TBC Bank Group PLC (TBCG) Earnings Call Transcript & Summary

Hello, and welcome to this TBC Uzbekistan Deep Dive Webinar. My name is Harry and I'll be your operator today. [Operator Instructions]. I would now like to turn the call over to Andrew Keeley, Director of Investor Relations to begin. Andrew, please go ahead when you're ready.

Thanks very much, Harry, for the introduction. And hello, and welcome, everybody, to today's deep dive webinar on TBC Uzbekistan. It's great to have so many of you with us on this call. My name is Andrew Keeley. I'm Director of Investor Relations at TBC Bank. And I'm showing today's call by all of [Technical Difficulty] and Nika Kurdiani. One of the [indiscernible] joined us last September as Head of International. Prior to that, he spent 15 years in his customers CEO, building up kickoff into being one of the leading and most profitable digital banks in the world. And subsequent to that, he helped set up the digital lending platform in the Philippines. Nika Kurdiani, is CEO of our business in Uzbekistan. Nika is a TBC veteran. He's been with us about 10 years. [indiscernible] had a variety of senior management roles, including running our MSB and payments businesses. In 2018, Nika helped set up Space, the Georgia and digital bank that has basically become the prototype for the digital banking platform that we have in Uzbekistan today. And over the past 5 years, Nika have basically been leading TDC's charges. So the basically consists of a presentation by over Nika for about 30 minutes, and then that will be followed by Q&A. And just to add that the full slide deck is available now on TBC's website. So with that, I hand over to Oliver. Thank you.

Thanks very much, Andrew, and thanks to everybody for joining us today. We view quite a lot of you on the line and on Zoom so that as great. We're showing there's interest in Uzbekistan and obviously interest in TBC at Uzbekistan, so we're looking forward to telling you a bit about our story. And I hope you all know that we're quite happy to follow up if there are any other questions, you have our details. So please reach out. So as Andrew said, Nika and I will talk about 3 minutes, 15 minutes each, and then we'll move to Q&A. So please feel free to pop up a question. So who are we? We've been in Uzbekistan for about 4 years, we were team. And Nika and the original team basically decided that Uzbekistan was a good place to do business and did some -- made some very, very good decisions. So Eva chooses open Uzbekistan, which is a very good start, as you'll be hearing today. Then they decided to go and get a greenfield store banking license, which was an absolutely tip-top decision. Then they decided to launch a consumer lending led business, which is something which a lot of mailbacks and digital banks around the world didn't do and that was a blinding decision as well. This is also led by deposits, fixed via banking leases, which is super important if you want to build a scale business. Then we decided to buy Payme, which you'll be hearing a lot about today, which is Uzbekistan's largest P2P transfer business and the second largest payment aggregation business in Uzbekistan. So we'll be telling you some of the numbers. It's a big business already. Unprofitable, which is very important. And all of this another great decision was underpinned -- is underpinned by a separate tech stack, a separate team, a separate organization, which means we are completely tailored or customized to what we're doing in Uzbekistan and the moving fast, learning fast, failing, fast pivoting or stuff that you need in a high-growth fintech. So -- on this slide, you can see in bold the things that we are building this is our product road map for the next 12 to 18 months. So the things that are not in bubble in that example on the left-hand side in TBC, which is the digital bank. You see the things which already exists, which we're scaling at the moment. So digital cash loans, deposits, which from that cash lending book, some cards, actually quite a large number of cards, remittance business gamification, and we will be building and launching an SME offering, which is a transactional business that eventually becoming a lending business for small business credit cards, which we're building up speed right now. And daily banking, so if you think of [indiscernible] off Black, but obviously, [indiscernible] iteration, we'll be doing something in that space again this year. Payme, as I said, is one of the largest payment providers in Uzbekistan. P2P transfers, payments for utilities, mobile top-up, PSM and QR payments offline already exist, and we'll be adding troubled services, ticketing entertainment as we go forward over the next 2 months. And Payme Nasiya, which is today off-line point-of-sale lending, which installment loans. And we'll be adding BNPL, which is integrated into Payme payments and e-commerce as we go through the next 12 to 18 months. I should say that all of our businesses are profitable. So Nika will be coming on that later, but it's just worth bearing in mind that we are not a start-up. So I won't still Nika's number. Just as we go into the next slide, what's very important here is the sequencing. So we are building a digital financial ecosystem. And we're focused, we're experienced. We know what to build in and what's in order to be able to scale profitably. So it's in a bit of history as to how we got where we are today. But I think the most important thing on this slide are the customer numbers, you can see us going from 2019, 1.8 million customers to non 14 million. I think we've hit 14 million today. So this shows our number of registered users in the ecosystem. -- our Mal, so transactional i.e., customers were actually doing something as opposed to just going to the mobile app is around 4 million of growing very quickly. So this is a big customer base. This is a big chunk of the active population in Uzbekistan. But it's, as I'll come on a little bit later, a growing population has plenty of room to grow. This is important because it gives a network effect, and it gives us a customer base to whom we can cross-sell as we go forward. Next slide, please, Andrew. We have 2 main apps. You can see them here, TBC UZ, the bank and Payme the payments provider. We're rated very high, as you can see here, in Playstore and both apps are ranked in the top 5. Payme very flagrant and basically oscillates around the second or third place. And we have 15 million downloads and growing by the day. So this is a mobile delivered on ship services. We're a mobile-only company. Our focus is on OXY and delivery through mobile and do what going very quickly in that space. Next slide, please. We have what I consider to be not just a leading team in terms of the region, Central Asia, but basically a leading team globally. So it would help people who've built scale fintech from around the world, not just in, let's say, CIS or former Silver Union countries, but other geographies as well. These are people who know how to build profitable digital lending business, finance and payment services and scale. So you can see some familiar names, for example, Casino, Yandex, are not TBC in this list, but this is just a part of really quite a very strong team, and we couldn't do it justice by putting it all on the slide because we've been too busy I will just point out here that we have a relatively recent addition who's been with us for a month or so Costa Kubo, who's our Head of AI, who's driving forward some very interesting things that we're doing in our business in terms of dialogue-based banking through our mobile app. So courses space. Next slide, please, Andrew. So a little bit about why Uzbekistan before I hand over to Nika. So last year alone, was Uzbekistan added 1 million new population through birth as opposed to through immigration. The average age is 29 years old than decreasing. GDP Capital is growing. If you take PPP -- GDP capture is over $10,000. Its economy is in a good place and growing by 5%, 6%. And -- so this is a country to watch out for, and it's appearing on people's radars more often. Next slide, please, Andrew. In terms of the banking sector, specifically consumer lending, which is our locomotive at the moment, you can see that there's huge potential for growth. So the banking sector assets have been growing very quickly. The double over the last few years will double again and potentially the speed of that growth or the doubling will accelerate. And retail lending to GDP is very low. So if you take our mortgage in coal, and it's actually 5%, 6% is unsecured lending to GDP. So very low levels of penetration and we're growing from a low base. But that reads a cost as well into deposits, which is just 8% of GDP. So it's an established market, but it's growing from a very low base and still early stage. Andrew. Importantly on this slide, so there's a bit more color in terms of retail lending penetration. And you can see that retail lending is growing other place, but from a low base. The important thing I want to pick up on this slide was it is the fact that it's a well-regulated market. So yes, it's growing relatively quickly. It's very low levels of penetration versus GDP, as I mentioned. But it's already a well-regulated market. So for example, lending to consumers and FX is prohibited, which is entirely right. The PTI payment to income regulations call into higher than 50% of a customer's not income. There are risk weights already in place. So for example, our consumer lending book is risk weighted to around 165%, and that's a well-established piece of regulation, which is rigorously enforced. There's new claim rate up. So what the customer repays can't be more than 50% of the principal within the 12-month there basically annually. So this is not a market where we're likely to see this kind of boom bust cycle and the overextension of credit and consumer protection issues or just a rational competition, which gives us great confidence as we grow this business. Next slide, please. This is a little bit about the landscape in terms of the share of state-owned banks and banking assets. So you can see that it was around 80%. And then OTP came into the market and bought pet which meant that overnight the share of state-owned assets in the banking sector went from 80% to 70%. It will go down. There is no the bank in the market, but obviously, there are lots of different strong players. It's a very vibrant market in terms of what some of the banks are doing. In terms of e-commerce and marketplaces with fintech services around them in terms of fintechs, but in consumer lending, payments, there's a very interesting payments ecosystem, which I believe it will be talking about a little bit later. And just lots going on, just a surprising amount. So when you per the bullet, and I would encourage you all to come to a touch come look for yourselves. There's really tons happening. I was very surprised when I started doing deals in it was baton. It's a very exciting place in terms of fintech in general. And also just to wrap up this slide, this foreign players coming to market. Solvency GBC, those Turkish banks, LTP, I mentioned, Koreans to Kazak Banks now. So a lot going on. Andrew. So over to Nika.

