TCS Group Holding PLC
International Financial Reporting Standards Consolidated Condensed Interim Financial Information (Unaudited)
30 September 2020
TCS Group Holding PLC
CONTENTS | ||
CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION | ||
Consolidated Condensed Interim Statement of Financial Position.............................................................................. | 1 | |
Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income............................. | 2 | |
Consolidated Condensed Interim Statement of Changes in Equity............................................................................. | 3 | |
Consolidated Condensed Interim Statement of Cash Flows....................................................................................... | 4 | |
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION | ||
1 | Introduction...................................................................................................................................................... | 5 |
2 | Operating Environment of the Group ............................................................................................................... | 7 |
3 | Significant Accounting Policies........................................................................................................................... | 9 |
4 | Critical Accounting Estimates and Judgements in Applying Accounting Policies ................................................ | 11 |
5 | Adoption of New or Revised Standards and Interpretations .......................................................................... | 12 |
6 | New Accounting Pronouncements................................................................................................................. | 13 |
7 | Cash and Cash Equivalents .......................................................................................................................... | 14 |
8 | Loans and Advances to Customers............................................................................................................... | 14 |
9 | Investments in Securities............................................................................................................................... | 33 |
10 | Repurchase Receivables............................................................................................................................... | 34 |
11 | Due to Banks ................................................................................................................................................. | 35 |
12 | Customer Accounts ....................................................................................................................................... | 35 |
13 | Share Capital, Share Premium and Treasury Shares.................................................................................... | 36 |
14 | Net Margin ..................................................................................................................................................... | 37 |
15 | Fee and Commission Income and Expense .................................................................................................. | 38 |
16 | Customer Acquisition Expense...................................................................................................................... | 39 |
17 | Administrative and Other Operating Expenses.............................................................................................. | 39 |
18 | Dividends....................................................................................................................................................... | 40 |
19 | Segment Analysis .......................................................................................................................................... | 41 |
20 | Management of Capital ................................................................................................................................... | 48 |
21 | Contingencies and Commitments .................................................................................................................... | 49 |
22 | Fair Value of Financial Instruments .................................................................................................................. | 53 |
23 | Related Party Transactions.............................................................................................................................. | 57 |
24 | Events after the End of the Reporting Period.................................................................................................... | 59 |
Report on review of Consolidated Condensed Interim Financial Information
To TCS Group Holding PLC
Introduction
We have reviewed the accompanying consolidated condensed interim statement of financial position of TCS Group Holding PLC and its subsidiaries (the 'Group') as at 30 September 2020 and the related consolidated condensed interim statement of profit or loss and other comprehensive income for the three-month and nine-month periods then ended, and consolidated condensed interim statements of changes in equity and cash flows for the nine- month period then ended, and notes, comprising a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and presentation of this consolidated condensed interim financial information in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union. Our responsibility is to express a conclusion on this consolidated condensed interim financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union.
PricewaterhouseCoopers Limited
Certified Public Accountants and Registered Auditors
11 November 2020
Nicosia
Cyprus
PricewaterhouseCoopers Ltd, PwC Central, 43 Demostheni Severi Avenue, CY-1080 Nicosia, Cyprus P O Box 21612, CY-1591 Nicosia, Cyprus
T: +357 22 - 555 000, F:+357 - 22 555 001, www.pwc.com.cy
PricewaterhouseCoopers Ltd is a private company registered in Cyprus (Reg. No.143594). Its registered office is at 3 Themistocles Dervis Street, CY-1066, Nicosia. A list of the company's directors, including for individuals the present and former (if any) name and surname and nationality, if not Cypriot and for legal entities the corporate name, is kept by the Secretary of the company at its registered office. PwC refers to the Cyprus member firm, PricewaterhouseCoopers Ltd and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
TCS Group Holding PLC
Consolidated Condensed Interim Statement of Financial Position
30 September 2020 | 31 December | ||
In millions of RR | Note | (Unaudited) | 2019 |
ASSETS | |||
Cash and cash equivalents | 7 | 73,481 | 57,796 |
Mandatory cash balances with the CBRF | 4,793 | 3,448 | |
Due from other banks | 1,882 | 2,084 | |
Loans and advances to customers | 8 | 346,313 | 329,175 |
Financial derivatives | 7,343 | 390 | |
Investments in securities | 9 | 233,091 | 135,178 |
Repurchase receivables | 10 | 5,048 | - |
Guarantee deposits with payment systems | 11,488 | 8,877 | |
Current income tax assets | 4,332 | 815 | |
Deferred income tax assets | 959 | 1,517 | |
Tangible fixed assets and right-of-use assets | 10,720 | 10,560 | |
Intangible assets | 6,070 | 5,435 | |
Other financial assets | 16,464 | 21,673 | |
Other non-financial assets | 3,590 | 2,510 | |
TOTAL ASSETS | 725,574 | 579,458 | |
LIABILITIES | |||
Due to banks | 11 | 14,108 | 663 |
Customer accounts | 12 | 513,426 | 411,614 |
Debt securities in issue | 25,446 | 26,078 | |
Financial derivatives | 153 | 590 | |
Deferred income tax liabilities | - | 142 | |
Subordinated debt | 22,367 | 18,487 | |
Insurance provisions | 5,969 | 6,280 | |
Other financial liabilities | 18,236 | 14,648 | |
Other non-financial liabilities | 9,382 | 4,874 | |
TOTAL LIABILITIES | 609,087 | 483,376 | |
EQUITY | |||
Share capital | 13 | 230 | 230 |
Share premium | 13 | 26,998 | 26,998 |
Treasury shares | 13 | (3,238) | (3,164) |
Share-based payment reserve | 13,23 | 905 | 1,039 |
Retained earnings | 90,980 | 66,880 | |
Revaluation reserve for investments in debt securities | 495 | 3,996 | |
Equity attributable to shareholders of the Company | 116,370 | 95,979 | |
Non-controlling interest | 117 | 103 | |
TOTAL EQUITY | 116,487 | 96,082 | |
TOTAL LIABILITIES AND EQUITY | 725,574 | 579,458 | |
Approved for issue and signed on behalf of the Board of Directors on 11 November 2020.
_____________________ | ____________________ |
Constantinos Economides | Mary Trimithiotou |
Director | Director |
The notes № 1-24 are an integral part of this Consolidated Condensed Interim Financial Information. | 1 |
TCS Group Holding PLC
Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income
Unaudited | |||||
Nine months | Three months | Nine months | Three months | ||
ended | ended | ended | ended | ||
Note | 30 September | 30 September | 30 September | 30 September | |
In millions of RR | 2020 | 2020 | 2019 | 2019 | |
Interest income calculated using the effective | 14 | 93,987 | 30,205 | 80,644 | 29,465 |
interest rate method | |||||
Other similar income | 14 | 13 | 2 | 118 | - |
Interest expense calculated using the effective | 14 | (16,430) | (5,277) | (15,406) | (5,531) |
interest rate method | |||||
Other similar expense | 14 | (110) | (36) | (107) | (39) |
Expenses on deposit insurance | 14 | (1,258) | (457) | (1,331) | (487) |
Net margin | 14 | 76,202 | 24,437 | 63,918 | 23,408 |
Credit loss allowance for loans and advances to | 8 | (34,613) | (6,586) | (19,603) | (7,952) |
customers and credit related commitments | |||||
Credit loss allowance (charge)/reversal for debt | (360) | (99) | 225 | 83 | |
securities at FVOCI | |||||
Total credit loss allowance for debt financial | (34,973) | (6,685) | (19,378) | (7,869) | |
instruments | |||||
Net margin after сredit loss allowance | 41,229 | 17,752 | 44,540 | 15,539 | |
Fee and commission income | 15 | 33,393 | 12,973 | 25,696 | 9,359 |
Fee and commission expense | 15 | (14,699) | (5,688) | (10,636) | (3,974) |
Customer acquisition expense | 16 | (13,591) | (5,473) | (13,888) | (4,049) |
Net gains/(losses) from derivatives revaluation | 6,678 | 3,720 | (1,407) | (11) | |
Net (losses)/gains from foreign exchange translation | (8,743) | (4,242) | 1,236 | (451) | |
Net gains/(losses) from operations with foreign | 1,211 | 291 | (684) | (15) | |
currencies | |||||
Net gains from disposals of debt securities at FVOCI | 6,787 | 538 | 277 | 137 | |
Net gains from debt instruments at FVTPL | 75 | 65 | 390 | - | |
Insurance premiums earned | 13,932 | 4,546 | 9,520 | 4,262 | |
Insurance claims incurred | (2,904) | (795) | (3,282) | (1,374) | |
Administrative and other operating expenses | 17 | (25,244) | (8,859) | (20,461) | (7,394) |
Net gains from repurchase of subordinated debt | 168 | 18 | - | - | |
Other operating income | 2,405 | 1,087 | 866 | 435 | |
Profit before tax | 40,697 | 15,933 | 32,167 | 12,464 | |
Income tax expense | (8,806) | (3,296) | (7,045) | (2,730) | |
Profit for the period | 31,891 | 12,637 | 25,122 | 9,734 | |
Other comprehensive (loss)/income | |||||
Items that may be reclassified to profit or loss | |||||
Debt securities at FVOCI and Repurchase | |||||
receivables: | |||||
- Net gains/(losses) arising during the period, net | 1,929 | (1,121) | 3,760 | 1,126 | |
of tax | |||||
- Net gains reclassified to profit or loss upon | (5,430) | (431) | (222) | (110) | |
disposal, net of tax | |||||
Other comprehensive (loss)/income for the | (3,501) | (1,552) | 3,538 | 1,016 | |
period, net of tax | |||||
Total comprehensive income for the period | 28,390 | 11,085 | 28,660 | 10,750 | |
Profit is attributable to: | |||||
- Shareholders of the Company | 31,877 | 12,631 | 25,119 | 9,730 | |
- Non-controlling interest | 14 | 6 | 3 | 4 | |
Total comprehensive income is attributable to: | 28,376 | 11,079 | 28,657 | 10,746 | |
- Shareholders of the Company | |||||
- Non-controlling interest | 14 | 6 | 3 | 4 | |
Earnings per share for profit attributable to the | |||||
Shareholders of the Company, basic | 162.76 | 64.35 | 136.76 | 49.96 | |
(expressed in RR per share) | |||||
Earnings per share for profit attributable to the | |||||
Shareholders of the Company, diluted | 160.85 | 63.49 | 134.37 | 49.14 | |
(expressed in RR per share) | |||||
The notes № 1-24 are an integral part of this Consolidated Condensed Interim Financial Information. | 2 |
TCS Group Holding PLC
Consolidated Condensed Interim Statement of Changes in Equity
Attributable to shareholders of the Company | Non- | Total | ||||||||
Share | Share | Share- | Revaluation | Treasury | Retained | Total | ||||
capital | premium | based | reserve for | shares | earnings | control- | equity | |||
Note | payment | investments in | ling | |||||||
In millions of RR | reserve | debt securities | Interest | |||||||
Balance at 1 January 2019 | 188 | 8,623 | 1,232 | (1,144) | (3,670) | 36,785 | 42,014 | 236 | 42,250 | |
Profit for the period | - | - | - | - | - | 25,119 | 25,119 | 3 | 25,122 | |
Other comprehensive income: | ||||||||||
Investments in debt securities at FVOCI and Repurchase receivables | - | - | - | 3,538 | - | - | 3,538 | - | 3,538 | |
Total comprehensive income for the period (Unaudited) | - | - | - | 3,538 | - | 25,119 | 28,657 | 3 | 28,660 | |
Shares issued | 13 | 42 | 18,874 | - | - | - | - | 18,916 | - | 18,916 |
Secondary public offering costs | 13 | - | (499) | - | - | - | - | (499) | - | (499) |
Acquisition of non-controlling interest in subsidiaries | - | - | - | - | - | (376) | (376) | (71) | (447) | |
Share-based payment reserve | 13,23 | - | - | (282) | - | 506 | 156 | 380 | - | 380 |
Dividends declared | 18 | - | - | - | - | - | (5,870) | (5,870) | - | (5,870) |
Balance at 30 September 2019 (Unaudited) | 230 | 26,998 | 950 | 2,394 | (3,164) | 55,814 | 83,222 | 168 | 83,390 | |
Balance at 1 January 2020 | 230 | 26,998 | 1,039 | 3,996 | (3,164) | 66,880 | 95,979 | 103 | 96,082 | |
Profit for the period | - | - | - | - | - | 31,877 | 31,877 | 14 | 31,891 | |
Other comprehensive loss: | ||||||||||
Investments in debt securities at FVOCI and Repurchase receivables | - | - | - | (3,501) | - | - | (3,501) | - | (3,501) | |
Total comprehensive (loss)/income for the period (Unaudited) | - | - | - | (3,501) | - | 31,877 | 28,376 | 14 | 28,390 | |
GDRs buy-back | 13 | - | - | - | - | (661) | - | (661) | - | (661) |
Share-based payment reserve | 13,23 | - | - | (134) | - | 587 | (4) | 449 | - | 449 |
Dividends declared | 18 | - | - | - | - | - | (7,773) | (7,773) | - | (7,773) |
Balance at 30 September 2020 (Unaudited) | 230 | 26,998 | 905 | 495 | (3,238) | 90,980 | 116,370 | 117 | 116,487 | |
The notes № 1-24 are an integral part of this Consolidated Condensed Interim Financial Information.
3
TCS Group Holding PLC
Consolidated Condensed Interim Statement of Cash Flows
Unaudited | |||
Nine months | Nine months | ||
ended | ended | ||
Note | 30 September | 30 September | |
In millions of RR | 2020 | 2019 | |
Cash flows from operating activities | 95,007 | 77,132 | |
Interest income received calculated using the effective interest rate method | |||
Other similar income received | 11 | 175 | |
Interest expense paid calculated using the effective interest rate method | 8 | (16,201) | (15,162) |
Recoveries from written-off loans | 2,777 | 2,440 | |
Expenses on deposits insurance paid | (1,192) | (1,185) | |
Fees and commissions received | 33,395 | 25,540 | |
Fees and commissions paid | (14,444) | (11,016) | |
Customer acquisition expense paid | (12,305) | (14,771) | |
Gains/(losses) from operations with foreign currencies received/(paid) | 103 | (684) | |
Losses from operations with derivatives paid | (689) | (452) | |
Insurance premiums received | 13,582 | 11,389 | |
Insurance claims paid | (2,488) | (2,837) | |
Other operating income received | 1,975 | 1,084 | |
Administrative and other operating expenses paid | (19,953) | (17,681) | |
Income tax paid | (10,913) | (10,991) | |
Cash flows from operating activities before changes in operating | 68,665 | 42,981 | |
assets and liabilities | |||
Changes in operating assets and liabilities | |||
Net increase in CBRF mandatory reserves | (1,345) | (820) | |
Net decrease/(increase) in due from banks | 202 | (1,075) | |
Net increase in loans and advances to customers | (45,926) | (135,570) | |
Net (increase)/decrease in debt securities measured at FVTPL | (1,076) | 5,781 | |
Net decrease/(increase) in guarantee deposits with payment systems | 125 | (4,702) | |
Net decrease in other financial assets | 4,612 | 4,053 | |
Net (increase)/decrease in other non-financial assets | (582) | 1,183 | |
Net increase/(decrease) in due to banks | 12,991 | (1,835) | |
Net increase in customer accounts | 80,814 | 68,933 | |
Net (decrease)/increase in other financial liabilities | (641) | 3,557 | |
Net decrease in non-financial liabilities | (291) | (524) | |
Net cash from/(used in) operating activities | 117,548 | (18,038) | |
Cash flows (used in)/from investing activities | (1,118) | (1,526) | |
Acquisition of tangible fixed assets | |||
Acquisition of intangible assets | (2,077) | (1,870) | |
Acquisition of investments in securities, repurchase receivables and other | |||
investments | (362,000) | (64,221) | |
Proceeds from sale and redemption of investments in securities | 269,327 | 64,614 | |
Net cash used in investing activities | (95,868) | (3,003) | |
Cash flows (used in)/from financing activities | 18 | (8,076) | (5,618) |
Dividends paid | |||
Repayment of subordinated debt | (1,937) | - | |
Repayment of debt securities in issue | 13 | (813) | (3,200) |
GDR's buy-back | (661) | - | |
Repayment of principal of lease liabilities | (563) | (987) | |
Proceeds of perpetual loan participation notes | 710 | 46 | |
Proceeds from debt securities in issue | - | 21,615 | |
Proceeds from secondary public offering | - | 18,916 | |
Secondary public offering costs paid | - | (451) | |
Net cash (used in)/from financing activities | (11,340) | 30,321 | |
Effect of exchange rate changes on cash and cash equivalents | 5,345 | (726) | |
Net increase in cash and cash equivalents | 15,685 | 8,554 | |
Cash and cash equivalents at the beginning of the period | 7 | 57,796 | 33,802 |
Cash and cash equivalents at the end of the period | 7 | 73,481 | 42,356 |
The notes № 1-24 are an integral part of this Consolidated Condensed Interim Financial Information.
4
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
1 Introduction
This consolidated condensed interim financial information for the nine months ended 30 September 2020 for TCS Group Holding PLC (the "Company") and its subsidiaries (together referred to as the "Group" or "TCS Group Holding PLC") has been prepared in accordance with International Accounting Standard 34 (IAS 34) "Interim Financial Reporting" as adopted by the European Union.
The Company was incorporated, and is domiciled, in Cyprus in accordance with the provisions of the Companies Law, Cap.113.
The Board of Directors of the Company at the date of authorisation of this consolidated condensed interim financial information consists of: Constantinos Economides, Alexios Ioannides, Mary Trimithiotou, Jacques Der Megreditchian and Martin Robert Cocker.
The Company Secretary is Caelion Secretarial Limited, 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol 3036, Cyprus.
At 30 September 2020 and 31 December 2019 the share capital of the Company is comprised of "class A" shares and "class B" shares. A "class A" share is an ordinary share with a nominal value of USD 0.04 per share and carrying one vote. A "class B" share is an ordinary share with a nominal value of USD 0.04 per share and carrying 10 votes. As at 30 September 2020 the number of issued "class A" shares is 119,291,268 and issued "class B" shares is 80,014,224 (31 December 2019: the same). Refer to Note 13 for further information on the share capital. On 25 October 2013 the Group completed an initial public offering of its "Class A" ordinary shares in the form of global depositary receipts (GDRs) listed on the London Stock Exchange plc. On 2 July 2019 the Group completed a secondary public offering (SPO) of its "class A" shares in the form of GDRs. Refer to Note 13 for the information about SPO. On 28 October 2019 the Group's GDRs started trading also on the Moscow Exchange.
