D
N
A
T
O
R
P
E
R
T
N
E
M
E
G
A
N
A
M
2
2
0
2
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
years
of growth and
innovation
20
22
TBC Bank1 is the leading
financial group in Georgia
4 - 121
Contents
122 - 129
MANAGEMENT REPORT
GOVERNANCE
Overview
Information about who we are and what we have
achieved
TBC at a glance
A proven track record of growth and profitability
Executive management team
6
9
10
Reflections from the top
Our CEO provides an overview of the year under review,
covering the most significant developments
CEO letter
Our strategic approach
A review of our operating environment,
business model and strategy
Our operating environment
Our business model
Our strategic priorities
Our key performance indicators
Our ESG strategy
How we create value for
A run through of our value proposition
for each of our stakeholder groups
Our customers
Financial services
Our colleagues
Our community
Our investors
Financial review
Risk management
Material existing and emerging risks
Climate-related financial disclosures 2022
Our environmental management system
12
14
18
20
22
26
28
28
54
60
64
64
72
90
100
114
Corporate governance
Supervisory board biographies
124
126
130 - 259
FINANCIAL STATEMENTS
Independent auditors’ report
Consolidated statement of financial position
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Separate statement of financial position
Separate statement of profit or loss and other
comprehensive income
Separate statement of changes in equity
Separate statement of cash flows
Notes to the consolidated and separate financial
Statements
132
138
139
140
141
142
143
144
145
146
260 - 270
ADDITIONAL INFORMATION
Glossary
Alternative performance measures
Abbreviations
264
266
271
1 TBC Bank refers to JSC TBC Bank (the Bank) and its subsidiaries (together Group)
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
3
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT Management Report
OVERVIEW
TBC AT A GLANCE
TBC at a glance
1. Who we are
The leading financial group in Georgia with a full
suite of financial products and services across all
client segments.
39.5%
as of
31 Dec 2022
40.3%
as of
31 Dec 2022
Market share1
of total loans
38.8% as of 31 Dec 2021
Market share1
of total deposits
40.4% as of 31 Dec 2021
Powered by TBC Bank
•
Leading retail bank in Georgia
• Number one banking choice
for MSMEs
• Number one trusted partner
for corporate and investment
banking (CIB) clients
Additional financial
services provided:
• TBC Pay
• TBC Leasing
• TBC Capital
3. How we are different
Best-in-class
digital solutions
Advanced data
analytics capabilities
801,000 digital
monthly active users
as of 31 Dec 2022
GEL 79 mln additional
income generated
in 2022
Excellent corporate
governance and risk
management
1 ISS Governance quality
score for TBC PLC2 as of
31 Dec 2022 indicating the
lowest governance risk
Motivated employees
59% Employee
Net Promoter Score
(ENPS)3 - well above
industry average of 47%
2. Our mission
Customers
page 28
4. Our strategic priorities
Investors
page 64
To make
people's
lives easier
Colleagues
page 54
Build on our leading
position in Georgian
Banking
Strengthen
our advanced
digitalisation levels
Take our customer
experience to the
next level
Community
page 60
6
7
1 Based on data published by the National Bank of Georgia.
2 TBC Bank Group PLC ("TBC PLC") is a holding company of JSC TBC Bank (the “Bank”) and its subsidiaries. TBC PLC is incorporated in England and
Wales and listed on the premium segment of the London Stock Exchange.
3 The Employee Net Promoter Scoreზ (ENPS) was measured in October 2022 by an independent consultant for the Bank’s employees.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT OVERVIEW CONTINUED
A PROVEN TRACK RECORD OF GROWTH AND PROFITABILITY
A proven track
record of growth and
profitability1
LOAN PORTFOLIO (GEL bln)
NET PROFIT BEFORE TAX (GEL mln)
CAGR 15%
CAGR 26%
1,270²
962
17.0
17.9
15.2
12.7
10.4
589
510
332
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
RETURN ON EQUITY (ROE)
COST TO INCOME
26.3%
26.0%
23.8%
22.0%
12.9%
37.8%
37.7%
35.1%
32.5%
28.8%
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
1 Definitions and detailed calculation of the APMs are given on pages 264-268.
2 For the full year 2022, the average exchange rates for GEL/US$ was 2.92, while GEL/GBP stood at 3.62.
8
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
9
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT EXECUTIVE MANAGEMENT TEAM
Executive
management team
VAKHTANG BUTSKHRIKIDZE
Chief Executive Officer
TORNIKE GOGICHAISHVILI
Deputy CEO, Retail and MSME Banking, Payments
NIKOLOZ KURDIANI
Deputy CEO, Brand Experience and
Marketing
For full biographies please refer to our website:
www.tbcbankgroup.com
NINO MASURASHVILI
Deputy CEO, Chief Risk Officer
GIORGI MEGRELISHVILI
Deputy CEO, Chief Financial Officer
GEORGE TKHELIDZE
Deputy CEO, CIB & Wealth Management
10
11
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OVERVIEW CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT CEO letter
“While we have achieved a lot
over the past 30 years, I am
extremely excited about the
journey that lies ahead.”
CEO LETTER
30 YEARS OF INNOVATION AND GROWTH
2022 marked TBC’s 30th anniversary. Over the course
of these past 30 years, TBC has grown to be the
leading financial institution in the country. Everything
we have done has been, and continues to be, centred
around our mission: “to make people’s lives easier”.
This progress would not have been possible without
the efforts of our outstanding team. The enthusiasm
and dedication of our people have brought us to
where we are today and I would like to thank every
current and former colleague for contributing to
TBC’s success over the past 30 years.
DELIVERING ON OUR STRATEGY
For TBC, 2022 was another highly successful year with
its core banking business generating outstanding
results. In terms of headline numbers:
• Financials - the net profit reached a record GEL
1,023 million, up by 21% year-on-year, while the
return on equity was 26.0%, despite one-off tax
charges in the amount of GEL 113 million, based
on the strong growth backed by solid capital
position. Without the one-off tax charges, the net
profit would have been GEL 1,136 million, while ROE
would have reached 28.8%.
• User base - by the end of 2022, the number of
registered users of our services reached 3.0
million, out of which 1.5 million were monthly active
users (MAU). This compares to a total addressable
market of around 3.7 million in Georgia.
• High digital engagement - digital MAU saw a
major acceleration during the year, reaching
801,000 in December 2022, up by 24% year-on-
year, while the average digital daily active users
(DAU) amounted to 384,000, an increase of 35%
over the same period.
Reinforcing our leadership position
This year, TBC once again reinforced its leadership
position with strong growth achieved in both loans
and deposits and maintained its market shares
of around 40%. Loan growth was largely due to
consumer and micro loans in line with our strategy
to refocus growth towards higher-yielding loans
in local currency. In the Corporate and Investment
Banking (CIB) segment, we focused on increasing
the share of large and mid-corporate clients and
lowering concentration levels. At the same time, the
asset quality remained high thanks to prudent credit
risk management. In terms of deposits, growth was
primarily driven by local currency deposit inflows. As
a result, the larisation levels of our loan and deposit
portfolios increased throughout the year in line with
our strategy.
Furthermore, we are proud to have maintained our
position as the leading business supporter. We
support businesses during every stage of their
development by providing financial expertise, as well
as a vast array of non-financial services, including
our start-up programme, workshops and seminars. In
line with this, our annual TBC Business Awards, which
recognises the best companies and services in the
country, is one of the most anticipated events among
the Georgian business community.
RECORD PROFITABILITY AND PRUDENT
CAPITAL LEVELS
In 2022, the operating income amounted to GEL 1,946
million and grew by 39% year-on-year. This growth
was driven by a strong increase in the net interest
income, on the back of a combination of robust loan
book growth and a higher net interest margin, as well
as a substantial contribution from FX operations,
related to strong business volumes and increased
margins.
On the asset quality side, our cost of risk continued to
normalise and amounted to 0.6% for the year. Strong
focus on digitalisation and data analytics capabilities
allows us to manage our business efficiently. As a
result, cost to income ratio decreased by 3.7 pp year-
on-year to 28.8%. Our capital position has remained
strong, supported by robust income generation
and the positive effect of a strengthening local
currency. At the end of 2022, our CET1 ratio stood at
15.5%, comfortably above the minimum regulatory
requirement of 11.6%.
ATTRACTING AND RETAINING TALENT
All the achievements I have mentioned above
are attributable to our team of 8,500 dedicated
colleagues. TBC pays great attention to attracting
and retaining the best talent by offering opportunities
for growth and development, thorough career
planning, a competitive compensation package,
as well as a flexible working environment. We offer
education opportunities through TBC Academy, as
well as provide financial support to attend various
external courses and gain international certifications.
As a result of these initiatives and more, it is a source
of much pride that our colleagues feel valued and
professionally fulfilled, as reflected in high employee
net promoter score (ENPS) of 59%1.
MUCH ACHIEVED OVER 30 YEARS, MUCH TO
LOOK FORWARD TO
While we have achieved a lot over the past 30 years,
I am extremely excited about the journey that lies
ahead. Our focus on maintaining the leadership
position in banking will result in strong balance sheet
growth, as well as generating both interest and non-
interest income streams that will in turn support the
Group’s robust profitability in the coming years. At the
same time, continued technological advancements
will help us increase efficiency further.
Vakhtang Butskhrikidze
CEO
24 April 2023
1 The Employee Net Promoter Score (ENPS) was measured in
October 2022 by an independent consultant for the Bank’s
employees.
Note: For better presentation purposes, certain financial numbers
are rounded to the nearest whole number.
12
13
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022REFLECTIONS FROM THE TOPFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTDEAR STAKEHOLDERS,2022 was a year of major instability across the region following the outbreak of the devastating war in Ukraine, which took the lives of so many innocent people, led to the humanitarian crisis due to the forcible displacement of millions of people and negatively affected the global geopolitical and economic landscape. I strongly believe that Ukraine will prevail in its fight for freedom. In the meantime, we will continue to stand by Ukraine by offering our support to those who have suffered from the hardships of the war, through various programmes, charity activities and fundraisers.The war has had an adverse impact on the global economy, leading to an energy crisis and rising inflation. Even in these difficult times, the Georgian economy has proved its resilience, recording continued strong growth. We remain mindful, however, of the challenging geopolitical situation and continue to monitor and analyse the war’s effects closely. OUR STRATEGIC APPROACH
OUR OPERATING ENVIRONMENT
Our operating
environment
ECONOMIC GROWTH
After rebounding from the pandemic, the Georgian economy maintained its strong growth momentum in 2022, with
real GDP growing by 10.1% year-on-year, according to Geostat’s preliminary estimates.
REAL GDP GROWTH (%)
6.4
3.6
4.4
3.0
2.9
4.8
4.8
5.0
10.5
10.1
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
FISCAL STIMULUS
The fiscal stimulus, although still sizeable, negatively affected growth in 2021 as the deficit amounted to around 6.1% of
GDP, after an expansionary 9.3% of GDP in 2020. In 2022, the deficit was even lower, at 2.5%. According to the Ministry
of Finance, fiscal consolidation is expected to take place in the coming years with deficit-to-GDP ratios of 2.8% and
2.3% in 2023 and 2024, respectively.
GOVERNMENT DEBT AND BUDGET BALANCE (% OF GDP)
-2.7
39
7
32
-2.3
39
7
32
-2.1
40
8
32
2017
2018
2019
61
13
48
2020
-9.3
-2.5
40
10
30
50
10
40
-6.1
2021
2022
Source: Geostat
EXTERNAL SECTOR
-6.8
External Public debt
Domestic Public debt
Budget balance, RHS
Source: Geostat, MOF
Georgia’s external sector performed significantly better throughout the year. Specifically, exports and imports of
goods grew by 32% and 33% YoY, respectively. Even though surging international prices were the major driver of
the increase in trade, some growth in real terms was also recorded. Notably, investment goods constituted a high
proportion of imports, indicating positive sentiments, while the terms of trade remained broadly stable, supporting
economic growth and the GEL.
As the initial adverse spillover effects of the Russian invasion of Ukraine was eventually compensated by the impact
of migration, the recovery of tourism and remittance inflows reached record highs. Including the migration effect,
tourism inflows for the full year 2022 surpassed the 2019 level by 8%. Remittance inflows grew further as well,
increasing by 28%1 year-on-year. Foreign Direct Investment (FDI) also experienced strong growth with a 99% YoY
increase in the third quarter and 102% growth in the first nine months of the year. Importantly, higher levels of FDI were
primarily due to much stronger additional equity investments rather than reinvested earnings.
CREDIT GROWTH ON A CONSTANT CURRENCY BASIS
As of December 2022, bank credit increased by 12% year-on-year, compared to 18% growth by the end of 2021, at
constant exchange rates. All segments experienced a moderation in growth. Corporate lending activity growth
decreased to 6% by the end of December, largely on the back of sizeable prepayments in the second half of the year,
compared to 18% in 2021. YoY growth in MSME and retail lending also cooled, although it maintained a relatively strong
momentum, with growth going down from 19% at the end of 2021 to 16% at the end of 2022, and from 18% to 15%,
respectively.
GROWTH OF LOANS BY SEGMENTS (YOY, EXCL. FX EFFECT, %)
YOY GROWTH OF INFLOWS AND IMPORTS (%)
182
102
32
18
33
28
8
Exports Export without
Imports
FDI*
Tourism
re-export
Tourism
vs 2019
Remittances**
35
30
25
20
15
10
5
0
16
15
12
6
9
1
-
b
e
F
9
1
-
r
p
A
9
1
-
n
u
J
9
1
-
g
u
A
9
1
-
t
c
O
9
1
-
c
e
D
0
2
-
b
e
F
0
2
-
r
p
A
0
2
-
n
u
J
0
2
-
g
u
A
0
2
-
t
c
O
0
2
-
c
e
D
2
1
-
b
e
F
1
2
-
r
p
A
1
2
-
n
u
J
1
2
-
g
u
A
1
2
-
t
c
O
1
2
-
c
e
D
2
2
-
b
e
F
2
2
-
r
p
A
2
2
-
n
u
J
2
2
-
g
u
A
2
2
-
t
c
O
2
2
-
c
e
D
Total loans
Corporate
MSME
Retail
Note: Aug-22 decline in corporate credit was largely due to the prepayments
Source: NBG
*sum of the first three quarters of the year
**Remittances from Russia are adjusted for double counting with tourism inflows and other similar effects, based on TBC Capital estimates.
Source: NBG, Geostat
14
1
Remittances from Russia are adjusted for double counting with tourism inflows and other similar effects, based on TBC Capital estimates.
15
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
INFLATION, MONETARY POLICY, AND THE EXCHANGE RATE
The initial economic effects of Russian aggression against Ukraine, which led to further depreciation of the GEL and
surging commodity prices and was later exacerbated by migration-driven rent increases, resulted in additional upward
pressure on inflation, which was already elevated.
Later on, the GEL started to regain its value against US$, supported by strong inflows and tight monetary policy,
appreciating to 2.69 at the end of December 2022 from 3.10 at the end of 2021. Over the same period, GEL appreciated
to 2.84 and 3.27 from 3.50 and 4.12 against EUR and GBP, respectively.
Initially, after cooling off before the invasion, inflation started to rise again. Thereafter, CPI inflation moderated to
9.8% by the end of 2022 from double-digit levels throughout the year as a result of a stronger GEL and disinflationary
pass-through from international markets. Notably, monthly inflation rates have retreated to a larger extent, with a 0.3%
deflation in December. Nevertheless, awaiting for the more pronounced evidence for the easing of the still elevated
inflation pressures, the NBG, after tightening in April, kept its monetary policy rate (MPR) at 11% until the end of the year.
CPI INFLATION AND MPR(%)
16
12
8
4
0
11
9.8
0
2
-
b
e
F
0
2
-
r
p
A
0
2
-
n
u
J
0
2
-
g
u
A
0
2
-
t
c
O
0
2
-
c
e
D
2
1
-
b
e
F
1
2
-
r
p
A
1
2
-
n
u
J
1
2
-
g
u
A
1
2
-
t
c
O
1
2
-
c
e
D
2
2
-
b
e
F
2
2
-
r
p
A
2
2
-
n
u
J
2
2
-
g
u
A
2
2
-
t
c
O
2
2
-
c
e
D
Monetary policy rate (MPR)
CPI inflation
Source: NBG, Geostat
GOING FORWARD
After double-digit growth for two years in a row, the consensus projection appears to be that growth will normalise in
2023 with the IMF, the World Bank and the NBG projecting 4% and the Georgian government, 5%. According to TBC
Capital’s projections, the economy is expected to grow by around 6.4% in 2023.
More information on the latest analyses and projections can be found at www.tbccapital.ge.
16
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
17
M
A
N
A
G
E
M
E
N
T
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
A
D
D
T
O
N
A
L
I
N
F
O
R
M
A
T
O
N
I
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OUR STRATEGIC APPROACH CONTINUEDMANAGEMENT REPORT
OUR BUSINESS MODEL
Our business model
We have a customer-centric business model focused on providing the best
experience for clients.
E
U
L
A
V
E
T
A
E
R
C
E
W
W
O
H
What we deliver
How we deliver
How we share value
with our Stakeholders
Our operations
• Retail banking: a wide range of convenient
digital products.
• MSME: A leading partner for micro, small and
medium enterprises.
• CIB & WM: a full suite of services for
our corporate and wealth management
customers.
• Payments: seamless solutions covering all the
payment needs of companies and individuals.
•
Leasing: an alternative source of financing for
our retail and corporate clients.
Cutting edge technology
Innovate through technological
advancement.
Customers
Provide tailored solutions and a superior
customer experience to our clients.
Large data hub
Utilise our advanced data analytics
capabilities to maximise customer
value via personalised offerings.
Implement AI and automation in
relevant business processes.
Prudent risk management
Apply risk-adjusted profitability
approach in decision-making.
Ensure the resilience of the Group is
maintained.
Outstanding team
Attract and retain the best talent.
Colleagues
Support our colleagues in their
professional development and provide
rewarding career opportunities.
Community
Support business development and
foster job creation, as well as take an
active part in CSR and ESG activities.
Investors
Generate sustainable returns for our
shareholders and continue to be a
reliable partner for our debt holders.
18
19
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
OUR STRATEGIC PRIORITIES
Our strategic
priorities
Our strategic priorities serve our mission to make people’s lives easier.
By delivering superior financial services to both individuals and companies
in Georgia, we can achieve our mission.
Each of our priorities has been carefully selected and thought through to
ensure that they all contribute towards maintaining robust profitability and
strong growth profile.
Build on our
leading position in
Georgian Banking
Strengthen
our advanced
digitalisation levels
Take our customer
experience to the
next level
• Grow in specific segments: consumer and
micro loans.
• Grow our fee and commission income.
•
Increase efficiency by utilising our data
analytics capabilities and achieving higher
automation levels.
• Attract and develop the best talent.
Increase digital engagement across the Group in
terms of both transactions and sales:
• Grow the number of digital monthly and
daily active users.
• Maintain retail transactions offloading ratio1
at high levels.
•
•
Increase sales offloading for major products.
Increase productivity through fully digital
processes.
• Develop tailored financial services and
products coupled with lifestyle offerings and
deliver these in the most convenient way.
• Create a seamless customer experience across
all channels within the Group.
20
21
1
The retail offloading ratios measures the share of transactions conducted in our remote channels, that is outside the branches.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT OUR KEY PERFORMANCE INDICATORS
Our key
performance
indicators
We use a broad range of financial and non-financial measures in order
to assess our performance and provide a balanced view that takes into
account the interests of all our stakeholders. The Supervisory Board
regularly reviews the key performance indicators (KPIs) in order to ensure
that they continue to show whether our strategy is working and ensures the
long-term sustainable growth of the Group.
GROUP-WIDE FINANCIAL KPIS
STRONG GROWTH AND
PROFITABILITY
SOLID BALANCE SHEET
NET PROFIT BEFORE TAX (GEL mln)
CET 1 CAPITAL RATIO
.
9
9
6
2
,
1
.
2
2
6
9
.
2
9
8
5
.
2
0
1
5
.
2
2
3
3
In 2022, we generated record
high net profit before tax,
which was supported by
strong revenue generation
across the board.
%
5
5
1
.
%
7
3
1
.
%
4
2
1
.
%
0
2
1
.
%
4
0
1
.
Our CET 1 capital ratio
increased in 2022, mainly due
to net profit generation and
local currency appreciation,
and remained comfortably
above the minimum
requirements by 3.9%.
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
RETURN ON EQUITY (ROE)1
LOAN BOOK LARISATION2 LEVEL
%
3
6
2
.
%
0
6
2
.
%
8
3
2
.
%
0
2
2
.
%
9
2
1
.
The robust profitability we
delivered during the year was
also reflected in a high return
on equity ratio. Without the
one-off tax charges, our ROE
would have been 28.8%.
%
9
2
5
.
%
3
6
4
.
%
3
.
1
4
%
6
0
4
.
%
9
9
3
.
The larisation level of our
loan portfolio went up in
2022 across all segments
supported by GEL
appreciation.
Added KPIs
Removed KPIs
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Group-wide financial KPIs:
Growth and profitability
– Net profit before tax
– Return on assets
– Net interest margin
– Growth of net F&C income
Balance sheet
– Loan book larisation level
– Liquidity Coverage Ratio
Operational KPIs:
Customer base
– Total registered users
– Monthly active customers
Digitalisation
– Digital monthly active users
– Retail offloading ratio
COST TO INCOME RATIO1
NON-PERFORMING LOANS (NPL)1
%
8
7
3
.
%
7
7
3
.
%
1
.
5
3
%
5
2
3
.
%
8
8
2
.
In 2022, we managed to
improve our cost to income
ratio further, due to strong
income generation and
efficient management of
costs.
%
7
4
.
%
1
.
3
%
7
2
.
%
4
2
.
%
2
2
.
In 2022, NPLs improved
across all segments.
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
1 Definitions and detailed calculation of the APMs are given on pages 264-268.
2 Share of GEL denominated loans in total loan portfolio.
22
23
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT OPERATIONAL KPIS
STEADY GROWTH IN GEORGIA
GROWING CUSTOMER BASE AND
ENGAGEMENT ACROSS THE GROUP
INCREASED DIGITAL FOOTPRINT
ACROSS THE GROUP1
HIGH EMPLOYEE AND CUSTOMER
SATISFACTION LEVELS
LOAN BOOK GROWTH AT
CONSTANT CURRENCY
TOTAL REGISTERED
USERS (mln)
DIGITAL MONTHLY
ACTIVE USERS (thousands)
EMPLOYEE NET
PROMOTER SCORE2
%
3
7
1
.
%
0
4
1
.
%
7
8
.
2020
2021
2022
In 2022, our loan book outpaced the
market and increased its market share in
total loans by 0.7 pp to 39.5%.
0
3
.
6
2
.
8
2
.
2020
2021
2022
The increase in the number of registered
users was mainly attributable to our retail
customers.
1
0
8
4
4
6
2
8
5
2020
2021
2022
Our digital monthly active users (MAU)
experienced significant growth.
%
8
6
%
6
%6
9
5
2020
2021
2022
The employee net promoter score (ENPS) measures
employee loyalty and reflects the likelihood of our
colleagues recommending their workplace to their
friends and family. In 2022, our employee satisfaction
levels decreased but still remained strong, well above
the industry average of 47%.
DEPOSIT GROWTH AT
CONSTANT CURRENCY
MONTHLY ACTIVE
CUSTOMERS (mln)
DIGITAL DAILY ACTIVE USERS /
MONTHLY ACTIVE USERS
(DAU/MAU)
CUSTOMER NET
PROMOTER SCORE3
%
2
0
3
.
%
1
.
3
2
%
7
3
1
.
2020
2021
2022
5
.
1
4
.
1
3
.
1
2020
2021
2022
%
8
4
%
4
4
a
/
n
2020
2021
2022
%
1
6
%
6
5
a
/
n
2020
2021
2022
In 2022, our deposits grew broadly in line
with the market, maintaining our total
deposit share at 40.3%.
The growth in monthly active customers was
mainly driven by our retail customers.
The daily engagement of our digital users
went up as the growth in the number of
digital daily users surpassed the growth of
digital monthly active users.
The customer net promoter score (NPS)
measures how willing customers are to
recommend our products and services
to others. In 2022, our NPS among retail
clients continued to increase, rising to 61%.
24
25
1 These terms are defined in Glossary on pages 262-263.
2 The Employee Net Promoter Score (ENPS) was measured in October 2022 by an independent consultant for the Bank’s employees.
3 The Net Promoter Score (NPS) was measured based on survey conducted by the independent research company IPM in December 2022.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT OUR ESG STRATEGY
Our ESG strategy
Our ESG Strategy reaffirms our commitment to making a long-term,
sustainable contribution and to be the leading supporter of ESG principles
in the country and region.
Enhanced
governance of
ESG and climate-
related risks and
opportunities
Sustainable loan
portfolio growth
Access to green
and sustainable
financing sources
Customer awareness,
investor confidence
and employee
diversity
Impact
measurement
and reporting
VARIOUS INITIATIVES AND PROGRAMMES TO SUPPORT THE TARGETS SET BY THE ESG STRATEGY
Sustainable loan portfolio growth KPIs
In 2021, ESG KPIs were linked to senior management remuneration over the medium term to reflect our mid-term
strategy. In 2022, we continued to incorporate ESG-related KPIs for bank-level positions and established sustainable
loan portfolio growth targets for business segments – retail, MSME and corporate: the target for green and social loans
for 2023 has been set at a total volume of GEL 1 billion.
The ESG Academy
In 2022, we developed the concept of the ESG Academy which was established in February 2023 to raise awareness
and knowledge of ESG topics, including green and social financing, regulatory requirements, diversity and affirmative
approaches, sustainable business models and practices among the Bank’s customers as well as TBC staff. The
first training programme ‘Green mind-set and green financing’ will include extensive training over two days for 900
employees and one-day’s training for 300 retail, MSME and corporate customers. The programme will be supported
by the partner IFIs – the Green for Growth Fund (GGF) and the European Fund for Southeast Europe (EFSE) and will run
for 22 months.
Science-based targets
In 2022, we built internal capacity on relevant GHG emissions calculation methodologies and approaches. This was
achieved via training and the use of external consultancies. As the next step, we aim to measure our performance in
line with internationally-established standards and align with science-based targets.
Measure ESG awareness among employees and customers
In 2022, 98% of the Bank employees participated in ESG-related training. In 2023, we aim to develop a framework
for measuring ESG awareness among employees in order to track the results regularly and identify areas for further
improvement. Furthermore, we will seek to establish an approach for customer engagement on ESG topics.
Key achievements in 2022:
Talent programmes for Information and communication technologies (ICT)
Our diversity targets focus on the empowerment of women, girls, talented young people from regions and rural areas
as well as on age-diverse recruitment. As technology is key to TBC Bank, ICT is a priority area. In 2023, through the
support of the USAID Industry-led skills programme, we will commence a new ICT programme, consisting of eight
new training courses in programming, information security and other technologies. Around 750 people from a diverse
range of backgrounds, ages and genders are expected to participate in the programme over the next 24 months. A
number of the graduates will be employed by TBC Bank and TBC’s partner companies.
• GEL 750 million sustainable loan portfolio target for 2022 met. Furthermore, the total volume of the sustainable
portfolio reached GEL 782 million, which constitutes a growth of 15.6% in comparison with the end of 2021 (GEL 676
million).
• Climate-related framework in line with the TCFD requirements established.
• Comprehensive ESG training framework covering all employees and different responsibility levels established.
• Diversity, Equality and Inclusion (DEI) Policy, targets and action plan defined.
• ESG strategies in all significant subsidiaries developed.
In 2023, we continue to follow our strategic plan and will focus on the following topics:
Competence
enhancement in
ESG matters at
Supervisory Board
and executive
management level
Capacity building
in green financing
at Bank level
GEL 1 billion target
for the sustainable
loan portfolio
Establishment of
the ESG Academy
- green financing
training courses
for employees and
customers
TCFD
implementation –
completion of the
second stage and
action plan
Regular reporting
on climate-related
risks, scenario
analysis, stress
testing, ESG risk
appetite
Measure ESG
awareness among
employees and
customers
Implementation
of the affirmative
recruitment
approach
Mentorship
programmes
Measure the
Bank’s direct
performance in
relation to the
Paris Agreement
targets for
GHG emissions
reduction
Increase
granularity and
automation of ESG
reporting
26
27
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022OUR STRATEGIC APPROACH CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTThe ESG Strategy is reviewed and approved by the Supervisory Board annually, while implementation is overseen by ESG-related committees at the Board and executive management level. The ESG Strategy defines several key areas and targets for different time horizons: OUR CUSTOMERS
FINANCIAL SERVICES
HOW WE CREATE VALUE FOR
OUR CUSTOMERS
Financial services
OVERVIEW
Banking business
Supplementary financial services
Leading Retail
Banking Franchise
Top Choice Bank for
MSMEs
Leading CIB and
WM Franchise
TBC Pay
Leading payments provider
TBC Leasing
Leading leasing services provider
LOAN PORTFOLIO
AS OF 31 DEC 2022
DEPOSIT PORTFOLIO
AS OF 31 DEC 2022
2%
10%
38%
GEL 17.9 bln
+14% YoY1
GEL 17.8 bln
+30% YoY1
51%
37%
27%
35%
Retail
CIB
MSME
Other2
GEL 8.1 bln
(2021: GEL 6.2 bln)
PAYMENTS TRANSACTION
VOLUME in 2022
GEL 290 mln
(2021: GEL 254 mln)
LEASING PORTFOLIO
as of 31 Dec 2022
28
29
1 Growth in constant currency.
2 Other includes Ministry of Finance (MOF) deposits.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION RETAIL BANKING
Our retail loan book increased 15% year-on-year in constant currency
terms, driven largely by strong growth in higher yield, non-mortgage loans.
LEADING RETAIL BANKING FRANCHISE IN GEORGIA
38.4%
(2021: 38.6%)
RETAIL LOAN MARKET SHARE1
38.1%
(2021: 40.3%)
RETAIL DEPOSITS MARKET SHARE1
We differentiate ourselves through the superior customer experience we deliver, the best-in-class digital channels we
provide and the advanced data analytics tools and fully-fledged payments solutions we have developed.
Retail
Mass Retail
Affluent Retail
• A leading position across the
mass retail segment;
• A full suite of financial products
and services;
• Acclaimed digital channels;
• Efficient, convenient and
accommodating next-generation
branches.
• Number one choice for affluent
customers;
• Innovative, flexible subscription
model offering tailored products
and services;
• Strong positioning in lifestyle
offerings.
MEASURING SUCCEESS IN 2022
98% OF ALL OUR RETAIL TRANSACTIONS WERE CONDUCTED REMOTELY IN 2022
2%
-1pp YoY
15%
0pp YoY
20%
-3pp YoY
YEAR IN REVIEW
63%
+4pp YoY
Internet & mobile bank
Self-service terminals
ATMs
Branches
GEL 6.8 bln
(2021: GEL 6.3 bln)
RETAIL LOANS
GEL 6.5 bln
(2021: GEL 5.6 bln)
RETAIL DEPOSITS
GEL 720 mln
(2021: GEL 577 mln)
RETAIL OPERATING INCOME
1.5 mln
(2021: 1.4 mln)
MONTHLY ACTIVE CUSTOMERS
801 K
(2021: 644 K)
DIGITAL MONTHLY ACTIVE USERS
30
31
1 Based on data published by the National Bank of Georgia as of 31 December 2022; In this context retail refers to individual customers.
2 Bankable population includes population of Georgia, aged 18-65.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDWIDE DISTRIBUTION NETWORK IN GEORGIA WITH STRONG FOCUS ON DIGITAL CHANNELSOur digital channels are an important part of our distribution network and comprise best-in-class mobile and internet banking applications that offer a fast and convenient banking experience. The vast majority of all banking transactions are conducted through these digital channels, which also serve as selling platforms for our core products. In addition, we operate a wide network of self-service terminals, which enable our customers to conduct most of their daily banking operations without the need to enter a branch. At the same time, our newly redesigned, next-generation branches are more focused on consulting and proactive sales. Currently, we have 129 branches covering all major regions of Georgia, compared to 147 by the end of 2021. EXPANDING OUR CUSTOMER BASE AND PENETRATION During 2022, we focused our efforts on expanding our active customer base both by gaining new customers and by increasing engagement with our existing clients. In addition, we increased our penetration levels among payroll clients, who provide a good source of fee and commission income. We also grew our youth customer base as part of our strategy to foster relationships with clients from a young age. Overall, the number of our monthly active customers increased by 7% year-on-year to 1.5 million, accounting for 66% of total bankable population in Georgia2.We also launched a data analytics project aimed at increasing the lifetime value of the customer. Within the scope of the project, we created an AI model, which not only helps us to better understand the expected value of clients, but also enables us to deliver a more tailored offering to our customers. It also provides an estimate for the probability of churn and therefore allows us to take a more proactive approach towards client retention. INCREASING DIGITAL ENGAGEMENT
In 2022, we enriched our mobile banking offerings by adding new features and functionalities. The most notable were:
• A refinancing functionality for our end-to-end (E2E) lending process, which gives our customers the opportunity to
•
transfer loans from other banks to TBC.
Introduction of Buy Now, Pay Later (BNPL), an easy to use new product for our retail clients. The user just has to scan
a QR code on a POS terminal and activate the BNPL limit. The repayment, which is interest free for customers, is
settled in four instalments.
• Purchase of a public transportation pass and integrating this into our mobile banking app.
In terms of operating metrics, in December 2022, the number of digital monthly active users (MAU) increased by 24%
year-on-year and reached 801,000 representing 54% of total monthly active individual customers. Over the same
period, the average number of daily digital active users (DAU) grew 35% year-on-year to 384,000. As a result, our digital
DAU/MAU ratio stood at 48%, up by 4 pp year-on-year. We also achieved strong results in the number of consumer
loans and retail deposits sold via our digital channels.
CONSUMER LOANS OFFLOADING
IN DIGITAL CHANNELS
DEPOSITS OFFLOADING
IN DIGITAL CHANNELS
48%
in 2022
67%
in 2022
+ 6 pp YoY
- 6 pp YoY
AWARD-WINNING DIGITAL BANKING
We are proud that our digital banking offering once more earned international recognition and received multiple
awards from Global Finance.
CONSUMER DIGITAL BANK AWARDS IN CENTRAL AND EASTERN EUROPE 2022
FROM GLOBAL FINANCE
The Best Bill
Payment and
Presentment
The Best User
Experience (UX)
Design
The Best in
Social Media
Marketing and
Services
The Best Open
Banking APIs
RETAIL GROSS LOANS
PORTFOLIO (GEL BLN)
RETAIL DEPOSIT
PORTFOLIO (GEL BLN)
6.3
2.2
4.1
6.8
2.5
4.3
6.5
1.9
4.6
5.6
1.5
4.1
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2022
Mortgage
Non-mortgage
Foreign currency
Local currency
32
33
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDGROWING OUR PAYMENTS BUSINESSAfter introducing Apple Pay in 2019, we launched Google Pay for Android users in 2022. The year under review also saw us focus on digital card issuance. As a result, the share of mobile wallet payments as a proportion of total contactless payments increased from 22% to 30% by the end of 2022, while 99% of all transactions conducted domestically by TBC cards were contactless in 2022. According to the latest update from VisaNet on 1 February 2023, Georgia ranks 1st in contactless payments penetration globally and we are proud of our substantial contribution to this outstanding achievement. We also signed a long-term partnership agreement with leading delivery business Glovo to provide exclusive offerings to our customers for cashbacks and prime membership. Furthermore, we extended our transportation payments network, which already covered Tbilisi, Kutaisi, Gori and Poti. By adding two more cities - Telavi and Bakuriani - we now provide a full-scale transport solution to our customers.DELIVERING STRONG BALANCE SHEET GROWTH WITH AN INCREASED FOCUS ON FAST CONSUMER LOANSIn 2022, our loan book grew by 15% year-on-year on a constant currency basis. This was largely driven by an increase in higher yield, non-mortgage loans, while growth in the mortgage portfolio was moderate. The growth in the non-mortgage portfolio was largely supported by fast consumer (cash) loans. To speed up and optimise the disbursement of fast consumer loans, we set up efficient processes for lead generation and implemented a close to real-time follow-up procedure. In addition, we developed a propensity model for fast consumer loans, which enabled us to target customers more efficiently. As a result, the conversion rate of the loans campaigns reached 10%. We have also upgraded risk tools to maintain the cost of risks within acceptable limits. Our deposits also demonstrated strong growth, increasing by 29% year-on-year on a constant currency basis. TBC CONCEPT
TBC Concept is a significant part of our retail business. It accounts for
around 60% of our retail loans and 55% of our retail deposits. It is also a big
contributor to our fee and commission income.
MEASURING SUCCEESS IN 2022
GEL 4.2 bln
(2021: GEL 4.1 bln)
LOAN PORTFOLIO
GEL 3.5 bln
(2021: GEL 3.1 bln)
DEPOSIT PORTFOLIO
106 K
(2021: 101 K)
MONTHLY ACTIVE CUSTOMERS
Serving around 106,000 customers, TBC Concept is the leading private banking service provider in Georgia. We
distinguish ourselves by providing convenient and seamless digital services, offering special benefits on banking
products and delivering exclusive life-style offerings.
In 2022, TBC Concept generated strong results. By the end of the year, the affluent retail loan and deposit portfolio
increased 13% and 26% year-on-year, respectively on a constant currency basis. Revenue per affluent customer also
went up by 31% year-on-year.
TBC Concept offers clients various subscription packages, which are tailored to the needs of specific customer
groups. For example, our “digital package” is best suited for digital savvy customers, who prefer to do their daily
banking operations online without the support of a personal banker. Meanwhile, our “360 package” is designed for
individuals who require a wider range of financial tools and are interested in brokerage services to better manage their
funds. During the year, we offered our clients a number of options to invest in bonds issued by Georgian companies as
well as US Treasury Bills.
In addition, our affluent customers can benefit from our multi-functional TBC Concept Flagship Space. This is
comprised of 80% lifestyle and 20% banking and includes exhibition spaces, cafe, co-working areas, self-service and
personal banking zones. During the year, TBC Concept Flagship Space hosted many different events for business, art
and culture with renowned speakers. Also, in 2022, in collaboration with Primeclass, we opened a new Concept Space
in Tbilisi International Airport creating a pleasant area for relaxation and working before departure.
In 2022, affluent customers had exclusive access to over 300 special offers and promotions revolving around music
festivals, travel, shopping and other recreational activities. We also continued to offer our Concept clients concierge
services, which include trip planning, studying abroad, restaurant reservations, flower delivery, dry cleaning, laundry,
car service.
M
A
N
A
G
E
M
E
N
T
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
A
D
D
T
O
N
A
L
I
N
F
O
R
M
A
T
O
N
I
TBC Concept
In collaboration with Primeclass, we opened
a new Concept Space in Tbilisi International
Airport creating a pleasant area for relaxation
and working before departure.
34
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
35
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUED
MSME BANKING
WELL-DIVERSIFIED MSME LOAN PORTFOLIO WITH A STRONG PRESENCE IN THE TRADE,
AGRICULTURE AND CONSTRUCTION SECTORS AS OF 31 DEC 2022
Our MSME loan book increased 25% year-on-year in constant currency
terms, on the back of strong growth in the micro sub-segment.
20.1%
14.0%
TOP CHOICE BANK FOR MSMEs IN GEORGIA
We differentiate ourselves through the extensive business support programme we offer, the superior customer
experience we deliver and the advanced data analytics capabilities we have. This year, we were named the Best SME
Bank 2023 in Georgia as well as in Central and Eastern Europe by Global Finance.
MSME
Micro1
SME
• A full range of financial products and solutions from
start-ups to well-established enterprises;
• Accelerated loan approval process driven by high
automatisation levels;
• Convenient subscription model;
• Best-in-class business support programme.
Trade
Agriculture
Construction
Hospitality & Leisure
Transportation
Healthcare
Automotive
Pawn Shops
Food Industry
Manufacturing
Services
Real Estate
Other
12.6%
10.7%
10.4%
1.9%
2.5%
2.7%
3.1%
3.7%
4.8%
5.2%
8.3%
YEAR IN REVIEW
MEASURING SUCCEESS IN 2022
GEL 4.8 bln
(2021: GEL 4.1 bln)
MSME LOANS
GEL 1.8 bln
(2021: GEL 1.6 bln)
MSME DEPOSITS
GEL 319 mln
(2021: GEL 263 mln)
MSME OPERATING INCOME
77 %
(2021: 63%)
OF NEWLY REGISTERED BUSINESSES CHOOSE TBC2
58 K
(2021: 54 K)
MSME MONTHLY ACTIVE CUSTOMERS3
Includes collateralised business and agri loans up to GEL 1 million, as well as micro businesses with a maximum turnover of GEL 2 million.
1
2 Based on internal estimates as of 31 December 2022.
3
4 Based on external survey conducted by an independent research company, ACT in January 2023.
Includes monthly active MSME legal entities.
36
37
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDGROWING OUR CUSTOMER BASE AND INCREASING CUSTOMER DIGITAL ENGAGEMENTDuring 2022, the number of our monthly active MSME customers3 increased 7% year-on-year to 58,000. In addition, usage of our business internet and mobile banking platforms continued to grow with digital monthly active users reaching 34,000 by the end of 2022, up 8% year-on-year. This represents around 60% of our total active business customers. We pride ourselves on having the highest top of mind (TOM) score of 47% among MSME customers in the Georgian banking sector4. We are always looking to provide more convenient and efficient services to our customers and in line with this, the year under review saw us upgrade our existing subscription plan with new products better tailored to their needs. The upgraded subscription plan offers several packages and combines financial products with an extensive range of non-financial services, such as exclusive face-to-face and group meetings, seminars and workshops with leading specialists in various areas, as well as special offers from our partners. By the end of the year, around 40% of our MSME clients had subscribed to this service compared to 25% a year ago. We also started working on the development of a new user-friendly IT tool. This will provide a 360-degree view of our clients and will help us analyse their needs more comprehensively and more efficiently. In addition, we are developing a Machine learning (ML) model, which will be able to estimate the probability of churn for each MSME client and will enable us to take proactive measures in a timely manner. CORPORATE/INSTITUTIONAL DIGITAL BANK AWARDS IN CENTRAL AND
EASTERN EUROPE 2022 FROM GLOBAL FINANCE
Best
Corporate/
Institutional
Digital Bank
Best Online
Treasury
Services
Best in
Social Media
Marketing and
Services
Best Online
Portal/User
Experience
(UX) Design
Most
Innovative
Digital Bank
COUNTRY AND GLOBAL AWARDS 2022 FROM GLOBAL FINANCE
Best Corporate/
Institutional Digital Bank
in Georgia
Best Online Portal/User
Experience (UX) Design
of Corporate/Institutional
Digital Bank in the Global
sub-category
MSME GROSS LOANS
PORTFOLIO (GEL BLN)
MSME DEPOSIT
PORTFOLIO (GEL BLN)
4.8
2.4
2.4
4.1
2.2
1.9
31 Dec
2021
31 Dec
2022
1.6
0.8
0.8
1.8
0.9
0.9
31 Dec
2021
31 Dec
2022
Micro
SME
Foreign currency
Local currency
38
39
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDEXPANDING OUR MERCHANT BASEWe continue to support businesses by introducing different payment solutions that are tailored to their specific requirements.In December 2022, we launched the Tap2Phone solution for small and micro merchants allowing them to use android-based mobile devices for card acceptance though NFC technology, a cheaper alternative of a POS terminal. In 2023, we plan a full scale roll out of this product to penetrate the small and micro segment and increase the number of merchant terminals.In addition, we have introduced a dynamic currency conversion service for POS terminals. This enables cardholders from different countries to make payments in the original currency, making the payment process more comfortable and transparent for international visitors.We also opened a dedicated support centre for our merchant acquiring business, which provides full support to our clients with regards to POS terminals and e-commerce. In addition, we enriched our online payment platform (available at www.tbcpayments.ge) with new features allowing our merchants to monitor their transactions online and generate advanced analytical reports. DRIVING LOAN BOOK GROWTH VIA THE MICRO SUB-SEGMENTIn 2022, our loan book grew 25% year-on-year on a constant currency basis to GEL 4.8 billion. Growth was mainly driven by micro loans and was supported by a more streamlined business process, including confirmation of loan agreement via SMS, and a high automation level for loans below GEL 100,000. During the year, around 77% of such loans were processed automatically, using pre-determined rules and a scoring model, which significantly decreased the time-to-yes period. As a result, the share of micro loans in our total MSME portfolio increased by 4 pp year-on-year and reached 50%, making us the largest provider of micro business financing in the country. Over the same period, our deposits went up by 22% year-on-year at constant currency basis. EARNING INTERNATIONAL RECOGNITIONWe are proud that our digital banking offering once more earned international recognition and received multiple awards from Global Finance. ENHANCING OUR BUSINESS SUPPORT PROGRAMMEPROVIDING EDUCATIONAL RESOURCES FOR BUSINESSESIn 2022, we continued to run our successful full-scale business support programme. We also enhanced it further by adding extensive educational resources, which are accessible from a single platform www.tbcbusiness.ge. During the year, we conducted 100 trainings for 3,800 business representatives in the following subjects: marketing, finance, management and taxation. The programme has been developed in partnership with the Asian Development Bank and provides free access to live lectures on various relevant topics, such as technology, digital marketing and human resources. Our educational programme is the largest in Georgia and has attracted over 30,000 attendees to around 1,000 lectures over the past six years.SUPPORTING STARTUPS Since 2017, we have run our renowned programme Startuperi, which is designed to provide financial and non-financial support for companies at an early stage of development. The programme aims to increase the number of successful startups in Georgia by providing them with easily accessible capital, a digital platform for advertising campaigns, as well as various educational programmes, conferences and partnerships with large companies. In 2022, we disbursed around 90 loans totalling GEL 42 million through this programme - the total outstanding loan portfolio within this programme amounted to GEL 131 million as of 31 December 2022. During 2022, in partnership with Impact Hub Georgia, we launched a pre-acceleration programme for 40 selected technology start-ups in order to increase their ability to attract investment by helping them to develop a business plan, communication strategy and technical plan. The pre-accelerator programme lasted for 12 weeks and consisted of individual mentoring, networking events, and lectures. COLLABORATING WITH GOVERNMENTAL AND INTERNATIONAL PROJECTS TO SUPPORT LOCAL ENTREPRENEURSHIP In order to foster business development in rural areas and help create new job opportunities, we actively support local businesses through the provision of affordable finance. We work in partnership with several state programmes, “Produce in Georgia”, “Host in Georgia” and “Preferential Agro Credit”, to support local production, as well as agricultural and hospitality businesses. The programmes offer reduced interest rates through government subsidies. In 2022, we disbursed around 3,800 loans totalling GEL 240 million. The total outstanding portfolio of these loans amounted to GEL 475 million as of 31 December 2022, making us the biggest
partner bank for these programmes.
In addition, in cooperation with the European Bank for Reconstruction and Development (“EBRD”), we run two
programmes:
• “Business loan for women entrepreneurs”- offering special loan terms and conditions for women entrepreneurs to
support gender equality.
• “Business Loan with 15% Cash Back”- a project that aims to promote EU trade standards in the following areas:
agriculture, food production and laboratories.
The outstanding MSME loan book under these programmes amounted GEL 28 million, which was comprised of
around 100 loans as of the year end.
Detailed information about these programmes is available at www.tbcbusiness.ge.
CONTINUING OUR ANNUAL BUSINESS AWARDS
Established in 2015, our renowned Annual Business Awards event aims to promote and support business activities in
Georgia. Over the past seven years, it has become the most anticipated business event of the year, attracting more
than 3,500 businesses from various fields, who have shared their success stories with the public at large and have
inspired others to turn their ideas into reality.
This year, we added a new “outstanding customer experience” category to the four existing ones, which are:
• The best product
• The best innovative start-up
• Outstanding social responsibility
• Outstanding role in the development of the region
In addition, two special awards have been also included: “gender equality” and “green initiatives”, which have been
sponsored by our partners UN Women and Global Climate Partnership Fund (GCPF) respectively.
This year we had an unprecedently high number of around 410 applicants compared to 360 last year. The event was
organised in partnership with VISA and attracted 60 million views, while top of mind awareness reached 68%1.
1 Based on survey conducted by an independent research company, ACT.
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TBC Business
Awards 2022
Established in 2015, our renowned Annual
Business Awards event aims to promote and
support business activities in Georgia.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
41
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUED
CORPORATE AND
INVESTMENT BANKING
“Our CIB deposits increased by 33% year-on-year in constant currency
terms led by local currency deposits, translating into improved larisation
levels and strong income generation in transactional business.”
LEADING CIB AND WEALTH MANAGEMENT FRANCHISE IN GEORGIA
40.8%
(2021: 39.1%)
CIB LOAN MARKET SHARE1
42.9%
(2021: 40.5%)
CIB DEPOSIT MARKET SHARE1
Our success is driven by our client-centric business model, our investment in talent and our focus on advancing data
analytics and digital capabilities.
WELL-DIVERSIFIED LOAN PORTFOLIO WITH STRONG PRESENCE
IN EVERY SECTOR OF THE GEORGIAN ECONOMY AS OF 31 DEC 2022
1.6%
2.2%
2.5%
6.0%
21.2%
2.5%
2.6%
2.7%
3.5%
4.8%
6.0%
8.9%
Real Estate
Energy & Utilities
Food Industry
Agriculture
Automotive
Individual
Hospitality & Leisure
Metals & Mining
14.7%
Construction
Trade
Healthcare
Oil & Gas
Services
Financial Services
Other
10.5%
10.3%
CIB
YEAR IN REVIEW
Corporate
Wealth management
Investment banking
• The largest and most
trusted partner for
corporates with leading
position both in loans
and deposits.
• TBC WM – an
• TBC Capital - the
established wealth
management business
with growing financial
advisory and brokerage
franchise.
leading investment
bank with 80%+
market share2 in Debt
Capital Markets (DCM)
transactions and
230+ research reports
annually.
MEASURING SUCCEESS IN 2022
GEL 6.3 bln
(2021: GEL 6.5 bln)
CIB LOANS
GEL 9.1 bln
(2021: GEL 7.4 bln)
CIB DEPOSITS
GEL 607 mln
(2021: GEL 483 mln)
CIB OPERATING INCOME
GEL 1.4 bln
(2021: GEL 0.5 bln)
TOTAL ASSETS UNDER MANAGEMENT
7.7 K
(2021: 7.0 K)
NUMBER OF CIB CUSTOMERS
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1 Based on data published by the National Bank of Georgia as of 31 December 2022; in this context, corporate refers to legal entities.
2 TBC Capital market share in publicly and privately issued bonds in Georgia during 2022.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDCORPORATE BANKINGSTRENGTHENING OUR PRESENCE AMONG LARGE AND MID-CORPORATE CLIENTS In 2022, our CIB loan book grew by 6% year-on-year in constant currency terms. This was mainly driven by large and mid-sized corporate clients which together accounted for 53% of the CIB loan book, a 6 pp year-on-year increase. At the same time, our top 10 loans accounted for a smaller proportion of the total loan book - down 2 pp year-on-year to 5%. Our loan book remains well-diversified with a strong presence in all the major sectors of the Georgian economy - no single industry accounts for more than 22% of the total CIB book. In addition, our established syndication desk further enhanced the diversification of our portfolio as well as generated additional fee and commission income. During the year, we syndicated 40 transactions with a total amount of GEL 248 million. We are always looking to strengthen our leading position in corporate lending and with this in mind the year under review saw us initiate an end-to-end credit process redesign and digitalisation project, the objective of which is to increase efficiency - we are aiming to decrease our “time to yes” and “time to cash” by around 30-40% next year. GENERATING A STRONG PERFORMANCE IN TRANSACTIONAL BANKING
STRIVING TO ENHANCE THE CUSTOMER EXPERIENCE
In 2022, our CIB deposit book increased by 33% year-on-year in constant currency terms thanks largely to solid growth
in local currency deposits in line with our lari ation strategy. As a result, the share of local currency deposits increased
by 14 pp year-on-year on a constant currency basis and reached 55%. This has translated into solid non-interest
income generation from our transactional business, as shown below:
CIB DEPOSIT PORTFOLIO
(GEL BLN)
CIB NON-INTEREST INCOME
(GEL MLN)
7.4
3.0
4.4
9.1
5.0
4.1
206
127
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2022
As part of our commercial excellence transformation project, which was launched in 2020, we continued to advance
our corporate client management and analytical tool. This provides a full 360-degree view of each client based
on industry benchmarks. The AI tool delivers a number of benefits: firstly, full transparency and instant availability
of information enables clients’ profitability to be managed efficiently; secondly, relationship managers are able to
identify solutions that match clients’ needs instantly. As a result, our corporate clients receive a timely and high-quality
service, while our employees spend less time on routine tasks and more on value-add ones, thereby increasing their
productivity and wellbeing. In terms of financial benefits, this project generated an additional c. GEL 20 million net
banking income during 2022.
INVESTMENT BANKING AND
WEALTH MANAGEMENT
Established in 1999 as a wholly-owned investment banking subsidiary of TBC Bank and a licensed brokerage firm, TBC
Capital is a leading provider of investment, brokerage and corporate finance solutions. TBC Capital offers a full range
of financial services from structuring to executing deals or advising on complex corporate transactions. This year, we
strengthened our corporate advisory team and secured a solid pipeline of more than 50 high-quality assets, closed
one small sell-side M&A transaction and executed two landmark strategic advisory projects for large corporates with
international shareholder bases.
Foreign currency
Local currency
DRIVING CAPITAL MARKETS DEVELOPMENT IN GEORGIA
Our focus on digitalisation and new products is also enabling us to enhance the experience our customers have when
they transact with us. This year, for example, we redesigned the FX customer journey, which has resulted in faster
execution times. In addition, our bulk cash depository machines, which were introduced late last year, collected GEL
1.3 billion cash from our customers during 2022, resulting in considerable time savings for both our clients and our
cashiers at our branches. In all, we managed to offload 50% of cash transactions from the branches. Currently, we
operate 47 of these machines, which are located in the premises of our large clients and in all our major branches
across the country.
In terms of trade finance operations, we continue to lead the market with our GEL 2.2 billion guarantees portfolio and
more than 48% market share. In 2022, we also introduced a new factoring platform which has significantly enhanced
the customer journey. Not only has this resulted in a threefold increase in the number of factoring transactions, but also
a reduction in the time it takes to process the financing to just 30 minutes. Furthermore, all transactions are paperless
and require no physical interaction, making the customer journey more seamless and efficient. At the end of the year,
our factoring portfolio reached GEL 132 million, up 48% year-on-year.
In 2022, we received the following awards:
TRADE FINANCE AND FACTORING AWARDS
Market Leader
and Best Service
Provider in
Trade Finance in
Georgia 2022 from
Euromoney
Trade Finance
and Supply Chain
Finance 2022 from
Global Finance
Best Deal of the
Year in Trade
Finance 2022 from
ADB
Best Deal of the
Year in Factoring
2022 from FCI
Domestic Factoring
Provider of the Year
2022 from RFIx
With a more than 80% market share in debt capital market transactions1, 2022 saw TBC Capital maintain its leadership
position in terms of total public and private bonds placed on the Georgian market. We conducted several milestone
transactions acting as either sole manager or joint managers alongside other local or international investment banks,
including our first-ever US$ 80 million Secured Green Bond placement.
LOCAL MARKET
GEORGIA REAL ESTATE JSC
US$ 35,000,000
2 Year Public Placement - 8.50%
October 2022
Joint Lead Manager
GEORGIAN RENEWABLE
POWER OPERATIONS JSC
US$ 80,000,000
5 Year Public Placement - 7.00%
October 2022
NIKORA JSC
GEL 35,000,000
3 Year Public Placement
TIBR3M+3.50%
November 2022
Joint Lead Manager
Joint Lead Manager
TBC LEASING
TEGETA HOLDING
GEOPLANT
US$ 6,050,000
6 Year Private Placement - 9.50%
December 2022
Sole Lead Manager
GEL 150,000,000
US$ 2,560,000
3 Year Public Placement
3M+3.50%
December 2022
Sole Lead Manager
2 Year Private Placement - 9.00%
December 2022
Sole Lead Manager
1 TBC Capital market share in publicly and privately issued bonds in Georgia during 2022.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUED HOW WE CREATE VALUE FOR
OUR CUSTOMERS CONTINUED
In terms of Eurobond placements on international markets, TBC Capital was the only local investment bank to act as a
Joint Lead Manager on a US$ 300 million Eurobond placement by Silknet JSC in January 2022. TBC Capital was also
active in private bond placements and acted as Sole Lead Manager for TBC Leasing, EBRD, FMO, ADB and AIIB.
SERVING AS A TRUSTED STRATEGIC ENABLER IN BUSINESS AND INVESTMENT DECISIONS THROUGH OUR
SOPHISTICATED RESEARCH SERVICES
Our research division equips decision makers with in-depth and timely macroeconomic and sectoral analyses of
Georgia and the wider region. During the year, we continued to issue our regular weekly, monthly, and quarterly
publications. We also added to our offering new publications and reports, such as Global Industry Overview, Education
Market Overview and focused series on Residential Real Estate and Tourism. Overall, TBC Capital issued more than
230 publications in 2022. The full list of publications is available at www.tbccapital.ge. In addition, during the year TBC
Capital hosted several large-scale conferences for local and international stakeholders of the Georgian economy.
In 2022, National Bank of Georgia named TBC Capital as The Best Macroeconomic Forecaster of 2021. Furthermore,
TBC Capital continued to be a research contributor to Bloomberg and Refinitiv, targeting a wider international
audience interested in Georgia.
EXPANDING OUR WEALTH MANAGEMENT VALUE PROPOSITION BASED ON BROKERAGE SERVICES
TBC WM is Georgia’s leading wealth management franchise, serving around 2,900 resident and non-resident high net
worth clients. We offer a wide range of personalised banking and investment products that are carefully designed to
meet the individual needs of our customers and maximise their wealth. In addition, our clients benefit from exclusive
lifestyle offerings for major elite events taking place in the country. We also have a representative office in Israel, TBC
Invest, which acts as an intermediary with high net worth clients from Israel and offers fast and efficient consulting
services on the ground.
During 2022, we continued to broaden our alternative investment offerings in order to help our wealth management
clients diversify their funds and earn higher yields. In May 2022, we launched the first credit fund in Georgia managed
by our subsidiary company, TBC Asset Management, which allows our clients to invest in a diversified portfolio of
Georgian senior secured loans spread across a range of different sectors. We also upgraded our trading platform,
operated by our subsidiary, TBC Capital, providing our clients with an easy access to more than 60 stock exchanges
across 20 countries. Next year, we are planning to add pre-market and post-market trading capabilities, along with
shorting and margin trading solutions.
As a result of the above, the share of capital-light, alternative investment products as a proportion of our total WM’s
assets under management increased by 8% and reached 19% by the end of 2022.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION Over the past 30 years, TBC Bank has been actively supporting
companies operating in different sectors, helping them to achieve success
and contributing to the entire country’s development.
PRODUCTION
Zedazeni Group
Coca Cola Bottlers Georgia
REAL ESTATE
42%
TBC MARKET SHARE IN
REAL ESTATE
HORECA
41%
TBC MARKET SHARE IN
HORECA
ENERGY
54%
TBC MARKET SHARE IN
ENERGY
48
Archi
Orbi
Lopota
Silk Road Hospitality
Peri
Wissol Group
26%
TBC MARKET SHARE IN
PRODUCTION
FMCG & RETAIL
50%
TBC MARKET SHARE IN
FMCG & RETAIL
AUTOMOTIVE
47%
TBC MARKET SHARE IN
AUTOMOTIVE
Spar
Nikora Group
Tegeta Group
Hyundai Georgia
Note: market shares are calculated based on data published by the National Bank of Georgia as of 31 December 2022.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUED TBC PAY
TBC Pay is the leading payments provider in Georgia offerings convenient
payments solutions to customers via its wide network of self-service
terminals.
MEASURING SUCCESS IN 2022
4.3 K
(2021: 4.2 K)
NUMBER OF SELF-
SERVICE TERMINALS
+31% YoY
GEL 8.1 bln
VOLUME OF PAYMENTS
TRANSACTIONS
622 K
(2021: 582 K)
NUMBER OF USERS
GEL 20 mln
(2021: GEL 10 mln)
NET PROFIT
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDMANAGEMENT REPORTAT A GLANCETBC Pay is a leading payments provider in Georgia, offering individuals and businesses convenient payment solutions. TBC Pay is a wholly owned subsidiary of TBC Bank and has been operating since 2008.We offer a wide range of services, including utility payments, mobile top-ups, payments for public transportation, loan repayments and money transfers through a wide and easily accessible distribution network. We are focused on providing superior customer services and ensuring our services are accessible. We mainly service our customers via self-service terminals that are conveniently distributed across the country - at the end of 2022, the number of self-service terminals amounted to 4,300. These terminals allow customers to conduct a range of payments instantly on a 24/7 basis, using both cash and cards. In addition, TBC Pay operates a website (www.tbcpay.ge), along with a mobile app, both of which offer user friendly and engaging user interface. By the end of 2022, the number of registered users who use our app reached 396,000, while the number of active users stood at 64,000. For businesses with large cash operations, TBC Pay offers cash management services in the form of specialised cash boxes. After depositing cash into these boxes, the sum is automatically transferred to the company’s bank account. The cash boxes are secured via a strong authorisation process. YEAR IN REVIEWIn order to support the increased scale of the business, the company is streamlining its processes and implementing new technologies. During 2022, we continued implementing enterprise resource planning software and BI tools. These programmes will enable us to speed up the decision-making process across the company. In parallel, we have been working on the development of OpenApi products, which will enable us to attach other banks’ accounts onto our online platforms. Over 2022, the volume of transactions conducted through self-service, cash management terminals, digital channels, as well as payment aggregation business grew by 32% to GEL 8.1 billion. Over the same period, net profit amounted to GEL 20.4 million, up 105% year-on-year. LOOKING AHEADOur strategy is to further support the offloading of cash transactions from TBC branches by increasing the accessibility of our services via effective cash collection process and timely technical support.
TBC LEASING
With an 80% market share, TBC Leasing is a leading leasing services
provider in Georgia.
MEASURING SUCCESS IN 2022
80%
(2021: 77%)
MARKET SHARE1
2,037
(2021: 2,265)
NUMBER OF
CUSTOMERS
GEL 290 mln
(2021: GEL 254 mln)
LEASING PORTFOILIO
GEL 14 mln
(2021: GEL 12 mln)
NET PROFIT
CORPORATE LEASING PORTFOLIO
BREAKDOWN AS OF 31 DEC 2022
RETAIL LEASING PORTFOLIO
BREAKDOWN AS OF 31 DEC 2022
6%
8%
9%
9%
9%
21%
19%
19%
48%
52%
Construction
Manufacturing
Trade
Medicine
Used cars
New ccars
Service
Agriculture
Development
Other
TBC Leasing continued its active involvement in the financing of green, renewable and energy-efficient assets
through various initiatives, including:
• TBC Leasing continues to support local businesses, especially small and medium-sized enterprises. For this
•
purpose, TBC Leasing attracted EUR 3 million from its reliable partner - the European Bank for Reconstruction and
Development (EBRD). At least 70% of the resource will be directed to finance investments in green technologies,
which, in turn, will give us the opportunity to support local enterprises in expanding their green activities and
increasing their competitiveness.
In addition, we commenced a collaboration with Green for Growth Fund (GGF) to develop a digital platform, which
will allow our customers to submit requests for funding for prospective solar photovoltaic projects and obtain
quotes from TBC Leasing in a more efficient way. This platform will be integrated into TBC Leasing’s website and
will be equipped with a leasing and an impact calculator for solar PV systems – enabling potential clients to estimate
the leasing rates from different technology suppliers, including the main impact metrics such as energy and carbon
dioxide (CO2) emission reduction, savings in monetary terms and estimated payback period. The platform is
expected to go live in the first quarter of 2023.
As a result, our green leasing portfolio has grown to GEL 25 million from just GEL 3 million last year. We plan to further
increase our green leasing portfolio in the coming years.
LOOKING AHEAD
The Georgian leasing market has substantial growth potential given its low penetration level - leasing represents only
around 1% of Georgia’s GDP, significantly below peer countries where leasing accounts for approximately 5%2 of GDP.
Importantly, over the past five years, the compound annual growth (CAGR) of the Georgian leasing market was around
22%1, as awareness of leasing products as an alternative way of financing for SME clients has increased. We expect to
see further growth in both the Georgian leasing market and TBC Leasing in the year ahead.
1 Based on internal estimates.
2 Based on UK Good Governance Fund, Leasing Market Research.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR CUSTOMERS CONTINUEDMANAGEMENT REPORTAT A GLANCEDelivering comprehensive solutions, TBC Leasing offers an alternative source of financing to our retail and business clients. A wholly owned subsidiary of TBC Bank, TBC Leasing is a leading leasing services provider in Georgia and as of 31 December 2022 had a market share1 of 80%. Our technical know-how and specialist knowledge and expertise enable us to offer our clients all-round asset finance solutions and other complementary advisory services, including financial leasing, operating leasing, sale and leasebacks, all of which are tailored to the individual customer’s needs. In 2022, to meet our customers’ needs, we introduced a new product for the Georgian market, commercial real estate leasing, which accumulated a portfolio of GEL 41 million by the end of the year. We serve both individuals and business clients and have extensive geographical coverage throughout Georgia via official representative dealerships, vendors, direct sales channels as well as TBC Bank branches. We actively leverage TBC Bank’s wide sales network, which further supports our book creation via referral synergies. YEAR IN REVIEWOur leasing portfolio increased by 27% during the year on a constant currency basis and stood at GEL 290 million as of 31 December 2022. 92% of the portfolio related to legal entities, particularly in the construction, service and manufacturing sectors. The remaining 8% of the portfolio related to individual clients. New cars accounted for 48% of the total retail portfolio, used cars the remaining 52%. In 2022, TBC Leasing generated net profits of GEL 13.9 million, up 20% year-on-year. OUR COLLEAGUES
HOW WE CREATE VALUE FOR
OUR COLLEAGUES
Our colleagues
We are committed to providing a healthy and safe workplace environment, where
people can develop and grow, encouraging diversity, equality and inclusion
among our workforce while delivering top-quality services to our clients.
MEASURING SUCCESS IN 2022
59%
(2021: 66%)
EMPLOYEE NET
PROMOTER SCORE1
36%
(2021: 35%)
WOMEN IN MIDDLE
MANAGERIAL POSITIONS2
89%
(2021: 88%)
ENGAGEMENT INDEX3
Case study
“I began working at TBC as a teller, but I was interested in pursuing a career
in programming. In my free time I would learn the basics of programming by
myself, using online resources, however I felt the need for mentorship from
experienced tutors.
This is when I decided to register for the education programme at TBC IT Academy. The selection process was
challenging, but I worked hard and was selected to participate in the programme, which was fully financed by TBC.
This programme gave me invaluable knowledge, as well as the opportunity to begin my career in programming. One
year later, I am now a part of TBC’s tech team and can continue my professional growth in a job that I find interesting
and fulfilling. My experience has shown me that dedication and hard work are necessary to succeed, however having
the right opportunity is just as important. I am grateful to TBC for giving me the opportunity to unlock my true
potential and change my career path in line with my interests.“
Giorgi Shengelia
Developer at TBC Bank
1 The Employee Net Promoter Score (ENPS) was measured in October 2022 by an independent consultant for the Bank’s employees.
2 Branch managers, division and department heads, as well as directors of the Group’s subsidiaries.
3 Engagement Index was measured in October 2022 by an independent consultant for the Bank’s employee’s and measures how much employees
feel involved and committed to TBC Bank.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTOVERVIEWWe strongly believe that people are our vital capital and strive to become the most attractive employer in the country in which we operate. With an effective talent acquisition and development framework, we support Group strategy and create maximum value for both TBC and our employees. Post COVID-19, we introduced hybrid working arrangements, allowing our employees to work from wherever they choose. Today, most of our non-customer facing employees work outside the office, which has resulted in higher employee satisfaction levels and increased efficiency across the Group. In 2022, in the light of increased inflation, we raised the salaries for around 58% our mass position employees in customer-facing and support roles. The average increase was around 20-25%.During 2022, our main priorities were: talent acquisition and development, performance management, engagement and motivation, as well as ensuring equality and diversity. OUR MAIN STRATEGIC PRIORITIES TALENT ACQUISITION AND DEVELOPMENTWe strive to be one of the best employers in the Georgian market and in line with this, we aim to build a best-in-class talent acquisition and development function. We actively monitor the labour market, both in Georgia and abroad, in order to expand our network for attracting key personnel, including but not limited to: business, finance, risk and tech positions. For entry-level positions, we run a wide-scale internship programme to attract the best students from Georgia’s leading universities. After the successful completion of a one-year internship, top candidates are offered employment in various departments, including finance, risk, corporate, marketing, IT and data analytics. In addition, we have started active cooperations with local universities and colleges, in order to attract recent graduates for entry level positions at the front office.We continue to run a talent development programme for middle management which is focused on enhancing leadership skills and developing a growth mindset. Since the launch of the programme in 2021, up to 110 people have successfully graduated from this programme. Highly positive feedback has been received from the graduates of this programme. HOW WE CREATE VALUE FOR
OUR COLLEAGUES CONTINUED
Since 2019, we have run an internal IT academy, which offers courses in front-end and back-end development for both
our existing employees as well as potential ones. This programme is free of charge for selected candidates and is run
by experienced staff members and leading professionals from relevant fields. Since its establishment, we have trained
approximately 800 people and recruited 290 people.
