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TCS Group Holding PLC
International Financial Reporting Standards
Consolidated Financial Statements and
Independent Auditor’s Report
31 December 2020
TCS Group Holding PLC
CONTENTS
Board of directors and other officers
Consolidated Management Report
Independent Auditor’s Report
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial Position............................................................................................ 1
Consolidated Statement of Profit or Loss and Other Comprehensive Income .......................................... 2
Consolidated Statement of Changes in Equity........................................................................................... 3
Consolidated Statement of Cash Flows..................................................................................................... 4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Introduction ...................................................................................................................................... 5
Operating Environment of the Group............................................................................................... 7
Critical Accounting Estimates and Judgements in Applying Accounting Policies................................. 9
Segment Analysis .......................................................................................................................... 11
Cash and Cash Equivalents........................................................................................................... 15
Due from Other Banks ................................................................................................................... 16
Loans and Advances to Customers............................................................................................... 17
Investments in Securities and Repurchase Receivables............................................................... 37
Guarantee Deposits with Payment Systems.................................................................................. 47
Brokerage Receivables and Brokerage Payables ......................................................................... 47
Tangible Fixed Assets, Intangible Assets and Right-of-use Assets .............................................. 48
Other Financial and Non-financial Assets...................................................................................... 49
Due to Banks.................................................................................................................................. 50
Customer Accounts........................................................................................................................ 51
Debt Securities in Issue ................................................................................................................. 51
Subordinated Debt ......................................................................................................................... 52
Insurance Provisions...................................................................................................................... 52
Other Financial and Non-financial Liabilities.................................................................................. 54
Share Capital, Share Premium and Treasury Shares ................................................................... 56
Net Margin...................................................................................................................................... 58
Fee and Commission Income and Expense.................................................................................. 59
Customer Acquisition Expense...................................................................................................... 60
Insurance Premiums Earned and Claims Incurred........................................................................ 60
Administrative and Other Operating Expenses.............................................................................. 61
Other Operating Income................................................................................................................. 62
Income Taxes................................................................................................................................. 62
Dividends ....................................................................................................................................... 64
Reconciliation of Liabilities Arising from Financing Activities......................................................... 65
Financial and Insurance Risk Management................................................................................... 65
Management of Capital ................................................................................................................... 82
Contingencies and Commitments.................................................................................................... 83
Offsetting Financial Assets and Financial Liabilities...................................................................... 87
Transfers of Financial Assets......................................................................................................... 88
Non-Controlling Interest ................................................................................................................. 89
Financial Derivatives...................................................................................................................... 89
Fair Value of Financial Instruments.................................................................................................. 90
Presentation of Financial Instruments by Measurement Category .................................................... 95
Related Party Transactions.............................................................................................................. 97
Events after the End of the Reporting Period ................................................................................... 99
Significant Accounting Policies......................................................................................................... 99
Adoption of New or Revised Standards and Interpretations........................................................ 117
New Accounting Pronouncements............................................................................................... 117
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TCS Group Holding PLC
Board of directors and other officers
Board of directors
Constantinos Economides, Chairman
Alexios Ioannides
Mary Trimithiotou
Jacques Der Megreditchian
Martin Robert Cocker
The above all served throughout 2020 and through to the date of these consolidated financial statements.
The Company’s Articles of Association include regulations for the retirement by rotation of Directors at each
annual general meeting. These regulations will operate in 2021 on the basis of the composition of the Board
at the relevant date.
Company Secretary
Caelion Secretarial Limited
25 Spyrou Araouzou
Berengaria 25, 5th floor,
3036, Limassol, Cyprus
Registered office
25 Spyrou Araouzou
Berengaria 25, 5th floor,
3036, Limassol, Cyprus
TCS Group Holding PLC
Consolidated Management Report
The Board of directors presents its report together with the audited consolidated financial statements of
TCS Group Holding PLC (the “Company”) and its subsidiaries (collectively the “Group”) for the year ended
31 December 2020.
Principal activities and nature of operations of the Group
1.
The Group’s principal activities are mainly undertaken within the Russian Federation and consist of
on-line retail banking operations, through its subsidiary JSC “Tinkoff Bank” (the “Bank”), and other
operations through its subsidiaries, such us insurance operations through JSC “Tinkoff Insurance”
(the “Insurance Company”), mobile services through LLC “Tinkoff Mobile” and asset management
through LLC “Tinkoff Capital” (Note 1).
2.
The Bank specialises in retail banking for individuals, individual entrepreneurs (“IE”), small and
medium enterprises (“SME”) and brokerage services. The Bank which is fully licensed by the Central
Bank of Russia, launched its operations in the Summer of 2007 and is a member of the Russian
Deposit Insurance System. The Insurance Company specialises in providing non-life insurance
coverage such as accident, property, travel, credit protection and auto insurance. The founder of the
Company is Oleg Tinkov who was also the controlling shareholder throughout 2020.
Changes in group structure
3.
During 2020 the Group founded an infrastructure company LLC “Tinkoff Invest Lab” to support and
optimize the Group’s investment services.
4.
In August 2020 the Group acquired a 22.15% shareholding in Incantus Holding Limited by
transferring its 100% shareholding in LLC “Fintech DC” to Incantus Holding Limited and by providing
a convertible loan (Notes 7 and 38). Incantus Holding Limited is a group of fintech start-ups launched
in 2020 to provide a range of services to retail customers in Europe (excluding CIS) through the
mobile banking platform Vivid Money. In October 2020 a new venture capital fund has invested into
the share capital of Incantus Holding Limited. As a result the Company’s shareholding in Incantus
Holding Limited has decreased to 16.32%.
5.
As at 31 December 2020 the Group holds 16.32% of the shares of Incantus Holding Limited.
Review of developments, position and performance of the Group’s business
6.
The Group operates a flexible business model. Its virtual network enables it to quickly and easily
increase business or slow down customer acquisition depending upon the availability of funding and
market conditions. The Bank’s primary customer acquisition channels are Internet and Mobile, but it
also uses Direct Sales Agents and partnerships (co-brands) to acquire new customers. These
customer acquisition models, combined with the Bank’s virtual network, afford it a geographic reach
across all of Russia’s regions resulting in a highly diversified portfolio.
7.
In 2020 the Group signed a long-term rental contract for space in a business centre in Moscow, which
is currently under construction, and which will become the Group’s new headquarters. Construction
will be completed according to plan in 2022.
8.
9.
In 2020 LLC “Tinkoff Capital” launched Russia’s first exchange-traded fund (ETF) tracking the
Nasdaq Technology Sector Index (NDXT).
During 2020 the Company actively continued the development of its call-center and software
development services in Cyprus, providing training so that these employees might provide a wider
range of services to the Bank and, indirectly, its customers.
10. The key offerings of JSC “Tinkoff Insurance” are personal accident insurance, collective insurance
against accidents and illnesses, travel insurance, motor vehicle insurance and property insurance,
compulsory third party liability insurance (CTP) and voluntary third party liability insurance (VTP)
(Note 23). The Insurance Company focuses on online sales.
TCS Group Holding PLC
Consolidated Management Report
11. In terms of financial performance the profit of the Group for the year ended 31 December 2020 was
RR 44,213 million (2019: RR 36,123 million). This result is driven by two major continuing trends: the
ongoing growth of the Group’s consumer finance business and a growing contribution from the non-
credit fees-and-commission business lines. Net margin increased by 19.1% to RR 104,702 million
(2019: increased by 46.6% to RR 87,926 million) on the back of credit and investment portfolio
growth. The growth of the credit portfolio was driven not only by credit card loans but also by other
types of loans, such as secured, cash and POS loans. The Group aims to diversify its credit portfolio
by the extension of collateralised credit products which represents a business line with lower credit
risks. The 90 days plus overdue loans ratio (“NPL”) increased to 10.4% as at 31 December 2020
(2019: 9.1%). The NPL coverage ratio reduced to 153% as at 31 December 2020 (2019: reduced to
156%). The Investment in securities portfolio increased by 76.4% and amounted to RR
238,454 million as at 31 December 2020 (31 December 2019: increased by 35% to RR
135,178 million). This growth has been fuelled by the continued development of the debit card and
SME business lines. The Group continues to maintain a good quality and diversified securities
portfolio. During the year the Bank developed the Tinkoff Investments product by increasing the
customer base and providing of new trading instruments to its clients. The Group’s Insurance
business continues to develop at a good pace. This year insurance premiums earned increased by
31.6% to RR 18,567 million (2019: increase by 111.4% to RR 14,110 million). The growth was as a
result of a continuous development of auto (including CTP and VTP) and travel insurance, as well
as the growth of personal accident insurance along with the credit portfolio and providing a wider
coverage of insured risks. In order to reflect appropriately the uncertainty associated with the COVID-
19 pandemic, the Group has made changes to its ECL model, which resulted in approximately RR
5.6 billion of additional credit loss allowance charge in the first half of 2020 and was the main driver
of increased cost of risk. Refer to Notes 2 and 3.
Environmental matters
12. As the Group is an online-only financial institution, the management of the Group believes that none
of the Group’s business relationships, products or services are likely to have any significant actual
or potential significant environmental impacts and do not believe its operations are exposed to any
material environmental risks. Management, in reaching this view, have taken into account the risk of
adverse impacts that may stem from the Company’s own activities as well as its business
relationships including its supply and subcontracting chains. This belief is based on continuous
scrutiny of the business. The Group is continuously reviewing its processes to identify opportunities
to reduce their environmental impact.
Human resources
13. Empowerment is an important ingredient in the success of our organization. To achieve this,
decision-making is delegated to levels deep below the management team, discussion, idea
generation and exchange and transparency are actively promoted and encouraged and an open
leadership style ensures that information can move freely. The Group utilizes all types of forums to
promote continual dialogue – such as email, online chat rooms, flash meetings, as well as formalized
meeting structures. The Group offers clear far-reaching career path for its employees, a unique work
environment and fair and transparent compensation.
14. Clear performance evaluation processes and fair compensation are essential. Compensation is a
combination of fixed rate salary and supplemental bonuses and is based on employee performance.
Employees are evaluated on a regular basis in order to monitor their achievement against their Key
Performance Indicators as well as to provide feedback which can be used for their career
development and to determine incentive compensation.
15. Prior to its IPO in 2013, the Group set up share-based management long term incentive plans as
retention and motivational tools for key and senior managers. In March 2016, the Group announced
a consolidated long-term management incentive and retention plan, covering around 50 key, senior
and middle managers (MLTIP). Since then the Group has announced the expansion of MLTIP. The
total size of the MLTIP pool was 8.13% of the Group’s share capital as at 31 December 2020. The
plan is designed to align more closely managers’ interests with those of shareholders to grow the
Group's value. Current MLTIP is awarded over four years with each annual award vesting over the
subsequent three years. The Group believes that participation in its share capital is an effective
motivation and retention tool. The management incentive and retention plan embraces more
managers, for two main reasons: firstly, internal promotions as some employees were promoted to
key managerial positions; and, secondly, as part of its expansion and transformation into a financial
marketplace, the Group has hired a significant number of new managers to develop and manage
new business lines and to strengthen internal controls, including cyber security.
TCS Group Holding PLC
Consolidated Management Report
16. In April 2020 the Group launched a key employees retention plan (KERP), which is a new long term
incentive program for more than 250 senior and middle management level employees. The purpose
of the program is to retain and motivate key employees with high potential. This is a performance-
based cash-settled program linked to the market price of the Group’s GDRs.
Non-Financial Information and Diversity Statement
17. The Group’s policies and other information that provide an understanding of the development,
performance, position and impact of the Group’s activities in the areas of environmental, social and
employee matters, respect for human rights, anti-corruption and bribery matters can be found in the
Group’s most recently published Non-Financial Information and Diversity Statement (Sustainability
Report). The Group will publish its Sustainability Report for the year ended 2020, on the Company’s
website, www.tcsgh.com.cy (and www.tinkoff.ru/eng) no later than 30 June 2021.
Principal risks and uncertainties
18. The Group’s business and financial results are impacted by uncertainties and volatilities in the
Russian economic environment which can be impacted by global factors and/or by national factors.
19. The Group is subject to a number of principal risks which might adversely impact its performance.
The principal activities of the Group are banking and insurance operations and so it is within this area
that the principal risks occur. Management considers that those principal risks are financial risks,
operational risks and legal risks. Financial risk comprises market risks (including currency risk,
interest rate risk and other price risk), credit risk and liquidity risk.
20. The Board has put in place arrangements to identify, evaluate and manage the principal risks and
uncertainties faced by the Group. The Group has an established risk management program that
focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects
on the Group's financial performance. This is overseen by a dedicated Risk Management function,
which works with senior management of the operating companies in Russia as well as the Board of
directors in this area. The primary objectives of the financial risk management function are to
establish acceptable risk limits, and then ensure that the exposures remain within these limits. The
operational and legal risk management functions are intended to ensure the proper functioning of
internal policies and procedures that minimize operational and legal risks. The risk management
strategy is established so as to identify, assess, monitor and manage the risks arising from Group's
activities. These risks as well as other risks and uncertainties, which affect the Group and how these
are managed, are presented in Notes 29 and 31 of the consolidated financial statements.
21. Analysis of impact of COVID-19 pandemic on the Group is disclosed in the Note 2 of the сonsolidated
financial statements.
Contingencies
22. The Group’s contingencies are disclosed in Note 31 to the consolidated financial statements.
Future developments
23. The Group’s strategic objective is to be a full service, online financial and lifestyle ecosystem with a
broad range of financial, insurance and quasi-financial products, serving customers through a high-
tech online and mobile platform that offers premium quality service and convenience, while
maintaining high growth rates, profitability and effective data-driven risk management.
Results
24. The Group’s results for the year are set out on page 2 of the consolidated financial statements.
Information on distribution of profits is presented in Note 27.
Any important events for the Group that have occurred after the end of the financial year
25. Important events for the Group that have occurred after the end of the financial year are presented
in Note 39.
TCS Group Holding PLC
Consolidated Management Report
Share capital, redesignation and conversion of class B and class A shares
26. As at 31 December 2020 the issued share capital of the Company was 199,305,492 shares (2019:
same). Of these 129,391,449 were class A shares (2019: 119,291,268) and 69,914,043 class B
shares (2019: 80,014,224) with a par value of USD 0.04 per share. In December 2020
10,100,181 class B shares in the Company held by the Rigi Trust were converted to class A shares.
As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from 87.03%
to 84.38%.
27. On 7 January 2021 all 69,914,043 issued class B shares (35.08% of the total number of issued
shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares, and on the
same date all issued shares were reclassified and redesignated as ordinary shares. Following the
conversion, each share carries a single vote, and the total number of votes capable of being
exercised is equal to the total number of issued shares (currently 199,305,492 shares following the
class B share conversion). As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group
decreased from 84.38% to 35.08%. As a result his control over the Group was ceased.
Treasury shares
28. At 31 December 2020 the Group held 3,013,379 (2019: 4,185,166 ) of its own GDRs, equivalent to
approximately RR 3,238 million (2019: RR 3,164 million) and which represent 1.5% (2019: 2.1%) of
the issued shares.
29. Treasury shares are GDRs of TCS Group Holding PLC that are held by a special purpose trust which
has been specifically created for the long-term incentive programme for the MLTIP (see Note 38 for
further information).
30. During 2020 the Group repurchased 650,000 GDRs at market price for RR 661 million (2019: no
GDRs were repurchased).
31. During 2020 the Group transferred 1,809,681 GDRs (2019: 2,419,187 GDRs), representing 0.91%
(2019: 1.21%) of the issued shares, upon vesting under the MLTIP. This resulted in a transfer of RR
587 million (2019: RR 506 million) out of treasury shares to retained earnings.
Research and development activities
32. During the years ended 31 December 2020 and 2019 the Group has undertaken research and
development activities related to software including greater use of biometrics, voice assistant, social
networking, machine learning and intelligence.
Board of directors
33. The members of the Board of directors as of 31 December 2020 and at the date of this report are
presented above. All served throughout the year ended 31 December 2020 and through to the date
of these consolidated financial statements.
34. There were no significant changes in the assignment of responsibilities or remuneration of the Board
of directors.
Branches
35. The Group did not operate through any branches during the year.
Independent auditor
36. The Independent Auditor, PricewaterhouseCoopers Limited, has expressed its willingness to
continue in office. A resolution giving authority to the Board of directors to fix its remuneration will be
proposed at the Annual General Meeting (AGM).
TCS Group Holding PLC
Consolidated Management Report
Going concern
37. The Directors have access to all information necessary to exercise their duties. The Directors
continue to adopt the going concern basis in preparing the consolidated financial statements based
on the fact that, after making enquiries and following a review of the Group’s budget for 2021,
including cash flows and funding facilities, the Directors consider that the Group has adequate
resources to continue in operation for the foreseeable future. This assessment was made with the
available information to the Group as at the date of approving the financial statements.
Corporate Governance Statement
GDRs of TCS Group Holding PLC (a Cyprus incorporated company), with each GDR issued under a deposit
agreement dated on or about 24 October 2013 with JPMorganChase Bank N.A. as depositary representing
one ordinary (formerly class A) share, are listed on London Stock Exchange. The Company’s GDRs are
also listed on the Moscow Exchange. No shares of TCS Group Holding PLC are listed on any exchange.
The Company is required to comply with the UK corporate governance regime to the extent it applies to
foreign issuers of GDRs listed on the London Stock Exchange. The Company has not adopted corporate
governance measures of the same standard in all respects as those adopted by UK incorporated
companies or companies with a premium listing on the London Stock Exchange.
As the shares themselves are not listed on the Cyprus Stock Exchange (or elsewhere), the Cypriot
corporate governance regime, which only relates to companies that are listed on the Cyprus Stock
Exchange, does not apply to the Company and accordingly the Company does not monitor its compliance
with that regime.
From IPO in 2013 until 7 January 2021, the Company maintained a capital structure with two classes of
shares, class A and class B. On 7 January 2021, all class B shares were converted to class A and
simultaneously all shares were reclassified and redesignated as ordinary shares all ranking pari passu for
all purposes and in all respects with the other existing shares, with the provisions in the Articles of
Association of the Company relating to class B shares deemed deleted.
The Company’s Home State is Cyprus.
A description of the terms and conditions of the GDRs can be found at “Terms and Conditions of the Global
Depositary Receipts”, “Summary of the Provisions relating to the GDRs whilst still in Master Form” and
“Description of Arrangements to Safeguard the Rights of the Holders of the GDRs” in the Prospectus issued
by the Company dated 22 October 2013 and on the website at www.tinkoff.ru/eng.
Copies of the Articles of Association of the Company adopted on 21 October 2013, the terms of reference
of the Committees, and other corporate governance related as well as investor relations related materials
can also be found on the website www.tinkoff.ru/eng, at the Company’s main website www.tcsgh.com.cy,
on
the
Company’s
page
on
the
London
Stock
Exchange
website
(www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary) and at the official site of
the Department of Registrar of Companies, Cyprus (http://www.mcit.gov.cy/).
The Board of directors
The role of the Board is to provide entrepreneurial leadership to the Group within a framework of prudent
and effective controls which enable risk to be assessed and managed. The Board sets the Group’s strategic
objectives, ensures that the necessary financial and human resources are in place for the Group to meet
its objectives and reviews management’s performance. The Board also sets the Group’s values and
standards and ensures that its obligations towards the shareholders and other stakeholders are understood
and met.
The Board operates under a formal schedule of matters reserved to the Board for its decision, approved by
shareholders in 2013.
The authorities of the members of the Board are specified by the Articles of Association of the Company
and by law. The current five strong Board of directors is comprised of three executive directors including
the chairman, and two non-executive directors both of whom are independent. There was no change in the
composition of the Board or status of the directors in 2020. The Board of directors contains no Director B.
TCS Group Holding PLC
Consolidated Management Report
The longest serving director Mr. Constantinos Economides took over the role of Chairman of the Board of
directors in June 2015. The names of the people who served on the Board during 2020 are listed at the
Board of directors and other officers.
The Group has established two Committees of the Board. Specific responsibilities have been delegated to
those committees as described below.
The Board is required to undertake a formal and rigorous review annually of its own performance, that of
its committees and of its individual directors. That review was recently carried out, in-house, in relation to
2020, looking at overall performance. All directors completed detailed questionnaires on the Board’s, the
committees’ and individual director’s performance. The role of appraising the Chairman of the Board for
2020 was performed by the Chairman of the Audit Committee. Analysis of the resultant feedback will be
discussed at a meeting of the Board of directors on 10 March 2021 and no changes are expected to be
made in the performance of the Board, its committees or individual directors.
The Board has not appointed a senior independent director. There are only two independent directors of
whom at least one will retire each year.
Number of directors
Unless and until otherwise determined by the Company in general meeting, the number of directors shall
be no less than four, of whom two must be non-executive, and until 7 January 2021 was not permitted to
exceed seven, when class B shares were in issue. From 7 January 2021, there is no maximum number of
directors.
The Articles of Association of the Company provide for the retirement by rotation of certain directors at each
Annual General Meeting (AGM). At the AGM on 24th August 2020 the director who retired by rotation was
Mr. Jacques Der Megreditchian who was duly reappointed that day by vote of all the shareholders.
Committees of the Board of directors
The Company has established two Committees of the Board of directors: the Audit Committee and the
Remuneration Committee. Their terms of reference are summarized below. Both Committees were formed
in October 2013. The Board reserves the right to amend their terms of reference and arranges a periodic
review of each Committee’s role and activities and considers the appropriateness of additional committees.
Committees-current composition
The Audit Committee is chaired by an independent non-executive director Mr. Martin Cocker, and had, until
16 August 2019, two other members both non-executive directors, one of whom was independent. From
16 August 2019 the Audit Committee has comprised its chairman Mr. Martin Cocker and one independent
non-executive director.
The Remuneration Committee is also chaired by an independent non-executive director, Mr. Jacques Der
Megreditchian, and had until 16 August 2019 two other members both non-executive directors, one of
whom was independent. From 16 August 2019 the Remuneration Committee has comprised its chairman
Mr. Jacques Der Megreditchian and one independent non-executive director.
The current terms of reference of both Committees are available to the public and can be found on the
Group’s websites. A short summary of both is set out below.
Role of the Audit Committee
The Audit Committee’s primary purpose and responsibility is to assist the Board in its oversight
responsibilities. In executing this role the Audit Committee monitors the integrity of the financial statements
of the Group prepared under International Financial Reporting Standards (“IFRS”) as adopted by the
European Union (EU) and any formal announcements relating to the Group’s and the Company’s financial
performance, reviewing significant financial reporting judgments contained in them, oversees the financial
reporting controls and procedures implemented by the Group and monitors and assesses the effectiveness
of the Company’s internal financial controls, risk management systems, internal audit function, the
independence and qualifications of the independent auditor and the effectiveness of the external audit
process. The Audit Committee is required to meet at appropriate times in the reporting and audit cycle but
in practice meets more often as required.
TCS Group Holding PLC
Consolidated Management Report
Under its terms of reference, the Audit Committee is required, at least once each year, to review its own
performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and to
recommend any changes it considers necessary for Board approval. The Audit Committee met this
obligation through members participating in the main Board review described above. After consideration of
the review, no changes were proposed to the committee’s terms of reference. The Audit Committee
operates a structured framework around the extensive work it does on non-financial statements related
matters holding at least two additional meetings annually, which would typically be held at the Bank’s head
office in Moscow, to consider specific, non-financial statements related areas within its terms of reference.
No such meeting was held in 2020 due to COVID-19 travel restrictions but at least two are planned for
2021.
The Audit Committee has developed a risk matrix which constantly evolves to reflect new risks, the
perceived impact of, and the Group’s appetite for, any given risk and the measures taken to mitigate those
risks. This matrix is run in conjunction with the internal audit function.
Changes in the top management team
A new post of chief information security officer was created in late 2017 and filled, with additional personnel
expert in cyber-security recruited, in a very competitive market, through 2019 and 2020 to support the
Group’s ever-increasing efforts to stay ahead of trends and threats in this sphere. The Group has further
broadened its top management team with a new chief investment officer appointed in 2019 and a new chief
operating officer appointed in early 2020.
Role of the Remuneration Committee
The Remuneration Committee is responsible for determining and reviewing among other things the
framework of remuneration of the executive directors, senior management and its overall cost and the
Group’s remuneration policies. The objective is to ensure that the executive management of the Group are
provided with appropriate incentives to encourage enhanced performance and are in a fair and responsible
manner rewarded for their individual contributions to the success of the Group. The Remuneration
Committee’s terms of reference include reviewing the design and determining targets for any performance
related pay schemes and reviewing the design of all share incentive plans for approval by the Board. The
Remuneration Committee is required to meet at least twice a year but in practice meets far more often.
The Remuneration Committee continued with its work into 2020 on an ongoing review of the operation of
the Group’s MLTIP which launched in 2016 and in considering additional awards to both existing and new
participants for this and subsequent years.
In the end of Q2 2020 the Committee approved the proposals of launching a new incentive and retention
plan for more than 250 senior and middle managers (KERP).
The Committee has also been working on plans for an incentive and compensation arrangement within
MLTIP for when, in the period 2022 to 2024, existing awards made to MLTIP joiners in 2016-2017 start to
go into run off. The Remuneration Committee recommended in June 2020 and December 2020 7 and 8
members of key management respectively be granted new awards under MLTIP in Q3 2021.
Under its terms of reference the Remuneration Committee is required at least once each year to review its
own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness
and to recommend any changes it considers necessary for Board approval. The Remuneration Committee
met this obligation through members participating in the main Board review (described above) under which
detailed questionnaires were completed by all directors assessing the operation of the Board and both
committees as well as individual directors. Although earlier reviews had resulted in certain minor changes
to the Remuneration Committee’s terms of reference, no further changes were felt required based on the
most recent review. The Committee continues to meet as required.
Appointment, retirement, rotation and removal of directors
The directors of the Company are appointed by the general meeting of shareholders with the sanction of
an ordinary resolution. Such an appointment may be made to fill a vacancy or as an additional director. But
no director may be appointed unless nominated by the Board of directors or a committee duly authorized
by the Board of directors or by a shareholder or shareholders together holding or representing shares which
in aggregate constitute or represent at least 5% in number of votes carried or conferred by the shares giving
a right to vote at a general meeting.
TCS Group Holding PLC
Consolidated Management Report
The Board of directors may at any time appoint any person to the office of director either to fill a vacancy
or as an additional director and every such director shall hold office only until the next following annual
general meeting and shall not be taken into account in determining the directors who are to retire by rotation.
One third of the directors (or if their number is not a multiple of three, the number nearest to three but not
exceeding one-third) shall retire by rotation at every annual general meeting. Directors holding an executive
office are excluded from retirement by rotation.
Directors may be removed from office by the shareholders at a general meeting with the sanction of an
ordinary resolution, subject to giving 28 days’ notice to that director in accordance with the Articles of
Association.
The office of director shall be vacated if the director:
•
•
becomes bankrupt or makes any arrangement or composition with his creditors generally; or
becomes prohibited from being a director by reason of any court order made under Section 180
(disqualification from holding the position of director on the basis of fraudulent or other conduct) of
the Cyprus Companies Law; or
•
•
•
becomes, or may be, of unsound mind; or
resigns his office by notice in writing to the Company left at the registered office; or
is absent from meetings of the board for six consecutive months without permission of the Board of
directors and his alternative director (if any) does not attend in his place and the Board of directors
resolves that his office be vacated.
Significant direct/indirect holdings
For the significant direct and indirect shareholdings held in the share capital of the Company, please refer
to Note 1 of the consolidated financial statements.
Internal control and risk management systems in relation to the financial reporting process
Policies, procedures and controls exist around financial reporting. Management is responsible for executing
and assessing the effectiveness of these controls.
Financial reporting process
The Board of Directors is responsible for the preparation of the consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union
(EU) and the requirements of the Cyprus Companies Law, Cap.113, and for such internal control as the
Board of directors determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error. In preparing the consolidated
financial statements, the Board of directors is responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Board of directors either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
The Board has delegated to the Audit Committee the responsibility for reviewing the consolidated financial
statements to ensure that they are in compliance with the applicable framework and legislation and for
recommending these to the Board for approval. The Audit Committee is responsible for overseeing the
Group’s financial reporting process.
Internal Controls and Risk Management
Management is responsible for setting the principles in relation to risk management. The risk management
organisation is divided between Policy Making Bodies and Policy Implementation Bodies. Policy Making
Bodies are responsible for establishing risk management policies and procedures, including the
establishment of limits. The main Policy Making Bodies are the Board of directors, the Management Board,
the Finance Committee, the Credit Committee and the Business Development Committee.
The policy implementation level of the Group’s risk management organisation consists of the Finance
Department, the Risk Management Department, the Collections Department and the Internal Control
Service.
TCS Group Holding PLC
Consolidated Management Report
In addition the Group has implemented an online analytical processing management system based on a
common SAS data warehouse that is updated on a daily basis. The set of daily reports includes but is not
limited to sales reports, application processing reports, reports on the risk characteristics of the card
portfolios, vintage reports, transition matrix (roll rates) reports, reports on the pre-, early and late collections
activities, reports on compliance with CBR requirements, capital adequacy and liquidity reports, operational
liquidity forecast reports and information on intra-day cash flows.
Diversity policy
The Group is committed to offering equal opportunity to all current and prospective employees, such that
no applicant or employee is discriminated in favour of or against on the grounds of sex, racial or ethnic
origin, religion or belief, disability, age or sexual orientation in recruitment, training, promotion or any other
aspect of employment.
Recruitment, training and promotion are exclusively based on merit. All the Group employees involved in
the recruitment and management of staff are responsible for ensuring the policy is fairly applied within their
areas of responsibility. The Group applies this approach throughout, at all levels. This includes its
administrative, management and supervisory bodies, including the Board of directors of the Company.
The composition and diversity information of the Board of directors of the Group for the year ended and as
at 31 December 2020 is set out below:
Name
Constantinos
Economides
Age
45
Male/Female
Educational/professional background
ICAEW, MSc in Management Sciences, experience in ‘Big
Four’ professional services firms
Male
Alexios Ioannides
44
43
61
61
Male
Female
Male
ICAEW, ICPAC, BSc in Business Administration,
experience in ‘Big Four’ professional services firms
ICPAC, FCCA, Licensed insolvency practitioner, experience
in ‘Big Four’ professional services firms
ICAEW, BSc in Mathematics and Economics,
experience in ‘Big Four’ professional services firms
BSc in Business Administration and in Financial Analysis,
banking and finance experience
Mary Trimithiotou
Martin Robert Cocker
Jacques Der
Megreditchian
Male
Further details of the corporate governance regime of the Company can be found on the website:
https://www.tinkoff.ru/eng/investor-relations/corporate-governance/.
By Order of the Board
Constantinos Economides
Chairman of the Board
Limassol
10 March 2021
Independent Auditor’s Report
To the Members of TCS Group Holding PLC
Report on the Audit of the Consolidated Financial Statements
Our opinion
In our opinion, the accompanying consolidated financial statements of TCS Group Holding PLC
(the “Company”) and its subsidiaries (together the “Group”) give a true and fair view of the
consolidated financial position of the Group as at 31 December 2020, and of its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union and the
requirements of the Cyprus Companies Law, Cap. 113.
What we have audited
We have audited the consolidated financial statements which are presented in pages 1 to 118 and
comprise:
the consolidated statement of financial position as at 31 December 2020;
the consolidated statement of profit or loss and other comprehensive income for the year then
ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
The financial reporting framework that has been applied in the preparation of the consolidated
financial statements is International Financial Reporting Standards as adopted by the European
Union and the requirements of the Cyprus Companies Law, Cap. 113.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the Group throughout the period of our appointment in accordance
with the International Ethics Standards Board for Accountants’ International Code of Ethics for
Professional Accountants (including International Independence Standards) (IESBA Code)
together with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the IESBA Code.
2
Our audit approach
Overview
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where the
Board of Directors made subjective judgements; for example, in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits, we also addressed the risk of management override of internal
controls, including among other matters, consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
Overall group materiality: Russian Roubles (“RR”) 2 800
million, which represents approximately 5% of profit
before tax.
We planned and conducted our audit to cover the two
largest business components of the Group, being Banking
and Insurance operations, for which we performed full
scope audits of each of their complete financial
information.
For the other components, we performed substantive
audit procedures where necessary.
We have identified the following key audit matters:
Credit loss allowance for loans and advances to
customers, using the expected credit loss model in line
with the requirements of IFRS
Instruments”;
9
“Financial
Recognition of interest income calculated using the
effective interest rate method on loans and advances
to customers.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to
obtain reasonable assurance whether the consolidated financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for
materiality, including the overall group materiality for the consolidated financial statements as a
whole as set out in the table below. These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and in aggregate on the consolidated
financial statements as a whole.
3
Overall group materiality
How we determined it
RR 2 800 million
Approximately 5% of profit before tax.
Rationale for the
materiality benchmark
applied
We chose profit before tax as the benchmark because, in our
view, it is the benchmark against which the performance of
the Group is most commonly measured by the users of the
consolidated financial statements, and it is a generally
accepted benchmark. We chose 5%, which in our experience is
an acceptable quantitative threshold for this materiality
benchmark.
We agreed with the Audit Committee that we would report to them misstatements identified during
our audit above RR 140 million as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
How we tailored our group audit scope
TCS Group Holding PLC is the parent of a group of companies. The financial information of this
Group is included in the consolidated financial statements of TCS Group Holding PLC.
Considering our ultimate responsibility for the opinion on the Group’s consolidated financial
statements we are responsible for the direction, supervision and performance of the group audit. In
this context, we tailored the scope of our audit and determined the nature and extent of the audit
procedures for the components of the Group to ensure that we perform sufficient work to enable us
to provide an opinion on the consolidated financial statements as a whole, taking into account the
structure of the Group, the significance and/or risk profile of the group entities or activities, the
accounting processes and controls, and the industry in which the Group operates.
The Group has two primary business components, being Banking (which includes retail business for
individuals and small and medium-sized entities business) and Insurance operations both of which
operate primarily in the Russian Federation. The Banking business comprises a number of reporting
units being JSC Tinkoff Bank, LLC Microfinance company Т-Finans, LLC Phoenix and LLC Tinkoff
Capital. The Insurance business comprises solely JSC Tinkoff Insurance. Full scope audit procedures
were performed in respect of the Banking and Insurance operations.
Other Group business reporting components are not considered to be primary business components
for audit purposes. Where necessary, additional substantive audit procedures were carried out across
these non-primary components at the financial statement item level in order to achieve the desired
level of audit evidence. The consolidated financial statements are a consolidation of all of the above
business reporting components.
We determined the level of involvement we needed to have in the audit work at the business
reporting components to be able to conclude whether sufficient appropriate audit evidence was
obtained as a basis for our opinion on the consolidated financial statements as a whole. We worked
with other PwC network firms in relation to the activity of the Group in the Russian Federation and
Cyprus. Overall, we have obtained sufficient and appropriate audit evidence regarding the
consolidated financial information of the Group as a whole to provide a basis for our audit opinion
on the consolidated financial statements.