As at 30 September 2020 and 31 December 2019 the entities and the individuals holding either Class A or Class B shares of the Company were:
Class of | 30 September | 31 December | Country of | |
shares | 2020 | 2019 | Incorporation | |
(Unaudited) | ||||
Guaranty Nominees Limited | ||||
(JP Morgan Chase Bank NA) | Class A | 59.85% | 59.85% | United Kingdom |
Virtue Trustees (Switzerland) AG as Trustee | ||||
of the Bernina Trust | Class B | 18.47% | - | Switzerland |
Virtue Trustees (Switzerland) AG as Trustee | ||||
of the Rigi Trust | Class B | 21.68% | - | Switzerland |
Ioanna Georgiou | Class A | 0.00% | 0.00% | Cyprus |
Panagiota Charalambous | Class A | 0.00% | 0.00% | Cyprus |
Maria Vyra | Class A | 0.00% | 0.00% | Cyprus |
Marios Panayides | Class A | 0.00% | 0.00% | Cyprus |
Chloi Panagiotou | Class A | 0.00% | 0.00% | Cyprus |
Leonora Chagianni | Class A | 0.00% | 0.00% | Cyprus |
Altoville Holdings Limited | Class B | - | 18.47% | Cyprus |
Nemorenti Limited | Class B | - | 21.68% | Cyprus |
Total | 100.00% | 100.00% |
Guaranty Nominees Limited is a company holding class A shares of the Company for which global depositary receipts are issued under a deposit agreement made between the Company and JP Morgan Chase Bank NA signed in October 2013.
On 19 March 2020 Altoville Holdings Limited and Nemorenti Limited transferred all of the Company's Class B shares owned by them to two Tinkov family trusts. Russian entrepreneur Mr. Oleg Tinkov, who was the beneficial owner of Altoville Holdings Limited and Nemorenti Limited at 31 December 2019, remains the ultimate beneficiary of these shares, and thus his voting rights are unaffected by this change. This change also has no consequences for or impact on the operations of the Company and its subsidiaries.
5
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
1 Introduction (Continued)
As at 30 September 2020 the six individuals listed above each hold one share. The individuals hold them as nominees of Mr. Oleg Tinkov (31 December 2019: as nominees of Altoville Holdings Limited).
As at 30 September 2020 and 31 December 2019 the ultimate controlling party of the Company is Mr. Oleg Tinkov. Mr. Oleg Tinkov controls approximately 87.03% of the aggregated voting rights attached to the Class A and B shares as at 30 September 2020 (31 December 2019: 87.03%) excluding voting rights attached to GDRs in TCS Group Holding PLC he holds, if any.
The subsidiaries of the Group are set out below. Except where stated the Group owns 100% of shares and has 100% of voting rights of each of these subsidiaries as at 30 September 2020 and 31 December 2019.
JSC "Tinkoff Bank" (the "Bank") provides on-line retail banking services in Russia. The Bank specialises in issuing credit cards and other credit products.
JSC "Tinkoff Insurance" (the "Insurance Company") provides insurance services such as accident, property, travellers, financial risks and auto insurance.
LLC "Microfinance company "Т-Finans" provides micro-finance services.
TCS Finance D.A.C. is a structured entity which issued debt securities including subordinated perpetual bonds for the Group. The Group neither owns shares nor has voting rights in this company. However, this entity was consolidated as it was specifically set up for the purposes of the Group, and the Group has exposure to substantially all risks and rewards through outstanding guarantees of the entity's obligations.
LLC "TCS" provides printing, distribution and other services to the Group.
LLC "Phoenix" is a debt collection agency.
LLC "Tinkoff Software DC" and LLC "Fintech DC" provide software development services. In August 2020 the Group disposed of LLC "Fintech DC" in exchange of 22.15% shareholding in Incantus Holding Limited (refer to Note 23).
LLC "Tinkoff Mobile" is a mobile virtual network operator set up in 2017 to provide mobile services.
LLC "CloudPayments" is a developer of online payment solutions whose core business is online merchant acquiring in Russia. As at 30 September 2020 and 31 December 2019 the Group held 95% of the shares of LLC "CloudPayments".
ANO "Tinkoff Education" is a non-commercial organization set up by the Bank as the sole founder.
LLC "Tinkoff Capital" is an asset management company established in June 2019 to manage investment funds, mutual funds and non-state pension funds.
LLC "Tinkoff Invest Lab" is an infrastructure company created for supporting and optimizing of the Group's investment services.
EBT is a special purpose trust which has been specifically created for the long-term incentive programme for Management of the Group (MLTIP). The Group neither owns shares nor has voting rights in EBT.
Principal activity. The Group's principal business activities are retail banking to private individuals, individual entrepreneurs' ("IE") and small and medium enterprises' ("SME") accounts and banking services, brokerage services and insurance operations within the Russian Federation through the Bank and the Insurance Company. The Bank operates under general banking license No. 2673 issued by the Central Bank of the Russian Federation ("CBRF") on 8 December 2006. The Insurance Company operates under an insurance license issued by the CBRF.
The Bank participates in the state deposit insurance scheme, which was introduced by Federal Law No. 177-FZ "Deposits insurance in banks of the Russian Federation" dated 23 December 2003.
6
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
1 Introduction (Continued)
The State Deposit Insurance Agency guarantees repayment of insurance compensation up to
- 1.4 million per individual, individual entrepreneur and small enterprise deposits in case of the withdrawal of a license of a bank or a CBRF-imposed moratorium on payments.
Registered address and place of business. The Company's registered address is 25 Spyrou Araouzou, Berengaria 25, 5th floor, Limassol, Cyprus, and place of business is Office 403, Lophitis Business Centre I, Corner of 28th October/Emiliou Chourmouziou Streets, Limassol 3035 Cyprus. The Bank's registered address is 1-st Volokolamsky proezd, 10, building 1, 123060, Moscow, Russian Federation. The Insurance Company's registered address is 2-nd Khutorskaya Street, building 38A, 127287, Moscow, Russian Federation. The Group's principal place of business is the Russian Federation.
Presentation currency. This consolidated condensed interim financial information is presented in millions of Russian Rubles (RR).
2 Operating Environment of the Group
Russian Federation. The Group operates mainly within the Russian Federation. There were a number of significant changes in the operating and economic environment during the first half of 2020, which had an impact on the Group's business including:
- In March 2020 the World Health Organization (WHO) announced that the spread of the COVID-19 virus across the globe is a pandemic. Significant restrictions on travel and movement of individuals and the closure of non-essential businesses have either been imposed in most countries or have happened as a result of the pandemic. This has led to significant declines in GDP in most if not all large economically strong countries. Russia has not been immune to the negative personal and economic hardships arising from this virus and from the response to it trying to limit its spread.
- Oil prices have decreased significantly due to the significant reduction in oil consumption in the current economic climate but demonstrated stable growth during the second quarter of 2020. This in turn has led to significant volatility and depreciation of the Russian Rouble exchange rate against the US dollar and the Euro.
- Further, the capital markets (equities and bonds) have seen a substantial volatility in prices in many sectors.
As of the reporting date and subsequently some of the restrictions imposed by government authorities in the Russian Federation due to the COVID-19 pandemic have been lifted and the Group observes that business activity in the Russian Federation is recovering. However, the level of ongoing uncertainty in relation to further negative developments around the COVID-19 pandemic and possible impact on the Group remains high. Hence it is practically impossible to make a comprehensive quantitative assessment with a high degree of certainty of the impact of these changes to the economic environment on the Group's financial position, and in particular in considering credit loss allowances on the loan portfolio which requires to consider the probability of default of most borrowers in the next 12 months and for others over the life of their loan. Some other factors impacting on this are set out below.
The Government of the Russian Federation has implemented various support measures for individuals and corporates impacted by the COVID-19 pandemic including their right in certain circumstances to obtain repayment holidays on their loans for up to 6 months and reduced rates of interest in this period.
The Group has itself implemented several measures to support its clients, especially those who face financial difficulties and a significant decrease of current income due to the situation, including the below:
- proposing internally developed loan restructuring programs as an alternative to the State announced programs which will result in either deferral or decrease in the minimal payments of outstanding loan balance for one or more months;
- broadened cashback offers for debit cards more tailored to customer individual needs and spending behaviour;
7
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
2 Operating Environment of the Group (Continued)
- provided several educational resources on its mobile app and website for borrowers to learn how to deal with potential unemployment or income decline, and how to request and obtain the most suitable debt restructuring program;
- supported its small and medium-sized entities client base during the pandemic by lowering acquiring and account fees, offering payment holidays, helping SMEs to move online and launching 0% loans to pay salaries in partnership with the Russian Bank for SME support.
According to IFRS 9 "Financial Instruments", the Group uses forecast information in the expected credit loss models, including forecasts of macroeconomic indicators. For the purpose of calculating credit loss allowances as at 30 September 2020, the Group took into account expectations regarding the following macro-factors and allocated higher weight to the pessimistic macroeconomic scenario:
- Russian stock market index MOEX;
- Moscow Prime Offered Rate;
- Debt load of Russian population based on statistics from bureaus of credit history.
In order to reflect appropriately the uncertainty associated with the COVID-19 pandemic the Group has made the following changes to their ECL model:
- the macro-adjustment calculation approach was refined to reflect the most recent impact of economic developments;
- an adjustment to the loss given default was made to address lower expected recoveries during the upcoming quarters;
- higher probabilities of default were applied to the loans which have been restructured.
More detailed information about the changes and their impact on the results of the Group's operations for the nine months ended 30 September 2020 is disclosed in Note 4.
The management of the Group considers that the Group has demonstrated over the years and during the current COVID-crisis its ability to withstand shocks and retains its positive long-term outlook in particular due to the following advantages of the Group's business model:
- using flexible business structure, the Group swiftly shifted some of its resources from businesses that were needed to run more conservatively to businesses with higher growth prospects;
- the Group has a highly liquid, diversified, foreign exchange hedged, and well-capitalized balance sheet;
- the Group's digital model is exactly what is needed in the current environment and this can be seen in the ongoing increased online payment volumes as well as increased take up of its mobile lifestyle app, current accounts, and brokerage business;
- by mid-March 2020 over 95% of the Group's office-based employees had successfully moved to remote working, and remain so, without any major disruption to its business model and customer service. Approximately 2,500 smart couriers continue to deliver the Group's products all over Russia.
The Group regularly stress tests its business to assess the sustainability of its liquidity and capital positions. These tests demonstrate that Group's current levels of capital and liquidity are more than sufficient to absorb potential economic and operational shocks related to a second wave of the COVID-19 pandemic. The Group has a proven ability to organically replenish capital and liquidity buffers by slowing down Group's lending and customer acquisition activities, although it currently does not expect to do this for the rest of 2020.
While the number of positive COVID-19 cases continues to rise in Russia, the Group is not aware of any government intentions to re-impose extensive lockdown measures. But some extra measures are being implemented. For example, Moscow's mayor announced that it will limit, among other activities, operations of restaurants, entertainment venues, and public events.
8
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
2 Operating Environment of the Group (Continued)
Although such measures may have a negative impact on the Group's business, the management of the Group considers that the Group is well equipped to deal with such eventualities.
3 Significant Accounting Policies
Basis of preparation. This consolidated condensed interim financial information has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union (EU) and should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2019 which have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the requirements of the Cyprus Companies Law, Cap. 113.
Except as described below, the same accounting policies and methods of computation were followed in the preparation of this consolidated condensed interim financial information as compared with the annual consolidated financial statements for the year ended 31 December 2019.
Cash-settled share-basedprogram. The expense is recognized gradually over the vesting period and is measured at the fair value of the liability at each end of the reporting period. The fair value of the liability reflects all vesting conditions, except for the requirement of the employee to stay in service which is reflected through the amortization schedule.
The liability is measured, initially and at the end of each reporting period until settled, at fair value, taking into account the terms and conditions on which the instruments were granted and the extent to which the employees have rendered service to date.
Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period.
Seasonality. Management does not consider that the Group's business exhibits material differences due to seasonality.
Foreign currency translation. At 30 September 2020 the rate of exchange used for translating foreign currency balances was USD 1 = RR 79.6845 (31 December 2019: USD 1 = RR 61.9057), and the average rate of exchange was USD 1 = RR 70.7778 for the nine months ended 30 September 2020 and USD 1 = RR 73.5598 for the three months ended 30 September 2020 (nine months ended 30 September 2019: USD 1 = RR 65.0789, three months ended 30 September 2019: USD 1 = RR 64.5685).
Changes in presentation. In September 2020 as a result of a detailed review of the marketing agreements with the payment systems the Group changed its accounting policy in relation to income received under these agreements by reclassifying it from Other operating income to reduce the Payment System fees accounted for in Interest income and Fee and commission expenses. Part of the net payment system fees which relates to the borrowers' transactions is included in the effective interest income of the loans. Another part which relates to the customer's transactions was reclassified to Fee and commission expenses and presented on a net basis within the payment systems. Management considers that this reclassification results in a more reliable and relevant presentation of the substance of these agreements since such income from payment systems primarily represents volume rebates, hence it could be offset against related expenses. The net effect of this change in accounting policy on net income for prior periods was not significant and was adjusted in the consolidated condensed interim statement of profit or loss and other comprehensive income for the three months ended 30 September 2020.
In December 2019 the management of the Group made a detailed review of the components that make up interest income and identified one type of fee (payment channels fee) which now has more characteristics of being a service fee than being part of the effective interest income of the loans. The management considers that the reclassification of this fee to Fee and commission expense will result in a more reliable and relevant presentation of the financial information and is more consistent with the market practice of many other banks.
9
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
3 Significant Accounting Policies (Continued)
In 2019 the management of the Group improved the presentation of the results of operations with foreign currencies, derivatives revaluation and foreign exchange translation and disclosed separately in the consolidated condensed interim statement of profit or loss and other comprehensive income the following line items: Net gains/(losses) from derivatives revaluation, Net (losses)/gains from foreign exchange translation and Net gains/(losses) from operations with foreign currencies. Improvements were also made to the presentation of the cash flows from the insurance operations by disclosing separately in the consolidated condensed interim statement of cash flows the following line items: Gains/(losses) from operations with foreign currencies received/(paid), Losses from operations with derivatives paid, Premiums received from insurance operations and Claims paid from insurance operations.
Management considers that such improved and more detailed disclosure provides users of this consolidated condensed interim financial information with more relevant information.
The effect of changes described above on the consolidated condensed interim statement of profit or loss and other comprehensive income for the six months ended 30 June 2020 is as follows:
Unaudited | |||
As | Reclassification | As | |
originally | reclassified | ||
In millions of RR | presented | ||
Six months ended 30 June 2020: | |||
Interest income calculated using the effective interest rate | |||
method | 63,399 | 383 | 63,782 |
Fee and commission expense | (10,260) | 1,249 | (9,011) |
Other operating income | 2,950 | (1,632) | 1,318 |
The effect of changes described above on the consolidated condensed interim statement of profit or loss and other comprehensive income for the nine and three months ended 30 September 2019 is as follows:
Unaudited | |||
As | Reclassification | As | |
originally | reclassified | ||
In millions of RR | presented | ||
Nine months ended 30 September 2019: | |||
Interest income calculated using the effective interest rate | |||
method | 78,982 | 1,662 | 80,644 |
Fee and commission expense | (11,276) | 640 | (10,636) |
Other operating income | 3,168 | (2,302) | 866 |
Net gains/(losses) from derivatives revaluation | - | (1,407) | (1,407) |
Net (losses)/gains from foreign exchange translation | - | 1,236 | 1,236 |
Net gains/(losses) from operations with foreign currencies | (855) | 171 | (684) |
Three months ended 30 September 2019: | |||
Interest income calculated using the effective interest rate | |||
method | 28,841 | 624 | 29,465 |
Interest expense calculated using the effective interest rate method | (5,426) | (105) | (5,531) |
Fee and commission expense | (4,040) | 66 | (3,974) |
Customer acquisition expense | (4,154) | 105 | (4,049) |
Other operating income | 1,125 | (690) | 435 |
Net gains/(losses) from derivatives revaluation | - | (11) | (11) |
Net (losses)/gains from foreign exchange translation | - | (451) | (451) |
Net gains/(losses) from operations with foreign currencies | (477) | 462 | (15) |
10
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
3 Significant Accounting Policies (Continued)
The effect of changes described above on the consolidated condensed interim statement of cash flows for the nine months ended 30 September 2019 is as follows:
Unaudited | |||
As originally | Reclassification | As reclassified | |
In millions of RR | presented | ||
Interest income received calculated using the effective | |||
interest rate method | 75,550 | 1,582 | 77,132 |
Fees and commissions paid | (11,425) | 409 | (11,016) |
Other operating income received | 3,075 | (1,991) | 1,084 |
Gains/(losses) from operations with foreign currencies | |||
received/(paid) | (1,136) | 452 | (684) |
Losses from operations with derivatives paid | - | (452) | (452) |
Insurance premiums received | - | 11,389 | 11,389 |
Insurance claims paid | - | (2,837) | (2,837) |
Cash received from insurance operations | 8,552 | (8,552) | - |
4 Critical Accounting Estimates and Judgements in Applying Accounting Policies
The Group makes estimates and assumptions that affect the amounts recognized in the consolidated condensed interim financial information and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognized in the consolidated condensed interim financial information and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:
ECL measurement. Calculation and measurement of ECLs is an area of significant judgement and involves the use of complex models and data inputs. The following components of ECL calculation have a major impact on credit loss allowance: probability of default ("PD") (impacted by definition of default, SICR, forward-looking scenarios and their weights) and loss given default ("LGD").
The Group makes estimates and judgments, which are constantly analyzed based on statistical data, actual and forecast information, as well as management experience, including expectations regarding future events that are considered reasonable in the current circumstances.
In order to address rising credit risks the Group adjusted the main approaches to assessing the level of expected credit losses that have the most significant effect on the amounts recognised in the consolidated condensed interim financial information:
- the macroeconomic model has become more conservative, based on different scenarios: base, optimistic and pessimistic, and higher weight is assigned to the pessimistic scenario;
- for instruments in default the Group has applied increased coefficients of LGD;
- the Group has estimated the volume of loans to individuals which were restructured as of the reporting date and applied higher PDs to such loans for the purposes of estimation of expected credit losses.
The impact of the changed macroeconomic conditions assessed using the approaches described above was approximately RR 5.4 billion of additional credit loss allowance charge for nine months ended 30 September 2020 and was the main driver of increased cost of risk. Given the unpredictability of current economic environment and uncertainty regarding its development the Group made a decision to keep macro-adjustment at current level.
11
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
4 Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)
Also in the second quarter of 2020 for the purposes of LGD estimation the Group has refined the approach to calculation of the rate used for discounting expected cash flows from defaulted loans. The refined approach is that the Group uses more disaggregated and specific discount rates for each credit product in the overall loan portfolio of the Group rather than one generic rate, which makes the estimate more precise. The impact of this change comprised RR 0.9 billion of additional credit loss allowance charge.