In addition, TBC Academy, which was established in 2011, continues to offer various development opportunities
to our employees. During 2022, more than 1,200 employees took various courses, such as business development,
banking, change management, leadership, financial analytics and many more. We also provide financial support to our
employees to attend various external courses and gain international certifications such as MBA, CFA, FRM, ACCA and
others.
We offer competitive remuneration packages to our employees, which are comprised of a fixed salary, performance-
based bonuses and a benefits package. Benefits include health insurance, critical disease and life insurance, paid sick
leave, as well as six months fully-paid maternity and paternity leave. Additional benefits include a social assistance
package in case of marriage, childbirth and family member support, paid days off for all employees and extra paid days
off for employees with more than three children, as well as special social payments for employees with more than four
children.
PERFORMANCE MANAGEMENT
Through our effective performance management system, we strive to increase employee productivity and reinforce a
culture of feedback.
Our performance management system is closely linked with the overall objectives of the Group and is based on
three core principles: clarity, fairness and integrity. We make sure that our colleagues have a clear understanding
of their role in the company and that they are actively engaged in setting their personal goals. Employees are also
given appropriate coaching by their managers to help them achieve their goals. Regular employee feedback and
constructive dialogue are important parts of our performance appraisal system and have been incorporated into
middle management KPIs.
We use different assessment systems for front and non-customer facing employees, depending on the positions held.
For front-office staff, targets are set on a monthly basis and rewards are linked to sales and customer service quality
levels. Middle managers, as well as our non-customer facing staff, are assessed by KPIs and a competency-based
system.
In addition, we run a 360-degree evaluation that provides each employee with the opportunity to receive feedback
from his/her manager, peers and subordinates. 360-degree feedback allows our employees to understand how their
performance is viewed by others. It also helps them to identify their strengths and weaknesses and develop new
skills. Furthermore, during 2022, we conducted a series of effective feedback training for our employees in order to
strengthen the feedback culture within the organisation.
EMPLOYEE ENGAGEMENT AND MOTIVATION
We strive to develop a supportive and empowering work culture to offer equal opportunities for work and
development and to encourage a healthy work-life balance.
Our CEO and the executive management team play a special role in promoting the corporate culture and values
through regular communication with employees. They also share the Group’s strategy and achievements as well as
obtain feedback.
We support and encourage our employees to participate in rotations as well as to obtain promotions within the Group.
Under equal conditions, the priority is given to the internal candidate. In 2022, the promotion and horizontal transfer
rate was around 30% for the Bank. For certain positions, we have implemented a special career mapping programme.
We are also actively working on developing a succession planning framework for senior positions in order to ensure
smooth transition.
Special attention is given to the recognition of achievements by our team members by sharing success stories in
our internal communication channels. In addition, we have several internal rewards to grow the service culture and
customer focus among employees.
56
We carefully listen to our colleagues and conduct an annual survey to measure their satisfaction and engagement
levels. 78% of employees participated in the satisfaction survey this year and our employee net promoter score
remained high at 59%1 compared to 66% of 2021, but still remained well above industry average of 47%. The results of
the survey are thoroughly analysed and presented to the management and Board to plan future actions.
EQUALITY AND DIVERSITY
We are committed to encouraging diversity, equality and inclusion among our workforce, and eliminating any kind
of discrimination. We embrace and encourage our employees’ differences in age, sex, colour, disability, ethnicity,
family or marital status, gender identity or expression, language, national origin, physical and mental ability, political
affiliation, race, religion, sexual orientation, socio-economic status, and other characteristics that make our employees
unique.
This year, we upgraded the Diversity, Equality and Inclusion Policy. The Policy provides clear guidance for ensuring the
proactive and consistent integration of diversity, equality and inclusion in the Group’s work inside the company, in the
marketplace and in the community at large. The updated policy is available at: www.tbcbankgroup.com.
We remain committed to having a gender-balanced workforce and culture that supports and empowers women.
In 2021, we set a target at the Bank level to increase the number of women in middle managerial positions from the
current level of 36% to 40% by 2023. By the end of 2022, this indicator remained unchanged. Starting from 2023, the
agile managerial positions - Product Owners and Chapter Leads will be included in the calculations of the Middle
Management in order to reflect the organisational transformation and structure in the Bank. In 2019, TBC was the first
company in Georgia to introduce agile structure which creates more dynamic working environment, instills an open
culture and empowers women and men in different roles and functions. The agile structure differs from the traditional
organisational set-up and is founded on cross-functional teams. As of 31 December 2022, representation of women in
newly classified middle managerial positions stood at 41%. Therefore, we adjusted the targets for the share of women
in middle managerial positions and set them at 43% in 2023 and 45% in 2024, respectively. Furthermore, in 2022, we
expanded our approach to certain subsidiaries of the Group and incorporated individual diversity targets within their
ESG strategies.
The tables below show the data at the Group level.
SUPERVISORY BOARD
EXECUTIVE MANAGEMENT
6
6
6
5
5
5
2
22
3
1
1
1
2020
2021
2022
2020
2021
2022
MIDDLE MANAGERIAL POSITIONS3
ALL EMPLOYEES
204
185
192
4,917
5,493
5,782
101
99
106
2,451
2,624
2,762
2020
2021
2022
2020
2021
2022
Female
Male
1 The Employee Net Promoter Score (ENPS) was measured in October 2022 by an independent consultant for the Bank’s employees.
2 Throughout 2022, we had three female non-executive Supervisory Board members until Maria Luisa Cicognani stepped down from the Supervisory
Board in September 2022. In February 2023, we appointed Janet Heckman - a new female non-executive member of Supervisory Board of the Bank,
approved by National Bank of Georgia on 21 April 2023.
3 Branch managers, division and department heads, as well as directors of the Group’s subsidiaries.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT M
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We have a good mix of people comprised of employees with extensive work experience and young and bright talents
with innovative and fresh ideas who have just graduated from top universities in Georgia and abroad. We believe that
age diversity creates a more dynamic and high-performing team which in turn leads to better results.
AGE DIVERSITY STATISTICS 2022
4%
10%
41%
Under 29
30-39
40-49
Over 50
45%
ETHICAL STANDARDS, RESPONSIBLE CONDUCT AND SAFETY AT WORK
TBC Bank is committed to running a business that promotes high ethical standards and values, respects human rights,
cares about the environment and community and encourages its employees to act with integrity and responsibility
towards each other and other stakeholders.
For this purpose, we have developed a set of policies at the Group level. We closely monitor adherence to these. These
policies can be found on our IR website at www.tbcbankgroup.com and are comprised of:
• Code of Ethics;
• Code of Conduct;
• Diversity, Equality and Inclusion Policy;
• Human Rights Policy;
•
• Anti-Bribery, Anti-Corruption and Prevention of the Facilitation of Tax Evasion Policy;
• Global Data Protection Policy;
• Environmental Policy;
• Climate Change Policy.
Incident Response Policy (Whistleblowing Policy);
In addition, we have introduced an Employee Discrimination, Violence and Harassment policy and a Health Safety and
Environment Policy at the Bank level and plan to introduce these across the Group going forward.
The Compliance Department regularly conducts tailored training sessions for different employee groups based
on their job specifications in the following areas: anti-corruption, anti-bribery, ethical issues, as well as anti-money
laundering and sanctions. During 2022, around 6,700 employees have undergone such training. Periodic audits are also
conducted by the Internal Audit Department to identify any violations or inappropriate behaviour.
Furthermore, on an annual basis, we conduct mandatory tests for all employees of the Bank to raise awareness and
highlight the importance of our internal policies and procedures. The topics include but are not limited to: safe working
environment, code of conduct and code of ethics, data and information security, whistleblowing, environmental
issues, inside information, corruption, money laundering and operational risks.
58
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
59
THIS YEAR, WE CELEBRATED OUR 30TH ANNIVERSARY
TOGETHER WITH 8,500 EMPLOYEES IN TSINANDALI ESTATE
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR COLLEAGUES CONTINUEDMANAGEMENT REPORT
HOW WE CREATE VALUE FOR
OUR COMMUNITY
OUR COMMUNITY
Our community
Being a systemically important bank in Georgia, we acknowledge our
responsibility towards society and are committed to creating a better
future for the communities in which we operate. Our wide range of high-
impact, sustainable projects are primarily focused on supporting business
development, the young, women, culture and sport.
• Another important project targeting the elimination of gender biases is ‘500 women in tech’, which has been
developed in cooperation with the Business and Technology University of Tbilisi, UN Women and the Government
of Norway. The programme, which lasts for 18 months, allows female candidates to study the following professions:
front-end and back-end development, user experience and graphic design, digital marketing and product testing.
PRESERVING CULTURAL HERITAGE
Preserving and popularising the cultural heritage of our country of operations across the wider community is very
important for TBC. In line with this, the year under review saw us continue high-impact initiative:
•
In 2022, TBC celebrated the 20th anniversary of the literary award Saba, which was founded by TBC and is the
biggest and most important literary event in Georgia. Each year, up to GEL 50,000 is awarded to winners in various
categories. In addition, Saba celebrated another anniversary in 2022: 10 years since the foundation of www.saba.
com.ge, the Saba online books store. Hosting up to 7,000 books and accessible via an easy-to-use mobile app,
where readers can enjoy a wide choice of books for a reasonable price, www.saba.com.ge is the biggest online
library in the Georgian language.
SUPPORTING SPORT AND HEALTHY LIFESTYLES
Supporting and promoting sport and healthy lifestyles are also important priorities for TBC. Here, we undertook
several initiatives in 2022:
• Since 2015, TBC has been the general sponsor of Georgian Rugby Union. This year, we extended the partnership
•
for another five years to 2027. Rugby is Georgia’s national game and is close to the heart of Georgians. We are proud
to contribute to the development of rugby in Georgia and are committed to supporting our national rugby team, as
well as implementing various projects to promote this sport.
In late 2022, TBC signed a partnership agreement with Georgian Ski Federation to host the 2023 Freestyle ski,
Snowboard and Freeski World Championships in Bakuriani, Georgia. The Championships will be held for three
weeks in 2023 and will provide a number of benefits, including supporting infrastructure development, attracting
professionals and fans from all over the world, as well as popularising these sports among Georgians.
SUPPORTING UKRAINIAN PEOPLE
Following the Russian invasion of Ukraine, TBC established a fund with an initial down payment of GEL 200,000, and
invited organisations and individuals to donate funds in support of Ukrainian People. More than GEL 1,800,000 has
been raised collectively by individuals and organisations and transferred to the National Bank of Ukraine. In the second
half of the year and in response to the large numbers of Ukrainian nationals who entered Georgia fleeing the war, TBC
switched to fundraising for Georgian organisations that assist Ukrainians in Georgia. We will continue supporting
Ukrainian people in 2023, in order to help alleviate the hardship caused by the unjust war.
Our efforts did not go unnoticed and we won the Corporate Responsibility Award 2022 in category SDG 16 – Peace,
Justice and Strong Institutions for Supporting Ukraine. The Corporate Responsibility Award is held annually by Global
Compact Network Georgia, with support from the Swedish Government and the USAID Civil Society Engagement
Program.
Corporate Responsibility Award 2022 in category
SDG 16 – Peace, Justice and Strong Institutions
for Supporting Ukraine
60
61
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTENCOURAGING MSME BUSINESS DEVELOPMENT AND ENTREPRENEURSHIPTBC has always been an avid supporter of start-ups and MSME businesses. In order to address the social and economic challenges in Georgia, the development of small and medium businesses is vital. It contributes to the reduction of unemployment and boosts economic growth. We assist businesses through the provision of both financial and non-financial support, including facilitating access to capital, sharing knowledge and expertise and developing products and services specially customised for business needs. Detailed information regarding these initiatives is outlined in our MSME Banking section on pages 36-41.SUPPORTING THE YOUNG GENERATIONDuring our 30 years of operations, TBC has always supported young talented people, many of whom are now successful artists, scientists and professionals, enjoying prominent careers in different fields in Georgia as well as abroad. In 2022, TBC continued to stand by the young generation with the following initiatives:• TBC Scholarship is the largest private scholarship programme for schoolchildren in Georgia. In cooperation with 14 partner organisations that specialise in children’s education and development, TBC selects talented and motivated schoolchildren from all over Georgia and provides them with financial support, as well as new opportunities for education. Since its inception in 2018, up to 400 schoolchildren with various talents in art, science, sport and social activism have participated in the programme.• Since 2019, TBC has supported the Tbilisi Book Festival, the largest event in the Georgian book sector which brings writers, publishers and readers together. In 2022, TBC continued supporting the festival and remained its partner for the whole year. • Supporting STEM education is one of TBC’s priorities. For the past eight years, TBC has partnered with Leonardo da Vinci, the Young Researchers and Innovators Annual Competition for Georgian high school students. The competition enables schoolchildren to demonstrate their talents in tech fields and gain access to further educational opportunities. TBC Bank provides marketing support for the competition, allocates its facilities and awards the winners. • TBC has also established a number of academies in Georgia, which provide free education opportunities to individuals interested in IT, risk management and other business fields, along with the opportunity of being employed by TBC. We also continue to run TBC Camp, a programme that was established in 2019 and envisages the conduct of a Stock Pitch Competition for fourth year finance students. This competition is integrated into the syllabus of several universities’ curricula and is comprised of intensive online lectures, training and the preparation of real investment cases. These are presented to a panel of judges. Selected teams are awarded special prizes.CREATING EQUAL OPPORTUNITIES FOR WOMENWe pay great attention to fostering equality of opportunities for different members of society. In this regard, we have launched several initiatives that support the education and career development of Georgian women:• TBC is a partner of the Grace Hopper Award, which was founded in Georgia by USAID and UN Women. The Award recognises the contributions of individuals and organisations that empower women in the information and communication technology (ICT) industry and leads to positive change in the sector. TBC is the
general sponsor
of Georgian
Rugby Union
We are proud to contribute to the development
of rugby in Georgia and are committed to
supporting our national rugby team, as well
as implementing various projects to further
popularise this sport.
62
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
MANAGEMENT REPORT OUR INVESTORS
FINANCIAL REVIEW
HOW WE CREATE VALUE FOR
OUR INVESTORS
Financial review
in thousands of GEL
Net interest income
Net fee and commission income
Other operating non-interest income
Operating income
Total credit loss (allowance)/recovery
Losses from modifications of financial instruments
Operating expenses
Profit before tax
Income tax expense1
Profit for the period
Balance sheet and capital highlights
in thousands of GEL
Total Assets
Gross Loans
Customer Deposits
Total Equity
CET 1 Capital (Basel III)
Tier 1 Capital (Basel III)
Total Capital (Basel III)
2022
1,243,095
265,650
437,644
1,946,389
(115,507)
-
(560,982)
1,269,900
(246,825)
1,023,075
31-Dec-22
28,329,010
17,857,276
17,841,357
4,265,802
3,333,039
3,873,439
4,516,525
2021
Change YoY
995,792
224,887
177,229
1,397,908
21,034
(1,726)
(454,993)
962,223
(119,278)
842,945
24.8%
18.1%
NMF
39.2%
NMF
NMF
23.3%
32.0%
NMF
21.4%
24,039,512
16,954,553
14,884,145
3,590,055
2,759,894
3,379,414
4,102,927
Risk Weighted Assets (Basel III)
21,508,072
20,217,629
Key APMs2
ROE1
ROA1
NIM
Cost to income
Cost of risk
NPL to gross loans
NPL provision coverage ratio
Total NPL coverage ratio
CET 1 CAR (Basel III)
Tier 1 CAR (Basel III)
Total CAR (Basel III)
Leverage (Times)
Net interest income
2022
26.0%
4.0%
5.9%
28.8%
0.6%
2.2%
92.1%
155.1%
15.5%
18.0%
21.0%
6.6x
20213
26.3%
3.7%
5.0%
32.5%
-0.3%
2.4%
99.2%
174.6%
13.7%
16.7%
20.3%
6.7x
Change YoY
-0.3 pp
0.3 pp
0.9 pp
-3.7 pp
0.9 pp
-0.2 pp
-7.1 pp
-19.5 pp
1.8 pp
1.3 pp
0.7 pp
-0.1x
In 2022, net interest income amounted to GEL 1,243.1 million, up by 24.8% on a YoY basis.
The YoY rise in interest income by GEL 356.7 million, or 19.1%, was mostly attributable to an increase in interest income
from loans related to the GEL 902.7 million, or 5.3%, increase in the respective portfolio, as well as a 1.0 pp rise in the
respective yield.
YoY interest expense increased by GEL 109.4 million, or 12.6%, mainly related to an increase in the deposit portfolio of
GEL 2,957.2 million, or 19.9%, and increased deposit costs by 0.2 pp.
31-Dec-21
Change YoY
As a result, our NIM for full year 2022, stood at 5.9%, up by 0.9 pp on a YoY basis.
17.8%
5.3%
19.9%
18.8%
20.8%
14.6%
10.1%
6.4%
In thousands of GEL
Interest income
Interest expense*
Net interest income
NIM
* Interest expense includes net interest gains from currency swaps
Non-interest income
2022
2,219,781
(976,686)
1,243,095
5.9%
2021
Change YoY
1,863,077
(867,285)
995,792
5.0%
19.1%
12.6%
24.8%
0.9 pp
Total non-interest income amounted to GEL 703.3 million during 2022, increasing by 74.9% on a YoY basis.
Net fee and commission income increased by 18.1% on a YoY basis, related to increased payment transactions in
Georgia and increased business activities through the year.
Net gains from FX operations increased more than three times on a YoY basis, mainly related to the high volume of
transactions and wider spreads.
The decrease in other operating income was related to a non-recurring gain from the disposal of our investment
property in amount of GEL 26.3 million in 2021.
Includes GEL 112.9 million one-off tax charge impact, due to changes to the corporate taxation model for financial institutions in Georgia.
1
2 The detailed information about APMs is given on pages 264-268
64
65
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORTFINANCIAL HIGHLIGHTSIncome statement highlights HOW WE CREATE VALUE FOR
OUR INVESTORS CONTINUED
In thousands of GEL
Net fee and commission income
Net gains from currency derivatives, foreign currency
operations and translation
Other operating income
Total other non-interest income
Credit loss allowance
2022
265,650
411,806
25,838
703,294
Credit loss allowance for loans during FY 2022 amounted to GEL 105.2 million, which translated into a 0.6% cost of risk.
In thousands of GEL
Credit loss (allowance)/recovery for loans to customers
Credit loss allowance for other transactions
Total credit loss (allowance)/recovery
Operating income after expected credit and non-financial
asset impairment losses
Cost of risk
Operating expenses
2022
(105,247)
(10,260)
(115,507)
2021
43,176
(22,142)
21,034
1,830,882
1,418,942
0.6%
-0.3%
Change YoY
NMF
-53.7%
NMF
29.0%
0.9 pp
During FY 2022, our operating expenses increased by 23.3% on a YoY basis.
During FY 2022, the annual increase in operating expenses was mainly driven by increased staff costs due to the
expansion of business as well as higher performance-related costs. The increase in administrative and other operating
expenses was mainly related to investments in our IT capabilities and business development.
Our cost to income ratio amounted to 28.8%, down by 3.7 pp on a YoY basis.
In thousands of GEL
Operating expenses
Staff costs
Provision for liabilities and charges
Depreciation and amortisation
Administrative and other operating expenses
Total operating expenses
Cost to income
Net profit
2022
2021
Change YoY
(306,526)
(255,747)
(2,000)
(85,108)
(167,348)
-
(70,622)
(128,624)
(560,982)
(454,993)
19.9%
NMF
20.5%
30.1%
23.3%
28.8%
32.5%
-3.7 pp
In 2022, we delivered robust profitability and generated GEL 1,023.1 million in net profit, up by 21.4% YoY, driven by
robust income generation in both, interest and non-interest income streams. As a result, our ROE stood at 26.0%.
In 2022, our income tax expenses increased and reached GEL 246.8 million by the end of the year. The increase was
related to changes in the taxation model in Georgia. The model change had an immediate impact of GEL 112.9 million
on income tax expenses.
Without one-off tax charges, our underlying net profit and ROE would have been GEL 1,136.0 million and 28.8%,
respectively.
66
2021
Change YoY
In thousands of GEL
224,887
124,194
53,035
402,116
18.1%
NMF
-51.3%
74.9%
Losses from modifications of financial instruments
Profit before tax
Income tax expense
Profit for the period
ROE
ROA
Funding and liquidity
2022
-
1,269,900
(246,825)
1,023,075
26.0%
4.0%
2021
Change YoY
(1,726)
962,223
(119,278)
842,945
26.3%
3.7%
NMF
32.0%
NMF
21.4%
-0.3 pp
0.3 pp
As of 31 December 2022, the total liquidity coverage ratio (LCR), as defined by the NBG, was 146.6%, above the 100%
regulatory limit, while the LCR in GEL and FC stood at 164.2% and 135.9%, accordingly, above the respective regulatory
limits of 75% and 100%.
Over the same period, NSFR stood at 135.3%, compared to the regulatory limit of 100%.
In thousands of GEL
Minimum net stable funding ratio, as defined by the NBG
Net stable funding ratio as defined by the NBG
Net loans to deposits + IFI funding
Leverage (Times)
Minimum total liquidity coverage ratio, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
Total liquidity coverage ratio, as defined by the NBG
LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
Regulatory capital
2022
100.0%
135.3%
87.7%
6.6x
100.0%
75%
100.0%
146.6%
164.2%
135.9%
2021
Change YoY
100.0%
127.3%
101.3%
6.7x
100.0%
75.0%
100.0%
115.8%
107.7%
120.8%
0.0 pp
8.0 pp
-13.6 pp
-0.1x
0.0 pp
0.0 pp
0.0 pp
30.8 pp
56.5 pp
15.1 pp
As of December 2022, our CET1, Tier 1 and Total Capital ratios stood at 15.5%, 18.0% and 21.0%, respectively, and
remained comfortably above the minimum regulatory requirements by 3.9%, 4.2% and 3.7%, accordingly.
The YoY increase in, CET1 Tier 1 and total capital adequacy ratios was mainly driven by net profit generation and the
appreciation of the local currency, which was partially offset by the 2021 final and 2022 interim dividends.
In thousands of GEL
CET 1 Capital
Tier 1 Capital
Total Capital
Total Risk-weighted Exposures
Minimum CET 1 ratio
CET 1 Capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 Capital adequacy ratio
Minimum total capital adequacy ratio
Total Capital adequacy ratio
2021
Change YoY
2022
3,333,039
3,873,439
4,516,525
2,759,894
3,379,414
4,102,927
21,508,072
20,217,629
11.6%
15.5%
13.8%
18.0%
17.3%
21.0%
11.7%
13.7%
14.0%
16.7%
18.4%
20.3%
20.8%
14.6%
10.1%
6.4%
-0.1 pp
1.8 pp
-0.2 pp
1.3 pp
-1.1 pp
0.7 pp
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
Loan portfolio
As of 31 December 2022, the gross loan portfolio reached GEL 17,857.3 million, up by 5.3% YoY or 14.0% on a constant
currency basis.
The proportion of gross loans denominated in foreign currency decreased by 6.6 pp on a YoY basis and accounted
for 47.1% of total loans. On a constant currency basis, the proportion of gross loans denominated in foreign currency
decreased by 2.5 pp YoY and stood at 51.2%.
As of 31 December 2022, our market share in total loans stood at 39.5%, up by 0.7 pp on a YoY basis. Our loan market
share in legal entities was 40.8%, up by 1.7 pp YoY. Our loan market share in individuals stood at 38.4%, down by 0.2 pp
on a YoY basis.
In thousands of GEL
Loans and advances to customers
2022
2021
Change YoY
Retail
– Retail loans GEL
– Retail loans FC
CIB
– CIB loans GEL
– CIB loans FC
MSME
– MSME loans GEL
– MSME loans FC
6,765,392
4,374,223
2,391,169
6,282,469
2,435,737
3,846,732
4,809,415
2,627,760
2,181,655
6,265,507
3,580,468
2,685,039
6,547,741
2,188,776
4,358,965
4,141,305
2,082,204
2,059,101
Total loans and advances to customers
17,857,276
16,954,553
FC refers to foreign currency
Loan yields
– Loan yields GEL
– Loan yields FC
Retail Loan Yields
– Retail loan yields GEL
– Retail loan yields FC
CIB Loan Yields
– CIB loan yields GEL
– CIB loan yields FC
MSME Loan Yields
– MSME loan yields GEL
– MSME loan yields FC
FC refers to foreign currency
2022
11.2%
15.5%
7.0%
12.6%
16.3%
6.5%
9.8%
14.1%
7.6%
11.1%
15.1%
6.4%
2021
10.2%
15.1%
6.5%
11.5%
16.1%
6.1%
9.0%
13.7%
7.0%
10.2%
14.9%
6.0%
8.0%
22.2%
-10.9%
-4.1%
11.3%
-11.8%
16.1%
26.2%
6.0%
5.3%
Change YoY
1.0 pp
0.4 pp
0.5 pp
1.1 pp
0.2 pp
0.4 pp
0.8 pp
0.4 pp
0.6 pp
0.9 pp
0.2 pp
0.4 pp
HOW WE CREATE VALUE FOR
OUR INVESTORS CONTINUED
Loan portfolio quality
On a YoY basis, total Par 30 (loans overdue by 30 days) remained stable at level of 2.0%, while total NPL improved by 0.2
pp and amounted to 2.2%.
The 0.4 pp increase in retail Par 30 was driven by an unsecured consumer portfolio, while the 0.9 pp improvement in
Par 30 for the MSME segment was mainly attributable to the SME sub-segment. Par 30 for the CIB segment remained
broadly stable.
By the end of the year, total portfolio NPL slightly improved by 0.2 pp, improvements were observed across all
segments.
Par 30
Retail
CIB
MSME
Total Loans
31-Dec-22
31-Dec-21
Change YoY
2.6%
0.5%
3.1%
2.0%
2.2%
0.6%
4.0%
2.0%
0.4 pp
-0.1 pp
-0.9 pp
0.0 pp
Non-performing Loans
31-Dec-22
31-Dec-21
Change YoY
Retail
CIB
MSME
Total Loans
2.2%
1.3%
3.4%
2.2%
2.5%
1.4%
4.0%
2.4%
-0.3 pp
-0.1 pp
-0.6 pp
-0.2 pp
NPL Coverage
31-Dec-22
31-Dec-21
Retail
Retail
CIB
MSME
Total
Cost of risk
Provision
Coverage
Total
Coverage
Provision
Coverage
Total
Coverage
147.8%
57.9%
58.8%
92.1%
192.1%
119.9%
139.2%
155.1%
157.0%
56.8%
68.0%
99.2%
222.7%
126.4%
155.5%
174.6%
In FY 2022, the cost of risk started to normalise, after significant recoveries in 2021, and amounted to 0.6%.
Cost of Risk
Retail
CIB
MSME
Total
2022
1.4%
0.0%
0.4%
0.6%
2021
0.4%
-1.0%
-0.2%
-0.3%
Change YoY
1.0 pp
1.0 pp
0.6 pp
0.9 pp
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
Deposit portfolio
The total deposits portfolio amounted to GEL 17,841.4 million, increasing by 19.9% YoY or 30.2% on a constant currency
basis.
The proportion of deposits denominated in a foreign currency decreased by 9.1 pp YoY and stood at 53.7% of total
deposits. On a constant currency basis, the proportion of deposits decreased by 5.5 pp YoY and accounted for 57.3%
of total deposits.
As of 31 December 2022, our market share in deposits amounted to 40.3%, down by 0.1 pp on a YoY basis, while
our market share in deposits to legal entities stood at 42.9%, down by 2.4 pp YoY. Our market share in deposits to
individuals stood at 38.1%, down by 2.2 pp on a YoY basis.
In thousands of GEL
Customer Accounts
Retail
– Retail deposits GEL
– Retail deposits FC
CIB
– CIB deposits GEL
– CIB deposits FC
MSME
– MSME deposits GEL
– MSME deposits FC
31-Dec-22
31-Dec-21
Change YoY
6,536,649
5,629,823
1,905,377
4,631,272
9,133,452
5,045,557
4,087,895
1,758,814
905,500
853,314
1,492,325
4,137,498
7,378,552
2,970,310
4,408,242
1,564,150
761,493
802,657
16.1%
27.7%
11.9%
23.8%
69.9%
-7.3%
12.4%
18.9%
6.3%
19.9%
Total Customer Accounts*
17,841,357
14,884,145
* Total deposit portfolio includes Ministry of Finance deposits in the amount of, GEL 412 million and GEL 312 million as of 31 December 2022 and 31
December 2021, respectively.
FC refers to foreign currency
Deposit rates
– Deposit rates GEL
– Deposit rates FC
Retail Deposit Yields
– Retail deposit rates GEL
– Retail deposit rates FC
CIB Deposit Yields
– CIB deposit rates GEL
– CIB deposit rates FC
MSME Deposit Yields
– MSME deposit rates GEL
– MSME deposit rates FC
FC refers to foreign currency
2022
3.6%
7.7%
0.9%
2.0%
5.6%
0.7%
4.8%
9.5%
1.2%
0.7%
1.2%
0.2%
2021
3.4%
6.7%
1.5%
2.2%
4.9%
1.3%
4.3%
8.5%
2.0%
0.8%
1.4%
0.2%
Change YoY
0.2 pp
1.0 pp
-0.6 pp
-0.2 pp
0.7 pp
-0.6 pp
0.5 pp
1.0 pp
-0.8 pp
-0.1 pp
-0.2 pp
0.0 pp
HOW WE CREATE VALUE FOR
OUR INVESTORS CONTINUED
APMS
APMs (based on monthly averages, where applicable)
Profitability ratios:
ROE1
ROA1
Cost to income
NIM
Loan yields
Deposit rates
Cost of funding
Asset quality & portfolio concentration:
Cost of risk
PAR 90 to Gross Loans
NPLs to Gross Loans
NPL provision coverage
Total NPL coverage
Credit loss level to Gross Loans
Related Party Loans to Gross Loans
Top 10 Borrowers to Total Portfolio
Top 20 Borrowers to Total Portfolio
Capital & liquidity positions:
Net Loans to Deposits plus IFI* Funding
Net Stable Funding Ratio
Liquidity Coverage Ratio
Leverage
CET 1 CAR (Basel III)
Tier 1 CAR (Basel III)
Total 1 CAR (Basel III)
* International Financial Institutions
The detailed information about APMs is given on pages 264-268.
2022
26.0%
4.0%
28.8%
5.9%
11.2%
3.6%
4.6%
0.6%
1.2%
2.2%
92.1%
155.1%
2.0%
0.1%
5.4%
8.5%
87.7%
135.3%
146.6%
6.6x
15.5%
18.0%
21.0%
2021
26.3%
3.7%
32.5%
5.0%
10.2%
3.4%
4.4%
-0.3%
1.2%
2.4%
99.2%
174.6%
2.4%
0.1%
6.9%
10.6%
101.3%
127.3%
115.8%
6.7x
13.7%
16.7%
20.3%
70
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1
Includes GEL 112.9 million one-off tax charge impact, due to changes to the corporate taxation model for financial institutions in Georgia.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
RISK MANAGEMENT
Risk management
ENTERPRISE RISK MANAGEMENT
> BUSINESS PLANNING
> RISK APPETITE
> RISK STRATEGY
CREDIT RISK
FINANCIAL RISK
NON-FINANCIAL RISK
CORPORATE
MSME
RETAIL
MARKET
LIQUIDITY
OPERATIONAL
OTHER
RISK
ORGANISATION
AND GOVERNANCE
GOVERNANCE
STRUCTURE
THREE LINES OF
DEFENCE
COMMITTEES
POLICIES
PERFORMANCE MANAGEMENT
RISK CULTURE
RISK REPORTING
RISK REPORTING AND ANALYTICS
SYSTEMS
AND DATA
INFRASTRUCTURE, IT AND SYSTEMS
RISK MODELS,
METHODOLOGIES
AND PROCESSES
CREDIT PROCESS
CREDIT RISK MODELLING
ASSETS AND LIABILITY MANAGEMENT (ALM)
AND LIQUIDITY RISK MODELLING
AND PROCESSES
OPERATIONAL RISK MODELLING
AND PROCESSES
CROSS-RISK
ANALYTICS
CAPITAL ADEQUACY MANAGEMENT AND STRESS TESTING
GOVERNANCE
The Group conducts its risk management activities within the framework of its unified risk management system.
The involvement of all governance levels in risk management, the clear segregation of authority, and effective
communication between the different entities facilitate clarity regarding the Group’s strategic and risk objectives,
adherence to its established risk appetite and sound risk management. The Group’s governance structure ensures
adequate oversight and accountability, as well as a clear segregation of duties. The Supervisory Board has joint
overall responsibility to set the tone at the top of the Group and monitor compliance with established objectives, while
the Executive Management governs and directs the Group’s daily activities.
72
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDOVERVIEWThe Group operates a strong, independent, business-minded risk management system. Its main objective is to contribute to the sustainability of risk-adjusted returns through the implementation of an efficient risk management system. The Group has adopted four primary risk management principles to better accomplish its major objectives:• Govern risks transparently to obtain understanding and trust. Consistency and transparency in risk-related processes and policies are preconditions for gaining the trust of multiple stakeholders. Communicating risk goals and strategic priorities to governing bodies and providing a comprehensive follow-up in an accountable manner are key priorities for the staff responsible for risk management;• Manage risks prudently to promote sustainable growth and resilience. Risk management acts as a backstop against excessive risk-taking. Capital adequacy management and strong forward-looking tools and decision-making ensure the Group’s sustainability and resilience;• Ensure that risk management underpins the implementation of strategy. Staff responsible for risk management provide assurance on the feasibility of achieving objectives through risk identification and management. Identifying and adequately pricing risks, as well as taking risk mitigation actions, supports the generation of desired returns and the achievement of planned targets;• Use risk management to gain a competitive advantage. Comprehensive, transparent and prudent risk governance facilitates understanding and trust from multiple stakeholders, ensuring the sustainability and resilience of the business model and the positioning of risk management as the Group’s competitive advantage and strategic enabler.Risk management frameworkThe Group’s risk management framework incorporates all the necessary components for comprehensive risk governance and is comprised of enterprise risk management, credit, financial and non-financial risk management, risk reporting and supporting IT infrastructure, cross-risk analytical tools and techniques such as capital adequacy management and stress testing. The following diagram depicts the risk management framework: SUPERVISORY1
BOARD
SUPERVISORY
BOARD
RISK
COMMITTEE
AUDIT
COMMITTEE
TECHNOLOGY AND
DATA COMMITTEE
ESG AND
ETHICS COMMITTEE
EXECUTIVE
MANAGEMENT
RISK
MANAGEMENT
STRUCTURE
ALCO
INFORMATION SECURITY COMMITTEE
ESG COMMITTEE
ENVIRONMENTAL COMMITTEE
FUNCTIONS:
ENTERPRISE RISK
CREDIT RISK
FINANCIAL RISK
NON-FINANCIAL RISK
COMMITTEES:
LOAN APPROVAL COMMITTEES
RESTRUCTURING AND COLLECTIONS COMMITTEES
The risk governance structure consists of two board levels, including the Supervisory Board and the Executive
Management of the Bank. The Supervisory Board has a Risk Committee that supervises the risk profile and risk
governance practices within the Group, as well as an Audit Committee that is responsible for implementing key
accounting policies and facilitating internal and external auditors activities. The Supervisory Board also has an ESG
and Ethics Committee, which supports the Supervisory Board in its oversight of the strategy, policies, initiatives
and programmes of the Group in relation to ESG matters, and a Technology and Data Committee, which supports
the Supervisory Board in its oversight of key enablers of the strategy, data and cyber issues, and the company’s IT
resources.
The Executive Management’s Assets and Liabilities Management Committee (ALCO) is responsible for the
implementation of asset-liability management policies. The Executive Management’ Information Security Steering
Committee governs information and cyber-security to ensure that relevant risks are at an acceptable level and that
management processes are continuously improved. In addition, the ESG Committee is established at the Executive
Management level and takes responsibility for implementing the Group’s ESG strategy and approving its action plans,
while the Environmental Committee supervises the proper implementation and functioning of the Environmental
Management System in the Group.
The Supervisory Board and the Bank’s senior management govern risk objectives through the Risk Appetite
Statement, which establishes the desired risk profile and risk limits. The statement also sets monitoring and reporting
responsibilities and escalation paths for different trigger events, and limits breaches, which prompt risk teams to
frame and implement established mitigation actions. To effectively incorporate the Group’s risk appetite into day-
to-day operations, Risk Appetite Statement metrics are cascaded into more granular limits at the business unit level,
establishing risk allocation across different segments and activities.
The process of setting and cascading the risk appetite is undertaken in parallel with the business planning process.
The interactive development of business and risk plans aligns the plans by solving risk-return trade-offs in the process
and increases the feasibility of achieving targets. Supervisory Board level oversight, coupled with the permanent
involvement of senior management in the Group’s risk management and the exercise of top-down risk allocation
by the enterprise risk management function, ensures clarity regarding risk objectives, intense monitoring of the risk
profile against the risk appetite, the prompt escalation of risk-related concerns and the establishment of remediation
actions.
The daily management of individual risks is based on the three lines of defence principle. While business lines are
the primary owners of risks, risk teams act as the second line of defence by sanctioning transactions, tools and
techniques for risk identification, analysis, measurement, monitoring and reporting. The committees established at
operational levels are charged with making transaction-level decisions as part of a framework comprised of clear and
sophisticated delegations of authority, based on the “four-eyes” principle. All new products and projects pass through
risk teams to ensure that the risks are comprehensively analysed.
These control arrangements are designed to ensure that the Group makes informed decisions that are adequately
priced and that any risks exceeding the Group’s established targets are not taken. Credit, liquidity, market, operational
and other non-financial risks are each managed by dedicated teams. The Group’s strong and independent risk-
management structure enables the fulfilment of all required risk management functions within the second line
of defence by highly skilled professionals, with a balanced mix of credentials in the banking sector in local and
international markets. In addition to the risk teams subordinated to the Bank’s Chief Risk Officer, the Bank’s
compliance department reports directly to the CEO and is specifically in charge of anti-money laundering,
compliance, and financial sanction risk management. As a third line of defence, the internal audit department is
responsible for providing independent and objective assurance and recommendations to the Group to promote the
further improvement of operations and risk management.
Sustainability risk management is done within a framework of established processes for risk management. According
to the Group’s vision, a sustainable bank is a profitable institution that offers adequate, affordable and need-based
services to its clients, treats its employees, suppliers and all other stakeholders with a high sense of responsibility, and
strongly supports the development of society. It is also a technologically advanced and environmentally aware bank
that is trusted by society. The sustainability risks are related to the Group’s different roles as a lender, asset manager,
service provider, purchaser and employer. Of particular interest in the area of sustainability are risks related to
compliance, conduct and digitalisation, as well as human rights, working conditions, the environment, climate change,
financial crime, and information and IT security. Sustainable development policies and management structures are
represented in various policy documents and management domains.
The Group has developed several thematic policies and codes that regulate various social and environ mental
protection issues related to company activity. They include: the Code of Ethics, the Incident Management Policy,
the Anti-Corruption Policy, the Personal Data Protection Policy, the Conflict of Interests Management Policy, Green
Purchase Recommendations etc. In 2021, the ESG Coordination Department was created in order to support the
establishment of an integrated ESG framework synergizing business, social, environmental and governance aims. The
department reports to the Chief Risk Officer. For more details about management of ESG matters, please see Our ESG
Strategy section on pages 26-27 and the TCFD reporting on pages 100-113.
ENTERPRISE RISK MANAGEMENT
A centralised Enterprise Risk Management (ERM) function is in place to ensure the effective development,
communication and implementation of risk strategy and risk appetite across the Group. The ERM function facilitates
cross-risk activities such as aggregation, analytics and reporting, and addresses issues that are not specific to a single
type of risk. Accordingly, the ERM function complements the role of other risk functions to ensure the coverage of
key risk activities and responsibilities and builds capabilities in a centralised team. The major ERM functions can be
summarised as follows:
• Risk appetite development, cascading and monitoring are essential elements of the Group’s strategy. A risk budget
is allocated to individual business lines to ensure the achievement of aggregated metrics;
• Stress-testing exercises are one of the crucial tools for effective risk identification, measurement and mitigation. In
that regard, the Group continuously advances its stress-testing capabilities and tools. Various scenario analysis and
stress-testing methods are conducted by the Bank to ensure that it maintains adequate capital in order to withstand
the given stress scenario and remain in a stable financial condition;
• Sign-off of long-term capital plans and capital adequacy analytics, as the second line of defence for the risk of
capital adequacy;
• Development and update of Internal Capital Adequacy Assessment Procedure (ICAAP) and Internal Liquidity
Adequacy Assessment Procedure (ILAAP);
• Consistency of risk management practices within the Bank is also an important task of the ERM. A risk management
function dedicated to promoting consistency ensures that risks are identified, measured and governed in an
optimal manner within the Bank, and reported and understood on a consolidated basis;
• Estimating expected losses, monitoring and analytics across various segments and products are further key
features of our strategy;
• All risk metrics are aggregated and analysed to assess the Group’s risk profile on a consolidated basis. Regular
reports on the Bank’s risk profile are submitted to the Executive Management and to the Supervisory Board’s Risk
Committee.
1 These terms are defined in the glossary on page 262-263.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR INVESTORS CONTINUED CREDIT RISK MANAGEMENT
As a provider of banking services, the Group is exposed to the risk of losses due to the failure of a customer or
counterparty to meet their obligations to settle outstanding amounts in accordance with agreed terms. Credit risk is
the greatest material risk faced by the Group since it is engaged mainly in traditional lending activities. Therefore, the
Group dedicates significant resources to its management.
The major objectives of credit risk management are to put in place a sound credit approval process for informed risk-
taking and procedures for effective risk identification, monitoring and measurement. The Group adopts segment and
product-specific approaches for prudent and efficient credit risk management. Therefore, the corporate, MSME and
retail portfolios are managed separately to address the specifics of individual segments. Corporate and MSME (except
micro) borrowers have larger exposures and are managed on an individual basis, whereas micro and retail borrowers
are managed on a portfolio basis. The major credit risk functions can be summarised as follows:
Credit approval
The Group strives to ensure a sound credit-granting process by establishing well-defined lending criteria and building
up an efficient process to assess each borrower’s risk profile. A comprehensive credit risk assessment framework is
in place with a clear segregation of duties among parties involved in the credit analysis and approval process. The
credit assessment process is distinct across segments, and is further differentiated across various product types to
reflect the differing natures of these asset classes. Corporate, SME and larger retail and micro loans are assessed on an
individual basis, whereas the decision-making process for smaller retail and micro loans is largely automated. After a
thorough assessment of borrowers’ requirements, credit analysts, in the case of corporate borrowers, and loan officers,
in the case of SME borrowers, prepare a presentation containing certain key information in relation to the potential
borrower and submit it for review to the business underwriting risk management unit. An underwriting risk manager
ensures that the project analysis provided by the credit analyst/loan officer is complete, that all risks and mitigating
factors are identified and adequately addressed, and that the loan is properly structured. Business underwriting risk
managers specialise in a particular sector to be aware of current industry trends and developments.
A multi-tiered system of loan approval committees is in place with different approval levels to consider the borrower’s
overall indebtedness and risk profile. These committees are responsible for reviewing credit applications and
approving exposures, with different committees based on the size and risk of the loan. At the highest level, the Chief
Executive Officer, Corporate Business Director and Chief Risk Officer are involved. In addition, exposures to the 20
largest borrowers or for amounts exceeding 5% of the Bank’s Tier 1 capital would require review and approval by the
Supervisory Board Risk Committee. Loan officers submit the credit applications for retail and micro exposures to the
respective underwriting risk management units. Depending on the amount of the loan, a loan approval committee
will review the loan request based on specified limits regarding the risk level of the customer. For the underwriting
of unsecured loans, point-of-sale loans and credit cards, an income verification process is performed in line with
the regulations on responsible lending. For decision-making, internal scorecard models and ratings provided by the
credit bureau are utilised. Different scorecard models are developed based on the type of product and the borrowers’
segment, taking into consideration a range of internal and external data. The performance of scorecard models is
closely monitored to ensure that decisions are in line with predefined risk limits. The credit scoring and underwriting
models are developed by an independent Credit Modelling team within the risk function and then validated as well by
an independent Model Risk Management team, also from the risk function.
Currency-induced credit risk
The Bank faces currency-induced credit risk, given that a large part of its exposure is denominated in foreign currency.
However, limits have been established within the risk appetite framework to ensure that the Bank continues its efforts
toward minimising the share of foreign currencies in the portfolio. Various management tools and techniques are
applied to mitigate the inherent currency-induced credit risk in the loan book, encompassing all phases of credit risk
management. In January 2019, the Government continued its efforts to reduce the economy’s dependence on foreign
currency financing by increasing the cap to GEL 200,000, under which loans must be disbursed in local currency.
In addition, the NBG, under its responsible-lending initiative, which came into force on 1 January 2019, introduced
significantly more conservative PTI and LTV thresholds for unhedged retail borrowers, further limiting exposure to
currency-induced credit risk. In 2022, the NBG continued its conservative approach for unhedged retail borrowers and
several new initiatives were introduced affecting the required PTI thresholds and tenors for foreign currency loans.
The Bank applies conservative lending standards to unhedged borrowers with exposures denominated in
foreign currencies to ensure that they can withstand a certain amount of forex depreciation without credit quality
deterioration. In addition to the measures in place throughout the underwriting process, the Bank actively monitors
and assesses the quality of loans denominated in foreign currencies through stress-testing exercises and holds
sufficient capital buffers against unexpected losses. In the event of a material currency depreciation, the Group has
tools in place to accelerate its monitoring efforts, identify customers with potential weaknesses and introduce prompt
mitigation.
The Bank has set a strategy to decrease the share of foreign currency loans in its portfolio. Annual targets have been
defined in the medium-term strategy, gradually decreasing the foreign currency share. The Assets and Liabilities
Committee (ALCO) of the Bank is closely monitoring the achievement of these targets.
Credit concentration risk
The Bank is exposed to concentration risk, defined as a potential deterioration in portfolio quality due to large
exposures or individual industries. It has established a set of tools to efficiently manage concentration risk and, in
particular, concentrations of single names and sectors in the portfolio. The Bank is subject to concentration limits
on single names and the largest 20 borrowers, and is focused on optimising the structure and quality of the latter
portfolio. In addition, the Bank imposes limits on individual sectors with more conservative caps applied for high-risk
sectors, which are defined based on a comprehensive analysis of industry cycles and outlooks. Credit concentrations
are monitored monthly. Trends in the risk positions are analysed in detail and corrective actions are recommended,
should new sources of risk or positive developments emerge. Along with managing concentration levels in the
portfolio, the Bank estimates unexpected losses and the respective economic capital for concentrations of both
single-name borrowers and sectors using the Herfindahl-Hirschman Index, thus ensuring that sufficient capital is held
against concentration risk.
Collateral management policy
Collateral represents the most significant credit risk mitigation tool for the Bank, making effective collateral
management one of the key risk management components. Collateral on loans extended by the Bank may include,
but is not limited to, real estate, cash deposits, vehicles, equipment, inventory, precious metals, securities and third-
party guarantees. The collateral accepted against a loan depends on the type of credit product and the borrower’s
credit risk. The Bank has a largely collateralised portfolio in all segments, with real estate representing a major share
of collateral. A centralised unit for collateral management governs the Bank’s view and strategy in relation to collateral
management, and ensures that collateral serves as an adequate mitigating factor for credit risk management. The
collateral management framework consists of a policy-making process, a sound independent valuation process,
a haircut system throughout the underwriting process, collateral monitoring (including revaluations and statistical
analysis) and collateral portfolio analysis.
The Bank’s Collateral Management and Appraisal Department (CMAD) defines collateral management policy
and procedures, which are approved by the Supervisory Board; purchases an appraisal service that must be in line
with International Valuation Standards (IVS), acting NBG regulations and internal rules (policy/ procedures and
etc.); authorises appraisal reports; and manages the collateral monitoring process (assets with a high fair value are
revaluated annually, while statistical monitoring is used for collaterals with low value). The CMAD uses a mixed
quality check scheme for valuation: appraisal reports are reviewed internally by its staff and separately by an external
company. Almost all activities under collateral management are automated through an in-house web application. The
collateral management function uses market research conducted under the Real Estate Market laboratory (REM lab)
project.
Credit monitoring
The Bank’s risk management policies and processes are designed to identify and analyse risk in a timely manner and
to monitor adherence to predefined limits, using reliable and timely data. The Bank dedicates considerable resources
to gain a clear and accurate understanding of the credit risk faced across various business segments. The Bank uses
a robust monitoring system to react promptly to macro and micro developments, identify weaknesses in the credit
portfolio and outline solutions to make informed risk management decisions. Monitoring processes are tailored to the
specifics of individual segments, as well as encompassing individual credit exposure, overall portfolio performance
and external trends that may impact the portfolio’s risk profile. The Risk Committee reviews reports relating to the
credit quality of the loan portfolio quarterly. By comparing current data with historical figures and analysing forecasts,
the management believes that it can identify risks and respond to them by amending its policies in a timely manner.
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The Bank uses a comprehensive portfolio supervision system to identify weakened credit exposures and take prompt,
early remedial actions when necessary. The collection and recovery processes are initiated when the borrower
does not meet the agreed payments or the borrower’s financial standing is weakened, potentially jeopardising the
repayment of the loan. Dedicated units manage weakened borrowers across all business segments, with collection
and recovery strategies tailored to business segments and individual exposure categories.
Apart from standard, business-as-usual restructurings that are carried out in all branches of the Bank, the restructuring
unit’s primary goal is to rehabilitate borrowers and transfer exposures back to the performing category. The
sophistication and complexity of the rehabilitation process differs based on the type and size of an exposure. Business
loans are transferred to the recovery unit when there is a strong probability that a material portion of the principal
amount will not be paid, and the main stream of recovery is no longer the borrower’s cash flow. Loan recovery plans
may include all available sources of loan recovery, such as selling the borrower’s assets, realising collateral or payments
under guarantees.
The Bank’s goal in the recovery process is to negotiate a loan recovery strategy with the borrower and secure cash
recoveries to the extent possible, or to negotiate repayment through the sale or repossession of collateral. Collection
functions for retail and micro loans support customers who are experiencing difficulties in fulfilling their obligations.
Such customers may miss payments or notify the Bank about their difficulty with loan repayments. A centralised team
monitors retail borrowers in delinquency, which, coupled with the branches’ efforts, aims to maximise collection.
Special software from FICO is used for early collection management purposes.
Collection strategies are defined based on the size and type of exposure. Specific strategies are tailored to different
subgroups of customers, reflecting their respective risk levels, so that greater effort is dedicated to customers with
a higher risk profile. Both secured and unsecured loans are transferred to the internal recovery unit, but in the case of
unsecured loans the Bank also collaborates with external collection agencies. The forms of collaboration normally
include outsourcing to collection services agencies, which act on behalf of the Bank when dealing with borrowers, or
selling specific parts of unsecured portfolios to external companies in order to secure immediate cash recoveries.
To recover collateralised loans, a recovery plan is outlined that considers the individual borrower’s specifics and may
involve loan repayments under revised schedules or the sale of collateral. Once the exposure has been transferred to
the recovery unit, if the Bank is unable to negotiate acceptable terms with the borrower, the Bank may initiate collateral
repossession, which is usually a standard process with limited legal complications, and may include court, arbitration
or notary procedures. Qualified incumbent lawyers support the restructuring and recovery units to ensure that
litigation and repossession processes are carried out efficiently.
Counterparty risk
Through performing banking services such as lending in the interbank money market, settling a transaction in the
interbank foreign exchange market, entering into interbank transactions related to trade finance or investing in
securities, the Bank is exposed to the risk of losses due to the failure of a counterparty bank to meet its obligations.
To manage counterparty risk, the Bank defines limits on an individual basis for each counterparty, while on a portfolio
basis it limits the expected loss from both treasury and trade finance exposures. As of 31 December 2022, the Bank’s
interbank exposure was concentrated with banks that external agencies, such as Fitch, Moody’s and Standard and
Poor’s, have assigned high A-grade credit ratings.
Measurement of Expected Credit Losses
Since January 2018, the Bank has been using a provisioning methodology that is in line with IFRS 9 requirements.
The methodology, along with a corresponding IT provisioning tool, was developed with support from Deloitte and
representatives of the Bank’s risk, finance and IT departments.
The IFRS 9 models are complex and make it possible to incorporate expectations of macro developments based on
predefined scenarios. The expected credit loss (ECL) measurement is based on four components used by the Group:
(i) the probability of default (PD); (ii) exposure at default (EAD); (iii) loss given default (LGD); and (iv) the discount rate.
The Bank uses a three-stage model for ECL measurement and classifies its borrowers in three stages:
• Stage I – the Bank classifies its exposures as Stage I if no significant deterioration in credit quality has occurred
since the initial recognition, and the instrument was not credit-impaired when initially recognised;
• Stage II – the exposure is classified as Stage II if any significant deterioration in credit quality has been identified
since the initial recognition but the financial instrument is not considered credit-impaired; and
• Stage III – the exposures for which credit-impaired indicators have been identified are classified as Stage III
instruments.
The ECL amount differs depending on exposure allocation to one of the three stages:
• Stage I instruments – the ECL represents that portion of the lifetime ECL that can be attributed to default events
occurring within the subsequent 12 months from the reporting date;
• Stage II instruments – the ECL represents the lifetime ECL, i.e. credit losses that can be attributed to possible
default events during the whole lifetime of a financial instrument. Generally, lifetime is set equal to the remaining
contractual maturity of the financial instrument. Factors such as the existence of contractual repayment schedules,
options for the extension of repayment maturity and monitoring processes held by the Bank affect the lifetime
determination;
• Stage III instruments – a default event has already occurred and the lifetime ECL is estimated based on the
expected recoveries.
The Bank actively reviews and monitors the results produced from the IFRS 9 models to ensure that the respective
results adequately capture the expected losses.
FINANCIAL RISK MANAGEMENT
Liquidity risk management
Liquidity risk is the risk that the Group either may not have sufficient financial resources available to meet all its
obligations and commitments as they fall due, or may only be able to access those resources at a high cost. Both
funding and market liquidity risks can emerge from a number of factors that are beyond the Group’s control. Due
to financial market instability, factors such as a downgrade in credit ratings or other negative developments may
affect the price or the ability to access the funding necessary to make payments in respect of the Group’s future
indebtedness.
The Bank’s liquidity risk is managed by the Financial Risk Management and Treasury departments and is monitored by
the Executive Management and the Assets and Liabilities Management Committee (ALCO), within their pre-defined
functions.
The principal objectives of the Group’s Liquidity Risk Management Policy are to:
• Ensure the availability of funds to meet claims arising from total liabilities and off-balance sheet commitments, both
actual and contingent, at an economic price;
• Recognise any structural mismatch existing within the Group’s statement of financial position and set monitoring
ratios to manage funding in line with the Group’s well-balanced growth; and
• Monitor liquidity and funding on an ongoing basis to ensure that approved business targets are met without
compromising the Group’s risk profile.
The Executive Management reviews the Liquidity Risk Management Policy, which is then presented to the Risk
Committee and approved by the Supervisory Board.
Liquidity risk is categorised into two risk types: funding liquidity risk and market liquidity risk.
Funding liquidity risk is the risk that the Bank will not be able to efficiently meet both expected and unexpected
current and future cash flows without affecting either its daily operations or its financial condition under both
normal conditions and during a crisis. Liquidity risk is measured by the Bank in accordance with NBG requirements.
Additionally, the Group applies, in accordance with best practice, stress tests and “what if” scenario analyses and
monitors the various liquidity risk parameters that the Group has developed internally.
To manage funding liquidity risk, in accordance with NBG requirements, the Bank currently monitors the following
Basel III-based parameters:
• For Short-term Liquidity Risk Management, the Bank applies the Liquidity Coverage Ratio (LCR); and
• For Long-term Liquidity Risk Management, the Bank applies the Net Stable Funding Ratio (NSFR).
In 2017, the NBG introduced its own LCR for liquidity risk management purposes. In addition to the Basel III guidelines,
the ratio applies conservative approaches to the deposit withdrawal rates, depending on the client group’s
concentration. Since September 2017, the Bank has also monitored compliance with the NBG’s LCR limits. In addition
to the total LCR limit, the NBG has also defined limits per currency for the GEL and foreign currencies (FC). The LCR
is calculated by reference to the qualified liquid assets divided by 30-day cash net outflows. It is used to help manage
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for the FC LCR. Since October 2019, FC Mandatory Reserves have been considered at 100% within high-quality liquid
assets for NBG LCR purposes. In addition, in the same period, the NBG lowered FC mandatory reserve requirements
from 30% to 25%. Since July 2021, the NBG regulation on mandatory FC reserve requirements has been further
adjusted, to reflect the decreased share of FC deposits in total deposits. The FC mandatory reserve requirements will
be reduced by 1% for every 2% decrease in the share of FC in total deposits. The initiative will have a positive effect on
the capital adequacy position of the Bank.
In September 2019, the NBG introduced a Net Stable Funding Ratio (NBG NSFR) for funding liquidity risk management
purposes. The NSFR is calculated by dividing the available stable funding by the required stable funding. It is used for
long-term liquidity risk management to promote resilience over a long-time horizon by creating additional incentives
for the Bank to rely on more stable sources of funding on a continuing basis. On a monthly basis, the Bank monitors
compliance with the set limit for the NBG NSFR. As of 31 December 2022, the ratios were above the prudential limits
set by the NBG, as follows:
Minimum net stable funding ratio, as defined by the NBG
Net stable funding ratio as defined by the NBG
Minimum total liquidity coverage ratio, as defined by the NBG
Minimum LCR in GEL, as defined by the NBG
Minimum LCR in FC, as defined by the NBG
Total liquidity coverage ratio, as defined by the NBG
LCR in GEL, as defined by the NBG
LCR in FC, as defined by the NBG
31-Dec-22
31-Dec-21
31-Dec-20
100.0%
135.3%
100.0%
75.0%
100.0%
146.6%
164.2%
135.9%
100.0%
127.3%
100.0%
75.0%
100.0%
115.8%
107.7%
120.8%
100.0%
126.0%
100.0%
n/a
100.0%
134.2%
132.2%
134.9%
Stress testing, conducted under the ILAAP framework, is the major tool for managing the liquidity risk. The ILAAP
assesses the adequacy of the liquidity position and relevant buffers, to see whether they can withstand plausible
severe shocks from both a normative and an economic perspective.
Market liquidity risk is the risk that the Bank cannot easily offset or eliminate a position at the then-current market
price because of inadequate market depth or market disruption.
To manage market liquidity risk, the Bank follows the Basel III guidelines on high-quality liquidity asset eligibility to
ensure that the Bank’s high-quality liquid assets can be sold without causing a significant movement in price, and with
minimum loss of value. In addition, the Bank has a recovery plan framework in place, which provides recovery options
for those unlikely cases of extreme stress, in which the regulatory requirements on liquidity may be breached.
Funding and maturity analysis
The Bank’s principal sources of liquidity include customer deposits and accounts, borrowings from local and
international banks and financial institutions, subordinated loans from international financial institution investors,
local interbank short-duration term deposits and loans, proceeds from the sales of investment securities, principal
repayments on loans, interest income, and fee and commission income. The Supervisory Board believes that a strong
and diversified funding structure is one of the Bank’s differentiators. The Bank relies on relatively stable deposits from
Georgia as its main source of funding. The Bank also monitors deposit concentration for large deposits and sets limits
for deposits by non-Georgian residents in its deposit portfolio.
To maintain and further enhance its liability structure, the Bank sets targets for deposits and funds received from
international financial institution investors in its risk appetite via the respective ratios. The loan to deposit and IFI
funding ratio (defined as the total value of net loans divided by the sum of the total value of deposits and funds
received from international financial institutions) stood at 87.7%, 101.3% and 100.7%, as at 31 December 2022, 2021 and
2020, respectively.
The management believes that, in spite of a substantial portion of customers’ accounts being on demand, the
diversification of these deposits by the number and type of depositors, coupled with the Bank’s past experience,
indicates that these customer accounts provide a long-term and stable source of funding for the Bank. Moreover, the
Group’s liquidity risk management includes the estimation of maturities for its current deposits. The estimate is based
on statistical methods applied to historic information about the fluctuations of customer account balances.
Market risk
The Bank follows the Basel Committee’s definition of market risk as the risk of losses in on- and off-balance sheet
positions arising from movements in market prices. These risks are principally: (a) risks pertaining to interest rate-
related instruments and equities in the “trading book” (financial instruments or commodities held for trading
purposes); and (b) foreign exchange risk and commodities risk throughout the Bank.
The Bank’s strategy is not to be involved in trading financial instruments or investments in commodities. Accordingly,
the Bank’s only exposure to market risk is foreign exchange risk in its “structural book”, comprising its regular
commercial banking activities which have no trading, arbitrage or speculative intent.
Foreign exchange risk
The NBG requires the Bank to monitor both balance sheet and total aggregate balance (including off-balance sheet)
open currency positions and to maintain the latter within 20% of the Bank’s regulatory capital. For the year ended 31
December 2022, the Bank maintained an aggregate balance open currency position of 1.91%.
In addition, the Supervisory Board sets further limits on open currency positions. The ALCO has set limits on the level
of exposure by currency and for total aggregate position that are more conservative than those set by the NBG and
the Supervisory Board. The heads of the treasury and financial risk management departments separately monitor the
Bank’s compliance with these limits daily.
Compliance with these limits is also reported daily to the Executive Management and periodically to the Supervisory
Board and its Risk Committee. On a Group-wide level, foreign-exchange risk is monitored and reported monthly. To
assess the currency risk, the Bank performs a VAR sensitivity analysis on a quarterly basis. The analysis calculates the
effect on the Bank’s income determined by the worst possible movements of currency rates against the Georgian Lari,
with all other variables held constant. During the years ended 31 December 2022, 2021 and 2020, the sensitivity analysis
did not reveal any significant potential effect on the Group’s equity:
In thousands of GEL
31-Dec- 2022
31-Dec-2021
31-Dec-2020
Maximum loss (VAR, 99% confidence level)
Maximum loss (VAR, 95% confidence level)
(6,013)
(4,207)
(1,496)
(1,030)
(1,806)
(1,315)
Interest rate risk management
Interest rate risk arises from potential changes in market interest rates that can adversely affect the value of the Bank’s
financial assets and liabilities. This risk can arise from maturity mismatches between assets and liabilities, as well
as from the re-pricing characteristics of such assets and liabilities. The major part of deposits, and part of the loans
offered by the Bank, are at fixed interest rates, while a portion of the Group’s borrowing is based on a floating interest
rate. The Group’s floating rate borrowings are, to a certain extent, hedged because the NBG pays a floating interest
rate on the minimum reserves that the Bank holds with it. Furthermore, many of the Bank’s loans to customers contain
a clause allowing it to adjust the interest rate on the loan in case of adverse interest rate movements, thereby limiting
exposure to interest rate risk. The management also believes that the Bank’s interest rate margins provide a reasonable
buffer to mitigate the effect of a possible adverse interest rate movement. The Bank also applies for interest rate risk
hedging instruments in order to mitigate interest rate risk.
To manage interest rate risk, the Bank employs a framework based on EBA’s 2018 guidelines and establishes
appropriate Risk Appetite limits, monitors compliance with them and prepares forecasts. Please see details in Interest
Rate Risk on pages 235-236 in the Note 35, Financial and Other Risk Management.
The Bank measures four types of interest-rate risk based on the source of the risk: (i) re-pricing risk; (ii) yield curve risk;
(iii) basis risk; and (iv) optionality (embedded option) risk.
The Bank considers numerous stress scenarios, including different yield curve shifts and behavioural adjustments to
cash flows (such as deposit withdrawals or loan prepayments), to calculate the impact on one year profitability and
enterprise value. Appropriate limits are set within the Risk Appetite framework approved by the Supervisory Board.
Capital risk management
Capital risk is the risk that the Bank may not have a sufficient level of capital to maintain its normal business activities,
and to meet its regulatory capital requirements under normal or stressed operating conditions. The management’s
objectives in terms of capital management are to maintain appropriate levels of capital to support the business
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strategy, meet regulatory and stress testing-related requirements and safeguard the Group’s ability to continue as a
going concern. The Group undertakes stress testing and sensitivity analysis to quantify extra capital consumption
under different scenarios. Capital forecasts, as well as the results of the stress testing and what-if scenarios, are
actively monitored with the involvement of the Bank’s management to ensure prudent capital management and timely
actions when needed. In 2022, the Group and the Bank complied with all regulatory capital requirements.
In December 2017, the NBG adopted amendments to the regulations relating to capital adequacy requirements. The
changes include amendments to the regulation on capital adequacy requirements for commercial banks, and the
introduction of new requirements (i) on additional capital buffer requirements for commercial banks within Pillar 2; (ii)
on the determination of the countercyclical buffer rate; and (iii) on the identification of systematically important banks
and determining systemic buffer requirements. The purpose of these amendments is to improve the quality of banks’
regulatory capital and achieve better compliance with the Basel III framework.
Pillar 1 minimum requirements plus combined buffer requirements. The amendments to the regulation on capital
adequacy requirements for commercial banks have made Pillar 1 minimum requirements in Georgia compatible with
the framework established by the Basel Committee of Banking Supervision. The amendments included:
• The separation of the 2.5% conservation buffer, which was previously merged with minimum capital requirements.
The updated minimum regulatory capital requirements are 4.5%, 6.0% and 8.0% for Common Equity Tier 1 capital,
Tier 1 capital and Total regulatory capital, respectively; and
• The introduction of a requirement that banks hold an additional combined buffer through Common Equity Tier 1
Capital, consisting of conservation, countercyclical and systemic buffers.
The rate for the conservation buffer has been set at 2.5% of RWAs, while a 0% rate has been set for the countercyclical
buffer. The countercyclical buffer can vary within the range of 0% to 2.5% and will be reviewed periodically, based
on the prevailing financial and macroeconomic environment. In addition, the NBG designated certain commercial
banks in Georgia as domestic systemically important banks (DSIBs) for which individual systemic buffers have been
introduced, which means that the DSIBs will be required to set aside more Common Equity Tier 1 capital relative to
RWAs, with the requirements being phased in from the end of 2018 to the end of 2021. In particular, the following
systemic buffers and compliance timeframes have been set by the NBG in relation to the Bank: 1.0% for the period
from 31 December 2018 to 31 December 2019, 1.5% for the period from 31 December 2019 to 31 December 2020, 2.0%
for the period from 31 December 2020 to 31 December 2021, and 2.5% from 31 December 2021 onwards.
Since March 2023, countercyclical capital buffer increased from 0% to 1%. The increased requirement will be in
force from March 2024. Also, in 2023, NBG made amendments to the Regulation of the Systemic Risk Buffer (The
amendments will enter into force in April 2023). According to the amendments, the systemic risk buffer is set at 2.5%
for the Bank, and if the Bank’s average market share in consecutive 3 months in non-bank deposits (excluding the
secured deposits of state institutions and secured deposits from organizations under state control) exceeds 40%, the
buffer amount will increase to 3.0%. If the systemic buffer is increased, the Bank will have to comply with the updated
requirement in one year.
Pillar 2 requirements. In accordance with the Basel III framework, the NBG also introduced additional capital buffer
requirements for commercial banks within Pillar 2 that are based on a supervisory review and assessment process and
deal with bank-specific risks that are not sufficiently covered under Pillar 1, including an unhedged currency induced
credit risk buffer and a net General Risk Assessment Programme (GRAPE) buffer. The NBG has also introduced a
credit portfolio concentration buffer and a net stress test buffer. The credit portfolio concentration buffer became
effective from 1 April 2018, and the need for the net stress buffer will be assessed based on the regulatory stress
testing results. Although the net stress test buffer has been effective since 1 October 2020, it is currently set at 0%.
Under the NBG regulation, 56% of the capital required under Pillar 2 should be held through Common Equity Tier 1
capital, while 75% of the capital should be held through Tier 1 capital, and 100% of the capital should be held through
Total regulatory capital.
Temporary Measures
In response to the COVID-19 pandemic, in March 2020, the NBG implemented certain countercyclical measures in
relation to capital adequacy requirements, including postponing the phasing-in of Pillar 2 buffers. According to the
new schedule communicated by the NBG in October 2020, the phase-in of concentration risk and the Net GRAPE
buffers will continue from March 2021 and will be fully introduced by the end of March 2023.
In June 2021, the NBG announced its decision to restore the CICR and conservation buffers. Banks will be required to
fully restore the CICR buffer by the end of 2022 and the conservation buffer by the end of 2023.