Thanks, Oliver. Hi, everybody. Great to see so many participants on the call. So basically, on the strategy, we are absolutely kind of obsessed with the purpose of making people's life easier through digital technologies and digital banking and what we are building is we're building something that we are sure that people will love and recommend for financial services, as Oliver said, this is digital financial services ecosystem. And we are focusing on making it the fastest, the most seamless and the most intuitive basically experience for the customers. Of course, making sure that they trust us the most. And basically, they are sure that our services are the most secure and safe. All this is based on one very fundamental thing, which is the team that is analytical, data-driven, very entrepreneurial, but for most, it is very results-oriented and execution treatment basically. So -- and then Oliver was mentioning that we did quite some progress, and we're talking now about the figures and this is exactly where it comes from. Let's move to the next slide, Andrew. In terms of a quick look on the digital financial services ecosystem, basically now we are in 4 verticals as we put it, basically, one is digital banking. I won't be going into each product line, but they are all on the slide. The second one is payments. We are one of the biggest ones in payments. If not the biggest one in P2P payments, for instance, POS lending, which is increasing in the country in terms of penetration and engagement features various ones, starting from gamification or loyalty services going onto to services, for instance. Let's go to the next one. In terms of results, I will be showing some figures. Basically, as Oliver said, we are present on the market starting from 2019. This is when we did the acquisition of the controlling stake in Payme. The bank was launched in 2020 October. This is where we started onboarding the customers. So basically, the results are quite impressive. We now count more than 13 million registered customers, out of which 4.3% are monthly active and all these figures are unique for the whole ecosystem. In terms of profitability, we've basically been profitable the last 5 quarters, the last quarter being significantly higher already spending at $8 million. The loan book basically grew significantly. And by the end of the last year, it stood around EUR 300 million. And as Oliver said, basically, we are lending only in local currency. So we tried and actually achieved a great result of having our loan book almost fully financed by local deposits, some deposits and the portfolio stands now at around USD 220 million. And yes, the revenue figure is also impressive is $24 million for the last quarter 2023. Now let's move to the next one. In terms of market shares, all these figures give us actually quite an impressive result in terms of market shares as well. In our core product offering, lending offering, basically, we are one of the strongest, if not the strongest on the market in terms of ICL, which is instant cash loan, where we already have a 13.9% market share by the end of last year. In terms of the retail -- total retail loan book penetration, basically, we are at 2.4%. And in deposits, retail deposits, we are at 3%. And again, I want to repeat that this has been achieved in last -- just in the last several years, and this is further increasing. So basically, we feel very stable here and positive. Let's move to the next slide. In terms of course, when you onto summer finance and general lending business, you have to be aware of your risks. And here, we have built a very strong muscle we closed last year with a cost of risk at 4.9%. The NPL coverage was super healthy, 220% and the Power 9 figures stood at 1.9%. So we are investing lots of energy and focus and technology into this. And basically, we are sure that we will be one of, if not already, one of the strongest one in terms of credit risk management in the space. Let's move to the next one. In terms of the margins and the portfolio yield, it stands around 42%. Net interest risk adjusted net interest margin was 17.7%. And overall, we are doing lots of exercises to keep this figure further increasing. And basically, the figures are super healthy as you see on the slide. Now let's move to the next one. In terms of profitability annualized, as I said, the bank was launched in October 2020 in October 2022. So exactly on the 24th month, the bank broke even. So it reached its monthly breakeven point. And ever since then, every month was positive. So we closed the full year 2023, with $23 million net profit. This consolidates all 3 businesses, all of them are profitable as it was mentioned, and which resulted in a very strong performance on ROE, 26% ROE for the full year 2023 and 7.9% ROE. Let's go to the next one. Yes. Now the question maybe how much does this all contribute already to the TBC Group's overall picture. So in terms of non-mortgage retail loans, we had over the 22% share in terms of total revenue 9%, retail deposits, 7% and net profit 5%. And again, as communicated, if I remember correctly, on the last call, investor call, the targets, the guidance for 2025 basically is that we will be reaching approximately USD 75 million in net profit. The amount will reach $5 million plus. We stand already at $4.3 million, and the average loan growth will be 80%, more than 80%. And actually, last year, we grew 2.3x. So all this performance is quite impressive and makes us very happy, and we are making everything to improve its fund. Let's move next Yes, by this [indiscernible] figures and just one more slide, and then I'll hand over to Oliver. After all, all these numbers basically still ask a question, what is our right to win, and there are many aspects, which we think are crucial in terms of our right to win and our -- us being so sure about our capabilities and success. First of all, all 3 businesses are profitable. We are running a fully licensed digital bank, which doesn't have any legacy because we did not acquire anything. We want greenfield from the day 1, which gives us capability of focusing only on growth and business development. We are always saying that we sequenced the product launches. Oliver also mentioned in the beginning, product launch is very well. And we built a consumer-led consumer finance led digital banking business, which gave us the profitability figures, which I outstanding I met earlier. The team is customer experience and customer service obsess. Basically, we are making sure that customer experience turns out and is considered to be the best in the country. And the team and the investments basically go quite significantly to that direction. The team, as we had on a separate slide, is also impressive. The collective experience we have, not only in our region, but globally, is impressive. We have people from super strong companies from various backgrounds and notary financial or banking services backgrounds this is also important, which is spread in -- from 17 countries in 8 different geographic locations. Of course, Georgia and Uzbekistan being 2 hubs where we operate 2 big offices. And at the end, we believe very much that mobile holding end-to-end digital service delivery is the way to go. And this is how we run actually our business and this is how we execute. Yes. And here, thanks, and Oliver I'll handing back to you.

