LONDON Aug 18, 2020 (Thomson StreetEvents) — Edited Transcript of TBC Bank Group PLC earnings conference call or presentation Tuesday, August 18, 2020 at 1:00:00pm GMT
Dear ladies and gentlemen, thank you for joining our second quarter 2020 financial results conference call. I’m Anna Romelashvili, Head of Investor Relations at TBC Bank. Today with me are Vakhtang Butskhrikidze, CEO of the Bank; and Giorgi Shagidze, Deputy CEO and CFO of the bank.
We will start today’s call with a brief presentation and give you an update about recent business macroeconomic developments in the country and provide an overview of the financial and operating performance of the group in the second quarter. Afterwards, you’ll have an opportunity to ask questions.
With that, I would like to hand over to Vakhtang.
Thank you, Anna. Thank you, everybody, for joining our call. I’ll start my presentation with the main highlights for the second quarter from Slide #3. As you can see from this slide, Georgia has been quite successful in fighting COVID-19. As of 14 August, the total number of cases totaled around 1,340 out of which is around 1,100 head recovered. Fortunately, the death rate is also relatively low in Georgia.
In terms of TBC results, we achieved a solid profitability and high efficiency in the second quarter, with return of equity standing at 19.5% and cost-to-income ratio at 38.5%, while the best standalone cost-to-income ratio stood at 32.3%. Over the same period, our capital and liquidity position remains strong, with our CR ratio standing at 124% and Tier 1 and total capital standing at 12.7% and 17.2%, respectively. At the same time, our digitalization level remains high, with offloading ratio reaching 96% and mobile banking penetration ratio at 45%.
Now let’s move onto the macroeconomical update on Slide 4. In June, we observed the recovery in the economy on the back of the gradual reopening after the lockdown. The remittance picked up sharply by 18% year-over-year, while the drop in exports moderated substantially, and we also — also see slow improvement in imports. International flights are also starting to resume this month. At the same time, hotel occupancy rates in most of the regions improved this summer, largely due to domestic tourists. Additionally, the government has introduced a new plan to attract remote workers to the country, which could, to some extent, [below] the shortage of the tourism costs. Georgia’s immediate, safe and attractive country is an important precondition for the success of such a strategy. In summary, GPP contraction moderated to 7.7% in June after a drop of 16.6% and 13.5% in April and May, respectively. We maintained our projection of a 4.5%to 5.5% drop of GDP for 2020 and expected to mostly recover to pre-crisis levels in 2021.
Moving on to Slide 5. You can see that the recoveries, we did across all wide range of sectors. This [partly] shows positive growth dynamics for majority of sectors, including groceries, clothing, health care and other consumer goods, while demonstrating improved trends for hotel and entertainment industries.
Now let’s move to Slide 6, which shows increasing fiscal spending and cautious monetary policies. Fiscal stimulus increased in the second quarter, and its impact on the economy is expected to be much larger in the second half of the year, supporting the recovery until the economy returns to its normal growth rate. The NBG continue to ease the monetary policy in order to stimulate the economy and delivered a 1 percentage point rate cut year-to-date, bringing the policy rate to 8%. Per delays since the NBG projections, inflation is expected to decline towards the target rate of 3% in the first half of 2021. NBG actual interest in the FX market to compensate the shortage of inflows and to reduce their fixed rate volatility, we think that the NBG international reserves, together with the additional extension, external funding to the state could be sufficient to continue supplying FX currency to the market. From the beginning of 2020, the Central Bank already sold $290 million on the market. And at the end of July, National Bank of Georgia’s gross reserves reached $3.84 billion, the highest levels historically. Gross reserves increased by 6.2% month-over-month largely on the back of government external borrowings, increasing the net reserves, which amounted to around $1.5 billion.
Now I’d like to briefly tell you how we manage pandemic. Slide 8 show that it was our…