The following table presents the capital adequacy ratios and minimum requirements set by the NBG:
82
In thousands of GEL
31-Dec-2022
31-Dec-2021
31-Dec-2020
CET 1 capital
Tier 1 capital
Tier 2 capital
Total regulatory capital
Risk-weighted exposures
Credit Risk-weighted exposures
Risk-weighted exposures for Market Risk
Risk-weighted exposures for Operational Risk
Total Risk-weighted exposures
Minimum CET 1 ratio
CET 1 capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 capital adequacy ratio
Minimum total capital adequacy ratio
Total capital adequacy ratio
IFRS Transition
3,333,039
3,873,439
643,086
4,516,525
18,818,597
86,250
2,603,225
21,508,072
11.6%
15.5%
13.8%
18.0%
17.3%
21.0%
2,759,894
3,379,414
723,513
4,102,927
18,091,753
21,981
2,103,895
20,217,629
11.7%
13.7%
14.0%
16.7%
18.4%
20.3%
1,911,233
2,385,181
752,731
3,137,912
16,322,524
106,379
1,872,574
18,301,477
7.4%
10.4%
9.2%
13.0%
13.7%
17.1%
In 2020-2022, the NBG developed the concept and changes for the transition to IFRS. In January 2023, in line with
the finalisation of the IFRS transition process, the NBG adopted amendments to the regulations relating to capital
adequacy requirements. According to the new amendments, commercial banks must comply with supervisory
regulations with IFRS-based numbers and approaches. Under the IFRS transition process, the NBG introduced a credit
risk adjustment (CRA) buffer. The CRA buffer was implemented as a Pillar 2 requirement and was fully set on CET 1
capital.
Parallel reporting will be maintained along with the transition to IFRS, from January 1 2023, until another decision
is made by the NBG. During parallel reporting, commercial banks are obliged to provide supervisory reports in
accordance with both the IFRS and the local GAAP.
In thousands of GEL
CET 1 capital
Tier 1 capital
Tier 2 capital
Total regulatory capital
Risk-weighted exposures
Credit Risk-weighted exposures
Risk-weighted exposures for Market Risk
Risk-weighted exposures for Operational Risk
Total Risk-weighted exposures
Minimum CET 1 ratio
CET 1 capital adequacy ratio
Minimum Tier 1 ratio
Tier 1 capital adequacy ratio
Minimum total capital adequacy ratio
Total capital adequacy ratio
31-Dec-2022 (IFRS)
3,835,846
4,376,246
407,853
4,784,099
18,488,516
93,833
2,636,659
21,219,008
14.0%
18.1%
16.2%
20.6%
19.6%
22.5%
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Operational risk management
One of the main risks that the Group faces is operational risk, which is the risk of loss resulting from internal and
external fraud events, inadequate processes or products, business disruptions and systems failures, human error or
damages to assets. Operational risk also implies losses driven by legal, reputational, compliance or cybersecurity risks.
The Group is exposed to many types of operational risk, including: fraudulent and other internal and external criminal
activities; breakdowns in processes, controls or procedures; and system failures or cyber-attacks from an external
party with the intention of making the Group’s services or supporting infrastructure unavailable to its intended
users, which in turn may jeopardise sensitive information and the financial transactions of the Group, its clients,
counterparties or customers.
Moreover, the Group is subject to risks that cause disruption to systems performing critical functions or business
disruption arising from events wholly or partially beyond its control, such as natural disasters, transport or utility
failures, etc., which may result in losses or reductions in service to customers and/or economic losses to the Group.
The operational risks discussed above are also applicable where the Group relies on outsourcing services from third
parties. Considering the dynamic environment and sophistication of both banking services and possible fraudsters,
the importance of constantly improving processes, controls, procedures and systems is heightened to ensure risk
prevention and reduce the risk of loss to the Group.
To oversee and mitigate operational risk, the Group maintains an operational risk management framework, which is an
overarching document that outlines the general principles for effective operational risk management and defines the
roles and responsibilities of the various parties involved in the process. Policies and procedures enabling the effective
management of operational risks complement the framework. The Executive Management ensures a strong internal
control culture within the Group, where control activities are an integral part of operations. The Supervisory Board sets
the operational risk appetite and compliance with the established risk appetite limits is monitored regularly by the Risk
Committee of the Supervisory Board.
The operational risk management department of the Bank acts as a second line of defence. It is responsible for
implementing the framework and appropriate policies and procedures to enable the Group to manage operational
risks, as well as monitoring operational risk events, risk exposures against risk appetite and material control issues. The
department is also responsible for the day-to-day management of operational risks, using a range of techniques that
include, but are not limited to:
• running risk and control self-assessments (RCSA), which are aimed at detecting possible gaps in operations and
processes with the purpose of suggesting appropriate corrective actions;
• collecting internal risk events and conducting root-cause analyses for further risk mitigation purposes;
• forming a unified operational loss database for further quantitative and qualitative analysis;
• analysing internal fraud events and monitoring key risk indicators;
• performing new risk assessments and validating the launch of new products, services or procedures;
• providing business advisory services regarding non-standard cases;
• monitoring IT incident occurrence and overseeing activities targeted at solving identified problems; and
• obtaining insurance policies to transfer the risk of losses from operational risk events.
The Bank’s operational risk management department has reinforced its risk assessment teams and methodologies
to further fine-tune the existing control environment. The same applies to the set of actions aimed at homogenising
operational risk management processes throughout the Group’s member companies. The Bank’s operational risk
management department reports to the Chief Risk Officer.
Various policies, processes and procedures are in place to control and mitigate operational risks, including, but not
limited to:
• the Bank’s new Risk Assessment Policy, which enables thorough risk evaluation prior to the adoption of new
products, services, or procedures;
• the Bank’s Outsourcing Risk Management Policy, which enables the Bank to control outsourcing (vendor) risk arising
from adverse events and risk concentrations due to failures in vendor selection, insufficient controls and oversight
over a vendor and/or services provided by a vendor, and other impacts on the vendor;
• the Risk and Control Self-Assessment (RCSA) Policy, which enables the Group to continuously evaluate existing and
potential risks, establish risk mitigation strategies and systematically monitor the progress of risk mitigation plans.
The completion of these plans is also part of the respective managers’ key performance indicators;
• the Operational Risk Event Identification Policy, which enables the Group to promptly report on operational
risk events, perform systematic root-cause analysis of such events and take corrective measures to prevent the
reccurrence of significant losses; and
• the Special Operational Risk Awareness Programme, which provides regular training to the Group’s employees and
strengthens the Group’s internal risk culture.
During the reporting period, one of the key operational risk management focus areas was the Risk and Control Self-
Assessment (RCSA) exercise, under which the Bank’s top priority processes were reviewed and areas of improvement
were identified.
The Operational Risk Management Framework and its complementing policies were updated to ensure effective
execution of the operational risk management programme. Additionally, the Bank has developed a bank-wide
operational risk registry.
Compliance
The first line of defence is responsible for compliance risk, strongly supported by the Bank’s compliance department
as the second line of defence. The Chief Compliance Officer oversees compliance within the Bank and reports
quarterly to the relevant committee of the Supervisory Board, with a managerial reporting line to the CEO. The Bank’s
compliance programme provides compliance policies, trainings, risk-based oversight and ensures compliance with
regulatory requirements.
The Bank’s Compliance Department manages regulatory risk by:
• ensuring that applicable changes in laws and regulations are implemented by the process owners in a timely
manner;
• participating in the new product/process risk approval process;
• conducting analysis of customer complaints, the operational risk event database, internal audit findings and
litigation cases to proactively reveal process weaknesses; and
• conducting an annual compliance risk assessment (RCSA) of internal processes.
The Bank’s Compliance Department ensures that all outcomes of the above mentioned analysis and processes are
addressed in a timely and appropriate manner. Additionally, as a second line of defence the Compliance Department
defines the risk metrics and monitors them at the frequencies defined by the Bank’s risk appetite framework. The
Compliance Department is responsible for escalating breaches of defined limits to the relevant boards.
Anti-money laundering (AML)
The Group aims to protect its customers, shareholders and society from financial crime and any resulting threat.
The Group is fully committed to complying with applicable EU, UK, and domestic laws and regulations related to
financial crime as well as relevant legislation in other countries where Group member financial institutions operate. It
also seeks to meet the respective industry best standards. The Group has implemented internal policies, procedures
and detailed instructions designed to prevent itself from being used or involved in money laundering, financing of
terrorism or in other unlawful activities such as bribery, corruption or tax evasion. The Group’s AML/CTF compliance
programme, as implemented, comprises written policies, procedures, internal controls and systems including, but
not limited to: policies and procedures to ensure compliance with AML laws and regulations; KYC and customer due
diligence procedures; a customer acceptance policy; customer screening against a global list of terrorists, specially
designated nationalities, relevant financial and other sanctions lists; regular staff training and awareness raising; and
procedures for monitoring and reporting suspicious activities by the Bank’s customers.
As part of the second line of defence, the Bank’s AML unit seeks to manage risk in accordance with the risk appetite
defined by the Group and promotes a strong risk culture throughout the organisation.
The Group has a sophisticated, artificial intelligence-based AML solution in place to enable the AML unit to monitor
clients’ transactions and identify suspicious behaviour. Using data analytics and machine learning, the Group
developed an anomaly detection tool to bring very complex cases to the surface, using client network analysis to
identify organised money laundering cases and enriched pre-defined patterns to create an automated system. This
approach has an immense business value as it uncovers cases that would otherwise be prohibitively expensive, since
manual analysis of these transactions is an extremely time-consuming process for AML officers. The tool compiles all
these incidents into dashboards and presents them to AML officers for further action.
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internal manuals for client identification and verification, client risk assignment, document keeping and KYC renewal
processes.
The Bank’s AML Unit works on constantly improving the software to increase operational efficiency and decrease
false-positive alerts. The Bank performs an enterprise-wide AML Risk Assessment annually, in line with the approved
methodology. Overall Group-wide residual risks for the year 2022 were assessed as medium. The Bank’s Compliance
Department addresses areas of attention in a timely and proper manner.
Financial Sanctions Risk Management
The aggression launched by the Russian Federation against Ukraine on 24 February 2022 resulted in an extremely
vigorous international response that led to the imposition of very tough economic sanctions, amongst other measures.
Members of legislative and government agencies, businessmen (oligarchs), legal persons, financial institutions,
economic sectors and categories of goods/services in Russia and Belarus have been sanctioned.
After analysis of the restrictions and rules set under the sanctions and following the instructions of the NBG, the Group
updated its processes and procedures to follow the revised and expanded sanctions regimes of the European Union,
USA (OFAC) and United Kingdom (HM Treasury).
The Group does not have any appetite to breach or facilitate the breach or avoidance of UN, UK, US or EU sanctions.
The Group is committed to avoiding any such deals or transactions with direct or indirect sanctioned parties or goods
or services.
The Group has carried out a number of actions to mitigate sanctions risk with the help of external advisors by
performing enterprise-wide sanctions risk assessments; developing a new sanctions policy; tightening clients
onboarding procedures, while it continues strengthening its screening tools and intensifying trainings on sanctions.
Information Security
In order to adequately address the challenges posed by cyberattacks, we are continuously analysing the Group’s cyber
threat landscape and assessing all relevant threat scenarios and actors, considering their intentions and capabilities,
as well as the tactics, techniques and procedures they are using or may use during their campaigns. Our focus is to be
prepared against Advanced Persistent Threats. Among many different threat vectors we are covering and monitoring,
the top five are below:
1. Attacks against internet-facing applications and infrastructure;
2. Software supply chain attacks;
3. Phishing attacks against our customers;
4. Phishing attacks against our employees; and
5. Ransomware attacks.
Information and cyber security is an integral part of the Group’s governance practices and strategic development. The
Group’s cyber security vision and strategy is fully aligned with its business vision and strategy and addresses all the
challenges identified during the threat landscape analysis.
Our vision is to strengthen our security in depth approach, enable secure and innovative business and maintain a
continuous improvement cycle. Our strategic objectives are:
1. To maintain our defence in depth approach by strengthening the team and implementing cutting-edge
technologies, in order to maintain resilience against Advanced Persistent Threats, which may come from state-
sponsored actors or organised cybercriminals;
2. To maintain compliance with industry leading information and cyber-security standards, sustain a continuous
improvement cycle for our information and business continuity management systems, and be one step ahead of
regulatory requirements; and
3. To optimise and automate security processes, and provide security services seamlessly to the business (where
possible).
Our security in depth approach and cyber-resilience programme
In order to follow our vision and achieve our strategic objectives, we run effective information and cyber-security
programmes, functions and systems, as follows:
1. Layered preventive controls are in place, covering all relevant logical and physical segments and layers of the
organisation and infrastructure in order to minimise the likelihood of successful initial access:
Identity and access controls;
• Data security controls;
•
• Endpoint security controls;
•
• Application security controls;
•
• Physical security controls.
Infrastructure security controls;
Internal and perimeter network security controls;
2. A professional team is in charge of effectively implementing, assuring the effectiveness of, maintaining and
fine-tuning the preventive controls mentioned above. The number and level of expertise of the team members
is significant. Our team members hold industry-leading certificates and work on a daily basis to strengthen and
extend their professional skill sets.
3. Layers of preventive controls in conjunction with a comprehensive awareness programme is the best combination
in order to minimise likelihood of successful attacks. Our robust awareness programme helps employees and
customers to improve cyber hygiene, understand the risks associated with their actions, identify cyberattacks they
might face during day-to-day operations and improve the overall risk culture. Our awareness programme provides
relevant materials to all key roles, from the Executive Management to IT engineers and developers. It covers annual
trainings and attestations for all employees, newcomer trainings and attestations, social engineering simulations,
security tips and notifications for all employees, security awareness raising campaigns for customers, and more.
4. Since we believe that 100% prevention is not achievable, the Group has threat-hunting capabilities and a security
operations centre in place to monitor every possible anomaly in near real-time that is identified across the
organisation’s network in order to detect potential incidents and respond in a timely and effective manner to
minimise the negative impact of possible attacks. To be up-to-date and track the techniques and tactics of our
adversaries, we are elaborating cyber threat intelligence procedures according to industry best practices and
following the MITRE ATTACK framework.
5. Information security governance and effective risk management processes ensure that the Bank has the
correct guidance, makes risk-informed decisions in compliance with its risk appetite, complies with regulatory
requirements and achieves a continuous improvement cycle. The Information Security Committee, which is
chaired by the CEO, has the ultimate responsibility to assure that an appropriate level of security is maintained and
a continuous improvement cycle of management processes is achieved. The Bank is in compliance with the NIST
cyber security management framework and its Information Security Management System is ISO 27001 certified.
6. On top of all of the above, the Bank further strengthens its cyber resilience through an effective Business Continuity
Management System and cyber insurance policy, in order to manage contingencies and recover from serious
disruptions with minimum possible impact.
To assess and assure an acceptable level of information and cyber security, we rely on external/internal audit reports,
red teaming exercise reports and penetration testing results which are conducted by our high professional internal
team and reputable external third-party partners.
• On an annual basis we conduct:
1. An external audit of the SWIFT customer protection framework;
2. An external audit of the NBG’s cyber security framework, which is based on the NIST cyber security
management framework;
3. External surveillance audits of ISO 27001; and
4. Penetration tests against internet-facing applications and critical infrastructure with help of our partners.
• Our internal team is in charge of continuous penetration tests of internal and external applications and
infrastructure.
• We conduct regular red-teaming exercises and assess our security capabilities against real world advanced threat
actors.
Model Risk Management
In line with the NBG’s requirements, international regulatory guidance and best practices, the Bank defines a model
as a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories,
techniques, and assumptions to process input data into quantitative estimates. A model has three components: an
information input component, an information-processing component and a reporting component. Model risk is
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with regulatory provisions, best practices, the Code of Conduct, and the Code of Ethics;
2. Maintaining liaison with the Compliance Department, administering policies and procedures in conjunction with
the compliance department and investigating complaints about the conduct of the department, its manager, or its
employees;
3. The front-line employees of the organisation should ensure that product information is accurate and complete, and
is conveyed both in writing and orally in a simple, understandable manner, regardless of the level of sophistication
of the client;
4. Keeping records of client interactions and emails containing sensitive and sales-related information, such as
information in relation to the acquisition of new clients and the formulation of complex product offers;
5. By providing periodic training to all employees regarding evolving compliance standards within the Group, we
ensure that new employees are educated regarding proper conduct;
6. By creating a culture of openness that encourages employees to speak out without fear of punishment, we are
preventing and detecting conflicts of interest, creating moral incentive programmes, and creating bonuses, and
achieving a risk-adequate incentive and disciplinary policy for the Group;
7. Investing considerable time and effort in investigating, analysing, implementing, and monitoring sales and after-
sales activities, and putting proper conduct into the required job skills, which ensures that conduct risk is not just
managed by risk management units, including compliance departments.
defined as the risk of adverse consequences (e.g., financial loss, reputational damage, etc.) arising from decisions
based on incorrect or misused model outputs.
The Bank’s Model Risk Management (MRM) function reports directly to the Chief Risk Officer, and its policy, approved
by both Executive Management and Supervisory Board, defines the framework within which it operates. Two main
components of the framework are governance and validation. The MRM acts as a second line of defence and aims to
consistently identify, quantify, minimise and mitigate model related risks across the Bank.
The governance component of the MRM defines the roles and responsibilities for the entirety of the model lifecycle.
It sets standards and procedures that encompass all phases of the lifecycle, from planning and development to initial
validation, model use, monitoring, ongoing validation and model retirement. It is also responsible for managing the
model inventory and keeping model risk within the risk appetite.
The validation component of the MRM is responsible for technical as well as conceptual evaluation of the model in
question, in accordance with the standards and procedures set by governance. The MRM uses a risk-based approach
during the initial and ongoing model validation process.
Legal Risk
The Legal Department of the Bank is responsible for managing all legal liability and compliance issues that arise within
the Bank as a result of legal risks. Its objectives are as follows:
•
Identify the legal risks. Analyse the legal risks associated with business plans and initiatives, including compliance
and liability risks, as well as risks associated with business actions.
• Calibrate the legal risks. Assess and calibrate the legal risks the company is facing, together with the Compliance
Department, to ensure regulatory compliance and set up the organisation’s tolerance and level of risk.
• Manage the legal risks. Develop strategies, plans, processes and policies, and provide the legal and other resources
required to deliver them.
The Legal Department strives to accomplish these objectives by providing a wide range of professional legal
services, including: (i) interacting with internal and external clients as well as outside counsel, government agencies
and regulatory agencies; (ii) issuing memos and opinions; (iii) drafting standard and customised contracts; (iv) being
responsible for corporate governance matters; (v) providing regulatory updates; and (vi) representing the Bank in
court, other dispute resolution venues, and before third parties.
The Legal Department’s role in compliance is to assist the Compliance Department in ensuring the effective
execution of the compliance programme by: (i) helping the Bank understand the legislative and regulatory change that
may impact its business model and operations; (ii) assisting the company in understanding the legal and regulatory
implications of its new projects, products, services and expansion plans.
It is the General Counsel’s responsibility to oversee the Bank’s legal department. The General Counsel determines the
Bank’s key business objectives for all legal teams, introduces the Bank’s vision and policies, and ensures that all legal
teams perform effectively. It is part of the General Counsel’s responsibilities to report to the Executive Management,
Supervisory Board, and committees on any existing legal risks and mitigation strategies and to establish a vision for a
future that will enable these risks to be effectively managed.
Conduct risk
Conduct risk is defined as the risk of achieving fair outcomes for customers and other stakeholders. The Bank’s
Code of Ethics serves as a moral compass for all staff and sets high ethical standards that each employee is required
to uphold. The Bank’s employees undertake and perform their responsibilities with honesty and integrity. They are
critical to maintaining trust and confidence in its operations and upholding important values of trust, loyalty, prudence
and care.
Additionally, the Bank’s management understands that it bears responsibility for a diversified group of domestic
and international investors, and needs to embrace the rules and mechanisms to protect customers and maintain the
confidence of investors and financial markets. The Group’s Directors strive to establish the “tone from the top”, which
sets out the messages describing and illustrating the core components of good conduct.
In managing conduct risk, the Bank entrusts different departments and divisions with carrying out the task of
managing, mitigating and eliminating conduct risk across all of the Bank’s operations with clients and other
stakeholders. The Compliance, Human Capital and Operational Risk departments cooperate to create a unified
conduct risk management framework and assist business lines and departments, in the following ways:
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Material existing and
emerging risks
Collateral represents the most significant credit risk mitigation tool for the Group, making effective collateral
management one of the key risk management components. The Group has a largely collateralised portfolio in all
its segments, with real estate representing a major share of collateral. As of 31 December 2022, 77.6% of the Group’s
portfolio was secured by cash, real estate or gold.
To manage counterparty risk, the Bank internally defines limits on an individual basis for each counterparty, by limiting
the expected loss from both treasury and trade finance exposures. As of 31 December 2022, the Bank’s interbank
exposure was concentrated among high A-grade credit rating’ banks, assigned by external agencies, such as Fitch,
Moody’s and Standard and Poor’s.
Additionally, the Bank actively performs stress testing and scenario analysis in order to check the resilience of
borrowers under various stress conditions.
For more information on mitigating measures, please refer to Credit Risk Management on page 76.
2. The Bank faces currency-induced credit risk due to the high share of loans denominated in foreign currencies in
the Bank’s portfolio.
Risk description
Tha Bank has a significant portfolio in foreign currencies. A potential material GEL depreciation is one of the most
significant risks that could negatively impact portfolio quality. As of 31 December 2022, 47.1% of the Group’s total gross
loans and advances to customers (before provision for loan impairment) were denominated in foreign currencies. The
income of many customers is directly linked to foreign currencies via remittances, tourism or exports. Nevertheless,
customers may not be protected against significant fluctuations in the GEL exchange rate against the currency of
the loan. The US$/GEL rate remained volatile throughout FY 2022, with the average currency exchange rate of GEL
strengthening by 14.6% year-on-year. The GEL remains in free float and is exposed to a range of internal and external
factors that, in some circumstances, could lead to its depreciation.
Risk mitigation
Particular attention is paid to currency-induced credit risk, due to the high share of loans denominated in foreign
currencies in the Bank’s portfolio. The vulnerability to exchange rate depreciation is monitored in order to promptly
implement an action plan, as and when needed. The ability to withstand a certain amount of exchange rate
depreciation is incorporated in the credit underwriting standards, which also include significant currency depreciation
buffers for unhedged borrowers. In addition, the Bank holds significant capital against currency-induced credit risk.
Given the experience and knowledge built through recent currency volatility, the Bank is in a good position to promptly
mitigate exchange rate depreciation risks. In January 2019, Georgian government authorities continued their efforts
to reduce the economy’s dependence on foreign currency financing by increasing the cap to GEL 200,000, under
which loans must be disbursed in the local currency. In addition, under the NBG’s responsible lending regulations,
unhedged retail borrowers are required to have highly conservative Payment-to-Income (PTI) and Loan-to-Value (LTV)
thresholds. The Bank has set a strategy to decrease the share of foreign currency loans in its total portfolio. Annual
targets have been defined in the medium-term strategy, gradually decreasing the share of foreign currency. The
Assets and Liabilities Committee (ALCO) is closely monitoring the achievement of these targets.
For more information on mitigating measures, please refer to Currency-induced Credit Risk under the Risk
Management section on page 76.
3. The Bank is exposed to concentration risk.
Risk description
The Bank has large individual exposures to single-name borrowers whose potential default would entail increased
credit losses and higher impairment charges. The Bank’s portfolio is well diversified across sectors, resulting in only a
moderate vulnerability to sector concentration risks. However, should exposure to common risk drivers increase, the
risks are expected to amplify correspondingly. At a consolidated level, the Group’s maximum exposure to the single
largest industry (Real Estate) stood at 9% of the loan portfolio as of 31 December 2022. At the same time, exposure to
the 20 largest borrowers stood at 8.5% of the loan portfolio.
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The Bank constantly monitors the concentrations of its exposure to single counterparties, as well as sectors and
common risk drivers, and introduces limits for risk mitigation. As part of its risk appetite framework, the Bank limits
both single-name and sector concentrations. Stringent monitoring tools are in place to ensure compliance with the
established limits.
In addition, the Bank has dedicated restructuring teams to manage borrowers who face financial difficulties. Also,
the concentration buffer under Pillar 2 helps to ensure that the Bank remains adequately capitalised to mitigate
concentration risks.
For more information on mitigating measures, please refer to Credit Concentration Risk under the Risk Management
section on page 77.
5. The Bank faces the risk of not meeting the minimum regulatory requirements, which may compromise growth
and strategic targets. Additionally, adverse changes in FX rates may impact capital adequacy ratios.
Risk description
NBG sets a capital adequacy framework, with capital requirements consisting of a Pillar 1 minimum requirement, a
Pillar 2 requirement, and combined (systemic, countercyclical and conservation) buffers. The buffers were introduced
gradually, with the phase-in of concentration risk and Net GRAPE buffers to be completed by March 2023.
The Bank’s capitalisation as of December 2022 stood at:
• 15.5% for CET 1, with an updated regulatory minimum requirement of 11.6%;
• 18.0% for Tier 1, with an updated regulatory minimum requirement of 13.8%; and
• 21.0% for Total capital, with an updated regulatory minimum requirement of 17.3%.
4. The Group’s performance may be compromised by adverse developments in the economic environment.
These ratios were above the respective regulatory minimums.
Risk description
A potential slowdown in economic growth in Georgia will likely have an adverse impact on the repayment capacity
of borrowers, restraining their future investment and expansion plans. Negative macroeconomic developments
could compromise the Group’s performance in various ways, such as exchange rate depreciation, a spike in interest
rates, rising unemployment, a decrease in household disposable income, falling property prices, worsening loan
collateralisation, or falling debt service capabilities of companies as a result of decreasing sales. Potential political and
economic instability in Georgia’s neighboring countries and main trading/economic partners could negatively affect
its economic outlook through worsening current and financial accounts in the balance of payments (e.g. decreased
exports, tourism inflows, remittances and foreign direct investments).
The Georgian economy recorded very strong growth of 10.1% in 2022, notwithstanding the negative impact of
Russia’s invasion of Ukraine. The adverse spillover appears to be more than balanced by the positive migration
impact. Moreover, exports, remittance inflows and to a large extent FDIs performed strongly. In addition, the GEL also
showed a significant improvement, with the US$/GEL exchange rate standing at around 2.70 at the end of December,
compared to 3.2 in early March. Meanwhile, similar to many other countries worldwide, inflation remains a challenge,
with the CPI growing by 9.8% YoY in December 2022. Therefore, in line with the tightening internationally, the domestic
monetary policy stance has been hawkish, leading to a moderate demand for credit when adjusted for inflation, taking
into account the second year of continuous double-digit economic growth in a row.
Risk mitigation
To decrease its vulnerability to economic cycles, the Group identifies cyclical industries and proactively manages
its underwriting approach and clients within its risk appetite framework. The Group has in place a macroeconomic
monitoring process that relies on close, recurrent observation of the economic developments in Georgia and
neighbouring countries to identify early warning signals indicating imminent economic risks. This system allows the
Group to promptly assess significant economic and political events and analyse their implications for the Group’s
performance. These implications are duly translated into specific action plans with regards to reviewing underwriting
standards, risk appetite metrics or limits, including the limits for each of the most vulnerable industries. Additionally,
the stress testing and scenario analysis conducted during the credit review and portfolio-monitoring processes
enable the Group to evaluate the impact of macroeconomic shocks on its business in advance. Resilience towards
a changing macroeconomic environment is incorporated into the Group’s credit underwriting standards. As such,
borrowers are expected to withstand certain adverse economic developments through prudent financials, debt-
servicing capabilities and conservative collateral coverage.
Taking into account the regional crisis, the Group adjusted its risk management framework, leveraging its pre-existing
stress testing practices. This included more thorough and frequent monitoring of the portfolio as well as stress testing,
to ensure close control of changes in capital, liquidity, and portfolio quality in times of increased uncertainty.
For more details on the developments in the economies of the Group’s operations in 2022, please refer to the Our
Operating Environment section on pages 14-17.
In January 2023, in line with the IFRS transition process, the NBG adopted amendments to the regulations relating
to capital adequacy requirements (this is covered in further detail under Capital Risk Management on page 81). GEL
volatility remains a significant risk to the Bank’s capital adequacy. A 10% GEL depreciation would translate into drops of
0.8 pp, 0.7 pp and 0.6 pp in the Bank’s CET 1, Tier 1 and Total regulatory capital adequacy ratios, respectively.
Risk mitigation
The Bank undertakes stress testing and sensitivity analysis to quantify extra capital consumption under different
scenarios. Such analyses indicate that the Bank holds sufficient capital to meet the current minimum regulatory
requirements. These analyses are used to set appropriate risk appetite buffers internally, on top of the regulatory
requirements. Capital forecasts, as well as the results of stress testing and what-if scenarios, are actively monitored
with the involvement of the Bank’s Executive Management and the Risk Committee of the Supervisory Board to help
ensure prudent management and timely action, when needed.
For more information on capital risk and respective mitigating measures, please refer to Capital Risk Management on
page 81.
6. The Group is exposed to regulatory and enforcement action risk.
Risk description
The Group’s activities are highly regulated and thus face regulatory risk. In Georgia, the NBG sets lending limits and
other economic ratios (including, but not limited to lending, liquidity, and investment ratios) along with the mandatory
capital adequacy ratio. In addition to complying with minimum reserves and financial ratios, the Bank is required to
submit periodic reports. It is also subject to the Georgian tax code and other relevant laws.
Following the Company’s listing on the London Stock Exchange’s premium segment, the Group became subject to
increased regulations from the UK Financial Conduct Authority. In addition to its banking operations, the Group also
offers other regulated financial services products, including leasing, insurance and brokerage services.
The Group is also subject to financial covenants in its debt agreements. For more information, see the Group’s Audited
Financial Statements.
Risk mitigation
The Group has established systems and processes to ensure full regulatory compliance, which are embedded in all
levels of the Group’s operations. The Group’s “three lines of defence” model defines the roles and responsibilities for
risk management. The Bank has dedicated compliance departments, acting as second lines of defence, reporting
directly to the Chief Executive Officers of the respective bank and have primary roles in the management of regulatory
compliance risk. The Group’s Audit Committee is responsible for ensuring regulatory compliance at the Supervisory
Board level. The Group has processes and tools in place to identify, assess, monitor, report and manage the risks in
order to remain within the risk appetite limits.
For more information please refer to Compliance under the Risk Management section on page 85.
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Risk description
Historically, Georgia has enjoyed close business relations with Russia and Ukraine. The aggression launched by the
Russian Federation against Ukraine on the 24th of February 2022 resulted in a vigorous international response which
translated among others into the imposition of the tough economic sanctions by US, EU, UK and other countries. As
a consequence, Russian and Belarusian members of legislative and government agencies, oligarchs, businessmen,
state-owned companies, financial institutions and other legal entities have been directly sanctioned, while numerous
economic restrictions and trade prohibitions have been enforced on some sectors of activity and specific categories
of goods and services in Russia, Belarus, Crimea and other occupied territories. Also as a consequence of the conflict,
many Russian citizens have relocated to Georgia. Considering the level of interactions of the Bank with Russia and
Russian citizens, and the amplitude of the sanctions prohibitions and restrictions, the risk of being involved in attempts
of sanctions circumvention has substantially increased.
In addition to the sanctions risk related to Russia, and due to the significant increase in international shipping costs,
Georgia is exposed to the risk of transshipment via Iran for its import and export activities with Asian countries.
Breaches of the US, EU and UK sanctions regime would expose the Group to fines and regulatory actions by the
local regulator, the National Bank of Georgia, and by US, EU or UK authorities and enforcement agencies. Beside
the regulatory risk, the Group would have to face a reputational risk, mainly with its correspondent banks and other
financial third party relationships.
Risk mitigation
In line with the risk appetite of the Group and the instructions of the National Bank of Georgia, the Group implemented
processes and procedures designed to ensure compliance with local, UN, US, EU and UK sanctions regimes. The
Group seeks to avoid any transactions of any nature with direct or indirect sanctioned parties, goods or services, and
to not facilitate in any manner the circumvention of UN, US, EU and UK sanctions programmes.
To this effect, the Group has recently strengthened its sanctions programme via a number of actions with the support
of external advisors: performance of an enterprise-wide sanctions risk assessment, issuance of a new Sanctions
Policy and Procedure, and reinforcement of client on-boarding and relationship management, while it continues to
strengthen its close transactions monitoring and additional due diligence in case of Russian related transactions or
potential transshipment via Iran, to review and fine-tune its screening tools and conduct enhanced sanctions training.
For more information please refer to Financial Sanctions Risk Management on page 86.
8. Liquidity risk is inherent in the Group’s operations.
Risk description
While the Group currently has sufficient financial resources available to meet its obligations as they fall due, liquidity
risk is inherent in banking operations and can be heightened by numerous factors. These include an overreliance
on, or an inability to access, a particular source of funding, as well as changes in credit ratings or market-wide
phenomena. Access to credit for companies in emerging markets is significantly influenced by the level of investor
confidence and, as such, any factors affecting investor confidence (e.g. a downgrade in credit ratings, central bank
or state interventions, or debt restructurings in a relevant industry) could influence the price or availability of funding
for companies operating in any of these markets. The Bank is in compliance with the minimum liquidity requirements
set by the NBG, which include the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). As of
31 December, 2022, the net loan to deposits plus international financial institution funding ratio stood at 88.5%, the
liquidity coverage ratio at 146.6%, and the net stable funding ratio at 135.3%. These figures are all well above the NBG’s
minimum requirements or guidance for such ratios.
Risk mitigation
To mitigate this risk, the Bank holds a solid liquidity position and performs outflow scenario analyses for both normal
and stress circumstances to make sure that it has adequate liquid assets and cash inflows. The Group maintains
a diversified funding structure to manage the respective liquidity risks. There is adequate liquidity to withstand
significant withdrawals of customer deposits, but the unexpected and rapid withdrawal of a substantial amount of
deposits could have a material adverse impact on the Group’s business, financial condition, and results of operations
and/or prospects.
Stress testing is a major tool for managing liquidity risk. Stress testing is performed within the ILAAP and Recovery
Plan frameworks. The former assesses the adequacy of the liquidity position and relevant buffers and whether they can
sustain plausible severe shocks, while the latter provides a set of possible actions that could be taken in the unlikely
event of regulatory requirement breaches to support a fast recovery in the liquidity position. The liquidity risk position
and compliance with internal limits are closely monitored by the Assets and Liabilities Management Committee
(ALCO) of the Bank.
For more information on liquidity risk and respective mitigating measures, please refer to Liquidity Risk Management
on page 79.
9. Any decline in the Group’s net interest income or net interest margin (NIM) could lead to a reduction in
profitability and accumulation of organic capital.
Risk description
Net interest income accounts for most of the Group’s total income. Consequently, fluctuations in its NIM affect
the results of its operations. New regulations and the high level of competition could drive interest rates down,
compromising the Group’s profitability. At the same time, the cost of funding is largely exogenous to the Group and is
derived from both local and international markets.
In 2022, the NIM increased by 0.9 pp to 5.9%, driven by an increase in loan yields, a decrease in the foreign currency
(FC) cost of fund, and optimisations in wholesale funding, further accompanied by increased loan larisation. As of
31 December 2022, GEL 5,190 million in assets (19%) and GEL 3,380 million in liabilities (14%) were floating in GEL,
compared to GEL 4,867 million in assets1 (18%) and GEL 850 million in liabilities (4%) that were floating in relation to the
LIBOR/SOFR/Euribor rates. The Bank was in compliance with the Economic Value of Equity (EVE) sensitivity limit set
by the NBG of 15% of Tier 1 capital, with the ratio standing at 7.1% as of 31 December 2022.
Risk mitigation
The Bank continues to focus on fee and commission income growth to safeguard itself from possible margin
compressions on lending and deposit products in the future. To meet its asset-liability objectives and manage the
interest rate risk, the Bank uses a high-quality investment securities portfolio, long-term funding and derivative
contracts. In 2022, the Bank seized the opportunity to improve funding structure and redeemed US$ 54.68 mln from
outstanding 2024 senior bonds.
10. The Group faces a growing and evolving threat of cyber-attacks.
Risk description
No material cyber-security breaches have happened at the Bank in recent years. Nonetheless, the Group’s rising
dependency on IT systems increases its exposure to potential cyber-attacks. Given their increasing sophistication,
potential cyber-attacks may lead to significant security breaches. Such risks change rapidly and require continued
focus and investment.
Risk mitigation
In order to mitigate the risks associated with cyber-attacks and ensure clients’ security, the Group continuously
updates and enhances its in-depth security strategy. It strives to evolve its mitigation mechanisms, covering multiple
preventive and detective controls ranging from the data and end-point computers to edge firewalls.
A Security Operations Centre has been built, which monitors every possible anomaly identified across the
organisation’s network in order to detect potential incidents and respond to them effectively.
At least once a year, a full information security and cyber security threat analysis is performed, taking into
consideration the relevant regional and sector specific perspectives. Moreover, at least once a year a detailed
examination of information security matters is presented to the Technology and Data Committee of the Supervisory
Board. At least once every two years, as part of this analysis, an external consultant is contracted to assess the
efficiency of our capabilities against industry best practices and real-world cyber-attack scenarios. This analysis gives
the Group a broad overview as well as detailed insight, which help to further enhance its information and cyber security
systems. In addition, cyber-attack readiness exercises are performed on a regular basis. These exercises evaluate the
actual position of the Group in this area and provide a benchmark against international best practices.
1 Excluding US$ Mandatory reserves, where no interest is accrued from May, 2022 per NBG regulation.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR INVESTORS CONTINUED Employees play a crucial role in information security. As a result, annual mandatory training sessions are conducted
for all employees, comprised of remote learning courses on security issues, fraud and phishing simulations, and
informative emails to further assist our employees with information security matters. New employees are also
given training as part of the onboarding process. These measures ensure that employees are fully aware of their
responsibilities and are prepared for various security threats.
The Information Security Steering Committee governs information and cyber security to ensure that relevant risks are
at an acceptable level and that management processes are continuously improved. Moreover, disaster recovery plans
are in place to ensure business continuity in case of need.
In 2022, a Red Team exercise was carried out, results are assuring high effectiveness of the Bank’s security in-depth
capabilities.
In 2021, the Bank achieved ISO 27001 certification for its information security management system, which
demonstrates that the Bank is following robust information security practices effectively, in order to protect its
information and information systems from different types of threats. In 2022, an ISO 27001 surveillance audit was
completed, and the Bank maintained the certification.
Also in 2022, two more audits were conducted to assess the Bank against the Cyber Security Management Framework
and the SWIFT Customer Security Controls Framework (CSCF). No critical findings and major non-compliances were
identified during these exercises. Cyber Security Management Framework is defined by National Bank of Georgia,
based on the National Institute of Standards and Technology (NIST) Cyber Security Management Framework.
The Group has not experienced any material information security breaches in the last three years. For more
information on cyber security, please refer to the Information Security under the risk management section on page 86.
11. External and internal fraud risks are part of the operational risk inherent in the Group’s business, and, unless
proactively managed, could materially impact the Group’s profitability and reputation.
Risk description
The increased complexity and diversification of operations, coupled with the digitalisation of the banking sector, mean
that fraud risks are evolving. External fraud events may arise from the actions of third parties against the Group, most
frequently involving events related to banking cards, loans and client phishing. Internal fraud events arise from actions
committed by the Group’s employees, although such events happen less frequently. During the reporting period, the
Group faced several instances of fraud, none of which had a material impact on the Group’s profit and loss statement.
The rapid growth in digital crime has exacerbated the threat of fraud, with fraudsters adopting new techniques and
approaches to obtain funds illegally. Therefore, unless properly monitored and managed, the potential impact could
become substantial.
Risk mitigation
The Group actively monitors, detects and prevents risks arising from fraud events and has permanent monitoring
processes in place to detect unusual activities in a timely manner. The risk and control self-assessment exercise
focuses on identifying residual risks in key processes, subject to the respective corrective actions. Through our
continuous efforts to monitor and mitigate fraud risks, coupled with the high level of sophistication of our internal
processes, the Group ensures the timely identification and control of fraud-related activities. The Bank is currently
working on a strategic initiative to further enhance fraud prevention systems and plans to utilise client behavioural
analytics to further minimise external fraud threats.
12. The Group remains exposed to some reputational risk.
Risk Description
There are reputational risks to which the Group may be exposed, such as risks related to international sanctions
imposed on Russia in response to the war in Ukraine, isolated cases of anti-banking media narratives, cases of phishing
and other cybercrimes, as well as risks associated with the process of digitalisation. However, none of these risks is
unique to the Group.
Risk Mitigation
impact of direct and indirect reputational risks. The Group monitors its brand value through public opinion studies and
surveys and by receiving feedback from stakeholders on an ongoing basis. Dedicated internal and external marketing
and communications teams actively monitor mainstream media and social media coverage on a daily basis. These
teams monitor risks, develop scenarios and create respective contingency plans. The Group tries to identify early
warning signs of potential reputational or brand damage in order to mitigate it and elevate it to the attention of the
Supervisory Board before it escalates. A special Task Force is in place at the top management level, comprised of
strategic communications, marketing and legal teams, to manage reputational risks when they occur. Communications
and cyber security teams conduct extensive awareness-raising campaigns on cyber security and financial literacy,
involving the media, the Banking Association of Georgia and Edufin (TBC’s inhouse financial education platform),
aimed at mitigating and preventing cyber threats and phishing cases.
13. The Group faces the risk that its strategic initiatives do not translate into long-term sustainable value for its
stakeholders.
Risk Description
The Group may face the risk of developing a business strategy that does not safeguard long-term value creation in an
environment of changing customer needs, competition and regulatory restrictions. In addition, increased uncertainty
stemming from the major economic and social disruptions caused by the COVID-19 pandemic and the war in Ukraine,
may hamper the Group’s ability to effectively develop and execute its strategic initiatives in a timely manner and
thereby compromise its capacity for long-term value creation. Please see the Group’s main strategic priorities in Our
Strategic Priorities and Our Key Performance Indicators section on pages 22-25.
Risk Mitigation
The principal driver for the formation of the portfolio of strategic initiatives is the diversification of the Group’s revenue
and value pockets and the optimization of enterprise value evolution over the strategy time horizon. Notwithstanding
the aforementioned, the Group conducts annual strategic review sessions involving the Supervisory Board, the
Executive Management and the middle management in order to ensure that it remains on the right track and assesses
business performance from different perspectives, concentrating its analysis on key trends and market practices, both
in regional and global markets. In addition, the Bank continuously works with the world’s leading consultants in order to
enhance its strategy. Furthermore, the Group conducts quarterly analyses and monitors the metrics used to measure
strategy execution, and in case of any significant deviations, it takes corrective or mitigation actions.
14. The Group is exposed to risks related to its ability to attract and retain highly qualified employees.
Risk Description
The Group faces the risk of losing key personnel or failing to attract, develop and retain skilled or qualified employees
based on its objectives. The transformation into a digital company leads to increased demand for IT professionals
across the Group.
To adapt to the rapidly changing business environment, the Group needs to develop an “agile” culture and increase
leadership capabilities, achieve a high level of engagement among employees, and equip them with the necessary
skills.
Risk Mitigation
The Group actively monitors the labour market both in Georgia and abroad, proactively recruiting the best candidates
and expanding the networks of key personnel. The Group treats all employees equally and fairly, supporting and
coaching them to succeed. Ensuring equal opportunity in all areas of human resource management such as selection,
promotion, training and development, is critical to retaining employee engagement and satisfaction across our
workforce. We are also actively working on developing a succession planning framework for senior positions in order
to ensure a smooth transition, as well as offer promotion opportunities to employees.
The Bank established an IT academy which offers courses in front-end and back-end development, Android and iOS
mobile development, as well as user experience research and strategy, DevOps, Java, Test Automation, Outsystems
and Data Engineering. This programme is free of charge for selected candidates and is run by experienced staff
members and leading professionals from relevant fields.
To mitigate the possibility of reputational risks, the Group works continuously to maintain strong brand recognition
among its stakeholders. The Group follows all relevant external and internal policies and procedures to minimise the
Top management regularly conducts online meetings with employees to share the Group’s strategy and information
on recent achievements with employees. The Bank was one of the first companies in Georgia to allow its back-office
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR INVESTORS CONTINUED The Bank aims to increase its understanding of climate-related risks and their longer-term impacts over the coming
years, which will enable it to further develop its approach to mitigation. Furthermore, the Group’s portfolio has strong
collateral coverage, with around 75% of the loan book collateralised with cash, real estate or gold. Since the collateral
evaluation procedure includes monitoring, any need to change collateral values arises from our regular collateral
monitoring process.
In June 2022, the Group released its full-scale sustainability report for the year 2021 in reference to Global Reporting
Initiative (GRI) standards. The Global Reporting Initiative (GRI) helps the private sector to understand and realise its
role and influence on sustainable development issues such as climate change, human rights and governance. The
report is designed for all interested parties and groups in Georgia and abroad and aims to give them clear, fact-based
information about the social, economic and environmental impact of our activities in 2021. It presents our endeavours
to create value for our employees, clients, suppliers, partners and society as a whole. The Sustainability Report 2021 is
available at www.tbcbankgroup.com.
3. The Group’s performance may be affected by the LIBOR discontinuation and transition.
Risk description
The majority of the Bank’s US$ floating portfolio is still linked to the 6-month US$ LIBOR, while the EUR floating
portfolio is linked to the Euro Interbank Offered Rate (Euribor), the discontinuation of which was not declared.
The discontinuation of LIBOR and the transition process exposes the Group to execution, conduct, financial and
operational risks, and may result in earnings volatility, customer complaints and legal proceedings, or have other
adverse impacts on the Group’s business and operations.
Risk mitigation
The Group actively monitors international and local transition-related developments to regulate and align the
Group’s transition process with market practice. On 29 July 2021, the Alternative Reference Rates Committee (ARRC)
announced its recommendation to use Term Secured Overnight Financing Rate (SOFR) published by CME Group,
Inc. (CME). The ARRC recommendation allows loan agreements to use Term SOFR in place of LIBOR, either as a
replacement for LIBOR (whether pursuant to the operation of a fallback provision or otherwise) or in new deals.
In 2021, the Group formed a steering committee to ensure a smooth transition away from LIBOR, including efforts to
introduce Term SOFR rates in the Group’s loan agreements. The steering committee raises awareness of the transition,
both internally and externally, to ensure the availability of the necessary tools to facilitate the transition and the fair
treatment of all the Group’s customers during the process. Since April 2022, the Bank has applied Term SOFR rates to
newly disbursed US$ floating-rate loans. The transition from LIBOR to the Term SOFR benchmark is expected to be
finalised by the end of June, 2023.
employees to work remotely. Importantly, this initiative not only resulted in improved employee satisfaction levels, but
also opened up the possibility of attracting new talent from beyond Georgia.
EMERGING RISKS
Emerging risks have significant unknown components and may affect the performance of the Group over a long-term
horizon. We believe the following risks have the potential to increase in significance over time and could have a similar
impact on the Group as the principal risks.
1. The Group’s performance may be compromised by adverse developments in the region, in particular the war in
Ukraine and possible spread of the geopolitical crisis and/or the potential outflow of migrants from Georgia.
Risk description
While inflows to the Georgian economy are quite diversified, the country is still vulnerable to geopolitical and
economic developments in its region. In particular, the Russian invasion of Ukraine, the consequent sanctions imposed
on Russia and the resulting elevated uncertainties have an adverse impact on the Georgian economy.
At the same time, just as the migration effect made an important contribution to economic growth in 2022, any
sizeable outflow could lead to a deterioration in the business environment. The reverse would probably be the case
in any rapid conflict resolution scenario, which would create positive spill overs, such as the likely faster recovery of
growth in Russia and Ukraine, that should also be taken into account.
Risk mitigation
The Group actively employs stress testing and other risk measurement and monitoring tools to ensure that early
triggers are identified and translated into specific action plans to minimise the negative impact on the Bank’s capital
adequacy, liquidity, and portfolio quality in times of increased uncertainty.
2. The Group is exposed to the risks arising from climate change.
Risk description
The risks associated with climate change have both a physical impact, arising from more frequent and severe weather
changes, and a transitional impact that may entail extensive policy, legal and technological changes to reduce the
ecological footprint of households and businesses. For the Group, both risks could materialise through impaired
asset values and the deteriorating creditworthiness of our customers, which could result in a reduction of the Group’s
profitability. The Group may also become exposed to reputational risks because of its lending to, or other business
operations with, customers deemed to be contributing to climate change.
Risk mitigation
The Group’s objective is to act responsibly and manage the environmental and social risks associated with its
operations in order to minimise negative impacts on the environment. This approach enables us to reduce our
ecological footprint by using resources efficiently and promoting environmentally friendly measures in order to
mitigate climate change.
The Group has in place an Environmental Policy, which governs its Environmental Management System (“EMS”) and
ensures that the Group’s operations adhere to the applicable environmental, health, safety and labour regulations
and practices. We take all reasonable steps to support our customers in fulfilling their environmental and social
responsibilities. The management of environmental and social risks is embedded in the Group’s lending process
through the application of the EMS. The Group has developed risk management procedures to identify, assess,
manage and monitor environmental and social risks. These procedures are fully integrated in the Group’s credit risk
management process. Our Environmental Policy is fully compliant with Georgian environmental legislation and follows
international best practices (the full policy is available at www.tbcbankgroup.com). For more detailed information on
the EMS, please refer to pages 114-121.
In order to increase our understanding of climate-related risks to the Bank’s loan portfolio, in 2021 the Bank performed
a high-level sectoral risk assessment, since different sectors might be vulnerable to different climate-related risks over
different time horizons. The risk assessment focused on economic sectors such as energy, oil and gas, metals and
mining, tourism, agriculture, food industry, healthcare, construction and real estate. In 2022, we advanced our TCFD
framework further, especially in strategic planning and risk management. These developments are described in our
TCFD section on pages 100-113.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONHOW WE CREATE VALUE FOR OUR INVESTORS CONTINUED CLIMATE-RELATED FINANCIAL DISCLOSURES 2022
Climate-related
financial disclosures
2022
Recommended disclosure Status
Reference Short summary
Disclosed
2.2
– In 2022, we continued to incorporate climate and broader
ESG considerations into our financial planning processes.
The Group aligned loan portfolio growth planning with risks
and opportunities in different sectors and defined relevant
products on sectoral level, thus supporting sustainable
portfolio growth and the transition to a lower-emission
economy in Georgia.
Disclosed
2.3
– Multiple scenarios were used to explore different plausible
scenarios and trade-offs and to gain a more holistic view of
the risks: Below 2 °C, Net Zero 2050, Delayed Transition.
Page 108
Where to find
Page 107
Describe the impact of climate-
related risks and opportunities
on the organisation’s
businesses, strategy, and
financial planning
Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario
Describe the organisation’s
processes for identifying and
assessing climate-related risks
Disclosed
Describe the organisation’s
processes for managing
climate-related risks
Disclosed
3
3
Disclosed
3
– Since 2012, TBC Bank has E&S risk management
Page 109
procedures to identify, assess, manage and monitor
environmental and social risks which are fully compliant
with Georgian environmental legislation, follow
international best practices.
– In 2022, TBC Bank developed the ESG Profile Methodology
for corporate customers. The aim is to incorporate the ESG
Profile scorecard in the overall risk management process.
ESG factors such as climate adaptation, transition to low-
carbon activities, implementation of green technologies,
diversity and inclusion, good corporate governance are
considered during the assessment and respective scores
are assigned based on expert judgment.
– In 2022, TBC continued to embed climate-related risks
and opportunities within its business further. TBC was
supported by the Technical Assistance Trust Fund
(EPTATF) through its Climate Action Support Facility
(CASF) for Promoting Climate Action for SMEs in
Georgia. The EPTATF comprises one year of consultancy
support for the implementation of TBC’s climate action
strategy, provided by the Frankfurt School of Finance and
Management,
Page 109
Page 109
Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into the
organisation’s overall risk
management
Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with its
strategy and risk management
process
Where to find
Page 102
Recommended disclosure
Status
Reference
Short summary
– ESG and Ethics Committee at the Board level established.
– ESG and Ethics Committee at the Board level established.
Disclosed
4
– Scope 1, Scope 2 and Scope 3 GHG emissions (flights).
– Total sustainable loan portfolio volume.
– Portfolio breakdown by sectors.
Page 112
Describe the organisation’s
governance around climate-
related risks and opportunities
Describe management’s role
in assessing and managing
climate-related risks and
opportunities
Disclosed
Disclosed
1.1
1.2
Describe the climate-related
risks and opportunities the
organisation has identified over
the short, medium, and long
term
Disclosed
2.1, 2.2
– Since March 2021, responsibility for climate change-
Page 102
related risks and opportunities is assigned to the executive
level ESG Committee.
– During 2022, the ESG Committee met four times and
covered various climate-related topics: TCFD reporting,
TCFD implementation action plan, Policy on Climate
Change.
– TBC Group’s ambition is to be a leading supporter of ESG
principles in Georgia and the wider region. We aspire to
make our direct environmental impact net zero by 2025,
and continue to develop our plan to enable our indirect
environmental impact to also reach net zero as soon as
practicable thereafter.
Page 104
Page 107
Disclose Scope 1, Scope 2 and,
if appropriate, Scope 3 GHG
emissions and the related risks
Disclosed
4. EMS
chapter
page 114
– The summary of Scope 1, Scope 2 and Scope 3 GHG
Page 112
emissions (flights), 2022 targets versus actual results, as
well as targets for 2023 are disclosed.
Describe the targets used by
the organisation to manage
climate-related risks and
opportunities and performance
against targets
Disclosed
4
– Total sustainable loan portfolio volume of GEL 782 million
Page 112
achieved (the target volume was GEL 750 million).
– Total sustainable loan portfolio target volume for 2023 is
set at GEL 1 billion.
100
101
1 While this report is focused on climate-related risks and opportunities, TBC has also published corporate sustainability disclosure on other
environmental, social, and governance (“ESG”) topics in its 2021 Sustainability Report available at www.tbcbankgroup.com.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONThis report sets out the Bank’s disclosures in relation to the implementation of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations in line with the UK Government’s initiative to enshrine in regulations mandatory TCFD-aligned requirements for premium and standard-listed companies in the UK. The report includes climate-related disclosures to align with the TCFD recommendations, TCFD published guidance and the Financial Conduct Authority Listing Rules. In 2021, we published our first disclosure to demonstrate our commitment towards taking active measures to mitigate climate change, to assess and mitigate climate risks and to identify climate opportunities. In 2022, we advanced our TCFD framework further, especially in strategic planning and risk management. These developments are described in this report. As the sustainability landscape evolves with new information and greater standardisation, the Bank will continue to refine and expand its disclosures to provide meaningful information for stakeholders.It should be noted that the data we have used provide the best available approach to reporting progress made, notwithstanding the challenges that exist given the incompleteness and novelty of the data sets and methodologies required for the Georgian environment, which bears the largest part of our activities. We expect the availability and reliability of required data to improve over time, and we intend to integrate applicable improved data into our reporting as it becomes available.Below is the disclosure prepared by the Group considering the implementation of TCFD recommendations1. 1. GOVERNANCE
1.1. Supervisory Board’s oversight of climate-related risks and opportunities
The Supervisory Board (Supervisory Board of JSC TBC Bank) approves and oversees the Group ESG Strategy in
order to address specifically the Bank’s targets and initiatives that relate to climate change, its direct and indirect
environmental impact and sustainable development in the Bank. The ESG Strategy also covers customers, employees,
suppliers, wider society, financial inclusion, employee relations and talent management, workplace diversity and
inclusion. The Supervisort Board retains the primary responsibility for overseeing the implementation of the strategy,
as part of its commitment to having direct oversight over the Bank’s climate-related issues.
In January 2022, the Supervisory Board established an Environmental, Social and Governance (ESG) and Ethics
Committee at the Board level. This reflects the importance of sustainability in TBC’s corporate governance and allows
the Board members to dedicate more time and focus to ESG topics.
The role of the Committee is formalised to support and advise the Supervisory Board in its oversight of the
implementation of (i) strategy (ii) policies and (iii) programmes of the Company and its subsidiaries in relation to ESG
matters and ensuring that the ESG strategy is implemented across all of the Bank’s relevant businesses. Furthermore,
the ESG and Ethics Committee supports the Supervisory Board in promoting its collective vision of values, conduct
and culture and overseeing executive management’s (Executive Management of Joint Stock Company TBC Bank)
efforts (i) to foster a culture of ethics (ii) appropriate conduct, and (iii) employee ethical engagement within the Bank.
The Committee provides strategic guidance on climate-related matters and reports to the Supervisory Board, which
has overall oversight.
The ESG and Ethics Committee met four times during 2022 and covered the following topics: a) regular review of and
status update on the Bank’s ESG strategy, including climate strategy, as well as implementation plans; b) monitoring
of their execution; c) oversight and recommendation to the Supervisory Board for approval of the Bank’s disclosures
on ESG matters, including reporting in line with the TCFD principles, in the Annual Report and Accounts. Key topics
covered in 2022 by the ESG and Ethics Committee are as follows: review of the newly developed Policy on Climate
Change, Human Rights Policy and Diversity, Equality and Inclusion Policy, review of the TCFD reporting for the Annual
Report 2021 and the Sustainability Report 2021, the ESG and climate-related training agenda for TBC staff and the ESG
Strategy 2023.
The Supervisory Board is supported by the Risk Committee. For example, progress against the reporting metrics, such
as the volume of the sustainable loan portfolio, is reported to the Risk Committee, which also received updates three
times a year through the Chief Risk Officers (CRO) report. In 2022, we elaborated on our ESG Risk Appetite and intend
to integrate this into our Risk Appetite Framework (RAF). Furthermore, the responsibilities of the Audit Committee
cover the review of annual reports, including the TCFD reporting, as well as follow up on compliance with policies,
procedures and regulations.
The Supervisory Board has established a diverse and comprehensive training agenda, which is reviewed annually.
The Bank’s Company Secretarial team creates a general training catalogue at the beginning of each year, which
covers all relevant areas of Risk, Audit, Remuneration and Governance. The catalogue includes an effective mix
of publicly available and client-tailored webinars, analytical materials, and opportunities for live discussion with
industry participants. The providers of these training opportunities include the Big Four accounting firms, external
legal advisors, chartered institutes (such as the Institute of Directors and the Governance Institute), and, where
relevant, senior professionals with specific subject matter expertise. Directors use the training catalogue in order
to create their bespoke training calendars and exchange knowledge during Supervisory Board meetings or via the
dedicated Supervisory Board platform. In February 2023, as part of a larger, one-year climate-related project, further
topic-specific training sessions on climate-related issues were delivered by the Frankfurt School of Finance and
Management to equip members of the Supervisory Board as well as the executive management of Bank with detailed
knowledge about the TCFD and climate change-related risks and opportunities and the operative tools available to
implement the climate action strategy.
1.2. Executive management’s role
At the executive level, responsibility for climate change-related risks and opportunities is assigned to the ESG
Committee, which was established by the executive management in March 2021 and is responsible for implementing
the ESG strategy and approving the annual as well as separate, detailed action plans for key projects. The progress
and implementation status of action plans are monitored at the ESG Committee’s meetings. During 2022, the ESG
Committee met four times and covered various climate-related topics: TCFD reporting, TCFD implementation action
plan, Policy on Climate Change. The ESG Committee’s responsibilities also include the review and monitoring of
climate-related risks and opportunities as well as the establishment of an effective mitigation and control system to
manage identified (material) climate-related risks. The ESG Committee meets on a quarterly basis.
The implementation of the ESG strategy is supported by the various organisational functions responsible for ESG
matters: Environmental and Social Risk Management Team, the ESG Department and the ESG competences centre – a
working group initiated in order to support the enhancement of the TCFD framework.
Furthermore, the Environmental Committee meets on a quarterly basis and oversees the implementation and
operation of the Environmental Management System, which includes addressing the resource consumption and
other environmental impacts of TBC Bank’s daily operations. The Environmental and Social Risk Management
Team regularly reports on the environmental management plans and results to the Environmental Committee. The
Environmental Committee reports directly to the Chief Risk Officer.
THE ESG GOVERNANCE STRUCTURE1
SUPERVISORY BOARD
ESG AND ETHICS COMMITTEE
ESG COMMITTEE
ENVIRONMENTAL COMMITTEE
FUNCTIONS:
ESG COORDINATION DEPARTMENT
ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT TEAM
SUPERVISORY
BOARD
EXECUTIVE
MANAGEMENT
RISK
MANAGEMENT
STRUCTURE
2. STRATEGY
The Bank’s objective is to act responsibly and manage the environmental and social risks associated with its
operations in order to minimise negative impacts on the environment. In order to achieve this, the Bank has clearly
defined processes in place to identify and assess climate-related risks to our business. This approach enables
the Bank to reduce our ecological footprint by using resources efficiently and promoting environmentally friendly
measures in order to mitigate climate change.
TBC Bank has reviewed all of the operational activities, procured items and outsourced services that it can control
(present and planned), and has identified all of the material environmental aspects relevant to the business. The direct
environmental impact of our business activity arises from energy, water, fuel and other resource usage, waste and
emissions. The Bank has established a comprehensive internal environmental system to manage its GHG emissions
and is committed to reducing them by closely monitoring its consumption of resources. In order to evaluate the
significance of the impact for each of the categories, we have developed a comprehensive evaluation methodology
and applied it to the whole Bank. Based on this, annual goals are defined and specific initiatives and programmes are
developed to attain them.
In 2020, the Bank obtained an ISO 14001:2015 certificate for its Environmental Management System. In 2021 and
2022, TBC Bank completed the re-certification process successfully. More information about the Environmental
Management System can be found in the Environmental Management System section on pages 114-121.
In 2021, the Bank developed and approved the ESG Strategy. In 2022, we updated our ESG Strategy in order to reflect
the progress made during 2022 and adjust targets and initiatives for future years.
1 These terms are defined in the glossary on pages 262-263.
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2021 ESG Strategy target / initiative
2022 status
2023 target
Establish ESG governance framework
until the end of 2021
ESG governance framework
established at both Supervisory
Board and executive management
levels
Enhance ESG governance and achieve
a higher maturity level
Set up a system for measuring impacts
on sustainability across the Bank,
customers, employees and society
Regular reports on key parameters
to the ESG-related Committees at
Supervisory Board and executive
management level established
Increased granularity and automation
of reporting, regular reporting on
climate-related risks, scenario analysis,
stress testing, ESG risk appetite
Increase sustainable loan portfolio
GEL 750 million
GEL 1 billion
Increase customer loyalty and
employee motivation
Establishment of ESG training
framework for all TBC Bank
employees
Implementation of the green loan
framework
Green loan procedure implemented
Measure ESG awareness among
employees and customers
Harmonisation of the green loan
procedure and the green taxonomy of
the National Bank of Georgia
Green Taxonomy of the National Bank
of Georgia
Bank’s Policy on Climate Change
The National Bank of Georgia
introduced the Green Taxonomy,
developed in line with the best
international taxonomies. The
implementation process has been
finalised
Climate Change Policy developed
and approved1
The Green taxonomy is in force
starting from 1st January 2023
Development of sectoral guidelines
ESG profiles for corporate customers
The framework on ESG profiles for
corporate customers developed
Starting implementation with existing
Top 20 corporate customers
Incorporation of ESG matters in risk
appetite
Development of ESG risk appetite
Establishment of regular monitoring
and review
ESG strategies in material subsidiaries Separate ESG Strategies developed
Implementation of ESG Strategies
TBC Bank’s ambition is to be the leading supporter of ESG principles in Georgia and the wider region. We aspire
to make our direct environmental impact net zero by 2025, and continue to develop our plan to enable our indirect
environmental impact to also reach net zero as soon as practicable thereafter.
The long-term aspirations are supported by different measures outlined in the ESG Strategy. The key components for
2023 and 2024 are listed below:
• Development of a methodology to calculate financed emissions;
• Measure the Bank’s direct performance towards the Paris Agreement targets for the reduction of GHG emissions;
• Excluding/limiting high-carbon activities (please see our Exclusion List at www.tbcbankgroup.com);
•
Increase ESG awareness and knowledge about the risks and opportunities of climate change among employees,
customers and the wider public;
• ESG Academy - green financing training courses for employees and customers;
• Forecasting methodology and tools for supporting medium and long-term targets for GHG emissions reduction;
• Develop a methodology for the calculation of the GHG emissions of the total loan portfolio and define the action
plan for implementation.
2.1. Climate-related risks and opportunities
Climate-related risks
The table below shows a summary of potential transitional and physical risks identified by the Bank for the Georgian
environment. The time horizons considered in the assessment are short – up to three years, medium – up to eight
years, long - above eight years with the levels of a possible impact – low, medium or high. While assessing the impact
of climate change risks on a sector, a category – low, medium and high - was assigned relative to other sectors, as
well as in comparison with other risk categories. Furthermore, it is to consider, that the assessment - low, medium
and high – within a subcategory of transitional or physical risk was assigned relative to other subcategories within the
same climate risk category. Thus, the assessment results are not comparable with the same impact categories in other
countries or regions.
The overall assessment of transitional and physical risks is given below.
Risk sources Policy and Legal
Technology
Market
Transition risks
– Enhanced
regulatory
environmental
and mandated
requirements:
may introduce
minimum
standard or
expectations
on green
credentials
of product
outputs or
business
operations,
enhanced
emissions-
reporting
obligations
– Changing
customer
behaviour
including
deliberate
move
to lower
carbon
footprint
products
– Increased
cost of raw
materials,
increased
volatility
and costs,
sourcing
restrictions
for carbon
heavy raw
materials
– Substitution
of existing
products
and services
with lower
emissions
options,
including
requirements
to replace
manufacturing
technology
to cleaner
alternatives
– Investment in
technology
to reduce
emissions
or improve
energy
efficiency of
operations
and
households.
Reputation
– Shifts in
consumer
preferences
to green
products
– Stigmatisation
of sector,
resulting
in reduced
revenue from
negative
impacts on
workforce
management
and planning
(e.g., employee
attraction and
retention)
– Increased
stakeholder
concern or
negative
stakeholder
feedback
Physical risks
Acute
Chronic
– Increased
severity of
extreme
weather
events
such as
floods
– Changes in
precipitation
patterns
and extreme
variability
in weather
patterns
affecting food
production
and living
environment
– Rising mean
temperatures
affecting
working
conditions,
living
conditions
and local
infrastructure
– Rising
sea levels
affecting local
ecosystems,
increasing
subsidence
and flood risks
Medium
Long
Medium
Long
Medium
Long
Low
Medium
Low
Low
Medium
Medium
Types of
risks
Time
horizon
Level of
potential
impacts
affecting
customers
and TBC
The overall assessment of the impact of transitional policy measures
Georgia’s 2030 Climate Change Strategy2 and Climate Action Plan lays out different policy measures on which TBC
Bank based its identification of the potential impact of the policy measures on different economic sectors, which
are financed by TBC Bank. As a summary of the potential impact of the various transition risks and physical risks
identified, the transitional risks in Georgia and on the TBC Bank’s activities are low. The assessment considers that
trade and services dominate the Georgian economy, and the policy measures outlined in Georgia’s 2030 Climate
Change Strategy will have an overall low impact on the economic sectors, especially in the short and medium term.
Georgia’s 2030 Climate Change Strategy takes into consideration that Georgia is a transitional and growing economy,
and therefore government strategy is not to impede GDP growth with policy measures but rather to support a smooth
1 Policy available at www.tbcbankgroup.com.
2 Georgia’s 2030 Climate Change Strategy.
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such as mining, crude petroleum, natural gas and metal ores, manufacturing coke and refined petroleum products1
are present only to an extremely limited extent in Georgia, resulting in a low overall impact of transitional measures on
economic growth, if any.
The technology risk is a subcategory of transition risk. The technology risk related to climate change, unnecessary
investments in the technological development or missing investments in the technological improvements are
assessed to be low in Georgia, as Georgian companies hardly invest in the development of new green technologies;
they benefit from technologies developed in other (technologically advanced) countries and deploy technologies
which are already tested and established. Therefore, failed investments are unlikely to occur.
Market risk is low, as the consumer behaviour in Georgia show a very slow trend towards lower carbon footprint
products. For reputational risk, no material impact expected, as TBC Bank has developed E&S risk management
procedures to identify, assess, manage and monitor environmental and social risks which are fully compliant with
Georgian environmental legislation, follow international best practices. Please see more information about the
environmental management system in the chapter Environmental Management System on the pages 114-121.
The overall assessment of the impact of the physical risks
Georgia’s geographical location and natural conditions – a small country with a mountainous landscape, a Black Sea
coastal zone, and semi-arid areas in the Southeast – all contribute to the country’s vulnerability to the physical risks of
climate change. The sectors that are thought to be most vulnerable to climate change in Georgia include agriculture,
forestry, tourism, and healthcare2.
