increased 14% year-over-year, including 36% growth in unsecured consumer lending, while digital monthly active users rose 19% year-over-year. The bank also reported continued market-share gains and declared a GEL 1.75 per-share Q2 dividend.
  • Negative Sentiment: Uzbekistan asset quality remains a key risk. Group NPLs increased to 3.3%, and management expects Uzbekistan’s cost of risk to rise to the low-to-mid teens in Q3 because of older loan vintages and changes to the auto-collection system, although it anticipates improvement in Q4.
  • Neutral Sentiment: Uzbekistan’s loan portfolio stabilized in Q2 and grew 0.4% sequentially, with business lending, credit cards, BNPL and POS lending offsetting declines in cash loans. Management expects the portfolio to return to at least its year-end 2025 size by the end of 2026, but said normalized risk costs remain too early to determine.
  • Positive Sentiment: TBC completed its acquisition of Uzbekistan’s OLX classifieds platform, which management expects could generate retail, SME and payments leads over time. However, meaningful financial contribution is not expected until potentially the second half of 2027.
AI Generated. May Contain Errors.
Earnings Conference Call
TBC Bank Group Q2 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

My name is Seb, and I'll be the operator for your call today. If you'd like to ask a question during the Q&A session, you can use the raise hand button on Zoom, or you can type your question into the Q&A chat box. If you've joined on the telephone line, please press star one to raise your question. I will now hand you over to Andrew Keeley, Director of Investor Relations, to begin. Please go ahead.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thanks very much, Seb. Hello and welcome everyone to our Q2 results call. As usual, I'm joined on today's call by our Group CEO, Vakhtang Butskhrikidze, and I'm also joined by our new Group CFO, Guy Stevens. Welcome, Guy. As usual, the call will begin with a presentation, and then we'll move into Q&A. With that, I'll hand over to Vakhtang. Thank you.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

Thank you, Andrew, and hello everyone. Thank you for joining us today. As Andrew mentioned, today's call is also an opportunity to welcome our new Group CFO, Guy Stevens. We are delighted to have Guy join the team and wish him every success in his new role. Now let's turn to our Q2 results. I am pleased to present another strong quarter for TBC. Our profitability remains consistently high. In the Q2, group's net profit reached GEL 386 million, up by 12% year-on-year, with a strong return on equity of 23.6%. This is driven by a good momentum in revenues as total operating income increased by 10% year-on-year, while our focus on managing our cost base helped us to reduce the cost-income ratio by almost two percentage points quarter-on-quarter to 38.8%.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

Lending volumes remained robust with the loan portfolio growing by 12% year-on-year, with Georgia in particular posting strong 14% year-on-year growth, while our Uzbekistan portfolio stabilized in Q2 and is starting to return to growth. The continuous improvements we are making in our mobile banking services is bringing in more customers, particularly in Georgia, where we added over 50,000 digital MAU in Q2. In total, as a group, we now have 7.2 million digital MAU, a 6% increase year-on-year. Our strong financial performance and the solid capital position have enabled us to declare a Q2 dividend of GEL 1.75 per share, bringing the total dividend for the H1 of this year to GEL 3.5 per share. On the next slide, you can see the contributions made to the group by our different businesses.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

With our Georgian core currently contributing the majority share both in terms of balance sheet and the profits. Turning to Georgia. Georgia's economy continues to post excellent growth, with real GDP growth accelerating to 7.9% in the H1 of this year. While the conflict in the Middle East has made a minimal impact on the Georgian economy as a whole, it does continues to impact inflation, which increased to 5.8% in June. We expect inflation to remain at this level for the rest of the year, which suggests the National Bank of Georgia would keep interest rates on hold. Our real GDP growth outlook remains unchanged at 7.4%. We continue to strengthen our market-leading franchise in Georgia.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

Our gross loan portfolio grew by 14% year-over-year, with particularly strong momentum in unsecured consumer loans, which have increased by 36% year-over-year, bringing us further gains in market shares. We are continually refining our digital customer experience and product offerings in retail with cash secured loans and overdrafts launched in our mobile application in the H1 of this year, which will help us to support the strong growth in the coming quarters. As you know, we remain the dominant bank in the market in a number of key market segments. In affluent retail, we have over 50% market share in loans and customers, with the number of TBC Concept customers breaking through 200,000 in the Q2, up by 30% year-over-year. Meanwhile, in CIB, we are the leader with 44% market share in loans.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