In 2020 the Group has refined its approach to calculation of the impact of modification of original cash flows without derecognition on stage 3 loans credit loss allowance and gross carrying amount (refer to Note 8). In particular the Group refined the approach to estimation of timing of receipt of expected cash flows and related discounting effect. This refinement has not affected either amounts recognised in the consolidated condensed interim statement of profit or loss and other comprehensive income or the amounts recognised in consolidated condensed interim statement of financial position.
An increase or decrease in PDs by 2% compared to PDs used in the ECL estimates calculated at 30 September 2020 would result in an increase or decrease in credit loss allowances of RR 5.1 billion (31 December 2019: by 1% and RR 2.1 billion).
An increase or decrease in LGDs by 2% compared to LGDs used in the ECL estimates calculated at 30 September 2020 would result in an increase or decrease in credit loss allowances of RR 1.5 billion (31 December 2019: by 1% and RR 0.5 billion).
5 Adoption of New or Revised Standards and Interpretations
The following amended standards became effective from 1 January 2020, but did not have any material impact on the Group:
- Interest rate benchmark reform - Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on 26 September 2019 and effective for annual periods beginning on or after 1 January 2020).
- Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual periods beginning on or after 1 January 2020).
- Definition of materiality - Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods beginning on or after 1 January 2020).
- Definition of a business - Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020).
The following amendments became effective from 1 June 2020, but did not have any material impact on the Group:
Covid-19-Related Rent Concessions - Amendments to IFRS 16 (issued on 28 May 2020 and effective for annual periods beginning on or after 1 June 2020).
12
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
6 New Accounting Pronouncements
Certain new amendments have been issued that are mandatory for annual periods beginning on or after
1 January 2021:
IFRS 17 "Insurance Contracts"(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023)*. IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-basedstandard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjustedpresent value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making,an entity will be recognising the loss immediately. The Group is currently assessing the impact of IFRS 17 on the insurance contracts issued by the Insurance Company as well as the impact for credit cards and similar loan products which may include insurance component.
Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023)*. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard. The following amendments to IFRS 17 were made: effective date, expected recovery of insurance acquisition cash flows, contractual service margin attributable to investment services, reinsurance contracts held - recovery of losses and other amendments.
The following other new pronouncements are not expected to have any material impact on the Group when adopted:
- Classification of liabilities as current or non-current, deferral of effective date - Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023)*.
- Sale or contribution of assets between an Investor and its associate or joint venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB)*.
- Annual Improvements to IFRSs 2018-2020 - amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 and narrow scope amendments to IAS 16, IAS 37 and IFRS 3 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022)*.
- Interest rate benchmark (IBOR) reform - phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021)*.
- Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union.
13
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
7 Cash and Cash Equivalents
30 September | 31 December | |
2020 | 2019 | |
In millions of RR | (Unaudited) | |
Cash on hand | 15,201 | 11,118 |
Cash balances with the CBRF (other than mandatory reserve deposits) | 18,424 | 16,599 |
Placements with other banks and non-bank credit organizations with | ||
original maturities of less than three months | 39,856 | 30,079 |
Total cash and cash equivalents | 73,481 | 57,796 |
Cash on hand includes cash balances in ATMs and cash balances in transit. Placements with other banks and organizations with original maturities of less than three months include placements under reverse sale and repurchase agreements in the amount of RR 24,063 million as at 30 September 2020 (31 December 2019: RR 20,681 million). The Group has a right to sell or repledge securities received under reverse sale and repurchase agreements.
The carrying amount of cash and cash equivalents at 30 September 2020 and 31 December 2019 also represents the Group's maximum exposure to credit risk on these assets.
For the purpose of ECL measurement cash and cash equivalents balances are included in Stage 1. The ECL for these balances represents an immaterial amount, therefore the Group did not recognise any credit loss allowance for cash and cash equivalents. Except for reverse sale and repurchase agreements, amounts of cash and cash equivalents are not collateralised. As at 30 September 2020 the fair value of collateral under reverse sale and repurchase agreements was RR 24,031 million (31 December 2019:
- 22,369 million). There is no material impact of collateral on credit loss allowance for cash and cash equivalents. Refer to Note 22 for the disclosure of the fair value of cash and cash equivalents.
8 | Loans and Advances to Customers | ||
30 September | 31 December | ||
2020 | 2019 | ||
In millions of RR | (Unaudited) | ||
Gross carrying amount of loans and advances to customers at AC | 415,253 | 383,912 | |
Less credit loss allowance | (70,374) | (54,737) | |
Total carrying amount of loans and advances to customers at AC | 344,879 | 329,175 | |
Loans and advances to customers at FVTPL | 1,434 | - | |
Total loans and advances to customers | 346,313 | 329,175 |
Loans and advances to customers at FVTPL represent a loan that does not meet SPPI requirement and that was issued to related party (refer to Note 23).
14
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Gross carrying amount and credit loss allowance amount for loans and advances to customers at AC by classes at 30 September 2020 and 31 December 2019 are disclosed in the table below:
30 September 2020 (Unaudited) | 31 December 2019 | |||||
Gross | Credit | Carrying | Gross | Credit | Carrying | |
carrying | loss | amount | carrying | loss | amount | |
In millions of RR | amount | allowance | amount | allowance | ||
Credit card loans | 262,228 | (55,512) | 206,716 | 244,937 | (44,129) | 200,808 |
Cash loans | 59,175 | (10,149) | 49,026 | 62,265 | (8,029) | 54,236 |
Other loans | 93,850 | (4,713) | 89,137 | 76,710 | (2,579) | 74,131 |
- Secured loans | 36,431 | (977) | 35,454 | 29,601 | (496) | 29,105 |
- POS loans | 26,384 | (1,487) | 24,897 | 25,940 | (1,057) | 24,883 |
- Car loans | 28,963 | (1,853) | 27,110 | 20,156 | (913) | 19,243 |
- Loans to IE and SME | 2,072 | (396) | 1,676 | 1,013 | (113) | 900 |
Total loans and advances to | ||||||
customers at AC | 415,253 | (70,374) | 344,879 | 383,912 | (54,737) | 329,175 |
Credit cards are issued to customers for cash withdrawals or payment for goods or services, within the range of limits established by the Bank. These limits may be increased or decreased from time-to-time based on management decision. Credit card loans are not collateralized.
Cash loans represent a product for the borrowers who have a positive credit history and who do not have overdue loans in other banks. Cash loans are loans provided to customers via the Bank's debit cards. These loans are available for withdrawal without commission.
Secured loans represent loans secured with a car or real estate.
POS ("Point of sale") loans represent loans to fund online and offline purchases through internet and offline shops for individual borrowers.
Car loans represent loans for the purchase of a vehicle which is used as collateral under the loan.
Loans to IE and SME represent loans provided by the Bank to individual entrepreneurs and small and medium businesses for the purpose of working capital management.
The credit loss allowance for loans and advances to customers recognised in the period is impacted by a variety of factors. The main movements in the tables presented below are described as follows:
- new originated or purchased category represents the gross carrying amounts and the related ECL of purchased loans and loans issued during the reporting period (and withdrawals of limits of new credit card borrowers) as at the end of the reporting period or as at the date of transfer of loan out of stage 1 (whichever date is earlier);
- transfers between Stage 1, 2 and 3 due to balances experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent "step up" (or "step down") between 12-month and lifetime ECL. Transfers present the amount of credit loss allowance charged or recovered at the moment of transfer of a loan among the respective stages;
- changes to ECL measurement model assumptions and estimates represent movements due to changes in PDs, EADs and LGDs models during the period;
- movements other than transfers and new originated or purchased loans category represent all other movements of ECL in particular related to changes in gross carrying amounts (including drawdowns, repayments, and accrued interest), as well as updates of inputs to ECL model in the period;
- write-offsof allowances are related to assets that were written-off during the period;
15
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
- unwinding of discount (for Stage 3) category represents adjustment to credit loss allowance and gross carrying amount for Stage 3 loans to increase it to discounted amount of the expected cash shortfalls to the reporting date using the effective interest rate.
The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans and advances to customers between the beginning and the end of the reporting and comparative periods:
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | |||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | |||
In millions of RR | impaired) | impaired) | |||||||
Credit card loans | |||||||||
At 31 December 2019 | 11,704 | 6,853 | 25,572 | 44,129 | 197,796 | 11,432 | 35,373 | 336 | 244,937 |
Movements with impact | |||||||||
on credit loss allowance | |||||||||
charge for nine months | |||||||||
ended 30 September | |||||||||
2020 | |||||||||
New originated or | |||||||||
purchased | 2,760 | - | - | 2,760 | 31,786 | - | - | 161 | 31,947 |
Transfers: | |||||||||
- to lifetime (from Stage 1 | |||||||||
to Stage 2) | (3,136) | 6,662 | - | 3,526 | (14,042) | 14,042 | - | - | - |
- to credit-impaired (from Stage 1 and Stage 2 to
Stage 3) | (4,018) (6,556) | 23,159 | 12,585 | (20,196) (9,399) | 29,595 | - | - |
- recovered (from Stage 3 to Stage 2 and from Stage
2 to Stage 1) | 342 | (779) | (26) | (463) | 1,446 | (1,415) | (31) | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and | |||||||||
estimates | 2,840 | 300 | 1,336 | 4,476 | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 5,823 | 1,963 | (3,169) | 4,617 | 5,485 | (4) | (3,717) | (168) | 1,596 |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
nine months ended | |||||||||
30 September 2020 | 4,611 | 1,590 | 21,300 | 27,501 | 4,479 | 3,224 | 25,847 | (7) | 33,543 |
Movements without | |||||||||
impact on credit loss | |||||||||
allowance charge for the | |||||||||
period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 4,410 | 4,410 | - | - | 4,410 | - | 4,410 |
Write-offs | - | - | (10,036) | (10,036) | - | - | (10,036) | - | (10,036) |
Sales | - | - | (1,017) | (1,017) | - | - | (1,151) | - | (1,151) |
Modification of original | |||||||||
cash flows without | |||||||||
derecognition | - | - | (9,475) | (9,475) | - | - | (9,475) | - | (9,475) |
At 30 September 2020 | 16,315 | 8,443 | 30,754 | 55,512 | 202,275 | 14,656 | 44,968 | 329 | 262,228 |
16
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- (lifetime (lifetime originated | ||||||
months | ECL) | ECL) | months | ECL) | ECL) | credit | |||
In millions of RR | ECL) | ECL) | impaired | ||||||
Credit card loans | |||||||||
At 30 June 2020 | 14,710 | 11,831 | 29,483 | 56,024 | 190,815 | 20,878 | 41,747 | 361 | 253,801 |
Movements with impact on | |||||||||
credit loss allowance | |||||||||
charge for three months | |||||||||
ended 30 September 2020 | |||||||||
New originated or | |||||||||
purchased | 786 | - | - | 786 | 12,022 | - | - | 23 | 12,045 |
Transfers: | |||||||||
- to lifetime (from Stage 1 to | |||||||||
Stage 2) | (2,087) | 4,375 | - | 2,288 | (9,057) | 9,057 | - | - | - |
- to credit-impaired (from Stage 1 and Stage 2 to
Stage 3) | (168) | (7,412) | 8,464 | 884 | (642) (10,050) | 10,692 | - | - |
- recovered (from Stage 3 to Stage 2 and from Stage 2 to
Stage 1) | 1,332 | (2,365) | (67) | (1,100) | 5,033 | (4,950) | (83) | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and estimates | (144) | 14 | 61 | (69) | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 1,886 | 2,000 | (1,242) | 2,644 | 4,104 | (279) | (1,402) | (55) | 2,368 |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
three months ended | 1,605 | (3,388) | 7,216 | 5,433 | 11,460 | (6,222) | 9,207 | (32) | 14,413 |
30 September 2020 | |||||||||
Movements without impact | |||||||||
on credit loss allowance | |||||||||
charge for the period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 1,276 | 1,276 | - | - | 1,276 | - | 1,276 |
Write-offs | - | - | (3,652) | (3,652) | - | - | (3,652) | - | (3,652) |
Sales | - | - | (232) | (232) | - | - | (273) | - | (273) |
Modification of original cash | |||||||||
flows without derecognition | - | - | (3,337) | (3,337) | - | - | (3,337) | - | (3,337) |
At 30 September 2020 | 16,315 | 8,443 | 30,754 | 55,512 | 202,275 | 14,656 | 44,968 | 329 | 262,228 |
17
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | |||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) credit im- | ECL) | SICR) credit im- | impaired | |||||
In millions of RR | paired) | paired) | |||||||
Credit card loans | |||||||||
At 31 December 2018 | 9,266 | 4,708 | 19,322 | 33,296 | 145,732 | 6,654 | 25,497 | 107 | 177,990 |
Movements with impact on | |||||||||
credit loss allowance | |||||||||
charge for nine months | |||||||||
ended 30 September 2019 | |||||||||
New originated or | |||||||||
purchased | 3,994 | - | - | 3,994 | 48,653 | - | - | 128 | 48,781 |
Transfers: | |||||||||
- to lifetime (from Stage 1 to | |||||||||
Stage 2) | (2,512) | 6,221 | - | 3,709 | (10,515) | 10,515 | - | - | - |
- to credit-impaired (from Stage 1 and Stage 2 to
Stage 3) | (2,988) | (3,994) 15,042 | 8,060 | (13,303) | (5,140) 18,443 | - | - |
- recovered (from Stage 3 to Stage 2 and from Stage 2 to
Stage 1) | 251 | (794) | (15) | (558) | 1,167 | (1,149) | (18) | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and estimates | (387) | - | - | (387) | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 3,595 | 916 | (3,407) | 1,104 | 24,048 | 257 | (4,025) | (8) | 20,272 |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for nine | |||||||||
months ended | 1,953 | 2,349 | 11,620 | 15,922 | 50,050 | 4,483 | 14,400 | 120 | 69,053 |
30 September 2019 | |||||||||
Movements without impact | |||||||||
on credit loss allowance | |||||||||
charge for the period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 2,175 | 2,175 | - | - | 2,175 | - | 2,175 |
Write-offs | - | - | (8,656) | (8,656) | - | - | (8,656) | - | (8,656) |
Sales | - | - | (739) | (739) | - | - | (843) | - | (843) |
Modification of original cash | |||||||||
flows without derecognition | - | - | (1,559) | (1,559) | - | - | (1,559) | - | (1,559) |
At 30 September 2019 | 11,219 | 7,057 | 22,163 | 40,439 | 195,782 | 11,137 | 31,014 | 227 | 238,160 |
18
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | ||||||||||
Credit loss allowance | Gross carrying amount | |||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | ||
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | ||||
months | ECL for | ECL for | months | ECL for | ECL for | credit | ||||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | ||||
im- | im- | |||||||||
In millions of RR | paired) | paired) | ||||||||
Credit card loans | ||||||||||
At 30 June 2019 | 10,392 | 6,489 | 19,479 | 36,360 | 185,036 | 9,767 | 27,211 | 221 | 222,235 | |
Movements with impact on | ||||||||||
credit loss allowance | ||||||||||
charge for three months | ||||||||||
ended 30 September 2019 | ||||||||||
New originated or | ||||||||||
purchased | 551 | - | - | 551 | 10,567 | - | - | 45 | 10,612 | |
Transfers: | ||||||||||
- to lifetime (from Stage 1 to | ||||||||||
Stage 2) | (2,144) | 5,370 | - | 3,226 | (9,094) | 9,094 | - | - | - | |
- to credit-impaired (from | ||||||||||
Stage 1 and Stage 2 to | ||||||||||
Stage 3) | (259) | (4,878) | 6,054 | 917 | (1,109) | (6,428) | 7,537 | - | - | |
- recovered (from Stage 3 | ||||||||||
to Stage 2 and from Stage | ||||||||||
2 to Stage 1) | 367 | (1,097) | (33) | (763) | 1,778 | (1,738) | (40) | - | - | |
Changes to ECL | ||||||||||
measurement model | ||||||||||
assumptions and estimates | - | - | - | - | - | - | - | - | - | |
Movements other than | ||||||||||
transfers and new | ||||||||||
originated or purchased | ||||||||||
loans | 2,312 | 1,173 | (1,111) | 2,374 | 8,604 | 442 | (1,431) | (39) | 7,576 | |
Total movements with | ||||||||||
impact on credit loss | ||||||||||
allowance charge for | ||||||||||
three months ended | 827 | 568 | 4,910 | 6,305 | 10,746 | 1,370 | 6,066 | 6 | 18,188 | |
30 September 2019 | ||||||||||
Movements without impact | ||||||||||
on credit loss allowance | ||||||||||
charge for the period | ||||||||||
Unwinding of discount (for | ||||||||||
Stage 3) | - | - | 932 | 932 | - | - | 932 | - | 932 | |
Write-offs | - | - | (2,385) | (2,385) | - | - | (2,385) | - | (2,385) | |
Sales | - | - | (222) | (222) | - | - | (259) | - | (259) | |
Modification of original cash | ||||||||||
flows without derecognition | - | - | (551) | (551) | - | - | (551) | - | (551) | |
At 30 September 2019 | 11,219 | 7,057 | 22,163 | 40,439 | 195,782 | 11,137 | 31,014 | 227 | 238,160 | |
19
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | |||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | |||
In millions of RR | impaired) | impaired) | |||||||
