Digital Banking Expansion In Uzbekistan Will Boost Customer Engagement And Efficiency

Key Takeaways

• Significant growth potential in Uzbekistan due to strong loan growth and digital banking investment driving enhanced customer engagement and cost efficiency.
  
• Dominant market position in Georgia and strategic capital distributions signal robust cash flow, supporting long-term revenue and shareholder value growth.
  
• Political and economic uncertainties in Georgia and Uzbekistan pose risks to TBC Bank's revenue, profitability, and earnings due to inflation, currency, and execution challenges.

Catalysts

Through its subsidiaries, provides banking, leasing, insurance, brokerage, and card processing services to corporate and individual customers in Georgia, Azerbaijan, and Uzbekistan.

• The strong loan growth in Uzbekistan, with a year-on-year loan book doubling, suggests robust future revenue growth potential, particularly with significant market reach in Uzbekistan.
  
• Continued investment in digital banking in Uzbekistan, with successful product rollouts, is expected to drive increased earnings through enhanced customer engagement and reduced operational costs, thereby potentially improving net margins.
  
• The company's strategic focus on high-value products like unsecured consumer loans and innovative initiatives like AI-driven collection systems in Uzbekistan are expected to contribute positively to future earnings and operating efficiencies, potentially improving net profit margins.
  
• TBC Bank's dominant market position in Georgia, combined with a strong macroeconomic backdrop, positions it well to capitalize on further loan and deposit growth, which should bolster revenue growth.
  
• The planned capital distributions, including an increased dividend payout and share buybacks, signal robust cash flow, which may drive EPS growth and shareholder value in the long term.

TBC Bank Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming TBC Bank Group's revenue will grow by 23.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 49.1% today to 42.7% in 3 years time.
• Analysts expect earnings to reach GEL 2.1 billion (and earnings per share of GEL 38.48) by about February 2028, up from GEL 1.3 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.0x on those 2028 earnings, down from 6.2x today. This future PE is lower than the current PE for the GB Banks industry at 6.2x.
• Analysts expect the number of shares outstanding to grow by 1.99% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.97%, as per the Simply Wall St company report.

TBC Bank Group Future Earnings Per Share Growth

Risks

• Political instability in Georgia, such as during election periods, could affect economic growth and create uncertainty, potentially impacting TBC Bank's revenue and profitability.
  
• The economic outlook in Georgia is less certain with anticipated GDP growth below previous years, which could constrain revenue growth and net margins for TBC Bank.
  
• The bank's operations in Uzbekistan are expanding rapidly, but this comes with execution risk, especially with ambitious product launches and digital initiatives, which could affect earnings if not managed effectively.
  
• There is significant growth in dollarization of deposits in Georgia, which could expose the bank to currency risks and impact net interest margins.
  
• High inflation in Uzbekistan may persist and pose challenges to maintaining stable earnings, pressuring net interest margins and increasing the cost of risk.

Valuation

• The analysts have a consensus price target of GEL49.083 for TBC Bank Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of GEL64.19, and the most bearish reporting a price target of just GEL35.58.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be GEL5.0 billion, earnings will come to GEL2.1 billion, and it would be trading on a PE ratio of 6.0x, assuming you use a discount rate of 8.0%.
  
• Given the current share price of GEL40.25, the analyst price target of GEL49.08 is 18.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.