4
Key audit matters incorporating the most significant risks of material misstatements,
including assessed risk of material misstatements due to fraud
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the consolidated financial statements of the current period. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our audit addressed the Key Audit
Matter
Credit loss allowance for loans and advances
to customers, using the expected credit loss
model in line with the requirements of IFRS 9
“Financial Instruments”
This is a complex accounting standard for
which models have been developed by the
Group as a basis to calculate expected credit
losses (“ECL”). These calculations involve the
application of significant management
judgement and estimates.
In relation to the ECL models for measuring
credit loss allowance we assessed the
appropriateness of the key assumptions used
in the methodologies and models of the Group
(including refinements to those made to
address changes in the economic environment
associated with the COVID-19 pandemic) and
their compliance with the requirements of
IFRS 9.
Therefore, we applied focus to the “expected
credit loss” models used by the Management
for the purpose of compliance with IFRS 9.
These models are described in more detail in
Note 40 “Significant Accounting Policies” and
Note 29 “Financial and Insurance Risk
Management” to the consolidated financial
statements.
For a sample of loans, we recalculated their
probabilities of default and compared the
results with the models’ outputs. Additionally,
we reviewed the Group’s back-testing of
probabilities of default estimated on the basis
of the models by comparing them to the actual
default rates evidenced in the loan portfolios.
An assessment of the credit loss allowance for
loans and advances to customers is performed
on a portfolio basis, with the key assumptions
being the probability of an account falling into
arrears and subsequently defaulting (which is
impacted by the definitions of “significant
increase in credit risk” and “default”), the
estimated recoveries from defaulted loans and
the lifetime period for revolving credit
With regard to the controls relating to the
credit loss allowance calculation process, we
assessed and tested on a sample basis the
design and operating effectiveness of the key
controls over credit loss data and calculations.
These key controls included those over
classification of certain loans by loan
facilities. Statistical models are used for the
assessment of the probability of default,
recovery rate and the lifetime period for
revolving credit facilities. In addition,
portfolios, allocation of cash received from
customers to respective loans and advances to
customers, identification of the overdue loans
and the data transfer from source systems to
the credit loss allowance models.
calculation of the expected credit loss
allowance incorporates forward-looking
information, taking into consideration
different macro-economic scenarios and
adjusting the probability of default. During
2020 the Group refined the methodologies
used for calculation of the allowance to address
changes in the economic environment
We determined that we could place reliance
upon these key controls for the purposes of our
audit.
In addition, we performed testing, on a sample
basis, of the statistical models used to calculate
the credit loss allowance and we also tested, on
a sample basis, the completeness of
associated with the COVID-19 pandemic.
restructured credit-impaired loans. This
testing of the models varied by portfolio
including testing of the coding used, re-
performance of the calculation including
Note 40 “Significant Accounting Policies”,
Note 3 “Critical Accounting Estimates and
Judgements in Applying Accounting Policies”,
Note 7 “Loans and Advances to Customers”
5
Key Audit Matter
How our audit addressed the Key Audit
Matter
calculation of the effect of forward-looking
information on credit loss allowance and
testing the system generated data used in the
models.
and Note 29 “Financial and Insurance Risk
Management” to the consolidated financial
statements provide detailed information on the
credit loss allowance for loans and advances to
customers.
We tested a sample of post model accounting
adjustments where applicable, including
considering the basis for the adjustment, the
logic applied, the source data used, the key
assumptions adopted and consistency with
prior periods. We verified management
assumptions in the context of the economic
environment that is affected by the COVID-19
pandemic.
We assessed the disclosures made against the
relevant accounting standards for their
completeness and accuracy.
Based on the evidence obtained we found the
models used to be appropriate and the outputs
from the models to be reasonable.
Recognition of interest income calculated
using the effective interest rate method on
loans and advances to customers
We focused on this area mainly because
management’s calculation of interest income
applying the effective interest rate method
uses, in addition to relevant nominal interest
rates, a number of different fees received and
costs incurred. Significant management
judgement and estimates are involved in
determining the expected lives of loans, and
which fees and costs are included in interest
income instead of net commission income and
the pattern of their recognition in income. The
Group has from its history of lending in
different economic conditions and cycles a
significant amount of information from which
to assess trends in payments, repayments and
product transfers. This detailed information is
used to obtain estimates of its customers’
behaviour and performance, including the
assumptions around expected lives of loans
which is then used in the effective interest rate
calculation.
Our audit procedures in relation to the
effective interest rates of loans originated by
the Group included testing, on a sample basis,
the key controls in relation to the nominal
interest income, and the fee income and costs
incurred which contribute to interest income
calculated using the effective interest rate
method. These controls included those over
calculation and accrual of the nominal interest
income and fee income and costs incurred
parts of interest income calculated using the
effective interest rate method and the data
transfer from the source system to the
accounting system.
We determined that we could place reliance
upon these key controls for the purposes of our
audit.
We analysed the appropriateness and
consistency of the methodology and its
application across each of the loan portfolios
and loans’ credit quality stages within these
portfolios and assessed the reasonableness of
the key assumptions and estimates used in the
methodology calculations, including the fee
income and costs components of the effective
interest income rate and expected repayment
periods of the loans by considering historic
Note 40 “Significant Accounting Policies”,
Note 3 “Critical Accounting Estimates and
Judgements in Applying Accounting Policies”,
Note 20 “Net Margin” and Note 29 “Financial
and Insurance Risk Management” included in
the consolidated financial statements provide
detailed information on the interest income
6
Key Audit Matter
How our audit addressed the Key Audit
Matter
calculated using the effective interest rate
method and effective interest rates of loans
and advances to customers.
information. We also assessed the
mathematical accuracy of the calculations
through re-performance of a sample of them.
In addition, we performed substantive
analytical procedures to assess the
reasonableness of the interest income
calculated using the effective interest rate
method recognised by the Group.
Our testing did not identify any material errors
in management’s application of the effective
interest rate method for interest income from
loans and advances to customers.
Reporting on other information
The Board of Directors is responsible for the other information. The other information comprises
the information included in the Consolidated Management Report including the Corporate
Governance Statement, which we obtained prior to the date of this auditor’s report, and the Group’s
complete Annual Report, which is expected to be made available to us after that date. Other
information does not include the consolidated financial statements and our auditor’s report
thereon.
Our opinion on the consolidated financial statements does not cover the other information and we
do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information identified above and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
When we read the Group’s complete Annual Report, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to those charged with
governance and if not corrected, we will bring the matter to the attention of the members of the
Company at the Company's Annual General Meeting and we will take such other action as may be
required.
Responsibilities of the Board of Directors and those charged with governance for
the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements
that give a true and fair view in accordance with International Financial Reporting Standards as
adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and
for such internal control as the Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
7
In preparing the consolidated financial statements, the Board of Directors is responsible for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the Board of
Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
8
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters.
Report on Other Legal and Regulatory Requirements
Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the
following information in our Independent Auditor’s Report, which is required in addition to the
requirements of International Standards on Auditing.
Appointment of the Auditor and Period of Engagement
We were first appointed as auditors of the Group by the members of the Company for the audit of
the consolidated financial statements for the year ended 31 December 2007. Our appointment has
been renewed annually, since then, by shareholder resolution. In December 2008 the Company
listed Euro denominated bonds on the Swedish Stock Exchange (NASDAQ OMX Stockholm) and
accordingly the first financial year the Company qualified as an EU PIE was the year ended 31
December 2008. Since then, the total period of uninterrupted engagement appointment was 13
years.
Consistency of the Additional Report to the Audit Committee
We confirm that our audit opinion on the consolidated financial statements expressed in this report
is consistent with the additional report to the Audit Committee of the Company, which we issued on
10 March 2021 in accordance with Article 11 of the EU Regulation 537/2014.
Provision of Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation
537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-
audit services which were provided by us to the Group and which have not been disclosed in the
consolidated financial statements or the consolidated management report.
Other Legal Requirements
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
In our opinion, based on the work undertaken in the course of our audit, the consolidated
management report has been prepared in accordance with the requirements of the Cyprus
Companies Law, Cap. 113, and the information given is consistent with the consolidated
financial statements.
In light of the knowledge and understanding of the Group and its environment obtained in
the course of the audit, we are required to report if we have identified material
misstatements in the consolidated management report. We have nothing to report in this
respect.
9
In our opinion, based on the work undertaken in the course of our audit, the information
included in the corporate governance statement in accordance with the requirements of
subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law,
Cap. 113, and which is included as a specific section of the consolidated management
report, have been prepared in accordance with the requirements of the Cyprus Companies
Law, Cap. 113, and is consistent with the consolidated financial statements.
In our opinion, based on the work undertaken in the course of our audit, the corporate
governance statement includes all information referred to in subparagraphs (i), (ii), (iii),
(vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.
In light of the knowledge and understanding of the Group and its environment obtained in
the course of the audit, we are required to report if we have identified material
misstatements in the corporate governance statement in relation to the information
disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies
Law, Cap. 113. We have nothing to report in this respect.
Other Matter
This report, including the opinion, has been prepared for and only for the Company’s members as a
body in accordance with Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors
Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whose knowledge this report may
come to.
The engagement partner on the audit resulting in this independent auditor’s report is George C.
Kazamias.
George C. Kazamias
Certified Public Accountant and Registered Auditor
for and on behalf of
PricewaterhouseCoopers Limited
Certified Public Accountants and Registered Auditors
PwC Central, 43 Demostheni Severi Avenue
CY-1080 Nicosia, Cyprus
10 March 2021
10
TCS Group Holding PLC
Consolidated Statement of Financial Position
31 December 2020
31 December 2019
In millions of RR
Note
ASSETS
Cash and cash equivalents
Mandatory cash balances with the CBRF
Due from other banks
Loans and advances to customers
Financial derivatives
5
136,351
5,379
1,887
376,521
5,035
238,454
29
55,564
3,448
2,084
329,175
390
6
7
35
8
Investments in securities
Repurchase receivables
135,178
-
8
Guarantee deposits with payment systems
Brokerage receivables
Current income tax assets
Deferred income tax assets
Tangible fixed assets and right-of-use assets
Intangible assets
9
10
15,475
24,064
3,133
947
10,481
7,082
31,070
3,386
8,877
2,799
815
1,517
10,560
5,435
21,673
2,510
26
11
11
12
12
Other financial assets
Other non-financial assets
TOTAL ASSETS
859,294
580,025
LIABILITIES
Due to banks
13
14
15
35
10
26
16
17
18
18
4,819
626,837
23,910
109
9,206
333
20,755
6,067
34,337
5,905
23
411,614
26,078
590
1,207
142
18,487
6,280
14,648
4,874
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Deferred income tax liabilities
Subordinated debt
Insurance provisions
Other financial liabilities
Other non-financial liabilities
TOTAL LIABILITIES
732,278
483,943
EQUITY
Share capital
Share premium
Treasury shares
Share-based payment reserve
Retained earnings
19
19
19
38
230
26,998
(3,238)
1,548
99,540
1,849
230
26,998
(3,164)
1,039
66,880
3,996
Revaluation reserve for investments in debt securities
Equity attributable to shareholders of the Company
Non-controlling interest
126,927
89
95,979
103
34
TOTAL EQUITY
127,016
859,294
96,082
TOTAL LIABILITIES AND EQUITY
580,025
Approved for issue and signed on behalf of the Board of directors on 10 March 2021.
Director
____________________
Mary Trimithiotou
Director
The notes № 1-42 are an integral part of these Consolidated Financial Statements.
1
TCS Group Holding PLC
Consolidated Statement of Profit or Loss and Other Comprehensive Income
In millions of RR
Note
2020
2019
Interest income calculated using the effective interest rate method
Other similar income
Interest expense calculated using the effective interest rate method
Other similar expense
20
20
20
20
20
128,084
83
(21,581)
(139)
111,129
118
(21,317)
(134)
Expenses on deposit insurance
(1,745)
(1,870)
Net margin
20
104,702
87,926
Credit loss allowance for loans and advances to customers and credit
related commitments
Credit loss allowance (charge)/reversal for debt securities at FVOCI
7,18
8
(38,972)
(369)
(26,551)
139
Total credit loss allowance for debt financial instruments
Net margin after сredit loss allowance
(39,341)
65,361
(26,412)
61,514
Fee and commission income
Fee and commission expense
Customer acquisition expense
Net gains/(losses) from derivatives revaluation
Net (losses)/gains from foreign exchange translation
Net gains/(losses) from operations with foreign currencies
Net gains from disposals of debt securities at FVOCI
Net gains from financial assets at FVTPL
Insurance premiums earned
21
21
22
47,609
(21,599)
(22,588)
4,163
(6,850)
1,595
7,210
603
18,567
(3,814)
(35,621)
168
35,858
(15,123)
(18,177)
(2,563)
2,216
(968)
301
389
14,110
(4,891)
(27,852)
-
23
23
24
Insurance claims incurred
Administrative and other operating expenses
Net gains from repurchase of subordinated debt
Other operating income
25
1,445
722
Profit before tax
56,249
45,536
Income tax expense
26
(12,036)
(9,413)
Profit for the year
44,213
36,123
Other comprehensive (loss)/income
Items that may be reclassified to profit or loss
Debt securities at FVOCI and Repurchase receivables:
- Net gains arising during the year, net of tax
3,621
(5,768)
5,381
(241)
- Net gains reclassified to profit or loss upon disposal, net of tax
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive income for the year
(2,147)
42,066
5,140
41,263
Profit is attributable to:
- Shareholders of the Company
- Non-controlling interest
44,209
4
36,122
1
Total comprehensive income is attributable to:
- Shareholders of the Company
- Non-controlling interest
42,062
4
41,262
1
Earnings per share for profit attributable to the Shareholders of the
Company, basic (expressed in RR per share)
Earnings per share for profit attributable to the Shareholders of the
Company, diluted (expressed in RR per share)
19
19
225.60
223.73
193.62
190.05
The notes № 1-42 are an integral part of these Consolidated Financial Statements.
2
TCS Group Holding PLC
Consolidated Statement of Changes in Equity
Attributable to shareholders of the Company
Share
capital
Share
premium
Share-
based
payment
reserve
Revaluation Treasury Retained
Total
Non-
control-
ling
Total
equity
reserve for
investments
in debt
shares earnings
Interest
In millions of RR
Note
securities
Balance at 31 December 2018
188
8,623
1,232
(1,144)
-
(3,670)
36,785
36,122
-
42,014
36,122
5,140
236
42,250
36,123
5,140
Profit for the year
-
-
-
-
-
-
-
-
-
-
-
-
1
-
Other comprehensive income:
Investments in debt securities at FVOCI and Repurchase receivables
5,140
5,140
Total comprehensive income for the year
36,122
41,262
1
41,263
Shares issued
19
19
42
-
-
-
-
18,874
(499)
-
-
-
-
-
-
-
-
-
-
-
18,916
(499)
(327)
469
-
-
18,916
(499)
(461)
469
Secondary public offering costs
Acquisition of non-controlling interest in subsidiaries
Share-based payment reserve
Dividends declared
-
-
-
-
(193)
-
-
506
-
(327)
156
(5,856)
(134)
19
27
-
-
(5,856)
(5,856)
Balance at 31 December 2019
230
26,998
1,039
3,996
(3,164)
66,880
95,979
103
96,082
Profit for the year
-
-
-
-
-
44,209
44,209
4
44,213
Other comprehensive loss:
Investments in debt securities at FVOCI and Repurchase receivables
-
-
-
(2,147)
-
-
(2,147)
-
(2,147)
Total comprehensive (loss)/income for the year
-
-
-
(2,147)
-
44,209
42,062
4
42,066
GDRs buy-back
Share-based payment reserve
Dividends declared
19
19
27
-
-
-
-
-
-
-
509
-
-
-
-
(661)
587
-
-
(4)
(11,545)
(661)
1,092
(11,545)
-
-
(661)
1,092
(11,563)
(18)
Balance at 31 December 2020
230
26,998
1,548
1,849
(3,238)
99,540
126,927
89
127,016
The notes № 1-42 are an integral part of these Consolidated Financial Statements.
3
TCS Group Holding PLC
Consolidated Statement of Cash Flows
In millions of RR
Note
2020
2019
Cash flows from operating activities
Interest income received calculated using the effective interest rate method
Other similar income received
Interest expense paid calculated using the effective interest rate method
Recoveries from written-off loans
129,555
11
(22,280)
4,063
107,854
175
(21,334)
3,420
7
Expenses on deposits insurance paid
Fees and commissions received
Fees and commissions paid
(1,792)
47,613
(22,236)
(21,116)
831
(1,673)
35,802
(15,993)
(19,272)
(968)
Customer acquisition expense paid
Gains/(losses) from operations with foreign currencies received/(paid)
Losses from operations with derivatives paid
Insurance premiums received
Insurance claims paid
Recoveries from the purchased loans received
Other operating income received
(934)
(647)
18,193
(3,629)
1,750
16,254
(4,337)
693
1,053
1,137
Administrative and other operating expenses paid
Income tax paid
(30,456)
(12,930)
(26,119)
(13,606)
Cash flows from operating activities before changes in operating assets and
liabilities
87,696
61,386
Changes in operating assets and liabilities
Net increase in CBRF mandatory reserves
Net decrease/(increase) in due from banks
Net increase in loans and advances to customers
Net increase in brokerage receivables
Net (increase)/decrease in debt securities measured at FVTPL
Net increase in guarantee deposits with payment systems
Net increase in other financial assets
(1,931)
197
(1,013)
(1,308)
(151,771)
(2,799)
5,879
(4,848)
(4,046)
19
(81,724)
(21,265)
(3,788)
(4,325)
(9,708)
(1,038)
4,777
Net (increase)/decrease in other non-financial assets
Net increase/(decrease) in due to banks
Net increase in customer accounts
(2,685)
135,633
1,207
201,922
7,999
Net increase in brokerage payables
Net increase in other financial liabilities
Net decrease in non-financial liabilities
16,512
(39)
1,387
(524)
Net cash from operating activities
195,285
36,517
Cash flows (used in)/from investing activities
Acquisition of tangible fixed assets
Acquisition of intangible assets
(2,076)
(3,642)
(1,783)
(2,539)
Acquisition of investments in securities, repurchase receivables and other investments
Proceeds from sale and redemption of investments in securities
(375,444)
282,288
(108,246)
71,000
Net cash used in investing activities
(98,874)
(41,568)
Cash flows (used in)/from financing activities
Dividends paid
Repayment of debt securities in issue
Repayment of subordinated debt
GDRs buy-back
Repayment of principal of lease liabilities
Proceeds from subordinated debt
Proceeds from debt securities in issue
Proceeds from secondary public offering
Secondary public offering costs paid
Other financing activities cash flows
27
28
28
19
28
28
28
19
19
(11,853)
(2,894)
(1,937)
(661)
(758)
710
(5,601)
(6,583)
-
-
(1,087)
46
23,254
18,916
(499)
(461)
331
-
-
-
Net cash (used in)/from financing activities
(17,062)
1,438
27,985
(1,172)
21,762
33,802
55,564
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
80,787
55,564
136,351
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
5
5
The notes № 1-42 are an integral part of these Consolidated Financial Statements.
4
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
1
Introduction
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (“IFRS”) for the year ended 31 December 2020
for TCS Group Holding PLC (the “Company”) and its subsidiaries (together referred to as the “Group”), and
in accordance with the requirements of the Cyprus Companies Law, Cap.113.
The Company was incorporated, and is domiciled, in Cyprus in accordance with the provisions of
the Companies Law, Cap. 113.
The Board of directors of the Company at the date of authorisation of these consolidated financial
statements consists of: Constantinos Economides, Alexios Ioannides, Mary Trimithiotou, Jacques Der
Megreditchian and Martin Robert Cocker.
The Company Secretary is Caelion Secretarial Limited, 25 Spyrou Araouzou, 25 Berengaria, 5th floor,
Limassol 3036, Cyprus.
At 31 December 2020 and 2019 the share capital of the Company is comprised of class A shares and class
B shares. A “class A” share is an ordinary share with a nominal value of USD 0.04 per share and carrying
one vote. A “class B” share is an ordinary share with a nominal value of USD 0.04 per share and carrying
10 votes. As at 31 December 2020 the number of issued class A shares is 129,391,449 (2019: 119,291,268)
and issued class B shares is 69,914,043 (2019: 80,014,224). Refer to Note 19 for further information on
the share capital. On 25 October 2013 the Group completed an initial public offering of its class A ordinary
shares in the form of global depository receipts (GDRs) listed on the London Stock Exchange plc. On
2 July 2019 the Group completed a secondary public offering (SPO) of its class A shares in the form of
GDRs. On 28 October 2019 the Group’s GDRs started trading also on the Moscow Exchange.
As at 31 December 2020 and 2019 the entities and the individuals holding either class A or class B shares
of the Company were:
Class of
shares
31 December 31 December
Country of
Incorporation
2020
2019
Guaranty Nominees Limited
(JP Morgan Chase Bank NA)
Virtue Trustees (Switzerland) AG as Trustee
of the Bernina Trust
Class A
Class B
64.92%
18.47%
59.85%
-
United Kingdom
Switzerland
Virtue Trustees (Switzerland) AG as Trustee
of the Rigi Trust
Ioanna Georgiou
Panagiota Charalambous
Maria Vyra
Chloi Panagiotou
Leonora Chagianni
Antonis Strati
Marios Panayides
Altoville Holdings Limited
Nemorenti Limited
Class B
Class A
Class A
Class A
Class A
Class A
Class A
Class A
Class B
Class B
16.61%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
-
-
0.00%
0.00%
0.00%
0.00%
0.00%
-
0.00%
18.47%
21.68%
Switzerland
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
Cyprus
-
-
Total
100.00%
100.00%
Guaranty Nominees Limited is a company holding class A shares of the Company for which GDRs are
issued under a deposit agreement made between the Company and JP Morgan Chase Bank NA signed in
October 2013.
On 19 March 2020 Altoville Holdings Limited and Nemorenti Limited transferred all of the Company’s class
B shares owned by them to two Tinkov family trusts. Russian entrepreneur Mr. Oleg Tinkov, who was the
beneficial owner of Altoville Holdings Limited and Nemorenti Limited at 31 December 2019, remained the
ultimate beneficiary of these B shares.
5
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
1
Introduction (Continued)
On 14 December 2020 10,100,181 class B shares of the Group held by the Rigi Trust were converted to
class A shares. As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from
87.03% to 84.38%.
As at 31 December 2020 the ultimate controlling party of the Company was Mr. Oleg Tinkov, who controlled
approximately 84.38% (2019: 87.03%) of the aggregated voting rights attached to the class A and B shares,
excluding voting rights attaching to TCS Group Holding PLC GDRs he holds, if any.
On 7 January 2021 all 69,914,043 class B shares (35.08% of the total number of issued shares) held by
the Rigi Trust and the Bernina Trust were converted to class A shares, and on the same date all issued
shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries
a single vote, and the total number of votes capable of being exercised are equal to the total number of
issued shares (currently 199,305,492 shares following the class B share conversion). The number of GDRs
in issue remained unchanged. As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group
decreased from 84.38% to 35.08%. As a result his control over the Group was ceased.
As at 31 December 2020 and 2019 the six individuals listed in the table above each held one share. The
individuals hold them as nominees of Mr. Oleg Tinkov (31 December 2019: as nominees of Altoville
Holdings Limited).
The subsidiaries of the Group are set out below. Except where stated the Group owns 100% of shares and
has 100% of voting rights of each of these subsidiaries as at 31 December 2020 and 2019.
JSC “Tinkoff Bank” (the “Bank”) provides on-line retail banking services in Russia. The Bank specialises in
issuing credit cards and other credit products.
JSC “Tinkoff Insurance” (the “Insurance Company”) provides insurance services such as accident, property,
travellers, financial risks and auto insurance.
LLC Microfinance company “Т-Finans” provides micro-finance services.
TCS Finance D.A.C. is a structured entity which issued debt securities including subordinated perpetual
bonds for the Group. The Group neither owns shares nor has voting rights in this company. However, this
entity was consolidated as it was specifically set up for the purposes of the Group, and the Group has
exposure to substantially all risks and rewards through outstanding guarantees of the entity’s obligations.
LLC “TCS” provides printing, distribution and other services to the Group.
LLC “Phoenix” is a debt collection agency.
LLC “Tinkoff Software DC” and LLC “Fintech DC” provide software development services. In August 2020
the Group acquired a 22.15% shareholding in Incantus Holding Limited by transferring its 100%
shareholding in LLC “Fintech DC” to Incantus Holding Limited and by providing a convertible loan (Notes 7
and 38). Incantus Holding Limited is a group of fintech start-ups launched in 2020 to provide a range of
services to retail customers in Europe (excluding CIS) through the mobile banking platform Vivid Money. In
October 2020 a new venture capital fund has invested into the share capital of Incantus Holding Limited.
As a result the Company’s shareholding in Incantus Holding Limited has decreased to 16.32%.
LLC “Tinkoff Mobile” is a mobile virtual network operator set up in 2017 to provide mobile services.
LLC “CloudPayments” is a developer of online payment solutions whose core business is online merchant
acquiring in Russia. As at 31 December 2020 and 2019 the Group held 95% of the shares of LLC
“CloudPayments”.
ANO “Tinkoff Education” is a non-commercial organization set up by the Bank as the sole founder.
LLC “Tinkoff Capital” is an asset management company established in June 2019 to manage investment
funds, mutual funds and non-state pension funds.
LLC “Tinkoff Invest Lab” is an infrastructure company created for supporting and optimizing of the Group’s
investment services.
6
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
1
Introduction (Continued)
EBT is a special purpose trust which has been specifically created for the long-term incentive programme
for Management of the Group (MLTIP). The Group neither owns shares nor has voting rights in EBT.
Principal activity. The Group’s principal business activities are retail banking to private individuals,
individual entrepreneurs’ (“IE”) and small and medium enterprises’ (“SME”) accounts and banking services,
brokerage services and insurance operations within the Russian Federation through the Bank and the
Insurance Company. The Bank operates under general banking license No. 2673 issued by the Central
Bank of the Russian Federation (“CBRF”) on 8 December 2006. The Insurance Company operates under
an insurance license issued by the CBRF.
The Bank participates in the state deposit insurance scheme, which was introduced by Federal Law
No. 177-FZ “Deposits insurance in banks of the Russian Federation” dated 23 December 2003. The State
Deposit Insurance Agency guarantees repayment of up to RR 1.4 million per individual, individual
entrepreneur and small enterprise deposits in case of the withdrawal of a license of a bank or a CBRF-
imposed moratorium on payments.
Registered address and place of business. The Company’s registered address is 25 Spyrou Araouzou,
Berengaria 25, 5th floor, Limassol, Cyprus, and place of business is Office 403, Lophitis Business Centre I,
Corner of 28th October/Emiliou Chourmouziou Streets, Limassol 3035 Cyprus. The Bank’s registered
address is 1-st Volokolamsky proezd, 10, building 1, 123060, Moscow, Russian Federation. The Insurance
Company’s registered address is 2-nd Khutorskaya Street, building 38A, 127287, Moscow, Russian
Federation. The Group’s principal place of business is the Russian Federation.
Presentation currency. These consolidated financial statements are presented in millions of
Russian Rubles (RR).
2
Operating Environment of the Group
Russian Federation. The Group operates mainly within the Russian Federation. There were a number of
significant changes in the operating and economic environment during 2020, which had an impact on the
Group’s business including:
•
In March 2020 the World Health Organization (WHO) announced that the spread of the COVID-19
virus across the globe is a pandemic. Significant restrictions on travel and movement of individuals
and the closure of non-essential businesses have either been imposed in most countries or have
happened as a result of the pandemic. This has led to significant declines in GDP in most if not all
large economically strong countries. Russia has not been immune to the negative personal and
economic hardships arising from this virus and from the response to it trying to limit its spread.
•
•
Oil prices have decreased significantly due to the significant reduction in oil consumption in the
current economic climate but demonstrated stable growth during the second quarter of 2020 and the
rest of the year. This in turn has led to significant volatility and depreciation of the Russian Rouble
exchange rate against the US dollar and the Euro.
Further, the capital markets (equities and bonds) have seen a substantial volatility in prices in many
sectors.
As of the reporting date and subsequently some of the restrictions imposed by government authorities in
the Russian Federation due to the COVID-19 pandemic have been lifted and the Group observes that
business activity in the Russian Federation is recovering. However, the level of ongoing uncertainty in
relation to further negative developments around the COVID-19 pandemic and possible impact on the
Group remains high. Hence it is practically impossible to make a comprehensive quantitative assessment
with a high degree of certainty of the impact of these changes to the economic environment on the Group’s
financial position, and in particular in considering credit loss allowances on the loan portfolio which requires
to consider the probability of default of most borrowers in the next 12 months and for others over the life of
their loan. Some other factors impacting on this are set out below.
7
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
2
Operating Environment of the Group (Continued)
The Government of the Russian Federation has implemented various support measures for individuals and
corporates impacted by the COVID-19 pandemic including their right in certain circumstances to obtain
repayment holidays on their loans for up to 6 months and reduced rates of interest in this period.
The Group has itself implemented several measures to support its clients, especially those who face
financial difficulties and a significant decrease of current income due to the situation, including the below:
•
proposing internally developed loan restructuring programs as an alternative to the State announced
programs which will result in either deferral or decrease in the minimal payments of outstanding loan
balance for one or more months;
•
•
broadened cashback offers for debit cards more tailored to customer individual needs and spending
behaviour;
provided several educational resources on its mobile app and website for borrowers to learn how to
deal with potential unemployment or income decline, and how to request and obtain the most suitable
debt restructuring program;
•
supported its small and medium-sized entities client base during the pandemic by lowering acquiring
and account fees, offering payment holidays, helping SMEs to move online and launching 0% loans
to pay salaries in partnership with the Russian Bank for SME support.
According to IFRS 9 “Financial Instruments”, the Group uses forecast information in the expected credit
loss models, including forecasts of macroeconomic indicators. For the purpose of calculating credit loss
allowances as at 31 December 2020, the Group took into account expectations regarding the following
macro-factors and allocated higher weight to the pessimistic macroeconomic scenario:
•
•
•
Russian stock market index MOEX;
Moscow Prime Offered Rate;
Debt load of Russian population based on statistics from bureaus of credit history.
In order to reflect appropriately the uncertainty associated with the COVID-19 pandemic the Group has
made the following changes to their ECL model:
•
•
•
the macro-adjustment calculation approach was refined to reflect the most recent impact of economic
developments;
an adjustment to the loss given default was made to address lower expected recoveries during the
upcoming quarters;
higher probabilities of default were applied to the loans which have been restructured.
More detailed information about the changes and their impact on the results of the Group’s operations for
the year ended 31 December 2020 is disclosed in Note 3.
The management of the Group considers that the Group has demonstrated over the years and during the
current COVID-crisis its ability to withstand shocks and retains its positive long-term outlook in particular
due to the following advantages of the Group’s business model:
•
•
•
using flexible business structure, the Group swiftly shifted some of its resources from businesses
that were needed to run more conservatively to businesses with higher growth prospects;
the Group has a highly liquid, diversified, foreign exchange hedged, and well-capitalized consolidated
statement of financial position;
the Group’s digital model is exactly what is needed in the current environment and this can be seen
in the ongoing increased online payment volumes as well as increased take up of its mobile lifestyle
app, current accounts, and brokerage business;
8
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
2
Operating Environment of the Group (Continued)
The Group regularly stress tests its business to assess the sustainability of its liquidity and capital positions.
These tests demonstrate that Group’s current levels of capital and liquidity are more than sufficient to
absorb potential economic and operational shocks related to a second wave of the COVID-19 pandemic.
3
Critical Accounting Estimates and Judgements in Applying Accounting Policies
The Group makes estimates and assumptions that affect the amounts recognized in the consolidated
financial statements and the carrying amounts of assets and liabilities within the next financial year.
Estimates and judgements are continually evaluated and are based on management’s experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Management also makes certain judgements, apart from those involving estimations, in the
process of applying the accounting policies. Judgements that have the most significant effect on the
amounts recognized in the consolidated financial statements and estimates that can cause a significant
adjustment to the carrying amount of assets and liabilities within the next financial year include:
ECL measurement. Calculation and measurement of ECLs is an area of significant judgement and involves
methodology, models and data inputs. The following components of ECL calculation have a major impact
on credit loss allowance: probability of default (“PD”) (impacted by definition of default, SICR, forward-
looking scenarios and theirs weights) and loss given default (“LGD”). Refer to Note 29 for explanation of
terms. The Group makes estimates and judgments, which are constantly analyzed based on statistical data,
actual and forecast information, as well as management experience, including expectations regarding
future events that are considered reasonable in the current circumstances. Refer to Note 29 for further
information on ECL measurement.
In order to address rising credit risks the Group adjusted the main approaches to assessing the level of
expected credit losses that have the most significant effect on the amounts recognised in the consolidated
financial statements:
•
the macroeconomic model has become more conservative, based on different scenarios: base,
optimistic and pessimistic, and higher weight is assigned to the pessimistic scenario;
•
•
for loans in default the Group has applied increased coefficients of LGD;
the Group has estimated the volume of loans to individuals which were restructured despite no
evidence of any SICR, as of the reporting date and applied higher PDs to such loans for the purposes
of estimation of expected credit losses;
The impact of the changed macroeconomic conditions assessed using the approaches described above
was approximately RR 5.6 billion of additional credit loss allowance charge in the first half of 2020 and was
the main driver of increased cost of risk. This additional credit loss allowance was charged at the end of
the first quarter of 2020 in the early days of the pandemic. Despite most problems arising from such loans
have rolled into the general ECL model, and also most loans that were restructured in early 2020 as a result
of the government of the Russian Federation and the bank’s response to the pandemic have subsequently
been repaid and/or normalised, but given the unpredictability of current economic environment and
uncertainty regarding its development the Group made a decision to keep the macro-adjustment at this
level at 31 December 2020.
In the second quarter of 2020 for the purposes of LGD estimation the Group has refined the approach to
calculation of the rate used for discounting expected cash flows from defaulted loans. The refined approach
is that the Group uses more disaggregated and specific discount rates for each credit product in the overall
loan portfolio of the Group rather than one generic rate, which makes the estimate more precise. The impact
of introducing this change comprised RR 0.9 billion of additional credit loss allowance charge.
In the fourth quarter of 2020 having accumulated additional information the Group has refined its
behavioural PD model used for PD estimation for credit card loans. Also the Group has refined PD models
for secured loans and car loans using the most recent statistical data. The impact of introducing these
changes comprised RR 0.2 billion of credit loss allowance recovery.
In 2020 the Group has refined its approach to calculation of the impact of modification of original cash flows
without derecognition on stage 3 loans credit loss allowance and gross carrying amount (refer to Note 7).
9
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
3
Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)
In particular the Group refined the approach to estimation of timing of receipt of expected cash flows and
related discounting effect.
This refinement has not affected either amounts recognised in the consolidated statement of profit or loss
and other comprehensive income or the amounts recognised in consolidated statement of financial position.
An increase or decrease in PDs by 2% compared to PDs used in the ECL estimates calculated at
31 December 2020 would result in an increase or decrease in credit loss allowances of RR 5.2 billion
(31 December 2019: by 1% RR 2.1 billion).