Cash loans | |||||||||
At 31 December 2019 | 2,358 | 1,882 | 3,789 | 8,029 | 51,925 | 5,034 | 4,670 | 636 | 62,265 |
Movements with impact on | |||||||||
credit loss allowance | |||||||||
charge for nine months | |||||||||
ended 30 September 2020 | |||||||||
New originated or | |||||||||
purchased | 1,589 | - | - | 1,589 | 24,061 | - | - | 35 | 24,096 |
Transfers: | |||||||||
- to lifetime (from Stage 1 | |||||||||
to Stage 2) | (736) | 3,125 | - | 2,389 | (5,177) | 5,177 | - | - | - |
- to credit-impaired (from | |||||||||
Stage 1 and Stage 2 to | |||||||||
Stage 3) | (1,042) | (1,705) | 4,703 | 1,956 | (3,084) | (2,178) | 5,262 | - | - |
- recovered (from Stage 3 | |||||||||
to Stage 2 and from Stage | |||||||||
2 to Stage 1) | 64 | (262) | (3) | (201) | 1,046 | (1,043) | (3) | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and | |||||||||
estimates | 813 | 110 | 176 | 1,099 | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 238 | (885) | (612) | (1,259) | (21,755) | (1,543) | (143) | (268) | (23,709) |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
nine months ended | |||||||||
30 September 2020 | 926 | 383 | 4,264 | 5,573 | (4,909) | 413 | 5,116 | (233) | 387 |
Movements without impact | |||||||||
on credit loss allowance | |||||||||
charge for the period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 366 | 366 | - | - | 366 | - | 366 |
Write-offs | - | - | (1,638) | (1,638) | - | - | (1,638) | - | (1,638) |
Sales | - | - | (315) | (315) | - | - | (339) | - | (339) |
Modification of original | |||||||||
cash flows without | |||||||||
derecognition | - | - | (1,866) | (1,866) | - | - | (1,866) | - | (1,866) |
At 30 September 2020 | 3,284 | 2,265 | 4,600 | 10,149 | 47,016 | 5,447 | 6,309 | 403 | 59,175 |
20
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | ||||||||||
Credit loss allowance | Gross carrying amount | |||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | ||
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | ||||
months | ECL) | ECL) | months | ECL) | ECL) | credit | ||||
In millions of RR | ECL) | ECL) | impaired | |||||||
Cash loans | ||||||||||
At 30 June 2020 | 3,315 | 2,828 | 4,204 | 10,347 | 46,489 | 6,592 | 5,663 | 607 | 59,351 | |
Movements with impact on | ||||||||||
credit loss allowance | ||||||||||
charge for three months | ||||||||||
ended 30 September 2020 | ||||||||||
New originated or | ||||||||||
purchased | 653 | - | - | 653 | 11,380 | - | - | 31 | 11,411 | |
Transfers: | ||||||||||
- to lifetime (from Stage 1 | ||||||||||
to Stage 2) | (386) | 1,567 | - | 1,181 | (2,557) | 2,557 | - | - | - | |
- to credit-impaired (from | ||||||||||
Stage 1 and Stage 2 to | ||||||||||
Stage 3) | (96) | (1,348) | 1,556 | 112 | (198) | (1,574) | 1,772 | - | - | |
- recovered (from Stage 3 | ||||||||||
to Stage 2 and from Stage | ||||||||||
2 to Stage 1) | 96 | (364) | (14) | (282) | 1,358 | (1,343) | (15) | - | - | |
Changes to ECL | ||||||||||
measurement model | ||||||||||
assumptions and | ||||||||||
estimates | (17) | (5) | 35 | 13 | - | - | - | - | - | |
Movements other than | ||||||||||
transfers and new | ||||||||||
originated or purchased | ||||||||||
loans | (281) | (413) | (117) | (811) | (9,456) | (785) | (40) | (235) | (10,516) | |
Total movements with | ||||||||||
impact on credit loss | ||||||||||
allowance charge for | ||||||||||
three months ended | (31) | (563) | 1,460 | 866 | 527 | (1,145) | 1,717 | (204) | 895 | |
30 September 2020 | ||||||||||
Movements without impact | ||||||||||
on credit loss allowance | ||||||||||
charge for the period | ||||||||||
Unwinding of discount (for | ||||||||||
Stage 3) | - | - | 149 | 149 | - | - | 149 | - | 149 | |
Write-offs | - | - | (664) | (664) | - | - | (664) | - | (664) | |
Sales | - | - | (86) | (86) | - | - | (93) | - | (93) | |
Modification of original | ||||||||||
cash flows without | ||||||||||
derecognition | - | - | (463) | (463) | - | - | (463) | - | (463) | |
At 30 September 2020 | 3,284 | 2,265 | 4,600 | 10,149 | 47,016 | 5,447 | 6,309 | 403 | 59,175 | |
21
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | |||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) | credit im- | ECL) | SICR) | credit im- | impaired | |||
In millions of RR | paired) | paired) | |||||||
Cash loans | |||||||||
At 31 December 2018 | 1,116 | 545 | 670 | 2,331 | 32,651 | 1,776 | 767 | 301 | 35,495 |
Movements with impact | |||||||||
on credit loss allowance | |||||||||
charge for nine months | |||||||||
ended 30 September | |||||||||
2019 | |||||||||
New originated or | |||||||||
purchased loans | 2,091 | - | - | 2,091 | 42,027 | - | - | 154 | 42,181 |
Transfers: | |||||||||
- to lifetime (from Stage 1 | |||||||||
to Stage 2) | (487) | 2,543 | - | 2,056 | (5,038) | 5,038 | - | - | - |
- to credit-impaired (from | |||||||||
Stage 1 and Stage 2 to | |||||||||
Stage 3) | (547) | (496) | 2,583 | 1,540 | (2,126) | (640) | 2,766 | - | - |
- recovered (from Stage 3 | |||||||||
to Stage 2 and from Stage | |||||||||
2 to Stage 1) | 14 | (76) | - | (62) | 419 | (419) | - | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and | |||||||||
estimates | (22) | - | - | (22) | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 56 | (745) | 86 | (603) | (13,203) | (993) | 340 | (123) | (13,979) |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
nine months ended | |||||||||
30 September 2019 | 1,105 | 1,226 | 2,669 | 5,000 | 22,079 | 2,986 | 3,106 | 31 | 28,202 |
Movements without | |||||||||
impact on credit loss | |||||||||
allowance charge for the | |||||||||
period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 91 | 91 | - | - | 91 | - | 91 |
Write-offs | - | - | (305) | (305) | - | - | (305) | - | (305) |
Sales | - | - | (83) | (83) | - | - | (89) | - | (89) |
Modification of original | |||||||||
cash flows without | |||||||||
derecognition | - | - | (327) | (327) | - | - | (327) | - | (327) |
At 30 September 2019 | 2,221 | 1,771 | 2,715 | 6,707 | 54,730 | 4,762 | 3,243 | 332 | 63,067 |
22
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | |||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR)credit im- | ECL) | SICR) | credit im- | impaired | ||||
In millions of RR | paired) | paired) | |||||||
Cash loans | |||||||||
At 30 June 2019 | 1,922 | 1,450 | 1,675 | 5,047 | 54,396 | 4,229 | 1,984 | 283 | 60,892 |
Movements with impact | |||||||||
on credit loss allowance | |||||||||
charge for three months | |||||||||
ended 30 September | |||||||||
2019 | |||||||||
New originated or | |||||||||
purchased loans | 465 | - | - | 465 | 11,741 | - | - | 90 | 11,831 |
Transfers: | |||||||||
- to lifetime (from Stage 1 | |||||||||
to Stage 2) | (389) | 1,648 | - | 1,259 | (3,121) | 3,121 | - | - | - |
- to credit-impaired (from | |||||||||
Stage 1 and Stage 2 to | |||||||||
Stage 3) | (119) | (870) | 1,331 | 342 | (336) | (1,100) | 1,436 | - | - |
- recovered (from Stage 3 | |||||||||
to Stage 2 and from Stage | |||||||||
2 to Stage 1) | 33 | (164) | (2) | (133) | 960 | (958) | (2) | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 309 | (293) | (31) | (15) | (8,910) | (530) | 85 | (41) | (9,396) |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
three months ended | |||||||||
30 September 2019 | 299 | 321 | 1,298 | 1,918 | 334 | 533 | 1,519 | 49 | 2,435 |
Movements without | |||||||||
impact on credit loss | |||||||||
allowance charge for the | |||||||||
period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 39 | 39 | - | - | 39 | - | 39 |
Write-offs | - | - | (137) | (137) | - | - | (137) | - | (137) |
Sales | - | - | (24) | (24) | - | - | (26) | - | (26) |
Modification of original | |||||||||
cash flows without | |||||||||
derecognition | - | - | (136) | (136) | - | - | (136) | - | (136) |
At 30 September 2019 | 2,221 | 1,771 | 2,715 | 6,707 | 54,730 | 4,762 | 3,243 | 332 | 63,067 |
23
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
The following table discloses the changes in the credit loss allowance and gross carrying amount between the beginning and the end of the reporting periods for secured loans, POS loans, car loans and loans to IE and SME combined as the amount of such changes for these products is not significant.
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- (lifetime (lifetime originated | ||||||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | |||
In millions of RR | impaired) | impaired) | |||||||
Other loans | |||||||||
At 31 December 2019 | 873 | 749 | 957 | 2,579 | 71,062 | 4,171 | 1,279 | 198 | 76,710 |
Movements with impact | |||||||||
on credit loss allowance | |||||||||
charge for nine months | |||||||||
ended 30 September | |||||||||
2020 | |||||||||
New originated or | |||||||||
purchased | 803 | - | - | 803 | 50,720 | - | - | 58 | 50,778 |
Transfers: | |||||||||
- to lifetime (from Stage 1 | |||||||||
to Stage 2) | (260) | 2,182 | - | 1,922 | (6,964) | 6,964 | - | - | - |
- to credit-impaired (from | |||||||||
Stage 1 and Stage 2 to | |||||||||
Stage 3) | (247) | (568) | 1,779 | 964 | (1,497) | (970) | 2,467 | - | - |
- recovered (from Stage 3 | |||||||||
to Stage 2 and from | |||||||||
Stage 2 to Stage 1) | 15 | (101) | (4) | (90) | 1,040 | (1,031) | (9) | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and | |||||||||
estimates | 242 | 15 | 22 | 279 | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | 122 | (1,067) | (208) | (1,153) | (30,591) | (2,189) | (219) | (46) | (33,045) |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
nine months ended | |||||||||
30 September 2020 | 675 | 461 | 1,589 | 2,725 | 12,708 | 2,774 | 2,239 | 12 | 17,733 |
Movements without | |||||||||
impact on credit loss | |||||||||
allowance charge for the | |||||||||
period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 119 | 119 | - | - | 119 | - | 119 |
Write-offs | - | - | (281) | (281) | - | - | (281) | - | (281) |
Sales | - | - | (37) | (37) | - | - | (39) | - | (39) |
Modification of original | |||||||||
cash flows without | |||||||||
derecognition | - | - | (392) | (392) | - | - | (392) | - | (392) |
At 30 September 2020 | 1,548 | 1,210 | 1,955 | 4,713 | 83,770 | 6,945 | 2,925 | 210 | 93,850 |
24
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12- | (lifetime | (lifetime | (12- | (lifetime | (lifetime | originated | |||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | |||
In millions of RR | impaired) | impaired) | |||||||
Other loans | |||||||||
At 30 June 2020 | 1,392 | 1,363 | 1,640 | 4,395 | 71,803 | 7,408 | 2,419 | 210 | 81,840 |
Movements with impact | |||||||||
on credit loss allowance | |||||||||
charge for nine months | |||||||||
ended 30 September | |||||||||
2020 | |||||||||
New originated or | |||||||||
purchased | 419 | - | - | 419 | 27,250 | - | - | 41 | 27,291 |
Transfers: | |||||||||
- to lifetime (from Stage 1 | |||||||||
to Stage 2) | (109) | 972 | - | 863 | (3,072) | 3,072 | - | - | - |
- to credit-impaired (from | |||||||||
Stage 1 and Stage 2 to | |||||||||
Stage 3) | (24) | (481) | 620 | 115 | (104) | (758) | 862 | - | - |
- recovered (from Stage 3 | |||||||||
to Stage 2 and from | |||||||||
Stage 2 to Stage 1) | 24 | (175) | (12) | (163) | 1,750 | (1,724) | (26) | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and | |||||||||
estimates | (8) | (7) | (5) | (20) | - | - | - | - | - |
Movements other than | |||||||||
transfers and new | |||||||||
originated or purchased | |||||||||
loans | (146) | (462) | (89) | (697) | (13,857) | (1,053) | (131) | (41) | (15,082) |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for | |||||||||
nine months ended | |||||||||
30 September 2020 | 156 | (153) | 514 | 517 | 11,967 | (463) | 705 | - | 12,209 |
Movements without | |||||||||
impact on credit loss | |||||||||
allowance charge for the | |||||||||
period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 53 | 53 | - | - | 53 | - | 53 |
Write-offs | - | - | (135) | (135) | - | - | (135) | - | (135) |
Sales | - | - | (10) | (10) | - | - | (10) | - | (10) |
Modification of original | |||||||||
cash flows without | |||||||||
derecognition | - | - | (107) | (107) | - | - | (107) | - | (107) |
At 30 September 2020 | 1,548 | 1,210 | 1,955 | 4,713 | 83,770 | 6,945 | 2,925 | 210 | 93,850 |
25
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | |||||||||
Credit loss allowance | Gross carrying amount | ||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 Purchased/ | Total | ||
(12- | (lifetime | (lifetime | (12- (lifetime (lifetime originated | ||||||
months | ECL for | ECL for | months | ECL for | ECL for | credit | |||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | |||
In millions of RR | impaired) | impaired) | |||||||
Other loans | |||||||||
At 31 December 2018 | 274 | 117 | 203 | 594 | 20,287 | 607 | 226 | 105 | 21,225 |
Movements with impact on | |||||||||
credit loss allowance charge | |||||||||
for nine months ended 30 | |||||||||
September 2019 | |||||||||
New originated or purchased | 687 | - | - | 687 | 49,792 | - | - | 37 | 49,829 |
Transfers: | |||||||||
- to lifetime (from Stage 1 to | |||||||||
Stage 2) | (120) | 997 | - | 877 | (3,368) | 3,368 | - | - | - |
- to credit-impaired (from | |||||||||
Stage 1 and Stage 2 to | |||||||||
Stage 3) | (97) | (116) | 639 | 426 | (612) | (166) | 778 | - | - |
- recovered (from Stage 3 to | |||||||||
Stage 2 and from Stage 2 to | |||||||||
Stage 1) | 1 | (10) | - | (9) | 141 | (141) | - | - | - |
Changes to ECL | |||||||||
measurement model | |||||||||
assumptions and estimates | (4) | - | - | (4) | - | - | - | - | - |
Movements other than | |||||||||
transfers and new originated | |||||||||
or purchased loans | (20) | (444) | (67) | (531) | (2,238) | (877) | (51) | (43) | (3,209) |
Total movements with | |||||||||
impact on credit loss | |||||||||
allowance charge for nine | |||||||||
months ended | |||||||||
30 September 2019 | 447 | 427 | 572 | 1,446 | 43,715 | 2,184 | 727 | (6) | 46,620 |
Movements without impact | |||||||||
on credit loss allowance | |||||||||
charge for the period | |||||||||
Unwinding of discount (for | |||||||||
Stage 3) | - | - | 28 | 28 | - | - | 28 | - | 28 |
Write-offs | - | - | (89) | (89) | - | - | (89) | - | (89) |
Sales | - | - | (16) | (16) | - | - | (18) | - | (18) |
Modification of original cash | |||||||||
flows without derecognition | - | - | (35) | (35) | - | - | (35) | - | (35) |
At 30 September 2019 | 721 | 544 | 663 | 1,928 | 64,002 | 2,791 | 839 | 99 | 67,731 |
26
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Unaudited | ||||||||||
Credit loss allowance | Gross carrying amount | |||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 Purchased/ | Total | |||
(12- | (lifetime | (lifetime | (12- (lifetime (lifetime originated | |||||||
months | ECL for | ECL for | months | ECL for | ECL for | credit | ||||
ECL) | SICR) | credit | ECL) | SICR) | credit | impaired | ||||
In millions of RR | impaired) | impaired) | ||||||||
Other loans | ||||||||||
At 30 June 2019 | 547 | 377 | 420 | 1,344 | 47,263 | 2,059 | 499 | 101 | 49,922 | |
Movements with impact on | ||||||||||
credit loss allowance charge | ||||||||||
for three months ended 30 | ||||||||||
September 2019 | ||||||||||
New originated or purchased | 312 | - | - | 312 | 26,913 | - | - | 25 | 26,938 | |
Transfers: | ||||||||||
- to lifetime (from Stage 1 to | ||||||||||
Stage 2) | (90) | 651 | - | 561 | (2,139) | 2,139 | - | - | - | |
- to credit-impaired (from | ||||||||||
Stage 1 and Stage 2 to | ||||||||||
Stage 3) | (20) | (206) | 317 | 91 | (105) | (300) | 405 | - | - | |
- recovered (from Stage 3 to | ||||||||||
Stage 2 and from Stage 2 to | ||||||||||
Stage 1) | 5 | (39) | (1) | (35) | 548 | (544) | (4) | - | - | |
Movements other than | ||||||||||
transfers and new originated | ||||||||||
or purchased loans | (33) | (239) | (36) | (308) | (8,478) | (563) | (23) | (27) | (9,091) | |
Total movements with | ||||||||||
impact on credit loss | ||||||||||
allowance charge for three | ||||||||||
months ended | ||||||||||
30 September 2019 | 174 | 167 | 280 | 621 | 16,739 | 732 | 378 | (2) | 17,847 | |
Movements without impact | ||||||||||
on credit loss allowance | ||||||||||
charge for the period | ||||||||||
Unwinding of discount (for | ||||||||||
Stage 3) | - | - | 15 | 15 | - | - | 15 | - | 15 | |
Write-offs | - | - | (39) | (39) | - | - | (39) | - | (39) | |
Sales | - | - | (4) | (4) | - | - | (5) | - | (5) | |
Modification of original cash | ||||||||||
flows without derecognition | - | - | (9) | (9) | - | - | (9) | - | (9) | |
At 30 September 2019 | 721 | 544 | 663 | 1,928 | 64,002 | 2,791 | 839 | 99 | 67,731 | |
27
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
The credit loss allowance charge during the nine months ended 30 September 2020 presented in the tables above differs from the amount presented in the consolidated condensed interim statement of profit or loss and other comprehensive income for the period due to RR 2,777 million recovery of amounts previously written-off as uncollectible (three months ended 30 September 2020: RR 988 million), and due to
- 1,591 million charge of ECL for credit related commitments, including RR 443 million of charge due to changes to ECL measurement model assumptions and estimates (three months ended 30 September 2020: due to RR 758 million charge of ECL for credit related commitments).
The credit loss allowance charge during the nine months ended 30 September 2019 presented in the tables above differs from the amount presented in the consolidated condensed interim statement of profit or loss and other comprehensive income for the period due to RR 2,440 million recovery of amounts previously written-off as uncollectible (three months ended 30 September 2019: recovery of RR 838 million), and due to RR 325 million release of ECL for credit related commitments (three months ended 30 September 2019: release of RR 54 million).
The amount of the recovery from written-off loans received during the period was credited directly to the credit loss allowance line in the consolidated condensed interim statement of profit or loss and other comprehensive income.
The contractual amounts outstanding of loans and advances to customers which were written off during the nine and three months ended 30 September 2020 and are still subject to enforcement activity are equal to RR 10,017 million and RR 3,597 million, respectively (RR 7,853 million during the nine months ended 30 September 2019 and RR 2,213 million during the three months ended 30 September 2019).
The amount of the ECL for credit related commitments is accounted for separately from ECL for credit cards loans and is included in other financial liabilities in the consolidated condensed interim statement of financial position.