The impact of physical risks on economic sectors which are financed by TBC Bank will materialized over time. For the
Bank, the risks can materialise through the impairment of asset values and the deterioration in the creditworthiness
of customers operating in Georgia. Certain geographic areas and economic sectors such as winter resorts and
agricultural land are already partially affected and might deteriorate further in the medium time horizon. The overall
assessment of the potential impact on Georgia and on TBC Bank’s activities is medium on a long-term perspective. It
is understood that climate change risks are largely associated with longer-term impacts; however, those longer-term
impacts are unclear, especially considering the shorter-term maturity structure of the Bank’s loan portfolio.
Climate-related opportunities
The table below provides a summary of climate-related opportunities.
Opportunity
Products and services
Products and services
Products and services
Green / climate-related funding
Resource efficiency
Description
Anticipated financial impact
Energy-efficiency loans
Renewable energy financing
Revenue increase
Revenue increase
Green lending procedure - a
standardised approach to sustainable
finance, including energy efficiency,
renewable energy and resource
efficiency financing
Global Climate Fund (GCF)
accreditation, enabling the Bank to
have direct access to GCF funding
TBCs sustainability strategy seeks
to decouple the Company’s growth
from its impact on the environment,
while increasing the efficiency
and resiliency of its operations.
Finding innovative ways to run its
operations with renewable energy,
lower emissions, and reduce waste,
among other efforts, reduces TBC’s
environmental impact
Revenue increase
Revenue increase / cost optimisation
Cost reduction or optimisation
The list depicts products and loan purposes which are relevant for sustainable loan portfolio growth in TBC Bank.
TBC has a number of different initiatives underway that support the management of climate-related risks and the
realisation of opportunities:
• Advisory and product services for customers;
• Sectoral approach towards climate-related risks and opportunities;
• Climate-related training for TBC staff;
• Green taxonomy training and capacity building of TBC employees;
• Green mindset training for customers.
2.2. Climate-related risks and opportunities on the business and financial planning
In 2022, we continued to incorporate climate and broader ESG considerations into our financial planning processes.
Some qualitative considerations that related to climate and ESG matters were incorporated in the financial planning
cycle for 2022. In 2022, the Group aligned loan portfolio growth planning with risks and opportunities in different
sectors and defined relevant products on a sectoral level, thus supporting sustainable portfolio growth and the
transition to a lower-emission economy in Georgia.
The table below depicts the sectors which were assessed to have a climate-related risk scoring of three and above
according to the recommended guidelines of the National Bank of Georgia3. The scoring system uses range from
0 to 10. As no sector is completely risk free and – for the time being – no sector is at absolute risk, the extremes can
be neglected. In practice, the results range from 2 to 7. In order to identify products relevant for a sector, separate
meetings were conducted with representatives of the various business lines and the potential for greening a sector
was assessed. As of end of 2022, the sustainable loan portfolio of TBC Bank (which equals to GEL 782 mln) includes
exposures with different purposes, such as: energy-efficiency loans, electric car loans, renewable energy financing
for solar panels and hydro power plants. Overall sustainable loan portfolio growth volume was distributed by sectors
in line with existing product catalogue and opportunities identified. Some products and services listed below are in
process of development and will be available throughout 2023.
Sector
% in standalone
Bank’s loan book
Climate Risk
Radar Score
Agriculture
4.6%
Automotive
1.7%
Construction
6.0%
Energy & Utilities
5.3%
Food Industry
5.9%
Individuals
38.3%
4
4
3
4
4
3
Manufacturing
0.9%
3.5
Metals and Mining 1.0%
Oil and Gas
1.1%
Real Estate
8.8%
4
4
3
Transportation
1.3%
3.5
Product Catalogue
Energy-efficiency loans
Climate-smart technologies
New irrigation systems
Hybrid and electric cars,
Euro 5, Euro 6 and Euro 7 cars
Energy-efficiency loans
Industry autos
Energy-efficiency loans for construction projects,
Production of energy-efficient building materials.
Energy-efficiency loans for machinery / appliances
Charging stations for electric cars
Renewable energy financing
Charging stations for electric cars
Energy-efficiency loans (warehouses, storage, appliances,
cars)
Energy-efficiency mortgages
Hybrid and electric car loans
Energy-efficiency loans (machinery, appliances, buildings)
Carbon filtering
Energy-efficiency loans (machinery, appliances, buildings)
Energy-efficiency loans for building charging stations for
electric cars
Energy-efficiency loans
Renewable energy financing (solar panels)
Hybrid and electric cars,
Euro 5, Euro 6 and Euro 7 cars, buses, trucks
1 Key elements of the 2021 Biennial Exploratory Scenario: Financial risks from climate change | Bank of England.
2 Georgia’s Third National Communication to the UNFCCC.
3
Information about the Climate Risk Radar.
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TBC Bank is taking significant steps to develop scenario analysis capabilities to better understand and act on the
implications of climate-related risks and opportunities for our business and customers. The development of climate-
related scenario analysis is a big challenge, as the availability, accessibility and suitability of climate data and sub-
sector information for financial risk analysis, as well as climate-related risk modelling capabilities, in Georgia are very
limited and still evolving. Despite these limitations, the scenario analysis allows us to test a range of possible future
climate pathways and understand the nature and magnitude of the risks they present. The purpose of scenario analysis
is not to forecast the future but to understand and prepare to manage risks that could arise. In 2022, we continued
working with the external consultant and developed a stress testing model covering different economic sectors in
Georgia in order to capture the stress testing impact on the whole credit portfolio of TBC Bank.
Scenario Selection
Multiple scenarios were used to explore different plausible scenarios and trade-offs and to gain a more holistic
view of the risks: Below 2 °C (B2C)1, Net Zero 2050 (NZ2050)2, Delayed Transition (DT)3. The selected set of scenarios
span across the timeframe from 2020 to 2050. The scenarios reflect different assumptions about the likelihood and
timing of government actions, technological developments, and their spillover effects on productivity. Each scenario
combines assumptions related to i) the introduction of a public policy measure (a higher carbon tax); (ii) productivity
shocks resulting from the insufficient maturity of technological innovations (higher energy prices), and the effects on
investments in non-energy sectors. The input for scenario analysis comes from the GCAM model used to derive the
NGFS scenarios. The data was sourced from the NGFS Phase II database and the GCAM5.3 (GCAM-USA) model – an
Integrated Assessment Model for the evolution of energy and socio-economic systems.
Macroeconomic impacts from transition risks arise from a fundamental shift in energy and land use and affects
every sector of the economy. The GCAM model describes how supply, demand, and prices of energy evolve across
the different transition scenarios. The model also provides GDP trajectories, carbon prices and GHG emissions for
Georgia.
Scenario Implementation
To complement the output from the GCAM model three additional transition channels have been included: i)
Increased Capex - Transitioning towards a decarbonised economy requires the replacement of “traditional” or carbon-
intensive technology by sustainable technology4. These new technologies are more expensive implying higher Capital
Expenditure / Leverage/ debt-servicing burden for TBC’s borrowers; ii) Direct Emissions - Energy prices are the main
transition channel for Carbon tax, but direct emissions (own heating, own fuel use, livestock emissions, etc.) might also
be taxed. That’s not captured by the energy biased IAMs; iii) Transition Winners - certain sectors can be considered
sector winners because they are likely to benefit from higher and accelerated investment cycles. Some of these
include Construction, Automotive, Trade, Manufacturing due to the move to carbon-light activities.
For physical risk, firstly, models and scenarios provided by NGFS for physical risks were examined. It was also preferred
to be compatible with scenarios in transition risks. In this context, available data sources made it appropriate to use
physical risk indicators only for the REMIND-MAgPIE5 model under three scenarios (i.e., Current Policies, Net Zero
2050, and Delayed Transition). Secondly, among various indicators, the indicators that could affect Georgia and the
sectors were selected. Physical risks, which are divided into two as acute and chronic, are examined through two
indicators. Considering Georgia’s natural disaster history, it was observed that the most harmful physical event with
high risk within the scope of acute risk was flooding, and therefore “Annual Expected Damage from River Floods” was
used as an acute risk indicator. In the context of chronic risk, the “Mean Air Temperature” was used as a fundamental
indicator.
The model output shows the change in revenue due to transition and physical risk over a long-time horizon 2020 to
2050. The shocks to the revenue per sector are integrated into TBC’s baseline scenario parameters and applied to the
different portfolio segments: micro, SME, corporate and retail.
Conclusions
Scenarios Below 2 °C and Net Zero 2050: The results by segments show that the impact of climate shocks on the
payment capacity of customers in retail, Micro, SME and corporate segments is negligible.
For the scenario Delayed Transition, the results differ slightly: climate shocks impact the payment capacity of
customers in retail, Micro and SME segments insignificantly; few corporate customers show negative trends (as the
collateral value is not considered initially), however, after considering collateral value, the result becomes negligible.
Even if the climate stress tests are not forecasting tools, they indicate the level of resilience towards climate shocks,
especially in the short and medium term; furthermore, climate stress test show that the most vulnerable sectors are
energy (non-renewable) & utilities, and oil and gas, if the transition risks materialise. However, as mentioned above,
transition risk is rather low in Georgia.
3. RISK MANAGEMENT
Processes for identifying and assessing climate-related risks
The risks associated with climate change have both a physical impact arising from more frequent and severe weather
changes, and a transitional impact that may entail extensive policy, legal and technological changes to reduce the
ecological footprint of households and businesses. For the Bank, both of these risks can materialise through the
impairment of asset values and a deterioration in the creditworthiness of customers, which could result in a reduction
in the Bank’s profitability. The Bank may also become exposed to reputational risks as a result of lending to or other
business operations with customers deemed to be contributing to climate change.
As mentioned above, climate risks can materialise, first of all, through the impairment of asset values and deteriorating
creditworthiness of customers. Therefore, as a first step, we looked at the largest subsidiary of the TBC JSC by assets,
constituting 98% of the Group’s assets – TBC Bank standalone, the largest financial institution in Georgia. In order to
increase the understanding of climate-related risks on its loan portfolio, the Bank performed a high-level sectoral risk
assessment, as different sectors might be vulnerable to different climate-related risks over different time horizons.
The risk assessment process and content is based on TCFD recommendations, climate-related documents published
by the Bank of England, the climate change assessments of Georgia performed as part of the IPCC reports, and the
targets and strategy 2030 defined by the Georgian Government to achieve the National Determined Contribution of
Georgia6 . The risk assessment focuses on economic sectors such as: energy, oil and gas, metals and mining, tourism,
agriculture, food industry, healthcare, construction and real estate. The assessment of levels and impacts might
change in the future, based on further reviews of the methodology, deep-dive analysis and increased understanding of
the impact of climate change risks.
The sectoral assessment was performed with the involvement of the business and credit risk specialists responsible
for the respective economic sectors in the Bank.
1 This scenario “Below 2 °C” gradually increases the stringency of climate policies, giving a 67% chance of limiting global warming to below
2 °C. This scenario assumes that climate policies are introduced immediately and become gradually more stringent though not as high as in
Net Zero 2050. CDR (Carbon Dioxide Removal) deployment is relatively low. Net-zero CO₂ emissions are achieved after 2070. Physical and
transition risks are both relatively low.
2 Net Zero 2050 is an ambitious scenario that limits global warming to 1.5 °C through stringent climate policies and innovation, reaching net
zero CO₂ emissions around 2050. Some jurisdictions such as the US, EU and Japan reach net zero for all greenhouse gases by this point. This
scenario assumes that ambitious climate policies are introduced immediately. CDR is used to accelerate the decarbonisation but kept to the
minimum possible and broadly in line with sustainable levels of bioenergy production. Net CO₂ emissions reach zero around 2050, giving at
least a 50 % chance of limiting global warming to below 1.5 °C by the end of the century, with no or low overshoot (< 0.1 °C) of 1.5 °C in earlier
years. Physical risks are relatively low, but transition risks are high.
3 Delayed Transition assumes global annual emissions do not decrease until 2030. Strong policies are then needed to limit warming to below
2 °C. Negative emissions are limited. This scenario assumes new climate policies are not introduced until 2030 and the level of action differs
across countries and regions based on currently implemented policies. The availability of CDR technologies is assumed to be low pushing
carbon prices higher than in Net Zero 2050. As a result, emissions exceed the carbon budget temporarily and decline more rapidly than in
Well-below 2 °C after 2030 to ensure a 67 % chance of limiting global warming to below 2 °C. This leads to both higher transition and physical
risks than the Net Zero 2050 and Below 2 °C scenarios.
4 According to Sustainable Finance Taxonomy for Georgia.
5 The REMIND-MAgPIE framework couples the energy-economy model REMIND and the agricultural production model MAgPIE. The Integrated
Assessment Model REMIND (REgional Model of Investment and Development) represents the future evolution of the world economies with
a special focus on the development of the energy sector and the implications for our world climate. The Model of Agricultural Production
and its Impact on the Environment (MAgPIE) is a global land use allocation model. It takes regional economic conditions such as demand for
agricultural commodities, technological development and production costs as well as spatially explicit data on potential crop yields, land and
water constraints into account.
6 A nationally-determined contribution (NDC) is a national plan highlighting climate change mitigation, including climate-related targets for
greenhouse gas emission reductions, policies and measures governments aim to implement in response to climate change and as a contribution to
achieve the global targets set out in the Paris Agreement.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION The sectoral distribution of the loan portfolio as of 31 December 2022 is given in the table below.
Gross loans by sectors for standalone Bank
Total exposure
(GEL mln)
% of Gross
Portoflio
Individuals
Real Estate
Hospitality & Leisure
Construction
Food Industry
Trade
Energy & Utilities
Agriculture
Healthcare
Services
Automotive
Transportation
Pawn Shops
Oil and Gas
Metals and Mining
Manufacturing
Financial Services
Media & Publishing
Communication
NGOs and Public sector
Government sector
Other
6,839.5
1,564.3
1,147.1
1,073.8
1,060.0
1,050.0
947.4
822.8
451.3
383.6
297.6
240.5
196.5
191.9
179.4
151.8
150.8
84.6
30.8
1.1
0.2
994.2
38.3%
8.8%
6.4%
6.0%
5.9%
5.9%
5.3%
4.6%
2.5%
2.1%
1.7%
1.3%
1.1%
1.1%
1.0%
0.8%
0.8%
0.5%
0.2%
0.0%
0.0%
5.7%
Total Loans to Customers (Gross)
17,859.2
100.0%
The maturity of assets is essential when defining the different time horizons for the analysis and when assessing the
materiality of climate-related risks for different sectors. The maturity structure of the loan portfolio shows that the
majority of assets is distributed in much shorter time horizons than the timeframe in which the impacts of climate
change, especially of physical risks, may arise in Georgia.
Processes for managing climate-related risks
Since 2012, TBC Bank has had in place a process to consider environmental and social risk, which was established in
line with industry guidelines, that aims to mitigate climate change. TBC Bank has developed E&S risk management
procedures to identify, assess, manage and monitor environmental and social risks which are fully compliant with
Georgian environmental legislation, follow international best practices and incorporate appropriate consideration
of IFC Performance Standards, EBRD Performance Requirements (PRs) and ADB’s Safeguard Requirements (SRs).
These procedures are fully integrated into the credit risk management process and are routinely applied to SMEs
and corporate customers. In collaboration with partner IFIs, a clear Environmental and Social (E&S) risk categorisation
matrix was developed. Projects that are to be financed are classified according to E&S categories (low, medium,
high and A category) based on analysis; where necessary, deep-dive analysis and due diligence are performed.
When categorising the transaction according to E&S risk category, priority is given to the higher risk. Additionally,
external specialised companies are involved in the detailed assessment of E&S risks for A category projects, such as
hydroelectric plants. The Environmental Management Policy and Procedure provides TBC with a good description of
assessing environmental risks related to clients. More information about the Environmental Management System can
be found in the Environmental Management System section on pages 114-121.
It is worth noting that processes related to climate risks will continue to evolve as TBC develops its approaches further.
Work is continuing to embed climate-related risks and opportunities within our business further. TBC is supported
by the Technical Assistance Trust Fund (EPTATF)1 through its Climate Action Support Facility (CASF) for Promoting
Climate Action for SMEs in Georgia. The EPTATF comprises one year of consultancy support for the implementation
of TBC’s climate action strategy, provided by the Frankfurt School of Finance and Management, covering:
• The climate action strategy, monitoring and reporting;
• Stress testing and sensitivity analysis; and
• Climate-related training.
This process is supported by the climate-related training to strengthen the Bank’s capacity, knowledge and
capabilities for managing climate-related risks across the business. During 2022, eight different training sessions and
workshops were conducted, covering topics such as climate-related risk management, financial planning and climate
stress testing.
ESG profiles for corporate customers
In 2022, the Bank developed the ESG Profile Methodology for corporate customers. The aim is to incorporate the
ESG Profile scorecard in the overall risk management process. ESG factors such as climate adaptation, transition to
low-carbon activities, implementation of green technologies, diversity and inclusion, good corporate governance are
considered during the assessment and respective scores are assigned based on expert judgment.
The ESG profile consists of three main components:
1. Environmental – covering a) environmental and social risks and b) vulnerability towards transitional and physical
risks;
2. Social – covering diversity, employee benefits and equal/fair pay;
3. Governance – covering ESG governance, the Company’s disclosures and diversity at Board and executive
management levels.
In the first stage, the Bank will test the approach of the ESG Scorecards on its Top corporate customers. Following
this, the plan and timeline will be defined in order to deploy ESG profiles for all corporate customers. The ESG Profile
Methodology is at the initial stage and will evolve in the future as far as knowledge, expertise within TBC and local
regulatory framework for climate-related topics advances.
Policy on Climate Change
In 2022, the Bank developed the Policy on Climate Change, which was approved by the Supervisory Board. This Policy
is largely an internal guidance document, supporting the implementation of the Bank’s ESG Strategy. The Policy
applies to TBC Bank’s staff and provides broad strategic orientation for implementation, including institutionalising
climate-related matters in the organisational culture, and advancing climate actions in all areas of operations. The
Policy on Climate Change has to be implemented with strong commitment, high-level leadership and an institutional
mandate, supported by the enhanced capacity to implement the climate action strategy, allocate sufficient resources
and achieve greater accountability.
1 The Services are financed through financial support from the EPTATF Trust Fund. Information given to the press or to any third parties, all
related publicity material, official notices, reports and publications, shall acknowledge that the Services are delivered “with funding by the
Eastern Partnership Technical Assistance Trust Fund (EPTATF).” The Fund was established in 2010 with a view to enhancing the quality and
development impact of the Bank’s Eastern Partnership operations through the financing of pre-feasibility and feasibility studies, institutional
and legal appraisals, Environmental and Social Impact Assessments for potential investments, of project management support and capacity
building for the beneficiaries during the implementation of investment projects, as well as of other upstream studies and horizontal activities.
It focuses on four priority sectors: energy, environment, transport and telecommunications with climate change and urban development as
cross-cutting issues.
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Board annually. The ESG strategy sets aspirational targets, such as achieving Net-Zero GHG emissions1 related to
direct environmental impact by 2025 and an increase in the sustainable loan portfolio, which consists of renewable
energy loans, energy efficiency loans, and financing with social components, etc. As of 31 December 2022, the total
sustainable portfolio2 stood at GEL 782 million, which exceeds the 2022 target volume GEL 750 million by GEL 32
million. Further details about the sustainable portfolio breakdown can be found on page 119. The target for 2023 is set
at GEL 1 billion.
From 2022 onwards, ESG-related KPIs are included in the long-term incentive plans for executive remuneration. The
executive management KPIs are linked to the target volumes of the sustainable loan portfolio and other sustainable
assets.
The Bank’s ESG strategy is evolving. The Bank continues to develop additional targets and metrics to measure all
identified risks and opportunities. In 2023, the focus will be on commencing the establishment of science-based
targets and the measurement of direct impacts in line with Paris Agreement targets.
Other risk categories
Climate risk might impact other, more traditional risk categories for banking such as: market risk, operational risk,
liquidity risk and reputational risk. A summary of the assessment is given in the table below. Certain risk factors,
which were identified for operational and reputational risks, are already covered under the existing risk management
framework.
Banking risk types
Impact from Physical Risk
Market risk
Liquidity risk
No material impact expected
No material impact expected
Impact from Transition Risk
No material impact expected
No material impact expected
Operational risk
Extreme events that would cause damage to
the Group's own sites could affect the ability
to provide services to its clients (e.g., lack of
electricity supply, inability for employees to
work in premises)
Reputational risk
No material impact expected
No material impact expected
Financing to high-emitting borrowers
could affect brand image, as perceived
by stakeholders
4. METRICS AND TARGETS
The metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk
management process
The metrics related to the Bank’s own operations are given in more detail in the section Environmental Management
System, on pages 114-121. Please see below the summary of Scope 1, Scope 2 and Scope 3 GHG emissions, 2022
targets versus actual results, as well as targets for 2023.
Total GHG emissions (CO2) (tonnes) and KPIs
Scope 1*
Fuel Combustion (heating, vehicles, generators)
Scope 2
(Electricity consumption)
Scope 3
(International flights)
Total emissions (tCO2)
Total emissions per full time employee (tCO2/pp)
Water consumption per employee (m3/pp)
Printing paper per person in reams
Actual
2020
Actual
2021
Actual
2022
2022
target
increase
2023
target
increase
2,970
3,102
3,175
Below 4%
Below 6%
1,524
1,499
1,489
Below 2%
Below 7%
106
4,600
0.65
10.72
13.46
18
4,619
0.60
9.54
13.50
506
5,170
0.62
8.90
12.67
-
-
Below 3%
Below 3%
Below 1.5%
Below 0.4%
Below 6%
Below 6%
Below 2%
Below 4%
* Scope 1:
a. 1,575 CO2e emissions in tonnes (from combustion of fuel (NG) from owned operation and facilities of TBC) in 2022 compared to
b. 1,485 CO2e emissions in tonnes (from owned vehicles of TBC Bank) in 2022 compared to 1,500 tCO2e in 2021 and 1,285 tCO2e in
1,505 tCO2e in 2021 and 1,609 tCO2e in 2020.
2020.
c. 115 CO2e emissions in tonnes (from owned generators of TBC Bank) in 2022 compared to 97 tCO2e in 2021 and 76 tCO2e in 2020.
1 Please refer to the definitions of Scope 1, Scope 2 and Scope 3 on page 116.
2 Our sustainable loan portfolio includes energy efficiency, youth support and women in business loans financed by special purpose funds
received from IFIs, as well as loans financing renewable energy, which include all hydro power plants financed by the Bank.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION OUR ENVIRONMENTAL MANAGEMENT SYSTEM
Our environmental
management system
As the largest financial institution in the country, we believe that we
can make a positive contribution towards tackling climate change and
accelerating the transition to a low-carbon economy.
Our Environmental and Social Risk Management (ESRM) team is comprised of three full-
time employees and is part of the SME and Corporate Business Credit Risk Department,
which reports directly to the Chief Risk Officer. Our ESRM team is responsible for
overseeing the operation of our EMS across the Group. It also provides assistance to
our subsidiaries on environmental and social issues and conducts training sessions on a
regular basis. The ESRM team reports environmental management plans and results to
the Environmental Committee on a quarterly basis.
Our EMS is based on four pillars:
Internal environmental activities;
•
• Environmental and social risk management in lending;
• Sustainable finance; and
• External communications.
Since 2020, the Bank has held ISO 14001:2015 certification, which serves as confirmation that our EMS is in full
compliance with international standards.
Continual development of our environmental staff is crucial for the proper implementation of our EMS. In this regard,
the ESRM team members attended several training sessions during the year including EBRD’s e-learning training
course on Environmental and Social Risk Management for Financial Intermediaries, Green for Growth Fund’s (GGF)
Green finance expert online course, as well as Webinar – TCFD for the Financial Sector -focus for Banks provided by
United Nations Sustainable Stock Exchanges initiative.
PILLAR 1: INTERNAL ENVIRONMENTAL ACTIVITIES
Calculation of greenhouse gas (“GHG”) emissions
Since banking is not a high-polluting activity, the implementation of an internal EMS to address the Group’s
consumption of resources is not expected to have a significant impact on the surrounding environment. However, TBC
Bank has reviewed all operational activities, procured items and outsourced services that it can control (present and
planned), and has identified all the material environmental aspects relevant to the business. These are sub-categorised
into indirect and direct environmental aspects, analysed based on a comprehensive scorecard and managed
accordingly.
TBC Bank has established a comprehensive internal environmental system to manage and report the Group’s GHG
emissions and is committed to reducing its GHG emissions by closely monitoring its consumption of energy, water
and paper. The guidelines for documenting environmental data have been developed and responsible staff in
subsidiary companies have been assigned to collect and provide the required data. TBC Bank also commissioned
G&L Management LTD, an independent Health, Safety, and Environment (HSE) consulting company, to verify the
measurements of its GHG emissions.
Total GHG emissions (CO2) (tonnes) and KPIs
Scope 1*
Fuel Combustion (heating, vehicles, generators)
Scope 2
(Electricity consumption)
Scope 3
(International flights)
Total emissions (tCO2)
Total emissions per full time employee (tCO2/pp)
Water consumption per employee (m3/pp)
Printing paper per person in reams
Actual
2020
Actual
2021
Actual
2022
2022
target
increase
2023
target
increase
2,970
3,102
3,175
Below 4%
Below 6%
1,524
1,499
1,489
Below 2%
Below 7%
106
4,600
0.65
10.72
13.46
18
4,619
0.60
9.54
13.50
506
5,170
0.62
8.90
12.67
-
-
Below 3%
Below 3%
Below 1.5%
Below 0.4%
Below 6%
Below 6%
Below 2%
Below 4%
* Scope 1:
a. 1,575 CO2e emissions in tonnes (from combustion of fuel (NG) from owned operation and facilities of TBC) in 2022 compared to
b. 1,485 CO2e emissions in tonnes (from owned vehicles of TBC Bank) in 2022 compared to 1,500 tCO2e in 2021 and 1,285 tCO2e in
1,505 tCO2e in 2021 and 1,609 tCO2e in 2020.
2020.
c. 115 CO2e emissions in tonnes (from owned generators of TBC Bank) in 2022 compared to 97 tCO2e in 2021 and 76 tCO2e in 2020.
Scope 1 - In 2022, this indicator increased by around 2% compared to 2021 and remained within the target level. The
increase was mainly related to the higher fuel consumption by TBC-owned cars, as the stationary delivery service for
the branches was brought inhouse.
Scope 2 – In 2022, total electricity consumption slightly decreased compared to 2021.
Scope 3 – In 2022, business flights went back to normal after a considerable slowdown in the previous year due to the
COVID-19 pandemic.
Overall, total emissions increased by 12% in 2022 compared to 2021 levels, while total emissions per full time employee
increased by 3% over the same period.
In 2022, water consumption per employee decreased by 10% year-on-year, while usage of printing paper went down by
6%.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC Bank has a comprehensive Environmental Policy in place, which governs our Environmental Management System (“EMS”) within the Group. Our Environmental policy is designed to ensure that that we:• comply with applicable environmental, health and safety and labour regulations;• use sound environmental, health and safety and labour practices;• take reasonable steps to make sure that our customers also fulfil their environmental and social responsibilities. Our Environmental Policy is fully compliant with Georgian environmental legislation and follows international best practices (the full policy is available at www.tbcbankgroup.com). Calculation methodology
To calculate the GHG inventory, we took the following steps: we set the organisational boundaries, established the
operational scope and developed a structured approach for data collection and the calculation of carbon dioxide
(CO2) equivalent. This report describes all emission sources required under the Companies Act 2006 (Management
Report) Regulations 2013 (Scope 1 and 2) and, additionally, the emissions under Scope 3 that are applicable to the
business. In preparing emissions data, the UK Government’s Greenhouse Gas Conversion Factors for Company
Reporting 2017 and National IPCC emission factors for electricity (tCO2*/MWhe) were used. The required data were
collected and a report was generated for TBC Bank’s main activities, as follows:
Scope 1 (the combustion of fuel and operation of facilities) includes emissions from the combustion of natural gas,
diesel and/or petrol in equipment at TBC Bank-owned and controlled sites. The combustion of petrol, diesel fuel,
natural gas etc. in TBC Bank-owned transportation vehicles.
Scope 2 (purchased electricity for own use (lighting, office appliances, cooling, etc.) includes emissions from the use
of electricity at TBC Bank-owned and controlled sites. To calculate the emissions, the conversion factor for National
IPCC emission factors for electricity (tCO2*/MWhe) was used.
Scope 3 includes emissions from all air business travel (short/medium/long and international haul); it should be noted
that information on the travel class was considered and an “economy class” conversion factor has been used for the
emissions calculation from the following link: www.atmosfair.de.
Intensity Ratio - we calculate intensity ratios in line with the Streamlined Energy and Carbon Reporting (SECR)
guidelines, www.secrhub.co.uk.
Supply chain monitoring
As one of the largest purchasers in the country, we acknowledge and understand the social, economic and
environmental impact of our procurement decisions and operations. In 2019, we developed an Environmental and
Social Risk Management Questionnaire in order to screen suppliers. We also regularly assess our long-term contractor
companies’ environmental and social risks. In case we identify any non-compliance with our E&S standards, our ESRM
team develops implementation Environmental and Social Action Plans (ESAPs) for each company and monitors their
implementation.
Raising environmental awareness among our employees
We believe that raising environmental awareness among our employees is vital for the effective implementation of the
EMS and to encourage new eco-friendly ideas and initiatives within the organisation.
For this purpose, we actively run various Environmental and Social training programmes, which include:
• E&S Training for new employees;
• Green Lending training for credit staff;
• An annual mandatory online EMS e-learning course for all staff, followed by a self-evaluation test;
In 2022, 97% of all staff, including senior management, successfully passed an online course and a self-evaluation test
about TBC’s EMS.
To ensure effective communication, training materials were created that briefly describe TBC’s Environmental
Management System.
PILLAR 2: ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT IN LENDING
We are committed to ensuring that our customers fulfil their environmental and social responsibilities. For this
purpose, we have Environmental and Social Risk Management (ESRM) Procedures in place. These are fully integrated
into the credit risk management process and ensure that environmental and social risk assessments, which are
appropriate, risk-based and sector specific, are applied to our commercial lending activities. Our procedures
incorporate appropriate consideration of IFC’s Performance Standards and EBRD’s Performance Requirements.
This approach enables us to manage effectively credit and reputational risks that could arise from our clients’ non-
compliance regarding environmental and social matters.
We closely screen and assess our business portfolio distribution in terms of environmental and social risk categories
and strive to reduce the share of impactful industries. In some cases, E&S risk categories differ. When categorising
transactions according to E&S risk category, priority is given to those that are higher risk.
BUSINESS LOAN PORTFOLIO BREAKDOWN BY E&S CATEGORIES (BY LOAN VOLUME)
A category
1%
0%
High
Medium
Low
28%
29%
17%
10%
61%
55%
70.0%
2022
2021
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Low Risk – transactions with minimal or no adverse social or environmental impacts, which are not generally subject
to further assessment (beyond their identification as such), except for the requirement for customer’s assent/
certification/disclosure compliance/non-compliance with local and national environmental, health and safety and
labour laws and regulations.
Medium Risk – transactions with limited potential for adverse social or environmental impacts that are few in number,
generally site-specific, largely reversible, clearly evident at the time of the assessment and readily addressable
through mitigation measures, which typically require a limited or focused environmental and/ or social assessment, or
straightforward application of environmental sitting, pollution standards, design criteria, or construction standards.
High Risk – transactions with potentially highly significant, negative and/or long-term environmental and/or social
impacts, the magnitude of which may be difficult to determine at the loan application stage. These typically require
analysis of environmental and social risks and impacts in the context of the total area of influence of the customer’s
operations. As part of the risk assessment, the client will identify individuals and groups that may be differentially or
disproportionately affected by its operations.
Category A – transactions with potentially significant adverse social or environmental impacts that may be diverse,
irreversible or unprecedented, the assessment of which usually requires inputs from independent external experts and
may require the involvement of IFI E&S specialists in the due diligence assessment process.
In addition, we strive to make a positive contribution to the development of private companies and assist them in the
proper management of environmental and social risks related to their business activities. In cases where we identify
any non-compliance with local legislative requirements and/or TBC’s standards, we develop Environmental and
Social Action Plans (ESAP) for our clients to assist them in enhancing their environmental performance and we closely
monitor the implementation of these.
PILLAR 3: SUSTAINABLE FINANCE
We acknowledge the importance of sustainable lending and are actively involved in developing a standardised
approach to sustainable finance, including energy efficiency, renewable energy and resource efficiency financing for
our retail and business clients.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION TBC is a leading partner in Georgia in local renewable energy financing,
including hydropower stations.
We actively cooperate with international partners to attract financing for sustainable lending:
• The Bank acknowledges the importance of addressing gender equality and the empowerment of women and
has in place several facilities that promote women’s entrepreneurship by supporting increased access to finance,
providing non-financial services as well as knowledge-sharing opportunities. In addition, there are dedicated funds
supporting young borrowers and entrepreneurs, providing loans for education, mortgage loans, as well as loans to
start businesses.
• TBC Bank has in place several guarantee facilities with a special focus on start-ups, women and regional
entrepreneurs. These risk-sharing instruments serve as a partial substitute for collateral and enable the Bank
to increase access to financing for underserved target groups, granting them better growth and development
opportunities.
• Moreover, TBC is actively mobilising green funds from partner international financial institutions to promote
sustainable economic growth, primarily by financing energy efficiency, resource efficiency and renewable energy
projects. Those facilities will help local businesses and households to become more competitive by investing in
high-performance technologies and adopting energy-efficient practices. In addition, financing is coupled with
technical assistance programmes, providing know-how and technical expertise to borrowers and ensuring that their
green investments are successfully implemented. Several green facilities have grant incentives in place as well.
During the year, TBC attracted various facilities totaling up to GEL 280 million for these purposes from several long-
standing international partners, such as EBRD, DEG, FMO, DFC.
In addition, in 2022, after receiving accreditation by the Green Climate Fund (GCF) in 2021, TBC signed the
Accreditation Master Agreement (AMA), which is the central instrument setting out the basic terms and conditions to
work together with the GCF. This authorises TBC Bank to access and mobilise financial resources from the GCF and
formalises TBC’s accountability in carrying out GCF-approved projects appropriately.
Furthermore, our partners – FMO, Dutch Entrepreneurial Development Bank, Symbiotics, Deutsche Investitions und
Entwicklungsgesellschaft mbH (DEG) and Global Climate Partnership Fund (GCPF) - all conducted E&S due diligence,
which included the review of our ESRM approaches, practices and plans related to the development of green
financing. In addition, on-site visits were conducted with our corporate clients. The results of the due diligence were
positive.
In order to support the implementation of Green Lending procedures within the Company and for better
understanding of the importance of Green Lending, the ESRM team conducted “Green Lending training” sessions
for 91 employees including SME credit officers, credit analysts, credit risk managers and business SME lending/sales
coordinators.
During 2022, our sustainable portfolio achieved 8 874.4 tCO2/a in CO2 savings according to the data provided by our
green facility fund providers. Over the same period, our renewable energy portfolio impact (avoided GHG emissions)
amounted to 10 002 tCO2/a according to the estimates of the external consultant under the Green for Growth Fund
(GGF) Technical Assistance Facility represented by Finance in Motion GmbH financed by the European Union under
the EU4Energy Initiative.
OUR SUSTAINABLE PORTFOLIO BREAKDOWN
2%
1%
6%
18%
GEL 782 mln
73%
Renewable Energy (RE)
Youth Support
Energy Efficiency (EE) Processing
Woman in Business (WiB)
Energy Efficiency (EE) Mortgage & Auto
Note: Our sustainable loan portfolio includes energy efficiency, youth support and women in business loans financed by special
purpose funds received from IFIs, as well as loans financing renewable energy, which includes all hydro power plants financed by the
bank.
PILLAR 4: EXTERNAL COMMUNICATION
TBC pays significant attention to the external communication of E&S matters with existing and potential customers
and other stakeholders. The feedback and recommendations received from our stakeholders and other interested
parties enable us to continuously improve our E&S performance.
Our grievance mechanism enables any interested party to register complaints with regards to E&S issues via our
website www.tbcbank.ge. All complaints are thoroughly analysed and addressed in a timely manner.
TBC Bank has successfully passed the third year surveillance audit of the Environmental Management System, ISO
14001:2015. This means that TBC’s Environmental System is managed in accordance with international standards and
requirements.
TBC Bank annually discloses its Environmental and Social Performance Annual Report to all its partner International
Financial Institutions. The report includes detailed information about Environmental and Social Risk Management in
Lending, the distribution of the Bank’s business portfolio in terms of environmental and social risk, a breakdown of its
sustainable portfolio and respective procedure updates etc.
In 2022, TBC Bank released its third full-scale Sustainability Report, which was prepared in accordance with Global
Reporting Initiative (GRI) standards. The Sustainability Report helps the Company to understand its role and influence
on sustainable development issues such as climate change, human rights and social welfare. The report is available at
www.tbcbankgroup.com.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022HOW WE CREATE VALUE FOR OUR INVESTORS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION M
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Agromax
Agromax is a fast-growing Georgian agricultural company that has
been a TBC Bank client for the past seven years. The company has
diverse activities across various branches of agriculture and cultivates
underrepresented farming cultures in the region, setting an example for
the local farmers.
Since 2017, Agromax has been actively implementing energy-efficient
and eco-friendly practices across its business. Over the years, TBC has
supported its initiatives through green finance, with the support of several
international institutions. Within the framework of the GGF (Green for
Growth Fund) green consultancy programme, Agromax installed solar
panels, allowing it to become more self-sustainable. Furthermore, with
the support of the EBRD, in order to improve harvests, it implemented a
drip irrigation system, which is the most efficient watering system that
mitigates crop failure related to droughts.
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
121
Governance
CORPORATE GOVERNANCE
SUPERVISORY BOARD BIOGRAPHIES
Corporate
Governance
• The Technology and Data Committee started operating in 2022 and supports the Supervisory Board in its oversight
of key enablers of the strategy, data and cyber issues, and the Bank’s IT resources.
• The ESG and Ethics Committee started operating in 2022 and ensures that the Bank stays focused on the ESG
issues that are key for all our stakeholders.
The Bank recognises the importance of ensuring diversity and sees significant benefit to our business in having the
Supervisory Board and management team that is drawn from a diverse range of backgrounds, since this brings the
required expertise, cultural diversity and different perspectives to the board discussions and helps to improve the
quality of decision making.
As at the date of this Annual Report, three (33%) of the eight members of the Supervisory Board are female, and there
are a number of talented women in key positions, who report directly to the CEO of the Bank and other members of the
management board within the Bank.
General meeting of shareholders (the “General Meeting”) is the supreme governing body of the Bank. The
shareholders of the Bank, among other things, are entitled to attend the General Meetings and participate in voting,
receive the dividends and demand explanations from the members of the Management Board of the Bank2 and the
Supervisory Board on the issues included in the agenda of the meeting. The General Meeting by a simple majority of
votes presented or represented, decides on the different matters, including (but not limited to) election and dismissal
of the members of the Supervisory Board, approval of the reports of the Management Board and Supervisory Board,
approval of annual financial statement, setting the compensation of the members of the Supervisory Board, approval
or rejection of the profit (dividend) distribution proposal, amending the charter of the Bank, and approval of reduction
of share capital of the Bank. In addition, subject to requirements of the laws of Georgia, the General Meeting may make
a decision with a majority of more than 75% of the votes presented or represented on taking action for liquidation,
commencement of a general assignment to creditors or voluntary winding up under applicable bankruptcy, insolvency
or similar laws and on approving a merger (except for the merger of the subsidiary with the Bank, in which Bank owns
75% of the voting rights, in which case – the decision is made by a simple majority of votes presented or represented),
division or other reorganisation.
Responsibility statement
The Management Report and Financial Statements have been prepared in accordance with applicable laws and
regulations.
We confirm that to the best of our knowledge that:
• The Group’s and the Bank’s Financial Statements, which have been prepared in accordance with the IFRS standards,
give a true and fair view of the assets, liabilities, financial position and profit or loss of the Bank and the undertakings
included in the consolidation taken as a whole;
• The Management Report includes a fair review of the development and performance of the business and of the
position of the Bank and the Group, together with a description of the principal risks and uncertainties they face; and
• The Management Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and
provide the information necessary for the shareholders to assess the Bank’s and Group’s position, performance,
business and strategy.
This responsibility statement was approved by the Supervisory Board and Management Board:
Vakhtang Butskhrikidze
CEO
24 April 2023
Arne Berggren
Chairman
24 April 2023
124
125
1 Appointed as an independent non-executive member of the Supervisory Board and PLC Board; in Supervisory Board - approved by National Bank
of Georgia on 21 April 2023.
2 General Director of the Bank (CEO) and Deputy General Directors (Deputy CEOs)
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022Joint Stock Company TBC Bank (the “Bank”) is the main subsidiary of TBC Bank Group PLC, a company incorporated in England and Wales and listed on the premium segment of the London Stock Exchange. The Bank’s Corporate Governance is in compliance with the requirements of the National Bank of Georgia’s Code on Corporate Governance for Commercial Banks, dated 26 September 2018, as amended from time to time (the “Code”). At the same time, the Bank also complies with the highest standards of corporate governance as prescribed by the UK Corporate Governance Code.In addition, the Bank has in place an effective internal control system in order to ensure accurate and reliable financial reporting. The Bank has a well-defined framework of accountability and delegation of authority, as well as policies and procedures that include financial planning and reporting; preparation of monthly management accounts; project governance; information security; and review of the disclosures within the annual report and accounts from the respective leads, to appropriately disclose all relevant developments in the year and to meet the requirements of a true and fair presentation.The Bank’s Supervisory Board (“Supervisory Board”) ensures that the Bank’s governance structure enables adequate oversight and accountability, as well as a clear segregation of duties. The involvement of all governance levels in risk management, the clear segregation of authority, and effective communications between different entities facilitate clarity regarding the strategic and risk objectives, adherence to the established risk appetite, risk budget and sound risk management. The centralised Enterprise Risk Management (ERM) function ensures effective development, communication and implementation of risk strategy and risk appetite across the Bank and its subsidiaries (“Group”).The main shareholder of the Bank is TBC Bank Group PLC, which holds 99.9% of the Bank’s share capital. The rights of the shareholders are governed by the Law of Georgia on Entrepreneurs and the Law on the Activities of Commercial Banks and also set out in the Charter of the Bank publicly available at www.tbcbank.ge.The Board of Directors of TBC Bank Group PLC (the “PLC Board”) is the principal decision-making body of the Bank and is responsible for promoting the Group’s purpose, culture, values and long-term success strategy and the delivery of sustainable value to stakeholders by. The PLC Board is responsible for establishing and overseeing the strategic direction of the Bank.In addition, the affairs of the Bank are supervised by a Supervisory Board. There is also equivalent committee structure of the Supervisory Board as the PLC Board’s committees. There are, therefore, in practice two equivalent supervisory bodies within the Group represented by the PLC Board and the Supervisory Board, which are separate but interconnected together with committees. The work of the PLC Board, the Supervisory Board and their respective committees is carefully balanced, dividing functions according to whether they are supervising the matters that affect the Group or those concerning solely the Bank. As a result, the Group’s governance structure ensures adequate oversight and accountability, as well as clear segregation of duties. Composition of PLC Board and the Supervisory Board including respective committees mirror at both levels in terms of non-executive membership.At the date of this report, in line with the “independence” criteria set by the Code, the Supervisory Board comprises eight independent, non-executive members: Arne Berggren (Chairman), Tsira Kemularia (Senior Independent member), Per Anders Fasth, Thymios P. Kyriakopoulos, Eran Klein, Nino Suknidze,Rajeev Sawhney and Janet Heckman1.The Supervisory Board has established six Committees: • The Risk Committee focuses on the possible risks and capital issues of the Bank. • The Audit Committee deals with the external auditors, internal controls and financial reporting, as well as, communication with the market and with the regulators. • The Remuneration Committee leads the remuneration-related issues, such as the right level of compensation to attract and retain people and balancing this with the level of compensation that is acceptable for our stakeholders. • The Corporate Governance and Nomination Committee is response for talent management and nomination and succession planning for the Supervisory Board and the executive team.FNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION SUPERVISORY BOARD BIOGRAPHIES
SUPERVISORY BOARD BIOGRAPHIES
ARNE BERGGREN
TSIRA KEMULARIA
PER ANDERS FASTH
JANET HECKMAN
POSITION
Chair
Senior Independent Non-Executive Supervisory Board Member
Independent Non-Executive Supervisory Board Member
Independent Non-Executive Supervisory Board Member
COMMITTEE Chair of CGN, Member of RemCo
Member of AC, ESGE and RemCo
Chair of AC, Chair (interim) RemCo, Member of RC
Member of RC and RemCo
APPOINTED
Supervisory Board: 18 July 2019, Chair: 1 March 2021
Supervisory Board: 10 September 2018, Senior Independent Non-
Executive Board Member: 15 September 2021
BORN
1958
NATIONALITY
Swedish
1977
British
1 July 2021
1960
Swedish
23 February 2023, approved by National Bank of Georgia on 21 April 2023
1954
American
CAREER
Arne has worked in the financial services industry for more than 30
years. He has held several senior leadership and advisory positions
at prominent financial institutions, including the IMF, World Bank,
Swedbank, Carnegie Investment Bank AB and the Swedish Ministry
of Finance and Bank Support Authority. Arne played a leading role in
the handling of the Swedish banking crisis in 1991-93 and assisted the
FRA in Thailand and FSC/ KAMCO in South Korea during the Asian
crisis. Arne has also served as an independent Non-Executive Director
in asset management companies in Turkey and Slovenia, and, until
recently, in Greece at Piraeus Bank.
SKILLS &
EXPERIENCE
Experience in international financial institutions and advising
governments;
Board membership and committee chairing experience in other UK-
listed banks;
Experience in investment banking activities and in leading bank
restructurings;
Deep understanding of strategic planning and implementation.
CONTRIBUTION
TO THE COMPANY
With more than 25 years of international banking experience,
coupled with his background and broad experience, Arne provides
a valuable perspective as Chair to the Board. Arne plays a pivotal
role in supporting the Company’s relationship with its major
shareholders, and, through his extensive experience in navigating
economic uncertainty, is invaluable in meeting the challenges
facing the Company and the wider sector. As Chair of the Corporate
Governance and Nominations Committee, Arne has secured high
calibre appointments in the last year. This has been instrumental in
ensuring the composition of the Board matches the culture, strategy
and leadership needs of the Company.
Throughout her career, Tsira has held various roles covering market risk
management and commodity trading at companies including Dynegy
Inc. in the US and UK and at Shell International Trading and Shipping Ltd
(STASCO) in London, Russia CIS, and Caribbean operations. Between
2005 and 2016, she served in a broad range of managerial roles covering
M&A and Commercial Finance, Group Treasury and Trading and Supply
in the UK, Moscow and Barbados. From 2016 to 2019, Tsira was the
Head of Group Pensions Strategy and Standards at Shell International
Ltd based in London. From 2019 to mid-2022, Tsira held the position
of Head of Internal Audit and Investigations for Shell’s global Trading
and Supply organisation, the world’s biggest commodity trading and
supply business. In July 2022, Tsira was appointed as a Vice President of
Corporate and UK Country Controller responsible for the Shell Group’s
financial management of the corporate segment which includes
Group’s Holdings and Treasury, Insurance and Pensions and responsible
for statutory reporting of all Shell’s UK incorporated companies and
Shell UK’s financial performance framework. Tsira is a member of the
Shell UK Management Board, and a member of Shell UK Country
Coordination Team, Chief of Staff for UK Crises Management.
More than 23 years of in-depth experience across the energy sector
including regulated commodity trading and financial services;
Chartered Director and Fellow with the Institute of Directors in London,
UK;
Former member of the British-Georgian Society and former Chair of
the Georgian Community in the UK;
Relevant experience and expertise in information security risk
management.
Tsira’s specialist knowledge in the areas of financial services, risk
management and internal audit enables her to contribute to, and
constructively challenge on, a wide range of Board matters. As a
Chartered Director, Tsira’s leadership qualities ensure she can act as
a sound advisor to the Chair and represent the interests of the other
Directors. Tsira brings significant regulatory, strategic and international
financial services expertise and knowledge of financial markets to the
Board.
Over the past 25 years, Per Anders has served as CEO at SBAB Bank, Hoist
Finance and European Resolution Capital as well as CFO and other senior
executive positions at the leading North-European bank SEB. He has also
gained extensive strategic consulting experience having spent 10 years at top-
tier consultancies McKinsey & Company and QVARTZ (now Bain & Company).
Per Anders has been a non-executive director of more than 15 financial
institutions in Europe. In addition, he has extensive professional experience
from having worked in more than 20 European countries, including Ukraine,
where he was an advisor to the World Bank and the Ministry of Finance.
Janet was the Managing Director for the Southern and Eastern Mediterranean
(SEMED) Region at the European Bank for Reconstruction and Development
(EBRD) from February 2017 until December 2019. Based in Cairo, she was also
the Country Head for Egypt. She currently serves on the boards of Astana
International Exchange and Air Astana, Kazakhstan. During her long career at
Citi, she spent time as EMEA Corporate and Investment Managing Director
and held a number of field roles across EMEA, and was responsible for Global
Relationship Banking across CEMEA.
Janet holds a Master’s of Science in Foreign Service with distinction from
Georgetown University, Washington, D.C. and a BA in History from Kenyon
College, Ohio. She also studied at the American University of Beirut, Lebanon
Extensive CEO and senior executive experience, having spent more than 20
years at leading banks and other financial institutions;
Over 30 years of accumulated experience as an independent non-executive
director;
Strong listed corporate governance, leadership and strategic advisory skills;
Significant financial reporting, investor relations and internal controls
experience;
Relevant experience from the financial information technologies (fintech) and
credit management industries across Europe.
Per Anders is regarded as a financial expert in the context of audit and risk
committee work. He has extensive experience of operating in regulatory
environments and is widely regarded in both the corporate and financial
world. Per Anders’s broad accounting and global executive experience brings
a wide perspective to his role as Chair of the Audit Committee and in Board
discussions and decision-making.
Extensive expertise in corporate banking and global relationship banking.
15 plus years experience in operations management.
Janet brings her extensive knowledge of financial services and corporate
banking to the Board, with her pact experiences in the formulation and delivery
of strategy for regional operations at the EBRD.
EXTERNAL
APPOINTMENTS
Board member of Bank of Cyprus
Chairman of Hoting Innovations AB
Trustee Director of the British Gas Trustee Solutions Ltd, a closed
pension fund (post British Gas acquisition by Shell)
Trustee Director of Shell Trustee Solutions Ltd
Chairman of Lyra Financial Wealth, a privately held wealth
management company
Board member of Atle Investment Management/Services, a privately held
investment management company
126
Board member and audit committee chair of Astana International Exchange
Board member of Air Astana, Kazakhstan
Vice President of American Chamber of Commerce in Bulgaria and
Kazakhstan and member of the board in Romania
Appointed to Fulbright association in Hungary, Romania, and Bulgaria and
Chairman in Bulgaria
Member of the Board of the British Business association in Kazakhstan
Appointed to the Kenyon College Alumni Association
127
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022SUPERVISORY BOARD BIOGRAPHIES CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION ERAN KLEIN
THYMIOS P. KYRIAKOPOULOS
RAJEEV SAWHNEY
NINO SUKNIDZE
POSITION
Independent Non-Executive Supervisory Board Member
Independent Non-Executive Supervisory Board Member
Independent Non-Executive Supervisory Board Member
Independent Non-Executive Supervisory Board Member
COMMITTEE Chair of ESGE, Member of TD and RC
Chair of RC, Member of AC and TD
Chair of TD, Member of ESGE and CGN
APPOINTED
1 July 2021
BORN
1965
NATIONALITY
British
1 July 2021
1975
Greek
CAREER
Eran is an experienced international banker and lawyer. Over a period
spanning more than two decades, he held senior roles in leading
financial institutions, such as Commerzbank, Citibank, ING Financial
Markets and Deutsche Bank. Covering both developed and emerging
markets, Eran has accumulated valuable knowledge in capital markets,
SME finance, retail lending, corporate governance, liquidity and
balance sheet management, as well as in risk management, audit and
strategy implementation. Until recently, he served as a Non-Executive
Director and risk committee chair at Privatbank, the largest bank in
Ukraine.
Thymios is a senior banking executive with considerable international
experience. He specialises in operational transformation, balance
sheet optimisation, risk management, financial engineering and
portfolio management. He serves on the board of the Hellenic
Corporation of Assets and Participations, the Greek sovereign wealth
fund, and is Chair of its Investment and Risk Committee. Thymios was
executive general manager and chief risk officer of Piraeus Bank S.A,
a leading listed Greek Bank, Managing Director at Goldman Sachs
Inc. in the fixed income currencies and commodities trading division,
and has held board and executive roles in insurtech, fintech, financial
services and advisory sectors.
SKILLS &
EXPERIENCE
Extensive experience in banking, credit, capital markets and legal;
Significant risk, corporate governance, strategy and structuring
expertise;
Strong Emerging Markets banking and stakeholder management
experience;
Relevant experience and expertise in information security risk
management.
CONTRIBUTION
TO THE COMPANY
Eran brings to the Board extensive and varied risk, governance and
strategy experience that he has gained at large financial institutions
and consulting fields in both developed and developing markets,
making him an ideal fit to spearhead the ESG and Ethics Committee
agenda, on behalf of the Group.
Extensive experience in global capital markets, regional banking and
supervised entities;
Expert risk manager, investor, investment banker, and balance sheet
optimiser;
Operational transformation leadership and crisis management
spanning systemic banks and fintech;
Strong governance, risk and asset management oversight skills for
both listed and quasi-governmental entities.
Thymios brings extensive governance, financial and operational
experience. His deep knowledge allows him to support and contribute
to the strategic direction of the Company while controlling the path
used in its implementation. Having led investment and risk functions
in internationally listed banks and currently acting as chair of the
risk committee of a national wealth fund, Thymios’s broad multi-
jurisdictional risk expertise enables him to bring innovative and
positive insights to his role as Chair of the Risk Committee.
29 November 2021
1957
Indian
Rajeev has 40 years’ experience as a senior corporate growth executive. He
specialises in digital technologies and has served in financial services and
various other industry sectors in Europe, North America and Asia. Currently,
Rajeev holds the positions of Executive Chairman and Non-Executive Director
of OXSIGHT Ltd, a medical technology innovation company, and an Oxford
University spin off. He was formerly a senior advisor to the CEO at global
IT services firm Zensar Ltd in the UK and a member of the advisory board
at Garble Cloud Inc., a cybersecurity company in Silicon Valley, USA. Prior
to that, Rajeev gained strong operational experience as President of HCL
Technologies and at the financial services firm, Mphasis, a Hewlett Packard
company. Rajeev has been on the World Economic Forum expert Task Force
on Low-Carbon Economic Prosperity, and contributed at the Work Economic
Forum Summer Davos on climate change deliberations.
Strong global corporate leadership experience of more than 40 years;
Significant advisory and executive experience with technology and
cybersecurity companies in financial services and other industry sectors;
Extensive expertise in Human Resource management;
Relevant experience and expertise in information security risk management.
Member of AC and CGN
29 November 2021
1979
Georgian
Nino is a business lawyer with over 20 years’ experience in the Georgian market.
She has a deep understanding of, and expertise in, various areas of practice
including banking, finance, corporate, regulation, competition and capital
markets. Currently, Nino is the managing partner of the law firm Suknidze &
Partners LLC. During 2017-20, she served as general counsel at JSC Bank of
Georgia. Before joining the bank, she held various positions at the Georgian
offices of international law firms Dentons and DLA Piper over a period of more
than 11 years.
Strong financial services background;
Extensive experience as a leading legal counsel in major financial services
sector transactions and listings;
Considerable governance, regulatory and risk management experience,
including at an LSE-listed company;
Experience in advising companies across a range of sectors, including
telecommunications, pharmaceuticals, energy and commerce.
Rajeev brings the extensive international leadership and general management
perspective that he has gained from the technology and fintech sectors to the
Board. He provides valuable insights into the Company’s increasingly important
technological evolution. In line with this, he has been appointed Chair of the
recently established Technology and Data Committee, where he provides key
support and leadership in these areas.
Nino is an experienced domestic and international lawyer with particular
expertise in regulated sectors, where she has counselled on a wide range
of legal, regulatory and business issues. Nino’s valuable experience brings a
considered perspective to the Board, and enriches discussion and strategic
thought.
EXTERNAL
APPOINTMENTS
No current additional board appointments.
Board member and chair of the investment and risk committees of the
Growthfund, the National Fund of Greece
Executive Chairman and board member of OXSIGHT Ltd
Vice President at Georgian Chamber of Commerce and Industry
Board member at Care Caucasus, a charity organisation in Georgia
128
AC
RC
CGN
RemCo
TD
ESGE
Audit Committee
Risk Committee
Corporate Governance and Nomination Committee
Remuneration Committee
Technology and Data Committee
ESG and Ethics Committee
129
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022SUPERVISORY BOARD BIOGRAPHIES CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION Financial Statements
INDEPENDENT AUDITORS’ REPORT
Independent
Auditor’s Report
TO THE SHAREHOLDERS AND MANAGEMENT OF JSC TBC BANK
PricewaterhouseCoopers Georgia LLC, I/C 405220611
King David Business Centre, 7th floor, #12 M. Aleksidze Street, Tbilisi 0171, Georgia
Tel: +995 (32) 250 80 50, www.pwc.com/ge
OUR AUDIT APPROACH
Overview
Materiality
Group
scoping
Key audit
matters
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
consolidated and separate financial statements. In particular, we considered where management made subjective
judgements; for example, in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of
management override of internal controls, including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable
assurance whether the consolidated and separate financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated and
separate financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall Group and Bank materiality for the consolidated and separate financial statements as a whole as set out in the
table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually
and in aggregate on the consolidated and separate financial statements as a whole.
Overall Group and Bank
materiality
Group: GEL 63.0 million (2021: GEL 48.1 million)
Bank: GEL 61.4 million (2021: GEL 48.7 million)
How we
determined it
Rationale for
the materiality
benchmark applied
5% of profit before tax
Profit before tax is a primary measure used by the shareholder in assessing the
performance of the Group and the Bank and is a generally accepted benchmark for
determining audit materiality. Annual profit before tax was considered as an appropriate
benchmark.
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133
OUR OPINION In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of JSC TBC Bank (the “Bank”) and its subsidiaries (together – the “Group”) as at 31 December 2022, and the Group’s and the Bank’s consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, with the requirements of the order N284/04 of the President of the National Bank of Georgia dated 26 December 2018, and with the requirements of the Law of Georgia on Accounting, Reporting and Auditing.What we have auditedThe Group’s and the Bank’s consolidated and separate financial statements comprise:• the consolidated and separate statements of financial position as at 31 December 2022;• the consolidated and separate statements of profit or loss and other comprehensive income for the year then ended;• the consolidated and separate statements of changes in equity for the year then ended;• the consolidated and separate statements of cash flows for the year then ended; and• the notes to the consolidated and separate financial statements, which include significant accounting policies and other explanatory information. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. IndependenceWe are independent of the Group and the Bank in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. • Overall Group materiality: GEL 63.0 million, which represents 5% of Group’s profit before tax.• Overall Bank materiality: GEL 61.4 million, which represents 5% of the Bank’s profit before tax.• Our scoping was driven by legal entity contribution to profit before tax and other key line items in the financial statements. • Audit matter which was of most significance in the audit of the consolidated and separate financial statements is:Expected credit loss allowance of loans and advances to customers.FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT INDEPENDENT AUDITORS’ REPORT CONTINUED
Key audit matters
How we tailored our Group and Bank audit scope
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated and separate financial statements of the current period. These matters were addressed in the context of
our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Expected credit loss allowance of loans and advances to
customers
We focused on this area as the management’s estimates
regarding the expected credit loss (‘ECL’) allowance for loans
and advances to customers are complex, require a significant
degree of judgement and are subject to high degree of
estimation uncertainty.
Under IFRS 9, Financial Instruments, management is required
to determine the credit loss allowance expected to occur
over either a 12-month period or the remaining life of an asset,
depending on the stage allocation of the individual asset. This
staging is determined by assessing whether or not there has
been a significant increase in credit risk (‘SICR’) or default
of the borrower since loan origination. Some of the criteria
applied by management for such an assessment are highly
judgemental and involve qualitative assessment of borrowers’
creditworthiness.
It is also necessary to consider the impact of future
macroeconomic conditions in the determination of ECLs. The
economic outlook is stable despite the inflationary pressures.
Management has designed and implemented a number of
models to achieve compliance with the requirements of IFRS 9.
Among others, management applies judgement to the models
in situations where past experience is not considered to be
reflective of future outcomes due to limited or incomplete data.
We consider the appropriateness of the model methodologies
and the following judgements used in the determination of the
modelled ECL allowance to be significant:
– Highly judgemental criteria applied for identification
of SICR, involving qualitative assessment of borrowers’
creditworthiness (relevant to Corporate and SME portfolios);
– Critical assumptions applied in the determination of loss
given default (‘LGD’) and probability of default (‘PD’);
– Assessment of model limitations and use of post model
adjustments (‘PMAs’), if required to address such risks; and
– Assessment of the key assumptions related to forward-
looking information (‘FLI’) including the appropriateness of
scenario weightings and macroeconomic variables.
We understood and evaluated the design of the key controls
over the determination of ECL allowance and tested their
operating effectiveness. These controls included among
others:
– Controls over model performance monitoring, including
periodic reviews of the policy and models, testing model
estimates against actual outcomes and approval of model
methodology changes;
– Review and approval of the key judgements and
assumptions used for determining LGDs, PDs and FLI;
– Controls over key parameters (such as PD and LGD)
calculation by the calculation engine;
– Controls over regular monitoring of the financial standing of
the borrowers;
– Controls over ECL calculation and analysis of results; and
– The Management Risk Committee’s review and approval of
key assumptions and assessment of ECL modelled outputs.
We noted no exceptions in the design or operating
effectiveness of the above controls. In addition, we performed
the substantive procedures described below.
We assessed whether the IFRS 9 ECL model methodologies
developed by management are appropriate, engaging our
credit risk modelling specialists and our industry knowledge.
This included an evaluation of the judgemental criteria set by
management for determining whether there had been a SICR
(applicable to Corporate and SME portfolios), and the critical
judgements and assumptions applied in determination of LGDs,
PDs and FLI. We concluded that management’s judgements in
deriving SICR, LGDs, PDs and FLI were reasonable
We independently verified the calculation of ECL and assessed
whether the ECL calculations were consistent with the
approved model methodologies.
We critically evaluated key aspects of model monitoring and
validation (“backtesting” of projected ECL) performed by
management relating to model performance and stability. We
have critically assessed the monitoring results and challenged
explanations for deviations from the expectation. Where
relevant, model methodologies were updated to address the
results of backtesting.
We challenged management in respect of the appropriateness
of the macroeconomic models as well as weightings applied to
each macroeconomic scenario.
We challenged management in respect of the completeness
of PMAs. We have assessed the completeness of the PMAs
applied including related judgements and assumptions used by
management. We took into account the latest backtest results
and the economic outlook to conclude whether circumstances
exist that would indicate that existing models are not able to
capture the emerging risks and additional PMAs are required,
and to evaluate if management’s judgements are reasonable.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the
consolidated and separate financial statements as a whole, taking into account the structure of the Group and the
Bank, the accounting processes and controls, and the industry in which the Group and the Bank operates.
The Group’s banking activities are primarily carried out in Georgia, with small subsidiary operations in two other
countries. The Group’s business activities comprise of four segments for which it manages and reports its operating
results and financial position, namely Retail Banking, Corporate and Investment Banking, Micro Small and Medium
Enterprises (‘MSME’) and Corporate Centre.
The Bank is the largest component of the Group. Its main operations are Retail and Commercial banking, with all
significant operations based in Georgia. Accounting functions and management of the Bank are primarily based in
Georgia, and represents 99% of the group assets and 97% of profit before tax.
Our audit approach and composition of our team were tailored to the structure of the Group. We did not use
component auditors for audit of in-scope areas. We performed full scope audit of the only significant component
of the Group - the Bank. We also performed audit of the material financial statement line items of one insignificant
component of the Group. Based on the procedures we performed over the reporting units our audit scoping/coverage
accounted for 99% of revenue (comprising interest income and fee and commission income) and 99.5% of total assets
of the Group. We also performed other audit procedures including testing information technology general controls
and other relevant controls related to financial reporting, to mitigate the risk of material misstatement.
OTHER INFORMATION
Management is responsible for the other information. The other information comprises the Management Report (but
does not include the consolidated and separate financial statements and our auditor’s report thereon).
Our opinion on the consolidated and separate financial statements does not cover the Management Report.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the
Management Report and, in doing so, consider whether the Management Report is materially inconsistent with the
consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the
Management Report, we are required to report that fact. We have nothing to report in this regard.
In addition, we are required by the Law of Georgia on Accounting, Reporting and Auditing to express an opinion
whether certain parts of the Management Report comply with respective regulatory normative acts and to consider
whether the Management Report includes the information required by the Law of Georgia on Accounting, Reporting
and Auditing.
Based on the work undertaken in the course of our audit, in our opinion:
• the information given in the Management Report for the financial year for which the consolidated and separate
financial statements are prepared is consistent with the consolidated and separate financial statements;
• the information given in the Management Report complies with the requirements of paragraph 6 and paragraph 7
(c), (g) of article 7 of the Law of Georgia on Accounting, Reporting and Auditing;
• the information given in the Management Report includes the information required by paragraph 7 (a), (b), (d) – (f)
and paragraph 8 of article 7 of the Law of Georgia on Accounting, Reporting and Auditing.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the consolidated and separate financial
statements in accordance with International Financial Reporting Standards, with the requirements of the order
N284/04 of the President of the National Bank of Georgia dated 26 December 2018, and with the requirements of the
Law of Georgia on Accounting, Reporting and Auditing, and for such internal control as management determines is
necessary to enable the preparation of the consolidated and separate financial statements that are free from material
misstatement, whether due to fraud or error.
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FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT INDEPENDENT AUDITORS’ REPORT CONTINUED
In preparing the consolidated and separate financial statements, management is responsible for assessing the Group’s
and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group or the Bank or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s and the Bank’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated and separate financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s and the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s and the Bank’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause the Group or the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements,
including the disclosures, and whether the consolidated and separate financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated and separate financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Levan Kankava.