An increase or decrease in LGDs by 2% compared to LGDs used in the ECL estimates calculated at
31 December 2020 would result in an increase or decrease in credit loss allowances of RR 1.5 billion
(31 December 2019: by 1% RR 0.5 billion).
Credit exposure on revolving credit facilities. For credit card loans, the Group's exposure to credit
losses extends beyond the maximum contractual period of the facility. For such facilities the Group
measures ECLs over the period that the Group is exposed to credit risk and ECLs are not mitigated by
credit risk management actions. Application of this approach requires judgement: determining a period for
measuring ECLs ‒ the Group considers historical information and experience about: (a) the length of time
for related defaults to occur on similar financial instruments following a SICR and (b) the credit risk
management actions that the Group expects to take once the credit risk has increased (e.g. the reduction
or removal of undrawn limits).
For details of the period over which the Group is exposed to credit risk on revolving facilities and which is
used as an approximation of lifetime period for ECL calculation for stage 2 and stage 3 loans and advances
to customers, refer to Note 29.
Perpetual subordinated bonds. A perpetual subordinated bond issue in June 2017 was initially
recognised in the amount of USD 295.8 million (RR 16.9 billion) represented by the funds received from
investors less issuance costs. Subsequent measurement of this instrument is consistent with the
accounting policy for debt securities in issue. Interest expense on the instrument is calculated using the
effective interest rate method and recognised in profit or loss for the year.
In the event the accrued interest is paid, the payment decreases the balance of the liability. A cancellation
of accrued interest for a given period results in its conversion, at the Group's option, into equity and
therefore the respective amount of the liability is reclassified to equity. Foreign exchange translation gains
and losses on the bond are recognised in profit or loss for the period. Application of this approach requires
judgement: the Group has taken into consideration that there are contingent settlement provisions that
could genuinely arise and as such has classified the perpetual subordinated bond instrument in its entirety
as a liability, rather than equity, on the basis of the terms of issue which stipulate the possible redemption
of the instrument in several cases other than liquidation of the issuer. If the Group had recognized this
instrument as equity, then interest expense would only have been recognized when it was paid and treated
as a distribution from equity rather than an expense in profit or loss.
The Group also from time to time invests in perpetual subordinated bonds issued by third parties. The
Group has taken into consideration that there are genuine contingent settlement provisions that could arise
and as such has classified the investments in perpetual subordinated bonds as investments in debt
securities on the basis of terms of issue which stipulate the possible redemption of the instrument in several
cases other than liquidation of the issuer.
The investments in these instruments are classified as debt investment securities measured at FVTPL since
the analysis of the contractual cash flow characteristics resulted in acquired perpetual bonds not passing
SPPI test. If the Group had recognized this instrument as equity instrument, then it could have been
measured at FVTPL or FVOCI as the Group does not hold it for trading purposes.
Interest income recognition. The effective interest method incorporates significant assumptions around
expected loan lives as well as judgements of type of fees and costs that are included in interest income.
Refer to Note 40.
10
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
3
Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)
Unbundling of loans and insurance products. Certain loans issued by the Group are forgivable upon
events such as the borrower's death, or the borrower becoming unemployed because the borrower had
opted to purchase the Insurance Company's products to cover repayments of the related loan products
issued by the Bank in such cases. The Group is able to measure the loans separately. Also the borrowers
are able to take a loan without insurance at the time of issuance with no different interest rate and the
borrowers can cancel the insurance products at any time, separately from the loan. Accordingly, the Group
unbundles the loans from the insurance arrangement.
The portion of the fee attributable to the insurance component (i.e. the amount paid to the Insurance
Company to cover the insured risk) is recognised within Insurance premiums earned line (refer to Note 23).
The remaining portion of the fee approximates a fee that the Bank would have earned on market terms for
selling third party insurance products and it is recognised as a fee for selling credit protection within Fee
and commission income line (refer to Note 21). The timing of recognition of the two income streams does
not materially vary as the insurance coverage is sold on a monthly basis.
Tax legislation. Russian and Cypriot tax, currency and customs legislation are subject to varying
interpretations. Refer to Note 31.
4
Segment Analysis
Operating segments are components that engage in business activities that may earn revenues or incur
expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM)
and for which discrete financial information is available. The CODM is the person or group of persons who
allocates resources and assesses the performance for the Group. The functions of CODM are performed
by the Management of the Bank and the Management of the Insurance Company.
Description of products and services from which each reportable segment derives its revenue
Since the business of the Group is expanding certain operating segments became significant enough to be
considered as separate reportable segments. This triggered changes in the number and composition of
segments to be presented. Disclosures for comparative periods were amended accordingly. The Group is
organised on the basis of 7 main business segments:
Consumer finance – representing retail loans (credit cards, cash loans, consumer loans, car loans, secured
loans), deposits and savings, also lifestyles and travel services to individuals.
Retail debit cards – representing customer current accounts services to individuals with the loyalty
programmes, co-branded offers, and also lifestyles and travel services to individuals. Assets of the segment
are represented by placements of the funds attracted in investments in securities, treasury transactions,
other financial and non-financial assets.
InsurTech – representing insurance services provided to individuals, such as personal accident insurance,
personal property insurance, travel insurance and vehicle insurance (Note 23).
SME services – representing customer current accounts, savings, deposits services and loans to individual
entrepreneurs and small to medium businesses. Assets of the segment are represented by placements of
the funds attracted into investments in securities, treasury transactions, other financial and non-financial
assets.
Acquiring and payments – providing merchants and businesses the ability to process payments online using
internet and offline acquiring services, through direct-to-merchant agreements, aggregators and the
Group's own aggregator CloudPayments.
InvestTech - representing online brokerage platform for investing in a range of securities including Russian
and international securities (ETFs, stocks, bonds, etc.).
Mobile virtual network operator (MVNO) services - providing full coverage across Russia and international
roaming, offering a number of value-added options such as virtual numbers, music and video streaming
services, etc.
11
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
4
Segment Analysis (Continued)
The Group’s principal activities are mainly undertaken within the Russian Federation. Given the retail nature of business of the segments, the Group does not have
any significant revenue stream from any single customer.
Factors that management used to identify the reportable segments
The Group’s segments are strategic business units that focus on different services to the customers of the Group. Their performance is analysed separately by the
CODM and they are managed separately because each business unit requires different marketing strategies and represents different types of businesses.
Measurement of operating segment profit or loss, assets and liabilities
The CODM reviews financial information prepared based on International financial reporting standards adjusted to meet the requirements of internal reporting. The
CODM evaluates performance of each segment based on profit before tax.
Information about reportable segment assets and liabilities, profit or loss
Segment reporting of the Group’s assets and liabilities as at 31 December 2020 is set out below:
Consumer
Finance
Retail Debit
Cards
Insur-
Tech
SME
Services
Acquiring
and
Invest-
Tech
MVNO
services
Elimina-
tions
Total
In millions of RR
Payments
Reportable segment assets
Reportable segment liabilities
458,245
203,723
245,923
345,585
12,437
6,901
55,517
91,412
15,563
649
73,773
83,428
755
3,499
(2,919)
(2,919)
859,294
732,278
Segment reporting of the Group’s assets and liabilities as at 31 December 2019 is set out below:
Consumer
Finance
Retail Debit
Cards
Insur-
Tech
SME
Services
Acquiring
and
Invest-
Tech
MVNO
services
Elimina-
tions
Total
In millions of RR
Payments
Reportable segment assets
Reportable segment liabilities
386,690
198,057
135,925
205,840
10,911
7,032
36,566
62,054
8,812
644
4,666
13,625
734
970
(4,279)
(4,279)
580,025
483,943
All jointly used assets, such as fixed assets, rights of use assets and intangible assets were allocated to the segments on the basis of detailed analysis of usage of
those assets by segments.
12
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
4
Segment Analysis (Continued)
Segment reporting of the Group’s income and expenses for the year ended 31 December 2020 is set out below:
Consumer
Finance
Retail
Debit
Cards
Insur-
Tech
SME
Services
Acquiring
and
Payments
Invest-
Tech
MVNO
services
Elimina-
tions
Total
In millions of RR
External revenues
Interest income calculated using the effective interest
rate method
113,494
9,092
409
2,358
-
2,804
10
-
128,167
Fee and commission income
- Fee and commission income on cards' and current
accounts' services
- Fee for selling credit protection
- Acquiring commission
2,715
4,657
11,154
-
-
-
-
-
9,147
-
261
15
-
-
1,815
-
-
-
-
-
-
23,292
4,657
11,049
6,813
1,798
-
-
-
-
-
-
-
-
11,049
-
-
-
-
-
4,998
-
- MVNO and investments services
- Other fees receivable
739
982
77
Timing of fee and commission income
recognition:
- At point in time
- Over time
5,906
2,205
10,396
1,740
-
-
5,346
3,801
11,126
-
4,927
332
511
1,319
-
-
38,212
9,397
8,111
11,126
Total fee and commission income
12,136
-
9,147
5,259
1,830
-
47,609
Insurance premiums earned
Other operating income
-
-
-
18,567
250
-
-
-
26
-
-
-
-
-
-
18,567
1,445
1,169
Total external revenues
122,774
21,228
19,226
11,505
11,152
8,063
1,840
-
195,788
Revenues from other segments
Interest income
-
2,737
56
1,244
-
-
-
(4,037)
-
Fee and commission income
- Acquiring commission
- Other fees receivable
Insurance premiums earned
Other operating income
-
2
-
-
-
-
72
-
-
-
-
-
85
-
-
-
-
-
-
-
(85)
(632)
(72)
-
-
-
-
251
379
-
-
-
-
371
-
(371)
Total revenues from other segments
TOTAL REVENUES
373
2,988
128
1,244
85
-
379
(5,197)
(5,197)
-
123,147
24,216
19,354
12,749
11,237
8,063
2,219
195,788
Interest expense
(16,965)
(38,243)
(1,889)
(12,466)
-
(9,322)
(372)
(9,266)
(4,042)
-
-
-
(1,215)
(726)
(803)
(1,385)
-
-
-
-
-
4,037
-
128
898
28
(23,465)
(39,341)
(21,599)
(22,588)
(3,814)
(35,621)
6,889
Credit loss allowance charge
Fee and commission expense
Customer acquisition expense
Insurance claims incurred
Administrative and other operating expenses
Other (losses)/ gains
-
(1,491)
(3,111)
-
(2,027)
-
-
(1,214)
(1,028)
-
(961)
-
(88)
(6,976)
(311)
-
(1,656)
-
(1,143)
(3,842)
(3,759)
219
(17,304)
(610)
(5,698)
5,935
(4,322)
1,345
106
-
SEGMENT RESULT
35,670
1,451
10,741
5,643
2,294
1,434
(984)
-
56,249
13
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
4
Segment Analysis (Continued)
Segment reporting of the Group’s income and expenses for the year ended 31 December 2019 is set out below:
Consumer
Finance
Retail
Debit
Cards
Insur-
Tech
SME
Services
Acquiring
and
Payments
Invest-
Tech
MVNO
services
Elimina-
tions
Total
In millions of RR
External revenues
Interest income calculated using the effective interest
rate method
103,077
5,673
322
1,883
-
284
8
-
111,247
Fee and commission income
- Fee and commission income on cards' and current
accounts' services
- Fee for selling credit protection
- Acquiring commission
2,665
5,550
8,759
-
-
-
-
-
7,867
-
33
-
-
635
-
15
-
-
890
-
-
-
-
-
-
19,339
5,550
8,342
1,525
1,102
-
-
-
-
-
-
-
-
8,342
-
-
-
- MVNO and investments services
- Other fees receivable
456
592
54
Timing of fee and commission income
recognition:
- At point in time
- Over time
6,656
2,015
8,122
1,229
-
-
4,791
3,076
8,396
-
530
138
235
670
-
-
28,730
7,128
Total fee and commission income
8,671
9,351
-
7,867
8,396
668
905
-
35,858
Insurance premiums earned
Other operating income
-
-
-
14,110
288
-
69
-
-
-
-
-
1
-
-
14,110
722
364
Total external revenues
112,112
15,024
14,720
9,819
8,396
952
914
-
161,937
Revenues from other segments
Interest income
-
3,739
83
1,327
-
-
1
(5,150)
-
Fee and commission income
- Acquiring commission
- Other fees receivable
Insurance premiums earned
Other operating income
-
-
-
-
83
-
-
-
-
-
-
85
-
-
-
-
-
-
-
(85)
(333)
(135)
(380)
-
-
-
-
-
135
-
250
-
-
380
-
-
Total revenues from other segments
TOTAL REVENUES
380
3,822
218
1,327
85
-
251
(6,083)
(6,083)
-
112,492
18,846
14,938
11,146
8,481
952
1,165
161,937
Interest expense
(18,273)
(26,429)
(2,581)
(11,380)
-
(8,561)
61
(4,682)
(2,024)
-
-
-
(1,632)
(44)
(729)
(2,150)
-
-
-
-
(5)
5,150
-
85
786
-
(23,321)
(26,412)
(15,123)
(18,177)
(4,891)
Credit loss allowance (charge)/reserval
Fee and commission expense
Customer acquisition expense
Insurance claims incurred
Administrative and other operating expenses
Other (losses)/ gains
-
-
(910)
(1,064)
-
(21)
(6,119)
(112)
-
(967)
-
(166)
(841)
-
(1,392)
(4,891)
(2,320)
(16)
(15,052)
(1,299)
(4,615)
581
(3,408)
109
(715)
(837)
62
-
(27,852)
-
-
(625)
SEGMENT RESULT
37,478
(394)
6,298
3,292
1,283
(770)
(1,651)
-
45,536
14
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
4
Segment Analysis (Continued)
Fee and commission income on cards’ and current accounts’ services include SME services commission,
SMS fee, interchange fee, foreign currency exchange transactions fee, fee for money transfers, cash
withdrawal fee and replenishment fee.
Interest income and interest expense from other segments amounted to RR 4,037 million for the year ended
31 December 2020 (2019: RR 5,150 million) are calculated using the funds transfer pricing curve.
5
Cash and Cash Equivalents
31 December
2020
31 December
2019
In millions of RR
Cash on hand
21,069
38,646
11,118
16,599
Cash balances with the CBRF (other than mandatory reserve deposits)
Placements with other banks with original maturities of less than three
months:
- AA- to AA+ rated
- A- to A+ rated
- BBB- to BBB+ rated
- BB- to BB+ rated
- B- to B+ rated
6,404
1,328
1,276
646
2,302
599
1,430
503
67
499
- CCC+ rated
-
2
Non-bank credit organizations:
- BBB- to BBB+ rated
- Unrated
53,764
12,719
20,088
2,856
Total Cash and Cash Equivalents
136,351
55,564
Cash on hand includes cash balances in ATMs and cash balances in transit. Placements with other banks
and organizations with original maturities of less than three months include placements under reverse sale
and repurchase agreements in the amount of RR 33,210 million as at 31 December 2020
(31 December 2019: RR 18,449 million). The Group has a right to sell or repledge securities received under
reverse sale and repurchase agreements.
The table below discloses the credit quality of cash and cash equivalents balances based on credit risk
grades at 31 December 2020:
Cash balances Placements with
with the CBRF other banks and
non-bank credit
Total
In millions of RR
organizations
Excellent
Good
Monitor
-
7,732
55,686
12,956
262
7,732
94,332
12,956
262
38,646
-
-
Sub-standard
Total cash and cash equivalents, excluding cash on
hand
38,646
76,636
115,282
15
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
5
Cash and Cash Equivalents (Continued)
The table below discloses the credit quality of cash and cash equivalents balances based on credit risk
grades at 31 December 2019:
Cash balances Placements with
with the CBRF other banks and
non-bank credit
Total
In millions of RR
organizations
Excellent
Good
Monitor
Doubtful
-
2,901
22,023
2,921
2
2,901
38,622
2,921
2
16,599
-
-
Total cash and cash equivalents, excluding cash on
hand
16,599
27,847
44,446
The carrying amount of cash and cash equivalents at 31 December 2020 and 2019 also represents the
Group’s maximum exposure to credit risk on these assets. Refer to Note 29 for the description of the
Group’s credit risk grading system.
For the purpose of ECL measurement cash and cash equivalents balances are included in Stage 1 for
excellent, good and monitor credit quality, in Stage 2 for sub-standard and Stage 3 for doubtful credit quality.
The ECL for these balances represents an immaterial amount, therefore the Group did not recognise any
credit loss allowance for cash and cash equivalents. Except for reverse sale and repurchase agreements,
amounts of cash and cash equivalents are not collateralised. As at 31 December 2020 the fair value of
collateral under reverse sale and repurchase agreements was RR 34,527 million (31 December 2019:
RR 20,130 million). There is no material impact of collateral on credit loss allowance for cash and cash
equivalents.
Refer to Note 36 for the disclosure of the fair value of cash and cash equivalents. ECL measurement
approach, interest rate, maturity and geographical risk concentration analysis of cash and cash equivalents
are disclosed in Note 29.
6
Due from Other Banks
31 December
2020
31 December
2019
In millions of RR
Placements with other banks with original maturities of more than three months
- BBB- rated
- BB- to BB+ rated
- B- to B+ rated
-
1,406
481
204
1,419
461
Total due from other banks
1,887
2,084
The table below discloses the credit quality of due from banks balances based on credit risk grades:
31 December
2020
31 December
In millions of RR
2019
Good
Monitor
1,406
481
1,577
507
Total due from other banks
1,887
2,084
16
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
6
Due from Other Banks (Continued)
The carrying amount of due from other banks at 31 December 2020 and 2019 also represents the Group’s
maximum exposure to credit risk on these assets. Refer to Note 29 for the description of credit risk grading
system used by the Group. For the purpose of ECL measurement due from other banks balances are
included in Stage 1.
The ECL for these balances represents an immaterial amount, therefore the Group did not create any credit
loss allowance for due from other banks. Refer to Note 29 for the ECL measurement approach. Refer to
Note 36 for the disclosure of the fair value of due from other banks. Interest rate, maturity and geographical
risk concentration analysis are disclosed in Note 29.
7
Loans and Advances to Customers
31 December
2020
31 December
2019
In millions of RR
Gross carrying amount of loans and advances to customers at AC
Less credit loss allowance
445,529
(70,900)
383,912
(54,737)
Total carrying amount of loans and advances to customers at AC
Loans and advances to customers at FVTPL
374,629
1,892
329,175
-
Total loans and advances to customers
376,521
329,175
Loans and advances to customers at FVTPL represent a loan that does not meet SPPI requirement and
that was issued to related party (refer to Note 38).
Gross carrying amount and credit loss allowance amount for loans and advances to customers at AC by
classes at 31 December 2020 and 2019 are disclosed in the table below:
31 December 2020
31 December 2019
Gross
carrying
amount
Credit loss
allowance
Carrying
amount
Gross
carrying
amount
Credit loss
allowance
Carrying
amount
In millions of RR
Credit card loans
Cash loans
Secured loans
POS loans
Car loans
Loans to IE and SME
267,586
68,131
40,232
32,690
33,991
2,899
(54,242)
(11,055)
(1,099)
(1,611)
(2,144)
(749)
213,344
57,076
39,133
31,079
31,847
2,150
244,937
62,265
29,601
25,940
20,156
1,013
(44,129)
(8,029)
(496)
(1,057)
(913)
200,808
54,236
29,105
24,883
19,243
900
(113)
Total loans and advances
to customers at AC
445,529
(70,900)
374,629
383,912
(54,737)
329,175
Credit cards are issued to customers for cash withdrawals or payment for goods or services, within the
range of limits established by the Bank. These limits may be increased or decreased from time-to-time
based on management decision. Credit card loans are not collateralized.
17
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Cash loans represent a product for the borrowers who have a positive credit history and who do not have
overdue loans in other banks. Cash loans are loans provided to customers via the Bank’s debit cards.
These loans are available for withdrawal without commission.
Secured loans represent loans secured with a car or real estate.
POS (“Point of sale”) loans represent loans to fund online and offline purchases through internet and offline
shops for individual borrowers.
Car loans represent loans for the purchase of a vehicle which is used as collateral under the loan.
Loans to IE and SME represent loans provided by the Bank to individual entrepreneurs and small and
medium businesses for the purpose of working capital management.
The credit loss allowance for loans and advances to customers recognised in the period is impacted by a
variety of factors. The main movements in the tables presented below are described as follows:
•
new originated or purchased category represents the gross carrying amounts and the related ECL
of purchased loans and loans issued during the reporting period (and withdrawals of limits of new
credit card borrowers) as at the end of the reporting period or as at the date of transfer of loan out of
stage 1 (whichever date is earlier);
•
transfers between Stage 1, 2 and 3 due to balances experiencing significant increases (or decreases)
of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”)
between 12-month and lifetime ECL. Transfers present the amount of credit loss allowance charged
or recovered at the moment of transfer of a loan among the respective stages;
•
•
changes to ECL measurement model assumptions and estimates represent movements due to
changes in PDs, EADs and LGDs models during the period;
movements other than transfers and new originated or purchased loans category represent all other
movements of ECL in particular related to changes in gross carrying amounts (including drawdowns,
repayments, and accrued interest), as well as updates of inputs to ECL model in the period;
•
•
write-offs of allowances are related to assets that were written-off during the period;
unwinding of discount (for Stage 3) category represents adjustment to credit loss allowance and
gross carrying amount for Stage 3 loans to increase it to discounted amount of the expected cash
shortfalls to the reporting date using the effective interest rate;
•
Modification of original cash flows without derecognition represents adjustment to credit loss
allowance and gross carrying amount of Stage 3 loans caused by the modification of terms of those
loans which is not substantial.
18
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans
and advances to customers between the beginning and the end of the reporting and comparative periods:
Credit loss allowance
Gross carrying amount
Stage 2 Stage 3Purchased/
(lifetime originated
ECL for credit
credit impaired
Stage 1 Stage 2
Stage 3
Total
Stage 1
Total
(12- (lifetime (lifetime
12-months (lifetime
ECL) ECL for
SICR)
months ECL for
ECL for
credit
ECL)
SICR)
In millions of RR
impaired)
impaired)
Credit card loans
At 31 December 2019
11,704
6,853
25,572
44,129
197,796
11,432
35,373
336 244,937
Movements with impact
on credit loss allowance
charge for the year:
New originated or
purchased
4,037
-
-
4,037
49,264
-
-
130
49,394
Transfers:
- to lifetime (from Stage 1
to Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
- recovered (from Stage 3
to Stage 2 and from
Stage 2 to Stage 1)
(2,520) 6,396
(5,642) (6,697)
-
29,371
(23)
3,876
17,032
(479)
(11,557)
(27,133)
1,416
11,557
(9,677)
(1,388)
-
36,810
(28)
-
-
-
-
-
-
328
(784)
Changes to ECL
measurement model
assumptions and
estimates
Movements other than
transfers and new
originated or purchased
loans
2,960
5,574
633
1,936
5,529
2,426
-
-
-
-
-
1,159
(4,307)
288
(166)
(4,089)
(285) (4,252)
Total movements with
impact on credit loss
allowance charge for
the year
4,737
707
26,977
32,421
12,278
326
32,693
(155)
45,142
Movements without
impact on credit loss
allowance charge for the
year:
Unwinding of discount (for
Stage 3)
Write-offs
-
-
-
-
-
-
5,713
(14,071) (14,071)
(2,134) (2,134)
5,713
-
-
-
-
-
-
5,713
(14,071)
(2,319)
-
-
-
5,713
(14,071)
(2,319)
Sales
Modification of original
cash flows without
derecognition
-
-
(11,816) (11,816)
-
-
(11,816)
-
(11,816)
At 31 December 2020
16,441
7,560
30,241
54,242
210,074
11,758
45,573
181 267,586
19
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 2 Stage 3Purchased/
(12-months (lifetimelifetime ECL originated
Stage 1 Stage 2
Stage 3
Total
Stage 1
Total
(12- (lifetime (lifetime
months ECL for
ECL for
credit
ECL)
ECL for for credit
SICR) impaired) impaired
credit
ECL)
SICR)
In millions of RR
impaired)
Credit card loans
At 31 December 2018
9,266
4,708
19,322
33,296
145,732
6,654
25,497
107 177,990
Movements with impact
on credit loss allowance
charge for the year:
New originated or
purchased
5,356
-
-
5,356
63,177
-
-
241
63,418
Transfers:
- to lifetime (from Stage 1
to Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
- recovered (from Stage 3
to Stage 2 and from Stage
2 to Stage 1)
(2,478) 6,097
(4,644) (4,111)
-
21,348
(21)
3,619
12,593
(544)
(11,142)
(21,206)
1,101
11,142
(5,322)
(1,077)
-
-
-
-
-
-
26,528
233
(756)
(24)
-
-
Changes to ECL
measurement model
assumptions and
estimates
Movements other than
transfers and new
originated or purchased
loans
(387)
4,358
-
(26)
(413)
1,006
-
-
-
-
-
915
(4,267)
20,134
35
(5,771)
(12) 14,386
Total movements with
impact on credit loss
allowance charge for the
year
2,438
2,145
17,034
21,617
52,064
4,778
20,733
229
77,804
Movements without
impact on credit loss
allowance charge the year
Unwinding of discount (for
Stage 3)
Write-offs
-
-
-
-
-
-
3,133
(10,999) (10,999)
3,133
-
-
-
-
-
-
3,133
(10,999)
(1,059)
-
-
-
3,133
(10,999)
(1,059)
Sales
(986)
(1,932)
25,572
(986)
(1,932)
44,129
Modification of original
cash flows without
derecognition
-
-
-
-
(1,932)
-
(1,932)
At 31 December 2019
11,704
6,853
197,796
11,432
35,373
336 244,937
20
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 1 Stage 2
Stage 3
Total
Stage 1 Stage 2
Stage 3 Purchased/
Total
(12- (lifetime (lifetime
(12- (lifetime (lifetime originated
months ECL for
ECL for
credit
months ECL for
ECL for
credit
credit
impaired
ECL)
SICR)
ECL)
SICR)
In millions of RR
Cash loans
impaired)
impaired)
At 31 December 2019
2,358
1,882
3,789
8,029
51,925
5,034
4,670
636
62,265
Movements with impact on
credit loss allowance
charge for the year:
New originated or
purchased
2,532
(686)
-
-
2,532
40,074
(5,116)
-
-
259
40,333
Transfers:
- to lifetime (from Stage 1
to Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
- recovered (from Stage 3
to Stage 2 and from Stage
2 to Stage 1)
3,078
-
5,911
(2)
2,392
2,709
(200)
5,116
-
6,626
(3)
-
-
-
-
-
-
(1,393) (1,809)
(4,273) (2,353)
60
(258)
126
982
(979)
Changes to ECL
measurement model
assumptions and
estimates
701
291
1,118
-
-
-
(297)
6,326
-
-
Movements other than
transfers and new
originated or purchased
loans
548
(978)
(876)
(1,306) (27,406) (2,051)
(465) (30,219)
Total movements with
impact on credit loss
allowance charge for the
year
1,762
159
5,324
7,245
4,261
(267)
(206)
10,114
Movements without impact
on credit loss allowance
charge for the year:
Unwinding of discount (for
Stage 3)
Write-offs
-
-
-
-
-
-
519
519
-
-
-
-
-
-
519
(2,363)
(426)
-
-
-
519
(2,363)
(426)
(2,363) (2,363)
(397) (397)
Sales
Modification of original
cash flows without
derecognition
-
-
(1,978) (1,978)
-
-
(1,978)
-
(1,978)
At 31 December 2020
4,120
2,041
4,894
11,055
56,186
4,767
6,748
430
68,131
21
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 1 Stage 2 Stage 3 Purchased/
Stage 1 Stage 2
(12- (lifetime
Stage 3
(lifetime
ECL for
credit
Total
Total
(12-months (lifetime
ECL) ECL for
SICR)
(lifetime
ECL for
credit
originated
credit
impaired
months ECL for
ECL)
SICR)
In millions of RR
Cash loans
impaired)
impaired)
At 31 December 2018
1,116
545
670
2,331
32,651
1,776
767
301
35,495
Movements with impact on
credit loss allowance
charge for the year:
New originated or
purchased
2,628
-
-
2,628
44,199
-
-
422
44,621
Transfers:
- to lifetime (from Stage 1
to Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
- recovered (from Stage 3
to Stage 2 and from Stage
2 to Stage 1)
(587)
(897)
14
2,960
(528)
(78)
-
3,927
-
2,373
2,502
(64)
(5,663)
(3,536)
408
5,663
(699)
(408)
-
4,235
-
-
-
-
-
-
-
Changes to ECL
measurement model
assumptions and
estimates
(22)
106
-
(1,017)
1,337
(1)
(23)
(718)
-
-
-
-
-
Movements other than
transfers and new
originated or purchased
loans
193
(16,134) (1,298)
676
(87) (16,843)
Total movements with
impact on credit loss
allowance charge for the
year
1,242
4,119
6,698
19,274
3,258
4,911
335
27,778
Movements without impact
on credit loss allowance
charge the year
Unwinding of discount (for
Stage 3)
Write-offs
-
-
-
-
-
-
138
(524)
(114)
138
(524)
(114)
-
-
-
-
-
-
138
(524)
(122)
-
-
-
138
(524)
(122)
Sales
Modification of original
cash flows without
derecognition
-
-
(500)
(500)
-
-
(500)
-
(500)
At 31 December 2019
2,358
1,882
3,789
8,029
51,925
5,034
4,670
636
62,265
22
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 1
(12-
months
ECL)
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
credit
Total
Stage 1
(12- (lifetime
months
Stage 2
Stage 3
(lifetime
ECL for
credit
Total
ECL for
SICR)
ECL)
In millions of RR
impaired)
impaired)
Secured Loans
At 31 December 2019
150
264
82
496
27,366
2,037
198
29,601
Movements with impact on
credit loss allowance charge
for the year:
New originated or purchased
141
-
-
141
21,517
-
-
21,517
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to
Stage 3)
- recovered (from Stage 3 to
Stage 2 and from Stage 2 to
Stage 1)
(40)
(15)
3
954
(135)
(41)
-
371
(3)
914
221
(41)
(4,120)
(524)
516
4,120
(355)
(509)
-
879
(7)
-
-
-
Changes to ECL
measurement model
assumptions and estimates
Movements other than
transfers and new originated
or purchased loans
67
3
9
79
-
-
-
-
(50)
(563)
(21)
(634)
(9,512)
.