During the nine months ended 30 September 2020 the Group sold credit-impaired loans to third parties (external debt collection agencies) with a gross amount of RR 1,529 million (three months ended 30 September 2020: RR 376 million) and credit loss allowance of RR 1,369 million (three months ended 30 September 2020: RR 328 million). The difference between the carrying amount of these loans and the consideration received was recognised as losses in the amount of RR 134 million within credit loss allowance for loans and advances to customers and credit related commitments for the nine months ended 30 September 2020 (three months ended 30 September 2020: RR 41 million as losses).
During the nine months ended 30 September 2019 the Group sold credit-impaired loans to third parties (external debt collection agencies) with a gross amount of RR 950 million (three months ended 30 September 2019: RR 290 million) and credit loss allowance of RR 838 million (three months ended 30 September 2019: RR 250 million). The difference between the carrying amount of these loans and the consideration received was recognised as losses in the amount of RR 53 million within credit loss allowance for loans and advances to customers for the nine months ended 30 September 2019 (three months ended 30 September 2019: RR 18 million as losses).
28
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Presented below is an analysis of issued, activated and utilised cards based on their credit card limits as at the end of the reporting period:
30 September 2020 | ||
In units | (Unaudited) | 31 December 2019 |
Credit card limits | ||
Up to RR 20 thousand | 970,459 | 781,128 |
RR 20-40 thousand | 513,501 | 482,343 |
RR 40-60 thousand | 474,160 | 451,425 |
RR 60-80 thousand | 472,860 | 455,978 |
RR 80-100 thousand | 449,227 | 440,139 |
RR 100-120 thousand | 306,386 | 322,726 |
RR 120-140 thousand | 344,376 | 365,750 |
RR 140-200 thousand | 827,486 | 772,992 |
More than RR 200 thousand | 207,017 | 180,731 |
Total number of cards (in units) | 4,565,472 | 4,253,212 |
Table above only includes credit cards less than 180 days overdue.
The following table contains an analysis of the credit risk exposure of loans and advances to customers measured at AC and for which an ECL allowance is recognised. The carrying amount of loans and advances to customers below also represents the Group's maximum exposure to credit risk on these loans.
Loans and advances to customers at 30 September 2020 are disclosed as follows:
Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12-months | (lifetime ECL | (lifetime ECL | originated | ||
ECL) | for SICR) | for credit | credit | ||
In millions of RR | impaired) | impaired | |||
Credit card loans | |||||
- Excellent | 67,692 | - | - | - | 67,692 |
- Good | 125,945 | 3,874 | - | - | 129,819 |
- Monitor | 8,638 | 4,610 | - | - | 13,248 |
- Sub-standard | - | 6,172 | 8,214 | - | 14,386 |
- NPL | - | - | 36,754 | 329 | 37,083 |
Gross carrying amount | 202,275 | 14,656 | 44,968 | 329 | 262,228 |
Credit loss allowance | (16,315) | (8,443) | (30,754) | - | (55,512) |
Carrying amount | 185,960 | 6,213 | 14,214 | 329 | 206,716 |
29
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12-months | (lifetime ECL | (lifetime ECL | originated | ||
ECL) | for SICR) | for credit | credit | ||
In millions of RR | impaired) | impaired | |||
Cash loans | |||||
- Excellent | 27,183 | - | - | - | 27,183 |
- Good | 19,523 | 3,696 | - | - | 23,219 |
- Monitor | 310 | 790 | - | - | 1,100 |
- Sub-standard | - | 961 | 924 | - | 1,885 |
- NPL | - | - | 5,385 | 403 | 5,788 |
Gross carrying amount | 47,016 | 5,447 | 6,309 | 403 | 59,175 |
Credit loss allowance | (3,284) | (2,265) | (4,600) | - | (10,149) |
Carrying amount | 43,732 | 3,182 | 1,709 | 403 | 49,026 |
Secured Loans | |||||
- Excellent | 18,986 | - | - | - | 18,986 |
- Good | 12,612 | 3,013 | - | - | 15,625 |
- Monitor | 162 | 598 | - | - | 760 |
- Sub-standard | - | 311 | - | - | 311 |
- NPL | - | - | 749 | - | 749 |
Gross carrying amount | 31,760 | 3,922 | 749 | - | 36,431 |
Credit loss allowance | (201) | (478) | (298) | - | (977) |
Carrying amount | 31,559 | 3,444 | 451 | - | 35,454 |
POS loans | |||||
- Excellent | 19,620 | - | - | - | 19,620 |
- Good | 4,390 | 729 | - | - | 5,119 |
- Monitor | 130 | 143 | - | - | 273 |
- Sub-standard | - | 135 | 28 | - | 163 |
- NPL | - | - | 999 | 210 | 1,209 |
Gross carrying amount | 24,140 | 1,007 | 1,027 | 210 | 26,384 |
Credit loss allowance | (432) | (200) | (855) | - | (1,487) |
Carrying amount | 23,708 | 807 | 172 | 210 | 24,897 |
30
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12-months | (lifetime | (lifetime ECL | originated | ||
ECL) | ECL for | for credit | credit | ||
In millions of RR | SICR) | impaired) | impaired | ||
Car loans | |||||
- Excellent | 19,055 | - | - | - | 19,055 |
- Good | 6,765 | 1,393 | - | - | 8,158 |
- Monitor | 132 | 334 | - | - | 466 |
- Sub-standard | - | 261 | - | - | 261 |
- NPL | - | - | 1,023 | - | 1,023 |
Gross carrying amount | 25,952 | 1,988 | 1,023 | - | 28,963 |
Credit loss allowance | (638) | (521) | (694) | - | (1,853) |
Carrying amount | 25,314 | 1,467 | 329 | - | 27,110 |
Loans to IE and SME | |||||
- Excellent | 1,131 | - | - | - | 1,131 |
- Good | 782 | 10 | - | - | 792 |
- Monitor | 5 | 11 | - | - | 16 |
- Sub-standard | - | 7 | - | - | 7 |
- NPL | - | - | 126 | - | 126 |
Gross carrying amount | 1,918 | 28 | 126 | - | 2,072 |
Credit loss allowance | (277) | (11) | (108) | - | (396) |
Carrying amount | 1,641 | 17 | 18 | - | 1,676 |
Loans and advances to customers at 31 December 2019 are disclosed as follows:
Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | ||
(12-months | (lifetime ECL | (lifetime ECL | originated | |||
ECL) | for SICR) | for credit | credit | |||
In millions of RR | impaired) | impaired | ||||
Credit card loans | ||||||
- Excellent | 87,716 | - | - | - | 87,716 | |
- Good | 102,020 | 1,582 | - | - | 103,602 | |
- Monitor | 8,060 | 3,722 | - | - | 11,782 | |
- Sub-standard | - | 6,128 | 6,661 | - | 12,789 | |
- NPL | - | - | 28,712 | 336 | 29,048 | |
Gross carrying amount | 197,796 | 11,432 | 35,373 | 336 | 244,937 | |
Credit loss allowance | (11,704) | (6,853) | (25,572) | - | (44,129) | |
Carrying amount | 186,092 | 4,579 | 9,801 | 336 | 200,808 | |
31
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |||
(12-months | (lifetime ECL | (lifetime ECL | originated | ||||
ECL) | for SICR) | for credit | credit | ||||
In millions of RR | impaired) | impaired | |||||
Cash loans | |||||||
- Excellent | 34,258 | - | - | - | 34,258 | ||
- Good | 17,321 | 3,315 | - | - | 20,636 | ||
- Monitor | 346 | 585 | - | - | 931 | ||
- Sub-standard | - | 1,134 | 758 | - | 1,892 | ||
- NPL | - | - | 3,912 | 636 | 4,548 | ||
Gross carrying amount | 51,925 | 5,034 | 4,670 | 636 | 62,265 | ||
Credit loss allowance | (2,358) | (1,882) | (3,789) | - | (8,029) | ||
Carrying amount | 49,567 | 3,152 | 881 | 636 | 54,236 | ||
Secured Loans | |||||||
- Excellent | 19,941 | - | - | - | 19,941 | ||
- Good | 7,319 | 1,496 | - | - | 8,815 | ||
- Monitor | 106 | 322 | - | - | 428 | ||
- Sub-standard | - | 219 | - | - | 219 | ||
- NPL | - | - | 198 | - | 198 | ||
Gross carrying amount | 27,366 | 2,037 | 198 | - | 29,601 | ||
Credit loss allowance | (150) | (264) | (82) | - | (496) | ||
Carrying amount | 27,216 | 1,773 | 116 | - | 29,105 | ||
POS loans | |||||||
- Excellent | 19,525 | - | - | - | 19,525 | ||
- Good | 4,406 | 763 | - | - | 5,169 | ||
- Monitor | 100 | 117 | - | - | 217 | ||
- Sub-standard | - | 173 | 26 | - | 199 | ||
- NPL | - | - | 632 | 198 | 830 | ||
Gross carrying amount | 24,031 | 1,053 | 658 | 198 | 25,940 | ||
Credit loss allowance | (298) | (190) | (569) | - | (1,057) | ||
Carrying amount | 23,733 | 863 | 89 | 198 | 24,883 | ||
32
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
8 Loans and Advances to Customers (Continued)
Stage 1 | Stage 2 | Stage 3 | Purchased/ | Total | |
(12-months | (lifetime ECL | (lifetime ECL | originated | ||
ECL) | for SICR) | for credit | credit | ||
In millions of RR | impaired) | impaired | |||
Car loans | |||||
- Excellent | 15,581 | - | - | - | 15,581 |
- Good | 3,051 | 702 | - | - | 3,753 |
- Monitor | 93 | 157 | - | - | 250 |
- Sub-standard | - | 201 | - | - | 201 |
- NPL | - | - | 371 | - | 371 |
Gross carrying amount | 18,725 | 1,060 | 371 | - | 20,156 |
Credit loss allowance | (368) | (285) | (260) | - | (913) |
Carrying amount | 18,357 | 775 | 111 | - | 19,243 |
Loans to IE and SME | |||||
- Excellent | 622 | - | - | - | 622 |
- Good | 314 | 6 | - | - | 320 |
- Monitor | 4 | 6 | - | - | 10 |
- Sub-standard | - | 9 | - | - | 9 |
- NPL | - | - | 52 | - | 52 |
Gross carrying amount | 940 | 21 | 52 | - | 1,013 |
Credit loss allowance | (57) | (10) | (46) | - | (113) |
Carrying amount | 883 | 11 | 6 | - | 900 |
Stage 3 includes restructured loans that are less than 90 days overdue which are not considered as NPL according to the Group's credit risk grading master scale.
Loans in courts are included in Stage 3 and are loans to delinquent borrowers, against which the Group has filed claims to courts in order to recover outstanding balances. As at 30 September 2020 the gross carrying amount of the loans in courts was RR 29,463 million (31 December 2019: RR 22,228 million).
Refer to Note 22 for the disclosure of the fair value of loans and advances to customers. Information on related party balances is disclosed in Note 23.
9 | Investments in Securities | ||||
30 September 2020 | 31 December | ||||
In millions of RR | (Unaudited) | 2019 | |||
Debt securities measured at fair value through other comprehensive | 231,636 | 134,765 | |||
income | |||||
Securities measured at fair value through profit or loss | 1,455 | 413 | |||
Total investments in securities | 233,091 | 135,178 | |||
33
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
9 Investments in Securities (Continued)
- Debt securities measured at fair value through other comprehensive income
The table below discloses investments in debt securities measured at FVOCI by classes:
30 September 2020 | 31 December | |
In millions of RR | (Unaudited) | 2019 |
Russian government bonds | 118,697 | 56,382 |
Corporate bonds | 100,274 | 72,032 |
Municipal bonds | 8,110 | 6,351 |
Foreign government bonds | 4,555 | - |
Total debt securities measured at FVOCI | 231,636 | 134,765 |
Including credit loss allowance | 694 | 345 |
The debt securities measured at FVOCI are not collateralised.
- Securities measured at fair value through profit or loss
The table below discloses investments in debt securities measured at FVTPL by classes:
30 September 2020 | 31 December | |
In millions of RR | (Unaudited) | 2019 |
Perpetual corporate bonds | 1,455 | - |
Other securities | - | 413 |
Total securities measured at FVTPL | 1,455 | 413 |
At 31 December 2019 the other securities were represented by assets of the mutual funds which were controlled by the Group and managed by LLC "Tinkoff Capital". These assets were sold at 30 September 2020.
Investments in securities measured at FVTPL are carried at fair value, which also reflects any credit risk related write-downs and best represents Group's maximum exposure to credit risk. The securities measured at FVTPL are not collateralized. Refer to Note 22 for the disclosure of the fair value of investments in securities.
10 Repurchase Receivables
Repurchase receivables represent securities sold under sale and repurchase agreements which the counterparty has the right, by contract or custom, to sell or repledge. As at 30 September 2020 the sale and repurchase agreements are short-term and mature in October 2020. Repurchase receivables represent securities at FVOCI sold under sale and repurchase agreements:
30 September 2020 | |
In millions of RR | (Unaudited) |
Russian government bonds | 5,048 |
Total debt securities measured at FVOCI | 5,048 |
Including Credit loss allowance | 11 |
34
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
10 Repurchase Receivables (Continued)
At 31 December 2019 there were no repurchase receivables. Refer to Note 11 for the related liabilities. Refer to Note 22 for the disclosure of the fair value of each class of repurchase receivables. Securities at FVOCI reclassified to repurchase receivables continue to be carried at fair value in accordance with accounting policies for these categories of assets.
11 | Due to Banks | ||
30 September 2020 | 31 December | ||
In millions of RR | (Unaudited) | 2019 | |
Sale and repurchase agreements with other banks | 7,160 | 640 | |
Correspondent accounts and overnight placements of other banks | 6,948 | 23 | |
Total due to banks | 14,108 | 663 |
At 30 September 2020, included in the amounts due to other banks are liabilities of RR 4,797 million (31 December 2019: nil) arising from sale and repurchase agreements with debt securities at FVOCI. Refer to Note 10.
At 30 September 2020, included in the amounts due to other banks are liabilities of RR 2,363 million (31 December 2019: RR 640 million) arising from sale and repurchase agreements with securities of clients.
Refer to Note 22 for the disclosure of the fair value of amounts due to banks.
12 | Customer Accounts | ||
30 September 2020 | 31 December | ||
In millions of RR | (Unaudited) | 2019 | |
Individuals | |||
- Current/demand accounts | 302,182 | 211,661 | |
- Term deposits | 138,649 | 137,292 | |
IE and SME | |||
- Current/demand accounts | 69,278 | 60,174 | |
- Term deposits | 1,764 | 1,880 | |
Other legal entities | |||
- Current/demand accounts | 1,409 | 495 | |
- Term deposits | 144 | 112 | |
Total customer accounts | 513,426 | 411,614 |
Refer to Note 22 for the disclosure of the fair value of customer accounts. Information on related party balances is disclosed in Note 23.
35
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
13 Share Capital, Share Premium and Treasury Shares
Number of | Number of | Ordinary | Share | Treasury | Total | |
In millions of RR except for | authorised | outstanding | shares | premium | shares | |
the number of shares | shares | shares | ||||
At 1 January 2019 | 191,770,766 | 182,638,825 | 188 | 8,623 | (3,670) | 5,141 |
Shares issued | 18,263,882 | 16,666,667 | 42 | 18,874 | - | 18,916 |
Secondary public offering | ||||||
(SPO) costs | - | - | - | (499) | - | (499) |
GDRs and shares | ||||||
transferred under MLTIP | - | - | - | - | 506 | 506 |
At 31 December 2019 | 210,034,648 | 199,305,492 | 230 | 26,998 | (3,164) | 24,064 |
GDRs buy-back | - | - | - | - | (661) | (661) |
GDRs and shares | ||||||
transferred under MLTIP | - | - | - | - | 587 | 587 |
At 30 September 2020 | ||||||
(Unaudited) | 210,034,648 | 199,305,492 | 230 | 26,998 | (3,238) | 23,990 |
At 30 September 2020 the total number of outstanding shares is 199,305,492 shares (31 December 2019: 199,305,492 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share).
At 30 September 2020 and 31 December 2019 treasury shares represent GDRs of the Group repurchased from the market for the purposes permitted by Cyprus law including contribution to MLTIP. Refer to Note 23.
At 30 September 2020 the total number of treasury shares is 3,013,379 (31 December 2019: 4,185,166).
During the nine months ended 30 September 2020 the Group repurchased 650,000 GDRs at market price for RR 661 million (nine months ended 30 September 2019: no GDRs were repurchased by the Group).
During the three months ended 31 March 2019 Altoville Holdings Limited converted 6,385,310 Class B shares into Class A (on a one-to-one basis), which was 3.49% of its share, and then sold them to the market.
In June 2019 the Company's shareholders approved a resolution to increase the authorised share capital to USD 8,401,385.92 by the creation of 18,263,882 new undesignated ordinary shares of nominal value USD 0.04 each. At 30 September 2020 the total number of authorised shares is 210,034,648 shares
(31 December 2019: 210,034,648 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share).
On 2 July 2019 the Group completed a SPO on the London Stock Exchange plc and issued 16,666,667 "Class A" shares of the Company in the form of GDRs at a price of USD 18.00 per GDR, raising aggregate gross proceeds of USD 300 million (RR 18,916 million). All issued ordinary shares are fully paid.
All the incurred SPO costs were primary direct expenses accounted within share premium.