PricewaterhouseCoopers Georgia LLC (Reg.# SARAS-F-775813)
Levan Kankava (Reg.# SARAS-A-592839)
24 April 2023
Tbilisi, Georgia
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FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
in thousands of GEL
Note
31 December 2022
31 December 2021
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through other comprehensive
income
Repurchase receivables
Finance lease receivables
Investment properties
Current income tax prepayment
Deferred income tax asset
Other financial assets
Other assets
Premises and equipment
Right of use assets
Intangible assets
Goodwill
Investments in associates
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Other financial liabilities
Current income tax liability
Deferred income tax liability
Debt securities in issue
Provision for liabilities and charges
Other liabilities
Lease liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share capital
Share premium
Retained earnings
Share based payment reserve
Fair value reserve for investment securities measured at fair value through other
comprehensive income
Cumulative currency translation reserve
Net assets attributable to owners
Non-controlling interest
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
6
7
8
9
10
11
13
33
33
12
14
15
16
15
17
18
19
22
33
33
20
21
23
34
24
25
26
37
3,786,098
6,298
2,047,564
17,497,442
1,595,460
42,237
2,086,113
16,547,185
2,884,728
1,938,196
267,495
288,886
22,154
27
2,064
246,998
411,727
424,252
100,209
311,150
28,197
3,721
-
252,340
22,892
84
2,056
442,207
373,892
378,657
58,001
267,406
28,197
4,589
28,329,010
24,039,512
3,885,360
17,841,357
250,518
601
112,877
1,209,813
19,908
80,386
72,240
590,148
2,984,075
14,884,145
120,620
86,302
10,979
1,583,699
15,845
83,623
56,522
623,647
24,063,208
20,449,457
21,014
521,190
3,783,180
(57,556)
5,467
(7,657)
4,265,638
164
4,265,802
28,329,010
21,014
521,190
3,117,079
(52,521)
(10,862)
(5,938)
3,589,962
93
3,590,055
24,039,512
The consolidated and the separate financial statements on pages 138 to 261 were approved by the Supervisory Board
on 24 April 2023 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
Giorgi Megrelishvili
Chief Financial Officer
in thousands of GEL
Interest income
Interest income calculated using effective interest rate method
Other interest income
Interest expense
Net interest gains on currency swaps
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains from currency derivatives, foreign currency operations and translation
Net gains from disposal of investment securities measured at fair value through other
comprehensive income
Other operating income
Share of profit of associates
Other operating non-interest income
Note
2022
2021
28
28
28
28
28
29
29
30
2,219,781
2,159,567
60,214
(1,011,397)
34,711
1,243,095
477,613
(211,963)
265,650
411,806
5,811
19,675
352
437,644
(105,247)
781
(2,721)
1,863,077
1,805,196
57,881
(895,428)
28,143
995,792
378,160
(153,273)
224,887
124,194
11,156
41,042
837
177,229
43,176
236
1,204
Credit loss (allowance)/recovery for loans to customers
Credit loss recovery for finance lease receivables
Credit loss (allowance)/recovery for performance guarantees and credit related commitments
9
13
21
Credit loss allowance for other financial assets
(9,160)
(14,461)
Credit loss recovery for financial assets measured at fair value through other comprehensive
income
Net impairment of non-financial assets
Operating income after expected credit and non-financial asset impairment losses
Staff costs
Depreciation and amortization
Provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income/(expense) for the year
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve for investment securities measured at fair value through other
comprehensive income
Exchange differences on translation to presentation currency
Other comprehensive income/(expense) for the year
Total comprehensive income for the year
Profit is attributable to:
– Shareholders of the Group
– Non-controlling interest
Profit for the year
Total comprehensive income is attributable to:
– Shareholders of the Group
– Non-controlling interest
Total comprehensive income for the year
862
(22)
1,830,882
(306,526)
(85,108)
(2,000)
(167,348)
(560,982)
-
1,269,900
(246,825)
1,023,075
2,594
(11,715)
1,418,942
(255,747)
(70,622)
-
(128,624)
(454,993)
(1,726)
962,223
(119,278)
842,945
31
15,16
21
32
33
10
16,329
(22,020)
(1,719)
14,610
1,037,685
1,023,050
25
1,023,075
(677)
(22,697)
820,248
842,929
16
842,945
1,037,660
25
820,232
16
1,037,685
820,248
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
138
139
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
in thousands of GEL
Note
Share
Capital
Share
premium
Fair value
reserve
for invest-
ment
securities
at FVTOCI
Share
based
payments
reserve
Cumulative
currency
translation
reserve
Total
equity
excluding
non-
controlling
interest
Non-
controlling
interest
Retained
earnings
Total
Equity
Balance as of 1 January 2021
Profit for the year
Other comprehensive loss
for 2021:
Effect of change in business
model
Other effects during the
period
Total comprehensive
income for 2021
Share based payment
expense
Dividends declared
Other movements
Balance as of 31 December
2021
Profit for the year
Other comprehensive
income for 2022:
Disposal of investment
securities measured
at fair value through other
comprehensive income
Other effects during the
period
Total comprehensive
income for 2022
Share based payment
expense
Dividends declared
Tax effect for delivery of SBP
shares to employees
Share based payment
recharge by parent company
Other movements
Balance as of 31 December
2022
26
26
21,014
-
521,190
-
(73,130)
-
11,157
-
(5,261) 2,355,105 2,830,075
842,929
842,929
-
105 2,830,180
842,945
16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(22,020)
(677)
-
(22,697)
-
(22,697)
-
26,062
-
-
(48,082)
(677)
-
-
26,062
-
26,062
(48,759)
-
(48,759)
-
(22,020)
(677)
842,929
820,232
16
820,248
20,609
-
-
-
-
1
-
-
-
-
20,609
-
20,609
(81,872)
917
(81,872)
918
(48)
20
(81,920)
938
21,014
521,190
(52,521)
(10,862)
(5,938) 3,117,079 3,589,962
93 3,590,055
-
-
-
- 1,023,050 1,023,050
25 1,023,075
16,329
(1,719)
-
14,610
-
14,610
-
(1,853)
-
-
(1,853)
-
(1,853)
-
18,182
(1,719)
-
16,463
-
16,463
-
16,329
(1,719) 1,023,050 1,037,660
25 1,037,685
23,388
-
(3,621)
-
(24,802)
-
-
-
-
-
-
-
-
-
23,388
-
23,388
- (356,798) (356,798)
- (356,798)
-
-
-
-
(3,621)
-
(3,621)
-
(24,802)
-
(24,802)
(151)
(151)
46
(105)
21,014
521,190
(57,556)
5,467
(7,657) 3,783,180 4,265,638
164 4,265,802
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
in thousands of GEL
Cash flows from operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Cash received from trading in foreign currencies
Other operating income received
Staff costs paid
Administrative and other operating expenses paid
Income tax paid
Cash flows from operating activities before changes in operating assets and liabilities
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Finance lease receivables
Other financial assets
Other assets
Net change in operating liabilities
Due to other banks
Customer accounts
Other financial liabilities
Other liabilities and provision for liabilities and charges
Net cash flows from operating activities
Cash flows (used in)/from investing activities
Acquisition of investment securities measured at fair value through other comprehensive
income
Proceeds from disposal of investment securities measured at fair value through other
comprehensive income
Proceeds from redemption at maturity of investment securities measured at fair value
through other comprehensive income
Acquisition of premises, equipment and intangible assets
Proceeds from disposal of premises, equipment and intangible assets
Proceeds from disposal of investment properties
Net cash flows (used in)/from investing activities
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Proceeds from subordinated debt
Redemption of subordinated debt
Share based payment recharge paid
Proceeds from debt securities in issue
Redemption of debt securities in issue
Dividends paid
Net cash from/(used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
2022
2021 (restated)
2,177,765
34,711
(1,031,195)
476,575
(240,044)
338,167
18,448
(280,682)
(172,303)
(230,563)
1,090,879
(226,175)
(2,491,519)
5,273
54,871
59,318
390,402
4,797,211
24,934
4,672
3,709,866
1,953,538
28,143
(841,066)
361,844
(152,984)
61,142
25,904
(258,274)
(130,891)
(7,100)
1,040,256
390,174
(2,993,309)
9,493
(60,786)
14,975
139,893
2,379,482
(1,271)
40,277
959,184
(2,412,783)
(797,285)
816,417
1,025,775
391,341
412,204
(198,371)
17,454
5,472
(1,380,470)
2,501,875
(1,731,699)
(13,099)
62,578
(13,710)
(24,802)
3,504
(205,898)
(356,365)
222,384
(361,142)
2,190,638
1,595,460
3,786,098
(107,544)
20,826
23,639
577,615
1,750,443
(3,337,495)
(12,825)
–
(12,562)
–
242,287
-
(81,920)
(1,452,072)
(90,866)
(6,139)
1,601,599
1,595,460
28
10
10
10
34
34
34
34
34
34
6
6
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
140
141
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT
SEPARATE STATEMENT OF FINANCIAL POSITION
SEPARATE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Note
31 December
2022
31 December
2021
in thousands of GEL
ASSETS
Cash and cash equivalents
Due from other banks
Mandatory cash balances with National Bank of Georgia
Loans and advances to customers
Investment securities measured at fair value through other comprehensive income
Repurchase receivables
Investment properties
Other financial assets
Other assets
Premises and equipment
Right of use assets
Intangible assets
Goodwill
Investments in subsidiaries and associates
TOTAL ASSETS
LIABILITIES
Due to credit institutions
Customer accounts
Other financial liabilities
Current income tax liability
Deferred income tax liability
Debt securities in issue
Provisions for liabilities and charges
Other liabilities
Lease liabilities
Subordinated debt
TOTAL LIABILITIES
EQUITY
Share capital
Share premium
Retained earnings
Share based payment reserve
Fair value reserve for investment securities measured at fair value through other
comprehensive income
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
6
7
8
9
10
11
12
14
15
16
15
17
18
19
22
33
20
21
23
34
24
25
26
3,747,594
1,565,400
6,269
2,047,564
16,722
2,086,113
17,505,605
16,549,460
2,904,714
1,958,198
267,495
21,292
299,720
349,885
398,964
98,228
285,884
27,502
34,041
-
22,022
442,305
321,009
352,743
56,244
249,356
27,502
32,451
3,669,727
2,757,243
17,976,594
14,932,402
187,464
1,576
112,877
1,163,116
19,908
73,393
70,280
560,278
92,613
86,681
10,979
1,539,518
15,845
75,263
54,328
592,333
23,835,213
20,157,205
21,014
521,190
21,014
521,190
3,669,480
3,043,459
(57,556)
5,416
(52,521)
(10,822)
4,159,544
3,522,320
27,994,757
23,679,525
in thousands of GEL
Interest income
Interest expense
Net interest gains on currency swaps
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains from currency derivatives, foreign currency operations and translation
Net gains from disposal of Investment securities measured at fair value through other
comprehensive income
Other operating income
Share of profit of associates
Other operating non-interest income
Credit loss (allowance)/recovery for loans to customers
Credit loss (allowance)/recovery for performance guarantees and credit related
commitments
Credit loss recovery for financial assets measured at fair value through other
comprehensive income
Net recovery/(impairment) of non-financial assets
Operating income after expected credit and non-financial asset impairment losses
Staff costs
Depreciation and amortization
Provision for liabilities and charges
Administrative and other operating expenses
Operating expenses
Losses from modifications of financial instruments
Profit before tax
Income tax expense
Profit for the year
Note
28
28
28
29
29
30
9
36
12
10
31
21
32
33
2022
2,158,813
(994,169)
34,711
1,199,355
443,437
(240,901)
202,536
412,975
5,811
18,456
584
437,826
(108,446)
(2,721)
(4,374)
868
1,223
1,726,267
(279,273)
(76,766)
(2,000)
(139,143)
(497,182)
-
1,229,085
(246,294)
982,791
2021
1,803,709
(878,444)
28,143
953,408
349,598
(176,028)
173,570
124,879
11,156
86,170
810
223,015
37,633
1,204
(5,979)
2,670
(10,205)
1,375,316
(232,291)
(62,653)
-
(103,668)
(398,612)
(1,726)
974,978
(109,813)
865,165
Other comprehensive income/(expense) for the year:
Items that may be reclassified subsequently to profit or loss:
Movement in fair value reserve for investment securities measured at fair value
through other comprehensive income
Other comprehensive income/ (expense) for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
16,238
(22,081)
16,238
999,029
(22,081)
843,084
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
27,994,757
23,679,525
Credit loss allowance for other financial assets
The consolidated and the separate financial statements on pages 138 to 261 were approved by the Supervisory Board
on 24 April 2023 and signed on its behalf by:
Vakhtang Butskhrikidze
Chief Executive Officer
Giorgi Megrelishvili
Chief Financial Officer
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
142
143
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT
SEPARATE STATEMENT OF CHANGES IN EQUITY
SEPARATE STATEMENT OF CASH FLOWS
in thousands of GEL
Note
Share
Capital
Share
premium
Fair value
reserve of
investment
securities
measured at
FVOCI
Share
based
payment
reserve
Retained
earnings
Total
Balance as of 1 January 2021
21,014
521,190
(73,129)
11,259
2,259,159
2,739,493
Profit for the year
Other comprehensive loss for 2021:
Effect of change in business model
Other effects during the period
Total comprehensive income for 2021
Dividends declared
Share based payment expense
26
Other movements
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,609
(1)
-
865,165
865,165
(22,081)
26,062
(48,143)
-
-
-
(22,081)
26,062
(48,143)
(22,081)
865,165
843,084
-
-
-
(81,872)
(81,872)
-
20,609
1,007
1,006
Balance as of 31 December 2021
21,014
521,190
(52,521)
(10,822)
3,043,459
3,522,320
Profit for the year
Other comprehensive income for 2022:
Disposal of investment securities
measured
at fair value through other
comprehensive income
Other effects during the period
Total comprehensive income for 2022
Share based payment expense
26
Dividends declared
Share based payment recharge by
parent company
Tax effect for delivery of SBP shares to
employees
Other movement
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,388
-
(24,802)
(3,621)
-
-
982,791
982,791
16,238
(1,853)
18,091
-
-
-
16,238
(1,853)
18,091
16,238
982,791
999,029
-
-
-
-
-
-
23,388
(356,798)
(356,798)
-
-
28
(24,802)
(3,621)
28
Balance as of 31 December 2022
21,014
521,190
(57,556)
5,416
3,669,480
4,159,544
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
in thousands of GEL
Note
2022
2021 (restated)
Cash flows from operating activities
Interest received
Interest received on currency swaps
Interest paid
Fees and commissions received
Fees and commissions paid
Cash received from trading in foreign currencies
Staff costs paid
Administrative and other operating expenses paid
Income tax paid
Other operating income received
Cash flows from operating activities before changes in operating assets and liabilities
Net change in operating assets
Due from other banks and mandatory cash balances with the National Bank of Georgia
Loans and advances to customers
Other financial assets
Other assets
Net change in operating liabilities
Due to other banks
Customer accounts
Other financial liabilities
Other liabilities and provision for liabilities and charges
Net cash flows from operating activities
Cash flows (used in)/from investing activities
Acquisition of investment securities measured at fair value through other comprehensive
income
Proceeds from disposal of investment securities measured at fair value through other
comprehensive income
Proceeds from redemption at maturity of investment securities measured at fair value
through other comprehensive income
Dividends received
Cash received from capital reductions in subsidiaries and contributions paid in
subsidiaries
Acquisition of premises, equipment and intangible assets
Proceeds from disposal of premises, equipment and intangible assets
Proceeds from disposal of investment properties
Capital injection in subsidiaries
Net cash flows (used in)/ from investing activities
Cash flows from/(used in) financing activities
Proceeds from other borrowed funds
Redemption of other borrowed funds
Repayment of principal of lease liabilities
Proceeds from subordinated debt
Redemption of subordinated debt
Proceeds from debt securities in issue
Redemption of debt securities in issue
Dividends paid
Share based payment recharge paid
Net cash from/(used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
28
2,118,976
34,711
(1,013,784)
442,406
(268,982)
341,465
(252,817)
(145,066)
(229,501)
11,358
1,038,766
(250,716)
(2,497,954)
40,347
67,426
390,307
4,885,904
21,892
5,277
3,701,249
1,896,294
28,143
(827,586)
347,743
(175,738)
56,478
(235,399)
(103,865)
(60)
18,839
1,004,849
414,144
(2,981,673)
(67,642)
32,810
139,332
2,304,853
14,680
39,348
900,701
10
10
10
(2,411,395)
(797,285)
815,083
1,025,775
391,341
412,204
5,959
-
(178,404)
12,859
5,472
(1,006)
52,593
1,101
(93,626)
20,609
24,423
-
(1,360,091)
645,794
2,407,703
(1,652,197)
(11,716)
46,258
-
-
(205,898)
(356,365)
(24,802)
202,983
(361,947)
2,182,194
1,565,400
3,747,594
1,692,815
(3,267,884)
(10,797)
-
(12,562)
236,820
-
(81,872)
-
(1,443,480)
(74,332)
28,683
1,536,717
1,565,400
6
6
144
The notes set out on pages 146 to 261 form an integral part of these consolidated and separate financial statements.
145
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
1. INTRODUCTION
1. INTRODUCTION CONTINIUED
Principal activity. JSC TBC Bank (hereafter the “Bank”) was incorporated on 17 December 1992 and is domiciled in
Georgia. The Bank is a joint stock company limited by shares and was set up in accordance with Georgian regulations.
The Bank’s principal business activity is universal banking operations that include corporate, small and medium
enterprises (“SME”), retail and micro-operations within Georgia. The Bank is a parent of a group of companies
(hereafter the “Group”) incorporated in Georgia and Azerbaijan; their primary business activities include providing
banking, leasing, brokerage and card processing services to corporate and individual customers. The Bank has been
operating since 20 January 1993 under a general banking license issued by the National Bank of the Georgia (“NBG”).
The Bank’s registered address and place of business is 7 Marjanishvili Street, 0102 Tbilisi, Georgia. The Bank was
registered by District Court of Vake and the registration number is 204854595.
The Bank has 129 (2021: 134) branches1 within Georgia.
TBC Bank Group PLC ("TBCG") is a public limited by shares company, incorporated in the United Kingdom. TBCG
held 99.88% of the share capital of JSC TBC Bank (hereafter the “Bank”) as at 31 December 2022 (2021: 99.88%), thus
representing the Bank’s ultimate parent company. TBC Bank Group PLC’s registered legal address is 100 Bishopsgate,
C/O Law Debenture, London, England, EC2N 4AG. Registered number of TBC Bank Group PLC is 10029943.
Subsidiaries and associates. The consolidated and separate financial statements include the following principal
subsidiaries:
Proportion of voting rights
and ordinary share
capital held as of
31 December
Subsidiary name
2022
2021
Principal place
of business or
incorporation
Year of
incorp-
oration
Principal
activities
United Financial Corporation JSC
99.53%
99.53%
Tbilisi, Georgia
2001
Card processing
TBC Capital LLC
TBC Leasing JSC
100.00%
100.00%
Tbilisi, Georgia
100.00%
100.00%
Tbilisi, Georgia
1999
2003
Brokerage
Leasing
Non-banking credit
institution
As of 31 December 2022 and 2021 the Group shareholder structure was as follows:
TBC Kredit LLC
100.00%
100.00% Baku, Azerbaijan
1999
Shareholders
TBC Bank Group PLC
Other
Total
% of ownership interest held as of 31 December
TBC Pay LLC
100.00%
100.00%
Tbilisi, Georgia
2008
Processing
2022
99.88%
0.12%
100.00%
2021
99.88%
0.12%
100.00%
TBC Invest-Georgia LLC
100.00%
100.00% Ramat Gan, Israel
2011
Financial services
Index LLC
100.00%
100.00%
Tbilisi, Georgia
2009 Real estate management
TBC Asset Management LLC
100.00%
100.00%
Tbilisi, Georgia
2021
Asset management
As of 31 December 2022 and 31 December 2021, the shareholder structure of TBC Bank Group PLC by beneficiary
ownership interest was as follows:
The Group has investments in the following associates:
Shareholders
Dunross & Co.
Allan Gray Investment Management
BlackRock
Vanguard Group
Fidelity International
JPMorgan Asset Management
European Bank for Reconstruction and Development
Founders*
Other**
Total
* Founders include direct and indirect ownerships of Mamuka Khazaradze, Badri Japaridze.
** Other includes individual as well as corporate shareholders.
% of ownership interest held as of 31 December
2022
6.58%
5.66%
3.99%
3.91%
3.88%
3.86%
3.54%
16.04%
52.54%
100.00%
2021
7.45%
4.89%
2.90%
2.73%
3.13%
3.15%
5.05%
14.6%
56.1%
100.00%
Proportion of voting rights
and ordinary share
capital held as of
31 December
Subsidiary name
2022
2021
Principal place
of business or
incorporation
Year of
incorp-
oration
Principal
activities
CreditInfo Georgia JSC
21.08%
21.08%
Tbilisi, Georgia
2005
Financial intermediation
Tbilisi Stock Exchange JSC
28.87%
28.87%
Tbilisi, Georgia
2015
Finance, Service
Georgian Central Securities
Depository JSC
22.87%
22.87%
Tbilisi, Georgia
1999
Finance, Service
Georgian Stock Exchange JSC2
17.33%
17.33%
Tbilisi, Georgia
1999
Finance, Service
Kavkasreestri JSC2
10.03%
10.03%
Tbilisi, Georgia
1998
Finance, Service
146
147
1
2
Excluding pawnshop units.
The Group has a significant influence on Georgian Stock Exchange JSC and Kavkasreestri JSC with representatives in management board.
FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT 1. INTRODUCTION CONTINIUED
2. SIGNIFICANT ACCOUNTING POLICIES
The country of incorporation is also the principal area of operation of each of the above subsidiaries and associates.
The Group’s corporate structure consists of a number of related undertakings, comprising subsidiaries and associates,
which are not consolidated or equity accounted due to immateriality. A full list of these undertakings, the country of
incorporation and the ownership of each share class is set out below.
Proportion of voting rights
and ordinary share
capital held as of
31 December
Subsidiary name
2022
2021
Principal place
of business or
incorporation
Year of
incorp-
oration
TBC Invest International Ltd1
100.00%
100.00%
Tbilisi, Georgia
University Development Fund1
Natural Products of Georgia LLC1
33.33%
25.00%
33.33%
25.00%
Tbilisi, Georgia
Tbilisi, Georgia
TBC Trade LLC1
100.00%
100.00%
Tbilisi, Georgia
Diversified Credit Portfolio JSC
100.00%
100.00%
Tbilisi, Georgia
2016
2007
2001
2008
2021
Principal
activities
Investment Vehicle
Education
Trade, Service
Trade, Service
Operating environment of the Group. Georgia, where most of the Group’s activities are located, displays certain
characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject
to frequent changes and varying interpretations (Note 33). In 2021 the Georgian economy rebounded at 10.5%, mainly
on the back of the recovery of inflows, as well as stronger domestic demand. As for 2022, despite the adverse impact
of Russia’s invasion of Ukraine, the expansion continued at a speed that exceeded initial expectations, with real GDP
increasing by 10.1% in 2022. The main reasons behind the strong growth momentum are the resilience of Georgia’s
terms of trade at the time of rising commodity prices as well as Georgia’s broadly balanced net exposure to oil prices.
Moreover, while Russia’s invasion of Ukraine tourism recovery has slowed compared to the pre-war dynamics, when
adding the migration effect from citizens of Russia, Belarus and also to some extent Ukraine, the tourism recovery
has even strengthened. Additionally, higher remittance inflows and recovering foreign direct investments (FDIs) were
growth supportive throughout the year.
However, the baseline strongly depends on the global developments. While the Georgian economy is so far resilient
against recently elevated global slowdown risks and adverse economic impacts of Russia’s invasion of Ukraine, there
is a probability of more severe spill-over effects, as well as COVID resurgence risks. The materialization of these risks
could severely restrict economic activity in Georgia, and negatively impact the business environment and clients of
the Group.
For the purpose of measurement of expected credit losses (“ECL”), the Group uses supportable forward-looking
information, including forecasts of macroeconomic variables. As with any economic forecast, however, the projections
and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual
outcomes may be significantly different from those projected.
Climate Impact. Although global market conditions have affected market confidence and consumer spending
patterns, the Group remains well placed to continue displaying strong financial results. The Group has reviewed
its exposure to climate-related risks, but has not identified any risks that could significantly impact the financial
performance or position of the Group as at 31 December 2022. See more details outlined in risk management
disclosures in note 35.
Basis of preparation. These consolidated and separate financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRSs”) under the historical cost convention as modified by the initial
recognition of financial instruments based on fair value, and by the revaluation of financial instruments categorised at
fair value through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”) and with the
requirements of the Law of Georgia on Accounting, Reporting and Auditing. The principal accounting policies applied
in the preparation of these consolidated and separate financial statements are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
Presentation currency. These consolidated financial statements are presented in thousands of Georgian Lari (“GEL
thousands”), except per-share amounts and unless otherwise indicated.
Changes in presentation of the consolidated and separate statement of cash flows of JSC TBC Bank within
operating activity
To correct the presentation of cash flow items related to foreign exchange differences within the operating activities
of consolidated and separate statements of cash flows of JSC TBC Bank, the management corrected certain financial
statement line items. For details refer to the tables below and for further information refer to note 30.
Consolidated statement of cash flows:
Asset Management
in thousands of GEL
Cash received from trading in foreign currencies
Other financial assets
Customer accounts
Other financial liabilities
Separate statement of cash flows:
31 December 2021
(as originally presented)
Restatement
31 December 2021
(as restated)
113,043
(229,236)
2,606,998
(112,238)
(51,901)
168,450
(227,516)
110,967
61,142
(60,786)
2,379,482
(1,271)
in thousands of GEL
Cash received from trading in foreign currencies
Other financial assets
Customer accounts
Other financial liabilities
31 December 2021
(as originally presented)
Restatement
31 December 2021
(as restated)
108,379
(236,092)
2,532,369
(96,287)
(51,901)
168,450
(227,516)
110,967
56,478
(67,642)
2,304,853
14,680
Consolidated financial statements. Subsidiaries are those investees, including structured entities, that the Group
controls because it (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii)
has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its
power over the investees to affect the amount of investor’s returns. The existence and effect of substantive rights,
including substantive potential voting rights, are considered when assessing whether the Group has power over
another entity. For a right to be substantive, the holder must have practical ability to exercise that right when decisions
about the direction of the relevant activities of the investee need to be made. The Group may have power over an
investee even when it holds less than the majority of voting power in it. In such a case, the Group assesses the size of
its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto
power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of
investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are deconsolidated from
the date on which control ceases.
Separate financial statements. Investments in subsidiaries - The Company accounts investments at the original cost
of the investment until the investment is derecognised or impaired for its separate financial statements. The carrying
amounts of the investments are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, the assets’ recoverable amounts are estimated. Value in use is determined by
1
Dormant.
148
149
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT 2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
the present value of expected future cash flows discounted to present value. An impairment loss is recognised when
the carrying amount of the investments exceeds its recoverable amount. Impairment losses are recognised in profit or
loss.
Business combinations and goodwill accounting. Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured at the fair value of the consideration, including contingent
consideration, given at the acquisition date. Acquisition-related costs are recognised as an expense in the profit or loss
in the period in which they are incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any non-
controlling interest.
The Group measures the non-controlling interest that represents the current ownership’s interest and entitles the
holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either
at: (a) fair value, or (b) the non-controlling interest’s proportionate share of net assets of the acquired entity. Non-
controlling interests that are not present ownership interests are measured at fair value.
Goodwill is measured by deducting the acquiree’s net assets from the aggregate of the consideration transferred for
the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held
immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognised in profit or loss, after
the management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities
assumed, and reviews appropriateness of their measurement.
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments
issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration
arrangements, but excludes acquisition related costs such as advisory, legal, valuation and similar professional
services.
Transaction costs incurred for issuing equity instruments are deducted from the equity; transaction costs incurred for
issuing debt are deducted from its carrying amount and all other transaction costs associated with the acquisition are
expensed.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated;
unrealised losses are also eliminated unless the cost cannot be recovered. The Bank and all of its subsidiaries use
uniform accounting policies consistent with the Group’s policies.
Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests that are
not owned, directly or indirectly, by the Bank. Non-controlling interest forms a separate component of the Group’s
equity.
Associates. Associates are entities over which the Group has significant influence (directly or indirectly), but not
control, generally accompanying a shareholding of between 20 and 50 per cent of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognised at cost. The carrying
amount of associates includes goodwill identified on acquisition less accumulated impairment losses, if any. Dividends
received from associates reduce the carrying value of the investments in associates. Other post-acquisition changes
in Group’s share of net assets of an associate are recognised as follows: (i) the Group’s share of profits or losses of
associates is recorded in the consolidated profit or loss for the year as share of result of associates, (ii) the Group’s
share of other comprehensive income is recognised in other comprehensive income and presented separately, (iii);
all other changes in the Group’s share of the carrying value of net assets of associates are recognised in profit or loss
within the share of result of associates. However, when the Group’s share of losses in an associate equals or exceeds
its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses,
unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for
transactions with owners of non-controlling interest. Any difference between the purchase consideration and the
carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Group
recognises the difference between sales consideration and carrying amount of non-controlling interest sold as a
capital transaction in the statement of changes in equity.
Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant
influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount
recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting
for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised
in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the
related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are
recycled to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
Financial instruments – key measurement terms. Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best
evidence of fair value is the price in an active market. An active market is one in which transactions for the asset or
the liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The
fair value of financial instruments traded in an active market is measured as the product of the quoted price for the
individual asset or liability and the quantity owned by the entity. This is the case even if a market’s normal daily trading
volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might
affect the quoted price.
A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active market is
measured at the fair value of a group of financial assets and financial liabilities on the basis of the price that would be
received to sell a net long position (ie an asset) for a particular risk exposure or paid to transfer a net short position (i.e.
a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date.
Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or
consideration of financial data of the investees are used to measure the fair value of certain financial instruments
for which external market pricing information is not available. 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 valuations 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 solely based on observable market data (that is, the measurement requires
significant unobservable inputs). Transfers between levels of the fair value hierarchy are deemed to have occurred at
the end of the reporting period.
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial
instrument. An incremental cost is one that would not have incurred if the transaction had not taken place. Transaction
costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers
and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs
do not include debt premiums or discounts, financing costs or internal administrative or holding costs.
Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any
principal repayments, plus accrued interest, and for financial assets less any write-down for expected credit losses.
Accrued interest includes the amortisation of transaction costs deferred at initial recognition and of any premium
or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest
expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination,
if any), are not presented separately and are included in the carrying values of related items in the consolidated
statement of financial position. Repayments for loans are accounted for penalties in the first place, then accrued
interest and after that principal amount.
The effective interest method is a method of allocating interest income or interest expense over the term of the
financial instrument so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding
future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the
net carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest
instruments to the next interest repricing date, except for the premium or discount which reflects the credit spread
over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or
150
151
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT 2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees
paid or received between parties to the contract that are an integral part of the effective interest rate (refer to income
and expense recognition policy). For assets that are purchased or originated defaulted (“POCI”) at initial recognition,
the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial
recognition instead of contractual payments.
Initial recognition of financial instruments. Financial instruments at FVTPL are initially recorded at fair value. All other
financial instruments are initially recorded at fair value adjusted for transaction costs. Fair value at initial recognition
is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference
between fair value and transaction price which can be evidenced by other observable current market transactions
in the same instrument or by a valuation technique whose inputs include only data from observable markets. After
the initial recognition, an ECL (expected credit loss) allowance is recognised for financial assets measured at AC and
investments in debt instruments measured at FVOCI, resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery within the time frame set by regulation or market
convention (“regular way” purchases and sales) are recorded at trade date, which is the date that the Group commits
to deliver a financial asset. All other purchases are recognised when the entity becomes a party to the contractual
provisions of the instrument.
Financial assets – classification and subsequent measurement – measurement categories. The Group classifies
financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent
measurement of debt financial assets depends on: (i) the Group’s business model for managing the related assets
portfolio and (ii) the cash flow characteristics of the asset.
Financial assets – classification and subsequent measurement – business model. The business model drives
classification of financial assets. Management applied judgement in determining the level of aggregation and
portfolios of financial instruments when performing the business model assessment. When assessing sales
transactions, the Group considers their historical frequency, timing and value, reasons for the sales and expectations
about future sales activity. Sales transactions aimed at minimising potential losses due to credit deterioration are
considered consistent with the “hold to collect” business model. Other sales before maturity, not related to credit risk
management activities, are also consistent with the “hold to collect” business model, provided that they are infrequent
or insignificant in value, both individually and in aggregate. The Group assesses significance of sales transactions
by comparing the value of the sales to the value of the portfolio subject to the business model assessment over the
average life of the portfolio. In addition, sales of financial asset expected only in stress case scenario, or in response to
an isolated event that is beyond the Group’s control, is not recurring and could not have been anticipated by the Group,
are regarded as incidental to the business model objective and do not impact the classification of the respective
financial assets.
The “hold to collect and sell” business model means that assets are held to collect the cash flows, but selling is also
integral to achieving the business model’s objective, such as, managing liquidity needs, achieving a particular yield, or
matching the duration of the financial assets to the duration of the liabilities that fund those assets.
The residual category includes those portfolios of financial assets, which are managed with the objective of realising
cash flows primarily through sale, such as where a pattern of trading exists. Collecting contractual cash flow is often
incidental for this business model.
Financial assets – classification and subsequent measurement – cash flow characteristics. Where the business
model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Group assesses
whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embedded
derivatives are considered in their entirety when determining whether their cash flows are consistent with the SPPI
feature. In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic
lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending
risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending
arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial
recognition of an asset and it is not subsequently reassessed. The judgements applied by the Group in performing the
SPPI test for its financial assets is discussed below:
The time value of money element may be modified, for example, if a contractual interest rate is periodically reset but
the frequency of that reset does not match the tenor of the debt instrument’s underlying base interest rate, for example
a loan pays three months interbank rate but the rate is reset every month. The effect of the modified time value of
money was assessed by comparing relevant instrument’s cash flows against a benchmark debt instrument with SPPI
cash flows, in each period and cumulatively over the life of the instrument. The Group applied a threshold of 10% to
determine whether differences against a benchmark instruments are significantly different. In case of a scenario with
cash flows that significantly differ from the benchmark, the assessed instrument’s cash flows are not SPPI and the
instrument is then carried at FVTPL.
The Group identified and considered contractual terms that change the timing or amount of contractual cash flows.
The SPPI criterion is met if a loan allows early settlement and the prepayment amount substantially represents
principal and accrued interest, plus a reasonable additional compensation for the early termination of the contract.
The asset’s principal is the fair value at initial recognition less subsequent principal repayments, ie instalments net of
interest determined using the effective interest method. As an exception to this principle, the standard also allows
instruments with prepayment features that meet the following condition to meet SPPI: (i) the asset is originated
at a premium or discount, (ii) the prepayment amount represents contractual amount and accrued interest and a
reasonable additional compensation for the early termination of the contract, and (iii) the fair value of the prepayment
feature is immaterial at initial recognition.
Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing
the portfolio as a whole changes. The reclassification has a prospective effect and takes place from the beginning of
the first reporting period that follows after the change in the business model. The Group change its business model
in 2020 in relation to the securities held at amortised cost, which took effect from 1 January 2021 in these financial
statements as required by IFRS 9.
Financial assets impairment – expected credit loss (ECL) allowance. The Group assesses, on a forward-looking
basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments
and financial guarantee contracts. The Group measures ECL and recognises credit loss allowance at each reporting
date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by
evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information
that is available without undue cost and effort at the end of each reporting period about past events, current
conditions and forecasts of future conditions.
The Group applies a three stage model for impairment, based on changes in credit quality since initial recognition:
• Stage 1: A financial instrument that is not defaulted on initial recognition is classified in Stage 1. Financial assets in
Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events
possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”);
• Stage 2: If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is
transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis (“Lifetime ECL”). If a SICR is no
longer observed, instrument will move back to Stage 1. Financial instrument moves back from stage 2 to stage 1
with 6 month cure period in case of loans previously having default flag, while restructured loans remain in stage
2 until the restructured status is removed. In order to remove restructured status, borrower should make at least
12 consecutive payments, unless financial monitoring is performed. Refer to Note 35 for a description of how the
Group determines, on a forward-looking basis, when a SICR has occurred;
• Stage 3: Defaulted assets are transferred to Stage 3 and allowance for Lifetime ECL is recognized. The Group’s
definition of defaulted assets and definition of default is based on the occurrence of one or more loss events,
described further in Note 35.
Change in ECL is recognized in the statement of profit or loss with a corresponding allowance reported as a decrease
in carrying value of the financial asset on the statement of financial position. For financial guarantees and credit
commitments, provision for ECL is reported as a liability in Provisions for Liabilities and Charges.
Gross carrying amount and write offs. Gross carrying amount of a financial asset is the amortised cost of a financial
asset, before adjusting for any loss allowance. The Group directly reduces the gross carrying amount of a financial
asset when the entity has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.
The latter includes penalties under the local regulation requirements. The loans are collectively assessed for write off
based on overdue days criteria or are individually evaluated, depending on the loan segment and product type.
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2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
Financial assets- derecognition and modification. The Group derecognises financial assets when (a) the assets
are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has transferred the
rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i)
also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining
substantially all risks and rewards of ownership, but not retaining control. Control is retained if the counterparty does
not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose
restrictions on the sale. The Group sometimes renegotiates or otherwise modifies the contractual terms of the
financial assets.
The Group assesses whether the modification of contractual cash flows is substantial, in which it considers certain
qualitative and quantitative factors combined. Based on below shown internally developed methodology there are
certain qualitative triggers which lead to asset derecognition with no further quantitative testing required. These
qualitative criteria are included in the list below:
• Change in contract currency;
• Consolidation of two or more loans into one new loan;
• Change in counterparty;
• Loan with no predetermined payment schedule is changed with loan with schedule or vice versa;
• Change in contractual interest rate due to market environment changes.
The Group compares the original and revised expected cash flows to assets whether the risks and rewards of the
asset are substantially different as a result of the contractual modification. It should be assessed whether change
in contractual cash flow is significant (significance defined as 10% change). If the test result is above 10% threshold,
loan should be derecognized, whereas if the test is passed and result is below or equal to 10%, financial asset can be
assessed as modified.
If the risks and rewards do not change, the modified asset will not be substantially different (exceed 10% test) from
the original asset and the modification does not result in derecognition. The Group recalculates the gross carrying
amount by discounting the modified contractual cash flows by the original effective interest rate and recognises
a modification gain or loss in profit or loss. Any costs or fees incurred adjust the carrying amount of the modified
financial asset and are amortised over the remaining term of the modified financial asset.
Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC,
except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading
(e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination
and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan
commitments.
Financial liabilities – derecognition and modification. Financial liabilities are derecognised when they are
extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
An exchange between the Group and its original lenders of debt instruments with substantially different terms,
as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for
as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are
substantially different if the discounted present value of the cash flows under the new terms, including any fees
paid net of any fees received and discounted using the original effective interest rate, is at least 10% different
from the discounted present value of the remaining cash flows of the original financial liability. In addition, other
qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate,
new conversion features attached to the instrument are also considered. If an exchange of debt instruments or
modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the
gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any
costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the
modified liability.
Modifications of liabilities that do not result in extinguishment are accounted for using a cumulative catch up method,
with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is
attributed to a capital transaction with owners.
Cash and cash equivalents. Cash and cash equivalents are items which are readily convertible to known amounts
of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents include cash on hand,
amounts due from the National Bank of Georgia (NBG), excluding mandatory reserves, and all interbank placements
and interbank receivables with original maturities of less than three months. Funds restricted for a period of more than
three months on origination are excluded from cash and cash equivalents. Cash and cash equivalents are carried at AC
because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are
not designated at FVTPL. Features mandated solely by legislation, such as the bail-in legislation in certain countries,
do not have an impact on the SPPI test, unless they are included in contractual terms such that the feature would apply
even if the legislation is subsequently changed.
The payments or receipts presented in the statement of cash flows represent the Group’s transfers of cash and
cash equivalents, including amounts charged or credited to current accounts of the Group’s counterparties held
with the Group, such as loan interest income or principal collected by charging the customer’s current account or
interest payments or disbursement of loans credited to the customer’s current account, which represent cash or cash
equivalent from the customer’s perspective.
Mandatory cash balances with the National Bank of Georgia. Mandatory cash balances with National Bank of
Georgia are carried at AC and represent mandatory reserve deposits that are not available to finance the Group’s
day to day operations. Hence they are not considered as part of cash and cash equivalents for the purposes of the
consolidated statement of cash flows.
Due from other banks. Amounts due from other banks are recorded when the Group advances money to counterparty
banks. Amounts due from other banks are carried at AC when: (i) they are held for the purposes of collecting
contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at fair value through profit
or loss (FVTPL). Otherwise they are carried at fair value (FV).
Investments in debt securities. Based on the business model and the cash flow characteristics, the Group classifies
investments in debt securities as carried at AC, fair value through other comprehensive income (FVOCI) or FVTPL.
Debt securities are carried at AC if they are held for collection of contractual cash flows and where those cash flows
represent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting
mismatch.
Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling, where those
cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these assets is calculated
using the effective interest method and recognised in profit or loss. An impairment allowance estimated using the
expected credit loss model is recognised in profit or loss for the year. All other changes in the carrying value are
recognised in OCI. When the debt security is derecognised, the cumulative gain or loss previously recognised in
OCI is reclassified from OCI to profit or loss. Investments in debt securities are carried at FVTPL if they do not meet
the criteria for AC or FVOCI. The Group may also irrevocably designate investments in debt securities at FVTPL on
initial recognition if applying this option significantly reduces an accounting mismatch between financial assets and
liabilities being recognised or measured on different accounting bases.
Investments in equity securities. Financial assets that meet the definition of equity from the issuer’s perspective,
i.e. instruments that do not contain a contractual obligation to pay cash and that evidence a residual interest in the
issuer’s net assets, are considered as investments in equity securities by the Group. Investments in equity securities
are measured at FVTPL, except where the Group elects at initial recognition to irrevocably designate an equity
investments at FVOCI. The Group’s policy is to designate equity investments as FVOCI when those investments
are held for strategic purposes other than solely to generate investment returns. When the FVOCI election is used,
fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on
disposal. Impairment losses and their reversals, if any, are not measured separately from other changes in fair value.
Dividends continue to be recognised in profit or loss when the Group’s right to receive payments is established except
when they represent a recovery of an investment rather than a return on such investment.
Loans and advances to customers. Loans and advances to customers are recorded when the Group advances money
to purchase or originate a loan due from a customer. Based on the business model and the cash flow characteristics,
the Group classifies loans and advances to customers into one of the following measurement categories: (i) AC:
loans that are held for collection of contractual cash flows and those cash flows represent SPPI and loans that are not
voluntarily designated at FVTPL, and (ii) FVTPL: loans that do not meet the SPPI test or other criteria for AC or FVOCI
are measured at FVTPL.
Impairment allowances are determined based on the forward-looking ECL models. Note 35 provides information
about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the
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2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
Group incorporates forward-looking information in the ECL models.
Repossessed collateral. Repossessed collateral represents non-financial assets acquired by the Group to settle
overdue loans. The assets are initially recognised at fair value when acquired and included in premises and equipment,
investment property or repossessed collateral within other assets depending on their nature and the Group’s intention
in respect of recovery of these assets and are subsequently re-measured and accounted for in accordance with
the accounting policies for these categories of assets. Repossessed assets are recorded at the lower of cost or net
realisable value.
Loan commitments. The Group issues commitments to provide loans. These commitments are irrevocable or
revocable only in response to a material adverse change. Such commitments are initially recognised at their fair
value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight line basis
over the life of the commitment, except for commitments to originate loans if it is probable that the Group will enter
into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination; such loan
commitment fees are deferred and included in the carrying value of the loan on initial recognition. At the end of each
reporting period, the commitments are measured at (i) the remaining unamortised balance of the amount at initial
recognition, plus (ii) the amount of the loss allowance determined based on the expected credit loss model, unless
the commitment is to provide a loan at a below market interest rate, in which case the measurement is at the higher of
these two amounts. The carrying amount of the loan commitments represents a liability.
Financial guarantees. Financial guarantees require the Group to make specified payments to reimburse the holder of
the guarantee for a loss it incurs because a specified debtor fails to make payment when due in accordance with the
original or modified terms of a debt instrument. Financial guarantees are initially recognised at their fair value, which
is normally evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life
of the guarantee. At the end of each reporting period, the guarantees are measured at the higher of (i) the amount of
the loss allowance for the guaranteed exposure determined based on the expected loss model and (ii) the remaining
unamortised balance of the amount at initial recognition. In addition, an ECL loss allowance is recognised for fees
receivable that are recognised in the statement of financial position as an asset.
Performance guarantees. Performance guarantees are contracts that provide compensation if another party fails
to perform a contractual obligation. Such contracts transfer non-financial performance risk in addition to credit
risk. Performance guarantees are initially recognised at their fair value, which is normally evidenced by the amount
of fees received. This amount is amortised on a straight line basis over the life of the contract. Where the Group
has the contractual right to revert to its customer for recovering amounts paid to settle the performance guarantee
contracts, such amounts will be recognised as an asset upon transfer of the loss compensation to the guarantee’s
beneficiary. These fees are recognised within fee and commission income in profit or loss. The Group applies IFRS 9
for measurement of performance guarantees.
Sale and repurchase agreements. Sale and repurchase agreements (“repo agreements”), which effectively provide
a lender’s return to the counterparty, are treated as secured financing transactions. The lender provides funds to
the borrower and receives security as collateral. Securities sold under such sale and repurchase agreements are not
derecognized. The securities are not reclassified in the statement of financial position unless the transferee has,
by contract, the right or custom to sell or repledge the securities, in which case they are reclassified as repurchase
receivables. The corresponding liability is presented within amounts due to credit institutions. The repurchase
agreements are short-term in nature. Investment securities at fair value through other comprehensive income or bonds
carried at amortised cost reclassified to repurchase receivables continue to be carried at fair value or amortised cost
respectively in accordance with the accounting policies for these categories of assets.
Securities purchased under agreements to resell (“reverse repo agreements”), which effectively provide a lender’s
return to the Group, are recorded as Cash and cash equivalents (If the maturity of placement is less than 3 months),
due from other banks or loans and advances to customers, as appropriate. The difference between the sale and
repurchase price is treated as interest income and accrued over the life of repo agreements using the effective interest
method.
Securities lent to counterparties for a fixed fee are retained in the consolidated financial statements in their original
category in the statement of financial position unless the counterparty has the right by contract or custom to sell or
repledge the securities, in which case they are reclassified and presented separately. Securities borrowed for a fixed
fee are not recorded in the consolidated financial statements, unless these are sold to third parties, in which case the
purchase and sale are recorded in profit or loss for the year within gains less losses arising from trading securities. The
obligation to return the securities is recorded at fair value in other borrowed funds. Based on classification of securities
sold under the sale and repurchase agreements, the Group classifies repurchase receivables into one of the following
measurement categories: AC, FVOCI, and FVTPL.
Finance lease receivables. Where the Group is a lessor in a lease that substantially transfers all risks and rewards
incidental to ownership to the lessee, the assets leased out are presented as finance lease receivables and carried at
the present value of the future lease payments. Finance lease receivables are initially recognised at commencement
(when the lease term begins) using a discount rate determined at inception (the early date of the lease agreement and
the date of commitment by the parties to the principal provisions of the lease).
The interest income on stage 3 exposures is recognized on a carrying amount after deducting ECL. Incremental costs
directly attributable to negotiating and arranging the lease are included in the initial measurement of the finance lease
receivables and reduce the amount of income recognised over the lease term. Finance income from leases is recorded
within interest income in the profit or loss.
The ECL is determined in the same way as for loans and advances measured at AC and recognised through an
allowance account to write down the receivables’ net carrying amount to the present value of expected cash flows
discounted at the interest rates implicit in the lease investments. There is a ‘three stage’ approach which is based
on the change in credit quality of financial lease receivables since initial recognition. Immediate loss that is equal to
the 12-month ECL is recorded on initial recognition of financial leases that are not defaulted. In case of a significant
increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The estimated future cash
flows reflect the cash flows that may result from obtaining and selling the assets subject to the lease.
The Group normally structures its finance lease contracts so that the lessee makes a minimum prepayment of 20%
of the equipment purchase price at the inception of the lease term. The Group holds title to the leased assets during
the lease term. The title to the asset under the finance lease contract is transferred to the lessees at the end of the
contracts terms, including full repayment of lease payments. Generally the lease terms are up to five years.
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. The main
types of collateral obtained are:
• Leased assets (inventory and equipment);
• Down payment;
• Real estate properties;
• Third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where
collateral and other credit enhancements are equal to or exceed the assets’ carrying value(“over-collateralised assets”)
and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value (“under-
collateralised assets”).
The Group classifies its portfolio into three stages:
• Stage 1 – assets for which no significant increase of credit risk since initial recognition is identified;
• Stage 2 – assets for which significant increase in credit risk since initial recognition is identified;
• Stage 3 – defaulted exposures.
For stage 1 exposures the Group creates 12 months expected credit losses, whereas for stage 2 and stage 3 lifetime
expected credit losses are created.
For the Stage 2 classification purposes the Group applies both quantitative and the qualitative criteria including, but
not limited to:
• 30 days past due (DPD) overdue;
• Downgrade of the risk category of the borrower since initial recognition;
Default definition includes criteria such as: (i) 90 DPD overdue (ii) distressed restructuring and (iii) other criteria
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2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
indicating the borrower’s unlikeness to repay the liabilities.
The Group incorporates forward looking information (FLI) for both individual and collective assessment. For FLI
purposes the Group defines three scenarios, which are:
• Baseline (most likely);
• Upside (better than most likely);
• Downside (worse than most likely).
The Group derives the baseline macro scenario and takes into account projections from various external sources –
the National Bank of Georgia, Ministry of Finance, IMF as well as other IFIs- to ensure the alignment to the consensus
market expectations. Refer to Note 35 for the description of how the Group incorporates FLI in ECL calculations.
Upside and downside scenarios are defined based on the framework developed by the Bank’s macroeconomic unit.
The Group calculates expected impairment losses for each scenario. In order to come up with the final expected credit
loss figures the bank applies probability weighted average approach where probabilities of each scenario are used as
weights.
Receivables from terminated leases. The Group recognizes receivables from terminated contracts at the moment of
lease contract termination. These receivables are recognized at amount comprising difference between fair value of
repossessed assets and outstanding balance of finance lease receivables. Receivables are accounted for at AC less
ECL.
Prepayment for purchase of leasing assets. Prepayment for purchase of leasing assets comprises of advance
payments made to purchase assets for transfer into leases. Such advances are accounted for as non-financial assets.
On commencement of the leases, advances towards lease contracts are transferred into finance lease receivables.
Due to credit institutions. Amount due to credit institutions are recorded when counterparty banks advance money
or other assets to the Group. The non-derivative liability is carried at AC. If the Group purchases its own debt, it is
removed from the consolidated statement of financial position and the difference between the carrying amount of the
liability and the consideration paid is included in gains or losses arising from retirement of debt.
Customer accounts. Customer accounts are non-derivative liabilities to individuals, state or corporate customers and
are carried at AC.
Subordinated debt. Subordinated debt can only be paid in the event of a liquidation after the claims of other higher
priority creditors have been met and is included in the Bank’s “tier 2” capital. Subordinated debt is carried at AC.
Debt securities in issue. Debt securities in issue include promissory notes, bonds, certificates of deposit and
debentures issued by the Group. Debt securities are stated at AC. If the Group purchases its own debt securities in
issue, they are removed from the consolidated statement of financial position and the difference between the carrying
amount of the liability and the consideration paid is included in gains arising from retirement of debt.
Derivative financial instruments. Derivative financial instruments, including foreign exchange contracts, interest rate
futures, forward rate agreements, currency and interest rate swaps, currency and interest rate options are recognized
at their fair value. The Group also enters into offsetting deposits with its counterparty banks to exchange currencies.
Such deposits, while legally separate, are aggregated and accounted for as a single derivative financial instrument
(currency swap) on a net basis where (i) the deposits are entered into at the same time and in contemplation of one
another, (ii) they have the same counterparty, (iii) they relate to the same risk and (iv) there is no apparent business
purpose for structuring the transactions separately that could not also have been accomplished in a single transaction.
All derivative instruments are carried as assets when fair value is positive and as liabilities when fair value is negative.
Changes in the fair value of derivative instruments are included in profit or loss. The Group does not apply hedge
accounting. Certain derivative instruments embedded in other financial liabilities are treated as separate derivative
instruments when their risks and characteristics are not closely related to those of the host contract.
When derivative instruments are entered into with a view to decrease cost of funding, respective interest effect is
presented as a separate line of statement of comprehensive income, within net interest income.
Goodwill. Goodwill is carried at cost less accumulated impairment losses, if any. The Group tests goodwill for
impairment at least annually and whenever there are indications that goodwill may be impaired. Goodwill is allocated
to the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the
business combination. Such units or group of units represent the lowest level at which the Group monitors goodwill
and are not larger than an operating segment. Gains or losses on disposal of an operation within a cash generating unit
to which goodwill has been allocated include the carrying amount of goodwill associated with the disposed operation.
This is generally measured on the basis of the relative values of the disposed operation and the portion of the cash-
generating unit which is retained.
Premises and equipment. Premises and equipment are stated at cost, less accumulated depreciation and provision
for impairment, where required. Cost of premises and equipment of acquired subsidiaries is the estimated fair value at
the date of acquisition.
Costs of minor repairs and maintenance are expensed when incurred. Costs of replacing major parts or components
of premises and equipment items are capitalised and the replaced part is retired.
At the end of each reporting period management assesses whether there is any indication of impairment of premises
and equipment. If any such indication exists, management estimates the recoverable amount, which is determined
as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the
recoverable amount and the impairment loss is recognised in profit or loss for the year. An impairment loss recognised
for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in
use or fair value less costs to sell.
Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or
loss for the year (within other operating income or expenses).If impaired, premises and equipment are written down to
the higher of their value in use and fair value less costs to sell. The decrease in carrying amount is charged to profit or
loss. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates
used to determine the asset’s value in use or fair value less costs to sell.
Depreciation. Land and construction in progress are not depreciated. Depreciation on other items of premises and
equipment and right-of-use assets is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives as follows:
Asset
Premises
Furniture and fixtures
Computers and office equipment
Motor vehicles
Other equipment
Right-of-use assets
Intangible assets
Useful life
30 – 110 years;
5 – 8 years;
3 – 8 years;
4 – 5 years;
2 – 10 years;
term of the underlying lease;
1 – 20 years;
The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset
less the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its
useful life. The residual value of an asset is nil if the Group expects to use the asset until the end of its physical life. The
assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Investment property. Investment property is property that the Groups owns to earn rental income or for capital
appreciation, or both, and that it does not occupy.
Investment property is stated at cost less accumulated depreciation and provision for impairment, where required. It
is amortised on a straight line basis over an expected useful lives of 30 to 50 years. In case of any indication that the
investment properties may be impaired, the Group estimates the recoverable amount as the higher of value in use and
fair value less costs to sell. The carrying amount of an investment property is written down to its recoverable amount
through a charge to profit or loss for the year. An impairment loss recognised in prior years is reversed if there has been
a subsequent change in the estimates used to determine the asset’s recoverable amount.
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2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
As at 31 December 2022 The investment property of the bank after impairment and accumulated depreciation
comprised of land GEL 1,350 thousand and buildings GEL 19,942 thousand (2021: GEL 4,631 thousand and GEL 17,391
thousand).
Land included in investment property is not depreciated. Depreciation on other items of investment properties is
calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives
of 30 to 50 years. Residual values of investment properties are estimated to be nil.
Earned rental income is recorded in profit or loss for the year within other operating income.
Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic
benefits associated with the expenditure will flow to the Group and the cost can be measured reliably. All other
repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is
reclassified to premises and equipment.
Intangible assets. The Group’s intangible assets other than goodwill have definite useful lives and primarily include
capitalised computer software. Acquired computer software licences are capitalised on the basis of the costs incurred
to acquire and bring to use the specific software. Development costs that are directly associated with identifiable
and unique software controlled by the Group are recorded as intangible assets if the inflow of incremental economic
benefits exceeding costs is probable. Capitalised costs include staff costs and direct overheads of the software
development team. All other costs associated with computer software, e.g. its maintenance, are expensed when
incurred. Capitalised computer software is amortised on a straight line basis over expected useful lives of 1 to 20 years.
Accounting for leases by the Group as a lessee. The Group leases office, branches and service centre premises.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is recognised at cost and depreciated over the shorter of
the asset's useful life and the lease term on a straight-line basis.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payment that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined,
the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs, and
• restoration costs.
As an exception to the above, the Group accounts for short-term leases and leases of low value assets by recognising
the lease payments as an operating expense on a straight line basis.
In determining the lease term, management of the Group considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or
periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended
(or not terminated).
The Group applied the Amendment to IFRS 16 to COVID-19 related rent concessions granted by lessors 2020 and
extension of this amendment in 2021, respectively. These concessions were recorded as a reduction in the lease
liability and variable rent in the period in which they were granted. The amount was not material to the financial
statements.
Accounting for operating leases by the Group as a lessor. When assets are leased out under an operating lease, the
lease payments receivable are recognised as rental income on a straight-line basis over the lease term.
Income taxes. Income taxes are provided in the consolidated financial statements in accordance with the legislation
enacted or substantively enacted by the end of reporting period in the respective territories that the Bank and its
subsidiaries operate. The income tax charge/credit comprises of current tax and deferred tax and is recognised in
profit or loss except if it is recognised directly in other comprehensive income because it relates to transactions that
are also recognised, in the same or a different period, directly in other comprehensive income.
Current tax is the amount expected-to-be-paid to or recovered from the tax authorities in respect of taxable profits
or losses for the current and prior periods. Taxable profits or losses are based on estimates if consolidated financial
statements are authorised prior to filing relevant tax returns. Taxes, other than on income, are recorded within
administrative and other operating expenses.
Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary
differences on initial recognition of an asset or a liability in a transaction other than a business combination if the
transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax liabilities are not
recorded for temporary differences on initial recognition of goodwill and subsequently for goodwill that is not
deductible for tax purposes. Deferred tax balances are measured at tax rates enacted or substantively enacted at the
end of reporting period that are expected to apply to the extent of time when the temporary differences will reverse or
the tax loss carry forwards will be utilised.
Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax assets for
deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that
future taxable profit will be available against which the deductions can be utilised.
Deferred income tax is provided on post-acquisition retained earnings of subsidiaries, except where the Group
controls the subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or
otherwise in the foreseeable future.
Uncertain tax positions. The Group's uncertain tax positions are reassessed by the management at the end of each
reporting period. Liabilities are recorded for income tax positions that are determined by the management as more
likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The
assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of
reporting period and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other
than on income are recognised based on the management’s best estimate of the expenditure required to settle the
obligations at the end of the reporting period.
Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of uncertain
timing or amount. They are accrued when the Group has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount of the obligation can be made. Material provisions include provision
for performance guarantees, credit related commitments.
Share capital. Ordinary shares with discretionary dividends are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Any
excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in
equity.
Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the
end of the reporting period and before the consolidated financial statements are authorised for issue, are disclosed in
the subsequent events note.
Income and expense recognition. Interest income and expense are recorded for all debt instruments, other than
those at FVTPL, using the effective interest method. As part of interest income or expense this method defers all fees
paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction
costs and all other premiums or discounts. The group does not have Interest income on debt instruments at FVTPL.
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2. SIGNIFICANT ACCOUNTING POLICIES CONTINIUED
Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation
or acquisition of a financial asset or issuance of a financial liability, for example fees for evaluating creditworthiness,
evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing
transaction documents. Commitment fees received by the Group to originate loans at market interest rates are integral
to the effective interest rate if it is probable that the Group will enter into a specific lending arrangement and does not
expect to sell the resulting loan shortly after origination. The Group does not designate loan commitments as financial
liabilities at FVTPL.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets,
except for (i) financial assets that have become defaulted (Stage 3), for which interest income is calculated by applying
the effective interest rate to their AC, net of the ECL provision, and (ii) financial assets that are purchased or originated
defaulted, for which the original credit-adjusted effective interest rate is applied to the AC.
All other fees, commissions and other income and expense items are generally recorded when earned by reference to
completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total
services to be provided.
For cross currency basis swaps interest component calculation, notional amount is multiplied by agreement interest
rate for respective period. While making allocation of an interest income/(expense) from FX Swaps transactions,
annualized spread earned interest income/(expense) is calculated and distributed linearly throughout the lifetime of
the contract.
Fee and commission income. Fee and commission income is recognised over time on a straight line basis as the
services are rendered, when the customer simultaneously receives and consumes the benefits provided by the
Group’s performance. Such income includes recurring fees for account maintenance, account servicing fees, account
subscription fees, annual plastic card fees etc. Variable fees are recognised only to the extent that management
determines that it is highly probable that a significant reversal will not occur.
Other fee and commission income is recognised at a point in time when the Group satisfies its performance
obligation, usually upon execution of the underlying transaction. The amount of fee or commission received or
receivable represents the transaction price for the services identified as distinct performance obligations. Such
income includes fees for arranging a sale or purchase of foreign currencies on behalf of a customer, fees for
processing payment transactions, plastic card transactions, merchant fees, fees for cash settlements, collection or
cash disbursements, etc.
Foreign currency translation. The Group’s presentation currency is the Georgian Lari. The Group’s and the Bank’s
presentation currency is the Georgian Lari. The functional currency of each of the Group’s consolidated entities is the
currency of the primary economic environment in which the entity operates. Transactions in foreign currencies are
initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities are translated into each entity’s functional currency at the official exchange rate of the
territories where the Bank and its subsidiaries operate, at the respective reporting period. Foreign exchange gains and
losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities into
each entity’s functional currency at year-end official exchange rates are recognised in profit or loss. Translation at year-
end rates does not apply to non-monetary items, including equity investments. The effects of exchange rate changes
on the fair value of equity securities are recorded as part of the fair value gain or loss.
The results and financial position of each group entity (the functional currency of none of which is a currency of a
hyperinflationary economy) are translated into the presentation currency as follows:
(i) Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end
of the respective reporting period;
(ii) Income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions);
(iii) Components of equity are translated at the historic rate; and
(iv) All resulting exchange differences are recognised in other comprehensive income.
After losing control over a foreign operation, the exchange differences previously recognised in other comprehensive
income are reclassified to profit or loss for the year as part of the gain or loss on disposal. On partial disposal of a
subsidiary without loss of control, the related portion of accumulated currency translation differences is reclassified to
non-controlling interest within equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate. At 31 December 2022 the closing rate of exchange used for
translating foreign currency balances was GBP 1 = GEL 3.2581 (2021: GBP 1 = GEL 4.1737); USD 1 = GEL 2.7020 (2021: USD
1 = GEL 3.0976); EUR 1 = GEL 2.8844 (2021: EUR 1 = GEL 3.5040); AZN 1 = GEL 1.5924 (2021 AZN 1 = GEL 1.8222).
Offsetting. Financial assets and liabilities are offset and the net amount reported in the consolidated statement of
financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an
intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
Staff costs and related contributions. Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary
benefits as well as the cash settled part of the share based payment schemes are accrued in the year in which the
associated services are rendered by the Group’s employees.
Segment reporting. Operating segments are reported in a manner consistent with the internal reporting provided to
the Group’s chief operating decision maker. Segments whose revenue, result or assets are ten percent or more of all
the segments are reported separately.
Share based payments. A share-based payment arrangement is an agreement between the entity and another
party (including an employee) that entitles the other party to receive cash or other assets of the entity for amounts
that are based on the price (or value) of equity instruments (including shares) of the entity or another group entity, or
equity instruments (including shares or share options) of the entity or another group entity, provided the specified
vesting conditions, if any, are met. Under the share-based compensation plan the Group receives services from the
management as consideration for equity instruments of the Group. The fair value of the employee services received
in exchange for the grant of the equity instruments is recognised as an expense. The total amount to be expensed
is determined by the reference to the fair value of the equity instruments granted, excluding the impact of any non-
market service and performance vesting conditions. Non-market vesting conditions are included in the assumptions
about the number of equity instruments that are expected to vest. The total amount expensed is recognised over
the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each
balance sheet date, the Group revises its estimates of the number of equity instruments that are expected to vest
based on the non-marketing vesting conditions. It recognises the impact of the revision of original estimates, if any,
in profit or loss, with a corresponding adjustment to equity. Increase in equity on accrued shares resulting from the
equity settled scheme is accounted for under share based payment reserve. The Bank pays recharge amount to the
TBC Bank Group PLC and the share based reserve is debited correspondingly when treasury shares are purchased
by employee benefit trust (EBT). When portions of a single grant vest on two or more dates the entity applies graded
vesting for accounting of share based payment arrangement. Vesting period of each tranche of the grant ends when
the employee owns the shares with no further service restrictions. Under graded vesting scheme the expense for
earlier years is higher than for later years. Each tranche is expensed over its own service period with a credit entry
being equity.
162
163
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022MANAGEMENT REPORT 3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES
3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
Critical Judgements and Estimates
The table below describes sensitivity on 10% increase of PD and LGD estimates:
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and
judgements are continually evaluated and are based on the management’s experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. The management also
makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies.
Judgements and estimates that have the most significant effect on the amounts recognised in the consolidated
financial statements are the estimates that can cause a significant adjustment to the carrying amount of assets and
liabilities include following:
Judgements and estimates related to ECL measurement. Measurement of ECLs is a significant estimate that
involves determination of methodology, development of models and preparation of data inputs. Expert management
judgement is an also an essential part of calculating expected credit losses.
Management considers the significant management judgements and estimates in calculating ECL as follows:
Judgements used to define criteria used in definition of default. The Bank defines default using both quantitative
and qualitative criteria. Borrower is classified as defaulted if:
•
•
any amount of contractual repayments is past due more than 90 days; or
factors indicating the borrower’s unlikeliness-to-pay.
In addition, default exit criteria is defined using judgement as well as whether default should be applied on a borrower
or exposure level. For more details on the methodology please see Note 35.
Judgements used to define criteria for assessing, if there has been a significant increase in credit risk (SICR) which
is defined using both quantitative and qualitative criteria.
Qualitative factors usually include judgements around delinquency period of more than 30 days on contractual
repayments; exposure is restructured, but is not defaulted; borrower is classified as “watch”.
On a quantitative basis the Bank assess change in probability of default parameter for each particular exposure
since initial recognition and compares it to the predefined threshold. When absolute change in probability of
default exceeds the applicable threshold, SICR is deemed to have occurred and exposure is transferred to Stage
2. Quantitative indicator of SICR is applied to retail and micro segments, where the Bank has sufficient number of
observations.
The table below represents the sensitivity analysis of (i) 20% decrease of SICR thresholds (quantitative criteria applied
for retail and micro exposures described above. (ii) 10% increase in total number of stage 2 borrowers.
In thousands of GEL
31 December 2022
31 December 2021
20% decrease in
SICR thresholds
10% increase in Number of
Stage 2 Contracts
Increase credit loss allowance on loans
and advances by GEL 2,106.
Change of the Bank’s cost of credit risk
ratio by 1 basis points
Increase credit loss allowance on loans
and advances by GEL 2,470.
Change of the Bank’s cost of credit risk
ratio by 2 basis points.
Increase credit loss allowance on loans
and advances by GEL 1,639.
Change of the Bank’s cost of credit risk
ratio by 1 basis points.
Increase credit loss allowance on loans
and advances by GEL 2,511.
Change of the Bank’s cost of credit risk
ratio by 2 basis points.
Judgements used for calculation of credit risk parameters namely exposure at default (EAD), probability of default
(PD) and loss given default (LGD). The judgements includes and are not limited by:
(i) definition of the segmentation for risk parameters estimation purposes,
(ii) decision whether simplified or more complex models can be used,
(iii) time since default date after which no material recoveries are expected,
(iv) collateral haircuts from market value as well as the average workout period for collateral discounting.
In thousands of GEL
31 December 2022
31 December 2021
10% increase (decrease) in
PD estimates
10% increase (decrease) in
LGD estimates
Increase (decrease) credit loss allowance
on loans and advances by GEL 19,891
(GEL 18,843). Change of the Bank’s cost of
credit risk ratio by 12 (11) basis points
Increase (decrease) credit loss allowance
on loans and advances by GEL 25,043
(GEL 18,905). Change of the Bank’s cost of
credit risk ratio by 16 (12) basis points
Increase (decrease) credit loss allowance
on loans and advances by GEL 31,635
(GEL (31,770). Change of the Bank’s cost of
credit risk ratio by 19 (19) basis points.
Increase (decrease) credit loss allowance
on loans and advances by GEL 39,900
(GEL 35,129).Change of the Bank’s cost of
credit risk ratio by 26 (22) basis points.
Estimates used for forward-looking macroeconomic scenarios and judgements made for their probability
weightings.
For forward-looking information purposes the Bank defines three macro scenarios. The scenarios are defined as
baseline (most likely), upside (better than most likely) and downside (worse than most likely) scenarios of the state of
the Georgian economy.
Estimates applied in differentiating between these three scenarios represent GDP, USD/GEL rate, RE price,
employment levels, monetary policy rate and other macro variables. Under usual conditions, the scenario weights
applied are 50%, 25% and 25% for the base case, upside and downside scenarios respectively. As at 31 December
2022 the weights remained the same as at 31 December 2021 - 50%, 25% and 25% for the base, upside and downside
scenarios respectively. Based on the changes of the macro environment the Bank modifies the weightings based on
expert judgement.
The table below describes the unweighted ECL for each economic scenario as at 31 December 2022:
In thousands of GEL
Corporate
MSME
Consumer
Mortgage
Total
Baseline
45,775
95,991
183,342
33,856
358,964
Upside
45,456
94,270
182,366
33,519
355,611
Downside
Weighted
48,827
98,169
184,396
34,421
365,813
46,458
96,112
183,352
33,912
359,834
The table below describes the unweighted ECL for each economic scenario as at 31 December 2021:
In thousands of GEL
Corporate
MSME
Consumer
Mortgage
Total
Baseline
48,220
112,592
180,003
63,080
403,895
Upside
46,752
104,856
176,638
59,464
387,710
Downside
Weighted
59,640
122,768
183,600
68,491
434,499
50,731
113,101
180,050
63,486
407,368
164
165
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES CONTINUED
The following table describes the key macroeconomic variables under each scenario for future 3-year period as at 31
December 2022:
Baseline
Upside
Downside
Growth rates YoY, %
GDP
USD/GEL rate (EOP)
RE Price (in USD)
Employment (EOP)
2023
3.5%
2.80
2024
5.4%
2.65
2025
5.2%
2.60
2023
5.2%
2.47
19.8%
-2.0%
-1.3%
24.2%
1.9%
-0.8%
-0.2%
2.5%
8.4%
2024
7.9%
2.31
4.1%
-0.1%
7.0%
2025
8.4%
2.24
4.8%
0.6%
6.8%
2023
1.7%
3.06
2024
2.7%
2.92
2025
1.9%
2.90
11.6% -13.1% -12.5%
1.5%
-1.3% -0.9%
10.1%
9.3%
9.6%
Monetary policy rate (EOP, Level)
9.0%
7.8%
7.8%
The following table describes the key macroeconomic variables under each scenario for future 3-year period as at 31
December 2021:
Growth rates YoY, %
GDP
USD/GEL rate (EOP)
RE Price (in USD)
Employment (EOP)
2022
6.0%
3.30
1.6%
1.0%
Monetary policy rate (EOP, Level)
8.5%
Baseline
Upside
Downside
2023
5.5%
3.25
2.1%
1.0%
7.5%
2024
5.0%
3.20
2.6%
0.5%
7.0%
2022
7.8%
2.95
4.6%
1.5%
8.0%
2023
2024
8.2%
2.87
6.3%
1.7%
6.8%
8.3%
2.80
7.7%
1.3%
6.1%
2022
4.1%
3.55
2023
2.8%
3.55
2024
1.7%
3.52
-1.6% -2.5% -3.5%
0.6%
9.4%
0.4% -0.2%
8.7%
8.4%
The Bank assessed the impact of changes in GDP growth, unemployment and monetary policy rate variables on ECL
as a most critical estimates applied in ECL assessment.