On the next slide, you can see how our focus on the best-in-class digital financial services is bringing more customers to our platforms. Digital MAU is up 19% year-over-year, our DAU:MAU ratio has hit 50% as more customers interact with us on a daily basis. Evidence of the progress we have made can be seen as TBC being recognized by Euromoney as the best digital bank in Georgia for 2026. We are also strengthening our retail banking team. I'm delighted to welcome Sandro Rtveladze as the Deputy CEO who will head up retail banking in Georgia. Sandro brings over a decade of leadership experience across retail and digital banking, including as chairman of OTP Ipoteka Bank and previously CEO of TBC Uzbekistan. It's great to have him on the board.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

I'd also like to point out that we are also receiving industry recognition for the AI initiatives that are part of our natural business development. We have won several awards within not only Georgia but also in CEE region. Our INAP chatbot, for example, now handles more than 6,500 customer queries a day, 60% of which are resolved without being passed on to our call center. While we are using AI across a wide range of business functions from mortgage property valuation, email, KYC checks, to invoicing and contract workflows. Let's look on at Uzbekistan. As in the case in Georgia, Uzbekistan economy continues to deliver remarkable growth with real GDP growth expanding by 8.5% in the H1 of this year.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

Importantly, inflation has been declining over the past couple of years, reaching 6.4% in June, and is expected to remain broadly stable in H2. Lower inflation supports the local currency, which is important as all of our businesses is in Uzbek som. Turning to our business, we are seeing strong dynamics across our core verticals. Our daily banking products continue to scale rapidly with SOLO card issuance more than doubling year-on-year to exceed 1.2 million. While Osman credit card issuance has surpassed 210,000, and now credit cards accounting for 10% of our loan book, up from just 4% a year ago. At the same time, payment activity remains very strong. In the H1 of this year, total payment value reached $3.2 billion, up by 54% year-on-year, supported by Payme's continued leadership position in the market.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

The growth of our payment franchise is feeding into the renewed growth in our fee and commission income, which rose 15% quarter-on-quarter in Q2. Let's move on slide 13. Our Uzbekistan loan book stabilized in Q2 and is starting to return to growth. An increase in business, credit cards, and BNPL/POS lending now more than offset the decline in unsecured cash loans. Our deposits portfolio declined by 7% quarter-on-quarter as we optimized our liquidity position and decided to cut deposit costs. While we welcome starting to turn the corner in loan growth, we recognize that we will still face challenges in asset quality. With NPLs and risk costs remaining high as we continue to provision all the loan vintages, as well as start to adapt the changes being introduced to the auto collection system.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

We continue to expand our product offerings in Uzbekistan. In Q2, we launched auto loans and secured SME lending, both important launches for our ambitious future growth. I am also pleased to announce that in late July, we completed the acquisition of OLX, the leading classified platform in Uzbekistan. This transaction further extends the reach of our digital ecosystem and creates new opportunities to deepen customer engagement as TBC Uzbekistan plans to offer financial and payment services through OLX. I firmly believe that we are building a great long-term business in Uzbekistan. The strength of our digital platform has been recognized as the best digital bank in both Uzbekistan and the Central Asia by Euromoney. Thank you for your attention. I will now hand over to Guy. Guy, please.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Thank you, Vakhtang. Thank you all for joining the call today. As new group CFO, it's a real privilege to be presenting the group's results for the very first time. Very much looking forward to meeting our shareholders and the research community in the coming weeks and months. Turning now to our financial performance. The group delivered another solid set of results in the Q2 and H1 of 2026. Starting with profitability. I am pleased to report that in the Q2, we continued to generate strong profitability. We achieved a net profit of GEL 386 million in the Q2, up 12% year-on-year. This brought H1 net profit of GEL 751 million, up 13% year-on-year. In Georgia, net profit was up 14% year-on-year for the quarter.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Return on equity remained strong at 23.6% in the quarter and 23.5% in the H1, in line with our target of 23%+ for 2026 to 2028. This is the 14th consecutive quarter where the group's ROE has exceeded 23%. Let's deep dive into our profitability drivers. Revenues grew well in the Q2. Total operating income increased by 10% year-on-year, with H1 operating income growing at a similar rate. This growth has primarily been driven by net interest income, which increased by 13% year-on-year in the quarter. I am also pleased to report that we are seeing fee and commission income recovering in both Georgia and Uzbekistan, with 14% quarter-on-quarter growth driven by general business expansion in Georgia and strong payments growth in Uzbekistan.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