36
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
14 Net Margin
Unaudited | ||||
Nine months Three months | Nine months Three months | |||
ended | ended | ended | ended | |
30 September 30 September 30 September 30 September | ||||
In millions of RR | 2020 | 2020 | 2019 | 2019 |
Interest income calculated using the | ||||
effective interest rate method | ||||
Loans and advances to customers, including: | 67,784 | 21,298 | 62,189 | 22,197 |
Credit card loans | ||||
Cash loans | 8,658 | 2,554 | 8,529 | 3,364 |
Secured loans | 3,544 | 1,263 | 1,346 | 733 |
POS loans | 3,247 | 1,091 | 2,363 | 925 |
Car loans | 2,329 | 835 | 856 | 475 |
Loans to IE and SME | 334 | 78 | 214 | 87 |
Debt securities and repurchase receivables at | ||||
FVOCI | 7,589 | 2,988 | 4,835 | 1,556 |
Placements with other banks and non-bank | ||||
credit organizations with original maturities of | ||||
less than three months | 502 | 98 | 312 | 128 |
Total interest income calculated using the | ||||
effective interest rate method | 93,987 | 30,205 | 80,644 | 29,465 |
Other similar income | ||||
Debt securities and repurchase receivables at | ||||
FVTPL and loans and advances to customers | ||||
at FVTPL | 13 | 2 | 118 | - |
Total interest income | 94,000 | 30,207 | 80,762 | 29,465 |
Interest expense calculated using the | ||||
effective interest rate method | ||||
Customer accounts, including: | ||||
Individuals | ||||
- Current/demand accounts | 7,134 | 2,345 | 6,365 | 2,419 |
- Term deposits | 5,184 | 1,548 | 5,078 | 1,923 |
IE and SME | 777 | 258 | 1,110 | 325 |
Other legal entities | 18 | 4 | 33 | 8 |
RR denominated bonds | 1,522 | 514 | 769 | 316 |
Subordinated debt | 1,434 | 486 | 1,388 | 465 |
Due to banks | 334 | 113 | 587 | 49 |
Euro-Commercial Paper | 27 | 9 | 76 | 26 |
Total interest expense calculated using the | ||||
effective interest rate method | 16,430 | 5,277 | 15,406 | 5,531 |
Other similar expense | ||||
Lease liabilities | 110 | 36 | 107 | 39 |
Total interest expense | 16,540 | 5,313 | 15,513 | 5,570 |
Expenses on deposit insurance | 1,258 | 457 | 1,331 | 487 |
Net margin | 76,202 | 24,437 | 63,918 | 23,408 |
37
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
15 Fee and Commission Income and Expense
Unaudited | ||||
Nine months | Three months | Nine months | Three months | |
ended | ended | ended | ended | |
30 September | 30 September | 30 September | 30 September | |
In millions of RR | 2020 | 2020 | 2019 | 2019 |
Fee and commission income | ||||
IE and SME current accounts commission | 7,058 | 2,696 | 6,007 | 2,193 |
Acquiring commission | 5,456 | 2,002 | 4,627 | 1,539 |
Brokerage operations | 4,272 | 2,065 | 447 | 239 |
Fee for selling credit protection | 3,519 | 1,120 | 4,364 | 1,252 |
SMS fee | 2,881 | 994 | 2,347 | 843 |
Foreign currency exchange transactions fee | 2,801 | 897 | 2,084 | 869 |
Interchange fee | 2,349 | 1,233 | 2,555 | 1,016 |
Card to card commission | 2,078 | 829 | 1,348 | 589 |
Income from MVNO services | 1,271 | 495 | 551 | 258 |
Cash withdrawal fee | 521 | 201 | 519 | 192 |
Marketing services fee | 242 | 46 | 207 | 103 |
Placement fee | 97 | 35 | 87 | 48 |
Other fees receivable | 848 | 360 | 553 | 218 |
Total fee and commission income | 33,393 | 12,973 | 25,696 | 9,359 |
IE and SME current accounts commission represents commission for services to individual entrepreneurs and small to medium businesses. Fee for selling credit protection represents fee which the Bank receives for selling voluntary credit insurance to borrowers of the Group. Acquiring commission represents commission for processing card payments from online and offline points of sale. Income from MVNO services represents income from providing mobile services such as full coverage across Russia and international roaming, offering a number of value-added options such as virtual numbers, music and video streaming services, etc.
Unaudited | ||||
Nine months | Three months | Nine months | Three months | |
ended | ended | ended | ended | |
30 September | 30 September | 30 September | 30 September | |
In millions of RR | 2020 | 2020 | 2019 | 2019 |
Fee and commission expense | ||||
Payment systems | 9,894 | 3,926 | 7,442 | 2,768 |
Service fees | 1,532 | 554 | 1,345 | 470 |
Banking and other fees | 1,413 | 550 | 301 | 74 |
Payment channels | 990 | 324 | 941 | 363 |
Costs of MVNO services | 870 | 334 | 607 | 299 |
Total fee and commission expense | 14,699 | 5,688 | 10,636 | 3,974 |
Payment systems fees represent fees for MasterCard, Visa and other payment systems' services. Service fees represent fees for statement printing, mailing service, sms services and others. Payment channels represent fees paid to third parties through whom borrowers make loan repayments. Costs of MVNO services represent expenses for the traffic, telecommunications service and roaming.
38
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
16 Customer Acquisition Expense
Unaudited | ||||
Nine months | Three months | Nine months | Three months | |
ended | ended | ended | ended | |
30 September | 30 September | 30 September | 30 September | |
In millions of RR | 2020 | 2020 | 2019 | 2019 |
Marketing and advertising | 5,525 | 2,460 | 6,279 | 1,665 |
Staff costs | 4,672 | 1,696 | 4,558 | 1,391 |
Taxes other than income tax | 959 | 407 | 1,090 | 297 |
Partnership expenses | 812 | 286 | 688 | 270 |
Credit bureaux | 671 | 228 | 501 | 159 |
Cards issuing expenses | 543 | 250 | 309 | 185 |
Telecommunication expenses | 206 | 75 | 256 | 75 |
Other acquisition | 203 | 71 | 207 | 7 |
Total customer acquisition expenses | 13,591 | 5,473 | 13,888 | 4,049 |
Customer acquisition expenses represent expenses paid by the Group on services related to origination of customers which are not directly attributable to the recognised assets and are not incremental. The Group uses a variety of different channels for the acquisition of new customers.
Staff costs represent salary expenses and related costs of employees directly involved in customer acquisition. Included in staff costs are statutory social contributions to the state non-budgetary funds in the amount of RR 1,169 million for the nine months and RR 400 million for the three months ended 30 September 2020 (RR 1,185 million for the nine months and RR 362 million for the three months ended 30 September 2019).
17 | Administrative and Other Operating Expenses | ||||
Unaudited | |||||
Nine months | Three months | Nine months | Three months | ||
ended | ended | ended | ended | ||
30 September | 30 September | 30 September | 30 September | ||
In millions of RR | 2020 | 2020 | 2019 | 2019 | |
Staff costs | 17,519 | 6,226 | 14,355 | 5,270 | |
Amortization of intangible assets | 1,399 | 505 | 899 | 313 | |
Depreciation of fixed assets | 1,196 | 381 | 902 | 355 | |
Taxes other than income tax | 995 | 366 | 1,183 | 465 | |
Information services | 881 | 318 | 535 | 183 | |
Other provisions | 730 | 78 | 42 | 14 | |
Depreciation of right-of-use assets | 528 | 210 | 666 | 234 | |
Professional services | 440 | 219 | 586 | 139 | |
Operating lease expense | 382 | 129 | 311 | 103 | |
Collection expenses | 316 | 117 | 112 | 46 | |
Office maintenance and office supplies | 264 | 104 | 292 | 96 | |
Communication services | 192 | 69 | 215 | 67 | |
Security expenses | 145 | 48 | 129 | 53 | |
Other administrative expenses | 257 | 89 | 234 | 56 | |
Total administrative and other operating | |||||
expenses | 25,244 | 8,859 | 20,461 | 7,394 | |
39
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
17 Administrative and Other Operating Expenses (Continued)
Included in staff costs are statutory social contributions to the non-budget funds and share-based remuneration:
Unaudited | ||||
Nine months | Three months | Nine months | Three months | |
ended | ended | ended | ended | |
30 September | 30 September | 30 September | 30 September | |
In millions of RR | 2020 | 2020 | 2019 | 2019 |
Statutory social contribution to the | ||||
non-budget funds | 3,168 | 1,039 | 2,544 | 885 |
Share-based remuneration | 449 | 254 | 380 | 98 |
18 Dividends
The movements in dividends during nine months ended 30 September 2020 and 2019 are as follows:
Unaudited | ||
In millions of RR | 2020 | 2019 |
Dividends payable at 1 January | 582 | 760 |
Dividends declared | 7,773 | 5,870 |
Dividends paid | (8,076) | (5,618) |
Dividends paid under MLTIP after vesting date | (291) | (524) |
Foreign exchange loss/(gains) on dividends payable | 678 | (7) |
Dividends payable at 30 September | 666 | 481 |
Dividends per share declared (in USD) | 0.55 | 0.49 |
The movements in dividends during three months ended 30 September 2020 and 2019 are as follows:
Unaudited | ||
In millions of RR | 2020 | 2019 |
Dividends payable at 30 June | 656 | 471 |
Dividends declared during the period | 2,915 | - |
Dividends paid during the period | (2,944) | - |
Dividends paid under MLTIP after vesting date | (116) | - |
Foreign exchange loss on dividends payable | 155 | 10 |
Dividends payable at 30 September | 666 | 481 |
Dividends per share declared (in USD) | 0.20 | - |
Dividends declared in the tables above represent dividends declared by the Board of Directors reduced by
- 39 million for the nine months and by RR 10 million for the three months ended 30 September 2020 for dividends on GDRs acquired by the Company from the market not for the immediate purposes of the
existing MLTIP (nine months ended 30 September 2019: RR 11 million, three months ended
30 September 2019: nil).
On 5 August 2020 the Board of Directors declared an interim dividend in line with the current dividend policy of USD 0.20 (RR 14.68) per share/per GDR with a total amount allocated for dividend payment of around USD 39.9 million (RR 2,925 million). Declared dividends were paid in USD on 24 August 2020.
40
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
18 Dividends (Continued)
On 11 May 2020 the Board of Directors declared an interim dividend in line with the current dividend policy of USD 0.14 (RR 10.34) per share/per GDR with a total amount allocated for dividend payment of around USD 28 million (RR 2,061 million). Declared dividends were paid in USD on 1 and 2 June 2020.
On 10 March 2020 the Board of Directors declared an interim dividend of USD 0.21 (RR 14.18) per share/per GDR with a total amount allocated for dividend payment of around USD 41.9 million (RR 2,826 million). Declared dividends were paid in USD on 30 March and 1 April 2020.
On 13 May 2019 the Board of Directors declared an interim dividend of USD 0.17 (RR 11.09) per share/per GDR amounting to USD 31.05 million (RR 2,026 million). Declared dividends were paid in USD on 28 and 30 May 2019.
On 11 March 2019 the Board of Directors declared an interim dividend of USD 0.32 (RR 21.11) per share/per GDR amounting to USD 58.4 million (RR 3,855 million). Declared dividends were paid in USD on 25 and 27 March 2019.
The above dividends were declared and paid in USD. Dividends payable at 30 September 2020 related to treasury shares acquired under MLTIP amounting to RR 666 million are included in other non-financial liabilities (31 December 2019: RR 582 million).
19 Segment Analysis
Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM is the person or group of persons who allocates resources and assesses the performance for the Group. The functions of CODM are performed by the Management of the Bank and the Management of the Insurance Company.
Description of products and services from which each reportable segment derives its revenue
The Group is organised on the basis of 4 main business segments:
Retail banking - representing customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans, car loans, secured loans and brokerage services to individuals.
IE and SME accounts services - representing customer current accounts, savings, deposits services and providing loans to individual entrepreneurs and small to medium businesses.
Insurance operations - representing insurance services provided to individuals, such as personal accident insurance, personal property insurance, travel insurance and vehicle insurance.
MVNO services - providing full coverage across Russia and international roaming, offering a number of value-added options such as virtual numbers, music and video streaming services, etc.
The Management of the Group has refined the presentation of the Group's revenue structure in Segments analysis in order to present within revenues only those items of income which are not presented on a net basis. The comparative information was amended accordingly.
Factors that management used to identify the reportable segments
The Group's segments are strategic business units that focus on different services to the customers of the Group. They are managed separately because each business unit requires different marketing strategies and represents different types of businesses.
41
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
Measurement of operating segment profit or loss, assets and liabilities
The CODM reviews financial information prepared based on International financial reporting standards adjusted to meet the requirements of internal reporting. The CODM evaluates performance of each segment based on profit before tax.
Information about reportable segment profit or loss, assets and liabilities
Segment reporting of the Group's assets and liabilities as at 30 September 2020 is set out below:
Unaudited | ||||||
Retail | SME | Insurance | MVNO | Elimina- | Total | |
banking | accounts | operations | services | tions | ||
In millions of RR | services | |||||
Cash and cash equivalents | 49,681 | 23,366 | 2,634 | 53 | (2,253) | 73,481 |
Mandatory cash balances with the | ||||||
CBRF | 4,793 | - | - | - | - | 4,793 |
Due from other banks | - | - | 1,882 | - | - | 1,882 |
Loans and advances to customers | 345,903 | 3,110 | - | - | (2,700) | 346,313 |
Financial derivatives | 7,343 | - | - | - | - | 7,343 |
Investments in securities | 176,675 | 50,510 | 5,906 | - | - | 233,091 |
Repurchase receivables | 5,048 | - | - | - | - | 5,048 |
Guarantee deposits with payment | ||||||
systems | 11,488 | - | - | - | - | 11,488 |
Current income tax assets | 4,332 | - | - | - | - | 4,332 |
Deferred income tax assets | 959 | - | - | - | - | 959 |
Tangible fixed assets and right-of- | ||||||
use assets | 10,639 | - | - | 81 | - | 10,720 |
Intangible assets | 4,676 | 921 | 164 | 309 | - | 6,070 |
Other financial assets | 15,096 | 579 | 1,628 | 280 | (1,119) | 16,464 |
Other non-financial assets | 2,825 | - | 737 | 28 | - | 3,590 |
Total reportable segment assets | 639,458 | 78,486 | 12,951 | 751 | (6,072) | 725,574 |
Due to banks | 14,108 | - | - | 2,700 | (2,700) | 14,108 |
Customer accounts | 444,623 | 71,042 | - | - | (2,239) | 513,426 |
Debt securities in issue | 25,446 | - | - | - | - | 25,446 |
Financial derivatives | 153 | - | - | - | - | 153 |
Subordinated debt | 22,367 | - | - | - | - | 22,367 |
Insurance provisions | - | - | 6,001 | - | (32) | 5,969 |
Other financial liabilities | 17,802 | - | 1,126 | 500 | (1,192) | 18,236 |
Other non-financial liabilities | 9,036 | - | 133 | 228 | (15) | 9,382 |
Total reportable segment | ||||||
liabilities | 533,535 | 71,042 | 7,260 | 3,428 | (6,178) | 609,087 |
42
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
Segment reporting of the Group's income and expenses for the nine months ended 30 September 2020 is set out below:
Unaudited | ||||||
Retail | SME | Insurance | MVNO | Elimina- | Total | |
banking | accounts | operations | services | tions | ||
In millions of RR | services | |||||
Nine months ended 30 September 2020 | ||||||
Revenues | ||||||
Interest income calculated using the effective | ||||||
interest rate method | 91,496 | 2,335 | 351 | 1 | (196) | 93,987 |
Other similar income | 11 | 2 | - | - | - | 13 |
Fee and commission income | - | 7,058 | - | - | - | 7,058 |
- IE and SME current accounts commission | ||||||
- Acquiring commission | 5,129 | 391 | - | - | (64) | 5,456 |
- Brokerage operations | 4,272 | - | - | - | - | 4,272 |
- Fee for selling credit protection | 3,519 | - | - | - | - | 3,519 |
- SMS fee | 2,881 | - | - | - | - | 2,881 |
- Foreign currency exchange transactions fee | 2,494 | 307 | - | - | - | 2,801 |
- Interchange fee | 1,523 | 826 | - | - | - | 2,349 |
- Card to card commission | 2,078 | - | - | - | - | 2,078 |
- Income from MVNO services | - | - | - | 1,271 | - | 1,271 |
- Cash withdrawal fee | 521 | - | - | - | - | 521 |
- Marketing services fee | 242 | - | - | - | - | 242 |
- Placement fee | 97 | - | - | - | - | 97 |
- Other fees receivable | 848 | - | - | 281 | (281) | 848 |
Timing of fee and commission income recognition: | ||||||
- At point in time | 20,723 | 8,567 | - | 1,552 | (345) | 30,497 |
- Over time | 2,881 | 15 | - | - | - | 2,896 |
Total fee and commission income | 23,604 | 8,582 | - | 1,552 | (345) | 33,393 |
Insurance premiums earned | 178 | - | 13,981 | - | (227) | 13,932 |
Other operating income | 2,326 | 39 | 156 | - | (116) | 2,405 |
Total revenues | 117,615 | 10,958 | 14,488 | 1,553 | (884) | 143,730 |
Interest expense calculated using the effective | ||||||
interest rate method | (15,697) | (777) | - | (152) | 196 | (16,430) |
Other similar expense | (104) | - | - | (6) | - | (110) |
Expenses on deposit insurance | (1,105) | (153) | - | - | - | (1,258) |
Credit loss allowance for loans and advances to | ||||||
customers and credit related commitments | (34,333) | (280) | - | - | - | (34,613) |
Credit loss allowance charge for debt securities at | ||||||
FVOCI | (350) | - | (10) | - | - | (360) |
Fee and commission expense | (12,220) | (1,870) | - | (863) | 254 | (14,699) |
Customer acquisition expense | (11,759) | (906) | (751) | (568) | 393 | (13,591) |
Net gains from derivatives revaluation | 6,678 | - | - | - | - | 6,678 |
Net losses from foreign exchange translation | (8,741) | - | - | (2) | - | (8,743) |
Net gains from operations with foreign currencies | 900 | - | 311 | - | - | 1,211 |
Net gains from disposals of debt securities at | ||||||
FVOCI | 6,787 | - | - | - | - | 6,787 |
Net gains/(losses) from debt instruments at | ||||||
FVTPL | (20) | - | 95 | - | - | 75 |
Insurance claims incurred | - | - | (2,935) | - | 31 | (2,904) |
Administrative and other operating expenses | (21,075) | (2,513) | (1,084) | (686) | 114 | (25,244) |
Net gains from repurchase of subordinated debt | 168 | - | - | - | - | 168 |
Segment result | 26,744 | 4,459 | 10,114 | (724) | 104 | 40,697 |
43
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
Segment reporting of the Group's income and expenses for the three months ended 30 September 2020 is set out below:
Unaudited | ||||||
Retail | SME | Insurance | MVNO | Elimina- | Total | |
banking | accounts | operations | services | tions | ||
In millions of RR | services | |||||
Three months ended 30 September 2020 | ||||||
Revenues | ||||||
Interest income calculated using the effective | ||||||
interest rate method | 29,492 | 664 | 114 | 1 | (66) | 30,205 |
Other similar income | - | 2 | - | - | - | 2 |
Fee and commission income | - | 2,696 | - | - | - | 2,696 |
- IE and SME current accounts commission | ||||||
- Acquiring commission | 1,828 | 198 | - | - | (24) | 2,002 |
- Brokerage operations | 2,065 | - | - | - | - | 2,065 |
- Fee for selling credit protection | 1,120 | - | - | - | - | 1,120 |
- SMS fee | 994 | - | - | - | - | 994 |
- Foreign currency exchange transactions fee | 783 | 114 | - | - | - | 897 |
- Interchange fee | 892 | 341 | - | - | - | 1,233 |
- Card to card commission | 829 | - | - | - | - | 829 |
- Income from MVNO services | - | - | - | 495 | - | 495 |
- Cash withdrawal fee | 201 | - | - | - | - | 201 |
- Marketing services fee | 46 | - | - | - | - | 46 |
- Placement fee | 35 | - | - | - | - | 35 |
- Other fees receivable | 327 | - | - | 113 | (80) | 360 |
