May 13, 2020 / 7:32 AM / 17 days ago

Russian bank TCS expects slower growth in 2020, withdraws guidance

MOSCOW (Reuters) - Russian bank TCS Group Holding (TCSq.L) said on Wednesday it expected to remain profitable this year despite slower growth

but withdrew its 2020 guidance because of uncertainty due to the coronavirus pandemic.

Major Russian banks Sberbank (SBER.MM) and VTB (VTBR.MM) have also said they could adjust their guidance depending on the economic fallout from the outbreak.

Russia as of Wednesday had reported 242,271 cases of the coronavirus and 2,212 deaths.

“The group is withdrawing its previously issued 2020 guidance, and will not issue new guidance for 2020 unless and until market conditions stabilise,” TCS said as it reported a 26% rise year-on-year in first-quarter net profit to 9 billion roubles ($122.6 million).

TCS, the parent company of Tinkoff Bank, had previously said it expected annual net profit to increase to 42 billion roubles - another record - from 36.1 billion in 2019.

Russia’s central bank has warned that a spike in bad loans caused by the novel coronavirus was expected in the second half of the year or in early 2021.

TCS also said its net portfolio would be “negatively affected by rising provisions” for the remainder of 2020. It said its non-performing loan ratio rose to 9.4%, up from 9.1% in the fourth quarter of 2019.

Speaking on a conference call with reporters on Wednesday, Oliver Hughes, chief executive officer of Tinkoff Bank, said the lender was in no rush to broaden its loan portfolio at a time of high uncertainty.

“We are on standby,” Hughes said. “Now is not the time to build up our loan portfolio.”

The bank said its return on equity in the first quarter stood at 37.5% year-on-year, nearly 27 percentage points lower than for the same period last year.

TCS said it expected to remain profitable in 2020 “given it started the year with very strong liquidity and capital positions”.

The bank said its board had approved a second interim gross dividend payment of $0.14 per share.

“We understand the need to be sensible about capital returns in this uncertain environment,” Hughes said in a statement.

“We have no plans to alter our dividend policy of paying up to 30% of quarterly net income, but we will prioritise the capital needs of the business ahead of dividends if the situation demands it.”

TCS has recently made changes to its corporate governance, including its founder Oleg Tinkov stepping down last month as chairman of the board of Tinkoff Bank to focus on his treatment for acute leukaemia.

Tinkov has been feeling well despite his treatment, Hughes said on the call with reporters.

Reporting by Maria Kiselyova and Tatiana Voronova; Writing by Gabrielle Tétrault-Farber; Editing by Katya Golubkova, Jane Merriman and Emelia Sithole-Matarise

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