As you can see on the right-hand side, our margins remained resilient in Q2, with our group net interest margin at 7.1%, slightly higher than in the Q1. Georgia saw a second consecutive quarter of margin improvement, helped by growth in our unsecured retail loan book, the higher rate environment in Georgia, and putting our strong liquidity position to work. Overall net interest income in Georgia was up 19% year-on-year for the quarter. Meanwhile, in Uzbekistan, the NIM appears to have turned the corner, and we expect to improve gradually as the loan book returns to growth. Turning now to costs. On the cost side, our focus on efficiency is bearing fruit. Cost-income ratio fell by almost 2% in the quarter to 38.3%, which demonstrates the evidence of good cost control in both Georgia and Uzbekistan. Turning now to asset quality.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

As you can see on the right-hand side of the page, group cost of risk was 1.6% in Q2 and 1.5% for the H1. This is consistent with our performance in 2025. Asset quality remains largely stable and robust in Georgia, as reflected by a 70 basis points cost of risk in Q2. However, on the left-hand side, the level of NPLs increased by 0.3% in the quarter to 3.3% at the group level. This was driven by an increase in the level of NPLs in Uzbekistan. This reflects three things. Number one is an extension of the write-off period that we have applied in Uzbekistan from 270 days to 360 days, given we are seeing material recoveries beyond the previous cutoff point of 270 days. Secondly, there is some ongoing deterioration in credit quality for older vintages.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Thirdly, the contraction of the loan portfolio over the past year. This, of course, reduces the denominator of the ratio. I would, however, note that our NPL coverage ratio, provision ratio in Uzbekistan remains solid at 114%. As for the outlook for the Q3, we expect some upward pressure on the cost of risk in Uzbekistan, in part due to ongoing changes being implemented to the auto collection system for overdue loans. However, we expect to see a more positive trajectory from the Q4 of the year. Turning now to our balance sheet dynamics. Growth remained robust during the Q2. Gross loans increased 12% year-on-year on a constant currency basis, led by a strong performance in Georgia, where loans increased by 14% year-on-year. As Vakhtang mentioned earlier, the loan portfolio in Uzbekistan stabilized and is now showing signs of growth.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Customer deposits increased strongly, rising by 15% year-on-year on a constant currency basis. The growth was broad-based across retail and SCIB segments in Georgia and is supported by the strong customer acquisition outlined earlier by Vakhtang in Georgia. Turning now to our capital position. We continue to maintain robust levels of capital in both Georgia and Uzbekistan, comfortably above regulatory requirements. We had previously indicated a new regulatory framework was going to come into effect from the 1st of July for consumer loans in Uzbekistan. Today, we have learnt that this has actually been paused and is not currently being implemented. We will keep investors informed as we learn of developments. Had the previously communicated change in the risk weight framework for consumer loans in Uzbekistan been implemented, we still would have maintained material buffers above the regulatory minimums for our capital position in Uzbekistan.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Which brings me to capital returns. The group's strong profitability and capital generation continue to support attractive shareholder returns. As Vakhtang mentioned earlier, the board has declared a quarterly dividend of GEL 1.75 per share for the Q2. This brings total H1 dividends to GEL 3.5 per share, which is up 8% year-on-year. Finally, I'd like to close today's presentation by summing up the key takeaways for the H1 of 2026. TBC maintained strong growth and profitability in the H1 of the year with a 23.5% return on equity. This sets us up well for the H2 of the year and keeps us on track for our financial targets. In Georgia, strong customer acquisition and engagement is helping drive mid-teen loan and deposit growth. In Uzbekistan, we are delivering on the recalibration of our business.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

We're seeing signs that the loan portfolio has stabilized and is beginning to return to growth, while momentum across payments, cards, and the ecosystem remains strong. Although we do recognize the ongoing challenges on asset quality. Finally, our strong capital position continues to support both future growth of the business and attractive returns for our shareholders. Thank you for your attention, and at this point, we would now be happy to take your questions.