Timing of fee and commission | ||||||
income recognition: | ||||||
- At point in time | 8,126 | 3,342 | - | 608 | (104) | 11,972 |
- Over time | 994 | 7 | - | - | - | 1,001 |
Total fee and commission income | 9,120 | 3,349 | - | 608 | (104) | 12,973 |
Insurance premiums earned | 73 | - | 4,555 | - | (82) | 4,546 |
Other operating income | 1,103 | - | 59 | - | (75) | 1,087 |
Total revenues | 39,788 | 4,015 | 4,728 | 609 | (327) | 48,813 |
Interest expense calculated using the effective | ||||||
interest rate method | (5,033) | (258) | - | (51) | 65 | (5,277) |
Other similar expense | (36) | - | - | - | - | (36) |
Expenses on deposit insurance | (396) | (61) | - | - | - | (457) |
Credit loss allowance for loans and advances to | ||||||
customers and credit related commitments | (6,604) | 18 | - | - | - | (6,586) |
Credit loss allowance charge for debt securities at | ||||||
FVOCI | (99) | - | - | - | - | (99) |
Fee and commission expense | (4,902) | (607) | - | (313) | 134 | (5,688) |
Customer acquisition expense | (4,819) | (340) | (271) | (198) | 155 | (5,473) |
Net gains from derivatives revaluation | 3,720 | - | - | - | - | 3,720 |
Net losses from foreign exchange translation | (4,242) | - | - | - | - | (4,242) |
Net gains from operations with foreign currencies | 48 | - | 243 | - | - | 291 |
Net gains from disposals of debt securities at | ||||||
FVOCI | 538 | - | - | - | - | 538 |
Net (losses)/gains from debt instruments at FVTPL | (9) | - | 74 | - | - | 65 |
Insurance claims incurred | - | - | (782) | - | (13) | (795) |
Administrative and other operating expenses | (7,600) | (670) | (399) | (229) | 39 | (8,859) |
Net gains from repurchase of subordinated debt | 18 | - | - | - | - | 18 |
Segment result | 10,372 | 2,097 | 3,593 | (182) | 53 | 15,933 |
44
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
Segment reporting of the Group's assets and liabilities as at 31 December 2019 is set out below:
Retail | SME | Insurance | MVNO | Elimina- | Total | |
banking | accounts | operations | services | tions | ||
In millions of RR | services | |||||
Cash and cash equivalents | 31,098 | 25,524 | 3,851 | 43 | (2,720) | 57,796 |
Mandatory cash balances with the | ||||||
CBRF | 3,448 | - | - | - | - | 3,448 |
Due from other banks | 250 | - | 1,834 | - | - | 2,084 |
Loans and advances to customers | 330,905 | 900 | - | - | (2,630) | 329,175 |
Financial derivatives | 390 | - | - | - | - | 390 |
Investments in securities | 90,566 | 41,950 | 2,662 | - | - | 135,178 |
Guarantee deposits with payment | ||||||
systems | 8,877 | - | - | - | - | 8,877 |
Current income tax assets | 807 | - | 8 | - | - | 815 |
Deferred income tax assets | 1,517 | - | - | - | - | 1,517 |
Tangible fixed assets and right-of- | ||||||
use assets | 10,454 | - | - | 106 | - | 10,560 |
Intangible assets | 4,105 | 823 | 196 | 311 | - | 5,435 |
Other financial assets | 20,429 | 444 | 1,768 | 87 | (1,055) | 21,673 |
Other non-financial assets | 2,034 | - | 592 | 187 | (303) | 2,510 |
Total reportable segment assets | 504,880 | 69,641 | 10,911 | 734 | (6,708) | 579,458 |
Due to banks | 663 | - | - | 2,630 | (2,630) | 663 |
Customer accounts | 352,280 | 62,054 | - | - | (2,720) | 411,614 |
Debt securities in issue | 26,078 | - | - | - | - | 26,078 |
Financial derivatives | 590 | - | - | - | - | 590 |
Deferred income tax liabilities | 142 | - | - | - | - | 142 |
Subordinated debt | 18,487 | - | - | - | - | 18,487 |
Insurance provisions | - | - | 6,280 | - | - | 6,280 |
Other financial liabilities | 14,091 | - | 700 | 912 | (1,055) | 14,648 |
Other non-financial liabilities | 5,067 | - | 52 | 58 | (303) | 4,874 |
Total reportable segment | ||||||
liabilities | 417,398 | 62,054 | 7,032 | 3,600 | (6,708) | 483,376 |
45
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
Segment reporting of the Group's income and expenses for the nine months ended 30 September 2019 is set out below:
Unaudited | ||||||
Retail | SME | Insurance | MVNO | Elimina- | Total | |
banking | accounts | operations | services | tions | ||
In millions of RR | services | |||||
Nine months ended 30 September 2019 | ||||||
Revenues | ||||||
Interest income calculated using the effective | ||||||
interest rate method | 78,619 | 1,901 | 292 | - | (168) | 80,644 |
Other similar income | 118 | - | - | - | - | 118 |
Fee and commission income | - | 6,007 | - | - | - | 6,007 |
- IE and SME current accounts commission | ||||||
- Acquiring commission | 4,554 | 141 | - | - | (68) | 4,627 |
- Fee for selling credit protection | 4,364 | - | - | - | - | 4,364 |
- Interchange fee | 2,031 | 524 | - | - | - | 2,555 |
- SMS fee | 2,347 | - | - | - | - | 2,347 |
- Foreign currency exchange transactions fee | 1,871 | 213 | - | - | - | 2,084 |
- Card to card commission | 1,348 | - | - | - | - | 1,348 |
- Income from MVNO services | - | - | - | 551 | - | 551 |
- Cash withdrawal fee | 519 | - | - | - | - | 519 |
- Brokerage operations | 447 | - | - | - | - | 447 |
- Marketing services fee | 207 | - | - | - | - | 207 |
- Placement fee | 87 | - | - | - | - | 87 |
- Other fees receivable | 613 | - | - | 189 | (249) | 553 |
Timing of fee and commission income | ||||||
recognition: | ||||||
- At point in time | 16,041 | 6,820 | - | 740 | (317) | 23,284 |
- Over time | 2,347 | 65 | - | - | - | 2,412 |
Total fee and commission income | 18,388 | 6,885 | - | 740 | (317) | 25,696 |
Insurance premiums earned | 223 | - | 9,581 | - | (284) | 9,520 |
Other operating income | 670 | 46 | 212 | 1 | (63) | 866 |
Total revenues | 98,018 | 8,832 | 10,085 | 741 | (832) | 116,844 |
Interest expense calculated using the effective | ||||||
interest rate method | (14,359) | (1,110) | - | (100) | 163 | (15,406) |
Other similar expense | (103) | - | - | (4) | - | (107) |
Expenses on deposit insurance | (1,177) | (154) | - | - | - | (1,331) |
Credit loss allowance for loans and advances to | ||||||
customers and credit related commitments | (19,541) | (62) | - | - | - | (19,603) |
Credit loss allowance reversal for debt securities at | ||||||
FVOCI | 225 | - | - | - | - | 225 |
Fee and commission expense | (8,852) | (1,359) | (9) | (607) | 191 | (10,636) |
Customer acquisition expense | (11,406) | (1,243) | (837) | (812) | 410 | (13,888) |
Net losses from derivatives revaluation | (1,407) | - | - | - | - | (1,407) |
Net gains from foreign exchange translation | 1,236 | - | - | - | - | 1,236 |
Net losses from operations with foreign currencies | (677) | - | (7) | - | - | (684) |
Net gains from disposals of debt securities at | ||||||
FVOCI | 277 | - | - | - | - | 277 |
Net gains from debt instruments at FVTPL | 390 | - | - | - | - | 390 |
Insurance claims incurred | - | - | (3,282) | - | - | (3,282) |
Administrative and other operating expenses | (16,992) | (2,060) | (830) | (621) | 42 | (20,461) |
Segment result | 25,632 | 2,844 | 5,120 | (1,403) | (26) | 32,167 |
46
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
Segment reporting of the Group's income and expenses for the three months ended 30 September 2019 is set out below:
Unaudited | ||||||
Retail | SME | Insurance | MVNO | Elimina- | Total | |
banking | accounts | operations | services | tions | ||
In millions of RR | services | |||||
Three months ended 30 September 2019 | ||||||
Revenues | ||||||
Interest income calculated using the effective | ||||||
interest rate method | 28,762 | 654 | 117 | - | (68) | 29,465 |
Other similar income | - | - | - | - | - | |
Fee and commission income | - | 2,193 | - | - | - | 2,193 |
- IE and SME current accounts commission | ||||||
- Acquiring commission | 1,510 | 51 | - | - | (22) | 1,539 |
- Fee for selling credit protection | 1,252 | - | - | - | - | 1,252 |
- Interchange fee | 803 | 213 | - | - | - | 1,016 |
- SMS fee | 843 | - | - | - | - | 843 |
- Foreign currency exchange transactions fee | 788 | 81 | - | - | - | 869 |
- Card to card commission | 589 | - | - | - | - | 589 |
- Income from MVNO services | - | - | - | 258 | - | 258 |
- Cash withdrawal fee | 192 | - | - | - | - | 192 |
- Brokerage operations | 239 | - | - | - | - | 239 |
- Marketing services fee | 103 | - | - | - | - | 103 |
- Placement fee | 48 | - | - | - | - | 48 |
- Other fees receivable | 251 | - | - | 95 | (128) | 218 |
Timing of fee and commission income recognition: | ||||||
- At point in time | 5,775 | 2,523 | - | 353 | (150) | 8,501 |
- Over time | 843 | 15 | - | - | - | 858 |
Total fee and commission income | 6,618 | 2,538 | - | 353 | (150) | 9,359 |
Insurance premiums earned | 77 | - | 4,283 | - | (98) | 4,262 |
Other operating income | 382 | 15 | 83 | 1 | (46) | 435 |
Total revenues | 35,839 | 3,207 | 4,483 | 354 | (362) | 43,521 |
Interest expense calculated using the effective | ||||||
interest rate method | (5,228) | (325) | - | (41) | 63 | (5,531) |
Other similar expense | (35) | - | - | (4) | - | (39) |
Expenses on deposit insurance | (433) | (54) | - | - | - | (487) |
Credit loss allowance for loans and advances to | ||||||
customers and credit related commitments | (7,947) | (5) | - | - | - | (7,952) |
Credit loss allowance reversal for debt securities at | ||||||
FVOCI | 83 | - | - | - | - | 83 |
Fee and commission expense | (3,183) | (586) | (3) | (299) | 97 | (3,974) |
Customer acquisition expense | (3,076) | (457) | (330) | (337) | 151 | (4,049) |
Net losses from derivatives revaluation | (11) | - | - | - | - | (11) |
Net losses from foreign exchange translation | (451) | - | - | - | - | (451) |
Net losses from operations with foreign currencies | (14) | - | (1) | - | - | (15) |
Net gains from disposals of debt securities at | ||||||
FVOCI | 137 | - | - | - | - | 137 |
Insurance claims incurred | - | - | (1,374) | - | - | (1,374) |
Administrative and other operating expenses | (6,374) | (524) | (237) | (284) | 25 | (7,394) |
Segment result | 9,307 | 1,256 | 2,538 | (611) | (26) | 12,464 |
47
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
19 Segment Analysis (Continued)
For the nine months ended 30 September 2020 intersegment revenues amounted to RR 884 million (for the nine months ended 30 September 2019: RR 832 million).
For the three months ended 30 September 2020 intersegment revenues amounted to RR 327 million (for the three months ended 30 September 2019: RR 362 million).
20 Management of Capital
The Group's objectives when managing capital are (i) for the Bank to comply with the capital requirements set by the Central Bank of the Russian Federation (CBRF), (ii) for the Insurance Company to comply with the capital requirements set by the legislation of the Russian Federation, (iii) for the Group to comply with the financial covenants set by the terms of securities issued; (iv) to safeguard the Group's ability to continue as a going concern.
The Group considers total capital under management to be equity attributable to the shareholders of the Company as shown in the consolidated condensed interim statement of financial position. The amount of capital that the Group managed as of 30 September 2020 was RR 116,370 million (31 December 2019: RR 95,979 million).
Compliance with capital adequacy ratios set by the CBRF is monitored daily and submitted to the CBRF monthly with reports outlining their calculation reviewed and signed by the Bank's Chief Executive Officer and Chief Accountant. Other objectives of capital management are evaluated annually. The amount of regulatory capital of Tinkoff Bank calculated in accordance with the methodology set by CBRF as at 30 September 2020 was RR 123,966 million, and the equity capital adequacy ratio (N1.0) was 13.92% (31 December 2019: RR 99,731 million and 12.12%). Minimum required statutory equity capital adequacy ratio (N1.0) was 8% as at 30 September 2020 (31 December 2019: 8%).
In addition to the minimum 8% requirement for N1.0 the CBRF has the right to require banks to maintain an additional Capital Conservation Buffer which throughout 2020 has been 2.5% (2019: from 1.875% to 2.25%). Banks who do not maintain this buffer have some restrictions imposed on them including being unable to distribute their current period profits without limitation.
The Group also monitors capital requirements including capital adequacy ratio under the Basel III methodology of the Basel Committee on Banking Supervision: global regulatory framework for more resilient banks and banking systems (hereinafter "Basel III").
48
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
20 Management of Capital (Continued)
The composition of the Group's capital calculated in accordance with the methodology set by Basel Committee with capital adjustments as set out in Basel III is as follows:
30 September 2020 | 31 December | |
In millions of RR | (Unaudited) | 2019 |
Share capital | 230 | 230 |
Share premium | 26,998 | 26,998 |
Treasury shares | (3,238) | (3,164) |
Share-based payment reserve | 905 | 1,039 |
Retained earnings | 90,980 | 66,880 |
Revaluation reserve for investments in debt securities | 495 | 3,996 |
Less intangible assets | (6,070) | (5,435) |
Non-controlling interest | 117 | 103 |
Common Equity Tier 1 (CET1) | 110,417 | 90,647 |
Additional Tier 1 | 22,367 | 18,487 |
Tier 1 capital | 132,784 | 109,134 |
Total capital | 132,784 | 109,134 |
Risk weighted assets (RWA) | ||
Credit risk | 504,012 | 412,741 |
Operational risk | 152,881 | 152,881 |
Market risk | 16,167 | 4,603 |
Total risk weighted assets (RWA) | 673,060 | 570,225 |
Common equity Tier 1 capital adequacy ratio (CET1/ Total RWA), % | 16.41% | 15.90% |
Tier 1 capital adequacy ratio (Tier 1 capital / Total RWA), % | 19.73% | 19.14% |
Total capital adequacy ratio (Total capital / Total RWA), % | 19.73% | 19.14% |
The Group and the Bank have complied with all externally imposed capital requirements throughout the nine months ended 30 September 2020 and the year ended 31 December 2019.
The Insurance Company has complied with all capital requirements set by the legislation of the Russian Federation throughout the nine months ended 30 September 2020 and the year ended 31 December 2019.
21 Contingencies and Commitments
Legal proceedings. From time to time and in the normal course of business, claims against the Group may be received. On the basis of its own estimates and internal professional advice, management is of the opinion that no material unprovided losses will be incurred in respect of claims.
Tax contingencies. Russian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be challenged by the tax authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year when decision about review was made. Under certain circumstances reviews may cover longer periods. The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD), although it has specific features. This legislation provides for the possibility of additional tax assessment for controlled transactions (transactions between related parties and certain transactions between unrelated parties), if such transactions are not on an arm's length.
49
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
21 Contingencies and Commitments (Continued)
Tax liabilities arising from controlled transactions are determined based on their actual transaction prices. It is possible, with the evolution of the interpretation of transfer pricing rules, that such transfer prices could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.
The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on the assumption that these companies are not subject to Russian profits tax, because they do not have a permanent establishment in Russia. The Company is a tax resident of Cyprus only and full beneficial owner of the Bank and Insurance Company. This interpretation of relevant legislation may be challenged but the impact of any such challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the overall operations of the Group.
The Controlled Foreign Company (CFC) legislation introduced Russian taxation of profits of foreign companies and non-corporate structures (including trusts) controlled by Russian tax residents (controlling parties). The CFC income is subject to a 20% tax rate if the CFC is controlled by a legal entity and a rate of 13% if it is controlled by an individual. As a result, management reassessed the Group's tax positions and recognised current tax expense as well as deferred taxes that arose from the expected taxable manner of recovery of the relevant Group's operations to which the CFC legislation applies to and to the extent that the Group (rather than its owners) is obliged to settle such taxes.
As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax positions and interpretations be challenged by the tax authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group. As at 30 September 2020 and 31 December 2019 no material tax risks were identified.
Compliance with covenants. The Group is subject to certain non-financial covenants related primarily to its subordinated perpetual debt. Non-compliance with such covenants may result in negative consequences for the Group. Management believes that the Group was in compliance with all such covenants as at 30 September 2020 and 31 December 2019.
Future lease payments related to leases where leased asset is of low value. The future cash outflows to which the Group is exposed and which are not reflected in the lease liabilities amounted to RR 217 million at 30 September 2020 and relate primarily to leases of assets which are of low value (31 December 2019: RR 268 million).
Credit related commitments and performance guarantees issued. The primary purpose of these instruments is to ensure that funds are available to a customer as required. Commitments to extend credit represent unused portions of authorizations to extend credit in the form of credit card loans, guarantees. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments, if the unused amounts were to be drawn down.
Most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit related commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.
Performance guarantees are contracts that provide compensation if another party fails to perform a contractual obligation. Such contracts do not transfer credit risk. The risk under performance guarantee contracts is the possibility that the insured event (i.e. the failure to perform the contractual obligation by another party) occurs. The key risks the Group faces are significant fluctuations in the frequency and severity of payments incurred on such contracts relative to expectations. The Group uses a scoring model to predict levels of such payments. Claims must be made before the contract matures and most claims are settled within short term. This allows the Group to achieve a high degree of certainty about the estimated payments and therefore future cash flows.
50
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
21 Contingencies and Commitments (Continued)
Outstanding credit related commitments and performance guarantees are as follows:
30 September 2020 | 31 December | |
In millions of RR | (Unaudited) | 2019 |
Unused limits on credit card loans | 187,451 | 168,059 |
Credit loss allowance | (3,833) | (2,242) |
Total credit related commitments, net of сredit loss allowance | 183,618 | 165,817 |
Performance guarantees issued | 367 | 660 |
Provisions | (2) | (3) |
Total performance guarantees issued, net of provisions | 365 | 657 |
The total outstanding contractual amount of unused limits on contingencies and commitments liability does not necessarily represent future cash requirements, as these financial instruments may expire or terminate without being funded. In accordance with credit card service conditions the Group has a right to refuse the issuance, activation, reissuing or unblocking of a credit card, and is providing a credit card limit at its own discretion and without explaining its reasons.
