TBC Bank Group Plc - Operating with Strong Liquidity and Capital Position

FTSE 250-listed TBC Bank Group Plc (LON: TBCG) is a Tbilisi, Georgia-based Banking Company, which provides leasing, banking, brokerage, and card processing services to individual and corporate customers.

On 18 August 2020, the Company will announce the consolidated financial results for the second quarter and first half of 2020.

Recent News

On 2 July 2020, the Company announced that it had become a member of the FTSE4Good Index Series.

Q1 FY20 Update (for the first three months of 2020, as on 20 May 2020)

Overall results showed a decline in the profit due to a large COVID-19 related loan impairment charge but stated that it stayed on track to achieve the medium-term financial targets. The Group reported the profit for the period (without COVID-19 impact) stood at GEL 152.4 million as against GEL 133.3 million in Q1 FY19. Further, the cost to income for the Group stood at 36.5% in Q1 FY20 as compared to 37.7% in Q1 FY19. The net interest income surged by 3.4% (year-on-year) to GEL 208.0 million in Q1 FY20, while fee & commissions surged by 4.2% (year-on-year) to GEL 43.6 million.

Share Price Performance


 1-Year Chart as on 24 July 2020, before the market close (Source: Refinitiv, Thomson Reuters)

TBC Bank Group Plc’s shares were trading at GBX 774.00 on 24 July 2020 (before the market close at 10:10 AM GMT+1), up by 1.84% against the last day closing price. Stock 52 week High and Low were GBX 1,516 and GBX 635.00, respectively.

From the technical standpoint, 90-day RSI is currently close to an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Valuation Methodology
 

 
Key Risks

The Company’s performance is significantly exposed to the volatility in the capital market and the forex market. During an economic slowdown, expansion plans in the country would stop due to limited demand for new loans. The expectations of clients in an uncertain environment change quickly and place even greater pressure on the industry to respond to their evolving needs.

Conclusion

The Company is on track to deliver superior results and to attain sustainable growth for the shareholders. Further, it continues to operate with a strong capital base and a robust liquidity position. Also, the Group is developing customer-focused digital ecosystems, along with enhancing the value proposition beyond the financial service. The Group reported a robust financial performance and delivered substantial progress against the strategic priorities in the financial year 2019. In the short-term period, the Company and industry will be impacted by COVID-19. Hence, the Group has decided not to propose dividends to preserve capital. TBCG has reiterated the guidance for return on equity to above 20%, the cost to income to fall below 35%, loan book growth of around 10% to 15%, in the medium term.

Recently, the subsidiary (JBC TBC Bank) has launched banking operations in Uzbekistan. This can increase the customer base and develop as a global brand. Overall, the Group stays confident that the business will adapt and produce good returns for the shareholders in the long run.

Over the course of 4 years (FY15 - FY19), the Company’s revenue surged from GEL 762.90 million in FY15 to GEL 1,797.03 million in FY19. Compounded annual growth rate (CAGR) stood at 23.89%.

Based on the above rationale and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the current market price of GBX 774.00 (as on 24 July 2020, before the market close at 10:10 AM GMT+1) with lower double-digit upside potential based on 0.70x Price/NTM Book value multiple (approx.) on FY20E Book Value per share (approx.).

Metro Bank Plc – Operating with Strong Liquidity

Metro Bank Plc (LON: MTRO) is an FTSE All-Share Company, which provides banking and related services in the United Kingdom.

Recent News

On 8 July 2020, the Company announced that the newly appointed Chairman, Robert Sharpe will be joining from 1 November 2020.

Q1 FY20 Trading Update (for the first quarter ended 31 March 2020, as on 6 May 2020)


(Source: Company Website)

The Group reported an increase in total deposits by £77 million to £14,554 million in Q1 FY20 (December 2019: £14,477 million). During the lockdown, all the stores and centres remained open. The Company witnessed growth in retail savings accounts. The loan to deposit ratio for the first quarter of 2020 decreased to 100%. Further, the net loans decreased by 1% to £14,512 million in Q1 of the financial year 2020, as against the position of 31 December 2019. The Group reported a strong liquidity coverage ratio which was above 197% reported on 31 December 2019.

Share Price Performance


 1-Year Chart as on 24 July 2020, before the market close (Source: Refinitiv, Thomson Reuters)

Metro Bank PLC Plc’s shares were trading at GBX 112.65 on 24 July 2020 (before the market close at 10:20 AM GMT+1), down by 0.66% against the last day closing price. Stock 52 week High and Low were GBX 510.00 and GBX 66.30, respectively.

From the technical standpoint, 90-day RSI is currently close to an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Key Risks

Acquisitions to match rapid transformation may increase integration risks and expected synergies may not be achieved.The sector is also exposed to political, financial, and operational risks, each of which has the potential to impact company/industry performance significantly.

Conclusion

Looking forward, the Company is focussing on growth plans, while conservatively managing the cost in the uncertain short-term period. Moreover, MTRO is supporting the clients with the Coronavirus Business Interruption Loan Scheme and Bounce Back Loan Scheme. It has also reported an increase in total deposits in the first quarter of 2020. However, considering the rapidly evolving uncertainties, the Company was unable to provide guidance for the full year. Overall, the Group is maintaining strong liquidity and shall deliver a decent return in the long run.

Over the course of 4 years (FY15 - FY19), the Company’s revenue surged from £156.53 million in FY15 to £610.10 million in FY19. Compounded annual growth rate (CAGR) stood at 40.51%.

Based on the above rationale, we have given a "Speculative Buy" recommendation at the current market price of GBX 112.65 (as on 24 July 2020, before the market close at 10:20 AM GMT+1).
 
*Dividend Yield may vary as per the stock price movement.
*All forecasted figures and Industry information have been taken from Refinitiv, Thomson Reuters.

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