Thanks very much. So on this slide, we come back to the whole opportunity of population. So the rate of growth of Uzbekistan's population, it will be 40 million before you know it. But the most important thing here is the generational phenomenon, if you like. So where you have this kind of inverted pyramid, as you see in many countries around the world. Let's say, the younger growing countries outside more established markets, particularly Europe and U.S. You basically -- and this is something which maybe people didn't get in tick-off until quite late the people who didn't get it did quite well. So basically, it's the fact that you have more and more cohorts of young people coming into the market and becoming economically active and being consumers of financial services in greater numbers each year that goes by because of the inverted period. And the leach is that our penetration increases the -- as you go down into younger population segments. So the younger Uzbek the more likely that to be a TBC customer. So as these cohorts come into the market, we got more and more customers coming in, so you get this kind of acceleration effect. So the next slide is our basically first attendant doing some approximation of TAM. So the data in terms of the general market, Uzbekistan is not great yet, it's improving. But we've done some approximation just trying to take you to some sort of the right place in terms of where we think we can be. So Nika said that we've given official guidance of CVC Group that we will have $75 million or more with net profit coming from Uzbekistan market by the end of 2025. So that's one data point. The other date point is that -- there's currently around $5 billion worth of net revenue, which is the end of 2023 for the banking sector in Uzbekistan. The net profit for Uzbekistan for the banking sector was just under $1 billion. Our shareholder was -- so our share of net profit was higher than our share of net revenue because we have unsecured consumer loans and a higher margin consumer financial products. So basically, our share of net revenue was 1.6%, and I or share net profit was 2.1%. Going forward, we think that the net revenue for the banking sector will grow significantly with it net profit. So it will be up to probably $20 billion or so in terms of -- sorry, the sort of profit will go up to 2 billion, we think, in the next for 5 years by 2028. So a way of understanding where we can get to is to look at our share of consumer lending. So we currently have 3% of unsecured -- total consumer lending, which is 14% of cash loans, which is what Nika showed on an earlier slide. So currently 3% of total consumer lending. Can we get to 10% by 2028, we believe that's not a stretch of the imagination at all. And from that, you can work out roughly what our share of the profit pool will be. So this is something we're going to be doing further iterations of as we go through different versions of the presentations for the future. But we believe our TAM and our opportunity in terms of taking a chunk out of the profit pool is very interesting, and that's part of the investment thesis. So again, what's on space, we will be communicating more on this as we go forward as we execute and as we deliver on the funds, which we've just been describing. So Uzbekistan is a very interesting place, and were very honored to be helping putting it on the map in terms of the investor [indiscernible]. And at that, I think we've hit just show of 30 minutes, which is great. We'll be more than happy to take your questions. And I see there's already a couple in chat. Andrew, over to you.

Great. Thank you, guys, very much for your presentation. So yes, we'll go to Q&A. Please raise your hand if you want to ask a question or type something in chat. So first up, we have Rahim Salim from Investor. Please go ahead and make sure you're unmuted.

If I can, just 2 questions from me. Really helpful color in terms of the business and the changes in the product offering that you're hoping to deliver over the next couple of years. Can I just understand how we should think about margins, loan yields and deposit costs evolving in the business over that period of time? And then secondly, I appreciate this is a webinars Uzbekistan, but it'd be interesting to hear how you think this platform is transferable into other markets, especially given your experience and your title is Head of International businesses, not just as Uzbekistan.