Operator

Thank you. As a reminder, to ask a question, please press the raise hand button on Zoom. If you're on the phone line, please press star one to ask your question. You can also submit a written question using the Zoom question-answer box. We have a few questions with raised hands at the moment, so let's go ahead with the first one from Dmitry Vlasov. Please go ahead.

Dmitry Vlasov
Analyst at WOOD & Company

Thank you very much for the opportunity to ask a question. Congrats on solid results. My first one would be on NIM in Uzbekistan. What level of NIM expansion do you basically expect in Uzbekistan, given that you gradually diversify away from higher margin cash loans? That's the first question. The second question is on Georgia fees and commission. If this interchange fees cap would be implemented at some point, what sort of impact would you expect to have on your fees and commission income? That's it for now. Maybe I'll ask follow-ups. Thank you.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Okay. Thank you, Dmitry. First of all, on our Uzbekistan NIM. As I said, we're seeing signs that the NIM has turned a corner. Given what has happened on the asset side of the balance sheet with the contraction of the portfolio, we have had an excess liquidity position. That's something that we have focused on. Now that the portfolio is returning to growth, we expect to see that's going to help in terms of our NIM going forwards. We are more optimistic on the outlook for our NIM. I think in terms of the situation in Georgia, I'll let Vakhtang expand on this. I think at the current time, there is no sign of certainty or that there is going to be a change to the interchange fees, but I'll let Vakhtang expand on that.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

Thank you, Dmitry, and to answer the question about the commission income for Georgia. There are some kind of discussions going on, but I want to remember that there was such a case two years ago, three years ago. I think we are ready for any kind of scenario. For us, the base scenario that next year we are planning to have a growth in fee and commission income. If the situation will go worse than the base scenario, probably there will be growth, but one digital number, otherwise, we are forecasting growth has to be around 10.

Dmitry Vlasov
Analyst at WOOD & Company

That's very clear. Thank you.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thanks very much, Dmitry. Next up is Ross from Peel Hunt. Ross, please go ahead.

Analyst at Peel Hunt

Yeah. Afternoon. Thanks for taking my question. Thanks for the additional detail you provided around the increase in provisions in the Uzbekistan business. Can you give a bit more detail about how you see the asset quality evolving here into H2 and beyond? Secondly, on to Georgia NIM. It's pleasing to see the expansion in Q2, obviously helped by the increase in base rates. Again, how do you see the NIM in Georgia evolving from here into the H2 and beyond? Thanks.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

I think on asset quality in Uzbekistan, I think it probably makes sense to give a little bit more color to what we saw in Q2. As I mentioned, the increase in NPLs was driven by three factors. One was the change in the write-off policy, and that was driven by us actually recovering material amounts of loans post the 270-day cutoff. I mentioned the impact of the portfolio in terms of the portfolio being 10% lower as at the 30th of June relative to year-end. That obviously changes the denominator. To come specifically to your question in terms of how we see the outlook, we did see a deterioration in or a seasoning of older vintages, vintage of loans that originated 12 to 18 months ago. That had some impact in terms of the cost of risk.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Where does it take us through Q3? I think we will continue to see those older vintages come through in terms of seasoning. We also have the developments around progressive changes in auto collections for overdue loans, which is effectively similar to a direct debit. If someone doesn't pay their loan, you can automatically collect through the card payment system. Those have been well signaled in terms of the potential changes. As of now, there isn't clarity on that, but we have prepared well. We have been working on our collections, but what it all means in terms of where we're heading in terms of the cost of risk for Q3, we do expect an increase in the cost of risk in Uzbekistan, taking us to low mid-teens.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Going into the Q4 of the year, we do see a more positive trajectory. That's on the asset quality in Uzbekistan. In Georgia, in terms of where we've seen the NIM, there's been two consecutive quarters of improvement. Drivers of that, I outlined, we've been helped by our liquidity position. You'll see that our net loans as a proportion of assets has increased as we've deployed liquidity, which has helped us. Also in terms of the NIM, we've been helped by the very strong growth of our retail business. As Vakhtang mentioned, our unsecured retail book has grown very, very significantly, 36% up year-over-year. That has been a positive on NIM. In terms of the outlook from where we go from here, the NIM is certainly stable.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

There is potential upside to it. We're pleased with what we have achieved in Georgia, and would expect more of the same. In a sense, the messaging would be that as we continue to see retail grow, we should be seeing that flow through into the NIM.