The sensitivity analysis was performed separately for each of the variable to show their significant in ECL assessment,
but changes in those variables may not happen in isolation as various economic factors tend to be correlated across
the scenarios. The variables were adjusted in all three macroeconomic scenarios and the staging has been maintained
unchanged. From the assessment of forward looking scenarios, management is comfortable with the scenarios
capturing the non-linearity of the losses.
The table below shows the impact of +/-20% change in GDP growth, unemployment and monetary policy variables
across all scenarios on the Bank’s ECL as at 31 December 2022:
In thousands of GEL
20% increase
20% decrease
20% increase
20% decrease
20% increase
20% decrease
Impact on ECL
(987)
1,038
1,341
(1,231)
710
(616)
Change in GDP growth
Change in unemployment
Change in Monetary Policy
The table below shows the impact of +/-20% change in GDP growth and unemployment variables across all scenarios
on the Bank’s ECL as at 31 December 2021:
In thousands of GEL
20% increase
20% decrease
20% increase
20% decrease
20% increase
20% decrease
Impact on ECL
(9,036)
10,359
4,805
(4,541)
4,045
(3,493)
Change in GDP growth
Change in unemployment
Change in Monetary Policy
Individual assessment: Individual assessment is mainly used for stage 2 and stage 3 individually significant borrowers.
For selecting individually significant exposures, the management uses the following estimated thresholds above which
exposures are selected for individual review: for stage 2 - to GEL 10 million and for stage 3 - GEL 4 million. Additionally,
the Bank may arbitrarily designate selected exposures to individual measurement of ECL based on the Bank’s credit
risk management or underwriting departments’ decision. The individual assessment takes into account latest available
information in order to define ECL under baseline, upside and downside scenarios.
Post model adjustments
PMAs are a specific set of management adjustments to address known model limitations, either in model
methodology or model inputs. PMAs are made based on analysis of model inputs and parameters to determine the
required modifications in order to improve model accuracy.
Post model overlays
Post model overlays (PMOs) reflect management judgement that mainly rely on expert judgement and are applied
directly to expected credit losses at an aggregated level.
Once implemented, post model overlays and adjustments are re-assessed at each reporting date to determine the
validity of the adjustments. The appropriateness of PMAs and PMOs is subject to rigorous review and challenge. Post
model overlays and adjustments review and approval process goes through same phases as made for ECL process
governance.
As a result of COVID-19 pandemic, the Bank applied expert judgement to the measurement of the expected credit
losses in the form of post model adjustments (PMAs). The adjustments made were all in model adjustments, which
means that we made adjustments either to model inputs or its parameters and run the models based on the updated
adjustments. No post model overlays has been processed.
As at 31 December 2022 Bank introduced a PMA for clients affected by the Russian invasion in Ukraine. Specifically,
the default definition was modified for restructured, war-affected exposures amounting to GEL 8,174 thousand.
Restructured exposures are transferred to stage 2 instead of stage 3, however, for that particular exposures a lower
number of days past due (‘DPD’) will be used for default recognition: namely, instead of applying a standard 90 DPD,
default will be recognised earlier at 30 DPD after the end of grace period. The effect of this PMA on staging shares
amount to 0.05 pp. while the effect on ECL amounted GEL 2,340 thousand as at 31 December 2022 in case those
exposures were in stage 3.
As of 31 December 2022 all the COVID-19 related PMAs are no longer in place. Effect of PMAs on expected credit
losses as at 31 December 2021 is summarized below:
• Loss given default (LGD) – Recovery rate: As reported at 31 December 2021, the Bank had applied a downward
adjustment on recovery rates in stage 3 to reflect the expected impact of the COVID- 19 pandemic. The effect of
LGD related PMA on ECL as at 31 December 2021 amounted to GEL 12,835 thousand;
• Loss given default (LGD) – AWT: As reported at 31 December 2021, the Bank had extended AWT (average
workout period) from 1 Year to 2 years for SME and non-significant corporate portfolios, in order to reflect delayed
recoveries, mainly driven by COVID-19 pandemic. An adjustment was applied across all stages. The effect of this
PMA on ECL as at 31 December 2021 amounted to GEL 2,754 thousand.
• Full prepayment ratio (FPR): As reported at 31 December 2021, the Bank had applied downward adjustment to FPR
ratio which is used for exposure at default modeling (EAD). The adjustment was made based on the expectations
that full prepayments will be lower compared to the pre-pandemic levels. The effect of this PMA on ECL as at 31
December 2021 amounted to GEL 0.512 thousand.
1
Total exposure of the bank toward the borrower or group of interconnected borrowers
166
167
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS CONTINUED
Contingencies
and commitments
Derivatives
The following amended standards became effective from 1 January 2022, but did not have any material impact on
the Group:
Financial effect of IBOR reform. The reform and replacement of various inter-bank offered rates (‘IBORs’) has
become a priority for regulators. Many IBOR rates stopped being published on 31 December 2021, while certain USD
LIBOR rates will stop being published by 30 June 2023.
The Group applied the practical expedients of Interest Rate Benchmark Reform – Phase 2 amendments to IFRS 9 to
reflect changes to the basis for determining the contractual cash flows by adjusting the effective interest rate to the
financial assets and liabilities that have been subject to the index change. The Group is using a secured overnight
financing rate (SOFR, Term SOFR), which is selected as an alternative rate for USD LIBOR. The newly signed contracts
are in most cases already formed in SOFR or Term SOFR to reflect the anticipated change and therefore are not
subject to the transition process. A few contracts have already been changed from LIBOR to economically equivalent
SOFR in 2022 (as a direct consequence of IBOR reform), hence the change effect has not resulted in material effect for
the Group.
The table below discloses amounts of non-derivative financial assets and liabilities and derivative contracts on 31
December 2022 that are to be transitioned to alternative interest rate benchmarks in 2023:
In thousands of GEL
Index
Currency
Cessation
Date
Non
derivative
financial
assets
Loans and
advances
to
customers
Non
derivative
financial
liabilities
Subordinated
debt
Due to
credit instit
utions
Letters
of credit
Undrawn
credit lines
Derivative
liabilities
3M Libor
6M Libor
Total
USD 30-Jun-23
-
-
1,671
-
-
22,978
USD 30-Jun-23 3,719,416
248,069
268,754
1,593
256,892
-
3,719,416
248,069
270,425
1,593
256,892
22,978
The table below discloses amounts of non-derivative financial assets and liabilities and derivative contracts on 31
December 2021 that are to be transitioned to alternative interest rate benchmarks in 2022:
In thousands of GEL
Index
Currency
Cessation
Date
Non
derivative
financial
assets
Loans and
advances
to
customers
Non
derivative
financial
liabilities
Contingencies
and commitments
Derivatives
Subordinated
debt
Due to
credit
institutions
Letters
of credit
Undrawn
credit lines
Derivative
assets
6M Euro Libor
EUR
31-Dec-21
-
USD
TBD
24,831
USD 30-Jun-23
26,139
-
-
-
88,761
-
2,858
-
-
-
-
1,032
11
USD 30-Jun-23 5,432,142
281,604
361,360
4,771
909,315
USD 30-Jun-23
1,460
-
30,992
-
-
5,484,572
281,604
483,971
4,771
910,358
3,613
1M Libor
3M Libor
6M Libor
12M Libor
Total
-
-
3,613
-
-
The Group is exposed to a risk that the liquidity of the above financial instruments would start to decrease, as the
volume of operations with traditional IBOR-based financial instruments are shrinking. The Group may also expose to a
risk, that reference rate structure for funds attracted and loans disbursed may differ after moving to different reference
rates hence the change effect has not resulted in material financial effect for the Group.
The Group is working with its customers and other counterparties, such as international financial institutions to
perform a transition of legacy IBOR-based financial instruments to alternative benchmark interest rates and develop
new financial products for its customers. The Group is also enhancing its IT systems and internal processes to ensure
smooth transition from IBOR to alternative benchmark interest rates.
The continued orderly transition from LIBOR is going to be the Group’s key objective through 2023 and is grouped into
two work streams:
1. The development of alternative rate and risk free rate product capabilities.
2. The transition of legacy LIBOR contracts.
The Groups initiatives in connection with LIBOR transition include:
(a) Implementing rate fallback provisions into contracts, where appropriate;
(b) The Group continues to engage with market participants and the regulator to address market-wide challenges
associated with the USD LIBOR transition, including the efforts to introduce forward-looking term rates linked to
SOFR;
(c) To educate and inform clients on LIBOR transition and the necessity to prepare for the cessation of it.
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual
Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-
2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods
beginning on or after 1 January 2022).
• The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant or
equipment any proceeds received from selling items produced while the entity is preparing the asset for its
intended use. The proceeds from selling such items, together with the costs of producing them, are now
recognised in profit or loss. An entity has to use IAS 2 to measure the cost of those items. Cost does not include
depreciation of the asset being tested because it is not yet ready for its intended use. The amendment to IAS 16
also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and
physical performance of the asset. The financial performance of the asset is not relevant to this assessment. An
asset might therefore be capable of operating as intended by management and subject to depreciation before it
has achieved the level of operating performance expected by management.
• The amendment to IAS 37 clarifies the meaning of ‘costs to fulfill a contract’. The amendment explains that the
direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of
other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an
onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in
fulfilling the contract, rather than on assets dedicated to that contract.
•
IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what
constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3 referred to the 2001
Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3 was added for liabilities and
contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity
applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without
this new exception, an entity would have recognised some liabilities in a business combination that it would not
recognise under IAS 37. Therefore, immediately after the acquisition, the entity would have had to derecognise such
liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not
recognise contingent assets, as defined in IAS 37, at the acquisition date.
• The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial
liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid
to third parties will not be included in the 10% test.
•
Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the
lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion
about the treatment of lease incentives.
168
169
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 4. ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS CONTINUED
5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
•
IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure
its assets and liabilities at the carrying amounts that would be included in its parent’s consolidated financial
statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation
procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was
amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences
using the amounts reported by the parent, based on the parent’s date of transition to IFRS. The amendment
to IFRS 1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-
time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1
exemption.
• The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed.
This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax
basis.
5. NEW ACCOUNTING PRONOUNCEMENTS
The Group has not early adopted any of the amendments effective after 31 December 2022. The Group expects the
amendments will have an insignificant effect, when adopted, or is in the process of assessment of the scale of any
potential impact on the consolidated or separate financial statements of the Group and Bank.
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-based standard
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-adjusted present 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.
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 include a number of clarifications intended to ease
implementation of IFRS 17, simplify some requirements of the standard and transition. 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: The effective date of IFRS 17 (incorporating the amendments) has been deferred by two years to
annual reporting periods beginning on or after 1 January 2023; and the fixed expiry date of the temporary exemption
from applying IFRS 9 in IFRS 4 has also been deferred to annual reporting periods beginning on or after 1 January
2023.
• Expected recovery of insurance acquisition cash flows: An entity is required to allocate part of the acquisition
costs to related expected contract renewals, and to recognise those costs as an asset until the entity recognises
the contract renewals. Entities are required to assess the recoverability of the asset at each reporting date, and to
provide specific information about the asset in the notes to the financial statements.
• Contractual service margin attributable to investment services: Coverage units should be identified, considering
the quantity of benefits and expected period of both insurance coverage and investment services, for contracts
under the variable fee approach and for other contracts with an ‘investment-return service’ under the general
model. Costs related to investment activities should be included as cash flows within the boundary of an insurance
contract, to the extent that the entity performs such activities to enhance benefits from insurance coverage for the
policyholder.
• Reinsurance contracts held – recovery of losses: When an entity recognises a loss on initial recognition of an
onerous group of underlying insurance contracts, or on addition of onerous underlying contracts to a group, an
entity should adjust the contractual service margin of a related group of reinsurance contracts held and recognise
a gain on the reinsurance contracts held. The amount of the loss recovered from a reinsurance contract held is
determined by multiplying the loss recognised on underlying insurance contracts and the percentage of claims
on underlying insurance contracts that the entity expects to recover from the reinsurance contract held. This
requirement would apply only when the reinsurance contract held is recognised before or at the same time as the
loss is recognised on the underlying insurance contracts.
• Other amendments: Other amendments include scope exclusions for some credit card (or similar) contracts,
and some loan contracts; presentation of insurance contract assets and liabilities in the statement of financial
position in portfolios instead of groups; applicability of the risk mitigation option when mitigating financial risks
using reinsurance contracts held and non-derivative financial instruments at fair value through profit or loss; an
accounting policy choice to change the estimates made in previous interim financial statements when applying
IFRS 17; inclusion of income tax payments and receipts that are specifically chargeable to the policyholder under
the terms of an insurance contract in the fulfilment cash flows; and selected transition reliefs and other minor
amendments.
• Other amendments: Other amendments include scope exclusions for some credit card (or similar) contracts,
and some loan contracts; presentation of insurance contract assets and liabilities in the statement of financial
position in portfolios instead of groups; applicability of the risk mitigation option when mitigating financial risks
using reinsurance contracts held and non-derivative financial instruments at fair value through profit or loss; an
accounting policy choice to change the estimates made in previous interim financial statements when applying
IFRS 17; inclusion of income tax payments and receipts that are specifically chargeable to the policyholder under
the terms of an insurance contract in the fulfilment cash flows; and selected transition reliefs and other minor
amendments.
Transition option to insurers applying IFRS 17 – Amendments to IFRS 17 (issued on 9 December 2021 and effective
for annual periods beginning on or after 1 January 2023). The amendment to the transition requirements in IFRS 17
provides insurers with an option aimed at improving the usefulness of information to investors on initial application
of IFRS 17. The amendment relates to insurers’ transition to IFRS 17 only and does not affect any other requirements in
IFRS 17. The transition requirements in IFRS 17 and IFRS 9 apply at different dates and will result in the following one-
time classification differences in the comparative information presented on initial application of IFRS 17: accounting
mismatches between insurance contract liabilities measured at current value and any related financial assets
measured at amortised cost; and if an entity chooses to restate comparative information for IFRS 9, classification
differences between financial assets derecognised in the comparative period (to which IFRS 9 will not apply) and other
financial assets (to which IFRS 9 will apply). The amendment will help insurers to avoid these temporary accounting
mismatches and, therefore, will improve the usefulness of comparative information for investors. It does this by
providing insurers with an option for the presentation of comparative information about financial assets. When initially
applying IFRS 17, entities would, for the purpose of presenting comparative information, be permitted to apply a
classification overlay to a financial asset for which the entity does not restate IFRS 9 comparative information. The
transition option would be available, on an instrument-by-instrument basis; allow an entity to present comparative
information as if the classification and measurement requirements of IFRS 9 had been applied to that financial
asset, but not require an entity to apply the impairment requirements of IFRS 9; and require an entity that applies the
classification overlay to a financial asset to use reasonable and supportable information available at the transition date
to determine how the entity expects that financial asset to be classified applying IFRS 9.
Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued
on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12
specify how to account for deferred tax on transactions such as leases and decommissioning obligations. In specified
circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the
first time. Previously, there had been some uncertainty about whether the exemption applied to transactions such
as leases and decommissioning obligations – transactions for which both an asset and a liability are recognised.
The amendments clarify that the exemption does not apply and that entities are required to recognise deferred tax
on such transactions. The amendments require companies to recognise deferred tax on transactions that, on initial
recognition, give rise to equal amounts of taxable and deductible temporary differences.
170
171
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 5. NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
6. CASH AND CASH EQUIVALENTS
Classification of liabilities as current or non-current – Amendments to IAS 1 (originally issued on 23 January 2020
and subsequently amended on 15 July 2020 and 31 October 2022, ultimately effective for annual periods beginning
on or after 1 January 2024). These amend ments clarify that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a
substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no
longer requires such a right to be unconditional. The October 2022 amendment established that loan covenants to be
complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting
date. Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect
classification of liabilities. A liability is classified as current if a condition is breached at or before the reporting date
even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan
is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments
include clarifying the classification requirements for debt a company might settle by converting it into equity.
‘Settlement’ is defined as the extinguishment of a liability with cash, other resources embodying economic benefits
or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into
equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate
component of a compound financial instrument.
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). The amendment to IAS 1
on classification of liabilities as current or non-current was issued in January 2020 with an original effective date 1
January 2022. However, in response to the Covid-19 pandemic, the effective date was deferred by one year to provide
companies with more time to implement classification changes resulting from the amended guidance.
Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual
periods beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies should distinguish
changes in accounting policies from changes in accounting estimates.
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February
2021 and effective for annual periods beginning on or after 1 January 2023). IAS 1 was amended to require
companies to disclose their material accounting policy information rather than their significant accounting policies.
The amendment provided the definition of material accounting policy information. The amendment also clarified that
accounting policy information is expected to be material if, without it, the users of the financial statements would be
unable to understand other material information in the financial statements. The amendment provided illustrative
examples of accounting policy information that is likely to be considered material to the entity’s financial statements.
Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed.
However, if it is disclosed, it should not obscure material accounting policy information. To support this amendment,
IFRS Practice Statement 2, ‘Making Materiality Judgements’ was also amended to provide guidance on how to apply
the concept of materiality to accounting policy disclosures. Currently we are assessing the scale of impact on the
consolidated financial statements of the Group and the separate financial statements of JSC TBC Bank.
In thousands of GEL
Cash on hand
Cash balances with the National Bank of Georgia (other than mandatory reserve deposits)
Correspondent accounts and overnight placements with other banks
Placements with and receivables from other banks with original maturities of less than
three months
Reverse sale and repurchase agreements with other banks with original maturities of less
than three months
Total gross amount of cash and cash equivalents
Less: credit loss allowance by stages
Stage 1
Total cash and cash equivalents
31 December
2022
31 December
2021
1,224,264
315,253
1,442,961
434,027
370,022
831,035
134,262
630,247
45
-
3,786,527
1,595,589
(429)
(429)
(129)
(129)
3,786,098
1,595,460
As of 31 December 2022, 96% of the correspondent accounts and overnight placements with other banks was placed
with OECD (Organization for Economic Co-operation and Development) banking institutions (31 December 2021: 94%).
As of 31 December 2022, GEL 303,206 thousand was placed on interbank term deposits with one OECD bank and none
with non-OECD (As at 31 December 2021 GEL 45 thousand was placed on interbank term deposits with one non-
OECD bank and none with OECD banks). Interest rate analysis of cash and cash equivalents is disclosed in Note 35.
The credit-ratings of correspondent accounts and overnight placements with other banks are as follows:
In thousands of GEL
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
31 December
2022
31 December
2021
280,732
207,873
69,943
2,117
705,316
425,554
-
1,795
86,538
23,766
102,814
70,886
2,360
-
647
5,457
23,600
26,888
42
694
7
12,569
367
1,519
13,367
8,343
14
-
Total correspondent accounts and overnight placements with other banks
1,442,961
630,247
172
173
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 6. CASH AND CASH EQUIVALENTS CONTINUED
8. MANDATORY CASH BALANCES WITH NATIONAL BANK OF GEORGIA
The credit rating of placements with and receivables from other banks with original maturities of less than three
months stands as follows:
In thousands of GEL
AAA
BBB+
BB
BB-
Not rated
Total placements with and receivables from other banks with original maturities of less
than three months
31 December
2022
31 December
2021
1,085
303,364
9,541
120,037
-
434,027
-
-
-
-
45
45
The table illustrates the ratings by international agencies Standard & Poor’s and Fitch Ratings. When different
credit ratings are designated by the agencies, the highest designated rating for this asset is used, for those financial
institutions which are not assigned credit ratings country ratings are used. As at 31 December 2022 there were GEL
374,255 thousand investment securities held as collateral against reverse sale and repurchase agreements with other
banks with original maturities of less than three months (2021: nil). As at 31 December 2022 credit rating of reverse sale
and repurchase agreements with other banks with original maturities of less than three months is rated at BB-.
7. DUE FROM OTHER BANKS
Amounts due from other banks include placements with original maturities of more than three months that are not
collateralised and represent neither past due nor impaired amounts at the end of 2022 and 2021. Credit ratings of
placements with and receivables from other banks with original maturities of more than three months and restricted
cash were as follows:
Mandatory cash balances with the National Bank of Georgia (“NBG”) represent amounts deposited with the NBG.
Resident financial institutions are required to maintain an interest-earning obligatory reserve with the NBG, the amount
of which depends on the level of funds attracted by the financial institutions. The Bank earned up to 10.88%, 2.17% and
(0.7%) annual interest in GEL, USD and EUR, respectively, on mandatory reserve with NBG during the year 2022 (2021:
10.5%, (0.25%) and (0.7%) in GEL, USD and EUR, respectively).
In July 2022, Fitch Ratings has affirmed Georgia’s Long-Term Foreign and Local Currency Issuer Default Rating (IDRs)
at ‘BB’, the stable outlook. The Country Ceiling Rating is affirmed at ’BBB-‘, while short-term foreign and local-currency
IDRs are kept at ‘B’.
9. LOANS AND ADVANCES TO CUSTOMERS
in thousands of GEL
Corporate loans
Loans to micro, small and medium enterprises
Consumer loans
Mortgage loans
Total gross loans and advances to customers at amortised cost (AC)
Less: credit loss allowance
Stage 1
Stage 2
Stage 3
Total loans and advances to customers at amortised cost (AC)
31 December
2022
31 December
2021
6,282,469
6,547,741
4,809,415
4,141,305
2,512,220
2,153,066
4,253,172
4,112,441
17,857,276
16,954,553
(359,834)
(407,368)
(101,747)
(101,972)
(96,993)
(120,417)
(161,094)
(184,979)
17,497,442
16,547,185
In thousands of GEL
A+
BBB+
BBB
BBB-
BB
B+
Total placements with and receivables from other banks with original maturities of
more than three months and restricted cash
31 December
2022
31 December
2021
-
-
1,298
-
4,326
13,099
21
-
2,943
1,468
674
24,706
6,298
42,237
As of 31 December 2022, GEL 17,859,189 thousand of gross loans and advances to customers and GEL 353,584
thousand of credit loss allowance were attributable to the Bank (2021: GEL 16,948,195 thousand and GEL 398,735
thousand).
As at 31 December 2022 loans and advances to customers carried at GEL 958,530 thousand have been pledged
to local banks or other financial institutions as collateral with respect to other borrowed funds (2021: GEL 843,006
thousand).
Total credit loss allowance includes PMAs amounted to GEL 2,340 thousand and GEL 16,107 thousand for YE 2022 and
YE 2021 respectively.
The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans and
advances to customers carried at amortised cost between the beginning and the end of the reporting period. Below
main movements in the table are described:
As at 31 December 2022 the Group had no placements, with original maturities of more than three months and with
aggregated amounts above GEL 5,000 thousand (2021: two placements ). The total aggregated amount of placements
with and receivables from other banks with original maturities of more than three months was GEL 5,623 thousand
(2021: GEL 28,428 thousand) or 89.3% of the total amount due from other banks (2021: 67.3%).
As at 31 December 2022 GEL 693 thousand (2021: GEL 13,819 thousand) were kept on deposits as restricted cash under
an arrangement with a credit card company or credit card related services with other banks.
For the estimated fair values of due from other bank balances please refer to Note 40.
For the purpose of ECL measurement due from other banks balances are included in Stage 1. The ECL for these
balances at 31 December 2022 is GEL 18.9 thousand (2021: GEL 9.9 thousand).
174
175
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
• Transfers occur between Stage 1, 2 and 3, due to significant increases (or decreases) of credit risk or exposures
becoming defaulted in the period, and the consequent "step up" (or "step down") between 12-month and Lifetime
ECL. It should be noted, that:
- For loans, which existed at the beginning of the period, opening exposures are disclosed as transfer amounts;
- For newly issued loans, exposures upon issuance are disclosed as transfer amounts;
Total loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
• New originated or purchased gives us information regarding gross loans issued and corresponding credit loss
allowance created during the period (however, exposures which were issued and repaid during the period and
issued to refinance existing loans are excluded);
• Derecognised during the period refers to the balance of loans and credit loss allowance at the beginning of the
period, which were fully repaid during the period. Exposures which were issued and not fully repaid during the
period, written off or refinanced by other loans, are excluded;
• Net repayments refers to the net changes in gross carrying amounts, which is loan disbursements less repayments,
excluding loans that were fully repaid;
• Write-offs refer to write off of loans during the period;
• Foreign exchange movements refers to the translation of assets denominated in foreign currencies and effect to
translation in presentational currency for foreign subsidiary;
• Net re-measurement due to stage transfers and risk parameters changes refers to the movements in ECL as a result
of transfer of exposure between stages or changes in risk parameters and forward looking expectations;
• Modification refers to changes in terms that do not result in derecognition;
• Re-segmentation refers to the transfer of loans from one reporting segment to another. For presentation purposes,
amounts are rounded to the nearest thousands of GEL, which in certain cases is disclosed as nil.
At 1 January 2022
14,512,165
1,933,530
508,858
16,954,553
101,972
120,417
184,979
407,368
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(2,241,877) 2,377,744 (135,867)
-
(80,875)
131,871
(50,996)
-
(64,005) (363,664)
427,669
-
(9,832) (109,393)
119,225
-
1,991,879 (1,979,138)
(12,741)
-
138,471
(137,647)
(824)
-
9,824,500
-
-
9,824,500
169,303
-
-
169,303
(4,745,259)
(173,137)
(116,526) (5,034,922)
(50,872)
(14,164)
(38,873)
(103,909)
Net repayments
(2,037,641)
(219,172)
(55,873)
(2,312,686)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments1
-
-
-
-
(165,382)
107,892
147,574
90,084
Movements without impact on credit loss allowance charge for the period:
Write-offs
-
-
(194,012)
(194,012)
Changes in accrued
interest
(26,737)
5,690
3,631
(17,416)
Modification
4,016
834
732
5,582
-
-
-
-
(194,012)
(194,012)
-
-
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(1,151,310)
(180,726)
(36,287)
(1,368,323)
(1,038)
(1,983)
(5,979)
(9,000)
16,065,731
1,401,961
389,584
17,857,276
101,747
96,993
161,094
359,834
1 Movements with impact on credit loss allowance charge for the period differs from statement of profit or loss with amount of recoveries of GEL
50,231 thousands in 2022 (2021: GEL 44,642 thousands) The amount of recoveries include recoveries from sale of written off portfolio in the amount of
GEL 12,688 thousands sold In January 2022 and GEL 5,946 thousands sold in September 2022 (2021: GEL 11,649 thousands).
176
177
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total loans
in thousands of GEL
Total
Corporate loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
11,860,559
2,448,126
891,830
15,200,515
130,228
142,915
333,103
606,246
At 1 January 2022
5,743,444
712,548
91,749
6,547,741
24,404
1,310
25,017
50,731
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(1,734,485) 2,099,936 (365,451)
-
(66,102)
162,746
(96,644)
-
(366,906) (262,234)
629,140
-
(83,962)
(39,902)
123,864
-
1,950,513 (1,780,706) (169,807)
-
143,565
(93,518)
(50,047)
-
7,369,167
-
-
7,369,167
115,394
-
-
115,394
(2,161,851)
(162,437)
(192,679)
(2,516,967)
22,759
(16,651)
(50,522)
(44,414)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(167,429)
171,531
(4,102)
-
(770)
1,550
(780)
(13,861)
(21,457)
35,318
-
(1,428)
(160)
1,588
219,373 (207,522)
(11,851)
-
1,113
(738)
(375)
-
-
-
3,659,826
-
-
3,659,826
51,203
-
-
51,203
(2,805,071)
(35,641)
(13,318) (2,854,030)
(18,621)
(188)
(1,383)
(20,192)
Net repayments
(1,809,284)
(267,445)
(66,207)
(2,142,936)
-
-
-
-
Net repayments
(378,989)
(68,653)
(8,529)
(456,171)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(158,517)
(33,483)
122,486
(69,514)
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(36,022)
(494)
4,210
(32,306)
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
-
(193,678)
(193,678)
Re-segmentation
64,980
16,622
-
81,602
139
Write-offs
-
-
(193,678)
(193,678)
Changes in accrued
interest
11,271
(3,229)
1,870
9,912
Modification
5,346
1,930
2,466
9,742
-
-
-
-
-
-
-
-
-
Foreign exchange
movements
At 31 December
2021
(612,165)
(140,411)
(28,626)
(781,202)
(1,393)
(1,690)
(3,583)
(6,666)
14,512,165 1,933,530 508,858 16,954,553
101,972
120,417
184,979
407,368
Write-offs
-
-
(1,126)
(1,126)
Changes in accrued
interest
(40,308)
(563)
242
(40,629)
Modification
1,520
62
74
1,656
-
-
-
16
-
-
-
-
155
(1,126)
(1,126)
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(542,085)
(108,593)
(5,722)
(656,400)
(1,088)
(82)
(837)
(2,007)
5,741,400
458,334
82,735
6,282,469
18,930
1,214
26,314
46,458
178
179
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Corporate loans
in thousands of GEL
Gross carrying amount
Loans to micro,
small and medium
enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
4,574,134
955,187
161,428
5,690,749
53,995
8,194
45,452
107,641
At 1 January 2022
3,519,842
413,339
208,124
4,141,305
20,487
32,234
60,380
113,101
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(260,069)
331,488
(71,419)
-
(6,701)
12,127
(5,426)
-
(93,919)
(25,017)
118,936
-
(30,508)
(391)
30,899
-
461,963 (405,275) (56,688)
-
27,590
(8,265)
(19,325)
-
2,604,204
-
-
2,604,204
39,357
-
-
39,357
(1,034,926)
(10,074)
(35,273) (1,080,273)
(3,172)
102
(16,258)
(19,328)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(596,643)
649,360
(52,717)
-
(12,887)
30,360
(17,473)
(3,607)
(131,785)
135,392
470,443 (469,705)
(738)
-
-
(785)
(22,920)
23,705
31,196
(30,853)
(343)
-
-
-
2,732,945
-
-
2,732,945
30,670
-
-
30,670
(799,199)
(49,055)
(32,100)
(880,354)
(10,514)
(3,232)
(9,333)
(23,079)
Net repayments
(414,977)
(82,387)
(32,038)
(529,402)
-
-
-
-
Net repayments
(680,252)
(58,076)
(27,557)
(765,885)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(55,960)
(10,378)
(12,081)
(78,419)
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(33,027)
18,867
39,156
24,996
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
213,296
29,590
6,401
249,287
476
314
Write-offs
-
-
(340)
(340)
Changes in accrued
interest
1,988
(3,035)
3,917
2,870
Modification
719
608
996
2,323
-
-
-
-
-
-
2,897
(340)
3,687
(340)
-
-
-
-
Foreign exchange
movements
At 31 December
2021
(308,969)
(78,537)
(4,171)
(391,677)
(673)
(393)
(801)
(1,867)
5,743,444
712,548
91,749
6,547,741
24,404
1,310
25,017
50,731
Re-segmentation
(56,707)
(15,755)
-
(72,462)
(70)
74
-
4
Write-offs
-
-
(46,258)
(46,258)
Changes in accrued
interest
13,981
3,054
(716)
16,319
Modification
546
255
353
1,154
-
-
-
-
-
-
(46,258)
(46,258)
-
-
-
-
Foreign exchange
movements
At 31 December
2022
(273,607)
(23,802)
(19,940)
(317,349)
(132)
(569)
(2,621)
(3,322)
4,327,742
317,830
163,843
4,809,415
24,938
23,961
47,213
96,112
180
181
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Loans to micro,
small and medium
enterprises
in thousands of GEL
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Consumer loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
2,661,786
631,347
262,946
3,556,079
24,490
46,853
88,567
159,910
At 1 January 2022
1,829,908
237,400
85,758
2,153,066
54,279
64,793
60,978
180,050
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(466,965)
534,711
(67,746)
-
(10,917)
29,516
(18,599)
-
(71,234)
(94,868)
166,102
-
(14,450)
(10,455)
24,905
-
570,554 (537,576) (32,978)
-
36,444
(28,030)
(8,414)
-
2,023,430
-
-
2,023,430
16,667
-
-
16,667
(522,685)
(44,334)
(33,607)
(600,626)
(688)
(1,613)
(11,988)
(14,289)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(650,136)
668,563
(18,427)
-
(64,388)
76,190
(11,802)
-
(34,514)
(177,854)
212,368
-
(5,980)
(84,055)
90,035
-
409,926 (409,774)
(152)
-
88,788
(88,682)
(106)
-
2,080,841
-
-
2,080,841
85,603
-
-
85,603
(818,914)
(41,409)
(47,920)
(908,243)
(21,501)
(8,971)
(19,551)
(50,023)
Net repayments
(475,809)
(61,832)
(30,299)
(567,940)
-
-
-
-
Net repayments
(600,668)
(49,488)
(2,136)
(652,292)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(26,678)
(3,534)
32,293
2,081
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(81,011)
103,143
89,322
111,454
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(80,868)
6,542
(4,798)
(79,124)
(3,824)
78
(4,898)
(8,644)
Re-segmentation
3,580
(34)
-
3,546
(77)
(39)
-
(116)
Write-offs
-
-
(40,086)
(40,086)
Changes in accrued
interest
14,130
1,126
1,449
16,705
Modification
1,208
369
424
2,001
-
-
-
-
(40,086)
(40,086)
Write-offs
-
-
(142,912)
(142,912)
-
-
-
-
-
-
Changes in accrued
interest
3,110
5,105
5,345
13,560
Modification
1,076
260
101
1,437
-
-
-
-
(142,912)
(142,912)
-
-
-
-
-
-
Foreign exchange
movements
At 31 December
2021
(133,705)
(22,146)
(13,283)
(169,134)
(557)
(581)
(1,400)
(2,538)
3,519,842
413,339
208,124
4,141,305
20,487
32,234
60,380
113,101
Foreign exchange
movements
At 31 December
2022
(31,786)
(2,777)
(2,220)
(36,783)
(134)
(261)
(309)
(704)
2,192,423
229,992
89,805
2,512,220
55,579
62,118
65,655
183,352
182
183
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Consumer loans
in thousands of GEL
Total
Mortgage loans
in thousands of GEL
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
At 1 January 2021
1,556,559
267,296
187,730
2,011,585
48,372
66,352
127,101
241,825
At 1 January 2022
3,418,971
570,243
123,227
4,112,441
2,802
22,080
38,604
63,486
Movements with impact on credit loss allowance charge for the period:
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(404,297)
469,103 (64,806)
-
(46,034)
83,035
(37,001)
-
(107,233)
(99,591) 206,824
-
(22,505)
(25,955)
48,460
-
319,163 (287,805)
(31,358)
-
57,187
(45,306)
(11,881)
-
1,410,607
-
-
1,410,607
57,565
-
-
57,565
(408,992)
(55,937)
(87,562)
(552,491)
23,943
(14,452)
(11,487)
(1,996)
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(827,669) 888,290
(60,621)
-
(2,830)
23,771
(20,941)
(12,023)
(32,568)
44,591
-
(1,639)
(2,258)
3,897
892,137 (892,137)
-
-
17,374
(17,374)
1,350,888
-
-
1,350,888
1,827
-
-
-
-
-
-
1,827
(322,075)
(47,032)
(23,188)
(392,295)
(236)
(1,773)
(8,606)
(10,615)
Net repayments
(491,278)
(53,145)
29,536
(514,887)
-
-
-
-
Net repayments
(377,732)
(42,955)
(17,651)
(438,338)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(67,672)
541
94,437
27,306
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(15,322)
(13,624)
14,886
(14,060)
Movements without impact on credit loss allowance charge for the period:
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(30,782)
491
2,385
(27,906)
3,400
348
2,861
6,609
Re-segmentation
(11,853)
(833)
-
(12,686)
Write-offs
-
-
(151,635)
(151,635)
Changes in accrued
interest
(1,447)
(1,248)
(4,446)
(7,141)
Modification
2,098
437
828
3,363
-
-
-
-
(151,635)
(151,635)
Write-offs
-
-
(3,716)
(3,716)
-
-
-
-
-
-
Changes in accrued
interest
(3,520)
(1,906)
(1,240)
(6,666)
Modification
874
257
204
1,335
8
-
-
-
(51)
-
(43)
-
-
-
(3,716)
(3,716)
-
-
-
-
Foreign exchange
movements
At 31 December
2021
(14,490)
(2,201)
(1,738)
(18,429)
23
230
123
376
1,829,908
237,400
85,758
2,153,066
54,279
64,793
60,978
180,050
Foreign exchange
movements
At 31 December
2022
(303,832)
(45,554)
(8,405)
(357,791)
316
(1,071)
(2,212)
(2,967)
3,804,166
395,805
53,201
4,253,172
2,300
9,700
21,912
33,912
184
185
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Credit loss allowance
Stage 2
(lifetime
ECL
for SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
Mortgage loans
in thousands of GEL
At 1 January 2021
3,068,080
594,296
279,726
3,942,102
3,371
21,516
71,983
96,870
Movements with impact on credit loss allowance charge for the period:
Transfers:
– to lifetime
(from Stage 1
and Stage 3 to
Stage 2)
– to defaulted
(from Stage 1
and Stage 2 to
Stage 3)
– to 12-months
ECL (from Stage
2 and Stage 3 to
Stage 1)
New originated or
purchased
Derecognised or
fully repaid during
the period
(603,154)
764,634 (161,480)
-
(2,450)
38,068
(35,618)
-
(94,520)
(42,758)
137,278
-
(16,499)
(3,101)
19,600
-
598,833 (550,050) (48,783)
-
22,344
(11,917)
(10,427)
-
1,330,926
-
-
1,330,926
1,805
-
-
1,805
(195,248)
(52,092)
(36,237)
(283,577)
2,676
(688)
(10,789)
(8,801)
Net repayments
(427,220)
(70,081)
(33,406)
(530,707)
-
-
-
-
Net
re-measurement
due to stage
transfers, changes
in risk parameters
and repayments
-
-
-
-
(8,207)
(20,112)
7,837
(20,482)
Movements without impact on credit loss allowance charge for the period:
Re-segmentation
(101,646)
(36,623)
(3,988)
(142,257)
(52)
(740)
Write-offs
-
-
(1,617)
(1,617)
Changes in accrued
interest
(3,400)
(72)
950
(2,522)
Modification
1,321
516
218
2,055
-
-
-
-
-
-
(860)
(1,617)
(1,652)
(1,617)
-
-
-
-
Foreign exchange
movements
At 31 December
2021
(155,001)
(37,527)
(9,434)
(201,962)
(186)
(946)
(1,505)
(2,637)
3,418,971
570,243
123,227
4,112,441
2,802
22,080
38,604
63,486
The credit quality of loans to customers carried at amortised cost is as follows at 31 December 2022:
31 December 2022
Stage 1
(12months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
in thousands of GEL
Corporate loans risk category
- Very low
- Low
- Moderate
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
5,605,060
136,070
270
-
5,741,400
(18,930)
5,722,470
1,432,943
643,378
116,102
-
-
2,192,423
(55,579)
2,136,844
3,349,388
433,913
20,865
-
-
3,804,166
(2,300)
3,801,866
3,437,333
876,548
13,741
120
-
4,327,742
(24,938)
4,302,804
-
427,830
30,504
-
458,334
(1,214)
457,120
6,988
40,120
141,735
41,149
-
229,992
(62,118)
167,874
38,732
205,328
125,898
25,847
-
395,805
(9,700)
386,105
24,043
177,178
85,733
30,876
-
317,830
(23,961)
293,869
Total
5,605,060
563,900
30,774
82,735
6,282,469
(46,458)
6,236,011
1,439,931
683,498
257,837
41,149
89,805
2,512,220
(183,352)
-
-
-
82,735
82,735
(26,314)
56,421
-
-
-
-
89,805
89,805
(65,655)
24,150
2,328,868
-
-
-
-
53,201
53,201
(21,912)
31,289
-
-
-
-
163,843
163,843
(47,213)
116,630
3,388,120
639,241
146,763
25,847
53,201
4,253,172
(33,912)
4,219,260
3,461,376
1,053,726
99,474
30,996
163,843
4,809,415
(96,112)
4,713,303
186
187
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The credit quality of loans to customers carried at amortised cost is as follows at 31 December 2021:
in thousands of GEL
Corporate loans risk category
- Very low
- Low
- Moderate
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Consumer loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Mortgage loans risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
Loans to MSME risk category
- Very low
- Low
- Moderate
- High
- Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2021
Stage 1
(12months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
5,491,018
246,591
5,835
–
5,743,444
(24,404)
5,719,040
1,180,163
542,853
106,892
-
-
1,829,908
(54,279)
1,775,629
3,069,543
328,538
20,890
–
–
3,418,971
(2,802)
3,416,169
2,836,336
673,872
9,634
–
–
3,519,842
(20,487)
3,499,355
4,275
598,209
110,064
–
712,548
(1,310)
711,238
16,309
55,552
138,340
27,199
-
237,400
(64,793)
172,607
78,659
353,765
122,855
14,964
–
570,243
(22,080)
548,163
41,741
250,173
86,859
34,566
–
413,339
(32,234)
381,105
–
–
–
91,749
91,749
(25,017)
66,732
-
-
-
-
85,758
85,758
(60,978)
24,780
–
–
–
–
123,227
123,227
(38,604)
84,623
–
–
–
–
208,124
208,124
(60,380)
147,744
Total
5,495,293
844,800
115,899
91,749
6,547,741
(50,731)
6,497,010
1,196,472
598,405
245,232
27,199
85,758
2,153,066
(180,050)
1,973,016
3,148,202
682,303
143,745
14,964
123,227
4,112,441
(63,486)
4,048,955
2,878,077
924,045
96,493
34,566
208,124
4,141,305
(113,101)
4,028,204
The contractual amounts outstanding on loans to customers that have been written off partially or fully but are still
subject to enforcement activity was principal amount GEL 22,535 thousand (31 December 2021: GEL 19,238 thousand),
accrued interest GEL 4,160 thousand (31 December 2021: GEL 4,963 thousand) and accrued off balance sheet penalty
GEL 2,814 thousand (31 December 2021: GEL 2,113 thousand).
Economic sector risk concentrations within the customer loan portfolio are as follows:
31 December 2022
31 December 2021
in thousands of GEL
Individual
Real Estate
Hospitality,Restaurants & Leisure
Construction
Food Industry
Trade
Energy & Utilities
Agriculture
Healthcare
Services
Automotive
Financial Services
Transportation
Pawn Shops
Metals and Mining
Communication
Other
Total gross loans and
advances to customers
Amount
6,851,397
1,564,352
1,147,098
1,073,761
1,060,058
1,054,958
947,441
822,779
451,304
388,517
297,558
262,675
240,535
196,489
179,365
30,758
1,288,231
17,857,276
%
38%
9%
7%
6%
6%
6%
5%
5%
3%
2%
2%
1%
1%
1%
1%
0%
7%
Amount
6,407,171
1,591,277
1,350,184
1,041,416
994,780
860,286
1,095,387
838,719
406,608
348,738
309,043
112,937
224,066
159,851
43,132
41,191
1,129,767
%
38%
9%
8%
6%
6%
5%
7%
5%
2%
2%
2%
1%
1%
1%
0%
0%
7%
100%
16,954,553
100%
188
189
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
As of 31 December 2022, the Group had 177 borrowers (2021: 188 borrowers) with aggregated gross loan amounts
above GEL 10,000 thousand. The total aggregated amount of these loans was GEL 4,510,504 thousand (2021: GEL
5,017,758 thousand) or 25.26% of the gross loan portfolio (2021: 29.6%).
The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. There are
three key types of collateral:
Real estate;
•
• Movable property including fixed assets, inventory and precious metals;
•
Financial assets including deposits, shares, and third party guarantees.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where
collateral and other credit enhancements are equal to or exceed the assets’ carrying value (“over-collateralised assets”)
and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value (“under-
collateralised assets”).
The effect of collateral as at 31 December 2022:
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium
enterprises
31 December 2022
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
3,534,635
793,141
3,729,421
3,439,685
Fair value
of collateral
9,524,073
1,932,508
10,695,687
7,566,047
Carrying value
of the assets
Fair value
of collateral
2,747,834
1,719,079
523,751
1,369,730
1,135,017
60,642
238,075
523,237
Total
11,496,882
29,718,315
6,360,394
1,956,971
The effect of collateral as at 31 December 2021:
in thousands of GEL
Corporate loans
Consumer loans
Mortgage loans
Loans to micro, small and medium
enterprises
31 December 2021
Over-collateralised Assets
Under-collateralised Assets
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
3,929,725
648,355
3,672,323
3,098,087
8,578,057
3,117,799
9,877,124
7,035,782
2,618,016
1,504,711
440,118
1,043,218
878,667
23,910
156,248
419,978
Total
11,348,490
28,608,762
5,606,063
1,478,803
As at 31 December 2022 loans and advances to customers which were 1. over-collateralised and 2. credit loss allowance
was nil amounted to GEL 1,525,046 thousand (2021: GEL 1,576,220 thousand).
The effect of collateral by types as at 31 December 2022:
Over-collateralised Assets
Under-collateralised Assets
31 December 2022
in thousands of GEL
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
304,408
147,485
407,338
10,637,651
336,311
186,835
2,061,199
27,133,970
164,437
40,777
258,222
2,554,711
128,474
40,181
150,724
1,637,592
-
-
3,342,247
-
Total
11,496,882
29,718,315
6,360,394
1,956,971
The effect of collateral by types as at 31 December 2021:
Over-collateralised Assets
Under-collateralised Assets
31 December 2021
in thousands of GEL
Carrying value
of the assets
Fair value
of collateral
Carrying value
of the assets
Fair value
of collateral
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
271,396
91,525
331,047
10,654,522
310,681
115,404
1,313,628
26,869,049
-
-
207,788
15,917
253,934
1,861,299
3,267,125
147,871
15,657
138,523
1,176,752
-
Total
11,348,490
28,608,762
5,606,063
1,478,803
190
191
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
9. LOANS AND ADVANCES TO CUSTOMERS CONTINUED
The financial effect of collateral is determined by comparing the fair value of collateral to outstanding gross loans and
advances in the reporting date.
Stage 3 loans presented by segments and collateral classes as at 31 December 2022 are the following:
The gross carrying amount of loans by stages that have been modified since initial recognition at a time when the loss
allowance was measured at an amount equal to lifetime expected credit losses and for which the loss allowance has
changed during the reporting period to an amount equal to 12-month expected credit losses loans are the following:
31 December 2022
in thousands of GEL
Corporate
Consumer
Mortgage
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
Total
21
-
8,913
59,302
14,499
82,735
9
991
-
19,931
68,874
89,805
-
-
-
50,539
2,662
53,201
Stage 3 loans presented by segments and collateral classes as at 31 December 2021 are the following:
31 December 2021
Loans to micro,
small and medium
enterprises
47
308
1,131
143,285
19,072
163,843
in thousands of GEL
Stage 1
Stage 2
Stage 3
Total
31 December
2022
31 December
2021
354,308
184,044
49,975
588,327
487,742
431,160
50,792
969,694
At the central level a specific unit manages collateral to ensure that they serve as an adequate mitigation for credit
risk management purposes. In line with the Group's internal policies, collateral provided to loans are evaluated by
the Internal Appraisal Group (external reviewers are used in case of loans to related parties or specific cases when
complex objects are appraised). The Internal Appraisal Group is part of the collateral management unit and, in order
to ensure adequate and objective appraisal procedures, it is independent from the loan granting process. Real estate
collateral of significant value is re-evaluated annually by internal appraisers. Statistical methods are used to monitor
the value of real estate collateral that are of non-significant value and other types of collateral such as movable assets
and precious metals.
in thousands of GEL
Corporate
Consumer
Mortgage
Loans to micro,
small and medium
enterprises
In some instances, where the discounted recovery from the liquidation of collateral (adjusted for the liquidity haircut
and discounted for the period of expected workout time) is larger than the estimated exposure at default, no credit loss
allowance is recognised.
Cash Cover
Gold
Inventory
Real Estate
Unsecured and secured solely by
third party guarantees
Total
19
-
8,359
62,463
20,908
91,749
6
-
-
32,281
53,471
85,758
13
-
-
117,443
5,771
123,227
267
294
527
189,533
17,503
208,124
Collateral values include the contractual price of third-party guarantees, which, due to their nature, are capped at the
loan’s carrying value. The values of third-party guarantees in the tables above amounted to GEL 387,356 thousand and
GEL 857,891 thousand as of 31 December 2022 and 2021, respectively. These third-party guarantees are not taken into
consideration when assessing the impairment allowance. Refer to Note 40 for the estimated fair value of each class of
loans and advances to customers. Interest rate analysis of loans and advances to customers is disclosed in Note 35.
Information on related party balances is disclosed in Note 42.
For the year ended 31 December 2022 amortised cost of loans with lifetime ECL immediately before contractual
modification that was not a derecognition event was GEL 1,796,668 thousand (31 December 2021: GEL 2,110,117
thousand). During 2022, gains less losses recognised in profit or loss on modifications of loans with lifetime ECL that
did not lead to derecognition was GEL (14) thousand (2021: GEL 205 thousand)
For the year ended 31 December 2022 gross carrying amount of loans that were contractually modified (without
derecognition) in the past when measured at lifetime ECL and which were reclassified to Stage 1 (12 months ECL)
during the current year was GEL 1,063,796 thousand (31 December 2021: GEL 994,526 thousand).
192
193
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATIONTBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022 10. INVESTMENT SECURITIES MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
11. REPURCHASE RECEIVABLES
in thousands of GEL
Corporate bonds
Ministry of Finance of Georgia treasury bills
Foreign government treasury bills
Less: credit loss allowance by stages
Stage 1
Stage 2
Stage 3
Total investment securities measured at fair value through other comprehensive
income excluding corporate shares
Corporate shares – unquoted
Total investment securities measured at fair value through other comprehensive
income
31 December
2022
1,291,719
1,559,867
35,617
31 December
2021
707,253
1,231,024
1,683
(3,140)
(3,140)
-
-
(2,818)
(2,818)
-
-
2,884,063
1,937,142
665
1,054
2,884,728
1,938,196
All debt securities in 2022 and 2021 except for corporate bonds and foreign government treasury bills are issued by
the Government of Georgia and National Bank of Georgia. Country rating for Georgia stands at BB with stable outlook
(as assigned by Fitch rating agency in July 2022).87.6% of corporate bonds are issued by triple A rated international
financial institutions, 0.2% of corporate bonds are issued by BB- rated financial institutions, 9.5% of corporate bonds
are issued by BB rating and 2.7% by B+ rating. Information includes credit ratings assigned by the international rating
agencies (Standard & Poor’s, Fitch), for those financial institutions which are not assigned credit ratings, country
ratings are used.
In 2022 fair value adjustment to investment securities measured at fair value through other comprehensive income
amounted to GEL 16,329 thousands (2021: GEL (22,020) thousands).
The Group designated investments in corporate shares disclosed in the above table as equity securities at FVOCI. The
FVOCI designation was made because the investments are expected to be held primarily for liquidity management or
medium term investment purposes instead of short-term profit making from subsequent sales.
As at 31 December 2022 investment securities measured at fair value through other comprehensive income carried at
GEL 475,259 thousand have been pledged with local banks or financial institutions as a collateral for other borrowed
funds (2021: GEL 383,790 thousand). Refer to Note 18.
in thousands of GEL
Carrying amount as of 1 January
Purchases
Disposals
Redemption at maturity
Revaluation
Interest income accrued
Interest income received
Effect of translation to presentation currency
Transfer to repurchase receivables
Changes in credit loss allowance
Carrying amount as of 31 December
2022
1,938,196
2,412,783
(816,417)
2021
2,613,276
797,285
(1,025,775)
(391,341)
(412,204)
16,329
196,114
(45,696)
185,424
(178,112)
(169,068)
(25,007)
(5,486)
(267,495)
(322)
-
440
2,884,728
1,938,196
The movements in investment securities measured at fair value through other comprehensive income are as follows:
Other
Repurchase receivables represent securities sold under sale and repurchase agreements which the counterparty has
the right, by contract or custom, to sell or repledge.
in thousands of GEL
Investment securities measured at FVOCI sold under sale and repurchase agreements
Total repurchase receivables
31 December
2022
31 December
2021
267,495
267,495
-
-
For the end of 2022 the total balance of repurchase receivables gross portfolio were under stage 1 for credit loss
allowance purposes and respectively, the ECL amounted nil (2021: nil). Meanwhile credit risk category of total portfolio
is classified as very low.
12. OTHER FINANCIAL ASSETS
in thousands of GEL
Derivative financial assets
Receivables on credit card services and money transfers
Receivable on terminated leases
Receivables from plastic card service providers
Receivables on guarantees and letters of credit
Receivable from insurance service providers
Advances paid to promotional service provider
Investment held at fair value through profit or loss
Government subsidy related receivables
Trade receivables
Prepayments for purchase of leasing assets
Receivables for rental income
Receivables from sales of non-financial assets
Total gross amount of other financial assets
Less: credit loss allowance
Total other financial assets
31 December
2022
69,921
46,724
40,103
31 December
2021
199,233
62,881
46,346
28,081
23,140
21,194
19,733
9,704
3,981
3,892
2,794
666
657
30,823
301,413
(54,415)
14,472
9,766
18,785
17,681
11,125
1,949
6,827
2,073
1,349
72,650
28,877
494,014
(51,807)
246,998
442,207
For the year end of 2022 other financial asset gross portfolio with related credit loss allowance represented: stage 1 -
GEL 236,923 thousand and GEL 9,899 thousand (2021: GEL 416,687 thousand and GEL 3,955 thousand); stage 2 - GEL
412 thousand and GEL 66 thousand (2021: GEL 3,730 thousand and GEL 1,706 thousand); stage 3 – GEL 64,078 thousand
and GEL 44,450 thousand (2021: GEL 73,597 thousand and GEL 46,146 thousand).
194
195
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 13. FINANCE LEASE RECEIVABLES
13. FINANCE LEASE RECEIVABLES CONTINUED
As at 31 December 2022 finance lease receivables of GEL 288,886 thousand (2021: GEL 252,340 thousand) are
represented by leases of fixed assets excluding land and buildings.
The following table discloses the changes in the credit loss allowance and gross carrying amount for finance lease
receivables between the beginning and the end of the reporting period:
The Company normally structures its finance lease contracts so that the lessee makes a minimum prepayment of
20% of the equipment purchase price at the inception of the lease term. The Company holds title to the leased assets
during the lease term. The title to the asset under finance lease contract is transferred to the lessees at the end of the
contractual term subject to full payment of lease obligations. Generally, the lease terms are up to five years.
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. The main
types of collateral obtained are:
• Leased assets (inventory and equipment) ;
• Down payment;
• Real estate properties.
The financial effect of collateral is presented by disclosing the collateral values separately for (i) those assets where
collateral and other credit enhancements are equal to or exceed the assets’ carrying value (“over-collateralized
assets”) and (ii) those assets where collateral and other credit enhancements are less than the assets’ carrying value
(“undercollateralized assets”).
Finance lease payments receivable and their present values as of 31 December 2022 are as follows:
in thousands of GEL
Due
in 1 year
Due
between 1
and 2 year
Due
between 2
and 3 year
Due
between 3
and 4 year
Due
between 4
and 5 year
Due
in 5 year or
more
Total
Lease payments receivable
143,900
89,898
60,931
35,399
24,306
42,693
397,127
Unearned finance income
(36,763)
(23,306)
(13,885)
(7,758)
(4,454)
(13,475)
(99,641)
Credit loss allowance
(2,791)
(1,795)
(1,339)
(951)
(973)
(751)
(8,600)
Present value of lease payments
receivable
104,346
64,797
45,707
26,690
18,879
28,467
288,886
Finance lease payments receivable and their present values as of 31 December 2021 are as follows:
in thousands of GEL
Due
in 1 year
Due
between 1
and 2 year
Due
between 2
and 3 year
Due
between 3
and 4 year
Due
between 4
and 5 year
Due
in 5 year or
more
Total
Lease payments receivable
129,836
98,520
55,544
28,065
11,848
6,868
330,681
Unearned finance income
(32,106)
(19,805)
(9,777)
(4,332)
(1,460)
(1,078)
(68,558)
Credit loss allowance
(3,698)
(3,144)
(1,769)
(699)
(304)
(169)
(9,783)
Present value of lease payments
receivable
For fair values refer to Note 40.
94,032
75,571
43,998
23,034
10,084
5,621
252,340
Gross carrying amount
Credit loss allowance
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
190,697
43,732
27,694
262,123
2,712
3,422
3,649
9,783
(23,095)
29,847
(6,752)
(13,873)
(4,680)
18,553
7,688
(7,653)
(35)
-
-
-
(961)
1,385
(424)
(733)
(128)
861
199
(195)
(4)
-
-
-
in thousands of GEL
At 1 January 2022
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (from Stage 1
and Stage 2 to Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
New originated or purchased
178,718
-
-
178,718
3,933
-
-
3,933
Derecognised or fully repaid
during the period
Net repayments
Foreign exchange
movements
Other movements
Net re-measurement due to
stage transfers, changes in
risk parameters and
repayments
At 31 December 2022
(51,936)
(18,430)
(17,459)
(87,825)
(813)
(2,024)
(2,855)
(5,692)
(36,184)
(5,121)
(3,723)
(45,028)
-
-
-
-
(8,228)
(954)
(1,217)
(10,399)
(85)
(26)
(141)
(252)
(873)
(23)
793
(103)
-
-
-
-
-
-
-
-
(130)
(261)
1,219
828
242,914
36,718
17,854 297,486
4,122
2,173
2,305
8,600
196
197
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 13. FINANCE LEASE RECEIVABLES CONTINUED
13. FINANCE LEASE RECEIVABLES CONTINUED
Gross carrying amount
Credit loss allowance
As at 31 December 2021, credit quality of finance lease receivables is analysed below:
in thousands of GEL
At 1 January 2021
Transfers
– to lifetime (from Stage 1
and Stage 3 to Stage 2)
– to defaulted (from Stage 1
and Stage 2 to Stage 3)
– to 12-months ECL (from
Stage 2 and Stage 3 to
Stage 1)
Stage 1
(12-months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Stage 1
(12-months
ECL)
Total
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
defaulted)
Total
171,152
60,769
49,254
281,175
2,914
3,419
3,864
10,197
(27,924)
30,085
(2,161)
(9,135)
(1,952)
11,087
47,278
(38,439)
(8,839)
-
-
-
(181)
193
(12)
(83)
(107)
190
1,318
(1,042)
(276)
-
-
-
New originated or purchased
109,604
9,178
2,456
121,238
1,589
2,374
559
4,522
Derecognised or fully repaid
during the period
Net repayments
Foreign exchange
movements
Other movements
Net re-measurement due
to stage transfers, changes
in risk parameters and
repayments
(58,654)
(11,429)
(21,386)
(91,469)
(955)
(597)
(3,398)
(4,950)
(36,612)
(4,109)
(4,847)
(45,568)
(3,110)
(1,353)
(1,096)
(5,559)
(1,832)
977
3,161
2,306
-
-
-
(42)
(61)
(103)
-
-
-
(42)
(54)
(96)
-
-
-
-
(1,843)
(738)
2,794
213
At 31 December 2021
190,767
43,727
27,629
262,123
2,759
3,418
3,606
9,783
in thousands of GEL
Finance lease receivables risk
category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2021
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL for
defaulted)
161,019
29,748
-
-
-
190,767
(2,759)
188,008
4,397
8,993
15,797
14,540
-
43,727
(3,418)
40,309
Total
165,416
38,741
15,797
14,540
27,629
262,123
(9,783)
-
-
-
-
27,629
27,629
(3,606)
24,023
252,340
The effect of collateral as at 31 December 2022:
in thousands of GEL
Finance lease receivables
Total
31 December 2022
Over-collateralised Assets
Under-collateralised Assets
Gross carrying value
of the assets
226,389
Fair value of
collateral
397,377
Gross carrying value of
the assets
71,097
Fair value of
collateral
57,456
226,389
397,377
71,097
57,456
As at 31 December 2022, credit quality of finance lease receivables is analysed below:
The effect of collateral as at 31 December 2021:
in thousands of GEL
Finance lease receivables risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2022
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL for
defaulted)
216,763
26,063
88
-
-
242,914
(4,122)
238,792
-
6,982
9,780
19,956
-
36,718
(2,173)
34,545
-
-
-
-
17,854
17,854
(2,305)
15,549
Total
216,763
33,045
9,868
19,956
17,854
297,486
(8,600)
288,886
in thousands of GEL
Finance lease receivables
Total
31 December 2021
Over-collateralised Assets
Under-collateralised Assets
Gross carrying value
of the assets
221,676
Fair value of
collateral
366,792
Gross carrying value of
the assets
40,447
Fair value of
collateral
31,842
221,676
366,792
40,447
31,842
198
199
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
14. OTHER ASSETS
in thousands of GEL
Current other assets
Repossessed collateral
Prepayments for other assets
Prepayments for purchase of leasing assets
Other inventories
Prepaid taxes other than income tax
Total current other assets
Non-current other assets
Assets repossessed from terminated leases
Prepayments for construction in progress
Prepaid insurance of leasing assets
Assets purchased for leasing purposes
Other
Total non-current other assets
Total other assets
31 December
2022
31 December
2021
269,006
47,859
255,785
54,730
28,595
28,829
14,741
8,203
5,860
6,624
366,061
354,171
16,531
10,224
22,460
5,229
2,364
2,380
1,049
120
3,262
1,768
45,666
19,721
411,727
373,892
Repossessed collateral represents tangible assets acquired by the Group in settlement of overdue loans, which is
expected to be disposed in a foreseeable future. The assets do not meet the definition of non-current assets held for
sale and are classified as inventories in accordance with IAS 2 “Inventories”. The assets were initially recognised at the
lower of cost and net realisable value when acquired. In 2022, collaterals repossessed for settlement of impaired loans
amounted to GEL 98,289 thousand (2021: GEL 131,917 thousand).
As at 31 December 2022 repossessed collateral of the bank after impairment is comprised of lands to GEL 19,996
thousand, buildings to GEL 246,700 thousand and movable property to GEL 1,290 thousand (2021: GEL 11,898
thousand, GEL 242,106 thousand and GEL 433 thousand).
For certain repossessed collateral, the Group has granted previous owners a right to repurchase the repossessed
collateral at prices equal to or higher than the carrying value of the loan at the date of repossession. This right is
usually effective for a period of 6 to 24 months from the repossession date, during this time the repossessed collateral
may not be disposed to third parties. In some cases prolongation of repurchase right is offered to the owners of the
property. As at 31 December 2022, the carrying value of the repossessed collaterals subjected to the repurchase
agreement was GEL 143,780 thousand (2021: GEL 124,687 thousand).
15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS
in thousands of GEL
At cost
1 January 2021
Additions
Transfers within premises and equipment
Disposals
Impairment (charge)/reversal
Effect of translation to presentation
currency
31 December 2021
Additions
Transfers within premises and equipment
Disposals
Land, premises
and leasehold
improvements
Office and
other
equipment*
Construction
in progress
Total
premises and
equipment
Intangible
assets
Total
210,034
252,990
103,669
566,693 318,303 884,996
10,606
2,888
(12,312)
(7,787)
(66)
38,097
-
(12,243)
354
(68)
10,422
(2,888)
(1,693)
(483)
59,125
103,226
162,351
-
-
-
(26,248)
(30,080)
(56,328)
(7,916)
(92)
(8,008)
-
(134)
(23)
(157)
203,363
279,130
109,027
591,520
391,334
982,854
11,814
4,704
54,565
(274)
(3,082)
(19,867)
27,559
(4,430)
(2,958)
93,938
89,345
183,283
-
-
-
(25,907)
(4,770)
(30,677)
Reclassification to right of use assets
(20,813)
Impairment reversal
Effect of translation to presentation
currency
746
(107)
-
349
(148)
-
-
-
(20,813)
1,095
(255)
-
(20,813)
-
1,095
(53)
(308)
31 December 2022
196,625
313,755
129,198
639,578
475,856 1,115,434
Accumulated depreciation /
amortisation
1 January 2021
Depreciation / amortisation charge
Elimination of accumulated depreciation/
amortisation on disposals
Effect of translation to presentation
currency
(47,694)
(156,136)
(5,346)
(19,823)
8,093
7,925
52
66
31 December 2021
(44,895)
(167,968)
Depreciation / amortisation charge
(5,102)
(19,377)
Elimination of accumulated depreciation
of reclassification to right of use assets
Elimination of accumulated depreciation/
amortisation on disposals
Effect of translation to presentation
currency
31 December 2022
Carrying amount
31 December 2021
31 December 2022
9,249
-
943
11,612
107
105
(39,698)
(175,628)
-
-
-
-
-
-
-
-
-
-
(203,830)
(94,726) (298,556)
(25,169)
(30,994)
(56,163)
16,018
1,771
17,789
118
21
139
(212,863) (123,928) (336,791)
(24,479)
(42,910)
(67,389)
9,249
-
9,249
12,555
2,084
14,639
212
48
260
(215,326) (164,706) (380,032)
158,468
111,162
109,027
378,657 267,406 646,063
156,927
138,127
129,198
424,252
311,150 735,402
200
201
*Office and other equipment include furniture and fixtures, computer and office equipment, motor vehicles as well as other equipment
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
15. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS CONTINUED
16. RIGHT OF USE ASSETS CONTINUED
As of 31 December 2022 GEL 398,964 thousand of premises and equipment and GEL 285,884 thousand of intangible
assets were attributable to the Bank (2021: GEL 352,743 thousand and GEL 249,356 thousand).
On 10 August 2021, the Bank entered into a sale agreement to dispose of Space platform, which carried out the Group’s
digital banking operations. The disposal was effected in order to support the Groups plan for further expansion. The
disposal was completed on 10 August 2021, on which date control of Space platform passed to the Space International
JSC (subsidiary of TBC Bank Group PLC). The carrying value of the assets sold were GEL 24,615 thousand, which was
sold for the consideration of GEL 24,615 thousand.
On 18 June 2021, the Group sold land and buildings, where some of its back office functions were located, for cash
consideration of USD 25 million. USD 25 million (GEL 79.7 million) was received by 30 April 2022. Selling of those
assets was part of the Group’s plan to gradually prepare for relocation to new headquarter, which is in the process
of construction. Under the plan, the Group gradually discharged the occupied part of the buildings by 30 April 2022
and staff have been distributed to existing offices before the new headquarter will be completed. During this period
the property was being leased back using IFRS 16 exemption for short term leases. Net carrying amount of disposed
properties was GEL 37,416 thousand, out of which net balance disposed from premises and equipment were GEL
5,442 thousand, while the remaining part was disposed from investment property. Net gain on disposal from the sale
was recognised as part of other operating income in the 2021 consolidated financial statements of profit or loss in
the amount of GEL 26,294 thousand. Depreciation and amortisation charge presented on the face of the statement
of profit or loss and other comprehensive income include depreciation and amortisation charge of premises and
equipment, investment properties and intangible assets.
Construction in progress consists of construction and refurbishment of branch premises and the Bank’s new
headquarter, that will be transferred to premises upon completion.
Land and premises of the bank after impairment and depreciation comprised of land GEL 12,927 thousand and
buildings GEL 143,116 thousand (2021: GEL 12,927 thousand and GEL 137,446 thousand).
16. RIGHT OF USE ASSETS
The Group leases offices, branches and service centres. Rental contracts are typically made for fixed periods of 1 to 14
years.
Leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset
becomes available for use by the Group.
The right of use assets represents premises and is analysed as follows:
in thousands of GEL
Carrying amount at 1 January
Additions of new contracts
Increases in value from substantial changes in contractual terms
Reclassification from premises and equipment
Disposals
Depreciation charge
Elimination of depreciation
Carrying amount at 31 December
2022
58,001
30,062
5,199
11,564
2021
49,746
5,650
9,601
-
(1,830)
(1,234)
(17,277)
(13,710)
14,490
7,948
100,209
58,001
The lease agreements do not impose any covenants, other than the security interests in the leased assets that are held
by the lessor. Leased assets cannot be used as collateral for borrowings.
Expenses relating to short-term leases amounted GEL 2,385 thousand during 2022 (2021: GEL 5,325 thousand) and
expenses relating to leases of low-value assets amounted GEL 6,769 thousand during 2022 (2021: GEL 7,112 thousand).
These expenses are included in administrative and other operating expenses.
17. GOODWILL
As at 31 December 2022 carrying amount of Goodwill represented GEL 28,197 thousand (2021: GEL 28,197 thousand).