Sure. So do you want to take the first one, Nika, and maybe I'll add a bit if needed, and then I'll take the second one.

Yes. So basically, we do not expect the margins to go down because we are doing lots of things, these to be kept or malate increased. And this also is about the loan yields. But as Oliver mentioned, the low yields are capped in the country. So definitely, this is something that we are keeping in mind. And in terms of deposit costs, as I mentioned, I mean, we are predominantly now funded with retail deposits which obviously are more costlier than wholesale pending, and we are doing lots of things this year as we grow and as we reach certain maturity levels, right, we cannot do anything from the very beginning. So we are tapping into wholesale funding pipeline, and this will further we hope, improve our cost of funding. So we expect this basically to be going down gradually as we go forward.

Yes, just to add to that, just to help frame your thinking in terms of where we can come out in terms of maybe ROE. So is digital banks have a focus on consumer lending in the early years at least. Obviously, a lot of them, as you can see, have ROEs north of 35% quite comfortably. So our ROE for last year, which was just also coming out with sort of a start-up phase and into ramp-up phase was 26% even as we invested heavily into growth and into developing the business and the product. So that gives you an idea as to where we can come out in the next few years without giving any forward-looking statements. But one of the maybe useful data point is that we apply or we're beginning to apply an NPV based approach to consumer lending. And the hurdle rate that we're baking in to our models, the NPV models is 45%. So in Tinkoff days, it was 30%, which means in theory, the minimum ROE of the loan will be far team. In our case, it will be 4% to 5% because the cost of equity at this stage is also a little bit higher in Uzbekistan. So that just gives you an idea as to how we think about the business and how the ROE will be as we build this thing out. The second question was about international expansion, inevitably, and it's a good question. So our firm view with Nika is that we have to execute in Uzbekistan. We've got a fantastic opportunity in an amazing market with all the right proven requisites to do a good job. So this is about focused execution, brilliant customer service, UX/UI, et cetera, and building out our product offering, as I showed on the second slide. Andrew, I think there's -- maybe from you -- [Technical Difficulty] sorry. And so basically, -- we will know Uzbekistan. We need to get this scaling profitably. We're wanting not to be on a sustainable track. And we think that we'll start looking around maybe 18 and 30 months' time, when we feel that we're on the right trajectory in Uzbekistan. So there's no rush or we will go to market 3 at some point. The way we think about this very tentatively at the moment we genuinely not working and we -- yes, it's all about Uzbekistan at the moment. But when we do start looking, we have a bit of an investment thesis, which is that there are some overlooked under-looked markets of, let's say, 30, 60 million population with at least $1 billion worth of profit in the banking sector today, which would be the markets we would start looking at. And -- but beyond that, I can't tell you anything meaningful. It's all about Uzbekistan right now.

Next up, we have Robert from Peel Hunt.

I have 2 questions as well, please. The first question is, I'm very taken by your -- what I think is a very low cost of risk. I think you said you exited last year below 5%. And it surprises me a little bit because my understanding is that under IFRS 9 accounting, do you have to take provisions on day 1, looking at expected loss in the first year of the loan. And on a very fast-growing book, such as you have, I would have expected just a bigger accounting charge. So I was wondering whether you could perhaps sort of talk around to what extent is that 5% representing real defaults or losses? To what extent is it accounting requirements, et cetera. The other question I have is with respect to capital and your capital requirements because you do still have very strong loan growth expectations. And although your return on equity is very high, it's running well below what your expected loan growth will be. So I'd be interested in your views in terms of how much capital you might require, if any, from the group over the next couple of years and when you think you might become self-funding from a capital perspective.

Nika, do you want to take the cost of risk question?

Yes, I'll take the first one. So basically, as you correctly mentioned, yes, accounting-wise, you have to front-load the provisions. And basically, this is exactly what we're doing. But overall, the answer to this level of cost of risk is, in our opinion, very, very good infrastructure for risk management in the country, and there are many, many items to it, but I will just mention several of them. For instance, in Uzbekistan for many years now, Uzbekistan has implemented open banking with the local card payment systems, Myuzcard. And this allows the banks to out-collect the due amounts on the payment date on a daily basis. And this service runs every evening basically in several times a day, if you want so. It is just a fee that the banks are paying for each after collection stream basically. And this is a massive support, right? I don't know personally in a country that has this kind of automated auto collection instruments implemented. This is one. Secondly, there are 2 credit bureaus, on international creep and the second one, Central Bank owned local credit bureau, which are fully functional and is very, very decent in terms of information that we can get from there. And the third thing I want to mention is, again, the open banking thing, which is allowing banks or payment hubs basically to link the cards. When Oliver was describing Payme, he used the word payment aggregation service. So payment aggregation means that the customer would link the card to the app to any banking or payment app. And automatically, the card system is allowing the app to access 12 months of historical data, not only to autocorrect but also to access 12 months of isolical data. And this automatically gives you even more muslin terms of underwriting and understanding the customer quality and many other things, basically, we are integrated with the telecom operators in terms of data collection and scoring and other things that we are doing basically, and this allow us to have this kind of premise risk level.

I would just add 2 things very quickly to that. So it's a very data rich country and which is maybe a little bit surprising. But I worked in quite a few different markets over the last 30 years, and I can tell you the general piece. There are -- because it's a post-Soviet country, there's a centralized identification system, which is very important because many places in -- for example, Southeast Asia that I've looked at reasonably don't, which definitely helps in terms of verification, identification and then management of risk in the portfolio and collections. And then just make find, we have a lot of people who know what they're doing in consumer lending, which helps as well. And they're not how to grow a loan book safely. So coming on to the second question, which is about capital. So we have simply in the appendix, which Andrew has just put up on the screen. So you can see that our total capital was over 16%. I mentioned earlier that there are risk weights in Uzbekistan. You can see that on the right-hand part of the slide, 164% risk weighting in our loan book. So that's an additional buffer in terms of capital, your question is about our capital needs. So we are profitable. So we're capital generative. But obviously, we're not at this stage because we're investing, we're still relatively small. We are not generating enough capital to be self-sufficient in terms of organic capital generation. So the way you should think about this is that we have a sister who is hugely capital generative with an ROE of 26 -- over 26% last year. Making $400 million net profit last year, who is able to internally full dollar growth with capital and just for the fullness of the picture, we also have in our cap table in Uzbekistan, EBRD and IFC, who are also providing growth capital to us. So we'll need to do that, let's say, broadly for another 18 months or so in terms of getting this internal capital for growth. And thereafter will be self-sufficient in terms of capital. So we do not need to go to the market to raise capital. This can all be support in internal.