(1,178)
(119)
(10,809)
Total movements with
impact on credit loss
allowance charge for the
year
106
218
356
680
7,877
2,078
753
10,708
Movements without impact
on credit loss allowance
charge for the year:
Unwinding of discount
(for Stage 3)
Write-offs
-
-
-
-
46
(16)
46
(16)
-
-
-
-
46
(16)
46
(16)
Modification of original cash
flows
-
-
(107)
(107)
-
-
(107)
(107)
At 31 December 2020
256
482
361
1,099
35,243
4,115
874
40,232
23
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 2 Stage 3
(12- (lifetime (lifetime
Stage 1
Stage 2
Stage 3
Total
Stage 1
Total
2,644
(12- (lifetime (lifetime
months
ECL)
ECL for
SICR)
ECL for
credit
impaired)
months
ECL)
ECL for
SICR)
ECL for
credit
impaired)
In millions of RR
Secured Loans
At 31 December 2018
15
1
-
16
2,641
3
-
Movements with impact on credit
loss allowance charge for the
year:
New originated or purchased
168
(23)
-
-
-
168
476
27,907
(2,141)
-
-
-
27,907
-
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
499
2,141
-
- to credit-impaired (from
Stage 1 and Stage 2 to Stage 3)
- to 12-months ECL (from
(6)
-
-
-
81
-
75
-
(203)
1
203
-
-
-
Stage 2 and Stage 3 to Stage 1)
(1)
Movements other than transfers
and new originated or purchased
loans
(4)
(236)
6
(234)
(839)
(106)
-
(945)
Total movements with impact
on credit loss allowance
charge for the year
135
263
87
485
24,725
2,034
203
26,962
Movements without impact on
credit loss allowance charge the
year
Unwinding of discount
(for Stage 3)
Modification of original cash
flows
-
-
-
-
3
3
-
-
-
-
3
3
(8)
(8)
(8)
(8)
At 31 December 2019
150
264
82
496
27,366
2,037
198
29,601
24
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 1 Stage 2 Stage 3 Purchased/
(12- (lifetime (lifetime originated
Stage 1 Stage 2
Stage 3
Total
Total
(12- (lifetime (lifetime
months ECL for
ECL) SICR)
ECL for
credit
months ECL for ECL for
credit
impaired
ECL)
SICR)
credit
In millions of RR
POS loans
impaired)
impaired)
At 31 December 2019
298
190
569
1,057
24,031
1,053
658
198
25,940
Movements with impact on
credit loss allowance charge
for the year:
New originated or purchased
525
-
-
525
29,695
-
-
226
29,921
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to Stage
3)
- recovered (from Stage 3 to
Stage 2 and from Stage 2 to
Stage 1)
(83)
(119)
3
642
(234)
(15)
-
1,023
-
559
670
(1,863) 1,863
-
1,105
-
-
-
-
-
-
-
(751)
206
(354)
(206)
(12)
Changes to ECL
measurement model
assumptions and estimates
Movements other than
transfers and new originated
or purchased loans
40
3
16
59
-
-
-
-
-
(137)
(359)
(209)
(705) (21,040) (1,276)
(173)
(137) (22,626)
Total movements with
impact on credit loss
allowance charge for the
year
229
37
830
1,096
6,247
27
932
89
7,295
Movements without impact on
credit loss allowance charge
for the year:
Unwinding of discount (for
Stage 3)
Write-offs
-
-
-
-
-
-
46
(360)
(50)
46
(360)
(50)
-
-
-
-
-
-
46
(360)
(53)
-
-
-
46
(360)
(53)
Sales
Modification of original cash
flows without derecognition
-
-
(178)
(178)
-
-
(178)
-
(178)
At 31 December 2020
527
227
857
1,611
30,278
1,080
1,045
287
32,690
25
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Total Stage 1 Stage 2 Stage 3 Purchased/
(12- (lifetime (lifetime originated
Stage 1 Stage 2
(12- (lifetime
months ECL for
Stage 3
(lifetime
ECL for
credit
Total
months ECL for ECL for
credit
credit impaired
impaired)
ECL)
SICR)
ECL)
SICR)
In millions of RR
POS loans
impaired)
At 31 December 2018
190
81
189
460
14,560
505
210
105
15,380
Movements with impact on
credit loss allowance charge for
the year:
New originated or purchased
357
-
-
357
23,779
-
-
145
23,924
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
(61)
(71)
479
(92)
-
418
451
(1,673)
(518)
1,673
(137)
-
-
-
-
-
- to credit-impaired (from Stage
1 and Stage 2 to Stage 3)
- recovered (from Stage 3 to
Stage 2 and from Stage 2 to
Stage 1)
614
655
1
(7)
-
(6)
112
-
(112)
-
-
-
-
-
Changes to ECL measurement
model assumptions and
estimates
(15)
(7)
(1)
(23)
-
-
Movements other than
transfers and new originated or
purchased loans
(103)
(264)
(61)
(428) (12,229)
(876)
(34)
(52) (13,191)
Total movements with impact
on credit loss allowance
charge for the year
108
109
552
769
9,471
548
621
93
10,733
Movements without impact on
credit loss allowance charge
the year
Unwinding of discount (for
Stage 3)
Write-offs
-
-
-
-
-
-
19
(131)
(23)
19
(131)
(23)
-
-
-
-
-
-
19
(131)
(24)
-
-
-
19
(131)
(24)
Sales
Modification of original cash
flows without derecognition
-
-
(37)
(37)
-
-
(37)
-
(37)
At 31 December 2019
298
190
569
1,057
24,031
1,053
658
198
25,940
26
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 2 Stage 3
(lifetime (lifetime
Stage 1
(12-
Stage 2
Stage 3
Total
Stage 1
(12-
Total
(lifetime (lifetime
months
ECL)
ECL for
SICR)
ECL for
credit
months
ECL)
ECL for
SICR)
ECL for
credit
In millions of RR
Car Loans
impaired)
impaired)
At 31 December 2019
368
285
260
913
18,725
1,060
371
20,156
Movements with impact on credit
loss allowance charge for the
year:
New originated or purchased
485
-
-
485
21,598
-
-
21,598
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
(141)
(184)
844
-
703
354
(1,926)
(739)
1,926
(352)
-
-
-
- to credit-impaired (from
Stage 1 and Stage 2 to Stage 3)
- recovered (from Stage 3 to
Stage 2 and from Stage 2 to
Stage 1)
(232)
770
1,091
10
(50)
-
(40)
308
(307)
(1)
-
Changes to ECL measurement
model assumptions and
estimates
Movements other than transfers
and new originated or purchased
loans
105
21
13
32
150
-
-
-
-
(302)
38
(243)
(7,250)
(315)
(20)
(7,585)
Total movements with impact
on credit loss allowance
charge for the year
296
273
840
1,409
11,991
952
1,070
14,013
Movements without impact on
credit loss allowance charge for
the year:
Unwinding of discount
(for Stage 3)
Write-offs
-
-
-
-
81
(63)
81
(63)
-
-
-
-
81
(63)
81
(63)
Modification of original cash
flows
-
-
(196)
(196)
-
-
(196)
(196)
At 31 December 2020
664
558
922
2,144
30,716
2,012
1,263
33,991
27
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 2 Stage 3
(lifetime (lifetime
Stage 1
(12-
Stage 2
Stage 3
Total
Stage 1
(12-
Total
(lifetime (lifetime
months
ECL)
ECL for
SICR)
ECL for
credit
months
ECL)
ECL for
SICR)
ECL for
credit
In millions of RR
Car Loans
impaired)
impaired)
At 31 December 2018
56
25
4
85
2,754
78
6
2,838
Movements with impact on credit
loss allowance charge for the
year:
New originated or purchased
469
-
-
469
18,238
-
-
18,238
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to Stage 3)
- to 12-months ECL (from
Stage 2 and Stage 3 to Stage 1)
(98)
(72)
1
466
(23)
(4)
-
248
-
368
153
(1,087)
(320)
24
1,087
(34)
-
354
-
-
-
-
(3)
(24)
Changes to ECL measurement
model assumptions and
estimates
Movements other than transfers
and new originated or purchased
loans
(1)
13
-
-
(1)
-
-
-
-
(179)
(1)
(167)
(884)
(47)
2
(929)
Total movements with impact
on credit loss allowance
charge for the year
312
260
247
819
15,971
982
356
17,309
Movements without impact on
credit loss allowance charge the
year
Unwinding of discount
(for Stage 3)
Modification of original cash
flows
-
-
-
-
12
12
(3)
-
-
-
-
12
12
(3)
(3)
(3)
At 31 December 2019
368
285
260
913
18,725
1,060
371
20,156
28
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 1
Stage 2
Stage 3
Total
Stage 1
(12- (lifetime
months
Stage 2
Stage 3
(lifetime
ECL for
credit
Total
(12- (lifetime (lifetime
months
ECL)
ECL for
SICR)
ECL for
credit
ECL for
SICR)
ECL)
In millions of RR
impaired)
impaired)
Loans to IE and SME
At 31 December 2019
57
10
46
113
940
21
52
1,013
Movements with impact on credit
loss allowance charge for the year:
New originated or purchased
Transfers:
28
-
-
28
676
-
-
676
- to lifetime (from Stage 1 to Stage 2)
- to credit-impaired (from Stage 1
and Stage 2 to Stage 3)
(143)
(16)
10
314
(13)
-
-
77
3
171
48
(375)
(69)
-
375
(17)
-
-
86
-
-
-
-
Changes to ECL measurement
Movements other than transfers and
new originated or purchased loans
13
399
(20)
-
379
1,268
(56)
1
1,213
Total movements with impact on
credit loss allowance charge for
the year
278
281
80
639
1,500
302
87
1,889
Movements without impact on credit
loss allowance charge for the year:
Unwinding of discount
(for Stage 3)
Write-offs
-
-
-
-
11
(14)
11
(14)
-
-
-
-
11
(14)
11
(14)
At 31 December 2020
335
291
123
749
2,440
323
136
2,899
29
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Credit loss allowance
Gross carrying amount
Stage 2 Stage 3
(lifetime lifetime ECL
Stage 1
(12-
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
credit
Total
Stage 1
(12-
months
ECL)
Total
months
ECL)
ECL for
SICR)
for credit
impaired)
In millions of RR
impaired)
Loans to IE and SME
At 31 December 2018
13
10
10
33
332
21
10
363
Movements with impact on
credit loss allowance charge for
the year:
New originated or purchased
13
-
-
13
301
-
-
301
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
- to credit-impaired (from
Stage 1 and Stage 2 to Stage 3)
- to 12-months ECL (from
Stage 2 and Stage 3 to Stage 1)
(4)
26
-
44
-
22
29
-
(58)
(39)
1
58
-
47
-
-
-
-
(8)
-
(7)
(8)
-
(1)
Movements other than transfers
and new originated or
purchased loans
43
(19)
(13)
11
403
(49)
(10)
344
Total movements with impact
on credit loss allowance
charge for the year
44
-
31
75
608
-
37
645
Movements without impact on
credit loss allowance charge the
year
Unwinding of discount
(for Stage 3)
Modification of original cash
flows
-
-
-
-
5
-
5
-
-
-
-
-
5
-
5
-
At 31 December 2019
57
10
46
113
940
21
52
1,013
The credit loss allowance charge during the year ended 31 December 2020 presented in the tables above
differs from the amount presented in the consolidated statement of profit or loss and other comprehensive
income for the year due to RR 4,063 million (2019: RR 3,420 million) recovery of amounts previously
written-off as uncollectible, due to RR 1,750 million (2019: RR 693 million) recovery from the purchased
loans in excess of their gross carrying amount, and due to RR 1,295 million (2019: RR 201 million) charge
of ECL for credit related commitments, including RR 638 million of charge due to changes to ECL
measurement model assumptions and estimates. The amount of the recovery received from written-off
loans and purchased loans during the year was credited directly to the credit loss allowance line in the
consolidated statement of profit or loss and other comprehensive income.
The contractual amount outstanding of loans and advances to customers which were written off during the
reporting period ended 31 December 2020 and are still subject to enforcement activity is equal to
RR 13,966 million (reporting period ended 31 December 2019: RR 10,095 million).
The amount of the ECL for credit related commitments is accounted separately from ECL for credit cards
loans and is included in other financial liabilities in the consolidated statement of financial position.
30
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
During the year ended 31 December 2020 the Group sold credit-impaired loans to third parties (external
debt collection agencies) with a gross amount of RR 2,798 million (2019: RR 1,205 million) and credit loss
allowance of RR 2,581 million (2019: RR 1,123 million). The difference between the carrying amount of
these loans and the consideration received was recognised as losses in the amount of RR 186 million within
credit loss allowance for loans and advances to customers and credit related commitments for the year
ended 31 December 2020 (2019: losses in the amount of RR 73 million).
Presented below is an analysis of issued, activated and utilised cards based on their credit card limits as
at the end of the reporting period:
31 December
2020
31 December
2019
In units
Credit card limits
Up to 20 RR thousand
20-40 RR thousand
40-60 RR thousand
60-80 RR thousand
80-100 RR thousand
100-120 RR thousand
120-140 RR thousand
140-200 RR thousand
More than 200 RR thousand
1,046,228
538,746
497,940
495,431
479,786
331,606
378,547
870,503
225,417
781,128
482,343
451,425
455,978
440,139
322,726
365,750
772,992
180,731
Total number of cards (in units)
4,864,204
4,253,212
Table above only includes credit cards less than 180 days overdue.
The following table contains an analysis of the credit risk exposure of loans and advances to customers
measured at AC and for which an ECL allowance is recognised. The carrying amount of loans and
advances to customers below also represents the Group's maximum exposure to credit risk on these loans.
Loans and advances to customers at 31 December 2020 are disclosed as follows:
Stage 1
Stage 2
Stage 3
Purchased/
originated
credit
Total
(12-months (lifetime ECL (lifetime ECL
ECL)
for SICR)
for credit
impaired)
In millions of RR
impaired
Credit card loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
68,398
131,957
-
1,891
3,757
6,110
-
-
-
-
-
-
-
-
68,398
133,848
13,476
15,436
36,428
9,719
-
-
9,326
36,247
181
Gross carrying amount
Credit loss allowance
Carrying amount
210,074
(16,441)
193,633
11,758
(7,560)
4,198
45,573
(30,241)
15,332
181
267,586
(54,242)
213,344
-
181
31
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Stage 1
Stage 2
Stage 3
Purchased/
originated
credit
Total
(12-months (lifetime ECL (lifetime ECL
ECL)
for SICR)
for credit
impaired)
In millions of RR
impaired
Cash loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
33,877
22,053
-
-
-
-
-
-
-
-
33,877
25,242
802
2,021
6,189
3,189
546
1,032
-
256
-
-
989
5,759
430
Gross carrying amount
Credit loss allowance
Carrying amount
56,186
(4,120)
52,066
4,767
(2,041)
2,726
6,748
(4,894)
1,854
430
68,131
(11,055)
57,076
-
430
Secured Loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
21,201
13,937
-
3,307
442
366
-
-
-
-
-
-
-
-
-
-
21,201
17,244
547
105
-
-
366
874
874
Gross carrying amount
35,243
(256)
4,115
(482)
3,633
874
(361)
513
-
40,232
(1,099)
39,133
Credit loss allowance
-
Carrying amount
34,987
-
POS loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
25,159
4,998
-
-
-
-
-
-
-
-
25,159
5,791
242
194
1,304
793
121
166
-
121
-
-
28
1,017
287
Gross carrying amount
Credit loss allowance
Carrying amount
30,278
(527)
1,080
(227)
853
1,045
(857)
188
287
32,690
(1,611)
31,079
-
29,751
287
32
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Stage 1
Stage 2
Stage 3
Purchased/
originated
credit
Total
(12-months (lifetime ECL (lifetime ECL
ECL)
for SICR)
for credit
impaired)
In millions of RR
impaired
Car loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
21,444
9,136
-
-
-
-
-
-
-
-
-
-
21,444
10,563
399
322
1,263
1,427
263
322
-
136
-
-
1,263
Gross carrying amount
Credit loss allowance
Carrying amount
30,716
(664)
2,012
(558)
1,454
1,263
(922)
341
-
-
-
33,991
(2,144)
31,847
30,052
Loans to IE and SME
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
1,673
760
-
295
12
16
-
-
-
-
-
-
-
-
-
-
1,673
1,055
19
16
136
7
-
-
136
Gross carrying amount
Credit loss allowance
Carrying amount
2,440
(335)
2,105
323
(291)
32
136
(123)
13
-
-
-
2,899
(749)
2,150
33
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Loans and advances to customers at 31 December 2019 are disclosed as follows:
Stage 1
(12-months (lifetime ECL
Stage 2
Stage 3
(lifetime ECL
for credit
Purchased/
originated
credit
Total
ECL)
for SICR)
In millions of RR
impaired)
impaired
Credit card loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
87,716
102,020
-
-
-
-
-
-
-
-
87,716
103,602
11,782
12,789
29,048
1,582
3,722
6,128
-
8,060
-
-
6,661
28,712
336
Gross carrying amount
Credit loss allowance
Carrying amount
197,796
(11,704)
186,092
11,432
(6,853)
4,579
35,373
(25,572)
9,801
336
244,937
(44,129)
200,808
-
336
Cash loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
34,258
17,321
-
3,315
585
1,134
-
-
-
-
-
-
-
-
34,258
20,636
931
1,892
4,548
346
-
-
758
3,912
636
Gross carrying amount
Credit loss allowance
Carrying amount
51,925
(2,358)
49,567
5,034
(1,882)
3,152
4,670
(3,789)
881
636
636
62,265
(8,029)
54,236
-
Secured Loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
19,941
7,319
-
-
-
-
-
-
-
-
-
-
19,941
8,815
428
1,496
322
219
-
106
-
-
219
198
198
Gross carrying amount
Credit loss allowance
Carrying amount
27,366
(150)
2,037
(264)
1,773
198
(82)
116
-
29,601
(496)
-
27,216
-
29,105
34
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Stage 1
Stage 2
Stage 3
(lifetime
ECL for
credit
Purchased/
originated
credit
Total
(12-months (lifetime ECL for
ECL)
SICR)
impaired
In millions of RR
impaired)
POS loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
19,525
4,406
-
763
117
173
-
-
-
-
-
-
-
-
19,525
5,169
217
100
-
-
26
632
199
830
198
Gross carrying amount
Credit loss allowance
Carrying amount
24,031
(298)
1,053
(190)
863
658
(569)
89
198
-
25,940
(1,057)
24,883
23,733
198
Car loans
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
15,581
3,051
-
702
157
201
-
-
-
-
-
-
-
-
-
-
15,581
3,753
250
93
-
-
201
371
371
Gross carrying amount
Credit loss allowance
Carrying amount
18,725
(368)
1,060
(285)
775
371
(260)
111
-
-
-
20,156
(913)
18,357
19,243
Loans to IE and SME
- Excellent
- Good
- Monitor
- Sub-standard
- NPL
622
314
4
-
-
-
6
6
9
-
-
-
-
-
52
-
-
-
-
-
622
320
10
9
52
Gross carrying amount
Credit loss allowance
Carrying amount
940
(57)
883
21
(10)
11
52
(46)
6
-
-
-
1,013
(113)
900
Stage 3 includes restructured loans that are less than 90 days overdue which are not considered as NPL
according to the Group’s credit risk grading master scale. Refer to Note 29 for the description of credit risk
grading system used by the Group.
Loans in courts are included in Stage 3 and are loans to delinquent borrowers, against which the Group
has filed claims to courts in order to recover outstanding balances. As at 31 December 2020 the gross
carrying amount of the loans in courts was RR 31,082 million (31 December 2019: RR 22,228 million).
35
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
Description of collateral held for loans to individuals carried at amortised cost is as follows at
31 December 2020:
Secured
loans
Car loans
Total
In millions of RR
Loans collateralised by:
- residential real estate
- cars
37,896
2,084
-
37,896
26,797
24,713
Total
39,980
24,713
64,693
Unsecured exposures
252
9,278
9,530
Total gross carrying amount (representing exposure to
credit risk for each class of loans at AC)
40,232
33,991
74,223
Description of collateral held for loans to individuals carried at amortised cost is as follows at
31 December 2019:
In millions of RR
Secured loans
Car loans
Total
Loans collateralised by:
- residential real estate
- cars
27,437
1,904
-
27,437
17,160
15,256
Total
29,341
15,256
44,597
Unsecured exposures
260
4,900
5,160
Total gross carrying amount (representing exposure to
credit risk for each class of loans at AC)
29,601
20,156
49,757
The disclosure above represents the lower of the carrying value of the loan or collateral taken; the remaining
part is disclosed within the unsecured exposures which arise mainly due to application of a discount in
determining the carrying value of collateral.
The extent to which collateral and other credit enhancements mitigate credit risk for financial assets carried
at amortised cost that are credit impaired, is presented by disclosing collateral values separately for (i) those
assets where collateral and other credit enhancements are equal to or exceed carrying value of the asset
(“over-collateralised assets”) and (ii) those assets where collateral and other credit enhancements are less
than the carrying value of the asset (“under-collateralised assets”).
36
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
7
Loans and Advances to Customers (Continued)
The effect of collateral on credit impaired assets at 31 December 2020 is as follows.
Over-collateralised assets
Under-collateralised assets
Gross carrying
amount of the
assets
Value of
collateral
Gross carrying
amount of the
assets
Value of
collateral
In millions of RR
Credit impaired assets:
Secured loans
Car loans
855
200
2,136
296
19
1,063
10
715
The effect of collateral on credit impaired assets at 31 December 2019 is as follows.
Over-collateralised assets
Under-collateralised assets
Gross carrying
amount of the
assets
Value of Gross carrying
Value of
collateral
collateral
amount of the
assets
In millions of RR
Credit impaired assets:
Secured loans
Car loans
194
25
442
31
4
346
2
208
The values of collateral considered in this disclosure are after a valuation haircut of 20% (2019: 20%) for
residential real estate and 30% (2019: 30%) for cars applied to consider liquidity and quality of the pledged
assets.
All contractual modifications of loans with the lifetime ECL that did not lead to derecognition did not have
gains less losses on modification recognised in profit or loss for the year ended 31 December 2020 (2019:
same).
Refer to Note 36 for the disclosure of the fair value of loans and advances to customers. Interest rate,
maturity and geographical risk concentration analysis are disclosed in Note 29. Information on related party
balances is disclosed in Note 38.
8
Investments in Securities and Repurchase Receivables
31 December
2020
31 December
2019
In millions of RR
Debt securities measured at fair value through other comprehensive income
Securities measured at fair value through profit or loss
234,189
4,265
134,765
413
Total investments in securities
238,454
29
135,178
-
Repurchase receivables at fair value through other comprehensive income
Total investments in securities and repurchase receivables
238,483
135,178
Repurchase receivables represent securities sold under sale and repurchase agreements which the
counterparty has the right, by contract or custom, to sell or repledge. As at 31 December 2020 the sale and
repurchase agreements are short-term and mature in January 2021.
37
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income
The table below discloses investments in debt securities and repurchase receivables measured at FVOCI
by classes:
31 December
2020
31 December
2019
In millions of RR
Investments in securities
Russian government bonds
Corporate bonds
Municipal bonds
Foreign government bonds
123,916
96,200
9,474
56,382
72,032
6,351
-
4,599
Repurchase receivables
Corporate bonds
29
-
Total investments in securities and repurchase receivables measured at
FVOCI
234,218
134,765
Including credit loss allowance
714
345
38
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
The table below contains an analysis of the credit risk exposure of investments in securities and repurchase
receivables measured at FVOCI at 31 December 2020, for which an ECL allowance is recognised, based
on credit risk grades:
Stage 1
(12-months
ECL)
Stage 2
Stage 3
Total
(lifetime ECL (lifetime ECL
for SICR) for credit im-
paired)
In millions of RR
Russian government bonds
- Good
125,422
125,422
-
-
-
125,422
125,422
Total AC gross carrying amount
-
Credit loss allowance
Fair value adjustment from AC to FV
(255)
(1,251)
-
-
-
-
(255)
(1,251)
Carrying value
123,916
-
-
123,916
Corporate bonds
- Excellent
- Good
560
85,653
6,726
-
-
-
-
-
560
85,653
7,346
- Monitor
620
Total AC gross carrying amount
92,939
620
-
93,559
Credit loss allowance
Fair value adjustment from AC to FV
(334)
2,953
(14)
36
-
-
(348)
2,989
Carrying value
95,558
642
-
96,200
Municipal bonds
- Good
- Monitor
7,750
1,523
-
-
-
-
7,750
1,523
Total AC gross carrying amount
9,273
-
-
9,273
Credit loss allowance
Fair value adjustment from AC to FV
(45)
246
-
-
-
-
(45)
246
Carrying value
9,474
-
-
9,474
39
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
Stage 1
(12-months
ECL)
Stage 2
Stage 3
Total
(lifetime ECL (lifetime ECL
for SICR) for credit im-
paired)
In millions of RR
Foreign government bonds
- Good
- Monitor
908
3,119
494
-
-
-
-
-
-
908
3,119
494
- Sub-standard
Total AC gross carrying amount
4,521
-
-
4,521
Credit loss allowance
Fair value adjustment from AC to FV
(66)
144
-
-
-
-
(66)
144
Carrying value
4,599
-
-
4,599
The table below contains an analysis of the credit risk exposure of debt securities measured at FVOCI at
31 December 2019, for which an ECL allowance is recognised, based on credit risk grades:
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit im-
paired)
Total
In millions of RR
Russian government bonds
- Good
54,471
54,471
-
-
-
-
54,471
54,471
Total AC gross carrying amount
Credit loss allowance
Fair value adjustment from AC to FV
(99)
2,010
-
-
-
-
(99)
2,010
Carrying value
56,382
-
-
56,382
Corporate bonds
- Excellent
- Good
411
61,042
8,192
-
-
-
-
-
-
411
61,042
8,192
- Monitor
Total AC gross carrying amount
69,645
-
-
69,645
Credit loss allowance
Fair value adjustment from AC to FV
(225)
2,612
-
-
-
-
(225)
2,612
Carrying value
72,032
-
-
72,032
40
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
Stage 1
(12-months
ECL)
Stage 2
(lifetime ECL
for SICR)
Stage 3
(lifetime ECL
for credit im-
paired)
Total
In millions of RR
Municipal bonds
- Good
- Monitor
5,663
422
-
-
-
-
5,663
422
Total AC gross carrying amount
6,085
-
-
6,085
Credit loss allowance
Fair value adjustment from AC to FV
(21)
287
-
-
-
-
(21)
287
Carrying value
6,351
-
-
6,351
Refer to Note 29 for the description of credit risk grading system used by the Group and the approach to
ECL measurement, including the definition of default and SICR as applicable to investments in securities
and repurchase receivables at FVOCI. The investments at FVOCI are not collateralised. Refer to Note 36
for the disclosure of the fair value.
Securities at FVOCI reclassified to repurchase receivables continue to be carried at fair value in accordance
with accounting policies for these categories of assets. Refer to Note 13 for the related liabilities.
The following table explains the changes in the credit loss allowance (including those pledged under
repurchase agreements) and gross carrying amount for debt securities at FVOCI for the year ended
31 December 2020:
Credit loss allowance
Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Gross carrying amount
Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Total
Total
months ECL for ECL for
months ECL for ECL for
ECL)
SICR)credit im-
ECL)
SICR)credit im-
In millions of RR
paired)
paired)
Russian government bonds
At 31 December 2019
99
-
-
99
54,471
-
-
54,471
Movements with impact on
credit loss allowance charge:
New originated or purchased
522
-
-
522
289,955
-
-
289,955
Foreign exchange gains
Redemption during the year
Disposal during the year
Interest income accrued
Interest received
1
(160)
(233)
8
(12)
30
-
-
-
-
-
-
-
-
-
-
1
767
(89,000)
-
-
-
-
-
-
-
-
-
-
767
(89,000)
(129,350)
5,318
(160)
(233) (129,350)
8
(12)
30
5,318
(6,739)
-
(6,739)
-
Other movements
-
-
-
-
Total movements with
impact on credit loss
allowance charge
156
255
-
-
-
-
156
255
70,951
-
-
-
-
70,951
At 31 December 2020
125,422
125,422
41
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
Credit loss allowance
Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Gross carrying amount
Total Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Total
months ECL for ECL for
months ECL for ECL for
ECL)
SICR)
credit
im-
ECL)
SICR)
credit
im-
In millions of RR
paired)
paired)
Corporate bonds
At 31 December 2019
225
-
-
225
69,645
-
-
69,645
Movements with impact on
credit loss allowance charge:
New originated or purchased
198
-
-
-
198
-
70,438
(620)
-
-
-
70,438
-
Transfers:
- to lifetime (from Stage 1 to
Stage 2)
(3)
3
620
Foreign exchange gains
Redemption during the year
Disposal during the year
Interest income accrued
Interest received
15
(13)
(117)
14
(16)
31
-
-
-
-
-
-
-
-
-
-
15
(13)
5,061
(4,171)
-
-
-
-
-
-
-
-
-
5,061
(4,171)
(46,924)
4,632
(5,122)
-
(117) (46,924)
14
(17)
43
4,587
(5,077)
-
45
(45)
-
(1)
12
Other movements
Total movements with
impact on credit loss
allowance charge
109
334
14
14
-
-
123
348
23,294
92,939
620
620
-
-
23,914
93,559
At 31 December 2020
Municipal bonds
At 31 December 2019
21
-
-
21
6,085
-
-
6,085
Movements with impact on
credit loss allowance charge:
New originated or purchased
25
-
-
25
7,440
-
-
7,440
Redemption during the year
Disposal during the year
Interest income accrued
Interest received
0
(19)
3
(2)
17
-
-
-
-
-
-
-
-
-
-
0
(19)
3
(2)
17
(91)
(4,140)
474
(495)
-
-
-
-
-
-
-
-
-
-
-
(91)
(4,140)
474
(495)
-
Other movements
Total movements with
impact on credit loss
allowance charge
24
45
-
-
-
-
24
45
3,188
9,273
-
-
-
-
3,188
9,273
At 31 December 2020
42
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
Credit loss allowance
Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Gross carrying amount
Total Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Total
months ECL for ECL for
months ECL for ECL for
ECL)
SICR) credit im-
paired)
ECL)
SICR) credit im-
paired)
In millions of RR
Foreign government
bonds
At 31 December 2019
-
-
-
-
-
-
-
-
Movements with impact on
credit loss allowance
charge:
New originated or
purchased
68
-
-
68
7,516
-
-
7,516
Foreign exchange gains
Disposal during the year
Interest income accrued
Interest received
1
(11)
1
(1)
8
-
-
-
-
-
-
-
-
-
-
1
(11)
1
(1)
8
246
(3,224)
61
-
-
-
-
-
-
-
-
-
-
246
(3,224)
61
(78)
-
(78)
-
Other movements
Total movements with
impact on credit loss
allowance charge
66
66
-
-
-
-
66
66
4,521
4,521
-
-
-
-
4,521
4,521
At 31 December 2020
43
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
The following table explains the changes in the credit loss allowance (including those pledged under
repurchase agreements) and gross carrying amount for debt securities at FVOCI for the year ended
31 December 2019:
Credit loss allowance
Gross carrying amount
Total Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Stage 1 Stage 2
Stage 3
Total
(12- (lifetime (lifetime
months ECL for
ECL for
credit
im-
months ECL for ECL for
ECL)
SICR)
ECL)
SICR)
credit
im-
In millions of RR
Corporate bonds
At 1 January 2019
paired)
paired)
255
89
128
-
-
-
-
383
89
64,951
25,936
1,318
1,607
-
-
-
66,558
25,936
-
Movements with impact on
credit loss allowance charge:
New originated or purchased
Transfers:
-
- to lifetime (from Stage 1 to
Stage 2)
24
(26)
(2)
(1,318)
Foreign exchange losses
Redemption during the year
Disposal during the year
Interest income accrued
Interest received
(12)
(12)
(91)
12
(12)
(28)
(6)
-
(40)
4
(4)
(56)
-
-
-
-
-
-
(18)
(12)
(2,702)
(3,609)
(96)
-
(193)
43
(43)
-
-
-
-
-
-
-
(2,798)
(3,609)
(16,541)
4,117
(4,018)
-
(131) (16,348)
16
(16)
(84)
4,074
(3,975)
-
Other movements
Total movements with
impact on credit loss
allowance charge
(30)
225
(128)
-
-
-
(158)
225
4,694
(1,607)
-
-
-
3,087
At 31 December 2019
69,645
69,645
44
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
Credit loss allowance
Gross carrying amount
Total Stage 1 Stage 2 Stage 3
(12- (lifetime (lifetime
Stage 1 Stage 2
Stage 3
Total
(12- (lifetime (lifetime
months ECL for
ECL for
credit
im-
months ECL for ECL for
ECL)
SICR)
ECL)
SICR)
credit
im-
In millions of RR
paired)
paired)
Russian government bonds
At 1 January 2019
66
-
-
66
25,190
-
-
25,190
Movements with impact on
credit loss allowance charge:
New originated or purchased
167
-
-
167
81,179
(833)
-
-
81,179
Foreign exchange losses
Redemption during the year
Disposal during the year
Interest income accrued
Interest received
(2)
-
-
-
-
-
-
-
-
-
-
-
-
(2)
-
-
-
-
-
-
-
-
-
-
-
-
(833)
(30,858)
(20,414)
2,119
(1,912)
-
(63)
(53)
4
(4)
(16)
(63) (30,858)
(53) (20,414)
4
(4)
2,119
(1,912)
-
Other movements
(16)
Total movements with
impact on credit loss
allowance charge
33
99
-
-
-
-
33
99
29,281
54,471
-
-
-
-
29,281
54,471
At 31 December 2019
45
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
8
Investments in Securities and Repurchase Receivables (Continued)
1)
Investments in securities and repurchase receivables measured at fair value through other
comprehensive income (Continued)
Credit loss allowance
Stage 1 Stage 2 Stage 3 Total Stage 1
(12- (lifetime (lifetime (12- (lifetime (lifetime
Gross carrying amount
Stage 2 Stage 3
Total
months
ECL)
ECL for
SICR)
ECL for
credit
im-
months
ECL)
ECL for
SICR)
ECL for
credit
im-
In millions of RR
Municipal bonds
At 1 January 2019
paired)
paired)
35
-
-
35
5,833
-
-
5,833
Movements with impact on
credit loss allowance charge:
New originated or
purchased
3
-
-
3
968
-
-
968
Redemption during the
year
Disposal during the year
Interest income accrued
Interest received
(1)
(4)
2
(3)
(11)
-
-
-
-
-
-
-
-
-
-
(1)
(4)
2
(3)
(11)
(482)
(216)
469
(487)
-
-
-
-
-
-
-
-
-
-
-
(482)
(216)
469
(487)
-
Other movements
Total movements with
impact on credit loss
allowance charge
(14)
21
-
-
-
-
(14)
21
252
-
-
-
-
252
At 31 December 2019
6,085
6,085
2)
Securities measured at fair value through profit or loss
The table below discloses investments in securities measured at FVTPL by classes:
31 December
2020
31 December
2019
In millions of RR
Perpetual corporate bonds
Other securities
4,265
-
-
413
Total securities measured at FVTPL
4,265
413
At 31 December 2019 the other securities were represented by assets of the mutual funds which were
controlled by the Group and managed by LLC “Tinkoff Capital”. These assets were sold at
30 September 2020.
Investments in securities measured at FVTPL are carried at fair value, which also reflects any credit risk
related write-downs and best represents Group’s maximum exposure to credit risk. The securities
measured at FVTPL are not collateralized. Interest rate, maturity and geographical risk concentration
analysis of investment in securities are disclosed in Note 29.
46
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
9
Guarantee Deposits with Payment Systems
As at 31 December 2020 and 2019 guarantee deposits were placed in favour of MasterCard with Barclays
Bank Plc London (A rated), in favour of Visa with United Overseas Bank Ltd Singapore (AA- rated), and in
favour of Russia payment card Mir with Russian National payment card system (NSPK).
As at 31 December 2020 the carrying value of guarantee deposits with payment systems was RR 15,475
million (2019: RR 8,877 million).
The table below discloses the credit quality of guarantee deposits with payment systems balances based
on credit risk grades:
31 December
2020
31 December
2019
In millions of RR
- Excellent
- Good
14,803
672
8,376
501
Total guarantee deposits with payment systems
15,475
8,877
The carrying amount of guarantee deposits with payment systems at 31 December 2020 and 2019 also
represents the Group's maximum exposure to credit risk on these assets. Refer to Note 29 for the
description of credit risk grading system used by the Group. For the purpose of ECL measurement
guarantee deposits with payment systems balances are included in Stage 1. Guarantee deposits with
payment systems are unsecured financial assets.
The ECL for these balances represents an immaterial amount, therefore the Group did not create any credit
loss allowance for guarantee deposits with payment systems. Refer to Note 29 for the ECL measurement
approach. Interest rate, maturity and geographical risk concentration analysis are disclosed in Note 29.
10
Brokerage Receivables and Brokerage Payables
31 December
2020
31 December
2019
In millions of RR
Amounts receivable from brokers and clearing organizations
Total brokerage receivables
24,064
24,064
9,206
2,799
2,799
1,207
1,207
Amounts payable to brokers and clearing organizations
Total brokerage payables
9,206
Brokerage receivables represent placements under reverse sale and repurchase agreements made by the
Bank with central counterparty to provide customers of the Bank who have brokerage accounts with the
Bank with the possibility to acquire securities in case those customers have insufficient own funds to acquire
those securities. These balances are fully collateralized by highly liquid securities and have minimal credit
risk. As at 31 December 2020 the fair value of collateral of brokerage receivables was RR 24,113 million
(31 December 2019: RR 2,239 million). For the purpose of ECL measurement brokerage receivables are
included in Stage 1. The ECL for these balances represents an immaterial amount, therefore the Group did
not recognise any credit loss allowance for brokerage receivables.
Brokerage payables represent funds attracted under sale and repurchase agreements made by the Bank
with central counterparty to provide customers of the Bank who have brokerage accounts with the Bank
with the possibility to borrow securities and make a short sale.
47
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
10
Brokerage Receivables and Brokerage Payables (Continued)
As at 31 December 2020 the fair value of collateral of brokerage payables was RR 9,696 million
(31 December 2019: RR 1,282 million).
ECL measurement approach, interest rate, maturity and geographical risk concentration analysis are
disclosed in Note 29. Refer to Note 32 for the disclosure of the the offsetting assets and liabilities. Refer to
Note 36 for the disclosure of the fair value of brokerage receivables and brokerage payables.
11
Tangible Fixed Assets, Intangible Assets and Right-of-use Assets
Land
Building
Equip- Leasehold Vehicles
Total Intangible
ment
improve-
ments
tangible
assets
fixed
In millions of RR
assets
Cost
At 31 December 2018
Additions
Disposals
396
4,219
4,341
1,788
(59)
1,536
42
46
-
10,534
1,920
(61)
6,625
2,564
(72)
-
-
-
-
86
(2)
At 31 December 2019
396
4,219
6,070
1,620
88
12,393
9,117
Additions
Disposals
-
-
-
-
2,168
(164)
2
-
-
2,170
(395)
3,669
(73)
(231)
At 31 December 2020
396
4,219
8,074
1,391
88
14,168
12,713
Depreciation and
amortisation
At 31 December 2018
Charge for the year
(Note 24)
-
(90)
(1,527)
(515)
(33)
(2,165)
(2,402)
-
-
(43)
-
(1,076)
9
(160)
2
(8)
-
(1,287)
11
(1,331)
51
Disposals
At 31 December 2019
-
(133)
(2,594)
(673)
(41)
(3,441)
(3,682)
Charge for the year
(Note 24)
Disposals
-
-
(43)
-
(1,421)
103
(149)
128
(4)
-
(1,617)
231
(1,961)
12
At 31 December 2020
-
(176)
(3,912)
(694)
(45)
(4,827)
(5,631)
Net book value
At 31 December 2019
396
396
4,086
4,043
3,476
4,162
947
697
47
43
8,952
9,341
5,435
7,082
At 31 December 2020
48
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
11
Tangible Fixed Assets, Intangible Assets and Right-of-use Assets (Continued)
Intangible assets additions in the amount of RR 1,854 million related to capitalised the software
developments by Tinkoff Software DC during the year ended 31 December 2020 (2019: RR 1,212 million).
