TCS, owner of Russia’s Tinkoff Bank, sees H1 profit drop

12:05 pm Wednesday, August 24th, 2022

By Alexander Marrow

MOSCOW (Reuters) -TCS Group Holding’s first-half net profit dropped to a five-year low, hit by higher funding costs and conservative provisioning, the owner of Russian online bank Tinkoff said on Wednesday.

The group did not provide precise figures for many metrics. In early March, days after Moscow sent troops into Ukraine, the Bank of Russia told Russian banks they should not publish certain financial statements, seeking to limit risks to credit agencies associated with the imposition of Western sanctions.

“In H1, net profit decreased substantially year on year, implying single-digit return on equity,” TCS said in a filing.

Return on equity for the same period of last year was 44.7%.

TCS’s Moscow-listed depositary receipts were down 5% at 1523 GMT. Trading in its London-listed global depositary receipts was suspended in early March.

TCS said Tinkoff’s customer numbers rose to 24.3 million, nearly 8 million more than a year ago, which it said supported double-digit growth in quarterly revenue.

The bank said interest income increased by 31% year on year to 52.2 billion roubles ($872.9 million), but its net interest margin fell by a single-digit percentage.

The increase in TCS’ cost of risk was similar to that at the start of the COVID-19 pandemic in the first half of 2020, it added.

Shortly before the conflict in Ukraine, Tinkoff was gearing up to expand in southeast Asia, earmarking up to $200 million for the drive, partnering with a payment solutions provider in the Philippines and speaking to regulators in other countries.

But, as for many Russian businesses, the past six months have been turbulent. TCS has gone quiet on its Asia plans.

TCS said it had a significant liquidity cushion and ample capital buffers that would help it to “adapt further to the changing environment in 2022”.

The lender has not been directly targeted with sanctions, but Tinkoff has flagged issues in conducting SWIFT transactions since major Russian banks were cut off from the messaging system underpinning global financial transactions.

The group ringfenced its Russian business in April, transferring shareholder’s authority over Tinkoff Bank to its Russian management team.

Weeks later, TCS founder Oleg Tinkov sold his 35% stake to a company controlled by Russian billionaire Vladimir Potanin soon after criticising Moscow’s actions in Ukraine.

($1 = 59.8000 roubles)

(Reporting by Alexander MarrowEditing by David Goodman and Mark Potter)