Thanks very much, Robert. Next up is Can Demir from Wood.

And so Oliver, I remember from my days of covering TCS, I remember you guys ramped up and scaled before you actually showed up on the radar of larger banks, you get a pretty consolidated position, especially in credit cards before 2022. And I was wondering, I mean, how do you see state banks competition? And if you maybe compare the state bank's behavior in Uzbekistan to VTB and Sberg? how do you -- how can you compare, how do these guys compare? I mean, are they already awake that you're building a business there? Or are they still sleepy? And maybe the second question is -- we talked about the positive side of thing business in Uzbekistan, but maybe you could also talk a bit about which aspects of Uzbekistan are challenging. I think that would be very useful, too.

Sure. Yes. Thanks I think it'd be appropriate if Nika who's been in the market for a bit longer than me, starts off. And obviously, we have nothing but deep respect for all the players in the market, including the state-owned banks, but can talk to that point. And then I can maybe just step over to make another bit of color in terms of maybe some observations comparisons with Russia, such as they are because they're very limited to goes with you. And then we'll answer your second question about the negatives and the challenges.

Yes. Thank you. It's a good question. Basically, firstly, as we had it on the slide, right, I mean, 80%. And after OTP acquisition, it went down to 70% approximately of the banking sector is within state banks. All of them are getting active. When we were starting, for instance, consumer finance was purely branch-based, especially in state banks, basically, which are huge and payroll reach -- payroll customer reach. But now we see that they are catching up. All of them have mobile apps, all of them have online credit products. So I would say that they are also building muscle. And of course, they understand that we are present because we were the first digital bank in the country which -- and plus we bought Payme and then we have 13-plus million customers. So this is impossible not to understand that we are there, not talking about the market share of 14% in consumer loan, right, the instant cash lending. So definitely, they do understand us. Do we feel them? Yes, of course, we fill them. Are they doing also things, progressive things to make us fill them more? Yes, of course, they are doing and they are implementing certain things, which are quite cool. For instance, installment cards and digital products. So I would say that competition overall is ramping up I wouldn't say that anybody is slipping on the market. I mean, the market is getting very active. But again, we should not forget that the GDP -- consumer finance to GDP penetration, as mentioned before, is significantly lower than in the region. So I think there is enough time for everybody to try in the next years where we want to be, of course, one of the most active ones, especially in consumer lending products. And Oliver, maybe you can comment on.

Yes. So I don't think really can do money kind of cross-border comparisons. But I suppose the short answer to your question is that there is no spare bank, no elephant dancing in the room as a growth ones put it yet. And so -- as Nika said, the market is changing. There's more talent available in the world's returning Uzbeks although nationalities, generally, Russian speaking coming into the market, which means that other players can do things, which they just can't done a few years ago, technology coming. So it's going to be an interesting place to do business. Right now, it doesn't feel like that's being led by the state-owned banks, but then state on banks are for good people as well, and they'll be doing a lot more as well. But I would say that it's actually worth looking at some of the other players. So a few of my favorites, as you may or may not have heard of, who are marketplace with fintech services being built around them. This is some really cool use entrepreneurs supported by lots of product development and tech from Russians who at BK in Russia, basically in 2022 and move WhatsApp to Uzbekistan to build this marketplace economics, and they're doing some very interesting stuff. There's at least who are a tragic consumer lender fintech. So there's tons to stop going in the market. It's just another a couple out of lots and lots of very interesting names. So I think for the more challenging. I would say that -- so if -- as I came into this story, I started as an adviser in March 2022 and then it was invited timely to join Nika and the team in September, which I did on a full-time basis. I was actually surprised to the upside by risk as the previous question indicated. So risks are very well managed and the underwriting infrastructure and the collection of infrastructure, legal enforcement in structure are very strong in Uzbekistan. But what I was surprised with the downside about was fun. So deposits are expensive in the market. Though not -- so basically, people still keep a lot of their money if they have any spare cash, in cash in dollars on the mattress. It's like some of the markets we know well. So Ukraine, Russia 20 years ago. That will -- and it already is, but they will hopefully accelerate that will come into the banking sector into the formal economy. But there's no at the moment. A little bit outside, probably 60%, 70% of this obviously a number is difficult to calculate. So as a result, there's an increase in lending, consumer lending, but also corporate lending, SME lending. And that has to be fueled by something, and it's typically fueled by deposits, but there's not enough deposits to go around to much the credit growth, which means the price of deposit from the retail has gone up. We have the luxury of being able to tap into other sources of funding. We have IFI funding. We have funding from our sister via plc, our parent company -- we are working on bonds and various sort of instruments, and we can swap all of this, which is obviously super important if we're borrowing foreign currency because we want 0 tolerance for FX risk in our balance sheet. So we're in a good place, but still deposits are expensive. I would say that's probably my #1. Nika I don't know if you want to add the number 2.

Yes. I'll say digitalization is a massive trend in the country. So everybody, including the government is massively digitalizing the services. And this automatically puts the pressure on the infrastructure. Of course, this is uncomparable. If you look what was 3 years ago and what is today. But still, I mean, also the digitalization and access to digital services is massively increasing. So I would say the second challenge is the technology on the infrastructure level in the country. But again, I mean, this is an irreversible trend. So we think -- and we see that this is being handled. So I don't think this is something that we should be scale of. But again, from time to time, the scale is becoming an issue for certain services, but we see them the quick improvements as well. So I would say, as over as funding and infrastructure, sometimes wishes lends us to whether which it will be a basically.