Other intangible assets acquired during the year ended 31 December 2020 and 2019 mainly represent
accounting software, retail banking software, insurance software, licenses and development of software.
Right-of-use assets and lease liabilities. Right-of-use-assets relate to the office premises leased by the
Group. Rental contracts are typically for fixed periods from 1 to 5 years. The Group does not have extension
or termination options of its lease agreements other than lease agreements of low value items.
The right of use assets by class of underlying items is analysed as follows:
In millions of RR
Office premises
1,671
Carrying amount at 1 January 2019
Additions
664
Depreciation charge (Note 24)
(727)
Carrying amount at 31 December 2019
1,608
Additions
234
Depreciation charge (Note 24)
(702)
Carrying amount at 31 December 2020
1,140
Prior to 1 January 2019 Group’s leases of premises and equipment were classified as operating leases.
From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability from the
date when the leased asset becomes available for use by the Group.
Expenses relating to leases of low-value assets and short-term leases in the amount of RR 548 million are
included in administrative and other operating expenses (2019: RR 410 million). Refer to Note 24. Total
cash outflow for leases during the year ended 31 December 2020 was RR 758 million (2019: RR 1,087
million).
12
Other Financial and Non-financial Assets
31 December
2020
31 December
2019
In millions of RR
Other Financial Assets
Settlement of operations with plastic cards
Other
23,882
7,188
16,384
5,289
Total Other Financial Assets
31,070
21,673
Other Non-Financial Assets
Prepaid expenses
Other
1,478
1,908
1,223
1,287
Total Other Non-Financial Assets
3,386
2,510
49
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
12
Other Financial and Non-financial Assets (Continued)
Settlement of operations with plastic cards represents settlements with payment systems and payment
channels on operations of the customers with banking cards due to be settled within 3 working days. This
amount also includes prepayment to the payment systems for operations during holiday period.
At 31 December 2020, included in other financial assets are receivables, investments in associates and
subrogation rights (2019: same).
As at 31 December 2020 and 2019 prepaid expenses consist of prepayments for marketing, IT support,
security and ATM-service.
The table below discloses the credit quality of other financial assets based on credit risk grades:
31 December
2020
31 December
2019
In millions of RR
- Excellent
- Good
19,683
11,387
9,219
12,454
Total other financial assets
31,070
21,673
Refer to Note 29 for the description of the Group’s credit risk grading system.
For the purpose of ECL measurement settlement of operations with plastic cards balances and other
receivables are included in Stage 1. The ECL for these balances represents an immaterial amount,
therefore the Group did not recognise any credit loss allowance. Refer to Note 29 for the ECL measurement
approach. Refer to Note 36 for the disclosure of the fair value of other financial assets. The maturity and
geographical risk concentration analysis of amounts of other financial assets is disclosed in Note 29.
13
Due to Banks
31 December
2020
31 December
2019
In millions of RR
Correspondent accounts and overnight placements of other banks
Sale and repurchase agreements with other banks
4,795
24
23
-
Total due to banks
4,819
23
At 31 December 2020, included in the amounts due to other banks are liabilities of RR 24 million
(31 December 2019: nil) arising from sale and repurchase agreements with debt securities at FVOCI. Refer
to Note 8.
Refer to Note 36 for the disclosure of the fair value of amounts due to banks. Interest rate, maturity and
geographical risk concentration analysis of due to banks is disclosed in Note 29. Refer to Notes 32 and 33
for information on the amounts included in due to banks received under sale and repurchase agreements
and fair value of securities pledged.
50
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
14
Customer Accounts
31 December
2020
31 December
2019
In millions of RR
Individuals
- Current/demand accounts
- Brokerage accounts
- Term deposits
323,145
73,970
135,995
199,408
12,253
137,292
IE and SME
- Current/demand accounts
- Term deposits
89,199
2,213
60,174
1,880
Other legal entities
- Current/demand accounts
- Term deposits
2,267
48
495
112
Total customer accounts
626,837
411,614
Refer to Note 36 for the disclosure of the fair value of customer accounts. Interest rate, maturity and
geographical risk concentration analysis of customer accounts amounts is disclosed in Note 29. Information
on related party balances is disclosed in Note 38.
15
Debt Securities in Issue
Date of maturity 31 December 31 December
In millions of RR
2020
2019
RR denominated bonds issued in April 2019
RR denominated bonds issued in September 2019
RR denominated bonds issued in April 2017
RR denominated bonds issued in June 2016
Structured debt notes issued in December 2020
Structured debt notes issued in October 2020
Structured debt notes issued in December 2020
EUR denominated ECP issued in December 2019
EUR denominated ECP issued in February 2019
USD denominated ECP issued in December 2019
21 March 2029
12 September 2029
22 April 2022
24 June 2021
5 December 2023
5 October 2023
1 December 2023
20 November 2020
18 February 2020
20 November 2020
10,134
10,166
2,492
10,158
10,157
2,468
835
-
836
119
89
74
-
-
-
1,030
831
599
-
-
Total debt securities in issue
23,910
26,078
On 3 April 2019 the Bank issued RR denominated bonds with a nominal value of RR 10,000 million at
9.25% coupon rate maturing on 21 March 2029.
On 25 September 2019 the Bank issued RR denominated bonds with a nominal value of RR 10,000 million
at 8.25% coupon rate maturing on 12 September 2029.
On 28 April 2017 the Bank issued RR denominated bonds with a nominal value of RR 5,000 million at
9.65% coupon rate maturing on 22 April 2022.
On 30 June 2016 the Group issued RR denominated bonds with a nominal value of RR 3,000 million at
11.7% coupon rate maturing on 24 June 2021.
51
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
15
Debt Securities in Issue (Continued)
During October and December 2020 the Bank issued structured debt notes with the total nominal value of
RR 282 million at 0.01% coupon rate maturing in October and December 2023. The structured debt notes
are linked to the performance of the underlying assets, such as the gold trust and equity indexes. The
derivative instruments embedded in the structured notes were separated and accounted within financial
derivatives line in the consolidated statement of financial position.
On 20 December 2019 the Group issued two tranches of ECP denominated in USD and EUR maturing on
20 November 2020. USD denominated ECP has a nominal value of USD 10 million with a discount of 3.6%.
EUR denominated ECP has a nominal value of EUR 15 million with a discount of 1.0%.
On 19 February 2019 the Group issued Euro-Commercial Paper (ECP) denominated in EUR maturing on
18 February 2020, which has a nominal value of EUR 12 million with a discount of 1.25%.
The Group redeemed all outstanding ECP at maturity date.
All RR denominated bonds and structured debt notes issued by the Bank are traded on the Moscow
Exchange. Refer to Note 36 for the disclosure of the fair value of debt securities in issue. Interest rate,
maturity and geographical risk concentration analysis of debt securities in issue are disclosed in Note 29.
16
Subordinated Debt
As at 31 December 2020 the carrying value of the subordinated debt was RR 20,755 million
(31 December 2019: RR 18,487 million).
On 15 June 2017 the Group issued perpetual subordinated loan participation notes with a nominal value of
USD 300 million with zero premium. The notes have no stated maturity. The Group has a right to repay the
notes at its discretion starting from 15 September 2022 and they are repayable in case of certain events
other than liquidation. The notes bear a fixed interest rate of 9.25% p.a. payable quarterly starting from
15 September 2017. Interest payments may be cancelled by the Group at any time.
The claims of lenders against the Group in respect of the principal and interest on these bonds are
subordinated to the claims of other creditors in accordance with the legislation of the Russian Federation.
The perpetual subordinated loan participation notes are traded on the Global Exchange Market. Interest
rate, maturity and geographical risk concentration analysis of subordinated debt is disclosed in Note 29.
Refer to Note 36 for the disclosure of the fair value of financial instruments.
17
Insurance Provisions
31 December
2020
31 December
2019
In millions of RR
Insurance Provisions
Provision for unearned premiums
Loss provisions
3,907
2,160
3,938
2,342
Total Insurance Provisions
6,067
6,280
52
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
17
Insurance Provisions (Continued)
Movements in provision for unearned premiums for the year ended 31 December 2020 and 2019 are as
follows:
2020
2019
Gross Reinsurer’s
Provision
Gross Reinsurer’s
Provision
net of
provision
share of
net of provision
share of
In millions of RR
provision reinsurance
provision reinsurance
Provision for unearned
premiums as at 1 January
3,938
(11)
3,927
1,760
(3)
1,757
Change in provision, gross
Change in reinsurers’ share of
provision
(31)
-
(31)
2,178
-
2,178
-
-
-
-
(8)
(8)
Provision for unearned
premiums as at 31 December
3,907
(11)
3,896
3,938
(11)
3,927
Movements in loss provisions for the year ended 31 December 2020 and 2019 are as follows:
OCP and
IBNR
URP
Provision
for claims provisions
handling
Total loss
In millions of RR
Note
expenses
Loss provisions as at 31 December 2018
965
9
125
1,099
Losses incurred in the current reporting period
Changes in OCP, IBNR and claims handling
provisions related to prior periods
Insurance claims paid
Claims handling expenses accrued
Claims handling expenses paid
4,026
-
-
4,026
-
-
-
(138)
(2,923)
(39)
(177)
(2,923)
862
(733)
253
23
23
-
-
-
-
862
(733)
-
Unexpired risk provision charge
Unexpired risk provision written off
253
(65)
-
-
(65)
Loss provisions as at 31 December 2019
1,930
197
215
-
2,342
Losses incurred in the current reporting period
Changes in OCP, IBNR and claims handling
provisions related to prior periods
Insurance claims paid
Claims handling expenses accrued
Claims handling expenses paid
3,456
-
3,456
-
-
-
-
(119)
(3,500)
147
28
(3,500)
528
(497)
(197)
23
23
-
-
-
528
(497)
-
Unexpired risk provision reversal
(197)
Loss provisions as at 31 December 2020
-
2,160
1,767
393
53
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
18
Other Financial and Non-financial Liabilities
31 December 2020
31 December
2019
In millions of RR
Other financial liabilities
Settlement of operations with plastic cards
Trade payables
Credit related commitments (Note 31)
Other
23,079
6,150
3,537
1,571
6,427
4,621
2,242
1,358
Total other financial liabilities
Other non-financial liabilities
34,337
14,648
Accrued administrative expenses
Taxes payable other than income tax
Lease liabilities
2,171
1,731
1,340
663
1,277
1,321
1,694
582
Other
Total other non-financial liabilities
5,905
4,874
Settlements of operations with plastic cards include funds that were spent by customers of the Bank by
usage of plastic cards but have not yet been compensated to payment systems by the Bank. Accrued
administrative expenses are mainly represented by accrued staff costs.
During 2020 the Group has managed to apply an online posting mechanism which allowed customer
accounts to be debited and payment systems to be credited for their transactions at the time of authorisation
of the transaction. In prior periods transactions were posted only after their clearing by payment systems
which could require another business day.
Movements in the credit loss allowance for credit related commitments were as follows for the year ended
31 December 2020:
Stage 1
(12-months ECL)
Stage 2 Stage 3
(lifetime ECL for (lifetime
Gross committed
amount
SICR) ECL for
credit
im-
paired)
In millions of RR
At 31 December 2019
2,228
14
-
2,242
Movements with impact on provision
for credit related commitments
charge for the year:
New originated or purchased
920
-
-
920
Transfers:
- to lifetime (from Stage 1 to Stage
2)
- to credit-impaired (from Stage 1
and Stage 2 to Stage 3)
- to 12-months ECL (from Stage 2
and Stage 3 to Stage 1)
(36)
(59)
7
15
(6)
-
-
-
(21)
(65)
(8)
(15)
Changes to ECL measurement
model assumptions and estimates
Movements other than transfers and
new originated or purchased loans
(637)
1,090
(1)
17
-
-
(638)
1,107
Total charge to profit or loss for
the year
1,285
3,513
10
24
-
-
1,295
3,537
At 31 December 2020
54
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
18
Other Financial and Non-financial Liabilities (Continued)
Movements in the credit loss allowance for credit related commitments were as follows for the year ended
31 December 2019:
Stage 1
(12-months ECL)
Stage 2 Stage 3
(lifetime ECL for (lifetime
Gross committed
amount
SICR) ECL for
credit
im-
In millions of RR
paired)
At 31 December 2018
2,024
17
-
2,041
Movements with impact on
provision for credit related
commitments charge for the year:
New originated or purchased
840
-
-
840
Transfers:
- to lifetime (from Stage 1 to Stage
2)
- to credit-impaired (from Stage 1
and Stage 2 to Stage 3)
- to 12-months ECL (from Stage 2
and Stage 3 to Stage 1)
(23)
(45)
5
9
(7)
-
-
-
(14)
(52)
(10)
(15)
Changes to ECL measurement
model assumptions and estimates
Movements other than transfers and
new originated or purchased loans
(163)
(410)
-
-
-
(163)
(400)
10
Total charge to profit or loss for
the year
204
(3)
14
-
-
201
At 31 December 2019
2,228
2,242
The main movements in the table presented above are described as follows:
•
new originated or purchased category represents the day one 12-month ECL for the undrawn part of
the purchased loans and loans to new borrowers (for this particular product) before the first payment
became due;
•
transfers between Stage 1, 2 and 3 due to undrawn limits experiencing significant increases (or
decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or
“step down”) between 12-month and Lifetime ECL. Transfers present the amount of credit loss
allowance for loan commitments charged or recovered at the moment of transfer of a loan
commitment among the respective stages;
•
movements other than transfers and new originated or purchased loans category represents all other
movements of ECL for loan commitments in particular related to changes in gross carrying amounts
of associated loans, ECL model assumptions and other.
Interest rate, maturity and geographical risk concentration analysis of other financial liabilities is disclosed
in Note 29. Refer to Note 36 for disclosure of fair value of other financial liabilities. Refer to Note 31 for
analysis of loan commitments by credit risk grades.
55
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
19
Share Capital, Share Premium and Treasury Shares
Number of
authorised
shares
Number of Ordinary
Share Treasury
Total
5,141
In millions of RR except
for the number of shares
outstanding
shares
shares
premium
shares
At 1 January 2019
191,770,766
182,638,825
188
8,623
(3,670)
Shares issued
18,263,882
16,666,667
42
-
18,874
(499)
-
-
-
18,916
(499)
506
Secondary public
offering (SPO) costs
GDRs and shares
transferred under MLTIP
-
-
-
-
-
506
At 31 December 2019
210,034,648
199,305,492
230
26,998
(3,164)
24,064
GDRs buy-back
GDRs and shares
transferred under MLTIP
-
-
-
-
-
-
-
-
(661)
587
(661)
587
At 31 December 2020
210,034,648
199,305,492
230
26,998
(3,238)
23,990
At 31 December 2020 the total number of outstanding shares is 199,305,492 shares (31 December 2019:
199,305,492 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share).
At 31 December 2020 and 2019 treasury shares represent GDRs of the Group repurchased from the market
for the purposes permitted by Cyprus law including contribution to MLTIP. Refer to Note 38.
At 31 December 2020 the total number of treasury shares is 3,013,379 (31 December 2019: 4,185,166).
During the year ended 31 December 2020 the Group repurchased 650,000 GDRs at market price for
RR 661 million (2019: no GDRs were repurchased by the Group).
During the year ended 31 December 2020 the Group transferred 1,809,681 GDRs (2019: 2,419,187 GDRs),
representing 0.91% (2019: 1.21%) of the issued shares, upon vesting under the MLTIP. This resulted in a
transfer of RR 587 million (2019: RR 506 million) out of treasury shares to retained earnings.
In June 2019 the Company’s shareholders approved a resolution to increase the authorised share capital
to USD 8,401,385.92 by the creation of 18,263,882 new undesignated ordinary shares of nominal value
USD 0.04 each. At 31 December 2020 the total number of authorised shares is 210,034,648 shares
(31 December 2019: 210,034,648 shares) with a par value of USD 0.04 per share (31 December 2019:
USD 0.04 per share).
On 2 July 2019 the Group completed a SPO on the London Stock Exchange plc and issued 16,666,667 class
A shares of the Company in the form of GDRs at a price of USD 18.00 per GDR, raising aggregate gross
proceeds of USD 300 million (RR 18,916 million). All issued ordinary shares are fully paid.
All the incurred SPO costs were primary direct expenses accounted within share premium.
Basic earnings per share are calculated by dividing the profit or loss attributable to owners of the Company
by the weighted average number of ordinary shares in issue during the year, excluding treasury shares.
For the purpose of calculating diluted earnings per share the Group considered the dilutive effect of share
options granted under MLTIP.
56
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
19
Share Capital, Share Premium and Treasury Shares (Continued)
Earnings per share are calculated as follows:
In millions of RR except for the number of shares
2020
2019
Profit for the year attributable to ordinary shareholders of the Company
44,209
36,122
Weighted average number of ordinary shares in issue used for basic earnings
per ordinary share calculation (thousands)
Weighted average number of ordinary shares in issue used for diluted earnings
per ordinary share calculation (thousands)
195,962
197,604
186,559
190,070
Basic earnings per ordinary share (expressed in RR per share)
Diluted earnings per ordinary share (expressed in RR per share)
225.60
223.73
193.62
190.05
Information on dividends is disclosed in Note 27.
Reconciliation of the number of shares used for basic and diluted EPS:
In thousands
Note
2020
2019
Weighted average number of ordinary shares in issue used for basic
earnings per ordinary share calculation
195,962
186,559
Number of shares attributable for MLTIP
15,290
9,940
Number of shares transferred out of treasury shares upon vesting under
the MLTIP to retained earnings or forfeited
Number of shares that would have been issued at fair value
38
(8,014)
(5,634)
(6,158)
(271)
Weighted average number of ordinary shares in issue used for
diluted earnings per ordinary share calculation
197,604
190,070
57
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
20
Net Margin
In millions of RR
2020
2019
Interest income calculated using the effective interest rate method
Loans and advances to customers, including:
Credit card loans
Cash loans
Secured loans
POS loans
Car loans
Loans to IE and SME
89,253
11,439
4,950
4,806
3,342
529
84,325
11,878
2,285
3,452
1,512
325
Debt securities and repurchase receivables at FVOCI
Brokerage operations
10,510
2,629
6,705
184
Placements with other banks and non-bank credit organizations with original
maturities of less than three months
626
463
Total interest income calculated using the effective interest rate method
128,084
111,129
Other similar income
Financial assets at FVTPL
83
118
Total interest income
128,167
111,247
Interest expense calculated using the effective interest rate method
Customer accounts, including:
Individuals
- Current/demand accounts
- Term deposits
9,590
6,499
1,022
24
2,027
1,948
439
8,988
7,006
1,421
40
1,282
1,846
634
IE and SME
Other legal entities
RR denominated bonds
Subordinated debt
Due to banks
Euro-Commercial Paper
32
100
Total interest expense calculated using the effective interest rate method
21,581
21,317
Other similar expense
Lease liabilities
139
21,720
1,745
134
21,451
1,870
Total interest expense
Expenses on deposit insurance
Net margin
104,702
87,926
58
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
21
Fee and Commission Income and Expense
In millions of RR
2020
2019
Fee and commission income
Acquiring commission
SME services commission
Brokerage fee
Fee for selling credit protection
Interchange fee
11,049
7,437
4,998
4,657
3,963
3,945
3,943
3,117
1,815
746
8,342
6,757
635
5,550
3,473
3,244
3,024
1,980
890
SMS fee
Foreign currency exchange transactions fee
Fee for money transfers
Income from MVNO services
Cash withdrawal fee
720
Marketing services fee
Replenishment fee
394
141
340
141
Other fees receivable
1,404
762
Total fee and commission income
47,609
35,858
SME services commission represents commission for services to individual entrepreneurs and small to
medium businesses. Fee for selling credit protection represents fee which the Bank receives for selling
voluntary credit insurance to borrowers of the Group. Acquiring commission represents commission for
processing card payments from online and offline points of sale. Income from MVNO services represents
income from providing mobile services such as full coverage across Russia and international roaming,
offering a number of value-added options such as virtual numbers, music and video streaming services,
etc.
The Group has refined the presentation of the Group's revenue structure by reclassifying the sum of
merchant acquiring fee from SME services commission to acquiring commission. The comparative
information was amended accordingly.
In millions of RR
2020
2019
Fee and commission expense
Payment systems
Service fees
Banking and other fees
Payment channels
Costs of MVNO services
14,684
2,177
2,225
1,288
1,225
10,420
2,043
423
1,327
910
Total fee and commission expense
21,599
15,123
Payment systems fees represent fees for MasterCard, Visa and other payment systems’ services. Service
fees represent fees for statement printing, mailing service, sms services and others. Payment channels
represent fees paid to third parties through whom borrowers make loan repayments. Costs of MVNO
services represent expenses for the traffic, telecommunications service and roaming.
Refer to Note 40 that describes the types of revenues recognized on a point in time basis and on the over
time basis.
59
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
22
Customer Acquisition Expense
In millions of RR
2020
2019
Marketing and advertising
Staff costs
Taxes other than income tax
Partnership expenses
Cards issuing expenses
Credit bureaux
10,636
6,689
1,869
1,065
890
8,106
5,916
1,413
979
411
697
878
Telecommunication expenses
Other acquisition
284
277
326
329
Total customer acquisition expenses
22,588
18,177
Customer acquisition expenses represent expenses paid by the Group on services related to origination of
customers which are not directly attributable to the recognised assets and are not incremental. The Group
uses a variety of different channels for the acquisition of new customers.
Staff costs represent salary expenses and related costs of employees directly involved in customer
acquisition. Included in staff costs are statutory social contributions to the state non-budgetary funds in the
amount of RR 1,650 million for the year ended 31 December 2020 (2019: RR 1,561 million).
23
Insurance Premiums Earned and Claims Incurred
In millions of RR
2020
2019
Insurance premiums earned
Insurance premiums on insurance, co-insurance and reinsurance operations
Change in provision for unearned premiums
Reinsurers' share
18,536
16,289
(2,178)
(1)
31
-
Total Insurance premiums earned
18,567
14,110
Insurance claims incurred
Insurance claims on insurance, co-insurance and reinsurance operations
Changes in loss provisions
Claims handling expenses
(3,500)
182
(497)
1
(2,923)
(1,243)
(733)
8
Reinsurers’ share
Total Insurance claims incurred
(3,814)
(4,891)
The Insurance company provides following types of insurance:
Personal accident insurance and collective insurance against accidents, illnesses or loss of work provides
compensation and financial protection in the event of injuries, disability, death or loss of loss of work of the
borrower. It is different from life insurance and medical and health insurance. In accordance with the terms
of individual insurance contracts, the policyholder and beneficiary is an individual who has entered into an
insurance contract. In accordance with the terms of the collective insurance contract, the insurer is the Bank
that has concluded the collective insurance contract with the Insurance Company, the beneficiary is the
insured individual.
Motor vehicle insurance and property insurance provides compensation for damage to a client’s vehicle or
other property.
60
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
23
Insurance Premiums Earned and Claims Incurred (Continued)
Compulsory third party liability insurance (CTP) contracts provide the insured with financial protection from
the risk of civil liability of vehicle owners, which may occur as a result of harm to life, health or property of
others when using vehicles.
Voluntary third party (VTP) risk insurance contracts provide the insured with financial protection in case of
insufficiency of insurance payment for compulsory third party liability insurance of motor vehicle owners
(CTP) to compensate for harm caused to life, health and / or property.
Travel insurance provides compensation in case of medical or other unforeseen expenses of the client
while being away from their place of permanent residence.
Staff and administrative expenses for insurance operations are included in Note 24.
24
Administrative and Other Operating Expenses
In millions of RR
Note
2020
2019
Staff costs
24,335
1,961
1,617
1,421
1,299
1,206
702
19,204
1,331
1,287
1,473
787
Amortization of intangible assets
Depreciation of fixed assets
Taxes other than income tax
Information services
Other provisions
Depreciation of right-of-use assets
Professional services
11
11
260
727
773
410
11
11
600
548
393
Short-term and low-value lease
Collection expenses
165
Office maintenance and office supplies
Communication services
Security expenses
391
275
189
684
383
280
167
605
Other administrative expenses
Total administrative and other operating expenses
35,621
27,852
The total fees charged by the Company's statutory auditor for the statutory audit of the annual consolidated
and separate financial statements of the Company for the year ended 31 December 2020 amounted to
RR 6.9 million (2019: RR 2.8 million). The total fees charged by the Company's statutory auditor for the
year ended 31 December 2020 for other assurance services amounted to RR 0.8 million (2019: RR 3.8
million), for tax advisory services amounted to RR 3.4 million (2019: RR 2.3 million) and for other non-
assurance services amounted to RR 0.1 million (2019: 2.2 million).
Included in staff costs are statutory social contributions to the non-budget funds and share-based
remuneration:
In millions of RR
2020
2019
Statutory social contribution to the non-budget funds
4,223
3,398
Total
4,223
3,398
Share-based remuneration
- Management long-term incentive programme
- Key employees retention plan
1,092
372
469
-
Total
1,464
469
The average number of employees employed by the Group during the reporting year, including those who
are working under civil contracts, was 25,970 (2019: 26,780).
61
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
25
Other Operating Income
2020
2019
In millions of RR
Subrogation fee
Reimbursement fee
Other
250
190
1,005
218
194
310
Total other operating income
1,445
722
26
Income Taxes
Income tax expense comprises the following:
In millions of RR
2020
2019
Current tax
Deferred tax
10,612
1,424
13,844
(4,431)
Total income tax expense
12,036
9,413
The income tax rate applicable to the majority of the Group’s income is 20% (2019: 20%). The operations
of the Group are subject to multiple tax jurisdictions. The income tax rate applicable to the Russian
subsidiaries of the Company is 20%. The income tax rate applicable to the Company registered in Cyprus
is 12.5% (2019: 12.5%).
A reconciliation between the expected and the actual taxation charge is provided below.
In millions of RR
2020
2019
Profit before tax
56,249
45,536
Theoretical tax expense at statutory rate of 20% (2019: 20%)
11,250
9,107
Tax effect of items, which are not deductible or assessable for taxation
purposes:
- Non-deductible expenses
- Other expenses including dividend tax
Unrecognised tax losses
418
709
109
272
38
226
Effects of different tax rates:
- Income on government and corporate securities taxed at different rates
- Results of companies of the Group taxed at different statutory rates
(448)
(2)
(214)
(16)
Income tax expenses for the year
12,036
9,413
Differences between IFRS and taxation regulations in Russia and other countries give rise to temporary
differences between the carrying amount of assets and liabilities for financial reporting purposes and their
tax bases. As all of the Group’s temporary differences arise in Russia, the tax effect of the movements in
these temporary differences is detailed below and is recorded at the rate of 20% (2019: 20%).
In the context of the Group’s current structure and Russian tax legislation, tax losses and current tax assets
of different group companies may not be offset against current tax liabilities and taxable profits of other
group companies and, accordingly, taxes may accrue even where there is a consolidated tax loss.
Therefore, deferred tax assets and liabilities are offset only when they relate to the same taxable entity and
the same taxation authority.
62
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
26
Income Taxes (Continued)
The tax effect of the movements in temporary differences for the year ended 31 December 2020 is detailed
below.
31
December
2019
(Charged)/
credited to
profit or loss
Credited to
31
OCI December
2020
In millions of RR
Tax effect of deductible and taxable temporary
differences
Loans and advances to customers
Tangible fixed assets
Right-of-use assets
3,515
(604)
(322)
(271)
(1,019)
-
(187)
339
(44)
35
98
136
26
-
-
-
-
3,550
(506)
(186)
(245)
(1,473)
(34)
377
231
(53)
(58)
(991)
2
Intangible assets
Revaluation of debt investments at FVOCI
Revaluation of debt investments at FVTPL
Accrued expenses and other temporary differences
Lease liabilities
Customer accounts
Debt securities in issue
(1,117)
(34)
564
(108)
(9)
663
-
-
-
-
-
-
-
(62)
40
(10)
4
Financial derivatives
Insurance provisions
(1,031)
12
Net deferred tax assets
1,375
(1,424)
663
614
The tax effect of the movements in temporary differences for the year ended 31 December 2019 is detailed
below.
31 1 January Credited/ Charged
31
December
2019 (charged)
to OCI December
2019
2018 (IFRS 16
to profit
or loss
In millions of RR
adoption)
Tax effect of deductible and taxable temporary
differences
Loans and advances to customers
Tangible fixed assets
Right-of-use assets
696
(601)
-
(285)
(487)
1
(773)
-
(21)
(40)
(324)
13
-
-
2,819
(3)
-
-
-
-
3,515
(604)
(322)
(271)
(1,019)
-
(187)
339
(44)
(334)
12
14
702
(1)
586
6
(23)
(22)
364
(23)
Intangible assets
-
-
-
-
Revaluation of debt investment at FVOCI
Revaluation of debt investment at FVTPL
Accrued expenses and other temporary differences
Lease liabilities
Customer accounts
Debt securities in issue
(1,234)
-
-
-
-
-
-
-
333
-
-
-
-
(62)
40
(10)
Financial derivatives
Insurance provisions
Net deferred tax (liabilities)/assets
(1,821)
(1)
4,431
(1,234)
1,375
63
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
27
Dividends
The movements in dividends during the year ended 31 December 2020 and 2019 are as follows:
In millions of RR
2020
2019
Dividends payable at 1 January
Dividends declared
Dividends paid
582
11,563
(11,853)
364
760
5,856
(5,601)
(433)
Foreign exchange differences and other movements
Dividends payable at 31 December
656
582
Dividends per share declared (in USD)
0.80
0.49
Dividends declared in the tables above represent dividends declared by the Board of directors are reduced
by RR 74 million for the year ended 31 December 2020 due to dividends on GDRs acquired by the Company
from the market not for the immediate purposes of the existing MLTIP (2019: RR 25 million).
On 11 November 2020 the Board of directors declared an interim dividend in line with the current dividend
policy of USD 0.25 (RR 19.10) per share/per GDR with a total amount allocated for dividend payment of
around USD 49.8 million (RR 3,807 million). Declared dividends were paid in USD on 30 November 2020.
On 5 August 2020 the Board of directors declared an interim dividend in line with the current dividend policy
of USD 0.20 (RR 14.68) per share/per GDR with a total amount allocated for dividend payment of around
USD 39.9 million (RR 2,925 million). Declared dividends were paid in USD on 24 August 2020.
On 11 May 2020 the Board of directors declared an interim dividend in line with the current dividend policy
of USD 0.14 (RR 10.34) per share/per GDR with a total amount allocated for dividend payment of around
USD 28 million (RR 2,061 million). Declared dividends were paid in USD on 1 and 2 June 2020.
On 10 March 2020 the Board of directors declared an interim dividend of USD 0.21 (RR 14.18) per
share/per GDR with a total amount allocated for dividend payment of around USD 41.9 million
(RR 2,826 million). Declared dividends were paid in USD on 30 March and 1 April 2020.
On 13 May 2019 the Board of directors declared an interim dividend of USD 0.17 (RR 11.09) per share/per
GDR amounting to USD 31.05 million (RR 2,026 million). Declared dividends were paid in USD on 28 and
30 May 2019.
On 11 March 2019 the Board of directors declared an interim dividend of USD 0.32 (RR 21.11) per
share/per GDR amounting to USD 58.4 million (RR 3,855 million). Declared dividends were paid in USD on
25 and 27 March 2019.
Dividends were declared and paid in USD throughout the years ended 31 December 2020 and 2019.
Dividends payable at 31 December 2020 related to treasury shares acquired under MLTIP amounting to
RR 656 million are included in other non-financial liabilities (31 December 2019: RR 582 million).
64
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
28
Reconciliation of Liabilities Arising from Financing Activities
The table below sets out an analysis of the Group’s debt and the movements in the Group’s debt for each
of the periods presented. The debt items are those that are reported as financing in the consolidated
statement of cash flows.
Debt
Perpetual
Lease
Total
securities in subordinated
liabilities
In millions of RR
issue
9,605
bonds
20,644
At 31 December 2018
-
30,249
Adoption of IFRS 16
-
(6,583)
23,254
(432)
-
-
46
1,665
(1,087)
1,665
(7,670)
23,300
(2,699)
1,414
Cash flows from repayments
Cash flows from proceeds
Foreign exchange adjustments
Other non-cash movements
(2,267)
64
-
234
1,116
At 31 December 2019
26,078
18,487
1,694
46,259
Cash flows from repayments
Cash flows from proceeds
Foreign exchange adjustments
Other non-cash movements
(2,894)
331
(1,937)
710
3,609
(114)
(758)
(5,589)
1,041
4,068
226
-
-
459
(64)
404
At 31 December 2020
23,910
20,755
1,340
46,005
29
Financial and Insurance Risk Management
The risk management function within the Group is carried out with respect to financial risks, operational
risks and legal risks by the management of the Bank and Insurance Company. Financial risk comprises
market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The
primary function of financial risk management is to establish risk limits and to ensure that any exposure to
risk stays within these limits. The operational and legal risk management functions are intended to ensure
the proper functioning of internal policies and procedures in order to minimize operational and legal risks.
Credit risk. The Group exposes itself to credit risk, which is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to meet an obligation. Exposure to credit risk arises
as a result of the Group’s lending and other transactions with counterparties giving rise to financial assets.
The Group grants retail loans and SME loans to customers across all regions of Russia, therefore its credit
risk is broadly diversified.
The management of the Group takes special measures to mitigate growing credit risk such as decreasing
of credit limits for unreliable clients, diversifying of modes of work with overdue borrowers, toughening of
scoring for the new borrowers etc., giving rise to financial assets and off-balance sheet credit-related
commitments.
The Group’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets in the
consolidated statement of financial position. For financial guarantees issued, commitments to extend credit,
undrawn credit lines, the maximum exposure to credit risk is the amount of the commitment (Note 31).
65
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The Bank created a credit committee, which establishes general principles for lending to individual
borrowers. According to these principles, the minimum requirements for potential customers are listed
below:
•
•
•
•
•
Citizenship of the Russian Federation;
Age from 18 to 70 y.o., but not older than 70 y.o. at the time of loan repayment;
Availability of a cell-phone;
Permanent employment;
Permanent income.
For cash loans, minimum requirements are listed below:
•
•
The requested loan term is from 3 to 36 months;
Cash loan volumes range between RR 50 thousand and RR 2,000 thousand.
For POS loans minimum requirements are listed below:
•
•
•
The requested loan amount should exceed RR 3 thousand;
The requested loan term is from 3 to 36 months;
The amount of one POS loan does not exceed RR 500 thousand.
For secured loans minimum requirements are listed below:
•
•
The requested loan secured with a car amount should be between RR 100 thousand and
RR 3,000 thousand, loan term is from 3 months to 5 years. The requirement for the car is in good
condition of driving with an age not more than 15 years, availability of a vehicle registration certificate
and vehicle passport;
The requested loan secured with a real estate amount should be between RR 200 thousand and
RR 15,000 thousand, loan term is from 3 months to 15 years. The requirement for the real estate is
an apartment in the apartment building within the Russian Federation, which is free from any
encumbrances.