Analyst at Peel Hunt

Very clear. Thank you.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thanks very much, Ross. Next we have a question from Rahim from Cavendish. Rahim, please go ahead.

Rahim Karim
Analyst at Cavendish

Hi. Thanks for the chance to ask a couple of questions. The first was just in terms of the Georgian business. Obviously, delivery continues to go very well there and consistent, and credit growth is strong. I was just wondering if you saw any particular areas that are doing particularly well and anything that you'd like to draw out in terms of the focus there.

Rahim Karim
Analyst at Cavendish

On Uzbekistan, congrats for getting the OLX deal completed. Just be useful to hear your views on where the long-term sources of value are from that transaction and how we should try and monitor the success of that going forward.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

I will try to answer this question about the Georgian. As we mentioned in our presentation, we have very strong growth, 14%, and that growth will be continued in H2. Key priority for us is And also I mentioned in the presentation to increase retail business because we see very comfortable growth in CIB. We have more than 44% market share. We have a comfortable level of market share in SME, now our priority in Georgia to grow up faster our mass retail and retail business, and especially we are doing well. As we mentioned, we increased the number of our monthly active users by 50,000, we have much more ambitions to do better in H2. On the OLX, that was strategic move from our side.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

This is very important because as we showed in our presentation, monthly users of OLX today is more than six, five million. It's a good opportunity for us to increase leads for our retail customers in Uzbekistan. In addition, as we know, we are growing up our business in micro and SME, we believe that it's a good opportunity for us through OLX to bring more leads to our TBC Uzbekistan bank and to grow our loan portfolio and also payment business.

Rahim Karim
Analyst at Cavendish

Very helpful. Thank you both.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thank you, Rahim. Next up, we've got a question from Dan Mikhaylov. Dan, please go ahead.

Dan Mikhaylov
Analyst at Vergent

Hi, this is Dan from Vergent. Congratulations on the results. Two quick questions on Uzbekistan. The first one is, we saw a sequential improvement in loans in the Q2 of 2026. What kind of loans growth should we expect in Q3 and Q4 to get us to a certain year-end number now that we're back in positive territory? My second question is a follow-up on the early question on OLX. Could you elaborate on what kind of products you expect to be offering through that deal? Just trying to understand better how a classifieds business sort of ties into the lending side of your business.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Why don't I take the first part of that, and I'll ask Vakhtang maybe to do the second part. I think in Uzbekistan, as I said, portfolio down relative to year end. We did see growth in Q2, 0.4%. We continued as managed to see a contraction in our instant cash loan business as planned. We did start to see nice growth coming through or continuing growth coming through on the business loan side, buy now, pay later, credit cards, and we expect that trend to continue. In terms of the outlook for the year, I think given the profile of the business and given what we have seen in the past, we always expect to see volume growth to be strong in Q4 of the year.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

I think where we are hoping to land up is when we get to the end of 2026, we will see a portfolio that will be of the same size or have increased relative to the end of the year of 2025. Strong growth coming through towards the end of the year, so that when we'll reach the end of the year, we won't have seen a year-on-year contraction in the portfolio in Uzbekistan.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

To answer on the second question about what kind of product. This is the standard products such as auto loans, BNPL. Once more to iterate, we just closed the deal a few weeks ago, we are in the process to adapt and to understand how to develop that product, probably that could become material for our operations in the payments and in the leads and generation of the loans, probably from the second part of 2027.

Dan Mikhaylov
Analyst at Vergent

All clear. Thank you.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thank you, Dan. Next up, it's Simon from Citi. Please go ahead.