Goodwill Impairment Test
Goodwill is allocated to cash-generating units (CGUs, which represent the lowest level within the Group at which the
goodwill is monitored by Management and which are not larger than a segment) as follows:
in thousands of GEL
Bank Republic JSC
Bank Republic Retail
Bank Republic Corporate
Bank Republic MSME
Bank Republic Other
Other
Total carrying amount of goodwill
31 December
2022
24,166
11,088
31 December
2021
24,166
11,088
7,491
4,791
796
4,031
7,491
4,791
796
4,031
28,197
28,197
The recoverable amount of each CGU was determined based on value-in-use calculations. These calculations use
cash flow projections based on financial budgets covering a three-year period. Cash flows beyond the three-year
period are extrapolated using the estimated growth rates stated below, which is relevant for the market, where CGU is
operating.
Key assumptions used for value-in-use calculations is following:
in thousands of GEL
Bank Republic JSC
Growth rate applied to free cash flow to equity beyond three years
Pre-tax discount rate
31 December
2022
31 December
2021
5.2% p.a.
5.2% p.a.
14.7% p.a.
17.1% p.a.
Pre-tax discount rate used for value-in-use calculations is the assumption to which the recoverable amount is most
sensitive. The management determined the budgeted gross margin based on past performance and its market
expectations. The weighted average long term growth rates used are consistent with the forecasts included in the
industry reports. The discount rates reflect specific risks related to the relevant CGUs.
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic Retail had
been 10 percent higher than the management’s estimates or growth rate beyond three years of free cash flow to equity
had been 10 percent lower, the Group would not need to reduce the carrying value of goodwill or carrying value of net
assets of the CGU. Recoverable amount of Bank Republic Retail CGU exceeds its carrying amount by GEL 3,253,314
thousand (2021: GEL 2,269,542 thousand). The CGU’s carrying amount would equal its value in use at a discount rate of
35.72% p.a. (2021: 41.86% p.a.).
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
17. GOODWILL CONTINUED
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic Corporate
had been 10 percent higher than the management’s estimates or growth rate beyond three years of free cash flow
to equity had been 10 percent lower, the Group would not need to reduce the carrying value of goodwill or carrying
value of net assets of the CGU. Recoverable amount of Bank Republic Corporate CGU exceeds its carrying amount by
GEL 3,793,123 thousand (2021: GEL 1,744,639 thousand). The CGU’s carrying amount would equal its value in use at a
discount rate of 34.99% p.a. (2021: 29.47% p.a.).
If the revised estimated pre-tax discount rate applied to the discounted cash flows of CGU Bank Republic MSME had
been 10 percent higher than the management’s estimates or growth rate beyond three years of free cash flow to equity
had been 10 percent lower, the Group would not need to reduce the carrying value of goodwill or carrying value of net
assets of the CGU. Recoverable amount of Bank Republic MSME CGU exceeds its carrying amount by GEL 1,073,190
thousand (2021: GEL 611,733 thousand). The CGU’s carrying amount would equal its value in use at a discount rate of
25.00% p.a. (2021: 28.41% p.a.).
18. DUE TO CREDIT INSTITUTIONS
in thousands of GEL
Due to other banks
Correspondent accounts and overnight placements
Deposits from banks
Sale and repurchase agreements with other banks
Total due to other banks
Other borrowed funds
Borrowings from foreign banks and international financial institutions
Borrowings from other local banks and financial institutions
Borrowings from National Bank of Georgia
Total other borrowed funds
Total amounts due to credit institutions
31 December
2022
31 December
2021
334,081
38,469
262,415
181,905
142,752
-
634,965
324,657
2,185,622
1,653,245
34,239
24,754
1,030,534
981,419
3,250,395
2,659,418
3,885,360
2,984,075
As of 31 December 2022, for the purposes of maturity analysis of financial liabilities (Note 35) the above-mentioned due
to other banks are included within the amounts for which repayment is expected within 3 months.
19. СUSTOMER ACCOUNTS
in thousands of GEL
State and public organisations
Current/settlement accounts
Term deposits
Other legal entities
Current/settlement accounts
Term deposits
Individuals
Current/settlement accounts
Term deposits
Total customer accounts
31 December
2022
31 December
2021
1,053,255
577,020
553,743
364,121
5,859,281
4,865,920
1,265,154
932,480
5,329,038
4,444,586
3,780,886
3,700,018
17,841,357
14,884,145
State and public organisations include government owned profit orientated businesses. Economic sector
concentrations within customer accounts are as follows:
in thousands of GEL
Individuals
Trade
Financial services
Energy & utilities
Services
Construction
Government sector
Real estate
Transportation
Hospitality & leisure
Healthcare
Agriculture
Metals and mining
Other
31 December 2022
31 December 2021
Amount
9,101,046
1,568,181
1,296,593
1,073,229
830,207
773,603
623,953
545,959
452,229
223,906
169,611
77,068
26,514
1,079,258
%
51%
9%
7%
6%
5%
4%
3%
3%
3%
1%
1%
1%
0%
6%
Amount
8,144,604
1,237,807
1,226,110
542,425
718,050
598,856
480,046
418,062
403,249
155,778
194,648
78,810
32,675
653,025
%
55%
8%
8%
4%
5%
4%
3%
3%
3%
1%
1%
1%
0%
4%
Total customer accounts
17,841,357
100% 14,884,145
100%
As of 31 December 2022, the Group had 156 customers (2021: 141 customers) with balances above GEL 10,000 thousand.
Their aggregate balance was GEL 6,404,397 thousand (2021: GEL 4,754,533 thousand) or 35.9% of total customer
accounts (2021: 32%).
As of 31 December 2022, included in customer accounts are deposits of GEL 72,591 thousand and GEL 188,699
thousand (2021: GEL 28,379 thousand and GEL 109,404 thousand) held as collateral for irrevocable commitments
under letters of credit and guarantees issued, respectively. The latter is discussed in Note 36. As of 31 December 2022,
deposits held as collateral for loans to customers amounted to GEL 478,295 thousand (2021: GEL 576,261 thousand).
Refer to Note 40 for the disclosure of the fair value of each class of customer accounts. Information on related party
balances is disclosed in Note 42.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
20. DEBT SECURITIES IN ISSUE
21. PROVISION FOR LIABILITIES AND CHARGES
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Georgian Stock Exchange
Baku Stock Exchange CJSC
Baku Stock Exchange CJSC
Baku Stock Exchange CJSC
Total debt securities in issue
in thousands of GEL
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Irish Stock Exchange
Bonds issued on Georgian Stock Exchange
Baku Stock Exchange CJSC
Total debt securities in issue
Currency
USD
USD
USD
GEL
AZN
AZN
AZN
Currency
USD
USD
USD
GEL
AZN
Carrying amount as
of 31 December
2022
614,748
343,891
Maturity
Date
6/19/2024
10/3/2024
Coupon
rate
5.80%
10.80%
Effective
interest
rate
6.40%
11.40%
204,477
2/4/2027
8.90%
9.90%
38,550 3/20/2023 TIBR 3M+3.25%
12.50%
4,904
9/23/2023
12.00%
12.40%
1,652
6/6/2024
12.00%
12.40%
1,591
7/15/2024
12.00%
12.40%
1,209,813
Carrying amount as
of 31 December
2021
918,504
392,840
Maturity
Date
6/19/2024
10/3/2024
Coupon
rate
5.80%
10.80%
Effective
interest
rate
6.40%
11.40%
228,174
2/4/2027
8.90%
9.90%
38,532
3/20/2023 TIBR 3M+3.25%
12.50%
5,649 9/23/2023
12.00%
12.40%
1,583,699
On 14 July 2022 the TBC Kredit LLC issued interest-baring paperless unsecured bond in the amount of AZN 1 million,
with 2 year maturity at 12%.
On 7 June 2022 the TBC Kredit LLC issued interest-baring paperless unsecured bond in the amount of AZN 1 million,
with 2 year maturity at 12%.
On 6 April 2022 the Bank completed the partial redemption of 2019 issued senior bond in the amount of USD 55
million. Consideration paid amounted to USD 52 million. The difference between amount paid and amortised cost of
the bond adjusted with transaction fee was accounted as a gain on extinguishment of debt in the amount of USD 2
million recognized within other operating income.
On 28 October 2021, the Bank completed the transaction of USD 75 million 8.894% yield Additional Tier 1 Capital
Perpetual Subordinated Notes issue (“AT1 Notes”) and successfully returned to the international capital markets. The
AT1 Notes are listed on the regulated market of Euronext Dublin and are rated B- by Fitch.
On 23 September 2021 the TBC Kredit LLC issued interest-baring paperless unsecured bond in the amount of AZN 3
million, with 2 year maturity at 12%.
On 20 March 2020, TBC Leasing JSC with the help of TBC Capital LLC placed senior secured bonds of amount
GEL 58.4 million on the Georgian Stock Exchange JSC. The percentage of securities is variable, 3.25% added to the
3-month Tbilisi Interbank Interest rate. Fitch rates the bonds ‘BB-‘.
Movements in credit loss allowance for performance guarantees, credit related commitment and liabilities and
charges are as follows:
in thousands of GEL
Carrying amount as of 1 January 2021
Charges/(releases) recorded in profit or loss
Effect of translation to presentation currency
Carrying amount as of 31 December 2021
Charges/(releases) recorded in profit or loss
Effect of translation to presentation currency
Carrying amount as of 31 December 2022
Performance
guarantees
4,427
384
Credit
related
commitments
5,424
(1,588)
Provision for
other liabilities
and charges
7,601
-
Total
17,452
(1,204)
(191)
4,620
2,931
(345)
7,206
(212)
3,624
(210)
(237)
3,177
-
(403)
7,601
2,000
(76)
15,845
4,721
(658)
9,525
19,908
Credit related commitments and performance guarantees: Impairment allowance estimation methods differ for (i)
letter of credits and guarantees and (ii) undrawn credit lines. For letter of credits and guarantees allowance estimation
purposes the Group applies the staged approach and classifies them in stage 1, stage 2 or stage 3. Significant stage 3
guarantees are assessed individually. Non-significant stage 3 as well as all stage 1 and stage 2 guarantees and letter of
credits are assessed collectively using exposure, marginal probability of conversion, loss given default and discount
factor. Amount of the expected allowance differs based on the classification of the facility in the respective stage.
For impairment allowance assessment purposes for undrawn exposures the Group distinguishes between revocable
and irrevocable loan commitments. For revocable commitments the Group does not create impairment allowance. As
for the irrevocable undisbursed exposures the Group estimates utilization parameter (which represents expected limit
utilization percentage conditional on the default event) in order to convert off-balance part of the exposure to on-
balance.
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 22. OTHER FINANCIAL LIABILITIES
24. SUBORDINATED DEBT
Other financial liabilities comprise the following:
As of 31 December 2022, subordinated debt comprised of:
in thousands of GEL
Derivative financial liabilities
Trade payables
Transfers in transit
Liabilities for leasing activities
Payables to plastic card service providers
Payable to deposit insurance agency
Prepayments related to guarantees
Liabilities related to co-financing of hotels and restaurants sectors
Security deposits for finance lease receivables
Other accrued liabilities
Total other financial liabilities
Refer to Note 40 for disclosure of the fair value of other financial liabilities.
31 December
2022
73,102
49,210
31 December
2021
10,216
27,307
43,905
38,747
22,785
1,365
804
550
15,136
18,295
28,963
1,033
516
1,638
137
906
19,913
16,610
250,518
120,620
As of 31 December 2022 GEL 187,453 thousand of other financial liabilities were attributable to the Bank (2021: GEL
92,613 thousand).
23. OTHER LIABILITIES
in thousands of GEL
Accrued employee benefit costs
Advances received
Taxes payable other than on income
Other
Total other liabilities
31 December
2022
52,060
31 December
2021
45,984
15,164
13,075
4,101
9,061
17,046
7,518
80,386
83,623
All of the above liabilities are expected to be settled within twelve months after the year-end.
in thousands of GEL
Asian Developement Bank
Grant
Date
10/18/2016
Maturity
Date Currency
USD
12/31/2026
Agreement
interest
rate
12.19%
Outstanding
amount
in original
currency
51,001
Outstanding
amount
in GEL
137,804
Private lenders
6/8/2017-12/6/2022 1/25/2023-3/31/2028
USD 8%-9.5%
36,271
98,008
Global Climate Partnership Fund
11/20/2018
11/20/2028
USD
9.16%
25,097
67,813
European Fund for Southeast
Europe
Green for Growth Fund
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
European Fund for Southeast
Europe
European Fund for Southeast
Europe
ResponsAbility SICAV (Lux)
Micro and SME Finance Leaders
ResponsAbility SICAV (Lux)
Micro and SME Finance Fund
ResponsAbility SICAV (Lux)
Micro and SME Finance Fund
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
ResponsAbility SICAV (Lux) -
Microfinance Leaders
Total subordinated debt
12/21/2018
12/21/2028
USD
8.84%
20,079
54,252
12/18/2015
12/14/2018
12/14/2018
12/16/2030
12/15/2025
12/14/2028
USD
USD
USD
9.74%
9.28%
9.28%
15,359
14,986
14,968
41,501
40,492
40,443
12/18/2015
12/16/2030
USD
9.74%
7,679
20,749
3/15/2016
3/17/2031
USD
9.74%
7,678
20,745
4/7/2022
4/7/2032
USD
9.94%
6,080
16,428
11/30/2018
11/30/2028
USD
11.31%
5,955
16,091
4/7/2022
4/7/2032
USD
9.94%
5,168
13,964
4/7/2022
4/7/2032
USD
9.94%
3,952
10,679
11/30/2018
11/30/2028
USD
11.31%
3,128
8,453
11/30/2018
11/30/2028
USD
11.31%
1,009
2,726
590,148
208
209
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 24. SUBORDINATED DEBT CONTINUED
As of 31 December 2021, subordinated debt comprised of:
25. EQUITY
Share capital
in thousands of GEL
Asian Developement Bank
Grant
Date
10/18/2016
Maturity
Date Currency
USD
12/31/2026
Agreement
interest
rate
7.66%
Outstanding
amount
in original
currency
50,486
Outstanding
amount
in GEL
156,386
in thousands of GEL, unless otherwise indicated
As of 31 December 2021
As of 31 December 2022
Number of
ordinary shares
52,539,769
Share Capital
21,014
52,539,769
21,014
Private lenders
6/8/2017-12/19/2018 1/30/2022-12/19/2024
Global Climate Partnership Fund
11/20/2018
11/20/2028
USD
USD
8-8.5%
9.16%
35,304
25,097
109,427
77,739
Each share has a nominal value of GEL 0.4 (31 December 2021: GEL 0.4 per share). All issued ordinary shares are fully
paid and entitled to dividends.
12/21/2018
12/21/2028
USD
8.84%
20,079
62,195
Dividends
European Fund for Southeast
Europe
Green for Growth Fund
BlueOrchard Microfinance Fund
BlueOrchard Microfinance Fund
European Fund for Southeast
Europe
European Fund for Southeast
Europe
ResponsAbility SICAV (Lux)
Micro and SME Finance Fund
ResponsAbility SICAV (Lux) -
Financial Inclusion Fund
ResponsAbility SICAV (Lux) -
Microfinance Leaders
Total subordinated debt
12/18/2015
12/14/2018
12/14/2018
12/16/2030
12/15/2025
12/14/2028
USD
USD
USD
6.05%
9.28%
9.28%
15,189
14,966
14,954
47,048
46,360
46,321
12/18/2015
12/16/2030
USD
6.05%
7,594
23,523
3/15/2016
3/17/2031
USD
6.05%
7,592
23,517
11/30/2018
11/30/2028
USD
6.35%
5,930
18,369
11/30/2018
11/30/2028
USD
6.35%
3,115
9,649
11/30/2018
11/30/2028
USD
6.35%
1,005
3,113
623,647
The debt ranks after all other creditors in case of liquidation, except AT1 Notes.
Refer to Note 40 for the disclosure of the fair value of subordinated debt.
in thousands of GEL
Dividends payable at 1 January
Interim dividend:
Dividends declared during the year
Dividends paid in cash during the year:
Prior year final dividend:
Dividends declared during the year
Dividends paid in cash during the year:
Dividends payable at 31 December
2022
314
2021
214
238,000
81,872
(237,711)
(81,772)
118,798
(118,654)
747
-
-
314
On 11 August 2022, JSC TBC Bank’s shareholders agreed on an interim dividend of GEL 4.53 per share. The dividend
was paid on 4 October 2022.
On 13 May 2022, JSC TBC Bank’s shareholders passed a resolution to declare a final dividend of GEL 2.26 per share.
The dividend was paid on 8 July 2022.
On August 11, 2021, JSC TBC Bank’s shareholders agreed on a dividend of GEL 1.56 per share. The dividend was paid
on 7 September 2021.
210
211
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 26. SHARE BASED PAYMENTS
2022-2024 remuneration scheme:
The current compensation system was approved by shareholders at the TBC Bank Group PLC’s Annual General
Meeting in June 2021 and came into effect on 1 January 2022. It covers the period 2022-2024 inclusive.
Share salary 2022-2024
The base salary of the executive management board members of the Bank is determined based on market practice
and provides with a competitive fixed income to efficiently retain and reward TBC’s leadership.
For the CEO of the Bank the base salary comprises cash salary payable in GEL on a monthly basis and share salary.
Salary shares are delivered during the first quarter of the second year (i.e. the year after the performance year). The
number of shares is calculated based on the average share price of the last 10 days preceding the Remuneration
Committee decision date. Shares do not have deferral period, are not subject to malus and claw back or any other
restrictions and are vested immediately upon delivery.
The Deputy CEO’s base salary comprises only cash and is payable in GEL on a monthly basis.
Variable Remuneration
Variable remuneration of the Top Management consists of the annual bonus delivered in shares (the “Annual Bonus”)
and the share awards under Long Term Incentive Plan (the “LTIP Award”). 60% of variable remuneration is LTIP Award
and the remaining 40% constitutes the Annual Bonus.
Variable remuneration (Annual Bonus and LTIP Awards) are subject to meeting eligibility “gate KPIs”, which, based on
the Remuneration Committee’s recommendation, can be amended every year by the Board, and will only be paid if the
“gate KPIs” are met.
(a) Annual Bonus under Deferred Share plan 2022-2024
Annual Bonus is delivered in TBC PLC shares. The Top Management receives annual bonus entirely in TBC PLC shares
and it does not comprise any cash component. The Annual Bonus KPIs are set at the beginning of each year in relation
to that year by the Remuneration Committee.
The maximum opportunity of the Annual Bonus for each member of the Top Management is fixed at 135% of fixed
salary. For achieving target performance, no more than 50% of the maximum Annual Bonus opportunity is payable.
For threshold performance, no Annual Bonus is paid. The number of Shares to be allocated is calculated based on the
average share price of the last 10 days preceding the Remuneration Committee’s decision date. Annual Bonus share
awards are governed by the Deferred Share Plan of TBC PLC as amended from time to time (the “Deferred Share
Plan”).
The Top Management’s Annual Bonus awards are subject to a holding period (but not continued employment) over 2
years period with 50% being released after one year and remaining 50% being released at the end of second year. The
Annual Bonus is subject to malus and claw back provisions as described in the Deferred Share Plan. During the holding
period, participants are entitled to vote at the shareholder meetings and receive dividends.
(b) Long Term Incentive Plan (LTIP) 2022-2024
Long term incentive plan is used to provide a strong motivational tool to achieve long term performance conditions
and to provide rewards to the extent those performance conditions are achieved. Performance conditions are chosen
to align the Group’s and the Bank’s executive directors’ interests with strategic objectives of the Group over multi-year
periods and encourage a long-term view.
The level of LTIP Award grant is determined pro rata from the LTIP maximum opportunity based on the assessment
of the base i.e., prior year’s Annual Bonus corporate KPIs performance. LTIP Awards granted will then be subject to
3-year LTIP forward-looking performance conditions and will vest at the end of 5-year period following the grant. LTIP
Award forward-looking KPIs are set at the beginning of each year in relation to that year’s cycle by the Remuneration
Committee.
The maximum opportunity of the LTIP Award in any given year is 161% of salary. 100% of the award will crystalize for
achieving the maximum performance set for each measure. At threshold level of performance, for each measure, 25%
of the award will crystalize.
26. SHARE BASED PAYMENTS CONTINUED
The Remuneration Committee has the discretion, any time after an award has been granted, to reduce (including
to zero) an award if the Remuneration Committee considers that either the underlying financial performance of the
Bank or the performance of the individual is such that the level of vesting cannot be justified. The Participants are not
entitled to any dividend or voting rights until the LTIP Award vests.
2019-2021 remuneration system:
The compensation system was approved by shareholders at the AGM on 21 May 2018 and came into effect on 1
January 2019 and it covers the period 2019-2021 inclusive.
Deferred share salary 2019-2021
Part of the top management salary was paid with shares with the objective of closely promoting the long-term success
of the Group and aligning senior executive directors’ and shareholders’ interests. Shares were usually delivered during
the first quarter of the second year (i.e. the year after the performance year). 50% of the shares had 1 year deferral
period and the remaining 50% were deferred for 2 years from the delivery date. The shares were registered in the
trustees name as nominee for the participants and the participants were entitled to receive dividends. Starting from
2021, deferred share salary is no longer subject to the deferral and will be vested immediately upon delivery.
Deferred Bonus plan 2019-2021
The annual bonus for the top management was determined as to the extent that the annual KPIs have been met. Shares
were usually delivered during the first quarter of the second year (i.e. the year after the performance year) and the exact
date was determined by the Board. 50% of the shares had 1 year deferral period and the remaining 50% was deferred
for 2 years from the delivery date. The shares were registered in the trustees name as nominee for the participants and
the participants were entitled to receive dividends.
Annual KPIs were set by the Remuneration Committee at the beginning of each year in relation to that year and
approved by the Board. To the extent that the KPIs were achieved, the Remuneration Committee may recommend to
the Board whether an award may be made and the amount of such award. The Group did not pay guaranteed bonuses
to executive directors. The nature of the KPIs with their specific weightings and targets is disclosed in the published
annual report. Awards are subject to the Group’s malus and clawback policies until the end of the relevant holding
period. If at any time after making the award there is a material misstatement in the financial results for the year in
respect of which the award was formally granted, the Remuneration Committee can recommend to the Board that
some or all of the award for that year or any subsequent financial year that is unvested (or unpaid) to lapse (or not be
paid).
The number of shares was calculated based on the average share price of the last 10 days preceding the committee
decision date.
Long Term Incentive Plan (LTIP) 2019-2021
Long term incentive plan is used to provide a strong motivational tool to achieve long term performance conditions
and to provide rewards to the extent those performance conditions are achieved. Performance conditions are chosen
to align the Group’s and the Bank’s executive directors’ interests with strategic objectives of the Group over multi-year
periods and encourage a long-term view. In order for the shares to be delivered, the executive directors need to meet
rolling performance conditions over the 3 year performance period.
212
213
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 26. SHARE BASED PAYMENTS CONTINUED
27. SEGMENT ANALYSIS
Tabular information on the schemes is given below:
Number of unvested shares at the beginning of the period
2,125,246
3,028,818
31 December 2022
31 December 2021
Number of shares granted
Number of shares granted - Deferred salary*
Number of shares granted - Deferred bonus*
Number of shares granted - LTIP*
Number of shares granted - Middle management, subsidiaries’
management and other eligible employees**
Number of shares granted
Change in estimates for 2019-2021 awards
Change in estimates of number of shares expected to be granted
Change in estimate of number of shares expected to vest based on
changes in share price and exchange rate
Number of shares vested
2017 year award – 80% vesting
2018 year award – 10% vesting
2018 year award – 80% vesting
2019 year award – MM 33% vesting
2019 year award – TM 50% vesting
2020 year award – MM 33% vesting
2020 year award – TM 50% vesting
2021 year award - TM 100% vesting
Number of shares vested
Number of unvested shares at the end of the period
*2022 amounts represent 2022-2024 remuneration schemes for top management granted in 2022.
**2021 amounts represent 2021-2022 remuneration schemes for middle management granted in 2021
36,659
286,301
424,114
–
–
–
-
321,453
747,074
-
-
321,453
(361,739)
(361,739)
(35,879)
(169,753)
–
–
(456,815)
(47,401)
(137,779)
(14,846)
(45,902)
(89,094)
(791,837)
2,044,604
(451,251)
(57,102)
–
(47,401)
(137,779)
–
–
–
(693,533)
2,125,246
Expense recognised as staff cost during the period was GEL 21,672 thousand (31 December 2021: GEL 19,352 thousand).
Tax part of the existing bonus system is accounted for on an equity settled basis.
Staff costs related to equity settled part of the share based payment schemes are recognised in the income statement
on a straight line basis over the vesting period of each relevant tranche and corresponding entry is credited to share
based payment reserve in equity.
The Management Board (the “Board”) is the chief operating decision maker and it reviews the Group’s internal
reporting in order to assess the performance and to allocate resources. In 2022 the Group made following re-
segmentations:
• Standard annual re-segmentation after which some of the clients were reallocated to different segments – GEL
106,315 thousand of loans and GEL 87,359 thousand of customer accounts were transferred from micro, small and
medium enterprises to Corporate segment.
For corporate segment annual revenue and granted facility limits have been increased to GEL 15.0 million and GEL 6.0
million, respectively.
The definition has been updated starting from January 1, 2022. The updated changes are reflected in segments’
definitions below.
The operating segments according to the definition are determined as follows:
• Corporate – a legal entity/group of affiliated entities with an annual revenue exceeding GEL 15 million or which
has been granted facilities of more than GEL 6.0 million. Some other business customers may also be assigned to
the CIB segment or transferred to the micro, small and medium enterprises segment on a discretionary basis. In
addition, CIB includes Wealth Management private banking services to high-net-worth individuals with a threshold
of US$ 250,000 on assets under management (AUM), as well as on discretionary basis;
• Retail – non-business individual customers; or individual customers of the fully digital bank, Space;
• Micro, small and medium enterprises – business customers who are not included in the CIB segment;
• Corporate centre and other operations - comprises the Treasury, other support and back office functions, and non-
banking subsidiaries of the Group.
The Board of Directors assesses the performance of the operating segments based on a measure of profit before
income tax.
The reportable segments are the same as the operating segments.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s
total revenue in 2022 and 2021.
The vast majority of the Group’s revenues are attributable to Georgia. A geographic analysis of origination of the
Group’s assets and liabilities is given in Note 35.
Allocation of indirect expenses is performed based on drivers identified for each type of cost if possible. If there is no
identifiable driver for any type of expense/overhead cost, those expenses are allocated between segments based on
the same logic as applied for the expenses with similar nature (e.g. other operating expenses would follow the pattern
of closest category of operating expenses).
Intersegment transfer pricing methodology is internally created tool, which is based on matched maturity logics. It is
used to manage liquidity and interest rate risks. Corporate centre borrows monetary amounts (deposits) from business
segments, therefore, each of segment is compensated on each deposit based on its currency, duration, type and
liquidity requirements. Business segments then borrow money from corporate centre, to fund loans, on which each
segment pays agreed price to corporate centre, based on each loans currency, type (fixed or floating), duration, capital
requirement.
214
215
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
27. SEGMENT ANALYSIS CONTINUED
27. SEGMENT ANALYSIS CONTINUED
A summary of the Group’s reportable segments for the years ended 31 December 2022 and 2021 is provided below:
Segment disclosure below is prepared with the effect of 2022 re-segmentations as described above:
For comparison purposes segment disclosure below is prepared with the effect of 2022 re-segmentations as
described above:
in thousands of GEL
2022
Interest income
Interest expense
Corporate
Retail
Micro,
small and
medium
enterprises
Corporate
centre
and other
operations
Total
626,782
816,448
488,629
287,922
2,219,781
(368,195)
(120,248)
(11,632)
(511,322)
(1,011,397)
in thousands of GEL
2021
Interest income
Interest expense
Corporate
Retail
Micro,
small and
medium
enterprises
Corporate
centre
and other
operations
Total
568,021
678,815
378,330
237,911
1,863,077
(278,751)
(119,200)
(10,416)
(487,061)
(895,428)
Net interest gains on currency swaps
1,205
98
-
33,408
34,711
Net interest gains on currency swaps
-
-
-
28,143
28,143
Inter-segment interest income/(expense)
140,947
(254,944)
(234,065)
348,062
-
Inter-segment interest income /(expense)
70,380
(169,947)
(153,799)
253,366
-
400,739
441,354
242,932
158,070
1,243,095
Net interest income
359,650
389,668
214,115
32,359
995,792
Net interest income
Fee and commission income
Fee and commission expense
87,399
356,829
33,385
-
477,613
(12,868)
(175,988)
(13,275)
(9,832)
(211,963)
Fee and commission income
Fee and commission expense
77,141
275,875
25,144
-
378,160
(11,488)
(128,133)
(13,568)
(84)
(84)
(153,273)
224,887
Net fee and commission income/(epense)
74,531
180,841
20,110
(9,832)
265,650
Net fee and commission income/(expense)
65,653
147,742
11,576
Net gains from derivatives, foreign currency operations and
translation
Net gains from disposal of investment securities measured at
fair value through other comprehensive income
Other operating income
Share of (loss)/profit of associate
126,900
91,187
54,674
139,045
411,806
3,573
1,702
(232)
-
6,579
-
-
2,238
5,811
1,417
-
9,977
584
19,675
352
Net gains from derivatives, foreign currency operations and
translation
Net gains from disposal of investment securities measured at
fair value through other comprehensive income
Other operating income
Share of profit of associate
58,880
35,942
25,718
3,654
124,194
1,411
-
2,706
8,879
-
-
-
877
-
9,745
11,156
28,580
41,042
837
837
Other operating non-interest income
131,943
97,766
56,091
151,844
437,644
Other operating non-interest income
62,997
44,821
26,595
42,816
177,229
Credit loss recovery/(allowance) for loans to customers
2,763
(88,185)
(19,825)
Credit loss (allowance)/recovery for performance guarantees
and credit related commitments
Credit loss recovery for finance lease receivables
(2,889)
-
341
-
(173)
-
-
-
(105,247)
(2,721)
781
781
Credit loss recovery/(allowance) for loans to customers
58,304
(23,742)
Credit loss recovery for performance guarantees and credit
related commitments
Credit loss recovery for finance lease receivables
636
-
369
-
Credit loss allowance for other financial assets
(1,423)
(1,602)
(416)
(5,719)
(9,160)
Credit loss allowance for other financial assets
(521)
(3,307)
8,614
199
-
-
-
-
-
43,176
1,204
236
236
(10,633)
(14,461)
1,498
2,594
Credit loss recovery for financial assets measured at fair value
through other comprehensive income
Net recovery/(impairment) of non-financial assets
Operating income after expected credit and non-financial
asset impairment losses
79
432
-
(64)
-
105
783
(495)
862
(22)
606,175
630,451
298,824
295,432
1,830,882
Credit loss recovery for financial assets measured at fair value
through other comprehensive income
1,096
-
Net impairment of non-financial assets
(7,950)
(36)
(1,360)
(2,369)
(11,715)
Operating income after expected credit and non-financial
asset impairment losses
539,865
555,515
259,739
63,823
1,418,942
Staff costs
Depreciation and amortization
Provision for liabilities and charges
(59,710)
(165,527)
(65,904)
(15,385)
(306,526)
Staff costs
(49,009)
(134,138)
(52,956)
(19,644)
(255,747)
(6,668)
(61,535)
(14,378)
(2,527)
(85,108)
Depreciation and amortization
(5,258)
(51,480)
(11,626)
(2,258)
(70,622)
-
-
-
(2,000)
(2,000)
Administrative and other operating expenses
(16,394)
(77,593)
(20,384)
(14,253)
(128,624)
Administrative and other operating expenses
(23,371)
(102,131)
(26,258)
(15,588)
(167,348)
Operating expenses
(70,661)
(263,211)
(84,966)
(36,155)
(454,993)
Operating expenses
Profit before tax
Income tax expense
Profit for the year
(89,749)
(329,193)
(106,540)
(35,500)
(560,982)
Losses from modifications of financial instruments
(945)
(688)
(93)
-
(1,726)
516,426
301,258
192,284
259,932
1,269,900
(54,289)
(31,274)
(20,038)
(141,224)
(246,825)
462,137
269,984
172,246
118,708
1,023,075
Profit before tax
Income tax expense
Profit for the year
468,259
291,616
174,680
27,668
962,223
(53,195)
(29,126)
(19,784)
(17,173)
(119,278)
415,064
262,490
154,896
10,495
842,945
Total gross loans and advances to customers reported
6,282,469
6,765,392
4,809,415
-
17,857,276
Total gross loans and advances to customers reported
6,654,056
6,265,507
4,034,990
-
16,954,553
Total customer accounts reported
9,133,452
6,536,649
1,758,814
412,442
17,841,357
Total customer accounts reported
7,465,911
5,629,823
1,476,791
311,620
14,884,145
Total credit related commitments and performance guarantees
2,573,935
165,807
468,333
-
3,208,075
Total credit related commitments and performance guarantees
3,205,059
178,556
377,428
-
3,761,043
216
217
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT 27. SEGMENT ANALYSIS CONTINUED
27. SEGMENT ANALYSIS CONTINUED
in thousands of GEL
2022
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
in thousands of GEL
2021
– Fee and commission income
– Other operating income
Total
Timing of revenue recognition:
– At point in time
– Over a period of time
Corporate
Retail
Micro,
small and
medium
enterprises
Corporate
centre
and other
operations
Total
87,399
356,829
33,385
-
477,613
1,702
6,579
1,417
9,977
19,675
89,101
363,408
34,802
9,977
497,288
88,697
362,296
34,749
9,977
495,719
404
1,112
53
-
1,569
Corporate
Retail
Micro,
small and
medium
enterprises
Corporate
centre
and other
operations
Total
112,479
212,922
52,759
-
378,160
2,706
8,879
877
28,580
41,042
115,185
221,801
53,636
28,580
419,202
115,185
220,246
53,636
28,580
417,647
-
1,555
-
-
1,555
Segment disclosure below is prepared without the effect of 2022 re-segmentations as described above:
in thousands of GEL
2021
Interest income
Interest expense
Corporate
Retail
Micro,
small and
medium
enterprises
Corporate
centre
and other
operations
Total
562,014
678,815
384,337
237,911
1,863,077
(278,005)
(119,200)
(11,162)
(487,061)
(895,428)
Net interest gains on currency swaps
-
-
-
28,143
28,143
Inter-segment interest income /(expense)
71,408
(169,947)
(154,827)
253,366
-
Net interest income
Fee and commission income
Fee and commission expense
355,417
389,668
218,348
32,359
995,792
112,479
212,922
52,759
-
378,160
(81,033)
(38,282)
(33,874)
(84)
(153,273)
Net fee and commission income/(expense)
31,446
174,640
18,885
(84)
224,887
Net gains from derivatives, foreign currency operations and
translation
Net gains from disposal of investment securities measured at
fair value through other comprehensive income
Other operating income
Share of profit of associate
57,102
35,942
27,496
3,654
124,194
1,411
-
-
9,745
11,156
2,706
8,879
877
28,580
41,042
-
-
-
837
837
Other operating non-interest income
61,219
44,821
28,373
42,816
177,229
Credit loss recovery/(allowance) for loans to customers
59,743
(23,742)
Credit loss recovery for performance guarantees and credit
related commitments
Credit loss recovery for finance lease receivables
636
-
369
-
Credit loss allowance for other financial assets
(521)
(3,307)
Credit loss recovery for financial assets measured at fair value
through other comprehensive income
1,096
-
7,175
199
-
-
-
-
-
43,176
1,204
236
236
(10,633)
(14,461)
1,498
2,594
Net impairment of non-financial assets
(7,950)
(36)
(1,360)
(2,369)
(11,715)
Operating income after expected credit and non-financial
asset impairment losses
501,086
582,413
271,620
63,823
1,418,942
Staff costs
(49,009)
(134,138)
(52,956)
(19,644)
(255,747)
Depreciation and amortization
(5,258)
(51,480)
(11,626)
(2,258)
(70,622)
Administrative and other operating expenses
(16,394)
(77,593)
(20,384)
(14,253)
(128,624)
Operating expenses
(70,661)
(263,211)
(84,966)
(36,155)
(454,993)
Losses from modifications of financial instruments
(945)
(688)
(93)
-
(1,726)
Profit before tax
Income tax expense
Profit for the year
429,480
318,514
186,561
27,668
962,223
(48,779)
(32,189)
(21,137)
(17,173)
(119,278)
380,701
286,325
165,424
10,495
842,945
Total gross loans and advances to customers reported
6,547,741
6,265,507
4,141,305
-
16,954,553
Total customer accounts reported
7,378,552
5,629,823
1,564,150
311,620 14,884,145
Total credit related commitments and performance guarantees
3,201,286
178,556
381,201
-
3,761,043
218
219
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022FNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS CONTINUEDMANAGEMENT REPORT
28. INTEREST INCOME AND EXPENSE
29. FEE AND COMMISSION INCOME AND EXPENSE
2022
2021
Fee and commission income and expense of the Group are as follows:
in thousands of GEL
Interest income calculated using effective interest method
Loans and advances to customers
1,911,782
1,601,966
Investment securities measured at fair value through other comprehensive income
196,114
185,424
Repurchase receivables
Due from other banks
Other financial assets
Other interest income
Finance lease receivables
Total interest income
Interest expense
Customer accounts
Due to credit institutions
Subordinated debt
Debt securities in issue
Other interest expense
Lease Liabilities
Total interest expense
Net interest gains on currency swaps
Net interest income
2,449
45,577
3,645
-
13,491
4,315
60,214
57,881
2,219,781
1,863,077
(571,575)
(469,873)
(266,280)
(256,746)
(53,889)
(116,654)
(53,338)
(113,146)
(2,999)
(2,325)
(1,011,397)
(895,428)
34,711
28,143
1,243,095
995,792
During 2022 interest accrued on defaulted loans amounted to GEL 31,739 thousand (2021: GEL 36,105 thousand).
During 2022 capitalized interest expense in the amount of GEL 1,794 thousand (2021: GEL 1,756 thousand) was
attributable to the development of the Group’s headquarter. The capitalisation rate used to determine the amount of
borrowing costs eligible for capitalisation is weighted average of interest-bearing liabilities by currencies: 8.7% in GEL,
2.3% in USD and 0.6% in EUR. (2021: 7.7% in GEL, 2.9% in USD and 1.3% in EUR).
in thousands of GEL
2022
2021
Fee and commission income in respect of financial instruments not at fair value through
profit or loss:
– Card operations
– Settlement transactions
– Guarantees issued
– Cash transactions
– Issuance of letters of credit
– Foreign exchange operations
– Other
Total fee and commission income
Fee and commission expense in respect of financial instruments not at fair value
through profit or loss:
– Card operations
– Settlement transactions
– Cash transactions
– Guarantees received
– Letters of credit
– Foreign exchange operations
– Other
Total fee and commission expense
Net fee and commission income
249,608
188,749
132,582
108,046
40,559
8,879
6,816
5,234
42,125
7,383
2,906
3,259
33,935
25,692
477,613
378,160
152,069
22,177
18,460
3,714
1,256
930
13,357
115,998
18,052
6,062
3,034
1,594
402
8,131
211,963
153,273
265,650
224,887
220
221
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
29. FEE AND COMMISSION INCOME AND EXPENSE CONTINUED
31. STAFF COSTS
Fee and commission income and expense of the Bank are as follows:
Staff costs of the Group are as follows:
in thousands of GEL
2022
2021
Fee and commission income in respect of financial instruments not at fair value through
profit or loss:
– Card operations
– Settlement transactions
– Guarantees issued
– Cash transactions
– Issuance of letters of credit
– Foreign exchange operations
– Other
Total fee and commission income
Fee and commission expense in respect of financial instruments not at fair value
through profit or loss:
– Card operations
– Settlement transactions
– Cash transactions
– Guarantees received
– Letters of credit
– Foreign exchange operations
– Other
Total fee and commission expense
Net fee and commission income
246,899
185,842
101,027
40,559
17,543
6,861
5,242
25,306
79,617
44,960
13,825
73
3,262
22,019
443,437
349,598
159,611
19,958
43,531
3,714
1,256
922
11,909
240,901
202,536
124,191
16,143
23,843
3,034
1,594
392
6,831
176,028
173,570
30. NET GAINS FROM CURRENCY DERIVATIVES, FOREIGN CURRENCY OPERATIONS AND TRANSLATION
in thousands of GEL
Salaries and bonuses
Share based compensation
Other compensation cost
Salaries and other employee benefits
Staff costs of the Bank are as follows:
in thousands of GEL
Salaries and bonuses
Share based compensation
Other compensation cost
Salaries and other employee benefits
2022
2021
269,245
220,584
21,672
15,609
19,352
15,811
306,526
255,747
2022
2021
244,225
198,837
21,672
13,376
19,352
14,102
279,273
232,291
Share based compensation represents remuneration paid in shares and is excluded as non-cash in the consolidated
and separate statement of cash flows.
Breakdown of monthly average number of employees by categories is as follows:
Number of employees of the Group are as follows:
Position
Top Management
Middle Management
Other Employees
Total
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
Temporary
Permanent
2022
2021
-
6
-
286
1,105
6,965
8,362
-
6
-
295
1,047
6,370
7,718
2022
2021
-
6
-
237
1,038
6,252
7,533
-
6
-
226
1,000
5,728
6,960
Net gains from currency derivatives, foreign currency operations and translation for the following years are as follows:
Number of employees of the Bank are as follows:
in thousands of GEL
Net gains from trading in foreign currencies
Net gains/(losses) from foreign exchange translation
2022
117,779
2021
329,582
280,952
(212,601)
Position
Top Management
Net gains from derivative financial instruments other than derivatives on foreign currency
135
289
Total net gains from currency derivatives, foreign currency operations and translation
398,866
117,270
Middle Management
Management has corrected the presentation of translation gains/losses from derivatives on foreign currency. Gains of
GEL 227,516 thousand was presented as “Net gains/(losses) from foreign exchange translation” in 2021 accounts and
was reclassified to “Net gains from trading in foreign currencies” in 2022, comparatives and consolidated statement of
cash flows has been restated accordingly.
Other Employees
Total
in thousands of GEL
Net gains from trading in foreign currencies
Net gains/(losses) from foreign exchange translation
31 December 2021 (As
originally presented)
113,043
3,938
Reclassification
216,539
(216,539)
31 December 2021 (as
restated)
329,582
(212,601)
222
223
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
32. ADMINISTRATIVE AND OTHER OPERATING EXPENSES
32. ADMINISTRATIVE AND OTHER OPERATING EXPENSES CONTINUED
Administrative and other operating expenses of the Group are as follows:
Administrative and other operating expenses of the Bank are as follows:
in thousands of GEL
Advertising and marketing services
Professional services
Intangible asset maintenance
Taxes other than on income
Occupancy and rent*
Utilities services
Premises and equipment maintenance
Insurance
Communications and supply
Representative expenses
Stationery and other office expenses
Personnel training and recruitment
Transportation and vehicle maintenance
Business trip expenses
Security services
Loss on disposal of repossessed collateral
Loss on disposal of premises and equipment
Charity
Other
Total administrative and other operating expenses
2022
30,592
23,230
21,071
11,515
9,154
8,662
8,227
7,945
6,010
5,956
5,485
4,178
2,939
1,674
1,572
1,505
1,138
854
2021
17,375
19,085
19,131
9,850
12,437
8,192
6,589
7,999
5,615
539
4,431
2,553
2,365
337
1,787
598
1,229
417
15,641
8,095
167,348
128,624
in thousands of GEL
Advertising and marketing services
Professional services
Intangible asset maintenance
Utilities services
Premises and equipment maintenance
Occupancy and rent*
Taxes other than on income
Representative expenses
Stationery and other office expenses
Communications and supply
Personnel training and recruitment
Insurance
Business trip expenses
Security services
Loss on disposal of repossessed collateral
Loss on disposal of premises and equipment
Transportation and vehicle maintenance
Charity
Other
Total administrative and other operating expenses
*Includes short-term leases, low value leases not recognised under IFRS 16 scope.
*Includes short-term leases, low value leases not recognised under IFRS 16 scope.
2022
29,591
21,888
17,632
8,303
7,740
6,810
6,201
5,910
5,167
4,919
4,017
2,583
1,515
1,406
1,297
983
905
749
2021
16,621
19,547
16,500
7,852
6,200
9,634
5,584
515
4,108
4,553
2,389
2,214
297
1,619
583
1,117
634
417
11,527
3,284
139,143
103,668
224
225
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT 32. ADMINISTRATIVE AND OTHER OPERATING EXPENSES CONTINUED
33. INCOME TAXES
Auditors’ remuneration is included within professional services expenses above and comprises:
Income tax credit/(expense) comprise of the following:
in thousands of GEL
2022
Audit of TBC Bank Group and
subsidiaries annual financial
statements
Review of TBC Bank Group and
subsidiaries interim financial
statements
Other assurance services
Total auditors’ remuneration
2021
Audit of TBC Bank Group and
subsidiaries annual financial
statements
Review of TBC Bank Group and
subsidiaries interim financial
statements
Other assurance services
Total auditors’ remuneration
Audit
Audit Related
Other Services
Total
1,894
-
-
1,894
1,623
-
-
1,623
-
201
-
201
-
480
-
480
-
-
984
984
-
-
932
932
1,894
201
984
3,079
1,623
480
932
3,035
Fees presented in the tables above are exclusive of taxes. For the year ended 31 December 2021, GEL 910 thousands
(included in the table in other services) is attributable to the services in relation to issuance of AT1 Notes in October
2021. The mentioned amount is not part of the administrative expenses as it was integral to the transaction and has
been included in the effective interest rate of the instrument.
in thousands of GEL
Current tax charge
Effect of change in tax legislation
Deferred tax credit
Total income tax expense for the year
2022
2021
144,919
121,305
112,877
(10,971)
246,825
-
(2,027)
119,278
In 2022 the Government of Georgia has approved the changes to the current corporate tax model in Georgia for
financial institutions applicable from 2023.
According to the announced changes, the financial sector will no longer switch to the Estonian tax model, which was
expected to exempt banks from paying corporate taxes on retained earnings and only required a payment of 15%
corporate tax rate on distributed earnings.
The change to the corporate taxation model has an immediate impact on deferred tax balances and a corresponding
income tax expense, attributable to temporary differences between financial and tax accounting balances, arising
from prior periods. In addition to above changes, tax authorities require the banks to reimburse the tax reliefs obtained
through previous provisioning calculation differences caused by differences in tax and IFRS bases. On the other hand,
the effects of the equalizing of tax and IFRS bases for interest income and expense items are still under consideration
by tax authorities.
As a result of these changes, in 2022 the Group has recognized net deferred tax liabilities and corresponding deferred
tax expense in the amount of GEL 112,877 thousand in the statement of profit and loss.
In addition, with the effect from 2023, the existing corporate tax rate for banks will be increased from 15% to 20%, while
dividends will no longer be taxed with 5% dividend tax.
Current income tax liability to the regulatory authorities is generally paid on a quarterly basis. The amount is calculated
by dividing previous year current income tax amount by 4 equal portions.
The weighted average income tax rate is 2022: 15% (2021: 15%), when the income tax rate applicable to the majority of
subsidiaries income ranged from 15% - 20% (2021: 15% - 20%).
Reconciliation between the expected and the actual taxation (credit)/expense is provided below.
in thousands of GEL
Statutory rate
Profit before tax
Theoretical tax charge at statutory rate (15%-20%)
Tax effect of items which are not deductible or assessable for taxation purposes:
– Income which is exempt from taxation
– Non-deductible expenses
– Expected effects of change in tax legislation
– Other differences
2022
2021
15% – 20% 15% – 20%
1,269,900
962,223
190,594
144,310
(38,636)
(25,447)
187
94,716*
(36)
158
343
(86)
Total income tax expense for the year
246,825
119,278
*The amount represents the impact of 2022 tax legislation change, reduced by the deferred income tax that would have been accrued in 2022 if the tax
legislation change had not occurred.
226
227
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
33. INCOME TAXES CONTINUED
33. INCOME TAXES CONTINUED
Differences between financial reporting framework and statutory taxation regulations in Georgia and Azerbaijan give
rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes
and their tax bases. The tax effect of the movements in these temporary differences is detailed below and is recorded
at the rate of 15% (2021: 15%) for Georgia and 20% (2021: 20%) for Azerbaijan,
Income which is exempt from taxation includes interest income from placements in NBG, Georgian Government
Treasury bills and IFI securities. Non-deductible expenses include penalties paid and charity expenses towards
beneficiary which are not registered charity organizations.
Deferred tax assets/liabilities as of 31 December 2022 and 31 December 2021 are the following.
in thousands of GEL
Tax effect of (taxable)/deductible temporary
differences and tax loss carry forwards
Premises and equipment
Loans and advances to customers
Other financial assets
Other assets
Due to credit institutions
Other financial liabilities
Other liabilities
Share based payment
Goodwill
Investments in associates
One off reimbursement for different tax and
IFRS bases
Net deferred tax (liability)/asset
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax (liability)/asset
1
January
2022
Credited/
(charged) to
profit or loss
Effect of
change in tax
legislation
Effect of
currency
translation
31
December
2022
(1,162)
(13,399)
4,110
-
(368)
123
(922)
2,695
-
-
-
(8,923)
2,056
(10,979)
(8,923)
1,157
(50,882)
-
(50,887)
15,230
(4,092)
265
368
(128)
866
(2,695)
-
-
-
-
4,736
64
-
(719)
(867)
4,302
(4,987)
(423)
(64,101)
10,971
(112,877)
(8)
10,979
10,971
-
(112,877)
(112,877)
16
-
-
-
-
-
-
-
-
-
1,847
4,754
329
-
(724)
(923)
4,302
(4,987)
(423)
(64,101)
16 (110,813)
16
2,064
-
(112,877)
16
(110,813)
in thousands of GEL
Tax effect of (taxable)/deductible temporary
differences and tax loss carry forwards
Premises and equipment
Loans and advances to customers
Other financial assets
Due to credit institutions
Other financial liabilities
Other liabilities
Share based payment
Tax loss carried forward
Net deferred tax liability
Recognised deferred tax asset
Recognised deferred tax liability
Net deferred tax liability
1 January
2021
Credited/ (charged)
to profit or loss
31 December
2021
(3,781)
(18,617)
2,608
(1,684)
(461)
(2,333)
1,368
11,950
(10,950)
2,134
(13,084)
(10,950)
2,619
5,218
1,502
1,316
584
1,411
1,327
(11,950)
2,027
(78)
2,105
2,027
(1,162)
(13,399)
4,110
(368)
123
(922)
2,695
-
(8,923)
2,056
(10,979)
(8,923)
In the context of the Group’s current structure and Georgian tax legislation, tax losses and current tax assets of
different group companies may not be offset against current tax liabilities and taxable profits of other group
companies. Therefore, deferred tax assets and liabilities are offset only when they relate to the same taxable entity and
the same taxation authority.
228
229
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
34. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The table below sets out movements in the Group’s liabilities from financing activities for each of the periods
presented. The items of these liabilities are those that are reported as financing activities in the statement of cash
flows.
in thousands of GEL
Liabilities from financing activities at
1 January 2021
Proceeds from principal
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities at
31 December 2021
Proceeds from principal
Redemption of principal
Net interest movement**
Other non-cash movements*
Foreign exchange adjustments
Liabilities from financing activities at
31 December 2022
Other
borrowed
funds
Debt
securities
in Issue
Subordinated
debt
Lease
Liabilities
Total
4,345,079
1,419,513
672,740
54,588 6,491,920
1,750,443
242,287
-
-
1,992,730
(3,337,495)
(30,002)
-
-
2,710
-
(12,562)
(12,825) (3,362,882)
(191)
-
63
(27,420)
18,462
18,462
(68,607)
(80,811)
(36,340)
(3,766)
(189,524)
2,659,418
1,583,699
623,647
56,522 4,923,286
2,501,875
3,504
62,578
-
2,567,957
(1,731,699)
(205,898)
(13,710)
(13,099) (1,964,406)
5,318
-
13,765
(6,951)
2,921
284
22,288
-
36,553
29,602
(184,517)
(178,306)
(85,288)
(8,020)
(456,131)
3,250,395
1,209,813
590,148
72,240
5,122,596
* Other non-cash movements represent additions less terminations for finance lease contracts and gain on extinguishment of debt securities in issue.
**Net interest movement includes interest accrued and interest paid. Interest paid on other borrowed funds, debt securities in issue, subordinated debt
and lease liabilities is included in operating cash flow interest paid caption.
35. FINANCIAL AND OTHER RISK MANAGEMENT
Credit Quality
Depending on the type of financial asset the Group may utilize different sources of asset credit quality information
including credit ratings assigned by the international rating agencies (Standard & Poor’s, Fitch), credit scoring
information from credit bureau and internally developed credit ratings. Financial assets are classified in an internally
developed credit quality grades by taking into account the internal and external credit quality information in
combination with other indicators specific to the particular exposure (e.g. delinquency). The Group defines following
credit quality grades:
• Very low risk – exposures demonstrate strong ability to meet financial obligations;
• Low risk – exposures demonstrate adequate ability to meet financial obligations;
• Moderate risk – exposures demonstrate satisfactory ability to meet financial obligations;
• High risk – exposures that require closer monitoring, and
• Default – exposures in default, with observed credit impairment.
Expected credit loss (ECL) measurement
ECL is a probability-weighted estimate of the present value of future cash shortfalls. An ECL measurement is unbiased
and is determined by evaluating a range of possible outcomes. ECL measurement is based on four components used
by the Group: Probability of Default (“PD”), Exposure at Default (“EAD”), Loss Given Default (“LGD”) and Discount Rate.
The estimates consider forward looking information, that is, ECLs reflect probability weighted development of key
macroeconomic variables that have an impact on credit risk.
The Group uses is a three-stage model for ECL measurement and classifies its borrowers across three stages:
The Group classifies its exposures as Stage 1 if no significant deterioration in credit quality occurred since initial
recognition and the instrument was not defaulted when initially recognized. The exposure is classified to Stage 2
if the significant deterioration in credit quality was identified since initial recognition but the financial instrument
is not considered defaulted. The exposures for which the defaulted indicators have been identified are classified
as Stage 3 instruments. The Expected Credit Loss (ECL) amount differs depending on exposure allocation to one
of the Stages. In the case of Stage 1 instruments, the ECL represents that portion of the lifetime ECL that can be
attributed to default events potentially occurring within the next 12 months from the reporting date. In case of Stage
2 instruments, the ECL represents the lifetime ECL, i.e. credit losses that can be attributed to possible default events
during the whole lifetime of a financial instrument. Generally, lifetime is set equal to the remaining contractual maturity
of the financial instrument. Factors such as existence of contractual repayment schedules, options for extension of
repayment maturity and monitoring processes held by The Group affect the lifetime determination. In case of Stage 3
instruments, default event has already incurred and the lifetime ECL is estimated based on the expected recoveries.
Definition of default
Financial assets for which the Group observed occurrence of one or more loss events are classified in Stage 3.
The Group uses both quantitative and qualitative criteria for the definition of default. The borrower is classified as
defaulted if at least one of the following occurred:
• Any amount of contractual repayments is past due more than 90 days;
• Factors indicating the borrower’s unlikeliness-to-pay.
In case of individually significant borrowers The Group additionally applies criteria including but not limited to:
bankruptcy proceedings, significant fraud in the borrower’s business that significantly affected its financial condition,
breach of the contract terms etc. For SME and corporate borrowers default is identified on the counterparty level,
meaning that all the claims against the borrower are treated as defaulted. As for retail and micro exposures, facility level
default definition is applied considering additional pulling effect criteria. If the amount of defaulted exposure exceeds
predefined threshold, all the claims against the borrower are classified as defaulted. Once financial instrument is
classified as defaulted, it remains as such until it no longer meets any of the default criteria for a consecutive period of
six months, in which case exposure is considered to no longer be in default (i.e. to have cured). Probation period of six
months has been determined on analysis of likelihood of a financial instrument returning to default status after curing.
Exposures which are moved to stage 2 from default state are kept there for certain period before transferring to Stage 1
and classified as fully performing instruments again.
Significant increase in credit risk (“SICR”)
Financial assets for which the Group identifies significant increase in credit risk since its origination are classified in
Stage 2. SICR indicators are recognized at financial instrument level even though some of them refer to the borrower’s
characteristics. The Group uses both quantitative and qualitative indicators of SICR.
Quantitative criteria
On a quantitative basis The Group assess change in probability of default parameter for each particular exposure
since initial recognition and compares it to the predefined threshold. When absolute change in probability of
default exceeds the applicable threshold, SICR is deemed to have occurred and exposure is transferred to Stage
2. Quantitative indicator of SICR is applied to retail and micro segments, where the Group has sufficient number of
observations.
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Qualitative criteria
Financial asset is transferred to Stage 2 and lifetime ECLs is measured if at least one of the following SICR qualitative
criteria is observed:
Full Prepayment Rate (FPR) parameter represents the probability that a financial instrument will be fully prepaid during
the particular period to maturity. For the purpose of calculating Full Prepayment Ratio, the Group make the analysis of
the historical data of the contracts fully prepaid until the maturity. For revolving facilities, the Bank calculates the EAD
based on the expected limit utilisation percentage conditional on the default event.
• delinquency period of more than 30 days on contractual repayments;
• exposure is restructured, but is not defaulted;
• borrower is classified as “watch”.
The Group has not rebutted the presumption that there has been significant increase in credit risk since origination
when financial asset becomes more than 30 days past due. This qualitative indicator of SICR together with debt
restructuring is applied to all segments. Particularly for corporate and SME segment the Group uses downgrade of
risk category since origination of the financial instrument as a qualitative indicator of SICR. Based on the results of the
monitoring, borrowers are classified across different risk categories. In case there are certain weaknesses present,
which if materialized may lead to loan repayment problems, borrowers are classified as “watch” category. Although
watch borrowers’ financial standing is sufficient to repay obligations, these borrowers are closely monitored and
specific actions are undertaken to mitigate potential weaknesses. Once the borrower is classified as “watch” category
it is transferred to Stage 2. If any of the SICR indicators described above occur financial instrument is transferred to
Stage 2. Financial asset may be moved back to Stage 1, if SICR indicators are no longer observed.
ECL measurement
The Group utilizes two approaches for ECL measurement – individual assessment and collective assessment.
Individual assessment is mainly used for stage 2 and stage 3 individually significant borrowers. Additionally, the Group
may arbitrarily designate selected exposures to individual measurement of ECL based on the Group’s credit risk
management or underwriting departments’ decision.
The Group uses the discounted cash flow (DCF) method for the determination of recovery amount under individual
assessment. In order to ensure the accurate estimation of recoverable amount the Group utilizes scenario analysis
approach. Scenarios may be defined considering the specifics and future outlook of individual borrower, sector the
borrower operates in or changes in values of collateral. In case of scenario analysis The Group forecasts recoverable
amount for each scenario and estimates respective losses. Ultimate ECL is calculated as the weighted average of
losses expected in each scenario, weighted by the probability of scenario occurring.
As for the non-significant and non-impaired significant borrowers The Group estimates expected credit losses
collectively. For the collective assessment and risk parameters estimation purposes the exposures are grouped into
a homogenous risk pools based on similar credit risk characteristics. Common credit risk characteristics of the group
include but are not limited to: Stage (Stage 1, Stage 2 or Stage 3), type of counterparty (individual vs business), type
of product, rating (external or internal), overdue status, restructuring status, months in default category or any other
characteristics that may differentiate certain sub-segments for risk parameter’s estimation purposes. Number of pools
differs for different products/ segments considering specifics of portfolio and availability of data within each pool.
Collective ECL is the sum of the multiplications of the following credit risk parameters: EAD, PD and LGD, that are
defined as explained below, and discounted to present value using the instrument’s effective interest rate.
The key principles of calculating the credit risk parameters:
Exposure at default (EAD)
The EAD represents estimation of exposure to credit risk at the time of default occurring during the life of financial
instrument. The EAD parameter used for the purpose of the ECL calculation is time-dependent, i.e. the Group allows
for various values of the parameter to be applied to subsequent time periods during the lifetime of an exposure.
Such structure of the EAD is applied to all Stage 1 and Stage 2 financial instruments. In case of Stage 3 financial
instruments and defaulted POCI assets, the EAD vector is one-element with current EAD as the only value. EAD is
determined differently for amortising financial instruments with contractual repayment schedules and for revolving
facilities. For amortising products EAD is calculated considering the contractual repayments of principal and interest
over the 12-month period for facilities classified in Stage 1 and over lifetime period for remaining instruments. It is
additionally adjusted to include effect of reduction in exposure due to prepayments - Namely full prepayment ratio.
Probability of default (PD)
Probability of default parameter describes the likelihood of a default of a facility over a particular time horizon. It
provides an estimate of the likelihood that a borrower will be unable to meet its contractual debt obligations. The
PD parameter is time-dependent (i.e. has a specific term structure) and is applied to all non-defaulted contracts.
Taking into account specific nature of different segments of clients for which the PD is estimated as well as unique
characteristics that drive their default propensity, the PD is modelled differently for Retail and Micro segments and
Corporate and SME segments. PD assessment approach is also differentiated for different time horizons and is further
adjusted due to expected influence of macroeconomic variables as forecasted for the period (see ‘Forward Looking
Information” section for further details on incorporation of macroeconomic expectations in ECL calculation). FLI
adjustment is applied on PD for the three-year period, given the uncertainty involved in the macroeconomic forecasts
for the longer time horizon. Two types of PDs are used for calculating ECLs: 12-month and lifetime PD. Lifetime PDs
represent the estimated probability of a default occurring over the remaining life of the financial instrument and it is a
sum of the 12 months marginal PDs over the life of the instrument. The Group generally uses number based approach
of PD model construction, however for the nonhomogeneous portfolios exposure-weighted approach is utilised. The
Group uses different statistical approaches such as the extrapolation of 12-month PDs based on migration matrixes,
developing lifetime PD curves based on the historical default data and gradual convergence of long-term PD with the
long-term default rate.
Loss given default (LGD)
The LGD parameter represents the share of an exposure that would be irretrievably lost if a borrower defaults. For
Stage 1 and Stage 2 financial instruments, the LGD is estimated for each period in the instrument’s lifetime and reflects
the share of the expected EAD for that period that will not be recovered over the remaining lifetime of the instrument
after the default date. For Stage 3 financial instruments, the LGD represents the share of the EAD as of reporting
date that will not be recovered over the remaining life of that instrument. Assessment of LGD varies by the type of
counterparty, segment, type of product, securitization level and availability of historical observations. The general
LGD estimation process employed by the Group is based on the assumption that after the default of the exposure,
two mutually exclusive scenarios are possible. The exposure either leaves the default state (cure scenario) or does not
leave the default state and will be subject to recovery process (non-cure scenario). The probability that an exposure
defaults again in the cure scenario is involved in the estimation process. Risk parameters applicable to both scenarios,
i.e. cure rates and recovery rates, are estimated by means of migration matrices approach, where risk groups are
defined by consecutive months-in-default. For each LGD portfolio the Group defines the recovery horizon, since the
default date after which no material recoveries are assumed. Recovery horizon is defined by data analytics and expert
judgment. For certain portfolios based on the limitations of observations alternative versions of the general approach
may be applied. For significant corporate exposures, the Group uses the LGD modelling approach that is based
on realized recoveries from historical defaults, adjusted with approximation of future recoveries from individually
assessed defaulted exposures. In order to model LGD for SME and non-significant corporate borrowers, the Group is
estimating recoverable amount from the collateral and assumes that no recoveries from cash is expected. In order to
estimate recoverable amount from the collateral the Group is applying respective haircuts defined for different types
of collateral and discounts them using effective interest rate over the realization period. In addition, at each reporting
date, the Group makes the decision which historical data horizon should be used in order to model recoveries.
Forward-looking information
The measurement of unbiased, probability weighted ECL requires inclusion of forward looking information obtainable
without undue cost or effort. For forward-looking information purposes the Group defines three macro scenarios. The
scenarios are defined as baseline (most likely), upside (better than most likely) and downside (worse than most likely)
scenarios of the state of the Georgian economy. To derive the baseline macro-economic scenario, the Group takes
into account forecasts from various external sources – the National Bank of Georgia, Ministry of Finance, International
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Monetary Fund (“IMF”) as well as other International Financial Institutions (“IFI”’s) – in order to ensure the to the
consensus market expectations. Upside and downside scenarios are defined based on the framework developed by
the Group’s macroeconomic unit.
The Group uses statistical models and historical relationship between the various macroeconomic factors and default
observations to derive forward-looking adjustments. In case these models do not provide reasonable results either
from statistical or business perspective, the Group may apply expert judgment or use alternative approach. As at 31
December 2022, The Group employs statistical models to derive forward looking adjustment in all segments except
for corporate. In corporate segment, due to the insignificance of the statistical models, the Group does not applies FLI
adjustment. The baseline, upside and downside scenarios were assigned probability weighing of 50%, 25% and 25%,
respectively.
The forward looking information is incorporated in collective assessment of expected credit losses of Retail and
MSME portfolios and individually assessed exposures.
Model maintenance and validation
The Group regularly reviews its methodology and assumptions to reduce any difference between the estimates and
the actual credit loss. Such back-testing is performed at least once a year. As part of the back-testing process, the
Group evaluates actual realization of the risk parameters and their consistency with the model estimates. Additionally
staging criteria are also analysed within the back-testing process. The results of back-testing the ECL measurement
methodology are communicated to the Group Management and further actions for tuning the models and
assumptions are defined after discussions between authorised persons.
Risk governance
ECL impairment models were developed by internal credit risk governance division with the involvement of external
consultants. The division runs the models to calculate ECL each month. They are also responsible for model back-
testing, analytics and governance.
Economic scenarios and probability weights are prepared by macro-financial analysis unit.
All the assumptions, including PMAs and PMOs used in the ECL measurement go through of review and approval
process:
• Chief Economist reviews and approves the forward-looking scenarios and respective weights;
•
Internal allowance committee reviews and approves appropriateness of the estimates and judgements as well as
PMAs and PMOs used in ECL measurement on a regular basis; internal committee includes Head of ERM, Heads
of Portfolio Credit Risk Management divisions and CRO, who ultimately approves ECL results as of each reporting
date.
Climate risk. The Group’s largest operations are located in Georgia hence the climate risk overview is done by the
management from Georgian perspective. The Georgia’s 2030 Climate Change Strategy and Climate Action Plan
lays out different policy measures on which TBC Bank based its identification of the potential impact of the policy
measures on different economic sectors. As a summary of the potential impact of the various transition risks and
physical risks identified, the transitional risks in Georgia are low, considering, that trade and services dominate the
Georgian economy, the policy measures outlined in the Georgia’s 2030 Climate Change Strategy will have overall
low impact on the economic sectors, especially in short and medium term. The Georgia’s 2030 Climate Change
Strategy takes into consideration that Georgia is a transitional and growing economy, and therefore the government
strategy is not to impede the growth of the GDP with policy measures and rather to support a smooth transition where
necessary. It is worth noting, that the economic sectors most affected by transitional risks world-wide such as mining
crude petroleum, natural gas and metal ores, manufacturing coke and refined petroleum products are present to the
extremely limited extend in Georgia, resulting in a low overall impact of transitional measures on economic growth, if
any. In order to increase the understanding of climate-related risks on its loan portfolio, the Bank performed a high-
level sectoral risk assessment, as different sectors might be vulnerable to different climate-related risks over different
time horizons; furthermore, the Bank performed climate stress testing of the credit portfolio. The maturity structure
of the loan portfolio shows that the largest part of assets is distributed in the time horizons that are much shorter than
the impacts of climate change, especially of physical risks, can be materialized in Georgia. Therefore, the bank has not
made any adjustment to the level of provisions purely related to climate risk. On the other hand, the understanding of
climate related risks, which have longer-term impacts need to be increased in coming years, therefore, when the bank
has a more definitive analysis, it will further develop the approach, how to consider climate risks in provisioning. No
post model adjustments (PMAs) or Post model overlays (PMOs) have been posted for 2022 in this regard.
Geographical risk concentrations
Assets, liabilities, credit related commitments and performance guarantees have generally been attributed to
geographic regions based on the country in which the counterparty is located. Balances legally outstanding to/from
off-shore companies which are closely related to Georgian counterparties are allocated to the caption “Georgia”. Cash
on hand and premises and equipment have been allocated based on the country in which they are physically held.
Tables below includes geographical concentration by country of incorporation. Loans and advances to OECD and
Non-OECD resident customers, as well as to Georgian customers, are issued to the entities most of which are based
and performing in Georgia.
