MOSCOW: Russian online retail bank Tinkoff <TCSq.L> has more scope to increase lending in a recovering Russian economy after boosting capital via a $300 million bond deal earlier this month. Tinkoff, Russia’s second-largest credit card issuer after top bank Sberbank <SBER.MM>, is sticking to its loan book growth guidance of at least 20 percent this year but could do more. “Thanks to the additional capital … we have a buffer which would allow us to grow faster and longer if there is a source of quality growth,” management board chairman Oliver Hughes said in an interview. London-listed TCS Group, parent company of Tinkoff Bank, is a pioneer in online banking in Russia. Majority-owned by entrepreneur Oleg Tinkov, who has a 53.5 percent stake, it has become one of the top 50 banks in the country along with heavyweights such as Sberbank and VTB <VTBR.MM> since it was set up in 2006.
With no branches and, until recently no ATMs, Tinkoff aims to expand in credit card loans and online banking services, among other financial services in the country. “Now the capital is enough for a couple of years – depending on the pace of growth, until 2020,” Hughes said. He said the bank had no plans to issue new shares or conduct a sale of existing shares, nor to top up the bond deal. “Banks are proposing options to us all the time and we look at all of them. But the most optimal from the capital point of view now is Tier 1 debt,” Hughes said. After the Eurobond issue, Tinkoff’s capital adequacy ratio, calculated under Russian central bank requirements has increased by 6 percentage points to around 16.2 percent, Sergey Pirogov, vice president with the bank, said. “There are grounds to believe that there could be opportunities for faster growth,” Pirogov added. Tinkoff’s net loans rose 8 percent in the first quarter, when net profit jumped almost 80 percent year-on-year to 3.4 billion roubles ($57 million) and return on equity was 43 percent. The results come after the bank outperformed many consumer lenders during an economic crisis that began in 2014, sparked by a slump in oil prices and sanctions the West imposed on Moscow for its role in the Ukrainian crisis.
Tinkoff tightened requirements for borrowers and started looking closely at clients’ balance sheets, Hughes said, explaining how the bank had a “good crisis.” He added that in 2014 some clients went bankrupt while others paid back debts, helping the bank’s consumer lending to bottom out in mid-2015. “While everyone dozed, we gave out loans to the most reliable clients, keeping the loan approval level low,” he said. Now a rapid drop in household income had come to an end, the depreciation of the rouble had halted and the macroeconomic landscape had improved, Hughes said, adding the loan approval ratio had recovered from around 15 percent in the midst of the crisis to pre-crisis levels of around 30 percent. Tinkoff would be interested in buying into a loan portfolio following its purchase of a credit card loan book from electronics retailer Svyaznoy for 6.4 billion roubles in 2015, Hughes said, while adding there were no such options for now. When asked if other lenders had been in talks to acquire Tinkoff, he said “hardly anyone on the market is capable of buying us now.”