But just generally, a very general comment very quickly before we move on to next question. Uzbekistan is an open place. It's open for business, it's reforming. It's growing. It's got lots of progressive people, progressive companies and progressive people in the establishment. So maybe there's some stereotypes of people having their heads, and it's just not like that fall.

Next question is from Vladimir Slepushkin.

Yes. For the webinar and very interesting information on TDC Uzbekistan. I'm covering Uzbekistan symbiotics over a couple of years now. We are having $150 million outstanding portfolio invested among private banks in the country. So we are aware about some developments. And we also -- I think we have met a couple of times during some conferences. What I would like to understand or ask is, how do your assess your competitiveness on the consumer lending with loan portfolio yield at 42% against the average of the market by the CB statistics at 25%. And second question, if I may. How do you see the future of competition on your 4 verticals coming from states owned banks or more private banks in the years to come, please?

Sure, I'll take the first one for a second speak Nika will do the second one. So in terms of yields, you'll see our yields go up. So the yields were 43%, roughly speaking at the end of last year. They're currently around 45%, and they'll go up a little bit more. We are in mass market consumer lending at this stage. We will diversify into affluent my settlement. But right now, it's most market right away across Uzbekistan including the regions. The cost of funding is across the market probably 20 22%, maybe 24% if you look at privately-held bank, 24% to 25%. So if there's many banks running at 25% and the cost of funding is 25%, as you can gather they're not in our business for long, yes. So that's a very short answer to your question. Slightly longer answer is that in our particular case, these are relatively short duration personal loans, which are let with a small amount -- initial small amount. So this is less about the yield because customers are less sensitive to a high yield on a shorter duration, smaller loan ticket and more about the product, convenience, speed, availability, the whole year ex your mobile experience, how you onboard, how you can repay what other products and services you offer. It's more about that than the yields. If we were doing mortgages for 20 years, and obviously, the yield would be rather important because sensitivity a short answer, Nika.

Yes, just a small addition to that, just confirming what one set the loan book we have already more than $300 million, which is not small in consumer financing, Uzbekistan giving us 14% plus market share. So if the yield would be an issue, basically, we would not be reaching the levels and absolutely the convenience in getting consumer finance. So basically products is much more important than the yield, which on our tickets is basically not really felt -- and the cost of funding, of course, is a topic. And now in terms of overall competitiveness, it will grow, and it is good because it will increase the pie basically for everybody because the pie now is small, and it has to be increased. And the more we collectively work in terms of penetration, credit penetration and building up in proper credit history and the data around it in the country, the better for everybody. So in my opinion, basically, the competition for the next years to come will be increasing, and it will be only double for the overall market. Now do we feel confident about ourselves, definitely, yes, I mean the lower performance so far shows this confidence, I guess? So this is what I would say risk.

Next question is from Aaron Gelband of Warren Capital.

Thanks for putting together this presentation, very interesting. A question for me on kind of monetizing Uzbekistan. It sounds like the plan is really to monetize via personal loans, but you also have kind of this dominant payment business. And I'm just curious, is there kind of a playbook to monetize payments more directly or to leverage POS lending or BNPL type stuff to get into e-commerce kind of [indiscernible]. So just trying to understand kind of the rest of the monetization road map.

Do you want to kick off, Nika, then I'll chip in.

Yes, absolutely. So firstly, we charge 1% for P2P. And basically, we kept this stable for the last several years. And basically, we are monetizing quite massively in the P2P food this is already growing. I mean the figures for Payme, which we have in our quarter basically show the growth. The now is growing. Basically, we also have Q1 network quite significant QR network, many thousands basically monthly active payment acceptance points. And overall, what we see is that the Payme our ecosystem will be the driver of customer engagement and then cross-selling because we already built in to pay me our lending feature, which we are now working on to increase further. And this is one ecosystem basically. So the customers will be cross utilized across the board. Talking about BNPL and POS lending, we have our POS lending Payme Nasiya. And the name Payme there is not just for awareness of the brands, but also indicating the strategic fit of BNPL, into Payme, app and payment services. So definitely, yes, we will be also utilizing the total volume of payments, in Payme for our BNPL products. I don't know, Oliver, if you want to add something.

Yes. So just think about the logic of how we're going to be building out our financial services ecosystem, and we keep emphasizing this is a financial services ecosystem with core financial services at its heart. So we'll be other insurance in the not-too-distant future, which will be mainly for cross-sell sorry -- existing customer base, but who knows at some point will probably go beyond our existing customer base. SME, we showed on the product road map, which is initially transactional business and then going to lending to Micron small business payments that we've discussed, but obviously, loans will be a big part of this. So it's a personal loans we're talking about point-of-sale and Nika has just been explaining, but also credit cards. So that's basically all you need to know for the next 2 or 3 years for sure. And then where this will take us as we build our business and as the market evolves, consumer behavior evolves time will tell. So you should think about it.

Next up is Sebastian.

Good to see you back again. I have maybe a little bit uncomfortable question, but I still want to ask it. What's about management incentivation? I mean what are your personal goods and I mean, some titles and so on. So there's nothing about the potential is huge. So what's your part in that, how this would you share with me.

So the short answer is that the build is kind of business. Not being ideas led team -- so we have to be about the idea about making an impact, about doing interesting things. And I'm sorry for something which sounds a bit well won without moving the customer, which I'm glad to say we do. So otherwise, this thing just doesn't work. It's not about the material side holes. But there is a material side. And we work as an aligned team, aligned to shareholders for long-term equity participation. So we participate in the upside that we create the upside on -- which is over in both the upside, which Georgia is creating anyway, in TBC Georgia. So we have an [indiscernible] program.