The geographical concentration of the Group’s assets and liabilities as of 31 December 2022 is set out below by
country of incorporation:
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at fair
value through OCI
Repurchase receivables
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Credit related commitments
Georgia
OECD
Non-OECD
Total
2,074,615
5,001
2,047,564
17,094,888
1,712,616
-
282,300
246,866
1,683,849
27,634
3,786,098
1,297
-
151,750
596,009
267,495
-
-
-
-
6,298
2,047,564
250,804
17,497,442
576,103
2,884,728
-
267,495
6,586
288,886
132
246,998
23,463,850
2,700,400
861,259
27,025,509
1,299,611
257
3,633
1,303,501
24,763,461
2,700,657
864,892
28,329,010
1,363,669
15,090,636
1,201,666
250,085
72,219
98,008
18,076,283
208,519
18,284,802
6,478,659
901,320
1,670,769
1,930,394
1,034,409
-
433
-
354,336
3,319,572
1,168
3,320,740
(620,083)
565,669
2,898
591,297
3,885,360
1,716,312
17,841,357
8,147
1,209,813
-
21
250,518
72,240
137,804
590,148
2,453,581
23,849,436
4,085
213,772
2,457,666
24,063,208
(1,592,774)
4,265,802
56,881
1,523,870
10,538
1,684,205
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The geographical concentration of the Group’s assets and liabilities as of 31 December 2021 is set out below by country
of incorporation:
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at
fair value through OCI
Finance lease receivables
Other financial assets
Total financial assets
Non-financial assets
Total assets
Liabilities
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Non-financial liabilities
Total liabilities
Net balance sheet position
Performance guarantees
Credit related commitments
Georgia
OECD
Non-OECD
Total
987,932
26,174
2,086,113
16,104,160
1,440,168
246,328
439,224
21,330,099
1,131,337
22,461,436
1,325,363
12,805,769
1,578,050
120,343
56,253
109,427
15,995,205
194,364
16,189,569
6,271,867
724,710
2,178,835
593,004
16,033
-
126,415
496,377
-
2,749
14,524
1,595,460
30
-
42,237
2,086,113
316,610
16,547,185
1,651
1,938,196
6,012
234
252,340
442,207
1,234,578
339,061
22,903,738
-
4,437
1,135,774
1,234,578
343,498
24,039,512
1,612,336
1,029,719
-
270
-
357,834
3,000,159
46,376
2,984,075
1,048,657
14,884,145
5,649
1,583,699
7
269
120,620
56,522
156,386
623,647
1,257,344
20,252,708
-
2,385
196,749
3,000,159
(1,765,581)
675,323
4,197
1,259,729
20,449,457
(916,231)
3,590,055
165,661
1,565,694
12,317
2,195,349
Market risk. The Bank follows the Basel Committee’s definition of market risk as the risk of losses in on- and off-
balance sheet positions arising from movements in market prices. This risk is principally made up of (a) risks pertaining
to interest rate instruments and equities in the trading book and (b) foreign exchange rate risk (or currency risk) and
commodities risk throughout the Bank. The Bank’s strategy is not to be involved in trading book activity or investments
in commodities. Accordingly, the Bank’s exposure to market risk is primarily limited to foreign exchange rate risk in the
structural book.
Currency risk. Foreign exchange rate risk arises from the potential change in foreign currency exchange rates,
which can affect the value of a financial instrument. This risk stems from the open currency positions created due to
mismatches in foreign currency assets and liabilities. The NBG requires the Bank to monitor both balance sheet and
total aggregate (including off-balance sheet) open currency positions and to maintain the later one within 20% of the
Bank’s regulatory capital. The Asset-Liability Management Committee (“ALCO”) has set limits on the level of exposure
by currency as well as on aggregate exposure positions which are more conservative than those set by the NBG. The
Bank’s compliance with such limits is monitored daily by the heads of the Treasury and Financial Risk Management
Departments.
On 13 August 2018 the NBG introduced new regulation on changes to OCP (“open currency position”) calculation
method, according to this regulation, from March 2019 special reserves assigned to FC balance-sheet assets were
deductible gradually for OCP calculation purposes.
The full application of the regulation was finalized in Q4 2022, following the suspended period due to the COVID-19
pandemic previously.
Currency risk management framework is governed through the Market Risk Management Policy. The table below
summarises the Group’s exposure to foreign currency exchange rate risk at the balance sheet date. While managing
open currency position the Group considers part of the provisions to be denominated in the USD, Euro and other
currencies. Gross amount of currency swap deposits is included in Derivatives. Therefore, total financial assets and
liabilities below are not traceable with either balance sheet or liquidity risk management tables, where net amount of
gross currency swaps is presented.
As of 31 December 2022
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
Monetary
financial
assets
13,454,240
9,116,276
4,210,065
244,928
Monetary
financial
liabilities
10,906,671
10,829,585
1,934,556
198,532
Derivatives*
Net position
672,019
3,219,588
1,696,253
(17,056)
(2,322,418)
(46,909)
(31,929)
14,467
27,025,509
23,869,344
13,925
3,170,090
*Starting from 2022 management presents the undiscounted gross amount of currency derivatives in currency risk management table above as it
reflects Bank’s actual risk management policy principles. Comparative figures have not been restated due to immateriality. The derivative amounts in the
table above do not reconcile to note 39 as that one includes fair values of derivative financial instruments.
As of 31 December 2021
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
Monetary
financial
assets
10,245,525
8,088,897
4,420,441
148,875
Monetary
financial
liabilities
7,430,412
10,991,513
1,686,875
143,908
Derivatives
Net position
(339)
2,814,774
2,914,442
(2,725,047)
(39)
11,826
8,519
4,928
22,903,738
20,252,708
189,017
2,840,047
US Dollar strengthening by 20% (weakening 20%) would decrease Group’s profit or loss and equity in 2022 by GEL 3,411
thousand (increase by GEL 3,411 thousand). Euro strengthening by 20% (weakening 20%) would decrease Group’s profit
or loss and equity in 2022 by GEL 9,382 thousand (increase by GEL 9,382 thousand).
US Dollar strengthening by 20% (weakening 20%) would increase Group’s profit or loss and equity in 2021 by GEL 2,365
thousand (decrease by GEL 2,365 thousand). Euro strengthening by 20% (weakening 20%) would increase Group’s
profit or loss and equity in 2021 by GEL 1,704 thousand (decrease by GEL 1,704 thousand).
Interest rate risk. Interest rate risk arises from potential changes in the market interest rates that can adversely affect
the fair value or future cash flows of the financial instrument. This risk can arise from maturity mismatches of assets
and liabilities, as well as from the re-pricing characteristics of such assets and liabilities.
The biggest share of the Bank’s deposits and the part of the loans are at fixed interest rates, while a portion of the
Bank’s borrowings is at a floating interest rate. In case of need, the Bank also applies for interest rate risk hedging
instruments in order to mitigate interest rate risk. Furthermore, many of the Bank’s loans to customers contain a clause
allowing it to adjust the interest rate on the loan in case of adverse interest rate movements, thereby limiting the Bank’s
exposure to interest rate risk. The management also believes that the Bank’s interest rate margins provide a reasonable
buffer to mitigate the effect of possible adverse interest rate movements.
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The Group employs an advanced framework for the management of interest rate risk by establishing appropriate
Risk Appetite limits, monitoring compliance with them and preparing forecasts. From September, 2020 the NBG
introduced regulation on interest rate risk and set the limit for Economic Value of Equity (EVE) sensitivity at 15% of NBG
Tier 1 Capital. The main principles and assumptions of NBG IRR methodology are in line with Basel standards and EBA
guidelines developed for IRR management purposes.
According to NBG guidelines the net interest income sensitivity under parallel shifts of interest rate scenarios are
maintained for monitoring purposes, while EVE sensitivity is calculated under 6 predefined stress scenarios of interest
rate changes and the limit is applied to the worst case scenario result.
Interest rate risk is managed by the financial risk management department and is monitored by the ALCO,
which decides on actions that are necessary for effective interest rate risk management and follows up on their
implementation. The major aspects of interest rate risk management development and the respective reporting are
periodically provided to the Management Board, the Supervisory Board and the Risk Committee.
Following main assumptions under NBG IRR Regulation and EBA 2018 guidelines, at 31 December, 2022, if interest rates
had been 200 basis points higher, with all other variables held constant, profit would have been GEL 84 million higher,
mainly as a result of higher interest income on variable interest assets (2021: GEL 129 million). If interest rates at 31
December, 2022 had been 200 basis points lower with all other variables held constant, profit for the year would have
been GEL 78 million lower, mainly as a result of lower interest income on variable interest assets (2021: GEL 40 million).
At 31 December, 2022, if interest rates had been 200 basis points lower, with all other variables held constant, other
comprehensive income would have been GEL 35.6 million higher (2021: GEL 57 million), as a result of an increase in the
fair value of fixed rate financial assets measured at fair value through other comprehensive income and repurchase
receivables. If interest rates at 31 December, 2022 had been 200 basis points higher with all other variables held
constant, Other comprehensive income would have been GEL 35.6 million lower (2021: GEL 60.8 million), as a result of
decrease in the fair value of fixed rate financial assets measured at fair value through other comprehensive income.
The uptrend in downward shift effect is due to the updated IR yields by the regulator, which resulted into the higher
downward shifts in FC. While downtrend in upward shift effect is the result of the NBG’s new regulation, according to
which no positive interest rate is accrued on FC mandatory reserves.
The Bank calculates the impact of changes in interest rates using both Net Interest Income and Economic Value
sensitivity. Net Interest Income sensitivity measures the impact of a change of interest rates along the various
maturities on the yield curve on the net interest revenue for the nearest year. Economic Value measures the impact of
a change of interest rates along the various maturities on the yield curve on the present value of the Group’s assets,
liabilities and off-balance sheet instruments. When performing Net Interest Income and Economic Value sensitivity
analysis, the Bank uses parallel shifts in interest rates as well as number of different scenarios. TBC Bank closely
monitors the adverse effect of possible parallel yield curve shift scenarios on net interest income over a one-year
period to ensure compliance with the predefined risk appetite of the Bank.
In order to manage interest rate risk the Bank establishes appropriate limits. The Bank monitors compliance with the
limits and prepares forecasts. ALCO decides on actions that are necessary for effective interest rate risk management
and follows up on the implementation. Periodic reporting is done to Management Board and the Board’s Risk,
Committee.
Liquidity Risk. The liquidity risk is the risk that TBC Bank either does not have sufficient financial resources available to
meet all of its obligations and commitments as they fall due or can access those resources only at a high cost. The risk
is managed by the Financial Risk Management and Treasury Departments and is monitored by the ALCO.
The principal objectives of the TBC Bank’s liquidity risk management policy are to: (i) ensure the availability of funds in
order to meet claims arising from total liabilities and off-balance sheet commitments, both actual and contingent, at an
economic price; (ii) recognise any structural mismatch existing within TBC Bank’s statement of financial position and
set monitoring ratios to manage funding in line with well-balanced growth; and (iii) monitor liquidity and funding on an
on-going basis to ensure that approved business targets are met without compromising the risk profile of the Bank.
The liquidity risk is categorised into two risk types: the funding liquidity risk and the market liquidity risk.
Funding liquidity risk is the risk that TBC will not be able to efficiently meet both expected and unexpected current
and future cash flow and collateral needs without affecting either its daily operations or its financial condition. To
manage funding liquidity risk TBC Bank uses the Liquidity Coverage ratio and the Net Stable Funding ratio set, forth
under Basel III, and defined further by the NBG. In addition the Bank performs stress tests and “what-if” scenario
analysis. With Liquidity Coverage Ratio (“NBG LCR”), in addition to Basel III guidelines conservative approaches are
applied to the deposits’ withdrawal rates depending on the clients group’s concentration. For NBG LCR the limits are
set by currency (GEL, FC, Total). TBC monitors compliance with NBG LCR limits on a daily basis. On a monthly basis
the Bank also monitors compliance with the set limit for NBG NSFR.
The Liquidity Coverage Ratio is used to help manage short-term liquidity risks. The Bank’s liquidity risk management
framework is designed to comprehensively project cash flows arising from assets, liabilities and off-balance sheet
items over certain time buckets and ensure that NBG LCR limits, are met on a daily basis.
The Net Stable Funding ratio is used for long-term liquidity risk management to promote resilience over a longer time
horizon by creating additional incentives for TBC Bank to rely on more stable sources of funding on a continuous
basis. The Bank also monitors deposit concentration for large deposits and sets the limits for non-Georgian residents
deposits share in total deposit portfolio.
The management believes that a strong and diversified funding structure is one of TBC Bank’s differentiators. The
Bank relies on relatively stable deposits from Georgia as the main source of funding. In order to maintain and further
enhance the liability structure TBC Bank sets the targets for deposits and IFI funding within the Bank’s risk appetite.
The Bank’s liquidity position was strong as of 31 December 2022, both LCR and NSFR ratios well above the NBG
minimum requirements of 100%.
Maturity analysis. The table below summarizes the maturity analysis of the Group’s financial liabilities, based on
remaining undiscounted contractual obligations as of 31 December 2022 subject-to-notice repayments are treated as
if notice were to be given immediately. However, the Group expects that many customers will not request repayment
on the earliest date the Group could be required to pay and the table does not reflect the expected cash flows
indicated by the Group’s deposit retention history.
The maturity analysis of undiscounted financial liabilities as of 31 December 2022 is as follows:
in thousands of GEL
Due to credit institutions
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
1,814,831
548,857
1,983,019
183,256
4,529,963
Customer accounts – individuals
6,156,427
2,025,734
1,015,495
67,368
9,265,024
Customer accounts – other
Other financial liabilities
Lease liabilities
Subordinated debt
Debt securities in issue
Gross settled swaps and forwards:
– Inflows
– Outflows
Performance guarantees
Financial guarantees
Letters of credit
6,861,142
683,448
1,008,931
446,341
8,999,862
188,538
6,297
18,824
49,511
51,176
17,219
111,605
86,259
10,804
63,265
-
250,518
18,526
105,307
421,704
286,247
838,380
1,280,365
-
1,416,135
(2,599,378)
(279,912)
2,615,037
328,255
(58,148)
67,248
1,552,134
406,456
-
-
-
-
53,556
112,016
90,158
- (2,937,438)
-
3,010,540
-
-
-
-
1,552,134
406,456
255,730
1,051,216
Other credit related commitments
1,051,216
-
-
Total potential future payments for
financial obligations
18,174,591
3,684,657
5,882,841
1,001,738 28,743,827
238
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
The maturity analysis of undiscounted financial liabilities as of 31 December 2021 is as follows:
As at 31 December 2022 the analysis by expected maturities is as follows:
in thousands of GEL
Due to credit institutions
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
1,439,008
569,512
1,162,095
7,407
3,178,022
Customer accounts – individuals
5,307,483
1,714,014
1,184,616
85,094
8,291,207
in thousands of GEL
Cash and cash equivalents
Due from other banks
5,467,638
330,231
850,626
439,336
7,087,831
Mandatory cash balances with NBG
2,047,564
-
Customer accounts – other
Other financial liabilities
Lease liabilities
Subordinated debt
Debt securities in issue
Gross settled swaps and forwards:
– Inflows
– Outflows
Performance guarantees
Financial guarantees
Letters of credit
Other credit related commitments
Total potential future payments for
financial obligations
118,915
3,445
5,331
6,736
1,658
10,329
60,491
47
42,201
338,052
109,343
1,608,370
-
120,620
5,705
478,851
242,651
61,680
882,725
1,967,100
(603,531)
(27,350)
(402,077)
-
(1,032,958)
606,431
28,069
408,674
1,596,458
357,896
20,619
1,672,865
-
-
-
-
96,112
64,687
-
-
-
-
-
-
-
1,043,174
1,596,458
357,896
181,418
1,672,865
15,999,294
2,892,409
5,257,291
1,259,044 25,408,038
The undiscounted financial liability analysis gap does not reflect the historical stability of the current accounts. Their
liquidation has historically taken place over a longer period than the one indicated in the tables above. These balances
are included in amounts due in less than three months in the tables above.
Term deposits included in the customer accounts are classified based on remaining contractual maturities, however,
according to the Georgian Civil Code, individuals have the right to withdraw their deposits prior to maturity, if
they partially or fully forfeit their right to accrued interest and the Group is obliged to repay such deposits upon
the depositor’s demand. Based on the Bank’s deposit retention history, the Management does not expect that
many customers will require repayment on the earliest possible date. Accordingly, the table does not reflect the
Management’s expectations as to actual cash outflows.
The Group does not use the above undiscounted maturity analysis to manage liquidity as it shows contractual terms
purely and disregard the actual expected behaviour of the instruments. Instead, the Group monitors the liquidity
gap analysis based on the expected maturities. In particular, expected maturities disclosure include customers’
deposits and contingent liabilities according to their behavioural analysis, while for undiscounted cash flow disclosure
purposes, demand deposits and issued guarantees are put in on demand bucket.
Less than
3 months
From 3 to
12 months
From 1 to
5 Years
Over
5 years
Total
3,786,098
-
-
4,326
-
1,327
-
-
3,786,098
645
6,298
-
2,047,564
Loans and advances to customers
1,637,240
3,108,636
7,189,586
5,561,980
17,497,442
Investment securities measures at fair value
through OCI
Repurchase receivables
Finance lease receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Performance guarantees
Financial guarantees
Other credit related commitments*
Credit related commitments and
performance guarantees
2,884,728
267,495
32,027
186,864
-
-
-
-
-
-
2,884,728
267,495
75,455
58,326
152,937
1,808
28,467
288,886
-
246,998
10,842,016
3,246,743
7,345,658
5,591,092 27,025,509
1,787,320
392,818
1,545,929
159,293
3,885,360
1,405,899
176,629
-
16,258,829
17,841,357
47,661
188,538
4,531
16,171
81,779
51,176
11,862
70,244
1,080,373
10,804
43,259
-
-
1,209,813
250,518
12,588
72,240
254,624
249,109
590,148
3,450,120
784,508
2,934,989
16,679,819 23,849,436
7,206
3,177
93,839
104,222
-
-
-
-
-
-
-
-
-
-
-
-
7,206
3,177
93,839
104,222
Net liquidity gap as of 31 December 2022
7,287,674
2,462,235
4,410,669
(11,088,727)
3,071,851
Cumulative gap as of 31 December 2022
7,287,674
9,749,909
14,160,578
3,071,851
-
* Other credit related commitments represent credit line amounts, that is expected to be converted into on balance obligation based on historical
expectations.
240
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT 35. FINANCIAL AND OTHER RISK MANAGEMENT CONTINUED
36. CONTINGENCIES AND COMMITMENTS
As at 31 December 2021 the analysis by expected maturities is as follows:
in thousands of GEL
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Less than
3 months
1,595,460
24,791
2,086,113
From 3 to
12 months
-
723
-
From 1 to
5 Years
-
Over
5 years
Total
-
1,595,460
2,943
13,780
42,237
-
-
2,086,113
Loans and advances to customers
1,400,962
3,317,830
6,660,667
5,167,726
16,547,185
Investment securities measures at fair value
through OCI
Finance lease receivables
Other financial assets
Total financial assets
Due to credit institutions
Customer accounts
Debt securities in issue
Other financial liabilities
Lease liabilities
Subordinated debt
Total financial liabilities
Performance guarantees
Financial guarantees
Other credit related commitments*
Credit related commitments and
performance guarantees
1,938,196
-
-
-
1,938,196
28,961
62,684
435,807
3,021
155,074
3,379
5,621
252,340
-
442,207
7,510,290
3,384,258
6,822,063
5,187,127 22,903,738
1,419,171
500,592
1,057,079
7,233
2,984,075
1,166,917
104,189
-
13,613,039
14,884,145
5,261
100,349
1,328,307
149,782
1,583,699
118,915
3,611
2,337
1,658
9,637
19,042
47
38,130
179,963
-
120,620
5,144
56,522
422,305
623,647
2,716,212
735,467
2,603,526
14,197,503 20,252,708
4,620
3,624
64,196
72,440
-
-
-
-
-
-
-
-
-
-
-
-
4,620
3,624
64,196
72,440
Net liquidity gap as of 31 December 2021
4,721,638
2,648,791
4,218,537
(9,010,376)
2,578,590
Cumulative gap as of 31 December 2021
4,721,638
7,370,429
11,588,966
2,578,590
-
* Other credit related commitments represent credit line amounts, that is expected to be converted into on balance obligation based on historical
expectations.
The Management believes that the Group has sufficient liquidity to meet its current on- and off-balance sheet
obligations.
Legal and regulatory matters. When determining the level of provision to be set up with regards to such matters,
or the amount (not subject to provisioning) to be disclosed in the financial statements, the management seeks both
internal and external professional advice. The management believes that the provision recorded in these consolidated
financial statements is adequate and the amount (not subject to provisioning) need not be disclosed as it will not have
a material adverse effect on the financial condition or the results of future operations of the Group.
Tax legislation. Georgian and Azerbaijanian tax and customs legislation is subject to varying interpretations, and
changes, which can occur frequently. The management’s interpretation of the legislation as applied to the Group’s
transactions and activity may be challenged by the relevant authorities. In Azerbaijan, the tax review periods for the
five preceding calendar years remain open to review by authorities. In Georgia, the period of limitation for tax review
is three years. To respond to the risks, the Group has engaged external tax specialists to carry out periodic reviews
of Group’s taxation policies and tax filings. The Group’s management believes that its interpretation of the relevant
legislation is appropriate, and the Group’s tax and customs positions will be substantially sustained. As of December
31, 2022, the results of the annual tax audit have resulted in the accrual of a total tax liability of 11.6 million GEL. Despite
prior knowledge of the controversial tax issues and respective reserves having been established in previous financial
reporting periods, a further 2 million GEL in tax reserve expenses has been recorded during the fiscal year of 2022.
Compliance with covenants. The Group is subject to certain financial and non-financial covenants primarily related
to its debt. Non-compliance with such covenants may result in negative consequences for the Group including
mandatory prepayment and declaration of default. The Group was in compliance with all covenants as of 31 December
2022 and 31 December 2021.
Group’s financial covenants mainly consist of three major sub-categories. Key covenants within each category and
their compliance status is disclosed below:
Covenant Description
Liquidity
Net Stable Funding Ratio (NSFR)
Liquidity Coverage Ratio (LCR)
Net loan to deposit and funding ratio
Capital Adequacy
Tier 1 capital ratio
Total capital ratio
Asset Quality
Net problem loans to total capital
Status
Complied
Complied
Complied
Complied
Complied
Complied
For all financial covenants the Group has sufficient headroom for any potential violation risks to materialise.
Management of Capital. The Bank manages capital requirements under regulatory rules. The Bank complied with all
its imposed capital requirements throughout the reporting period.
Credit related commitments and financial guarantees. The primary purpose of these instruments is to ensure that
funds are available to a customer as required. Financial guarantees and standby letters of credit, which represent the
irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to
third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, that are underwritten
by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount
under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate or
cash deposits and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to prolong credit in the form of loans,
guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially
242
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT 36. CONTINGENCIES AND COMMITMENTS CONTINUED
36. CONTINGENCIES AND COMMITMENTS CONTINUED
exposed to a loss in an amount equal to the total unused commitments. However, the likely amount of loss is lower than
the total unused commitments since 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 ones.
As of 31 December 2022, outstanding credit related commitments presented by stages are as follows:
The credit quality of contingencies and commitments is as follows at 31 December 2022:
31 December 2022
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
Stage 1
1,008,262
232,066
399,820
1,640,148
(1,531)
(436)
(799)
(2,766)
1,637,382
Stage 2
40,296
-
1,044
41,340
(364)
-
-
(364)
40,976
As of 31 December 2021, outstanding credit related commitments presented by stages are as follows:
in thousands of GEL
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Total credit related commitments (before provision)
Credit loss allowance for credit related commitments
Undrawn credit lines
Letters of credit issued
Financial guarantees issued
Credit loss allowance for credit related commitments
Total credit related commitments
Stage 1
1,628,437
170,174
343,536
2,142,147
(1,961)
(320)
(734)
(3,015)
2,139,132
Stage 2
40,572
208
8,510
49,290
(578)
-
(9)
(587)
Stage 3
2,667
-
50
2,717
(47)
-
-
(47)
2,670
Stage 3
3,856
-
56
3,912
(22)
-
-
(22)
48,703
3,890
in thousands of GEL
Undrawn credit lines risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Financial guarantees issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
935,349
68,729
4,181
3
-
1,008,262
(1,531)
1,006,731
232,066
-
-
-
-
232,066
(436)
231,630
397,358
2,462
-
-
-
399,820
(799)
399,021
870
32,329
6,104
993
-
40,296
(364)
39,932
-
-
-
-
-
-
-
-
-
1,044
-
-
-
1,044
-
1,044
Total
936,219
101,058
10,285
996
2,667
1,051,225
(1,942)
-
-
-
-
2,667
2,667
(47)
2,620
1,049,283
-
-
-
-
-
-
-
-
-
-
-
-
50
50
-
50
232,066
-
-
-
-
232,066
(436)
231,630
397,358
3,506
-
-
50
400,914
(799)
400,115
244
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
36. CONTINGENCIES AND COMMITMENTS CONTINUED
36. CONTINGENCIES AND COMMITMENTS CONTINUED
The credit quality of contingencies and commitments is as follows at 31 December 2021:
in thousands of GEL
Undrawn credit lines risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Letters of credit issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
Financial guarantees issued risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2021
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
1,537,915
86,611
3,911
-
-
1,628,437
(1,961)
1,626,476
167,570
2,604
-
-
-
170,174
(320)
169,854
331,437
12,099
-
-
-
343,536
(734)
342,802
1,794
30,143
7,764
871
-
40,572
(578)
39,994
-
-
208
-
-
208
-
208
1,733
1,367
5,108
302
-
8,510
(9)
8,501
-
-
-
-
3,856
3,856
(22)
3,834
-
-
-
-
-
-
-
-
-
-
-
-
56
56
-
56
Total
1,539,709
116,754
11,675
871
3,856
1,672,865
(2,561)
1,670,304
167,570
2,604
208
-
-
170,382
(320)
170,062
333,170
13,466
5,108
302
56
352,102
(743)
351,359
The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees does not
necessarily represent future cash requirements, as these financial instruments may expire or terminate without
being funded. Non-cancellable commitments as of 31 December 2022 were GEL 313,199 thousand (2021: GEL 251,903
thousand).
Performance guarantees. Performance guarantees are contracts that provide compensation in case of another party
fails to perform a contractual obligation. Such contracts do not transfer credit risk. The risk under the performance
guarantee contracts is the possibility that the insured event occurs (i.e.: the failure to perform the contractual
obligation by another party). The key risks the Group faces are significant fluctuations in the frequency and severity of
payments incurred on such contracts, relative to expectations.
246
Outstanding amount of performance guarantees and respective provision by stages as of 31 December 2022 is stage
1 – GEL 1,495,335 thousand and GEL 2,997 thousand (2021: GEL 1,529,851 thousand and GEL 3,239 thousand), stage
2 – GEL 12,704 thousand and GEL 4 thousand (2021: GEL 30,267 thousand and GEL 3 thousand), stage 3 – GEL 15,831
thousand and GEL 4,204 thousand (2021: GEL 5,576 thousand and GEL 1,378 thousand).
The credit quality of performance guarantees is as follows at 31 December 2022:
in thousands of GEL
Performance guarantees risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2022
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
1,466,676
21,143
7,495
21
-
1,495,335
(2,997)
1,492,338
-
2,749
9,955
-
-
12,704
(4)
12,700
-
-
-
-
15,831
15,831
(4,204)
11,627
The credit quality of performance guarantees is as follows at 31 December 2021:
in thousands of GEL
Performance guarantees risk category
– Very low
– Low
– Moderate
– High
– Default
Gross carrying amount
Credit loss allowance
Carrying amount
31 December 2021
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for defaulted)
1,519,935
8,733
1,183
-
-
1,529,851
(3,239)
1,526,612
-
29,660
-
607
-
30,267
(3)
30,264
-
-
-
-
5,576
5,576
(1,378)
4,198
Total
1,466,676
23,892
17,450
21
15,831
1,523,870
(7,205)
1,516,665
Total
1,519,935
38,393
1,183
607
5,576
1,565,694
(4,620)
1,561,074
Fair value of credit related commitments were GEL 3,177 thousand as of 31 December 2022 (2021: GEL 3,624 thousand).
Total credit related commitments and performance guarantees are denominated in currencies as follows:
in thousands of GEL
Georgian Lari
US Dollar
Euro
Other
Total
2022
1,457,633
1,195,206
484,040
71,196
2021
898,178
901,092
220,068
68,840
3,208,075
2,088,178
247
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
36. CONTINGENCIES AND COMMITMENTS CONTINUED
38. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Capital expenditure commitments. As of 31 December 2022, the Group has contractual capital expenditure
commitments amounting to GEL 131,983 thousand (2021: GEL 104,162 thousand). Out of total amount as at 31 December
2022, contractual commitments related to the head office construction amounted GEL 105,623 thousand (2021: GEL
79,004 thousand).
37. NON-CONTROLLING INTEREST
The following table provides information for each subsidiary with a non-controlling interest as of 31 December 2022:
in thousands of GEL
Proportion of non-controlling
interest’s voting rights held
Profit attributable to
non-controlling interest
Accumulated non-controlling
interest in the subsidiary
United Financial Corporation JSC
0.47%
25
164
The summarised financial information of these subsidiaries was as follows as of and for the year ended 31 December
2022:
in thousands of GEL
United Financial
Corporation JSC
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities Revenue
Profit
Total
comprehensive
income
Net cash
flows
2,284
22,314
3,429
1,178
14,886
3,400
3,400
(457)
The following table provides information for each subsidiary with a non-controlling interest as of 31 December 2021:
in thousands of GEL
Proportion of non-controlling
interest’s voting rights held
Profit attributable to
non-controlling interest
Accumulated non-controlling
interest in the subsidiary
United Financial Corporation JSC
0.47%
16
93
The summarised financial information of these subsidiaries was as follows as of and for the year ended 31 December
2021:
in thousands of GEL
United Financial
Corporation JSC
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities Revenue
Profit
Total
comprehensive
income
Net cash
flows
4,173
16,352
1,838
3,593
16,691
3,113
3,113
(626)
As of 31 December 2022, financial instruments subject to offsetting, enforceable master netting and similar were as
follows:
Gross amounts
before
offsetting in
the statement
of financial
position
(a)
Gross
amounts set
off in the
statement
of financial
position
(b)
Net
amount after
offsetting in
the statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of
financial position
Cash collateral
received
(e)
Financial
instruments
(d)
Net amount of
exposure
(c)-(d)-(e)
267,495
-
267,495
262,415
370,022
-
370,022
370,022
46,724
-
46,724
-
684,241
-
684,241
632,437
262,415
-
262,415
262,415
22,785
-
22,785
-
285,200
-
285,200
262,415
-
-
-
-
-
-
-
5,080
-
46,724
51,804
-
22,785
22,785
in thousands of GEL
Assets
Investment securities
measured at FVOCI sold
under sale and repurchase
agreements
Reverse sale and
repurchase agreements
with other banks with
original maturities of less
than three months
Other financial assets:
– Receivables on credit
card services and money
transfers
Assets subject to
offsetting, master netting
and similar arrangement
Liabilities
Sales and repurchase
agreements
Other financial liabilities:
– Payables on credit card
services and money
transfers
Liabilities subject to
offsetting, master netting
and similar arrangement
248
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
38. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES CONTINUED
39. DERIVATIVE FINANCIAL INSTRUMENTS
As of 31 December 2021, financial instruments subject to offsetting, enforceable master netting and similar
arrangements were as follows:
In the normal course of business, the Group enters into various derivative financial instruments, to manage currency,
liquidity and interest rate risks and for trading purposes.
Gross amounts
before
offsetting in
the statement
of financial
position
(a)
Gross
amounts set
off in the
statement
of financial
position
(b)
Net
amount after
offsetting in
the statement
of financial
position
(c)=(a)-(b)
Amounts subject to
master netting and similar
arrangements not set off
in the statement of
financial position
Cash collateral
received
(e)
Financial
instruments
(d)
in thousands of GEL
Fair value of foreign exchange forwards and gross settled currency swaps, included in
other financial assets or due from other banks
Fair value of foreign exchange forwards and gross settled currency swaps, included in
other financial liabilities
Net amount of
exposure
(c)-(d)-(e)
Total
2022
2021
69,921
199,233
(73,102)
(10,216)
(3,181)
189,017
in thousands of GEL
Assets
Other financial assets:
– Receivables on credit
card services and money
transfers
Assets subject to
offsetting, master netting
and similar arrangement
Liabilities
Other financial liabilities:
– Payables on credit card
services and money
transfers
Liabilities subject to
offsetting, master netting
and similar arrangement
70,501
7,620
62,881
70,501
7,620
62,881
36,583
7,620
28,963
36,583
7,620
28,963
-
-
-
-
-
-
-
-
62,881
62,881
28,963
28,963
The amount set off in the statement of financial position reported in column (b) is the lower of (i) the gross amount
before offsetting reported in column (a) and (ii) the amount of the related instrument that is eligible for offsetting.
Similarly, the amounts in columns (d) and (e) are limited to the exposure reported in column (c) for each individual
instrument in order not to understate the ultimate net exposure.
Deposits placed with other banks and deposits received from other banks as part of gross settled currency swap
arrangements have been netted-off in these financial statements and the instrument has been presented as either
asset or liability at a fair value.
The disclosure does not apply to loans and advances to customers and related customer deposits unless they are
netted-off in the statement of financial position.
Foreign Exchange Forwards and gross settled currency swaps. Foreign exchange derivative financial instruments the
Group entered are generally traded in an over-the-counter market with professional counterparties on standardised
contractual terms and conditions. Derivatives have potentially favourable (assets) or unfavourable (liabilities)
conditions as a result of fluctuations in market interest rates, foreign exchange rates or other variables relative to their
terms. The aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to
time.
The table below sets out fair values, at the balance sheet date, of currencies receivable or payable under foreign
exchange forwards contracts and gross settled currency swaps the Group entered. The table reflects gross positions
before the netting of any counterparty positions (and payments) and covers the contracts with settlement dates after
the respective balance sheet date.
in thousands of GEL
Foreign exchange forwards and gross settled currency swaps: fair
values, at the balance sheet date, of
– USD payable on settlement (-)
– USD receivable on settlement (+)
– GEL payable on settlement (-)
– GEL receivable on settlement (+)
– EUR payable on settlement (-)
– EUR receivable on settlement (+)
– Other payable on settlement (-)
– Other receivable on settlement (+)
Fair value of foreign exchange forwards and gross settled currency
swaps
Net fair value of foreign exchange forwards and gross settled
currency swaps
2022
2021
Contracts
with
positive
fair value
Contracts
with
negative
fair value
Contracts
with
positive
fair value
Contracts
with
negative
fair value
(1,043,758)
(103,669)
(412,621)
(528,905)
69,042
2,758,993 3,355,801
500,167
(53,019)
(408,702)
(115,337)
(485,231)
1,002,936
130,514
394,562
205,667
(16,534) (2,489,689) (3,096,222)
(9,883)
142,774
39,931
54,955
326,103
(35,729)
4,209
(913)
433
(1,031)
(19,165)
19,126
1,031
69,921
(73,102)
199,233
(10,216)
(3,181)
189,017
250
251
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATIONMANAGEMENT REPORT
40. FAIR VALUE DISCLOSURES
(a) Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards require or permit in the statement of
financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair
value measurements are categorised as follows:
in thousands of GEL
Level 1
Level 2 Level 3
Total fair
Value
Carrying
value Level 1
Level 2 Level 3
Total fair
value
Carrying
value
31-Dec-22
31-Dec-21
Assets carried at fair
value
Financial assets
Investment securities measured at fair value through other comprehensive income
– Corporate Bonds
36,630 1,254,754
- 1,291,384 1,291,384
- 704,435
- 704,435 704,435
35,583
-
-
35,583
35,583
-
1,683
-
1,683
1,683
4,421 1,552,675
- 1,557,096 1,557,096
- 1,231,024
- 1,231,024 1,231,024
267,495
-
-
267,495
267,495
– Corporate shares
-
-
665
665
665
Investment securities measured at fair value through profit and loss
-
-
-
-
-
-
-
1,054
1,054
1,054
40. FAIR VALUE DISCLOSURES CONTINUED
There were no transfers between levels 1 and 2 during the year ended 31 December 2022 (2021: none).
The description of the valuation technique and the description of inputs used in the fair value measurement for level 2
measurements:
in thousands of GEL
Assets carried at fair value
– Ministry of Finance of Georgia
Treasury Bills, foreign government
treasury bills, corporate bonds
– Foreign exchange forwards and
gross settled currency swaps,
included in due from banks
Total assets recurring fair value
measurements at level 2
Liabilities carried at fair value
– Foreign exchange forwards
included in other financial liabilities
Total liabilities recurring fair value
measurements at level 2
Fair value at 31 December
2022
2021
Valuation technique
Inputs used
2,807,429
1,937,142
Discounted cash flows
(“DCF”)
Government bonds
yield curve
69,921
199,233
2,877,350
2,136,375
73,102
10,216
73,102
10,216
Forward pricing
using present value
calculations
Official exchange
rate, risk-free rate
Forward pricing
using present value
calculations
Official exchange
rate, risk-free rate
The description of the valuation technique and the description of inputs used in the fair value measurement for level 3
measurements:
-
69,921
-
69,921
69,921
-
199,233
-
199,233 199,233
-
-
9,704
9,704
9,704
-
-
11,125
11,125
11,125
in thousands of GEL
Assets carried at fair value
– Investment held at fair value
through profit or loss
344,129 2,877,350 10,369 3,231,848 3,231,848
- 2,136,375 12,179 2,148,554 2,148,554
– Corporate shares
Fair value at 31 December
2022
2021
Valuation technique
Inputs used
9,704
665
11,125
Discounted cash flows
(“DCF”)
Weighted average
borrowing interest
rate
1,054
Discounted cash flows
(“DCF”)
Government bonds
yield curve
-
73,102
-
73,102
73,102
-
10,216
-
10,216
10,216
-
73,102
-
73,102
73,102
-
10,216
-
10,216
10,216
Total assets recurring fair value
measurements at level 3
10,369
12,179
There were no changes in the valuation technique for the level 2 and level 3 recurring fair value measurements during
the year ended 31 December 2022 (2021: none).
Sensitivity of the input to fair value – increase/(decrease) in projected cash flows by 10% would result in increase/
(decrease) in fair value by GEL 291 thousand/ (GEL 291 thousand).
Fair value measurement analysis by level in the fair value hierarchy is disclosed in Note 2.
– Foreign government
treasury bills
– Ministry of Finance of
Georgia Treasury Bills
– Repurchase
receivables
– Foreign exchange
forwards and gross
settled currency
swaps, included in
other financial assets
or due from banks
– Investment held at fair
value through profit
or loss
Total assets
recurring fair value
measurements
Liabilities carried at fair
value
Financial liabilities
Foreign exchange
forwards and gross
settled currency swaps,
included in other
financial liabilities
Total liabilities
recurring fair value
measurements
252
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
40. FAIR VALUE DISCLOSURES CONTINUED
40. FAIR VALUE DISCLOSURES CONTINUED
(b) 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:
in thousands of GEL
Financial assets
Level 1
Level 2
Level 3 Total fair Value Carrying value
31 December 2021
in thousands of GEL
Financial assets
Level 1
Level 2
Level 3 Total fair Value Carrying value
31 December 2022
Cash and cash equivalents
1,224,265
2,561,833
6,298
2,047,564
-
-
-
3,786,098
3,786,098
6,298
6,298
2,047,564
2,047,564
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers:
– Corporate loans
– Consumer loans
– Mortgage loans
– Loans to micro, small and medium
enterprises
Finance lease receivables
Other financial assets
Non-financial assets
Investment properties, at cost
Total assets
Financial liabilities
Customer accounts
Debt securities in issue
Due to credit institutions
Other financial liabilities
Subordinated debt
Total liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,336,111
2,662,334
4,863,317
6,336,111
6,236,011
2,662,334
2,328,868
4,863,317
4,219,260
4,708,953
4,708,953
4,713,303
288,852
167,373
288,852
167,373
288,886
167,373
25,683
25,683
22,154
1,224,265
4,615,695
19,052,623
24,892,583
23,815,815
-
12,241,574
5,585,966
17,827,540
17,841,357
1,188,684
-
-
-
-
-
-
-
-
1,188,684
1,209,813
3,880,943
3,880,943
3,885,360
249,656
587,218
249,656
587,218
249,656
590,148
1,188,684
12,241,574
10,303,783
23,734,041
23,776,334
Cash and cash equivalents
831,034
764,426
-
-
42,237
2,086,113
-
-
-
1,595,460
1,595,460
42,237
42,237
2,086,113
2,086,113
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers:
– Corporate loans
– Consumer loans
– Mortgage loans
– Loans to micro, small and medium
enterprises
Finance lease receivables
Other financial assets
Non-financial assets
Investment properties, at cost
Total assets
Financial liabilities
Customer accounts
Debt securities in issue
Due to credit institutions
Other financial liabilities
Subordinated debt
Total liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,492,668
2,304,534
4,522,528
6,492,668
6,497,010
2,304,534
1,973,016
4,522,528
4,048,955
4,126,318
4,126,318
4,028,204
251,855
231,849
251,855
231,849
252,340
231,849
29,493
29,493
22,892
831,034
2,892,776
17,959,245
21,683,055
20,778,076
-
9,888,470
4,966,775
14,855,245
14,884,145
1,671,435
-
-
-
-
-
-
-
-
1,671,435
1,583,699
2,986,631
2,986,631
2,984,075
166,926
626,503
166,926
626,503
166,926
623,647
1,671,435
9,888,470
8,746,835
20,306,740
20,242,492
The fair values in the level 2 and the level 3 of fair value hierarchy were estimated using the discounted cash flows
valuation technique. The fair value of unquoted fixed interest rate instruments was calculated 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. The fair value of investment properties was estimated using market comparatives.
Amounts due to credit institutions were discounted at the Group’s own incremental borrowing rate. Liabilities due
on demand were discounted from the first date that the Group could be required to pay the amount. Amounts due to
credit institutions, subordinated debt and other financial liabilities were moved from level 2 to level 3. There were no
changes in the valuation technique for the level 2 and level 3 measurements of assets and liabilities not measured at
fair values in the year ended 31 December 2022 (2021: none)
254
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
41. PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
42. RELATED PARTY TRANSACTIONS
The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31
December 2022:
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at FVOCI
Repurchase receivable
Other financial assets
Total financial assets subject to IFRS
9 measurement categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
Fair value through other
comprehensive income
Fair value through
profit or loss
Total
3,786,098
6,298
2,047,564
17,497,442
-
-
167,373
-
-
-
-
2,884,728
267,495
-
-
-
-
-
-
-
79,625
3,786,098
6,298
2,047,564
17,497,442
2,884,728
267,495
246,998
23,504,775
3,152,223
79,625
26,736,623
-
-
-
-
-
-
288,886
1,303,501
23,504,775
3,152,223
79,625
28,329,010
The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31
December 2021:
in thousands of GEL
Assets
Cash and cash equivalents
Due from other banks
Mandatory cash balances with NBG
Loans and advances to customers
Investment securities measured at FVOCI
Other financial assets
Total financial assets subject to IFRS 9
measurement categories
Finance lease receivables
Non-financial assets
Total assets
Amortised
cost
Fair value through other
comprehensive income
Fair value through
profit or loss
Total
1,595,460
42,237
2,086,113
16,547,185
-
231,849
-
-
-
-
1,938,196
-
-
-
-
-
1,595,460
42,237
2,086,113
16,547,185
1,938,196
-
210,358
442,207
20,502,844
1,938,196
210,358
22,651,398
-
-
-
-
-
-
252,340
1,135,774
20,502,844
1,938,196
210,358
24,039,512
For the measurement purposes, IFRS 9, classifies financial assets into the categories discussed in Note 2.
As of 31 December 2022 and 2021 all of the Group’s financial liabilities except for derivatives are carried at amortised
cost. Derivatives belong to the assets fair value through profit or loss measurement category under IFRS 9.
Pursuant to IAS 24 “Related Party Disclosures”, parties are generally considered to be related if the parties are under
common control or one party has the ability to control the other or it can exercise significant influence over the other
party in taking 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:
• Parties with material ownership stake (more than 5% beneficial ownership stake for 2022 and 2021) in the Group or
with representatives in the Board of Directors are considered as Significant Shareholders.
• The key management personnel includes the Management Board of the Bank.
• Related parties not included in significant shareholders and key management personnel are presented in other
related parties.
Transactions between Group and its subsidiaries also meet the definition of related party transactions. Where these
are eliminated on consolidation, they are not disclosed in the Group Financial Statements.
As at 31 December 2022 and 2021 the Group’s outstanding balances with related parties were as follows:
Contractual
interest rate
Significant
shareholders
Key
management
personnel
Other
related
parties
Associates
Immediate
parent
Companies
under
common
control
4.4%-36.0%
–
-
-
6,097
1,135
3
-
–
–
–
–
–
–
in thousands of GEL
2022
Gross amount of
loans and advances to
customers
Credit loss allowance
for loans and advances
to customers
Customer accounts
0%-12.5%
1,248
25,106
51,490
4,341
90,358
45,442
Guarantees
2021
Gross amount of
loans and advances to
customers
Credit loss allowance
for loans and advances
to customers
–
–
–
–
4.0%-36.0%
19
6,686
5,713
–
–
5
1
–
–
–
–
–
–
357
–
–
Customer accounts
0%-12.5%
9,663
8,831
20,693
3,893
14,614
38,870
Guarantees
–
–
Other borrowed funds
from EBRD
0.86%-12.85%
360,889
–
–
–
–
–
–
–
–
211
–
256
257
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
42. RELATED PARTY TRANSACTIONS CONTINUED
42. RELATED PARTY TRANSACTIONS CONTINUED
The Group’s income and expense items with related parties except from key management compensation for the year
2022 and 2021 were as follows:
As of 31 December 2022 and 2021 transactions and balances of JSC TBC Bank with its subsidiaries were as follows:
in thousands of GEL
31 December 2022
31 December 2021
Significant
shareholders
Key
management
personnel
Other related
parties
Associates
Immediate
parent
Companies
under
common
control
in thousands of GEL
2022
Interest income - loans and
advances to customers
Interest expense
Fee and commission income
Administrative and other
operating expenses (excluding
staff costs)
2021
Interest income - loans and
advances to customers
Interest expense
Interest expense with EBRD
36,819
Fee and commission income
Administrative and other
operating expenses (excluding
staff costs)
2
–
-
10
6
-
4
3
287
359
21
443
264
330
–
19
162
93
948
134
400
121
329
–
76
269
–
140
2
-
-
–
2,568
482
–
-
109
1,649
-
2
-
-
-
-
–
3,691
747
–
-
2,324
-
407
-
The aggregate loan amounts disbursed to, and repaid, by related parties during 2022 and 2021 were as follows:
in thousands of GEL
2022
Amounts disbursed to related
parties during the year
Amounts repaid by related
parties during the year
2021
Amounts disbursed to related
parties during the year
Amounts repaid by related
parties during the year
Significant
shareholders
Key
management
personnel
Other
related
parties
Associates
Immediate
parent
Companies
under
common
control
43
2,007
934
(59)
(2,233)
(1,197)
-
3,889
1,309
(35)
(2,919)
(2,454)
-
-
-
-
-
-
-
-
-
-
-
-
Gross amount of loans and advances granted to subsidiaries
Customer accounts of subsidiaries
Other Financial Assets
Other Financial Liabilities
Investment in subsidiaries
19,492
135,236
66,276
4,761
31,513
The income and expense items for JSC TBC Bank with its subsidiaries were as follows:
in thousands of GEL
Interest income
Interest expense
Fee and commission income
Fee and commission expense
Other operating income
Administrative and other operating expense
13,699
48,258
23,515
10,830
30,020
2021
3,880
5,914
6,572
25,964
52,286
7,507
2022
3,705
6,487
8,792
32,593
5,876
5,466
Compensation of the key management personnel and Supervisory Board members is presented below:
in thousands of GEL
Salaries and short-term bonuses
Equity-settled share-based compensation
Total
43. EVENTS AFTER REPORTING PERIOD
2022
2021
Expense
Accrued liability
Expense Accrued liability
12,340
16,888
29,228
-
-
-
12,095
11,299
23,394
-
-
-
On 20 March 2023, TBC Leasing JSC issued GEL 100 million secured bonds, out of which GEL 80 million was
successfully placed while the remaining part is expected to be placed during 2023. Coupon rate of the bond is
determined as 3% plus 3-month Tbilisi Interbank Interest Rate.
258
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFNANCIAL STATEMENTSMANAGEMENT REPORTGOVERNANCEADDITIONAL INFORMATION
A FULL LIST OF RELATED UNDERTAKINGS AND THE COUNTRY OF INCORPORATION IS SET OUT BELOW.
Company Name
JSC TBC Bank
7 Marjanishvili Street, 0102, Tbilisi, Georgia
Country of incorporation
United Financial Corporation JSC
154 Agmashenebeli Avenue, 0112, Tbilisi, Georgia
TBC Capital LLC
TBC Leasing JSC
TBC Kredit LLC
TBC Pay LLC
TBC Invest LLC
Index LLC
TBC Invest International Ltd
University Development Fund
CreditInfo Georgia JSC
Natural Products of Georgia LLC
Mobi Plus JSC
Mineral Oil Distribution Corporation JSC
Georgian Card JSC
11 Chavchavadze Avenue, 0179, Tbilisi, Georgia
76 Chavchavadze Avenue, 0162,, Tbilisi, Georgia
71-77, 28 May Street, AZ1010, Baku, Azerbaijan
7 Marjanishvili Street, 0102, Tbilisi, Georgia
7 Jabonitsky street, , 52520, Tel Aviv, Israel
8 Tetelashvili,0102,, Tbilisi, Georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
2 Tarkhnishvili street, 0179, Tbilisi, Georgia
1 Chavchavadze Avenue, 0128 , Tbilisi, Georgia
45 Vazha Pshavela Street, 0177, Tbilisi, Georgia
11 Tskalsadeni Street, 0153, Tbilisi, Georgia
106 Beliashvili Street, 0159, Tbilisi Georgia
Georgian Central Securities Depositor JSC
74 Chavchavadze Avenue, 0162, Tbilisi, Georgia
Givi Zaldastanishvili American Academy In Georgia JSC
37 Chavchavadze Avenue, 0162, Tbilisi Georgia
United Clearing Centre
5 Sulkhan Saba Street, 0105, Tbilisi, Georgia
Banking and Finance Academy of Georgia
123, Agmashenebeli Avenue, 0112, Tbilisi, Georgia
Tbilisi's City JSC
TBC Trade LLC
Tbilisi Stock Exchange JSC
Georgian Stock Exchange JSC
Kavkasreestri JSC
TBC Asset Management LLC
Swift
Diversified Credit Portfolio JSC
15 Rustaveli Avenue, 0108, Tbilisi Georgia
11A Chavchavadze Ave, 0179, Tbilisi, Georgia
floor 2th block 8, 71 Vazha Pshavela Ave, Tbilisi, Georgia
74a chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
74a chavchavadzis avenue, vake-saburtalo, Tbilisi, Georgia
7 Marjanishvili Street, 0102, Tbilisi, Georgia
1 Adele Avenue, B-1310, La Hulpe, Belgium
7 Marjanishvili Street, 0102, Tbilisi, Georgia
260
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022
261
M
A
N
A
G
E
M
E
N
T
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
A
D
D
T
O
N
A
L
I
N
F
O
R
M
A
T
O
N
I
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022NOTES TO THE FINANCIAL STATEMENTS CONTINUED
262
263
Additional
Information
TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022ALTERNATIVE PERFORMANCE MEASURES CONTINUEDGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSMANAGEMENT REPORT TBC Invest
TBC JSC
TBC Leasing
TBC Pay
TBC PLC
TBCG
TBC Invest LLC.
TBC Bank JSC.
TBC Leasing JSC.
TBC Pay LLC.
TBC Bank Group PLC.
TBC Bank Group PLC.
GLOSSARY
Bank
Chairman
Code
Company
Consumer loans offloading
Corporate and Investment Banking (CIB)
segment
DAU/MAU
Deposit offloading
Joint Stock Company TBC Bank.
Chairman of Supervisory Board of TBC Bank JSC.
The UK Corporate Governance Code.
TBC Bank Group JSC.
Consumer loans offloading ratios includes the number of consumer loans disbursed
via the remote channels divided by total number of such loans issued.
A legal entity/group of affiliated entities with an annual revenue exceeding GEL 15.0
million or which has been granted facilities of more than GEL 6.0 million. Some other
business customers may also be assigned to the CIB segment or transferred to the
micro, small and medium enterprises (MSME) segment on a discretionary basis.
In addition, CIB includes wealth management (WM) private banking services to
high-net-worth individuals (HNWI) with a threshold of US$ 250,000 on assets under
management (AUM), as well as on discretionary basis.
Average daily active digital users divided by monthly active digital users. DAU/MAU is
calculated for the Bank internet and mobile banking only.
Deposit offloading ratio includes the number of time and savings deposits opened via
remote channels divided by total number of such deposits opened.
Digital daily active users (DAU)
Monthly average number of individual digital users who logged into our digital
channels at least once per day.
Digital monthly active users (MAU)
An individual user who logged into the digital application at least once during the
month.
ENPS (Employee Net Promoter Score)
The employee net promoter score measures employee loyalty and reflects the
likelihood of our colleagues recommending their workplace to their friends and family.
Executive Management
Executive Management of Joint Stock Company TBC Bank.
Group
TBC Bank JSC and its subsidiary companies.
Growth at constant currency basis
Refers to growth at fixed exchange rate of the starting period.
Lead
Micro loans
A potential client who has expressed interest in the product.
Includes collateralised business and agri loans up to GEL 1 million, as well as micro
businesses with a maximum turnover of GEL 2 million.
MSME (Micro, Small and Medium) segment Business customers (legal entities and private individual customers that generate
income from business activities) who are not included in the CIB segment.
MSME monthly active customers
NPS (Net Promoter Score)
MSME legal entity that used Business mBank or iBank at least once, or had at least
one active credit product, or performed at least one debit transaction, or had any type
of deposit with a balance above a certain threshold.
Net promoter score measures how willing customers are to recommend our products
and services to others.
Retail monthly active customers
An individual user who has at least one active product as of the reporting date or
performed at least one transaction during the past month.
Retail segment
Supervisory Board
Non-business individual customer.
Supervisory Board of Joint Stock Company TBC Bank.
TBC Asset Management
TBC Asset Management JSC.
TBC Bank
TBC Bank Group PLC
TBC Bank Group JSC and its subsidiary companies.
A public limited company registered in England and Wales. It is the parent company
of JSC TBC Bank (the Bank) and a group of companies that principally operate in
Georgia in the financial sector. It also offers non-financial services via TNET, the
largest digital ecosystem in Georgia. Since 2019, It has expanded its operations into
Uzbekistan by operating fast growing retail digital financial services in the country.
TBC Bank Group PLC is listed on the London Stock Exchange under the symbol
TBCG.
TBC Capital
TBC Capital LLC.
264
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022GOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSMANAGEMENT REPORT ALTERNATIVE PERFORMANCE MEASURES
The Group utilises a wide range of alternative performance measures (APMs) to assess the Group’s performance.
These measures can be grouped under the following headings:
Term
#
Type
Definition
Capital & liquidity positions
• Profitability
• Asset quality & portfolio concentration
• Capital & liquidity positions
The regulatory performance measures are calculated in accordance with NBG’s requirements for the Bank only based
on local accounting standards.
Term
#
Type
Definition
Profitability
ROE
ROA
Cost
to income
1
2
3
IFRS based
IFRS based
IFRS based
NIM
4
IFRS based
Loan
yields
Deposit rates
Cost of funding
5
6
7
IFRS based
IFRS based
IFRS based
Asset quality & portfolio concetration
Cost of risk
PAR 90
to Gross Loans
NPLs
to Gross Loans
NPL provision
coverage
Total NPL
coverage
8
9
IFRS based
IFRS based
10 IFRS based
11
IFRS based
12
IFRS based
Credit loss level
to Gross Loans
Related Party Loans
to Gross Loans
Top 10 Borrowers
to Total Portfolio
Top 20 Borrowers
to Total Portfolio
13
IFRS based
14
IFRS based
15
IFRS based
16
IFRS based
Return on average total equity (ROE) equals net profit attributable to owners divided by
the monthly average of total shareholders’ equity attributable to the PLC’s equity holders
for the same period; annualised where applicable.
Return on average total assets (ROA) equals net profit of the period divided by monthly
average total assets for the same period; annualised where applicable.
Cost to income ratio equals total operating expenses for the period divided by the total
revenue for the same period. (Revenue represents the sum of net interest income, net fee
and commission income and other non-interest income).
Net interest margin (NIM) is net interest income divided by monthly average interest-
earning assets; annualised where applicable. Interest-earning assets include investment
securities (excluding CIB shares), net investment in finance lease, net loans, and amounts
due from credit institutions.
Loan yields equal interest income on loans and advances to customers divided by monthly
average gross loans and advances to customers; annualised where applicable.
Deposit rates equal interest expense on customer accounts divided by monthly average
total customer deposits; annualised where applicable.
Cost of funding equals sum of the total interest expense and net interest gains on currency
swaps (entered for funding management purposes), divided by monthly average interest
bearing liabilities; annualised where applicable.
Cost of risk equals credit loss allowance for loans to customers divided by monthly
average gross loans and advances to customers; annualised where applicable.
PAR 90 to gross loans ratio equals loans for which principal or interest repayment is
overdue for more than 90 days divided by the gross loan portfolio for the same period.
NPLs to gross loans equals loans with 90 days past due on principal or interest payments,
and loans with a well-defined weakness, regardless of the existence of any past-due
amount or of the number of days past due divided by the gross loan portfolio for the same
period.
NPL provision coverage equals total credit loss allowance for loans to customers divided
by the NPL loans.
Total NPL coverage equals total credit loss allowance plus the minimum of collateral
amount of the respective NPL loan (after applying haircuts in the range of 0%-50% for
cash, gold, real estate and PPE) and its gross loan exposure divided by the gross exposure
of total NPL loans.
Credit loss level to gross loans equals credit loss allowance for loans to customers divided
by the gross loan portfolio for the same period.
Related party loans to total loans equals related party loans divided by the gross loan
portfolio.
Top 10 borrowers to total portfolio equals the total loan amount of the top 10 borrowers
divided by the gross loan portfolio.
Top 20 borrowers to total portfolio equals the total loan amount of the top 20 borrowers
divided by the gross loan portfolio.
Net Loans to
Deposits plus
IFI Funding
Net Stable
Funding Ratio
Liquidity
Coverage Ratio
Leverage
CET 1 CAR
(Basel III)
Tier 1 CAR
(Basel III)
Total CAR
(Basel III)
17
IFRS based
Net loans to deposits plus IFI funding ratio equals net loans divided by total deposits plus
borrowings received from international financial institutions.
Regulatory
based
Regulatory
based
Net stable funding ratio equals the available amount of stable funding divided by the
required amount of stable funding as defined by NBG in line with Basel III guidelines.
Calculations are made for the Bank only, based on local standards.
Liquidity coverage ratio equals high-quality liquid assets divided by the total net cash
outflow amount as defined by the NBG. Calculations are made for the Bank only, based on
local accounting standards.
18
IFRS based
Leverage equals total assets to total equity.
Regulatory
based
Regulatory
based
Regulatory
based
CET 1 CAR equals CET 1 capital divided by total risk weighted assets, both calculated in
accordance with requirements of the NBG Basel III standards. Calculations are made for
the Bank only, based on local accounting standards.
Tier 1 CAR equals tier I capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the NBG Basel III standards. Calculations are made
for the Bank only, based on local accounting standards.
Total CAR equals total capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the NBG Basel III standards. Calculations are made
for the Bank only, based on local accounting standards.
These tables provide the reconciliation of the Group’s IFRS based alternative performance measures with Financial
Statements.
1
2
3
Net profit attributable to owners
Reference to financial statements
FY 2022
FY 2021
Consolidated statement of profit and loss
and other comprehensive income
1,023,050
842,929
Total shareholders’ equity attributable to owners
Consolidated statement of financial position
4,265,638
3,589,962
Adjusted to arrive at monthly balances
Monthly averages of total shareholders’ equity
attributable to owners
Return on average total equity (ROE)
(328,851(
(380,050)
3,936,787
3,209,912
26.0%
26.3%
Net profit attributable to owners
Reference to financial statements
FY 2022
FY 2021
Consolidated statement of profit and loss
and other comprehensive income
1,023,050
842,929
Total assets
Consolidated statement of financial position
28,329,010
24,039,512
Adjusted to arrive at monthly balances
Monthly averages of total assets
Return on average total assets (ROA)
Total operating expenses
Total revenue
Cost to income
(2,903,705)
(1,034,585)
25,425,305
23,004,927
4.0%
3.7%
Reference to financial statements
FY 2022
FY 2021
Consolidated statement of profit and loss
and other comprehensive income
Consolidated statement of profit and loss
and other comprehensive income
560,982
454,993
1,946,389
1,397,908
28.8%
32.5%
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022GOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSMANAGEMENT REPORT 4
5
Net interest income
Reference to financial statements
FY 2022
FY 2021
Consolidated statement of profit and loss
and other comprehensive income
1,243,095
995,792
Total interest earning assets
Consolidated statement of financial position
22,724,918
20,866,071
– Investment securities measured at fair value
through other comprehensive income
– Bonds carried at amortised cost
– Net investment in finance lease
– Net loans
– Mandatory cash balances with National Bank of
Georgia
– Due from other banks
Adjusted to arrive at monthly balances
Monthly average interest earning assets
Net intrest margin (NIM)
2,884,728
1,938,196
-
-
288,886
252,340
17,497,442
16,547,185
2,047,564
2,086,113
6,298
42,237
(1,607,434)
(1,115,522)
21,117,484
19,750,549
5.9%
5.0%
Interest income from loans
Note 28. Interest income and expense
1,911,782
1,601,966
Total loan portfolio
Note 9. Loans and advances to customers
17,857,276
16,954,553
Reference to financial statements
FY 2022
FY 2021
Adjusted to arrive at monthly balances
Total monthly average loan portfolio
Loan yields
6 Returns
(771,572)
(1,314,893)
17,085,704
15,639,660
11.2%
10.2%
Reference to financial statements
FY 2022
FY 2021
Interest expense from customer accounts
Note 28. Interest income and expense
(571,575)
(469,873)
Total deposits portfolio
Note 19. Customer accounts
17,841,357
14,884,145
Adjusted to arrive at monthly balances
Total monthly average deposits portfolio
Deposit rates
2,096,195
972,237
15,745,162
13,911,908
3.6%
3.4%
7
Reference to financial statements
FY 2022
FY 2021
Total Interest expense
Consolidated statement of profit and loss
and other comprehensive income
(976,686)
(867,285)
Total interest bearing liabilities
Consolidated statement of financial position
23,598,918
20,132,088
– Customer accounts
– Due to credit institutions
– Subordinated Debt
– Debt securities in issue
– Lease Liabilities
Adjusted to arrive at monthly balances
Monthly average interest bearing liabilities
Cost of fund
17,841,357
14,884,145
3,885,360
2,984,075
590,148
623,647
1,209,813
1,583,699
72,240
56,522
(2,472,069)
(618,927)
21,126,849
19,513,161
4.6%
4.4%
8
9
10
11
12
13
14
Credit loss allowance for loans
Reference to financial statements
FY 2022
FY 2021
Consolidated statement of profit and loss
and other comprehensive income
(105,247)
43,176
Total loan portfolio
Note 9. Loans and advances to customers
17,857,276
16,954,553
Adjusted to arrive at monthly balances
Total monthly average loan portfolio
Cost of risks
(771,572)
(1,314,893)
17,085,704
15,639,660
0.6%
-0.3%
Reference to financial statements
FY 2022
FY 2021
Total principal or interest repayment is overdue
for more than 90 days
Not available
217,596
195,857
Total gross loan portfolio
Par 90 to gross loans
Note 9. Loans and advances to customers
17,857,276
16,954,553
1.2%
1.2%
Reference to financial statements
FY 2022
FY 2021
NPLs to gross loans equals loans with 90 days past
due on principal
Not available
390,651
410,853
Total gross loan portfolio
NPLs to gross loans
Note 9. Loans and advances to customers
17,857,276
16,954,553
2.2%
2.4%
Total credit loss allowance for loans to customers
Note 9. Loans and advances to customers
NPL provision coverage
NPL provision coverage
Not available
359,834
390,651
407,368
410,853
92.1%
99.2%
Reference to financial statements
FY 2022
FY 2021
NPL collatetal
Not available
246,242
309,979
NPL provision coverage
Note 9. Loans and advances to customers
359,834
407,368
Reference to financial statements
FY 2022
FY 2021
Total
Total NPL exposure
Total NPL Coverage
Not available
606,077
390,651
155.1%
717,347
410,853
174.6%
Total credit loss allowance for loans to customers
Note 9. Loans and advances to customers
359,834
407,368
Total gross loan portfolio
Note 9. Loans and advances to customers
17,857,276
16,954,553
Credit loss level to Gross Loans
2.0%
2.4%
Reference to financial statements
FY 2022
FY 2021
Related party loans
Total gross loan portfolio
Related party loans to gross loans
Reference to financial statements
Note 42. Related party transactions
FY 2022
26,717
FY 2021
12,015
Note 9. Loans and advances to customers
17,857,276
16,954,553
0.1%
0.1%
268
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022ALTERNATIVE PERFORMANCE MEASURES CONTINUEDGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSMANAGEMENT REPORT 15
16
17
18
Top 10 borrowers
Not available
967,960
1,165,425
Total gross loan portfolio
Note 9. Loans and advances to customers
17,857,276
16,954,553
Top 10 borrowers
5.4%
6.9%
Reference to financial statements
FY 2022
FY 2021
Top 20 borrowers
Not available
1,511,447
1,796,675
Total gross loan portfolio
Note 9. Loans and advances to customers
17,857,276
16,954,553
Top 20 borrowers
8.5%
10.6%
Reference to financial statements
FY 2022
FY 2021
Net loans
Consolidated statement of financial position
17,497,442
16,547,185
Total Deposits portfolio
Note 19. Customer accounts
17,841,357
14,884,145
Reference to financial statements
FY 2022
FY 2021
IFI funding
Deposits + IFI Funding
Net loans to deposits + IFI Funding
Not available
2,115,335
1,455,723
19,956,692
16,339,868
87.7%
101.3%
Total assets
Total equity
Leverage
Reference to financial statements
FY 2022
FY 2021
Consolidated statement of financial position
28,329,010
24,039,512
Consolidated statement of financial position
4,265,802
3,590,055
6.6x
6.7x
ABBREVIATIONS
ACCA
AGM
ALCO
APM
ATM
CAGR
CAR
CEE
CEO
CFA
CFO
CGU
CIB
CIS
COR
CRO
CSR
DCF
EBRD
ECL
EMEA
EMS
ENPS
EPS
ERM
ESG
ESRM
EU
EUR
FC
FDI
FTSE
FVOCI
GBP
GDP
GDR
GEL
GHG
Association of Chartered Certified
Accountants
Annual general meeting
Asset-liability management committee
Alternative performance measure
Automated teller machine
Compounded annual growth rate
Capital adequacy ratio
Central and Eastern Europe
Chief executive officer
Chartered Financial Analyst
Chief financial officer
Cash generating unit
Corporate investment banking
The Commonwealth of Independent States
Cost of risk
Chief risk officer
Corporate social responsibility
Discounted cash flows
European Bank for Reconstruction and
Development
Expected credit losses
Europe, Middle East and Africa
Environmental management system
Employee Net Promoter Score
Earnings per share
Enterprise risk management
Environmental, social and governance
Environmental and social risk management
European Union
Euro
Foreign currency
Foreign direct investment
Financial Times Stock Exchange
Fair value through other comprehensive
income
Great British pound, national currency of the UK
Gross domestic product
Global depositary receipt
Georgian lari, national currency of Georgia
Greenhouse gas
IFRS
IMF
IPCC
IPO
IT
JSC
KPI
LSE
LTIP
LTV
MBA
MSME
NBG
NCI
NIM
NMF
NPL
NPS
OCI
OECD
PLC
POS
P2P
PTI
PWC
ROA
ROE
SME
SPPI
STEM
TCFD
TOM
UK
US$
VAR
WM
HNWI
High-net-worth individuals
HR
IAS
IDR
IFC
IFI
IFRIC
Human resources
International Accounting Standards
Issuer default rating
International Finance Corporation
International financial institution
International Financial Reporting
Interpretations Committee
International Financial Reporting Standards
International Monetary Fund
Intergovernmental Panel on Climate Change
Initial public offering
Information technology
Joint stock company
Key performance indicators
London Stock Exchange
Long-term incentive plan
Loan to value
Master of Business Administration
Micro, small and medium-sized enterprises
National Bank of Georgia
Non-controlling interest
Net interest margin
Not meaningful figure
Non-performing loans
Net promoter score
Other comprehensive income
Organisation for Economic Cooperation and
Development
Public limited company
Point of sale
Peer-to-peer
Payment to income
PricewaterhouseCoopers
Return on average assets
Return on average equity
Small and medium-sized enterprises
Solely payments of principal and interest
Science, technology, engineering and
mathematics
Force on climate-related financial
disclosures
Top of mind score
United Kingdom of Great Britain and Northern Ireland
The US dollar, national currency of the United States
Value-at-risk
Wealth management
270
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TBC BANK ANNUAL REPORT AND ACCOUNTS 2022TBC BANK ANNUAL REPORT AND ACCOUNTS 2022ALTERNATIVE PERFORMANCE MEASURES CONTINUEDGOVERNANCEADDITIONAL INFORMATIONFNANCIAL STATEMENTSMANAGEMENT REPORT