Analyst at Citi

Thanks for the opportunity. A few questions from me. Wondering if you have a new kind of normalized risk cost idea for Uzbekistan going forward and when you think you would get there, because I understand that you think risk cost will rise again next quarter before it starts to normalize. That would be question number one. Also, interested in the fee outlook for the H2 and going forward. You had very nice fee growth in Uzbekistan. Is that expected to be maintained? Also interested in the tax rate or the outlook for tax for Uzbekistan, because you had positive tax in the Q1 or H1, actually, even though you had positive PBT. Maybe the same on the cost outlook and the FX income outlook. Thank you. Sorry, a lot of questions, I know.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Thanks, Simon. Uzbekistan, we are in a sort of recalibration transitory mode that we are delivering on. Q3, the expectation is that we do see the peaking of the cost of risk. As signaled, we are expecting that to be low mid-teens. As we get into Q4, hopefully, we have got clarity by then around the progressive changes around auto collections. We will be seeing a, hopefully, growth coming through in terms of the portfolio as we continue to implement the recalibration. As I said, we are seeing good growth and a change in the composition as SMEs, loans, buy now, pay later, credit cards come through in terms of the growth. Q4, we are going to be in a different position, hopefully, to Q3.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

I think it is too early to say kind of what the kind of run rate is going to be thereafter. I think, the next two quarters for us are very important in terms of showing that we can execute. I think, post that Q4, we are going to be in a better position to give a view in terms of the normalized cost of risk. As I said, I think the view is that Q3 is going to be the peak. In terms of the fee outlook, if you kind of decompose it into two parts, Georgia, we have benefited from very good volume growth from both our retail and CIB business, and that has helped us in terms of our fee and commission growth in Q2 of the year.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

I think, as I mentioned, you picked up on it in terms of how our payments business is doing as well. In Uzbekistan, that gives us some positivity. I think, for the full year in terms of fee and commission income, we expect to be sort of flattish for the full year. Obviously, Q1 was impacted by investments that we were making in terms of our cards and our loyalty program in Georgia. I think the message for the full year-on-year, will be flattish. Obviously, we saw growth in Q2, and we expect to see growth over the next two quarters. Tax rate. I think, there was also the issue around tax in Q1 in Uzbekistan. Two aspects to that. One was the ability to utilize the deferred tax asset and a tax credit.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

I think going into Q2, we don't expect to see anything kind of unusual. I think these should be considered as one-off. Then, the final question, I think was on one of kind of costs. As I said, Q2 was positive in terms of, there is a good focus in terms of cost management, both in Georgia and Uzbekistan. I think, we will continue to see that. I think Q1 was a sort of one-off in terms of where we were. I think, where we were in Q2 will probably give a better feel as to where we're heading for the full year.

Analyst at Citi

Super. Very clear. Thank you.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thank you, Simon. We don't currently have any. Oh, yes. We have a question. Nikolai, please go ahead.

Analyst

Hi. Can you hear me?

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Yes.

Analyst

Yeah. A couple of questions from me. On OLX, historically, that's been more of a classifieds type of business, and I was wondering about your plans for that platform. I know you have a partner there. Is the idea to keep the business model as it is currently, or you want to migrate it to one that is more of a marketplace that is similar to what Uzum is trying to do? The second question is on SME lending in Uzbekistan. I was in Uzbekistan about two to three weeks ago and understand that there's a lot of demand for SME loans in dollars as well. I was wondering what you see on your side in terms of what the demand is comprised of in terms of currency.

Analyst

Related to the SME question, as you reposition the book, to what extent the SME origination will be new origination versus reprofiled consumer loans? Finally, I know that you have an AT1 that is coming up for, or is becoming callable in November, a couple of months from now. I was wondering what your plans are regarding that. Thank you.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

I'll try to answer the first question, and afterwards, Guy will continue. On the OLX side, our strategy to continue be there as a classified business, not to go to the marketplace, because we believe that being the classified and the brand has a very good knowledge in Uzbekistan market will create the value for TBC operation there. One strategy is to increase number of the retail and micro and the SME customer. Our answer is that we'll keep the business as it exists today, classifieds.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

I think on the SME side, the business line is a separate business line. There is, I think, perhaps a less clear distinction in terms of what is a kind of an SME in Uzbekistan versus a retail customer in any jurisdictions. I think from our perspective, what we're seeing is that this is a new kind of customer segment, a new profile of customers. It's not a question of kind of substituting one classification for another classification. This is a different profile of customer. As of today, the demand is largely in local currency. I think in terms of the AT1, I'm not going to get into specifics around that at the moment. Obviously in the context of our capital, we have our capital stacks, we have our minimums, we have our buffers.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

We are mindful of the AT1, and we obviously have plans to ensure that we continue to have a comfortable level of AT1. I think, as and when we're in a position to make an announcement on that, we will.