For car loans minimum requirements are listed below:
•
•
•
The requested loan term is from 1 to 5 years;
Car loan volumes up to RR 3,000 thousand;
The requirement for the car is with an age not more than 18 years and availability of vehicle passport.
For loans to SME minimum requirements are listed below:
•
•
Working capital loan: loan volumes up to RR 10,000 thousand and loan term to 6 months;
Credit for individual entrepreneurs for any purpose: loan volumes up to RR 2,000 thousand and loan
term to 36 months;
•
•
•
Credit for individual entrepreneurs secured by real estate: loan volumes up to RR 15 million and loan
term to 15 years. The requirement for the real estate is an apartment in the apartment building within
the Russian Federation, which is free from any encumbrances;
Investment credit line secured by real estate: loan volumes up to RR 15 million and loan term to 5
years. The requirement for the real estate is an apartment in the apartment building within the
Russian Federation, which is free from any encumbrances;
For SME with a turnover from RR 120 million per year: loan volumes up to RR 60 million and loan
term to 5 years.
66
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
A credit decision process includes:
•
•
•
•
•
Validation of the application data. The system checks the validity of the data provided (addresses,
telephone numbers, age, if the applicant already uses any other products of the Bank);
Phone verification of the application information about the potential customer, his/her employment,
social and property status, etc. This step may be omitted for POS loans;
Requesting of the previous credit history of the applicant from the three largest credit bureaus in
Russia – Equifax, UCB (United Credit Bureau) and NBCH (National Bureau of Credit Histories);
Based on all available information, the credit score of the applicant is calculated and a final decision
is made about the approval of the credit product;
The approved loan amount, loan term and tariff plan are calculated depending on the score and
declared income.
Management of the Group manages the credit risk on unused limits on credit cards in the following way:
a)
b)
if the credit card loan is overdue for more than 7 days, its account will be blocked till repayment;
if the borrower had lost his/her source of income, then borrower account might be blocked till
verification of his/her new employment;
c)
if borrower’s loan debt burden in other banks is substantially bigger than at the time of loan origination
or the credit quality of the borrower decreases significantly then the borrower’s limit for credit might
be reduced accordingly.
When a customer experiences serious difficulties with his/her current debt servicing, he/she may be offered
loan restructuring. In this case the Bank stops accrual of interest, commissions and fines and the debt
amount is restructured according to a fixed instalment payment plan with not more than 36 equal monthly
payments. Another way of working with overdue loans is initiation of the state court process. This collection
option statistically gives greater recovery than the sale of credit-impaired loans. Defaulted clients that could
be subject to the court process are chosen by the Bank’s Collection Department considering the following
criteria:
a)
b)
c)
d)
e)
the client’s account balance was fixed, accrual of interest stopped;
information about the client is considered to be up to date;
the client denied restructuring program;
term of limitation of court actions has not expired;
court process is economically justified.
When loans become unrecoverable or not economically viable to pursue further collection efforts, the
Collection Department may decide to sell these loans to a debt collection agency. The Collection
Department considers the following criteria for credit-impaired loans qualifying for sale to external debt
collection agencies:
a)
loans remain unpaid after all collection procedures were performed (no payment during last 4-6
months);
b)
c)
d)
e)
the debtor cannot be either reached or found for the previous 4 months;
the debtor has no assets and there is no expectation he/she will have any in the future;
the debtor has died and there is no known estate or guarantor;
it is determined that it is not cost effective to continue collection efforts.
67
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
Credit risk grading system. For measuring credit risk and grading financial instruments except for loans
and advances to customers by the level of credit risk, the Group applies risk grades estimated by external
international rating agencies in case these financial instruments have risk grades estimated by external
international rating agencies (using Fitch ratings and in case of their absence - Moody’s or Standard &
Poor’s ratings adjusting them to Fitch’s categories using a reconciliation table):
Corresponding ratings of external international rating
Master scale credit risk grade
agency (Fitch)
Excellent
Good
Monitor
AAA, AA+ to AA-, A+ to A-
BBB+ to BBB-, BB+
BB to B+
Sub-standard
Doubtful
Default
B, B-
CCC+ to CC-
C, D
Each master scale credit risk grade is assigned a specific degree of creditworthiness:
•
•
•
•
•
•
Excellent – high credit quality with lowest or very low expected credit risk;
Good – good credit quality with currently low expected credit risk;
Monitor – adequate credit quality with a moderate credit risk;
Sub-standard – moderate credit quality with a satisfactory credit risk;
Doubtful – facilities that require closer monitoring and remedial management; and
Default – facilities in which a default has occurred.
For measuring credit risk and grading loans and advances to customers, credit related commitments and
those financial instruments which do not have risk grades estimated by external international rating
agencies, the Group applies risk grades and the corresponding range of probabilities of default (PD):
Master scale credit risk grade
Corresponding interval
Excellent
For credit cards: non-overdue with PD < 5%;
for other types of loans: non-overdue for the last 12 months with PD < 5% or with
early repayments
all other non-overdue loans
Good
Monitor
1-30 days overdue for all types of loans or without first due date for credit card
loans
Sub-standard
NPL
31-90 days overdue or restructured loans 0-90 days overdue
90+ days overdue
The condition of early repayments is satisfied, as described in the table above, if cumulative amount of
early repayments exceed 5% of the gross carrying amount at the date of recognition of the loan.
Each master scale credit risk grade is assigned a specific degree of creditworthiness:
•
•
•
Excellent – strong credit quality with minimum expected credit risk;
Good – adequate credit quality with low expected credit risk;
Monitor – adequate credit quality with a moderate credit risk and credit cards loans before the first
due date;
•
•
Sub-standard – low credit quality with a substantial credit risk, includes restructured loans that are
less than 90 days overdue;
NPL – non-performing loans, credit-impaired loans more than 90 days overdue.
68
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The rating models are regularly reviewed by the Credit Risk Department, backtested on actual default data
and updated if necessary. Despite the method used, the Group regularly validates the accuracy of ratings
estimates and appraises the predictive power of the models.
Expected credit loss (ECL) measurement – definitions and description of estimation techniques.
ECL is a probability-weighted estimate of the present value of future cash shortfalls (i.e., the weighted
average of credit losses, with the respective risks of default occurring in a given time period used as
weights). ECL measurement is based on the following components used by the Group:
Default occurs when a financial asset is 90 days past due or less than 90 days overdue but with the final
statement issued, i.e. the limit is closed, the balance is fixed, interest and commissions are no longer
accrued.
Probability of Default (PD) – an estimate of the likelihood of default to occur over a given time period.
Exposure at Default (EAD) – an estimate of exposure at a future default date, taking into account expected
changes in exposure after the reporting date, including repayments of principal and interest, and expected
drawdowns on committed facilities.
Loss Given Default (LGD) – an estimate of the loss arising on default as a percentage of the EAD. It is
based on the difference between the contractual cash flows due and those that the Group would expect to
receive.
Discount Rate – a rate to discount an expected loss to its present value at the reporting date. The discount
rate represents the effective interest rate (EIR) for the financial instrument or an approximation thereof.
Lifetime period – the maximum period over which ECL should be measured. For loans with fixed maturity,
the lifetime period is equal to 20 months. For revolving facilities, it is based on statistics of the average
period between the moment of the loan falling into the Stage 2 until the write-off or attrition. Currently the
Group estimates that this period equals to 4 years, though it is subject to periodical reassessment.
Lifetime ECL – losses that result from all possible default events over the remaining lifetime period of the
financial instrument.
12-month ECL – the portion of lifetime ECLs that represent the ECLs resulting from default events on a
financial instrument that are possible within 12 months after the reporting date that are limited by the
remaining contractual life of the financial instrument.
Forward looking information – the information that includes the key macroeconomic variables impacting
credit risk and expected credit losses for each portfolio segment. A pervasive concept in measuring ECL in
accordance with IFRS 9 is that it should consider forward-looking information.
Credit Conversion Factor (CCF) – a coefficient that shows that the probability of conversion of an off-
balance sheet amount to exposure on the consolidated statement of financial position within a defined
period. It can be calculated for a 12-month or lifetime period. Based on the analysis performed, the Group
considers that 12-month and lifetime CCFs are the same.
Purchased or originated credit-impaired (POCI) financial assets - financial assets that are credit-impaired
upon initial recognition.
69
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
Default and credit-impaired assets – assets for which a default event has occurred.
The default definition stated above should be applied to all types of financial assets of the Group.
An instrument is considered to no longer be in default (i.e. to have “cured”) when it no longer meets any of
the default criteria.
Significant increase in credit risk (SICR) – the SICR assessment is performed on an individual basis for all
financial assets by monitoring the triggers stated below. The criteria used to identify SICR are monitored
and reviewed periodically for appropriateness by the Group’s Risk Management Department.
The Group considers a financial instrument to have experienced a SICR when one or more of the following
quantitative, qualitative or backstop criteria have been met.
For interbank operations, bonds issued by banks and bonds issued by corporates and sovereigns:
•
•
•
30 days past due;
award of risk grade “Doubtful”;
decrease of assigned external rating by 2 notches, which corresponds to an approximate increase
of PD by 2.5 times.
For credit card loans:
•
•
30 days past due; or
threshold defined on an individual basis using existing scoring models: increase of the 12-month PD
compared to 12-month PD estimated 18 months ago or as of the date of initial recognition (if it
occurred less than 18 months ago) by 3 times or PD reaching 50% and above. 18-month period was
determined as the weighted average period of the most recent date where the credit limit was revised
by at least 25%, which is considered to be a substantial revision.
For all other loans:
•
•
30 days past due; or
if the loans were past due for more than 30 days during the last 6 months or if the loans fell past due
during the last 4 months more than once.
If the SICR criteria are no longer met, the instrument will be transferred back to Stage 1.
General principle of techniques applied
For non-POCI financial assets, ECLs are generally measured based on the risk of default over one of two
different time periods, depending on whether or not the credit risk of the borrower has increased significantly
since initial recognition.
This approach can be summarised in a three-stage model for ECL measurement:
•
•
Stage 1 – a financial instrument that is not credit-impaired on initial recognition and its credit risk has
not increased significantly since initial recognition, the loss allowance is based on 12-month ECLs;
Stage 2 – if since the date, which was assumed to be the date of initial recognition is identified a
SICR, the financial instrument is moved to Stage 2 but is not yet deemed to be credit-impaired, the
loss allowance is based on lifetime ECLs;
•
Stage 3 – if the financial instrument is credit-impaired or restructured, the financial instrument is then
moved to Stage 3 and the loss allowance is based on lifetime ECLs.
ECL for POCI financial assets is always measured on a lifetime basis (Stage 3), so at the reporting date,
the Group only recognises the cumulative changes in lifetime expected credit losses.
70
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The Group carries out two separate approaches for ECL measurement:
•
•
for loans and advances to customers: assessment on a portfolio basis: internal ratings are estimated
on an individual basis but the same credit risk parameters (e.g. PD, LGD) are applied during the
process of ECL calculations for the same credit risk ratings and homogeneous segments of the loan
portfolio;
for all other financial assets except FVTPL: assessment based on external ratings.
The Group performs an assessment on a portfolio basis for the retail loans. This approach incorporates
aggregating the portfolio into homogeneous segments based on borrower-specific information, such as
delinquency, the historical data on losses and other.
Principles of assessment on portfolio basis – to assess the staging of exposure and to measure a loss
allowance on a collective basis, the Group combines its exposures into segments on the basis of shared
credit risk characteristics, such as that exposures to risk within a group are homogeneous.
Examples of shared characteristics include type of customer, product type, credit risk rating, date of initial
recognition, overdue level and repayment statistics.
The different segments reflect differences in PD. The appropriateness of groupings is monitored and
reviewed on a periodic basis by the Risk Management Department.
In general, ECL is the multiplication of the following credit risk parameters: EAD, PD and LGD (definitions
of the parameters are provided above). The general approach used for ECL calculation is stated below.
where:
푃퐷푡 – probability of default in moment ꢀꢁ (can’t be higher than 100%);
푖
퐸퐴퐷푡 - exposure at default in moment ꢀꢁ;
푖
퐿퐺퐷푡 - loss given default in moment ꢀꢁ;
푖
ꢀꢁ – number of months in the loan’s lifetime;
퐸퐼푅 – effective interest rate;
푁 – remaining amount of payments.
The ECL is determined by predicting credit risk parameters (EAD, PD and LGD) for each future month
during the lifetime period for each exposure or segment. These three components are multiplied together.
This effectively calculates an ECL for each future month, which is then discounted back to the reporting
date and summed up. The discount rate used in the ECL calculation is the effective interest rate or an
approximation thereof.
The EADs are determined based on the expected payment profile, on an individual basis. For revolving
products, the EAD is predicted by taking the current withdrawn balance and adding a “credit conversion
factor” that accounts for the expected drawdown of the remaining limit of utilised loans by the time of default.
These assumptions vary by product type, current limit utilisation and other borrower-specific behavioural
characteristics. For other products EAD is equal to current exposure as there is no credit limit to utilize.
71
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
Two types of PDs are used for calculating ECLs: 12-month and lifetime PD:
•
•
12-month PDs – the estimated probability of a default occurring within the next 12 months. This
parameter is used to calculate 12-month ECLs. An assessment of a 12-month PD is based on the
latest available historic default data using borrower-specific behavioural characteristics and adjusted
for forward-looking information when appropriate. Based on borrower-specific PDs the exposures
are allocated to segments to which average PD for the segment is applied.
Lifetime PDs – the estimated probability of a default occurring over the remaining life of the financial
instrument. This parameter is used to calculate lifetime ECLs for Stage 2 and Stage 3 exposures. An
assessment of a lifetime PD is based on the latest available historic default data using product
specific lifetime periods defined above. To calculate Lifetime PD, the Group developed lifetime PD
curves based on the 12-month PD data.
LGD represents the Group's expectation of the extent of loss on a defaulted exposure. For credit card loans,
cash loans and POS loans LGDs are calculated on portfolio basis based on recovery statistics of defaulted
loans over the period of 24 or 36 months. For secured loans, car loans and loans to SME LGDs are
calculated using current market data in relation to the expected recoveries.
ECL measurement for loan commitments. The ECL measurement for these instruments includes the same
steps as described above for on-balance sheet exposures and differs with respect to EAD calculation. The
EAD is a product of credit conversion factor (“CCF”) and amount of the commitment. CCF for undrawn
credit limits of credit cards and overdrafts is defined based on statistical analysis of exposures at default.
Principles of assessment based on external ratings – the principles of ECL calculations based on external
ratings are the same as for their assessment on a portfolio basis. Credit risk parameters (PD and LGD) are
taken from the default and recovery statistics published by international rating agencies (Fitch and in case
of their absence - Moody’s or Standard & Poor’s).
Forward-looking information incorporated in the ECL models. The calculation of ECLs incorporates forward-
looking information. The Group has performed historical analysis and identified the key economic variables
impacting credit risk and ECLs for each portfolio. The list of variables:
•
•
•
Russian stock market index MOEX;
Moscow Prime Offered Rate;
Debt load of Russian population based on statistics from bureaus of credit history.
The impact of these economic variables on the ECL has been determined by performing statistical
regression analysis in order to understand the way how changes in these variables historically impacted
default rates. Three different scenarios are used: base, optimistic and pessimistic. The scenarios are
weighted accordingly with base scenario having the 71.1% (2019: 90.8%) weight, optimistic scenario having
the 0.1% (2019: 1.3%) weight and pessimistic scenario having the 28.8% (2019: 7.9%) weight.
Backtesting – the Group regularly reviews its methodology and assumptions to reduce any difference
between the estimates and the actual loss of credit. Such backtesting is performed on a quarterly basis.
The results of backtesting the ECL measurement methodology are communicated to Group Management
and further steps for refining models and assumptions are defined after discussions between authorised
persons.
Market risk. The Group takes on exposure to market risks. Market risks of the Group arise from open
positions in (a) currency and (b) interest rate, both of which are exposed to general and specific market
movements. The priority goal of market risk management is to maintain the risks assumed by the Group at
a level determined by the Group in accordance with its own strategic objectives. Management sets limits
on the value of risk that may be accepted, which is monitored on a daily basis. However, the use of this
approach does not prevent losses outside of these limits in the event of more significant market movements.
72
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
Currency risk. In respect of currency risk, the management sets limits on the level of exposure by currency
and in total for both overnight and intra-day positions, which are monitored daily.
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at the end of the
year:
31 December 2020
Non- Derivatives
At 31 December 2019
Non- Derivatives
Non-
Net
Non-
Net
derivative derivative
monetary monetary
position derivative derivative
monetary monetary
position
In
millions
of RR
financial
assets
financial
liabilities
financial
assets
financial
liabilities
RR
674,171
116,693
35,019
1,405
(545,395)
(140,851)
(31,909)
(1,414)
(24,276) 104,500
491,635
46,930
18,902
677
(390,010)
(62,098)
(20,261)
(675)
(12,995)
13,422
(595)
(32)
88,630
(1,746)
(1,954)
(30)
USD
Euro
GBP
Others
29,207
(5)
5,049
3,105
-
-
(9)
(513)
1,942
(2,455)
87
(788)
-
(701)
Total
829,230
(722,024)
4,926 112,132
558,231
(473,832)
(200)
84,199
Derivatives presented above are monetary financial assets or monetary financial liabilities but are
presented separately in order to show the Group’s gross exposure. Amounts disclosed in respect of
derivatives represent the fair value, at the end of the reporting period, of the respective currency that the
Group agreed to buy (positive amount) or sell (negative amount) before netting of positions and payments
with the counterparty. The amounts by currency are presented gross as stated in Note 35.
The net total represents the fair value of the currency derivatives. The above analysis includes only
monetary assets and liabilities.
The following table presents sensitivities of profit or loss and equity to reasonably possible changes in
exchange rates applied at the end of the reporting period, with all other variables held constant:
31 December 2020
At 31 December 2019
Impact on Impact on
Impact on
profit for the
year
Impact on
total profit for the
total
In millions of RR
equity
year
equity
USD strengthening by 20% (2019: by 20%)
USD weakening by 20% (2019: by 20%)
Euro strengthening by 20% (2019: by 20%)
Euro weakening by 20% (2019: by 20%)
GBP strengthening by 20% (2019: by 20%)
GBP weakening by 20% (2019: by 20%)
794
(794)
488
(488)
(1)
794
(794)
488
(488)
(1)
(277)
277
(310)
310
(5)
(277)
277
(310)
310
(5)
1
1
5
5
The exposure was calculated only for monetary balances denominated in currencies other than the
functional currency of the respective entity of the Group.
Interest rate risk. The Group takes on exposure to the effects of fluctuations in the prevailing levels of
market interest rates on its financial position and cash flows. Interest margins may increase as a result of
such changes but may reduce or create losses in the event that unexpected movements arise. Management
monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be
undertaken.
73
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The Group is exposed to prepayment risk through providing fixed rate loans, which give the borrower the
right to repay the loans early. The Group’s current year profit and equity at the end of the current reporting
period would not have been significantly impacted by changes in prepayment rates because such loans
are carried at amortised cost and the prepayment right is at or close to the amortised cost of the loans and
advances to customers (2019: no material impact).
The table below summarizes the Group’s exposure to interest rate risks. The table presents the aggregated
amounts of the Group’s financial assets and liabilities at carrying amounts, categorized by the earlier of
contractual interest repricing or maturity dates:
Demand and
less than
1 month
From 1 to
6 months 12 months
From 6 to
From 1 to
3 years
More than
3 years
Total
In millions of RR
31 December 2020
Total financial assets
Total financial liabilities
249,316
(379,481)
149,031
(165,961)
77,988
(75,564)
138,248
(90,975)
219,682
(10,152) (722,133)
834,265
Net interest sensitivity
gap at 31 December 2020
(130,165)
(16,930)
2,424
47,273
209,530
112,132
31 December 2019
Total financial assets
Total financial liabilities
136,773
(200,447)
153,392
(155,323)
66,962
(62,923)
121,755
(44,109)
80,306
(12,187) (474,989)
559,188
Net interest sensitivity
gap at 31 December 2019
(63,674)
(1,931)
4,039
77,646
68,119
84,199
The Group has no significant risk associated with variable interest rates on loans and advances provided
to customers or loans received.
The aim of interest rate risk management is to maintain the risks assumed by the Group within the limits
determined by the Group in accordance with its own strategic objectives. The interest rate risk is managed
by setting caps and floors in relation to interest rates on financial assets and liabilities depending on their
types and maturities and balancing the assets and liabilities which are sensitive to changes in interest rates.
The assessment of the magnitude of interest rate risk is carried out by performing a sensitivity analysis
which imply assessment of impact on net interest income of a shift in interest rates by 200 basis points. At
31 December 2020, if interest rates at that date had been 200 basis points lower/higher (2019: 200 basis
points), with all other variables held constant, profit for the year would have been RR 2,243 million (2019:
RR 1,684 million) lower/higher, equity would have been RR 2,243 million (2019: RR 1,684 million)
lower/higher.
74
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The Group monitors interest rates for its financial instruments. The table below summarizes interest rates
for the years 2020 and 2019 based on reports reviewed by key management personnel. For securities, the
interest rates represent yields to maturity based on market quotations at the reporting date:
31 December 2020
At 31 December 2019
In % p.a.
RR USD EURO GPB Other
RR USD EURO GPB
Other
Assets
Cash and cash equivalents
Loans and advances to
customers
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
33.5
3.2
6.9
6.9
-
-
1.7
-
1.3
-
-
-
-
-
-
-
-
-
-
-
37.2
5.3
7.9
6.5
-
1.6
4.3
4.3
-
-
-
-
-
-
-
-
-
-
-
-
Due from banks
Investments in securities
Repurchase receivables
Brokerage receivables
2.6
3.3
2.4
3.1
13.7
15.5 15.4
13.5
15.4 14.7
Liabilities
Due to banks
Customer accounts
Debt securities in issue
Brokerage payables
Subordinated debt
4.4
3.3
8.6
0.0
0.5
-
-
-
-
6.2
5.1
9.0
0.0
1
3.8
-
0.1
1.2
-
-
-
0.1
0.1
0.0
0.1
0.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15.6 15.6
10.0
15.8 15.3
10.0
-
-
-
The sign “-” in the table above means that the Group does not have the respective assets or liabilities in
the corresponding currency.
Geographical risk concentrations. The geographical concentration of the Group’s financial assets and
liabilities at 31 December 2020 is set out below:
Russia
OECD
Other
Non-OECD
Listed
Total
In millions of RR
Financial assets
Cash and cash equivalents
Mandatory cash balances with the CBRF
Due from other banks
Loans and advances to customers
Financial derivatives
Investments in securities
Repurchase receivables
Brokerage receivables
128,536
5,379
1,887
374,629
5,035
231,872
29
24,064
672
30,912
7,815
-
-
-
-
-
-
-
-
-
-
-
-
-
136,351
5,379
1,887
376,521
5,035
238,454
29
24,064
15,475
31,070
-
-
-
1,892
-
-
-
6,582
-
-
-
-
14,803
-
Guarantee deposits with payment systems
Other financial assets
158
Total financial assets
803,015
22,618
8,632
-
834,265
Financial liabilities
Due to banks
4,819
626,837
-
109
9,206
-
2,160
34,291
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46
-
-
4,819
626,837
23,910
109
9,206
20,755
2,160
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Subordinated debt
Insurance provisions
Other financial liabilities
23,910
-
-
20,755
-
-
34,337
Total financial liabilities
677,422
204,868
-
-
46
-
44,665
722,133
204,868
Credit related commitments (Note 31)
75
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The geographical concentration of the Group’s financial assets and liabilities at 31 December 2019 is set
out below:
Russia
OECD
Other
Listed
Total
In millions of RR
Non-OECD
Financial assets
Cash and cash equivalents
Mandatory cash balances with the CBRF
Due from other banks
Loans and advances to customers
Financial derivatives
Investments in securities
Brokerage receivables
Guarantee deposits with payment systems
Other financial assets
52,661
3,448
2,084
329,175
390
134,765
2,799
501
2,903
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55,564
3,448
2,084
329,175
390
135,178
2,799
-
-
-
413
-
8,376
-
8,877
21,673
21,673
Total financial assets
547,496
11,692
-
-
559,188
Financial liabilities
Due to banks
23
411,504
2,460
590
1,207
-
-
-
-
-
-
-
-
23
411,614
26,078
590
1,207
18,487
2,342
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Subordinated debt
Insurance provisions
Other financial liabilities
110
-
-
-
-
-
23,618
-
-
18,487
2,342
14,589
59
59
-
-
110
-
-
14,648
Total financial liabilities
432,715
168,059
42,105
474,989
168,059
Credit related commitments (Note 31)
Assets, liabilities and credit related commitments have been based on the country in which the counterparty
is located. Cash on hand has been allocated based on the country in which they are physically held.
Balances with Russian counterparties actually outstanding to/from offshore companies of these Russian
counterparties, are allocated to the caption “Russia”.
Other risk concentrations. Management monitors and discloses concentrations of credit risk by obtaining
reports listing exposures to borrowers with aggregated loan balances in excess of 10% of net assets. The
Group did not have any such significant risk concentrations at 31 December 2020 and 2019.
Liquidity risk. Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations
associated with financial liabilities. The Group is exposed to daily calls on its available cash resources from
unused limits on issued credit cards, retail deposits from customers, current accounts and due to banks.
The Group does not maintain cash resources to meet all of these needs as experience shows that only a
certain level of calls will take place and it can be predicted with a high level of certainty. Liquidity risk is
managed by the Financial Committee of the Bank. The Group seeks to maintain a stable funding base
primarily consisting of amounts due to institutional investors, corporate and retail customer deposits and
debt securities. The Group keeps all available cash in diversified portfolios of liquid instruments such as a
correspondent account with CBRF and overnight placements in high-rated commercial banks, in order to
be able to respond quickly and smoothly to unforeseen liquidity requirements. The available cash at all
times exceeds all accrued financing costs falling due within half a year plus two months of regular operating
costs.
76
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The liquidity management of the Group requires consideration of the level of liquid assets necessary to
settle obligations as they fall due; maintaining access to a range of funding sources; maintaining funding
contingency plans; and monitoring liquidity ratios against regulatory requirements.
The liquidity analysis takes into account the covenant requirements and ability of the Group to waive any
potential breaches within the grace period. The Bank calculates liquidity ratios on a daily basis in
accordance with the requirements of the CBRF. The Bank has complied with these ratios throughout 2020
and 2019. The CFO receives information about the liquidity profile of the financial assets and liabilities. This
includes daily, weekly, monthly and quarterly updates on the level of credit card transactions and
repayments, statistics on credit card issuance and credit card limit utilisation, inflow and outflow of retail
deposits, changes in the investment securities portfolio, level of expected outflows such as operating costs
and financing activities. The CFO then ensures the availability of an adequate portfolio of short-term liquid
assets, made up of an amount on the correspondent account with the CBRF and overnight deposits with
banks, to ensure that sufficient liquidity is maintained within the Group as a whole. Regular liquidity stress
testing under a variety of scenarios covering both normal and more severe market conditions and credit
card portfolio behaviour is reviewed by the CFO.
The table below shows liabilities at 31 December 2020 by their remaining contractual maturity. The amounts
of liabilities disclosed in the maturity table are the contractual undiscounted cash flows and gross loan
commitments. Such undiscounted cash flows differ from the amount included in the consolidated statement
of financial position because the consolidated statement of financial position amount is based on discounted
cash flows. When the amount payable is not fixed, the amount disclosed is determined by reference to the
conditions existing at the reporting date. Foreign currency payments are translated using the spot exchange
rate at the end of the reporting period.
The maturity analysis of financial liabilities at 31 December 2020 is as follows:
Demand
and less
From 1 From 3 to
to
From 6 to More than
1 year
Total
6 months 12 months
than 3 months
1 month
In millions of RR
Liabilities
Due to banks
-
-
84,412
316
198
-
-
80,149
515
251
-
-
80,306
1,930
501
-
4,819
49,184
23,245
25,842
-
4,819
629,761
26,179
26,843
9,206
24,110
2,160
34,337
1,348
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Subordinated debt
Insurance provisions
Other financial liabilities
Lease liabilities
335,710
173
51
9,206
168
345
34,337
64
322
207
-
496
953
-
998
358
-
22,126
297
-
102
166
330
686
Credit related commitments
(Note 31)
204,868
-
-
-
-
204,868
Total potential future
payments for financial
obligations
584,922
85,557
82,530
84,423
126,199
963,631
77
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The maturity analysis of financial liabilities at 31 December 2019 is as follows:
Demand
and less
than
From 1 to
3 months
From 3 to
6 months 12 months
From 6 to More than
Total
1 year
In millions of RR
1 month
Liabilities
Due to banks
23
189,176
168
-
84,108
338
199
-
-
70,530
487
203
-
-
60,627
2,082
399
-
-
11,605
23,795
19,833
-
23
416,046
26,870
20,634
1,207
20,312
2,342
14,648
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Subordinated debt
Insurance provisions
Other financial liabilities
Lease liabilities
-
1,207
149
463
291
917
-
440
438
-
891
296
-
18,541
228
14,648
-
11
109
111
209
1,254
1,694
Credit related commitments
(Note 31)
168,059
-
-
-
-
168,059
Total potential future
payments for financial
obligations
373,904
85,962
72,209
64,504
75,256
671,835
Financial derivatives receivable and payable are disclosed in the Note 35. The tables above present only
the gross payables.
Insurance provisions are disclosed in the table above based on their expected maturities.
Customer accounts are classified in the above analysis based on contractual maturities. However, in
accordance with the Russian Civil Code, individuals have a right to withdraw their deposits prior to maturity
if they forfeit their right to accrued interest.
The Group takes on exposure to liquidity risk, which is the risk of cash surplus in case of assets-liabilities
cash-flow profile mismatch. Exposure to liquidity risk arises as a result of the Group’s borrowing and
operational activities that assume cash payment obligations. The Group uses daily, short-term and long-
term reporting, stress-testing and forecasting practices to monitor and prevent potential liquidity problems.
The Group is actively increasing the number of counterparties for interbank lending, looks for new wholesale
markets, improves and creates additional debit and credit products to have more instruments over cash-
flow management. The recent economic situation has resulted in increased liquidity risk.
In response the management of the Group preserves cash safety cushions for possible cash outflows and
has planned Group’s liquidity position for the next year to ensure it can cover all upcoming payment
obligations.
78
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The expected maturity analysis of financial instruments at carrying amounts as monitored by management
at 31 December 2020 is presented in the table below.
Demand From 1 to From 3 to From 6 to From 1 to More than 5
Total
and less 3 months 6 months 12 months
5 years
years
than
In millions of RR
1 month
Assets
Cash and cash equivalents
Mandatory cash balances
with the CBRF
Due from other banks
Loans and advances to
customers
Financial derivatives
Investments in securities
Repurchase receivables
Brokerage receivables
Guarantee deposits with
payment systems
136,351
-
-
-
-
-
136,351
2,756
-
546
-
454
-
531
-
1,092
1,887
-
-
5,379
1,887
52,623
82
238,454
29
67,843
69,011
72,407
98,002
4,953
16,635
376,521
5,035
238,454
29
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,064
24,064
2,163
30,820
2,788
44
2,836
21
2,976
12
4,028
173
684
-
15,475
31,070
Other financial assets
Total financial assets
487,342
71,221
72,322
75,926 110,135
17,319
834,265
Liabilities
Due to banks
-
321,104
-
76
9,206
-
345
34,337
-
-
-
4,819
-
-
4,819
626,837
23,910
109
9,206
20,755
2,160
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Subordinated debt
Insurance provisions
Other financial liabilities
63,601
52,958
61,899 127,275
870
944
981
11,281
9,834
-
-
-
-
-
-
33
-
-
-
-
-
-
18,832
297
481
207
-
481
953
-
961
358
-
-
34,337
Total financial liabilities
365,068
122,274
65,159
6,062
55,336
16,986
64,199 162,537
9,834
7,485
722,133
112,132
-
Net liquidity gap at
31 December 2020
11,727
(52,402)
Cumulative liquidity gap at
31 December 2020
122,274 128,336 145,322
157,049 104,647
112,132
Provision for unearned premiums in the amount of RR 3,907 million is not included in the insurance
provisions stated above. Refer to Note 17.
79
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
The expected maturity analysis of financial instruments at carrying amounts as monitored by management
at 31 December 2019 is presented in the table below.
Demand
and less
From
1 to 3
From
3 to 6
From
6 to 12
From
1 to 5
years
More
than
5 years
Total
than months months months
1 month
In millions of RR
Assets
Cash and cash equivalents
Mandatory cash balances with the
CBRF
Due from other banks
Loans and advances to customers
Financial derivatives
Investments in securities
Brokerage receivables
Guarantee deposits with payment
systems
55,564
-
-
-
-
-
55,564
1,508
-
48,391
-
135,178
2,799
510
346
46
63,466
513
571
2,038
79,105
390
-
-
3,448
2,084
-
-
63,640
61,884
12,689 329,175
-
-
-
-
-
-
-
-
390
135,178
2,799
-
1,304
21,569
1,717
63
1,712
20
1,669
10
2,133
11
342
-
8,877
21,673
Other financial assets
Total financial assets
266,313
65,930
65,590
64,076
84,248
13,031 559,188
Liabilities
Due to banks
23
180,017
-
60,879
411
-
41,259
599
-
61,298
1,008
-
-
68,161
12,463
590
-
23
411,614
26,078
590
1,207
18,487
2,342
Customer accounts
Debt securities in issue
Financial derivatives
Brokerage payables
Subordinated debt
Insurance provisions
Other financial liabilities
-
11,597
-
-
-
-
-
1,207
-
463
14,648
158
917
-
-
438
-
-
296
-
18,329
-
-
-
228
-
14,648
Total financial liabilities
196,358
69,955
69,955
62,365
3,565
42,296
23,294
96,814
62,602
1,474
99,771
(15,523)
82,765
11,597 474,989
Net liquidity gap at
31 December 2019
1,434
84,199
Cumulative liquidity gap at
31 December 2019
73,520
98,288
84,199
-
Provision for unearned premiums in the amount of RR 1,760 million is not included in the insurance
provisions stated above. Refer to Note 17.
As at the 31 December 2020 all the investment in debt securities are classified within demand and less
than one month as they are easy repoable in CBR or on the open market securities and can provide
immediate liquidity to the Group. All current accounts of individuals are classified within demand and less
than one month (2019: the same).
The allocation of deposits of individuals considers the statistics of autoprolongations and top-ups of longer
deposits with the funds from shorter deposits after their expiration in case when the customers have more than
one active deposit. The matching and/or controlled mismatching of the maturities and interest rates of assets
and liabilities is fundamental to the management of the Group. It is unusual for banks ever to be completely
matched since business transacted is often of an uncertain term and of different types.
80
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
An unmatched position potentially enhances profitability but can also increase the risk of losses. The maturities
of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature,
are important factors in assessing the liquidity of the Group and its exposure to changes in interest and exchange
rates.
Management believes that in spite of a substantial portion of customer accounts being on demand,
diversification of these deposits by number and type of depositors, and the past experience of the Group
would indicate that these customer accounts provide a long-term and stable source of funding for the Group.