We've got a few questions in Chat. So there are groups around a few different things. One is on profitability kind of going forward. And we showed that we have a return on equity at 26% at the moment for this business. And the question is to what extent do we think these revenues are sustainable? So, you could just talk a little bit about that? And another question is on the regulatory environment. If you can talk a little bit about the kind of general kind of regulatory regime that exists in Uzbekistan. And a question in particular on whether Sharia-compliant banking is a big thing or we expect it to become an increase in those 2 to kick off.

Want to kick off Nika?

Yes, sorry. Yes. So in terms of profitability, we think that this is grow. And basically, we cannot give you the expectations or guidance now quickly. But overall, the dust is that this will definitely be growing, considering our business model and the data points we gave through this presentation. Oliver, maybe I will go into the Sharia and regulatory topics and maybe you can add. So in terms of regulatory environment, overall, we are saying that this is a very predictable regulatory environment. And this has been the case basically in the last several years that we are operating the bank pays also regulated lightly, but is also a regulated business. And so far, this has been very predictable and open basically relationship with the regulator. In terms of regulations, percent, we do not expect any surprises as Oliver explained earlier, there are already decent retail regulations in place, for instance, that the lending can only be happening in local fancy. There are PTI regulations. There are regulations in terms of the pricing and profitability. So we cannot earn on the customer more than 50% of the principle within 1 year and so on and so on. So basically, this is all in place, and this increases the predictability also. In terms of Sharia, there is no Sharia regulation yet. The state is working on that, and there have been many discussions around this topic. Overall, we see higher demand for Sharia-compliant products in the country. And respectively, within our own team, we are discussing more these topics because we understand that this is a must for Muslim country, and there is a very big population, which prefers basically Sharia compliance. So this is more or less the conformation.

Nothing to add.

Okay. A question from Jonathan Tan. So it's for Oliver. Basically is asking about besides the difference in side is what, do you see as the kind of good and bad differences in the opportunity you have here versus what you expected Tinkoff.

Yes, sure. So Jonathan, that's correct. So I think the way around -- Uzbekistan and Russia are completely different markets. Can be seen Uzbekistan is not copy it's not Tinkoff and it's not new and it's not toss and there's not lots of other things. It's -- we are who we are, yes. So this is our own thing going on here. If you look from a kilometer high view, then obviously, there are lots of similarities. But in the details and the operations and the customer approach and the product deterioration is very different. But I think I will actually frame my answer in a slightly different way and say that taste tin costs -- they were basically born 17 years now go area, give or take. Our new is only 12 years old, so they are doing things in a particular way on a certain tech stack with a certain team very successfully executing. I'm glad to say. But times moved on and technologies moved up. So when you think about how a lot of the above-named companies and many others deployed AI and chat bots and sales bots and even voice assistance in the mobile app, for example, it was actually quite painful. It was quite difficult to do. We don't do it case by case, chunk-by-chunk, -- it was very reborous work. With the advent of generative AI, actually, things have really quite radically changed and the speed with which you can deploy these solutions and the impact of the deployment of those solutions is actually pretty different to what it was 18 months ago. So I mentioned that Kosakowo's joined us. So he was the person who've leaned the team that launched Alisa in Yandex and spare devices, who's also in Tinkoff Digital, which is the first RTB platform in Russia already quite a while ago, now 12, 13 years ago. So he is helping us build up the capability to deploy some of these new technologies. So obviously, by hanging there without going into too many details, and we'll be opening the Kimono too much -- but I just think that means that we can do things in Uzbekistan in a different way to how they've done before and probably a lot quicker and maybe with more impact look at us.

Thanks, Oliver. Okay. We have a question he calls on some call from Sam Curtis.

It's all really super interesting stuff. I just have one question. It's building on the cost of funds question, I appreciate the comments around why cost of funds are so high in the market. But curious like how would you expect cost of funds to evolve going forward? Like is there a road map where you can take a greater share of noninterest-bearing deposits? And is there also an ability maybe to lend against the float that's used for the P2P business? It?

So in the product on, basically, we saw 2 items that will hugely contribute to that. So the average no interest or low interest account balances. One is MSME business that we are building already, and we will be launching very soon. And the second one is the winning. We call it willing debit cards, basically product or current technology products that will be launching very soon as well this year. So both of them are characterized by account average account balances that are either low interest or no interest, and this will massively contribute to that as well. And through MSME as well, we will be scaling up further the merchant acquiring business or payment acceptance business that, again, will contribute to this and not mentioning what I mentioned before, right, the wholesale funding and everything. So this will contribute further to decreasing the average cost of funding.

Yes. Just very quickly, so the wholesale funding pipeline that we have this year is actually pretty material. It will be between 50 and $100 million, and that's going to be quite a large portion of our funding this year, maybe even a bit more than those numbers. So we're finding ways of diversifying cheapening. And over time, the driver of that blended cost of funding going down will predominantly be growing accounts and SME as Nika explained. Just very briefly, your final point in your question was about using the float in the payments business. There is no flow in the payments business in Payme because it's just caster. So it goes from card-to-card through this payment aggregation technology. And even if there was, it's just -- it's small, it's not some movement in needles.

So there are a few questions in Sharia. I think just to kind of group some of them together, there's one a few questions on your thoughts on product pipeline. So we've had questions as to whether we are thinking of launching crypto in the future, retail broking. And a question about the credit cards business, what do we see as the potential kind of size of this market and the impact on the profitability of the business?

So if you could address that would be good. I'll start quickly on crypto and brokerage. And Nika, do you want to take credit cards. We're kind of interchangeable here, but -- so basically, crypto is not actually outright band in Uzbekistan. There are some crypto start-ups and some interesting stories happening. Could we get to crypto at some point? Possibly. But right now, it's just become of a kind of tangential to our story. But as we go into the current account product to all services around that, it may organically be one of those things that is complementary, and we might want to offer it. And hopefully, by that point, there'll be a more-clearer framework in terms of regulation and legislation to work safely in crypto, which kind of details into the second piece on brokerage. So right now, there is no brokerage market in Uzbekistan. The very few publicly traded instruments and debt capital markets are very underdeveloped, but hopefully going to be evolving very quickly over the next 24 months. And they're actually controls in terms of what you can actually buy abroad in terms of equities, for example. So it's definitely premature. But as we build up this big transactional customer base on top of what we have in PayMe, it's inevitable we're going to go in that direction and Uzbek will want access to those sorts of financial products and go more into savings diversification and pensions. So that will come. But right now, it's not an immediate road map.