Analyst

Excellent. Thank you.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thank you, Nik. I don't think we have any other questions on the Zoom line. Seb, do we have any on the phones?

Operator

Yes. On the phone, we have Piers Brown with Investec. Piers, if you'd like to go ahead.

Piers Brown
Piers Brown
Analyst at Investec

Good afternoon, everybody. I've got a couple of questions on Uzbekistan. If you could just confirm, I think you mentioned that the risk rating changes aren't going ahead, if you could just confirm that I understood that correctly. Allied to that, could you just describe what is the regulatory decision-making process in Uzbekistan? Seems like some of these decisions are coming a little bit out of the blue. If you could just help us to understand how much visibility you're getting on rule changes and at which agency are the decisions actually being made? Is it the Central Bank or the Finance Ministry, or are they coming at presidential level? How much consultation there is in that whole process with the banks.

Piers Brown
Piers Brown
Analyst at Investec

That's the first question. The second question is on the potential changes to auto collection. You're saying low mid-teens cost of risk in Q3. Is that including potential changes to auto collection? If those don't come about, would that guidance potentially be lower? Just to understand that. Thanks.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

Okay. Thanks, Piers. Why don't I take the first and third parts, and I'll ask Vakhtang to take the second part in terms of the engagement with the regulator. In terms of the framework for what was proposed as the new framework for consumer loan risk weightings, that had been very clearly indicated as coming into effect on the 1st of July. It was news to us today, we were communicated along with the other banks in Uzbekistan, that that framework is not going to be applied at the current time. This is fresh for us. I think it's obviously a positive, but in practice, we still would've been very well comfortably capitalized in Uzbekistan. At the moment, we don't have any kind of updates as to if and when it will be implemented.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

The messaging to us has been that at the current time, it is not being implemented, we consider this as a potential pause. As and when we have more information, obviously, we'll let you know on that. In terms of the auto collection process, again, it's something that's been very well signaled over a period of time. There has been, in anticipation of this coming into effect, progressive changes that have been implemented by the card companies, the card infrastructure in Uzbekistan, that we have responded to in terms of how we've looked at the cost of risk. We've responded as well in terms of what we're doing on the collection side. I think we don't anticipate any sort of negative surprise, because we have planned very well for that.

Guy Stevens
Guy Stevens
Group CFO at TBC Bank Group

However, clearly if there was a sort of backtracking in terms of the discussion around auto collections, that might have some impact. At the moment, our assumption is that these changes will go into effect. There is an ongoing process in terms of consultation with the regulator in terms of what the changes would be. Again, I think we have a pretty clear view as to what could happen. That is factored into our guidance in terms of the cost of risk for Q3. In terms of interaction with the regulator and relationship, maybe, Vakhtang, you could say a few words on that.

Vakhtang Butskhrikidze
Vakhtang Butskhrikidze
CEO at TBC Bank Group

Yeah. I think we built a very good relationship with the regulator. Personally, me, minimum two or 3x I'm meeting the governor of the National Bank. On the management level, there is weekly, monthly meetings. Good sign is that last one year we have seen that also regulator is before introducing any regulations, are in discussions not only with us, but also with commercial banks, and the debates are going there.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Are you with us, Piers?

Piers Brown
Piers Brown
Analyst at Investec

Yes, I am. Sorry, I thought the line had cut there. No, that's very clear. Thanks for the answers.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Thank you.

Operator

Thank you. Currently, we have no further questions on the phone line.

Andrew Keeley
Andrew Keeley
Director of Investor Relations at TBC Bank Group

Okay. We don't have any other questions. Just to say thank you everybody for joining our call. As ever, we are open to meeting you whenever works for you and look forward to continuing to engage in dialogue with you. We will see you at the Q3 numbers in November. Thank you very much, and have a good day. Bye-bye.

Operator

This concludes today's call. Thank you everyone very much for joining, and you may now disconnect.

Executives
    • Andrew Keeley
      Andrew Keeley
      Director of Investor Relations
    • Vakhtang Butskhrikidze
      Vakhtang Butskhrikidze
      CEO
    • Guy Stevens
      Guy Stevens
      Group CFO
Analysts
Powered by Quartr