Insurance risk. Insurance risk is the risk associated with insurance contracts, consisting in the possibility
of the occurrence of an insurance event and the uncertainty of the amount and time of occurrence of the
loss associated with it.
The insurance risk management process covers all stages, from the stage of development of insurance
rates to the settlement of losses.
The main steps in the insurance risk management process include:
•
•
•
Underwriting and regulation of tariff policy;
Efficiency of the loss settlement process;
Diversification of the insurance portfolio.
Tariff policy. The process of underwriting and regulation of the tariff policy includes the formation of tariffs
for certain areas of activity based on the analysis of results for previous periods, existing market conditions
and the Insurance Company's strategy.
The insurance tariff is set on the basis of the analysis of the expected loss ratio based on Group’s insurance
portfolio and similar products on the market, the commission ratio based on the analysis of product
profitability and commission rates for similar products on the market, and the analysis of the average market
rate. When developing tariffs, factors such as expected inflation and changes in the legislation of the
Russian Federation are also taken into account.
The Insurance Company monitors the correctness of the calculation of the insurance premium under the
insurance contract by analyzing, on a regular basis, the deviations of the actual received premiums from
the estimated premiums.
Loss settlement process. In accordance with the insurance contract, the policyholder is obliged to notify the
insurance company of a loss within a certain period of time. Losses are settled by specialized units, other
than selling business units. The insurance claims will be paid only after receiving all the necessary
documents confirming the fact of the insured event. Also, if necessary, economic security department and
legal department are involved in checking documents for settlement of losses. If at the time of payment of
the insurance claims the policyholder had outstanding debt of the insurance premium, the unpaid part is
deducted from the amount of compensation.
If there is a third party that caused an insurance loss to the insured client, the Group has a right to pursue
third parties responsible for loss for payment of some or all costs related to the claims settlement process
of the Group.
Diversification of the insurance portfolio. To reduce insurance risk, the Group also uses the diversification
of its insurance portfolio - it insures a large number of small risks, which, in particular, is achieved through
the remote provision of insurance services almost throughout the Russian Federation. The company does
not operate outside the Russian Federation and is exposed to risks associated with the geographical
features of the regions of the Russian Federation.
Sensitivity analysis. The following analyses the possible changes in the key assumptions used in the
calculation of insurance liabilities under contracts other than life insurance, provided that the other
assumptions are constant. This analysis reflects the impact on gross and net liabilities, profit before tax and
equity of the Group.
81
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
29
Financial and Insurance Risk Management (Continued)
Effect of changes in the key assumptions as at 31 December 2020:
In millions of RR except for the number
of claims
Change in
assumptions
Effect on
insurance
obligations
other than
life
Effect on the Effect on Effect on
reinsurers'
profit
equity
share in before tax
insurance
obligations
insurance other than life
insurance
The average cost of insurance claims
The average number of claims
– 10%
+ 10%
(180)
180
1
(1)
179
(179)
143
(143)
– 10%
+ 10%
(180)
180
1
(1)
179
(179)
143
(143)
Effect of changes in the key assumptions as at 31 December 2019:
Change in
assumptions
Effect on Effect on the
Effect on
profit
Effect on
equity
insurance
obligations
other than
life
reinsurers'
share in before tax
insurance
obligations
In millions of RR except for the number
of claims
insurance other than life
insurance
The average cost of insurance claims
– 10%
+ 10%
(193)
193
1
(1)
193
(193)
154
(154)
The average number of claims
– 10%
+ 10%
(193)
193
1
(1)
(193)
193
154
(154)
30
Management of Capital
The Group’s objectives when managing capital are (i) for the Bank to comply with the capital requirements
set by the Central Bank of Russian Federation (CBRF), (ii) for the Insurance Company to comply with the
capital requirements set by the legislation of the Russian Federation, (iii) for the Group to comply with the
financial covenants set by the terms of securities issued; (iv) to safeguard the Group’s ability to continue
as a going concern.
The Group considers total capital under management to be equity attributable to shareholders of the
Company as shown in the consolidated statement of financial position. The amount of capital that the Group
managed as of 31 December 2020 was RR 127,016 million (31 December 2019: RR 96,082 million).
Compliance with capital adequacy ratios set by the CBRF is monitored daily and submitted to the CBRF
monthly with reports outlining their calculation reviewed and signed by the Bank’s Chief Executive Officer
and Chief Accountant. Other objectives of capital management are evaluated annually. The amount of
regulatory capital of Tinkoff Bank calculated in accordance with the methodology set by CBRF as at
31 December 2020 was RR 121,350 million, and the equity capital adequacy ratio (N1.0) was 13.07%
(31 December 2019: RR 99,731 million and 12.12%). Minimum required statutory equity capital adequacy
ratio (N1.0) was 8% as at 31 December 2020 (31 December 2019: 8%).
82
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
30
Management of Capital (Continued)
The Group also monitors capital requirements including capital adequacy ratio under the Basel III
methodology of the Basel Committee on Banking Supervision: global regulatory framework for more
resilient banks and banking systems (hereinafter “Basel III”). The composition of the Group’s capital
calculated in accordance with the methodology set by Basel Committee with capital adjustments as set out
in Basel III is as follows:
31 December
2020
31 December
2019
In millions of RR
Share capital
Share premium
Treasury shares
Share-based payment reserve
Retained earnings
Revaluation reserve for investments in debt securities
Less intangible assets
Non-controlling interest
230
26,998
(3,238)
1,548
99,540
1,849
(7,082)
89
230
26,998
(3,164)
1,039
66,880
3,996
(5,435)
103
Common Equity Tier 1 (CET1)
Additional Tier 1
119,934
20,755
90,647
18,487
Tier 1 capital
140,689
140,689
109,134
109,134
Total capital
Risk weighted assets (RWA)
Credit risk
Operational risk
Market risk
562,918
199,184
24,707
412,741
152,881
12,170
Total risk weighted assets (RWA)
786,809
577,792
Common equity Tier 1 capital adequacy ratio (CET1/ Total RWA), %
Tier 1 capital adequacy ratio (Tier 1 capital / Total RWA), %
Total capital adequacy ratio (Total capital / Total RWA), %
15.24%
17.88%
17.88%
15.69%
18.89%
18.89%
The Group and the Bank have complied with all externally imposed capital requirements throughout the
years ended 31 December 2020 and 2019.
The Insurance Company has complied with all capital requirements set by the legislation of the Russian
Federation throughout the years ended 31 December 2020 and 2019.
31
Contingencies and Commitments
Legal proceedings. From time to time and in the normal course of business, claims against the Group
may be received. On the basis of its own estimates and internal professional advice, management is of the
opinion that no material unprovided losses will be incurred in respect of claims.
83
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
31
Contingencies and Commitments (Continued)
Tax contingencies. Russian tax legislation which was enacted or substantively enacted at the end of the
reporting period, is subject to varying interpretations when being applied to the transactions and activities
of the Group. Consequently, tax positions taken by management and the formal documentation supporting
the tax positions may be challenged tax authorities. Russian tax administration is gradually strengthening,
including the fact that there is a higher risk of review of tax transactions without a clear business purpose
or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of
taxes for three calendar years preceding the year when decision about review was made. Under certain
circumstances reviews may cover longer periods. The Russian transfer pricing legislation is generally
aligned with the international transfer pricing principles developed by the Organisation for Economic
Cooperation and Development (OECD), although it has specific features. This legislation provides for the
possibility of additional tax assessment for controlled transactions (transactions between related parties
and certain transactions between unrelated parties), if such transactions are not on an arm's length.
Tax liabilities arising from controlled transactions are determined based on their actual transaction prices.
It is possible, with the evolution of the interpretation of transfer pricing rules, that such transfer prices could
be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be
significant to the financial position and/or the overall operations of the Group.
The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are
determined on the assumption that these companies are not subject to Russian profits tax, because they
do not have a permanent establishment in Russia. The Company is a tax resident of Cyprus only and full
beneficial owner of the Bank and Insurance Company. This interpretation of relevant legislation may be
challenged but the impact of any such challenge cannot be reliably estimated currently; however, it may be
significant to the financial position and/or the overall operations of the Group.
The Controlled Foreign Company (CFC) legislation introduced Russian taxation of profits of foreign
companies and non-corporate structures (including trusts) controlled by Russian tax residents (controlling
parties). The CFC income is subject to a 20% tax rate if the CFC is controlled by a legal entity and a rate
of 13% if it is controlled by an individual. As a result, management reassessed the Group’s tax positions
and recognised current tax expense as well as deferred taxes that arose from the expected taxable manner
of recovery of the relevant Group’s operations to which the CFC legislation applies to and to the extent that
the Group (rather than its owners) is obliged to settle such taxes.
In third quarter 2020 amendments to Russia-Cyprus double tax treaty were made. The Group is currently
assessing the impact of those amendments.
As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from
time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While
management currently estimates that the tax positions and interpretations that it has taken can probably be
sustained, there is a possible risk that outflow of resources will be required should such tax positions and
interpretations be challenged by the tax authorities. The impact of any such challenge cannot be reliably
estimated; however, it may be significant to the financial position and/or the overall operations of the Group.
As at 31 December 2020 and 2019 no material tax risks were identified.
Future lease payments related to leases where leased asset is of low value The future cash outflows
to which the Group is exposed and which are not reflected in the lease liabilities amounted to RR 233 million
at 31 December 2020 and relate primarily to leases of assets which are of low value (31 December 2019:
RR 268 million).
Compliance with covenants. The Group is subject to certain covenants related primarily to its
subordinated perpetual debt. Non-compliance with such covenants may result in negative consequences
for the Group. Management believes that the Group was in compliance with all such covenants as at
31 December 2020 and 31 December 2019.
Credit related commitments and performance guarantees issued. The primary purpose of these
instruments is to ensure that funds are available to a customer as required. Commitments to extend credit
represent unused portions of authorizations to extend credit in the form of credit card loans, guarantees.
With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an
amount equal to the total unused commitments, if the unused amounts were to be drawn down. Most
commitments to extend credit are contingent upon customers maintaining specific credit standards. The
Group monitors the term to maturity of credit related commitments because longer-term commitments
generally have a greater degree of credit risk than shorter-term commitments.
84
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
31
Contingencies and Commitments (Continued)
Performance guarantees are contracts that provide compensation if another party fails to perform a
contractual obligation. Such contracts do not transfer credit risk. The risk under performance guarantee
contracts is the possibility that the insured event (i.e. the failure to perform the contractual obligation by
another party) occurs. The key risks the Group faces are significant fluctuations in the frequency and
severity of payments incurred on such contracts relative to expectations. The Group uses a scoring model
to predict levels of such payments. Claims must be made before the contract matures and most claims are
settled within short term. This allows the Group to achieve a high degree of certainty about the estimated
payments and therefore future cash flows.
Outstanding credit related commitments and performance guarantees are as follows:
31 December
2020
31 December
2019
In millions of RR
Unused limits on credit card loans
Credit loss allowance
208,405
(3,537)
168,059
(2,242)
Total credit related commitments, net of сredit loss allowance
204,868
165,817
Performance guarantees issued
Provisions
498
(4)
660
(3)
Total performance guarantees issued, net of provisions
494
657
The total outstanding contractual amount of unused limits on contingencies and commitments liability does
not necessarily represent future cash requirements, as these financial instruments may expire or terminate
without being funded. In accordance with credit card service conditions the Group has a right to refuse the
issuance, activation, reissuing or unblocking of a credit card, and is providing a credit card limit at its own
discretion and without explaining its reasons.
The following table contains an analysis of credit related commitments by credit quality at
31 December 2020 based on credit risk grades.
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL
for credit
Total
In millions of RR
impaired)
Credit related commitments
- Excellent
- Good
- Monitor
180,619
14,905
12,546
-
84
251
-
-
-
180,619
14,989
12,797
Unrecognised gross amount
Credit loss allowance
208,070
(3,513)
204,557
335
(24)
311
-
-
-
208,405
(3,537)
204,868
Unrecognised net amount
The following table contains an analysis of credit related commitments by credit quality at
31 December 2019 based on credit risk grades.
85
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
31
Contingencies and Commitments (Continued)
Stage 1
Stage 2
Stage 3
Total
(12-months ECL)
(lifetime ECL for (lifetime ECL for
SICR) credit impaired)
In millions of RR
Credit related commitments
- Excellent
- Good
- Monitor
145,154
12,285
10,360
-
84
176
-
-
-
145,154
12,369
10,536
Unrecognised gross amount
Credit loss allowance
167,799
(2,228)
165,571
260
(14)
246
-
-
-
168,059
(2,242)
165,817
Unrecognised net amount
Also, the Group may decide to increase or decrease a credit card limit using a scoring model, which is
based on the client's behaviour model. Therefore, the fair value of the contractual amount of revocable
unused limits on contingencies and commitments is close to zero. Credit related commitments are
denominated in RR.
The following table contains an analysis of performance guarantees issued by credit quality based on credit
risk grades.
31 December
2020
31 December
2019
Stage 1
Stage 1
In millions of RR
(12-months ECL)
(12-months ECL)
Performance guarantees issued
- Excellent
- Good
310
188
415
245
Unrecognised gross amount
Provisions
498
660
(4)
(3)
Unrecognised net amount
494
657
Mandatory cash balances with the CBRF of RR 5,379 million as at 31 December 2020 (31 December 2019:
RR 3,448 million) represent mandatory reserve deposits which are not available to finance the Bank's day
to day operations.
86
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
32
Offsetting Financial Assets and Financial Liabilities
Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as
follows at 31 December 2020:
Gross
amounts
before
Gross
amounts set
off in the
Net amount
after
offsetting in
the
Amounts subject to master
netting and similar amount
arrangements not set off in
the consolidated statement
of financial position
Net
of
expo-
sure
offsetting consolidated
statement of consolidated
financial
position
statement of
financial
position
Financial
instruments
Cash
collateral
In millions of RR
ASSETS
Reverse repurchase agreements
Brokerage receivables
Financial derivatives
33,210
24,064
4,920
-
-
-
33,210
24,064
4,920
34,527
24,113
-
-
-
(1,317)
(49)
125
4,795
Total assets subject to offsetting,
master netting and similar
arrangement
62,194
-
62,194
58,640
4,795
(1,241)
LIABILITIES
Due to banks
Brokerage payables
4,819
9,206
-
-
4,819
9,206
4,949
9,696
-
-
(130)
(490)
Total liabilities subject to
offsetting, master netting and
similar arrangement
14,025
-
14,025
14,645
-
(620)
Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as
follows at 31 December 2019:
Gross
amounts
before
Gross
amounts set
off in the
Net amount
after
offsetting in
the
Amounts subject to master
netting and similar amount
arrangements not set off in
the consolidated statement
of financial position
Net
of
expo-
sure
offsetting consolidated
statement of consolidated
financial
position
statement of
financial
Financial
instruments
Cash
collateral
position
In millions of RR
ASSETS
Reverse repurchase agreements
Brokerage receivables
Due from banks
18,449
2,799
204
-
-
-
-
18,449
2,799
204
20,130
2,239
227
-
-
-
(1,681)
560
(23)
(3)
Financial derivatives
20
20
-
23
Total assets subject to offsetting,
master netting and similar
arrangement
21,472
-
21,472
22,596
23
(1,147)
LIABILITIES
Due to banks
Brokerage payables
Financial derivatives
23
1,207
227
-
-
-
23
1,207
227
20
1,282
-
-
-
3
(75)
23
204
Total liabilities subject to
offsetting, master netting and
similar arrangement
1,457
-
1,457
1,302
204
(49)
87
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
32
Offsetting Financial Assets and Financial Liabilities (Continued)
As at 31 December 2020 the Group has master netting arrangements with counterparty banks, which are
enforceable in case of default. The Group also made margin deposits with clearing house counterparty as
collateral for its outstanding derivative positions. The counterparty may set off the Group’s liabilities with
the margin deposit in case of default (2019: same). The disclosure does not apply to loans and advances
to customers and related customer deposits.
33
Transfers of Financial Assets
The Group transferred financial assets in transactions that did not qualify for derecognition in the current
periods.
The table below shows the amount of operations under sale and repurchase agreements which the Group
enters into in the normal course of business:
31 December 2020
31 December 2019
Carrying
amount of
the assets
Carrying
amount of
the
associated
liabilities
Carrying
amount of
the assets
Carrying
amount of
the
associated
liabilities
In millions of RR
Notes
Debt securities at FVOCI pledged under
repurchase agreements
13
29
24
-
-
Total
29
24
-
-
In the normal course of business, the Group makes borrowings on interbank market using different financial
instruments as collateral to support its everyday operations in terms of liquidity.
The Group also enters into reverse sale and repurchase agreements. The summary of such operations is
provided in the table below:
31 December 2020
31 December 2019
Amounts Fair value of
Amounts Fair value of
granted
under
securities
received as
collateral
granted
under
securities
received as
collateral
repo
repo
In millions of RR
Notes agreements
agreements
Cash and cash equivalents
Brokerage receivables
5
10
33,210
24,064
34,527
24,113
18,449
2,799
20,130
2,239
Total
57,274
58,640
21,248
22,369
88
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
34
Non-Controlling Interest
The following table provides information about each subsidiary that has non-controlling interest:
Place of Proportion Proportion
business of non- of non-
(and controlling controlling
Profit or
loss
attribu- controlling
table to
non-
Accumu-
lated non-
Dividends
paid to
non-
country
of
interest
interest’s
voting
interest in controlling
the
interest
during the
year
incorpo-
ration if
different)
rights held controlling subsidiary
interest
In millions of RR
Year ended 31 December
2020
LLC “Cloudpayments”
Russia
Russia
5%
5%
5%
5%
4
1
89
18
-
Year ended 31 December
2019
LLC “Cloudpayments”
103
The summarised financial information of these subsidiaries was as follows:
Current
assets current liabilities
assets
Non-
Current
Non- Revenue
current
liabilities
Profit
Total Cash
compre- flows
hensive
In millions of RR
income
Year ended
31 December 2020
LLC “Cloudpayments”
389
329
277
301
105
136
-
-
1,226
606
91
606
91
(13)
2
Year ended
31 December 2019
LLC “Cloudpayments”
512
35
Financial Derivatives
The table below sets out fair values, at the end of the reporting period, of currencies receivable or payable
under foreign exchange forwards and swap contracts entered into by the Group. The table reflects gross
positions before the netting of any counterparty positions (and payments) and covers the contracts with
settlement dates after the end of the respective reporting period.
31 December 2020
31 December 2019
Contracts
with positive
fair value
Contracts with
negative fair
value
Contracts with
Contracts with
negative fair
value
positive fair
value
In millions of RR
Foreign exchange forwards and
swaps: discounted notional
amounts, at the end of the
reporting period, of
- USD receivable on settlement (+)
- USD payable on settlement (-)
- RR receivable on settlement (+)
- RR payable on settlement (-)
- EUR payable on settlement (-)
- GBP payable on settlement (-)
29,311
-
8,768
(1,570)
1,896
(8,388)
(301)
8,888
(2,664)
2,971
(9,474)
(294)
-
75
(24,351)
(104)
-
-
(5)
-
-
-
(15)
(17)
Fair value of foreign exchange
forwards and swaps
5,035
(109)
390
(590)
89
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
36
Fair Value of Financial Instruments
Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are
measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two
measurements are valuation techniques with all material inputs observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are
valuations not based on observable market data (that is, unobservable inputs).
(a)
Recurring fair value measurements
Recurring fair value measurements are those that the accounting standards require or permit in the
consolidated statement of financial position at the end of each reporting period. The levels in the fair value
hierarchy into which the recurring fair value measurements are categorised are as follows:
31 December 2020
31 December 2019
Level 1 Level 2 Level 3
Total
Level 1 Level 2 Level 3
Total
In millions of RR
ASSETS AT FAIR VALUE
Loans and advances to
customers
Financial derivatives
Investments in securities
Repurchase receivables
-
-
5,035
6,256
-
1,892
1,892
5,035
238,454 133,239
29
-
-
-
390
1,939
-
-
-
-
-
-
390
135,178
-
-
232,198
29
-
-
-
-
Total assets recurring fair
value measurements
232,227 11,291
1,892 245,410 133,239
2,329
-
135,568
LIABILITIES AT FAIR
VALUE
Other financial liabilities
Financial derivatives
-
-
-
-
-
-
161
-
-
-
-
161
590
109
109
590
Total liabilities recurring
fair value measurements
-
109
-
109
161
590
-
751
Investments in securities categorised in level 2 are represented by liquid debt securities classified in “Good”
credit risk grade.
90
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
36
Fair Value of Financial Instruments (Continued)
The description of valuation techniques and the description of the inputs used in the fair value measurement
for level 2 and level 3 measurements at 31 December 2020 are as follows:
In millions of RR
Fair value Valuation technique
Inputs used
ASSETS AT FAIR VALUE
Observable quotes for comparable
securities adjusted by multiplicator
depending on the degree of the
Quotes from the automated fair
value system for financial
instruments of NSD Price
Center*
Investments in securities
6,256 market activity
Russian rouble curve.
USD Dollar Swaps Curve.
EUR Swaps Curve.
CDS quotes assessment of
counterparty credit risk or
reference entities.
Foreign exchange swaps and
forwards
Discounted cash flows adjusted for
5,035 counterparty credit risk
Total recurring fair value
measurements at level 2
11,291
Revaluation of the convertible loan
based on the Incantus Holding
Limited’s share price as per its most
recent sale purchase transactions
with shares of Incantus Holding
Share price as per the most
recent sale purchase
transaction
Loans and advances to
customers
1,892 Limited (Note 38)
Total recurring fair value
measurements at level 3
1,892
LIABILITIES AT FAIR VALUE
Russian rouble curve.
USD Dollar Swaps Curve.
EUR Swaps Curve.
CDS quotes assessment of
counterparty credit risk or
reference entities.
Foreign exchange swaps and
forwards
Discounted cash flows adjusted for
109 counterparty credit risk
Total recurring fair value
measurements at level 2
109
91
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
36
Fair Value of Financial Instruments (Continued)
The description of valuation techniques and the description of the inputs used in the fair value measurement
for level 2 measurements at 31 December 2019 are as follows:
Fair
value
In millions of RR
Valuation technique
Inputs used
ASSETS AT FAIR VALUE
Observable quotes for
comparable securities adjusted
Quotes from the automated fair
by multiplicator depending on the value system for financial
Investments in securities
1,939 degree of the market activity
instruments of NSD Price Center*
Russian rouble curve.
USD Dollar Swaps Curve.
EUR Swaps Curve.
CDS quotes assessment of
counterparty credit risk or
reference entities.
Foreign exchange swaps and
forwards
Discounted cash flows adjusted
390 for counterparty credit risk
Total recurring fair value
measurements at level 2
2,329
LIABILITIES AT FAIR VALUE
Russian rouble curve.
USD Dollar Swaps Curve.
EUR Swaps Curve.
CDS quotes assessment of
counterparty credit risk or
reference entities.
Foreign exchange swaps and
forwards
Discounted cash flows adjusted
590 for counterparty credit risk
Total recurring fair value
measurements at level 2
590
* NSD Valuation Center is a fair value measurement service for bonds and other financial instruments,
accredited by the CBRF.
There were no changes in the valuation techniques for level 2 recurring fair value measurements during
the year ended 31 December 2020 and 2019. Level 2 derivatives comprise foreign exchange forwards and
swaps.
The foreign exchange forwards have been fair valued using forward exchange rates that are quoted in an
active market. Foreign exchange swaps are fair valued using forward interest rates extracted from
observable yield curves. The effects of discounting are generally insignificant for level 2 derivatives.
Changes of the fair value measurements at Level 3 for the year ended 31 December 2020 are as follows:
In millions of RR
Loans and advances to customers
Fair value at the date of recognition
Other interest income
1,374
8
Net gains from foreign exchange translation
Net gains from revaluation of convertible loan
16
494
Fair value as at 31 December 2020 - Level 3
1,892
As at 31 December 2020, if the share price had been 10% lower/higher, fair value of loans and advances
to customers carried at fair value would have been RR 64 million lower/higher.
92
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
36
Fair Value of Financial Instruments (Continued)
(b)
Assets and liabilities not measured at fair value but for which fair value is disclosed
Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair
value are as follows:
31 December 2020
Level 2 Level 3 Carrying Level 1 Level 2
31 December 2019
Level 3 Carrying
Level 1
In millions of RR
value
value
FINANCIAL ASSETS CARRIED AT AMORTISED COST
Cash and cash
equivalents
- Cash on hand
- Cash balances with the
CBRF (other than
mandatory reserve
deposits)
21,069
-
-
-
-
21,069
38,646
11,118
-
-
-
-
11,118
16,599
38,646
16,599
- Placements with other
banks and non-bank
credit organizations with
original maturities of less
than three months
-
76,636
-
76,636
-
27,847
-
27,847
Mandatory cash
balances with the CBRF
Due from other banks
Loans and advances to
customers
-
-
5,379
1,887
-
-
5,379
1,887
-
-
3,448
2,084
-
-
3,448
2,084
-
-
374,996
374,629
-
-
329,340
329,175
Guarantee deposits with
payment systems
Brokerage receivables
-
-
-
15,475
-
15,475
24,064
-
-
-
8,877
-
8,877
2,799
24,064
2,799
Other financial assets
Settlement of operations
with plastic cards
receivable
-
-
23,882
7,188
-
-
23,882
7,188
-
-
16,384
5,289
-
-
16,384
5,289
Other receivables
Total financial assets
carried at amortised
cost
21,069
177,682
390,471
588,855
11,118
74,450
338,217
423,620
93
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
36
Fair Value of Financial Instruments (Continued)
Fair values analysed by level in the fair value hierarchy and carrying value of liabilities not measured at fair
value are as follows:
31 December 2020
Level 2 Level 3 Carrying Level 1
value
31 December 2019
Level 2 Level 3 Carrying
value
Level 1
In millions of RR
FINANCIAL LIABILITIES CARRIED AT AMORTISED COST
Due to banks
-
-
4,819
9,206
-
-
4,819
9,206
-
-
23
1,207
-
-
23
1,207
Brokerage payables
Customer accounts
Individuals
-Current/demand accounts
- Brokerage accounts
-Term deposits
-
-
-
323,145
73,970
138,971
-
-
-
323,145
73,970
135,995
-
-
-
199,408
12,253
139,114
-
-
-
199,408
12,253
137,292
SME
-Current/demand accounts
-Term deposits
-
-
89,199
1,915
-
-
89,199
2,213
-
-
60,174
1,879
-
-
60,174
1,880
Other legal entities
-Current/demand accounts
-Term deposits
-
-
2,267
48
-
-
2,267
48
-
-
495
112
-
-
495
112
Debt securities in issue
RR Bonds issued on
domestic market
Euro-Commercial Paper
Subordinated debt
Perpetual subordinated
bonds
24,824
-
-
-
-
-
23,910 24,442
-
-
-
23,618
2,460
-
-
2,460
22,174
-
-
20,755 19,604
-
-
18,487
Other financial liabilities
Settlement of operations
with plastic cards
Trade payables
Credit related commitments
Other financial liabilities
-
-
-
-
23,079
6,150
-
-
-
-
-
23,079
6,150
3,537
1,571
-
-
-
-
6,427
4,621
-
-
-
-
-
6,427
4,621
2,242
1,358
1,571
1,358
Total financial liabilities
carried at amortised cost
46,998 674,340
-
719,864 44,046 429,531
-
472,057
Fair value is the amount at which a financial instrument could be exchanged in a current transaction
between willing parties, other than in a forced sale or liquidation, and is best evidenced by an active quoted
market price. Where quoted market prices are not available, the Group used valuation techniques. The fair
value of floating rate instruments that are not quoted in an active market was estimated to be equal to their
carrying amount. The fair value of unquoted fixed interest rate instruments was estimated based on
estimated future cash flows expected to be received discounted at current interest rates for new instruments
with similar credit risk and remaining maturity.
As at 31 December 2020 and 2019 the fair value of the debt securities in issue and subordinated debt has
been calculated based on quoted prices from the Moscow Exchange MICEX-RTS, St. Petersburg
Exchange and Global Exchange Market, where the Group’s debt securities are listed and traded.
94
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
36
Fair Value of Financial Instruments (Continued)
Weighted average discount rates used in determining fair value as of 31 December 2020 and 2019 are
disclosed below:
31 December
2020
31 December
2019
In % p.a.
Assets
Cash and cash equivalents
Due from other banks
Loans and advances to customers
Investments in securities
Repurchase receivables
Brokerage receivables
0.0
3.2
33.5
5.4
5.1
15.4
0.0
5.2
37.2
7.1
4.7
15.2
Liabilities
Due to banks
4.4
2.2
6.1
15.6
5.3
7.2
3.9
7.5
15.5
6.8
Customer accounts
Debt securities in issue
Brokerage payables
Subordinated debt
37
Presentation of Financial Instruments by Measurement Category
For the purposes of measurement, IFRS 9 “Financial Instruments” classifies financial assets into the
following categories: (a) financial assets at FVTPL; (b) financial assets at FVOCI and (c) financial assets at
AC. Financial assets at FVTPL have two sub-categories: (i) assets measured at FVTPL mandatorily, and
(ii) assets designated as such upon initial recognition.
The following table provides a reconciliation of classes of financial assets with these measurement
categories as of 31 December 2020:
In millions of RR
AC
FVTPL
FVOCI
Total
Cash and cash equivalents
- Cash on hand
- Cash balances with the CBRF (other than mandatory
reserve deposits)
21,069
38,646
-
-
-
-
21,069
38,646
- Placements with other banks and non-bank credit
organizations with original maturities of less than three
months
Mandatory cash balances with the CBRF
Due from other banks
76,636
5,379
1,887
374,629
-
-
-
-
-
76,636
5,379
1,887
376,521
5,035
Loans and advances to customers
Financial derivatives
1,892
5,035
-
-
Guarantee deposits with payment systems
Investments in securities
Repurchase receivables
15,475
-
-
-
15,475
238,454
29
4,265
234,189
-
-
-
29
-
Brokerage receivables
24,064
24,064
Other financial assets
- Settlement of operations with plastic cards receivable
- Other receivables
23,882
7,188
-
-
-
-
23,882
7,188
TOTAL FINANCIAL ASSETS
588,855
11,192
234,218
834,265
95
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
37
Presentation of Financial Instruments by Measurement Category (Continued)
The following table provides a reconciliation of classes of financial assets with these measurement
categories as of 31 December 2019:
In millions of RR
AC
FVTPL
FVOCI
Total
Cash and cash equivalents
- Cash on hand
11,118
16,599
-
-
-
-
11,118
16,599
- Cash balances with the CBRF (other than
mandatory reserve deposits)
- Placements with other banks and non-bank credit
organizations with original maturities of less than
three months
Mandatory cash balances with the CBRF
Due from other banks
Loans and advances to customers
Financial derivatives
27,847
3,448
2,084
329,175
-
-
-
-
-
27,847
3,448
2,084
329,175
390
8,877
135,178
2,799
-
390
-
413
-
-
-
Guarantee deposits with payment systems
Investments in securities
Brokerage receivables
8,877
-
2,799
-
134,765
-
Other financial assets
- Settlement of operations with plastic cards
receivable
- Other receivables
16,384
5,289
-
-
-
-
16,384
5,289
TOTAL FINANCIAL ASSETS
423,620
803
134,765
559,188
As of 31 December 2020 and 2019 all of the Group’s financial liabilities except derivatives were carried at
amortised cost.
96
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
38
Related Party Transactions
Parties are generally considered to be related if the parties are under common control or one party has the
ability to control the other party or can exercise significant influence over the other party in making financial
or operational decisions. In considering each possible related party relationship, attention is directed to the
substance of the relationship, not merely the legal form. Other related parties (excluding associates and
joint ventures) in the tables below are represented by entities which are under the control of the Group’s
ultimate controlling party Oleg Tinkov. The outstanding balances with related parties were as follows:
31 December 2020
31 December 2019
Key
Associates,
Key
Associates,
management
joint management
joint
personnel ventures and
other related
personnel ventures and
other related
In millions of RR
parties
parties
ASSETS
Gross amounts of loans and advances to
customers (contractual interest rate: 1.7-
16.5% p.a. (31 December 2019: 11.7-25.7%
p.a.))
422
-
1,892
158
437
-
150
843
Other financial assets
TOTAL ASSETS
422
2,050
437
993
LIABILITIES
Customer accounts (contractual interest rate:
0.8-3.7% p.a. (31 December 2019: 0.5-7.2%
p.a.))
1,221
2,086
1,779
227
Debt securities in issue (yield: 1.0-3.6% p.a.
(31 December 2019: 1.0-3.6% p.a.))
Other non-financial liabilities
-
-
-
-
2,460
-
584
521
TOTAL LIABILITIES
1,805
2,086
2,300
2,687
EQUITY
Share-based payment reserve
- Management long-term incentive program
1,378
-
930
-
TOTAL EQUITY
1,378
-
930
-
At 31 August 2020 the Group acquired 22.15% shareholding in Incantus Holding Limited, which is a group
of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding
CIS). The investment in Incantus Holding Limited was classified as an investment in associates and
accounted for using the equity method. Also the Group provided a convertible loan to Incantus Holding
Limited in the amount of EUR 15.4 million (RR 1,374 million) at 1.7% p.a. with a maturity date of 31 August
2025. The convertible loan agreement implies that the Group may convert the loan into the borrower's
shares at the price of initial acquisition of shares of Incantus Holding Limited by the Group subject to
compliance with a number of conversion requirements including a cap in relation to overall shareholding of
the Group in Incantus Holding Limited of 24.5%.
As at 31 December 2020 the shareholding of the Group in Incantus Holding Limited is equal to 16.32%,
and the carrying value of the convertible loan is equal to RR 1,892 million. The Company has extended
rights under the Shareholder Agreement at the board meeting level (Board Reserved matters) and at the
shareholder meeting level (Shareholder Reserved matters) in Incantus Holding Limited which provides the
Company significant influence over it and allows to treat it as associate.
97
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
38
Related Party Transactions (Continued)
The income and expense items with related parties were as follows:
2020
2019
Key Associates,
Key Associates,
management
personnel
joint management
joint
ventures
and other
related
ventures
and other
related
personnel
In millions of RR
parties
parties
Interest income calculated using the effective
interest rate method
Other similar income
18
-
32
8
2
-
27
-
Interest expense calculated using effective interest
rate method
Net (losses)/gains from foreign exchange translation
Net gains from financial assets at FVTPL
Administrative and other operating expenses
Other operating income
(29)
(33)
(40)
494
(248)
447
(64)
(101)
31
-
-
-
(2,895)
-
-
(1,913)
-
-
(173)
49
Key management compensation is presented below:
In millions of RR
2020
2019
Short-term benefits:
- Salaries
- Short-term bonuses
1,086
921
906
586
Long-term benefits:
- Management long-term incentive programme
- Key employees retention plan
862
26
421
-
Total
2,895
1,913
Key employees retention plan (KERP). On 14 April 2020 the Group launched a new long term incentive
program for more than 250 senior and middle management level employees. The purpose of the program
is to retain and motivate key employees with high potential. This is a performance-based cash-settled
program linked to the market price of GDRs. The expenses related to those participants who are considered
to be key management personnel are disclosed in the table above.