Yes. On credit cards, basically, firstly, as we all know, credit cards is like massively profitable business and we've done right and is done with good customer experience. We have card as an instrument as a form factor in the country is well established. We have 46 million payment cards in circulation in the country from Humo Uzcard. We have P2P. So we have QR payments well established in the country. So basically, there is everything for this product to be launched. And what is most important is that we have already in our own portfolio and the customer base, many hundred thousand lending customers -- and as we know, consumer finance product line basically is built out of mostly 3 products, which is credit cards, cash loans and POS/BNPL loans. So basically, we have the later to, and we are adding our credit cards. Is there any credit card on the market? There are several credit cards on the market, but they are very small and they are on a very initial stage of the launch. So we will be going on the market with this one, hopefully, towards the second half of this year. And definitely, there's a huge upside. I won't be giving you the expectations, of course, but basically, we see a massive upside, and this is all factored into our guidance for 2025 of course.

I just want to come back to the competitive landscape because I have quite a few questions on this. And just to maybe elaborate a little bit more. I mean there's a few questions about how you perceive the threat from big well-funded international fintechs, such as CASB or a Zoom the local player. So a bit more just on how you see this kind of competitive landscape aside from the state banks evolving? And also just any more color on the competition within the kind of MSME and e-commerce BNPL segment as well would be useful.

Okay. So I'll take CASB, you take Zoom Nika and then we'll go both to MSME. So obviously CASB. Monster is in the positive sense the work is absolutely incredible, what they've done, and they're doing further. They are present in Uzbekistan to auto along if I got the new mix on the car. So they're in a classified car vertical business. There were rumored to be coming to the market over the last couple of years, but it didn't materialize. That's a question to them. And we're asked this all the time, obviously, because there's a kind of tenancy for public investors to ask about public listed storage as you guys focus on taste. But obviously, as we said earlier, there's lots of stuff going on in North Uzbekistan, which is not about CASB not in the market in terms of financial services. Will coming my -- so my view on this is CASB a very, very strong player. They're very smart people, and they will give anybody a room for their money in any market that they come into, but this is Uzbekistan. Uzbekistan and Kazakhstan are not common stand at the end. It's totally different markets, very different ethnic groups, different people, different establishment and different competitive environment. So it's not like we're just open door in March, you don't kill everybody. It's -- they've got to go through execution, and we've got a very strong business up of other players in the market. So we will give them a remote if they come in us, that's CASB.

Yes. We have already $4 million customers and out of which almost a monthly active. So we are always a big business in the country. And on other competitors, especially Zoom, again, they are monsters too. I mean, they built in 2, 3 years, fantastic business, and they are expanding very quickly. Are we competing? We are not directly competing now because basically, the overlaps are not that big. We are building financial digital financial services ecosystem. They are building the ecosystem around e-commerce. Will we overlap maybe at one point, but at this point in time, we don't really feel each other. And both businesses growing. But again, I will revert back to my comment earlier on competition. The pie is small overall, and this has to be increased. So the more competition there is the bigger increase in the overall pie -- and I think for the next several years, this is just beneficial to everybody because there is enough market to be penetrated, and we all have to make sure that the access to finance and financial services overall and digital products is increasing in the country. As for BNPL or POS lending, the market is very small overall, and it is just starting. We are also a small player in that market, but we are investing and building up the business. It is already profitable, that is very important. And we would think that we'll have our fair market share. And considering the fact that in credit business overall, we have lots of thousands of customers. I mean, each of them helps each other, right? It's just going to cost fertilization basically. So in this regard, we feel very confident in this team.

Yes. So just to give you an idea, I think the total point-of-sale lending market is less than $0.5 billion of loan book across the whole country. So I mean, it just doesn't exist. It's just starting to take off, and it will be bigger. And the big thing, as Nika was mentioning earlier, within that will be installment compliment lending for. So we can compliance installments, which is a precise way of seeing. In terms of e-commerce, I apologize if you said this in off did. The total share of total retail spend in Uzbekistan that goes to e-commerce is less than 2% means is tiny, it's growing quickly. I read a report recently, I think it was Deloitte to cut members. Sorry, if I missed -- I located that, we said that it will go up to 20% in the next 4 or 5 years, which you couldn't do, but is very, very small still. And so anything that's e-commerce BNPL is even time. So it's all to play for very interesting times.

A question from Terry a couple of mentions. -- for digital banking and sector, are there any issues with regards to the security and protecting client data.

Do you want to pick up?

Yes. So basically, so far, this has been not a topic. Of course, we feel cybersecurity becoming an important area of focus. Overall, when you are a digital business, you have to invest a lot in this because you may be in a very quiet situation and suddenly, you may be hit with a huge DDoS attack or whatever it can be. So in this regard, we are very well invested. On the group level, overall, we have very strong capabilities. So I would say that we feel very, very strong and well-built basically in this. But would I say that Uzbekistan now is something like a very cautious market for these things and not yet. I think these issues did not arrive yet in the country. But overall, basically, it feels that these topics are becoming more and more important. And we, as I mentioned, are building the muscles accordingly.

Thank you, Nika. Okay, I think we've been through all of the questions. So thank you, everybody very much from your participation. I hope you find session useful and informative. As I said earlier, we are always available for follow-ups. And if you want to keep into [Technical Difficulty] Uzbekistan. [indiscernible] I'm happy to help. And yes, so we'll keep following this journey. And I'm sure this won't be the last of our deep-dive sessions on Uzbekistan, and we very much hope to see you all again sometime soon.

So thank you very much Bye now.

Ladies and gentlemen, this concludes today's webinar. You may now disconnect from the call. Goodbye.