The following table contains an analysis of credit related commitments by credit quality at 30 September 2020 based on credit risk grades.
Unaudited | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
(12-months ECL) | (lifetime ECL for | (lifetime ECL | ||
SICR) | for credit | |||
In millions of RR | impaired) | |||
Credit related commitments | ||||
- Excellent | 161,672 | - | - | 161,672 |
- Good | 16,307 | 171 | - | 16,478 |
- Monitor | 9,062 | 239 | - | 9,301 |
Unrecognised gross amount | 187,041 | 410 | - | 187,451 |
Credit loss allowance | (3,805) | (28) | - | (3,833) |
Unrecognised net amount | 183,236 | 382 | - | 183,618 |
51
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
21 Contingencies and Commitments (Continued)
The following table contains | an analysis of credit related commitments by credit | quality at | ||
31 December 2019 based on credit risk grades. | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
(12-months ECL) | (lifetime ECL for | (lifetime ECL for | ||
In millions of RR | SICR) | credit impaired) | ||
Credit related commitments | ||||
- Excellent | 145,154 | - | - | 145,154 |
- Good | 12,285 | 84 | - | 12,369 |
- Monitor | 10,360 | 176 | - | 10,536 |
Unrecognised gross amount | 167,799 | 260 | - | 168,059 |
Credit loss allowance | (2,228) | (14) | - | (2,242) |
Unrecognised net amount | 165,571 | 246 | - | 165,817 |
Also, the Group may decide to increase or decrease a credit card limit using a scoring model, which is based on the client's behaviour model. Therefore, the fair value of the contractual amount of revocable unused limits on contingencies and commitments is close to zero. Credit related commitments are denominated in RR.
The following table contains an analysis of performance guarantees issued by credit quality based on credit risk grades.
30 September 2020 | 31 December | |
(Unaudited) | 2019 | |
Stage 1 | Stage 1 | |
In millions of RR | (12-months ECL) | (12-months ECL) |
Performance guarantees issued | ||
- Excellent | 219 | 415 |
- Good | 148 | 245 |
Unrecognised gross amount | 367 | 660 |
Provisions | (2) | (3) |
Unrecognised net amount | 365 | 657 |
Mandatory cash balances with the CBRF of RR 4,793 million as at 30 September 2020 (31 December 2019: RR 3,448 million) represent mandatory reserve deposits which are not available to finance the Bank's day to day operations.
52
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
22 Fair Value of Financial Instruments
Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuation techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unobservable inputs).
- Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards require or permit in the consolidated condensed interim statement of financial position at the end of each reporting period. The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows:
30 September 2020 (Unaudited) | 31 December 2019 | |||||||
In millions of RR | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
ASSETS AT FAIR | ||||||||
VALUE | ||||||||
Loans and advances to | ||||||||
customers | - | - | 1,434 | 1,434 | - | - | - | - |
Financial derivatives | - | 7,343 | - | 7,343 | - | 390 | - | 390 |
Investments in securities | 229,754 | 3,337 | - | 233,091 | 133,239 | 1,939 | - | 135,178 |
Repurchase receivables | 5,048 | - | - | 5,048 | - | - | - | - |
Total assets recurring | ||||||||
fair value | ||||||||
measurements | 234,802 | 10,680 | 1,434 | 246,916 | 133,239 | 2,329 | - | 135,568 |
LIABILITIES AT FAIR | ||||||||
VALUE | ||||||||
Other financial liabilities | - | - | - | - | 161 | - | - | 161 |
Financial derivatives | - | 153 | - | 153 | - | 590 | - | 590 |
Total liabilities | ||||||||
recurring fair value | ||||||||
measurements | - | 153 | - | 153 | 161 | 590 | - | 751 |
Investments in securities categorised in level 2 are represented by liquid debt securities classified in "Good" credit risk grade.
53
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
22 Fair Value of Financial Instruments (Continued)
The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 30 September 2020 are as follows:
In millions of RR | Fair value Valuation technique | Inputs used |
ASSETS AT FAIR VALUE | Observable quotes for |
comparable securities adjusted by | |
multiplicator depending on the | |
Investments in securities | 3,337 degree of the market activity |
Foreign exchange swaps and | Discounted cash flows adjusted |
forwards | 7,343 for counterparty credit risk |
Quotes from the automated fair value system for financial instruments of NSD Price Center*
Russian rouble curve. USD Dollar Swaps Curve. EUR Swaps Curve.
CDS quotes assessment of counterparty credit risk or reference entities.
Total recurring fair value | |||
measurements at level 2 | |||
(Unaudited) | 10,680 | ||
LIABILITIES AT FAIR VALUE | Russian rouble curve. | ||
USD Dollar Swaps Curve. | |||
EUR Swaps Curve. | |||
Foreign exchange swaps and | Discounted cash flows adjusted | CDS quotes assessment of | |
counterparty credit risk or | |||
forwards | 153 | for counterparty credit risk | reference entities. |
Total recurring fair value | |||
measurements at level 2 | |||
(Unaudited) | 153 | ||
The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 31 December 2019 are as follows:
In millions of RR | Fair value | Valuation technique | Inputs used |
ASSETS AT FAIR VALUE | Observable quotes for | Quotes from the automated fair | |
comparable securities adjusted by | value system for financial | ||
multiplicator depending on the | instruments of NSD Price | ||
Investments in securities | 1,939 | degree of the market activity | Center* |
Russian rouble curve. | |||
USD Dollar Swaps Curve. | |||
Foreign exchange swaps and | Discounted cash flows adjusted | CDS quotes assessment of | |
counterparty credit risk or | |||
forwards | 390 | for counterparty credit risk | reference entities. |
Total recurring fair value | |||
measurements at level 2 | 2,329 | ||
LIABILITIES AT FAIR VALUE | Russian rouble curve. | ||
USD Dollar Swaps Curve. | |||
Foreign exchange swaps and | Discounted cash flows adjusted | CDS quotes assessment of | |
counterparty credit risk or | |||
forwards | 590 | for counterparty credit risk | reference entities. |
Total recurring fair value | |||
measurements at level 2 | 590 | ||
54
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
22 Fair Value of Financial Instruments (Continued)
- NSD Valuation Center is a fair value measurement service for bonds and other financial instruments, accredited by the CBRF.
There were no changes in the valuation techniques for level 2 recurring fair value measurements during the nine months ended 30 September 2020. Level 2 derivatives comprise foreign exchange forwards and swaps.
The foreign exchange forwards have been fair valued using forward exchange rates that are quoted in an active market. Foreign exchange swaps are fair valued using forward interest rates extracted from observable yield curves. The effects of discounting are generally insignificant for level 2 derivatives.
- Assets and liabilities not measured at fair value but for which fair value is disclosed
Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value are as follows:
30 September 2020 (Unaudited) | 31 December 2019 | |||||||
Level 1 | Level 2 | Level 3 | Carrying | Level 1 | Level 2 | Level 3 | Carrying | |
In millions of RR | value | value | ||||||
FINANCIAL ASSETS CARRIED AT AMORTISED COST | ||||||||
Cash and cash | ||||||||
equivalents | ||||||||
- Cash on hand | 15,201 | - | - | 15,201 | 11,118 | - | - | 11,118 |
- Cash balances with the | ||||||||
CBRF (other than | ||||||||
mandatory reserve | ||||||||
deposits) | - | 18,424 | - | 18,424 | - | 16,599 | - | 16,599 |
- Placements with other | ||||||||
banks and non-bank | ||||||||
credit organizations with | ||||||||
original maturities of less | ||||||||
than three months | - | 39,856 | - | 39,856 | - | 30,079 | - | 30,079 |
Mandatory cash | ||||||||
balances with the CBRF | - | 4,793 | - | 4,793 | - | 3,448 | - | 3,448 |
Due from other banks | - | 1,882 | - | 1,882 | - | 2,084 | - | 2,084 |
Loans and advances to | ||||||||
customers | - | - | 345,181 | 344,879 | - | - | 329,340 | 329,175 |
Guarantee deposits with | ||||||||
payment systems | - | - | 11,488 | 11,488 | - | - | 8,877 | 8,877 |
Other financial assets | ||||||||
Settlement of operations | ||||||||
with plastic cards | ||||||||
receivable | - | 11,167 | - | 11,167 | - | 16,384 | - | 16,384 |
Other receivables | - | 5,297 | - | 5,297 | - | 5,289 | - | 5,289 |
Total financial assets | ||||||||
carried at amortised | ||||||||
cost | 15,201 | 81,419 | 356,669 | 452,987 | 11,118 | 73,883 | 338,217 | 423,053 |
55
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
22 Fair Value of Financial Instruments (Continued)
Fair values analysed by level in the fair value hierarchy and carrying value of liabilities not measured at fair value are as follows:
30 September 2020 (Unaudited) | 31 December 2019 | |||||||
Level 1 | Level 2 | Level 3 | Carrying | Level 1 | Level 2 | Level 3 | Carrying | |
In millions of RR | value | value | ||||||
FINANCIAL LIABILITIES CARRIED AT AMORTISED COST | ||||||||
Due to banks | - | 14,108 | - | 14,108 | - | 663 | - | 663 |
Customer accounts | ||||||||
Individuals | ||||||||
-Current/demand accounts | - | 302,182 | - | 302,182 | - | 211,661 | - | 211,661 |
-Term deposits | - | 141,391 | - | 138,649 | - | 139,114 | - | 137,292 |
SME | ||||||||
-Current/demand accounts | - | 69,278 | - | 69,278 | - | 60,174 | - | 60,174 |
-Term deposits | - | 1,757 | - | 1,764 | - | 1,879 | - | 1,880 |
Other legal entities | ||||||||
-Current/demand accounts | - | 1,409 | - | 1,409 | - | 495 | - | 495 |
-Term deposits | - | 144 | - | 144 | - | 112 | - | 112 |
Debt securities in issue | ||||||||
RR Bonds issued on | ||||||||
domestic market | 24,181 | - | - | 23,260 | 24,442 | - | - | 23,618 |
Euro-Commercial Paper | - | 2,186 | - | 2,186 | - | 2,460 | - | 2,460 |
Subordinated debt | ||||||||
Perpetual subordinated | ||||||||
bonds | 23,818 | - | - | 22,367 | 19,604 | - | - | 18,487 |
Other financial liabilities | ||||||||
Settlement of operations | ||||||||
with plastic cards | - | 6,097 | - | 6,097 | - | 6,427 | - | 6,427 |
Trade payables | - | 6,711 | - | 6,711 | - | 4,621 | - | 4,621 |
Credit related commitments | - | - | - | 3,859 | - | - | - | 2,242 |
Other financial liabilities | - | 1,569 | - | 1,569 | - | 1,197 | - | 1,197 |
Total financial liabilities | ||||||||
carried at amortised cost | 47,999 | 546,832 | - | 593,583 | 44,046 | 428,803 | - | 471,329 |
Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price. Where quoted market prices are not available, the Group used valuation techniques. The fair value of floating rate instruments that are not quoted in an active market was estimated to be equal to their carrying amount. The fair value of unquoted fixed interest rate instruments was estimated based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity.
As at 30 September 2020 and 31 December 2019 the fair value of the debt securities in issue and subordinated debt has been calculated based on quoted prices from the Moscow Exchange MICEX-RTS and Global Exchange Market, where the Group's debt securities are listed and traded.
56
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
22 Fair Value of Financial Instruments (Continued)
Weighted average discount rates used in determining fair | value as of 30 September 2020 and | |
31 December 2019 are disclosed below: | ||
30 September 2020 | 31 December | |
In % p.a. | (Unaudited) | 2019 |
Assets | ||
Cash and cash equivalents | 0.0 | 0.0 |
Due from other banks | 3.2 | 5.2 |
Loans and advances to customers | 34.3 | 37.2 |
Investments in securities | 2.8 | 4.9 |
Repurchase receivables | 5.6 | - |
Liabilities | ||
Due to banks | 2.6 | 0.2 |
Customer accounts | 2.6 | 3.9 |
Debt securities in issue | 6.3 | 7.5 |
Subordinated debt | 6.1 | 6.8 |
23 Related Party Transactions
Parties are generally considered to be related if the parties are under common control or one party has the ability to control the other party or can exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Other related parties (excluding associates and joint ventures) in the tables below are represented by entities which are under the control of the Group's ultimate controlling party Oleg Tinkov. The outstanding balances with related parties were as follows:
30 September 2020 | 31 December 2019 | |||
(Unaudited) | ||||
Key | Associates, | Key | Associates, | |
management | joint ventures | management | joint ventures | |
personnel | and other | personnel | and other | |
In millions of RR | related parties | related parties | ||
ASSETS | ||||
Gross amounts of loans and advances to | ||||
customers(contractual interest rate: 1.7-16.5% p.a. | ||||
(31 December 2019: 11.7-25.7% p.a.)) | 436 | 1,706 | 437 | 150 |
Other financial assets | - | 686 | - | 843 |
TOTAL ASSETS | 436 | 2,392 | 437 | 993 |
LIABILITIES | ||||
Customer accounts (contractual interest rate: 0.8- | ||||
3.7% p.a. (31 December 2019: 0.5-7.2% p.a.)) | 891 | 1,202 | 1,779 | 227 |
Debt securities in issue (yield: 1.0-3.6% p.a. | ||||
(31 December 2019: 1.0-3.6% p.a.)) | - | 2,186 | - | 2,460 |
Other non-financial liabilities | 1,072 | - | 521 | - |
TOTAL LIABILITIES | 1,963 | 3,388 | 2,300 | 2,687 |
EQUITY | ||||
Share-based payment reserve | ||||
- Management long-term incentive program | 806 | - | 930 | - |
TOTAL EQUITY | 806 | - | 930 | - |
57
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
23 Related Party Transactions (Continued)
At 31 August 2020 the Group acquired 22.15% shareholding in Incantus Holding Limited, which is a group of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding CIS). The investment in Incantus Holding Limited was classified as an investment in associate. Also the Group provided a convertible loan to Incantus Holding Limited in the amount of EUR 15.4 million (RR 1,434 million) at 1.7% p.a. with a maturity date of 31 August 2025. The convertible loan agreement implies that the Group may convert the loan into the borrower's shares at the price of initial acquisition of shares of Incantus Holding Limited by the Group subject to compliance with a number of conversion requirements including a cap in relation to overall shareholding of the Group in Incantus Holding Limited of 24.5%.
The income and expense items with related parties were as follows:
Unaudited | ||||||||
Nine months ended | Three months | Nine months ended | Three months | |||||
ended | ended | |||||||
30 September 2020 | 30 September 2019 | |||||||
30 September 2020 | 30 September 2019 | |||||||
Key | Associa- | Key | Associa- | Key | Associa- | Key | Associa- | |
manage- | tes, joint | manage- | tes, joint | manage- | tes, joint | manage- | tes, joint | |
ment | ventures | ment | ventures | ment | ventures | ment | ventures | |
person- | and other | person- | and other | person- | and other | person- | and other | |
nel | related | nel | related | nel | related | nel | related | |
In millions of RR | parties | parties | parties | parties | ||||
Interest income calculated using | ||||||||
the effective interest rate method | 18 | 24 | 6 | 8 | 2 | 19 | 1 | 12 |
Other similar income | - | 2 | - | 2 | - | - | - | - |
Interest expense calculated | ||||||||
using effective interest rate | ||||||||
method | (22) | (27) | - | (8) | (53) | (76) | (23) | (76) |
Net (losses)/gains from foreign | ||||||||
exchange translation | - | (59) | - | (52) | - | 24 | - | 8 |
Administrative and other | ||||||||
operating expenses | (1,474) | (76) | (581) | (28) | (1,523) | - | (598) | - |
Other operating income | - | 447 | - | 447 | - | (2) | - | (26) |
Key management compensation is presented below:
Unaudited | ||||
Nine months | Three months | Nine months | Three months | |
ended | ended | ended | ended | |
30 September | 30 September | 30 September | 30 September | |
In millions of RR | 2020 | 2020 | 2019 | 2019 |
Short-term benefits: | ||||
- Salaries | 703 | 246 | 651 | 220 |
- Short-term bonuses | 439 | 146 | 531 | 290 |
Long-term benefits: | ||||
- Management long-term incentive programme | 315 | 180 | 341 | 88 |
- Key employees retention plan | 17 | 9 | - | - |
Total | 1,474 | 581 | 1,523 | 598 |
Key employees retention plan (KERP). On 14 April 2020 the Group launched a new long term incentive program for 250 senior and middle management level employees. The purpose of the program is to retain and motivate key employees with high potential. This is a performance-basedcash-settled program linked to the market price of GDRs. The expenses related to those participants who are considered to be key management personnel are disclosed in the table above.
Management long-termincentive program. On 31 March 2016 the Group introduced a MLTIP as both a long-term incentive and a retention tool for the management of the Group. Total number of GDRs attributable to the management is 11,940 thousand as at 30 September 2020 (31 December 2019: 9,940 thousand).
58
TCS Group Holding PLC
Notes to the Consolidated Condensed Interim Financial Information - 30 September 2020
23 Related Party Transactions (Continued)
Participants of the program receive the vested parts of their grants provided that they remain employed by the Group throughout the vesting period. Participants are entitled to the dividends, if any. Participants who leave the Group lose their right for the unvested parts of the grants.
The fair value of the awards as at grant dates (31 March 2016, 8 February 2017, 22 February 2018, 15 January 2019 and 5 June 2020) is determined on the basis of market quotes of GDRs as at those dates.
Each grant is divided into 4 equal awards. Each award vests over 4 years in equal tranches. The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the vesting dates
31 March and each subsequent 31 March (with the exception of 2019 when the vesting date for all participants was 31 January 2019) until 2022 for participants joining in 2016, until 2023 for participants joining in 2017, until 2024 for participants joining in 2018, until 2025 for participants joining in 2019 and until 2027 for participants joining in 2020.
The following table discloses the changes in the numbers of GDRs attributable to the MLTIP:
Number of GDRs | |
In thousands | attributable to the MLTIP |
At 31 December 2018 | 6,178 |
Granted | 91 |
Vested | (2,419) |
Forfeited | (68) |
At 31 December 2019 | 3,782 |
Vested | (1,810) |
Granted | 2,000 |
Forfeited | (17) |
At 30 September 2020 (Unaudited) | 3,955 |
24 Events after the End of the Reporting Period
On 11 November 2020 the Board of Directors declared an interim dividend in line with the current dividend policy of USD 0.25 per share/per GDR with a total amount allocated for dividend payment of approximately USD 49.8 million.
59
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TCS Group Holding plc published this content on 12 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 November 2020 08:18:06 UTC