Management long-term incentive program. On 31 March 2016 the Group introduced a MLTIP as both a
long-term incentive and a retention tool for the management of the Group. Total number of GDRs
attributable to the management is 15,290 thousand as at 31 December 2020 (31 December 2019:
9,940 thousand).
Participants of the program receive the vested parts of their grants provided that they remain employed by
the Group throughout the vesting period. Participants are entitled to the dividends, if any. Participants who
leave the Group lose their right for the unvested parts of the grants.
The fair value of the awards as at grant dates (31 March 2016, 8 February 2017, 22 February 2018,
15 January 2019, 5 June 2020 and 11 December 2020) is determined on the basis of market quotes of
GDRs as at those dates.
Each grant before 2020 is divided into 4 equal awards. Each award vests over 4 years in equal tranches.
The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the
vesting dates 31 March, as well as each subsequent 31 March (with the exception of 2019 when the vesting
date for all participants was 31 January 2019) until 2022 for participants joining in 2016, until 2023 for
participants joining in 2017, until 2024 for participants joining in 2018, until 2025 for participants joining in
2019.
98
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
38
Related Party Transactions (Continued)
Each grant provided in 2020 is divided into 5 equal tranches. The delivery dates as of which the GDRs are
allowed to be sold by the participants correspond to the vesting dates 31 August, as well as each
subsequent 31 August until 2025.
The following table discloses the changes in the numbers of GDRs attributable to the MLTIP:
Number of GDRs
In thousands
attributable to the MLTIP
At 31 December 2018
6,178
Granted
Vested
Forfeited
91
(2,419)
(68)
At 31 December 2019
3,782
Granted
Vested
Forfeited
5,350
(1,810)
(46)
At 31 December 2020
7,276
39
Events after the End of the Reporting Period
On 10 March 2021 the Board of directors declared an interim dividend in line with the current dividend policy
of USD 0.24 per share/per GDR with a total amount allocated for dividend payment of approximately
USD 47.8 million.
On 7 January 2021 all 69,914,043 class B shares (35.08% of the total number of issued shares) held by
the Rigi Trust and the Bernina Trust were converted to class A shares and on the same date all isued
shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries
a single vote, and the total number of votes capable of being exercised are equal to the total number of
issued shares (currently 199,305,492 shares following the class B share conversion). As a result of the
conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from 84.38% to 35.08%. As a result his
control over the Group was ceased.
40
Significant Accounting Policies
Basis of preparation. These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU) and the
requirements of the Cyprus Companies Law Cap. 113.
The consolidated financial statements have been prepared under the historical cost convention, as modified
by the initial recognition of financial instruments based on fair value, and by revaluation of financial
instruments categorised at fair value through profit or loss (“FVTPL”) and at fair value through other
comprehensive income (“FVOCI”). The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been consistently applied to all
the periods presented, unless otherwise stated. Refer to Note 41. Management prepared these
consolidated financial statements on a going concern basis.
99
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
Consolidated financial statements. Subsidiaries are those investees, including structured entities, that
the Group controls because the Group (i) has power to direct relevant activities of the investees that
significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the
investees, and (iii) has the ability to use its power over the investees to affect the amount of investor’s
returns. The existence and effect of substantive rights, including substantive potential voting rights, are
considered when assessing whether the Group has power over another entity. For a right to be substantive,
the holder must have practical ability to exercise that right when decisions about the direction of the relevant
activities of the investee need to be made. The Group may have power over an investee even when it holds
less than majority of voting power in an investee.
In such a case, the Group assesses the size of its voting rights relative to the size and dispersion of holdings
of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other
investors, such as those that relate to fundamental changes of investee’s activities or apply only in
exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are
consolidated from the date on which control is transferred to the Group (acquisition date) and are
deconsolidated from the date on which control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries other than those
acquired from parties under common control. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest.
The Group measures non-controlling interest that represents present ownership interest and entitles the
holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis,
either at: (a) fair value, or (b) the non-controlling interest's proportionate share of net assets of the acquiree.
Non-controlling interests that are not present ownership interests are measured at fair value.
Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration
transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an
interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative
goodwill”) is recognised in profit or loss, after management reassesses whether it identified all the assets
acquired and all liabilities and contingent liabilities assumed, and reviews appropriateness of their
measurement.
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity
instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from
contingent consideration arrangements, but excludes acquisition related costs such as advisory, legal,
valuation and similar professional services. Transaction costs incurred for issuing equity instruments are
deducted from equity; transaction costs incurred for issuing debt are deducted from its carrying amount and
all other transaction costs associated with the acquisition are expensed.
Intercompany transactions, balances and unrealised gains on transactions between group companies are
eliminated; unrealised losses are also eliminated unless the cost cannot be recovered. The Company and
all of its subsidiaries use uniform accounting policies consistent with the Group’s policies.
Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests
which are not owned, directly or indirectly, by the Group. Non-controlling interest forms a separate
component of the Group’s equity.
When the Group acquires a dormant company with no business operations holding an asset and this asset
is the main reason of acquisition of the company such transaction is treated as an asset acquisition. No
goodwill is recognized as a result of such acquisition.
Purchases and sales of non-controlling interests. The Group applies the economic entity model to
account for transactions with owners of non-controlling interest. Any difference between the purchase
consideration and the carrying amount of non-controlling interest acquired is recorded as a capital
transaction directly in equity. The Group recognises the difference between sales consideration and
carrying amount of non-controlling interest sold as a capital transaction in the consolidated statement of
changes in equity.
100
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
Associates. Associates are entities over which the Group has significant influence (directly or indirectly),
but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights.
Investments in associates are accounted for using the equity method of accounting and are initially
recognised at cost. The carrying amount of associates includes goodwill identified on acquisition less
accumulated credit losses, if any. Dividends received from associates reduce the carrying value of the
investment in associates. Other post-acquisition changes in Group’s share of net assets of an associate
are recognised as follows: (i) the Group’s share of profits or losses of associates is recorded in the
consolidated profit or loss for the year as share of result of associates, (ii) the Group’s share of other
comprehensive income is recognised in other comprehensive income and presented separately, (iii); all
other changes in the Group’s share of the carrying value of net assets of associates are recognised in profit
or loss within the share of result of associates.
However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate. Otherwise the Group continue to
recognise further losses if it has commitments to fund the associate’s operations.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the
Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
The Group applies the impairment requirements in IFRS 9 to long-term loans and similar long-term interest
that in substance form part of the investment in associate before reducing the carrying value of the
investment by a share of a loss of the investee that exceeds the amount of the Group’s interest in the
ordinary shares.
Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or
significant influence, any retained interest in the entity is remeasured to its fair value, with the change in
carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint venture or financial asset. In
addition, any amounts previously recognised in other comprehensive income in respect of that entity, are
accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that
amounts previously recognised in other comprehensive income are recycled to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive income are reclassified to profit or
loss, where appropriate.
Financial instruments – key measurement terms. Depending on their classification financial instruments
are carried at fair value or amortised cost as described below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The best evidence of fair value is price
in an active market. An active market is one in which transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing basis. Fair value of financial
instruments traded in an active market is measured as the product of the quoted price for the individual
asset or liability and the quantity held by the entity. This is the case even if a market’s normal daily trading
volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single
transaction might affect the quoted price.
The price within the bid-ask spread which management considers to be the most representative of fair value
for quoted financial assets and liabilities is the last bid price of the business day. A portfolio of financial
derivatives or other financial assets and liabilities that are not traded in an active market is measured at the
fair value of a group of financial assets and financial liabilities on the basis of the price that would be
received to sell a net long position (an asset) for a particular risk exposure or paid to transfer a net short
position (a liability) for a particular risk exposure in an orderly transaction between market participants at
the measurement date.
101
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
This is applicable for assets carried at fair value on a recurring basis if the Group: (a) manages the group
of financial assets and financial liabilities on the basis of the entity’s net exposure to a particular market risk
(or risks) or to the credit risk of a particular counterparty in accordance with the entity’s documented risk
management or investment strategy; (b) it provides information on that basis about the group of assets and
liabilities to the entity’s key management personnel; and (c) the market risks, including duration of the
entity’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities
is substantially the same.
Valuation techniques such as discounted cash flow models or models based on recent arm’s length
transactions or consideration of financial data of the investees, are used to measure fair value of certain
financial instruments for which external market pricing information is not available.
Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are
measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two
measurements are valuations techniques with all material inputs observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are
valuations not based on solely observable market data (that is, the measurement requires significant
unobservable inputs). Transfers between levels of the fair value hierarchy are deemed to have occurred at
the end of the reporting period. Refer to Note 36.
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of
a financial instrument. An incremental cost is one that would not have been incurred if the transaction had
not taken place. Transaction costs include fees and commissions paid to agents (including employees
acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities
exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts,
financing costs or internal administrative or holding costs.
Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition
less any principal repayments, plus accrued interest, and for financial assets less any allowance for
expected credit losses. Accrued interest includes amortisation of transaction costs deferred at initial
recognition and of any premium or discount to maturity amount using the effective interest method. Accrued
interest income and accrued interest expense, including both accrued coupon and amortised discount or
premium (including fees deferred at origination, if any), are not presented separately and are included in
the carrying values of related items in the consolidated statement of financial position.
The effective interest method is a method of allocating interest income or interest expense over the relevant
period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
(excluding future credit losses) through the expected life of the financial instrument or a shorter period, if
appropriate, to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.
The calculation does not consider expected credit losses and includes transaction costs, premiums or
discounts and fees and points paid or secured that are integral to the effective interest rate such as
origination fees.
The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing
date, except for the premium or discount, which reflects the credit spread over the floating rate specified in
the instrument, or other variables that are not reset to market rates. Such premiums or discounts are
amortised over the whole expected life of the instrument. The present value calculation includes all fees
paid or received between parties to the contract that are an integral part of the effective interest rate.
For assets that are purchased or originated credit impaired (“POCI”) at initial recognition, the effective
interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial
recognition instead of contractual payments.
102
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair
value. All other financial instruments are initially recorded at fair value adjusted for transaction costs that
are incremental and directly attributable to the acquisition or the issue of the financial asset or financial
liability. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial
recognition is only recorded if there is a difference between fair value and transaction price which can be
evidenced by other observable current market transactions in the same instrument or by a valuation
technique whose inputs include only data from observable markets.
After the initial recognition, an ECL allowance is recognised for financial assets measured at AC and
investments in debt instruments measured at FVOCI, resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery within the time frame established by
regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is
the date on which the Group commits to deliver a financial asset.
The Group uses discounted cash flow valuation techniques to determine the fair value of currency swaps,
foreign exchange forwards that are not traded in an active market. Differences may arise between the fair
value at initial recognition, which is considered to be the transaction price, and the amount determined at
initial recognition using a valuation technique. The differences are immediately recognised in profit or loss
if the valuation uses only level 1 or level 2 inputs.
Financial assets – classification and subsequent measurement – measurement categories. The
Group classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The
classification and subsequent measurement of debt financial assets depends on:
•
•
the Group’s business model for managing the related assets portfolio and
the cash flow characteristics of the asset.
Financial assets – classification and subsequent measurement – business model. The business
model reflects how the Group manages the assets in order to generate cash flows – whether the Group’s
objective is:
•
•
•
solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”);
or
to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to
collect contractual cash flows and sell”);
if neither of i) and ii) is applicable, the financial assets are classified as part of “other” business model
and measured at FVTPL.
Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence
about the activities that the Group undertakes to achieve the objective set out for the portfolio available at
the date of the assessment. Factors considered by the Group in determining the business model include
the purpose and composition of a portfolio, past experience on how the cash flows for the respective assets
were collected, how risks are assessed and managed, how the assets’ performance is assessed and how
managers are compensated.
Based on the analysis performed the Group included the following financial instruments in the business
model “hold to collect contractual cash flows” since the Group manages these financial instruments solely
to collect contractual cash flows: cash and cash equivalents, mandatory cash balances with the CBRF, due
from other banks, loans and advances to customers, guarantee deposits with payment systems, brokerage
receivables and other financial assets. The Group included debt securities at FVOCI in the business model
“hold to collect contractual cash flows and sell” since the Group manages these financial instruments to
collect both the contractual cash flows and the cash flows arising from the sale of assets. The Group
included debt securities measured at FVTPL and financial derivatives in the business model “other”.
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Significant Accounting Policies (Continued)
Financial assets – classification and subsequent measurement – cash flow characteristics. Where
the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and
sell, the Group assesses whether the cash flows represent solely payments of principal and interest (the
SPPI test). Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are consistent with the SPPI feature.
In making this assessment, the Group considers whether the contractual cash flows are consistent with a
basic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money,
other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending
arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed
on initial recognition of an asset and it is not subsequently reassessed. However, if the contractual terms
of the asset are modified, the Group considers if the contractual cash flows continue to be consistent with
a basic lending arrangement in assessing whether the modification is substantial. See below for “Financial
assets – modification”.
Financial assets – reclassification. Financial instruments are reclassified only when the business model
for managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place
from the beginning of the first reporting period that follows after the change in the business model. The
Group did not change its business model during the current and comparative period and did not make any
reclassifications.
Financial assets – impairment – credit loss allowance for ECL. The Group assesses on a forward-
looking basis the ECL for debt instruments (including loans) measured at AC and FVOCI and for the
exposure arising from loan commitments and financial guarantee contracts. The Group measures ECL and
recognises credit loss allowance at each reporting date.
The measurement of ECL reflects:
1)
an unbiased and probability weighted amount that is determined by evaluating a range of possible
outcomes;
2)
3)
the time value of money; and
all reasonable and supportable information that is available without undue cost and effort at the end
of each reporting period about past events, current conditions and forecasts of future conditions.
Debt instruments measured at AC are presented in the consolidated statement of financial position net of
the allowance for ECL.
For loan commitments (where those components can be separated from the loan) and financial guarantees,
a separate provision for ECL is recognised as a financial liability in the consolidated statement of financial
position. For debt instruments at FVOCI, changes in amortised cost, net of allowance for ECL, are
recognised in profit or loss and other changes in carrying value are recognised in OCI as gains less losses
on debt instruments at FVOCI.
The Group applies a “three stage” model for impairment in accordance with IFRS 9, based on changes in
credit quality since initial recognition:
1)
2)
A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial
assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that
results from default events possible within the next 12 months or until contractual maturity, if shorter
(“12 months ECL”).
If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset
is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until
contractual maturity but considering expected prepayments, if any (“lifetime ECL”). Refer to Note 29
for a description of how the Group determines when a SICR has occurred.
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Significant Accounting Policies (Continued)
3)
If the Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3
and its ECL is measured as a lifetime ECL. Refer to Note 29 for a description of how the Group
defines credit-impaired assets and default.
For financial assets that are purchased or originated credit-impaired (“POCI Assets”), the ECL is always
measured at a lifetime ECL. Note 29 provides information about inputs, assumptions and estimation
techniques used in measuring ECL, including an explanation of how the Group incorporates forward-looking
information in the ECL models.
As an exception, for certain financial instruments, such as credit cards, that may include both a loan and
an undrawn commitment component, the Group measures expected credit losses over the period that the
Group is exposed to credit risk, that is, until the expected credit losses would be mitigated by credit risk
management actions, even if that period extends beyond the maximum contractual period. This is because
contractual ability to demand repayment and cancel the undrawn commitment does not limit the exposure
to credit losses to such contractual notice period. Refer to Note 3 for critical judgements applied by the
Group in determining the period for measuring ECL.
Financial assets – write-off. Uncollectible assets are partly written-off against the related сredit loss
allowance usually after one year since they become overdue. The amount of uncollectible part of loan is
estimated on a loan portfolio basis taking into account defaulted loans recovery statistics. The Group writes-
off financial assets that are mostly still subject to enforcement activity, however, there is no reasonable
expectation of recovery. If credit-impaired loans are sold to third parties, the Group remeasures the amount
of ECL prior to sale taking into consideration the expected sales proceeds so that there are no gains or
losses on derecognition upon sale.
Repayments of written-off loans. Recovery of amounts previously written-off as uncollectible is credited
directly to the credit loss allowance line in the consolidated statement of profit or loss and other
comprehensive income. Cash flows related to repayments of written-off loans are separately presented
within recoveries from written-off loan in the consolidated statement of cash flows.
Financial assets – derecognition. The Group derecognises financial assets when (a) the assets are
redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has transferred
the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement
while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither
transferring nor retaining substantially all risks and rewards of ownership, but not retaining control. Control
is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated
third party without needing to impose restrictions on the sale.
Financial assets – modification. The Group sometimes renegotiates or otherwise modifies the contractual
terms of the financial assets. The Group assesses whether the modification of contractual cash flows is
substantial considering, among other, the following factors: any new contractual terms that substantially
affect the risk profile of the asset, significant change in interest rate, change in the currency denomination,
new collateral or credit enhancement that significantly affects the credit risk associated with the asset, or a
significant extension of a loan when the borrower is not in financial difficulties.
If the modified terms are substantially different, the rights to cash flows from the original asset expire and
the Group derecognises the original financial asset and recognises a new asset at its fair value. The date
of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation
purposes, including determining whether a SICR has occurred.
The Group also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference
between the carrying amount of the original asset derecognised and fair value of the new substantially
modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital
transaction with owners.
In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to
make the originally agreed payments, the Group compares the original and revised expected cash flows to
assets whether the risks and rewards of the asset are substantially different as a result of the contractual
modification. If the risks and rewards do not change, the modified asset is not substantially different from
the original asset and the modification does not result in derecognition.
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Significant Accounting Policies (Continued)
The Group recalculates the gross carrying amount by discounting the modified contractual cash flows by
the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets) and
recognises a modification gain or loss in profit or loss. Usually modifications of stage 3 loans do not result
in derecognition since they do not change the expected cash flows substantially and represent the way of
collection of past due balances.
Financial liabilities – measurement categories. Financial liabilities are classified as subsequently
measured at AC, except for financial liabilities at FVTPL: this classification is applied to derivatives, financial
liabilities held for trading (e.g. short positions in securities).
Financial liabilities – derecognition. Financial liabilities are derecognised when they are extinguished
(i.e. when the obligation specified in the contract is discharged, cancelled or expires).
An exchange between the Group and its original lenders of debt instruments with substantially different
terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are
accounted for as an extinguishment of the original financial liability and the recognition of a new financial
liability. The terms are substantially different if the discounted present value of the cash flows under the
new terms, including any fees paid net of any fees received and discounted using the original effective
interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the
original financial liability.
In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes
in the type of interest rate, new conversion features attached to the instrument and change in loan
covenants are also considered. If an exchange of debt instruments or modification of terms is accounted
for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the
extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or
fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the
modified liability.
Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate
using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic
substance of the difference in carrying values is attributed to a capital transaction with owners.
Cash and cash equivalents. Cash and cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value. Cash and cash equivalents include all interbank placements and reverse sale and repurchase
agreements with other banks with original maturities of less than three months. Funds restricted for a period
of more than three months on origination are excluded from cash and cash equivalents. Cash and cash
equivalents are carried at amortised cost as: (i) they are held for collection of contractual cash flows and
those cash flows represent SPPI, and (ii) they are not designated at FVTPL.
The payments or receipts presented in the consolidated statement of cash flows represent transfers of cash
and cash equivalents by the Group, including amounts charged or credited to current accounts of the
Group’s counterparties held with the Group, such as loan interest income or principal collected by charging
the customer’s current account or interest payments or disbursement of loans credited to the customer’s
current account, which represents cash or cash equivalent from the customer’s perspective.
Brokerage receivables and brokerage payables. Brokerage receivables represent placements under
reverse sale and repurchase agreements made by the Bank with central counterparty to provide customers
of the Bank who have brokerage accounts with the Bank with possibility to acquire securities in case those
customers have insufficient own funds to acquire those securities. Brokerage payables represent funds
attracted under sale and repurchase agreements made by the Bank with central counterparty to provide
customers of the Bank who have brokerage accounts with the Bank with the possibility to borrow securities
and make a short sale. Brokerage receivables and payables are short-term and accounted at amortised
cost.
Mandatory cash balances with the CBRF. Mandatory cash balances with the CBRF are carried at
amortised cost and represent non-interest bearing mandatory reserve deposits which are not available to
finance the Group’s day to day operations and hence are not considered as part of cash and cash
equivalents for the purposes of the consolidated statement of cash flows.
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Significant Accounting Policies (Continued)
Due from other banks. Amounts due from other banks are recorded when the Group advances money to
counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on
fixed or determinable dates. Amounts due from other banks are carried at amortised cost as: (i) they are
held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not
designated at FVTPL.
Certain bank deposits are subject to the “bail-in” legislation that permits or requires a national resolving
authority to impose losses on holders in particular circumstances. Where the bail-in clauses are included
in the contractual terms of the instrument and would apply even if legislation subsequently changes, the
SPPI test is not met and such instruments are mandatorily measured at FVTPL. The Group did not identify
such balances due from other banks. Where such clauses in the contract merely acknowledge the existence
of the legislation and do not create any additional rights or obligation for the Group, the SPPI criterion is
met and the respective instruments are carried at AC.
Investments in debt securities. Based on the business model and the contractual cash flow
characteristics, the Group classifies investments in debt securities as carried at AC, FVOCI or FVTPL.
Debt securities are carried at AC if they are held for collection of contractual cash flows and where those
cash flows represent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly
reduce an accounting mismatch.
Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling,
where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from
these assets is calculated using the effective interest method and recognised in profit or loss. An impairment
allowance estimated using the expected credit loss model is recognised in profit or loss for the year. All
other changes in the carrying value are recognised in OCI except for foreign exchange translation
gains/(losses) and interest income calculated using the effective interest rate method. When the debt
security is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from OCI
to profit or loss.
Investments in debt securities are carried at FVTPL if they do not meet the criteria for AC or FVOCI. The
Group may also irrevocably designate investments in debt securities at FVTPL on initial recognition if
applying this option significantly reduces an accounting mismatch between financial assets and liabilities
being recognised or measured on different accounting bases.
Loans and advances to customers. Loans and advances to customers are recorded when the Group
advances money to purchase or originate a loan due from a customer.
Based on the business model and the cash flow characteristics, the Group classifies loans and advances
to customers into one of the following measurement categories:
1)
AC: loans that are held for collection of contractual cash flows and those cash flows represent SPPI
and loans that are not voluntarily designated at FVTPL;
2)
FVTPL: loans that do not meet the criteria for AC or FVOCI are measured at FVTPL (mandatory
FVTPL).
Impairment allowances of the loans measured at AC are determined based on the forward-looking ECL
model. Note 29 provides information about inputs, assumptions and estimation techniques used in
measuring ECL, including an explanation of how the Group incorporates forward-looking information in the
ECL models.
Credit related commitments. The Group issues commitments to provide loans. Commitments to provide
loans are initially recognised at their fair value, which is normally evidenced by the amount of fees received.
Such loan commitment fees are deferred and included in the carrying value of the loan on initial recognition.
At the end of each reporting period, the commitments are measured at the amount of the loss allowance
determined based on the expected credit loss model. For loan commitments (where those components can
be separated from the loan), a separate provision for ECL is recognised as a liability in the consolidated
statement of financial position.
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TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
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Significant Accounting Policies (Continued)
Performance guarantees. Performance guarantees are contracts that provide compensation if another
party fails to perform a contractual obligation. Such contracts transfer non-financial performance risk in
addition to credit risk. Performance guarantees are initially recognised at their fair value, which is normally
evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life of
the contract. At the end of each reporting period, the performance guarantee contracts are measured at
the higher of (i) the unamortised balance of the amount at initial recognition and (ii) the best estimate of
expenditure required to settle the contract at the end of each reporting period, discounted to present value.
Where the Group has the contractual right to revert to its customer for recovering amounts paid to settle
the performance guarantee contracts, such amounts will be recognised as an asset upon transfer of the
loss compensation to the guarantee’s beneficiary. These fees are recognised within fee and commission
income in profit or loss.
Sale and repurchase agreements and lending of securities. Sale and repurchase agreements (“repo
agreements”), which effectively provide a lender’s return to the counterparty, are treated as secured
financing transactions. Securities sold under such sale and repurchase agreements are not derecognised.
The securities are not reclassified in the consolidated statement of financial position unless the transferee
has the right by contract or custom to sell or repledge the securities, in which case they are reclassified as
repurchase receivables. The corresponding liability is presented within amounts due to other banks or other
borrowed funds.
Securities purchased under agreements to resell (“reverse repo agreements”), which effectively provide a
lender’s return to the Group, are recorded as due from other banks or loans and advances to customers,
as appropriate. The difference between the sale and repurchase price, adjusted by interest and dividend
income collected by the counterparty, is treated as interest income and accrued over the life of reverse
repo agreements using the effective interest method.
Securities lent to counterparties for a fixed fee are retained in the consolidated financial statements in their
original category in the consolidated statement of financial position unless the counterparty has the right by
contract or custom to sell or repledge the securities, in which case they are reclassified and presented
separately.
Securities borrowed for a fixed fee are not recorded in the consolidated financial statements, unless these
are sold to third parties, in which case the purchase and sale are recorded in profit or loss for the year within
gains less losses arising from trading securities. The obligation to return the securities is recorded at fair
value in other borrowed funds.
Based on classification of securities sold under the sale and repurchase agreements, the Group classifies
repurchase receivables into one of the following measurement categories: AC, FVOCI, FVTPL.
Guarantee deposits with payment systems. Amounts of guarantee deposits with payment systems are
recorded when the Group advances money to payment systems with no intention of trading the resulting
unquoted non-derivative receivable. Amounts of guarantee deposits with payment systems are carried at
amortised cost.
Tangible fixed assets. Tangible fixed assets are stated at cost less accumulated depreciation and
provision for impairment, where required.
Costs of minor repairs and day-to-day maintenance are expensed when incurred. Costs of replacing major
parts or components of premises and equipment items are capitalised, and the replaced part is retired.
At the end of each reporting period management assesses whether there is any indication of impairment
of tangible fixed assets. If any such indication exists, management estimates the recoverable amount,
which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying
amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the
year. An impairment loss recognised for an asset in prior years is reversed if there has been a change in
the estimates used to determine the asset’s value in use or fair value less costs to sell.
Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in
profit or loss for the year (within other operating income or expenses).
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TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
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Significant Accounting Policies (Continued)
Depreciation. Depreciation of each item of tangible fixed assets is calculated using the straight-line method
to allocate its cost to its residual value over its estimated useful life as follows:
Useful lives in years
Building
99
Equipment
3 to 10
Vehicles
5 to 7
Leasehold improvements
Others (safes, fireproof cabinets)
Shorter of their useful economic life and the term of the underlying lease
20
The residual value of an asset is an estimated amount that the Group would currently obtain from disposal
of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition
expected at the end of its useful life. The assets’ residual values and useful lives are reviewed, and adjusted
if appropriate, at the end of each reporting period.
Intangible assets. Intangible assets are stated at cost less accumulated amortization. The Group’s
intangible assets other than insurance license have definite useful life and include capitalised acquired
computer software and internally developed software. Development costs that are directly associated with
identifiable and unique software controlled by the Group are recorded as intangible assets if the inflow of
incremental economic benefits exceeding costs is probable. Capitalised costs include staff costs of the
software development team and an appropriate portion of relevant overheads.
Computer software licenses acquired are capitalised on the basis of the costs incurred to acquire and bring
to use the specific software. All other costs associated with computer software, e.g. its maintenance, are
expensed when incurred. Capitalised computer software is amortised on a straight line basis over expected
useful lives of 1 to 10 years.
At each reporting date management assesses whether there is any indication of impairment of intangible
assets with an indefinite useful life. If any such indication exists, management estimates the recoverable
amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use.
The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit
or loss. An impairment loss recognised for an asset in prior years is reversed if there has been a change in
the estimates used to determine the asset’s value in use or fair value less costs to sell. Intangible assets
including goodwill with indefinite useful life are tested annually for impairment.
Accounting for leases by the Group as a lessee. Leases, where the Group is the lessee, are recognised
as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for
use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of
the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of the following lease payments:
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable under
cancellable and non-cancellable operating leases;
variable lease payments that are based on an index or a rate and that are initially measured using
the index or rate as at the commencement date;
•
•
•
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that
option.
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TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
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Significant Accounting Policies (Continued)
The lease term includes any non-cancellable and optional extension periods which have been assessed
as reasonably certain to be exercised. The lease payments are discounted using the interest rate implicit
in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the
rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in
a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
•
•
•
•
the amount of the initial measurement of lease liability,
any lease payments made at or before the commencement date less any lease incentives received,
any initial direct costs, and
dismantling and restoration costs.
As an exception to the above, the Group accounts for short-term leases and leases of low value assets by
recognising the lease payments as an operating expense on a straight line basis. Short-term leases are
leases with a lease term of 12 months or less, and the lease does not provide for the possibility of
repurchase of the asset at the end of the contract. Low value assets are assets with a value of RR 300,000
or less at the date of conclusion of the contract.
Right-of-use assets are included in tangible fixed assets, lease liabilities are included in other non-financial
liabilities in the consolidated statement of financial position. Depreciation of right-of-use assets are
recognised in administrative and other operating expenses in the consolidated statement of profit or loss
and other comprehensive income. Finance cost is recognised within other similar expense line of the
consolidated statement of profit or loss and other comprehensive income. Repayment of principal of lease
liabilities is disclosed within cash flows from financing activities of the consolidated statement of cash flows.
Due to other banks. Amounts due to banks are recorded when money or other assets are advanced to
the Group by counterparty banks. Non-derivative liability is carried at amortised cost.
Customer accounts. Customer accounts are non-derivative liabilities to corporate entities and individuals
and are carried at amortised cost.
Debt securities in issue. Debt securities are stated at amortised cost. If the Group purchases its own debt
securities in issue, they are removed from the consolidated statement of financial position and the difference
between the carrying amount of the liability and the consideration paid is included in a separate line of
consolidated statement of profit or loss and other comprehensive income.
Subordinated debt. Subordinated debt can only be paid in the event of a liquidation after the claims of
other higher priority creditors have been met. Subordinated debt is carried at AC.
Financial derivatives. Financial derivatives represented by forwards and foreign currency swaps are
carried at their fair value. Derivatives are carried as assets when fair value is positive and as liabilities when
fair value is negative. Changes in the fair value of financial derivatives are recorded in profit or loss within
Net gains/(losses) from derivatives revaluation. The Group does not apply hedge accounting.
Income taxes. Income taxes have been provided for in the consolidated financial statements in accordance
with Russian legislation and Cyprus legislation enacted or substantively enacted by the end of the reporting
period. The income tax charge comprises current tax and deferred tax and is recognised in profit or loss for
the year except if it is recognised in other comprehensive income or directly in equity because it relates to
transactions that are also recognised, in the same or a different period, in other comprehensive income or
directly in equity.
Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of
taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates
if the consolidated financial statements are authorised prior to filing relevant tax returns. Taxes other than
on income are recorded within administrative and other operating expenses.
110
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
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Significant Accounting Policies (Continued)
Deferred income tax is provided using the liability method for tax loss carry forwards and temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded
for temporary differences on initial recognition of an asset or a liability in a transaction other than a business
combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred
tax balances are measured at tax rates enacted or substantively enacted at the end of reporting period
which are expected to apply to the period when the temporary differences will reverse or the tax loss carry
forwards will be utilised. Deferred tax assets and liabilities are netted only within the individual companies
of the Group. Deferred tax assets for deductible temporary differences and tax loss carry forwards are
recorded only to the extent that it is probable that future taxable profit will be available against which the
deductions can be utilised.
Deferred income tax is not recognised on post-acquisition retained earnings and other post acquisition
movements in reserves of subsidiaries, where the Group controls the subsidiary’s dividend policy and it is
probable that the difference will not reverse through dividends or otherwise in the foreseeable future.
Uncertain tax positions. The Group's uncertain tax positions are assessed by management at the end of
each reporting period. Liabilities are recorded for income tax positions that are determined by management
as more likely than not to result in additional taxes being levied if the positions were to be challenged by
the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or
substantively enacted at the end of reporting period and any known court or other rulings on such issues.
Liabilities for penalties, interest and taxes other than on income are recognised based on management’s
best estimate of the expenditure required to settle the obligations at the end of the reporting period.
Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of
uncertain timing or amount. They are accrued when the Group has a present legal or constructive obligation
as a result of past events, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
Levies and charges, such as taxes other than income tax or regulatory fees based on information related
to a period before the obligation to pay arises, are recognised as liabilities when the obligating event that
gives rise to pay a levy occurs, as identified by the legislation that triggers the obligation to pay the levy. If
a levy is paid before the obligating event, it is recognised as a prepayment.
Other liabilities. Other liabilities are accrued when the counterparty has performed its obligations under
the contract and are carried at amortised cost.
Share capital. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of new shares are shown in equity as a deduction, net of tax, from the proceeds and debited against share
premium.
Share premium. Share premium is the difference between the fair value of the consideration receivable
for the issue of shares and the nominal value of the shares. The share premium account can only be
resorted to for limited purposes, which do not include the distribution of dividends, and is otherwise subject
to the provisions of the Cyprus Companies Law on reduction of share capital.
Treasury shares. Where the Company or its subsidiaries purchase the Company’s equity instruments, the
consideration paid, including any directly attributable incremental external costs, net of income taxes, is deducted
from equity attributable to the owners of the Company until the equity instruments are reissued, disposed of or
cancelled. Where such shares are subsequently disposed of or reissued, any consideration received is included
in equity. The value of GDRs transferred out of treasury shares for the purposes of the long-term incentive
programme for management of the Group are determined based on the weighted average cost.
Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends
declared after the end of the reporting period and before the consolidated financial statements are
authorised for issue, are disclosed in the Note 39. The accounting reports of the Group entities are the
basis for profit distribution and other appropriations. The separate financial statements of the Company
prepared in accordance with IFRS as adopted by the EU and in accordance with Cyprus Companies Law
is the basis of available reserves for distribution.
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TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
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Significant Accounting Policies (Continued)
Dividend distribution to the Company's shareholders is recognised as a liability in the Company's
consolidated financial statements in the year in which the dividends are appropriately authorised and are
no longer at the discretion of the Company. More specifically, interim dividends are recognised as a liability
in the period in which these are authorised by the Board of directors and in the case of final dividends,
these are recognised in the period in which these are approved by the Company's shareholders.
Interest income and expense recognition. Interest income and expense calculated using effective
interest method are recorded for all debt instruments, other than those at FVTPL, on an accrual basis using
the effective interest method. This method defers, as part of interest income or expense, all fees paid or
received between the parties to the contract that are an integral part of the effective interest rate, transaction
costs and all other premiums or discounts.
Fees integral to the effective interest rate include origination fees (e.g. interchange fee on credit card loans)
received or paid by the entity relating to the creation or acquisition of a financial asset or issuance of a
financial liability.
Commitment fees (e.g. annual fee on credit card loans) received by the Group to originate loans at market
interest rates are integral to the effective interest rate if it is probable that the Group will enter into a specific
lending arrangement and does not expect to sell the resulting loan shortly after origination. The Group does
not designate loan commitments as financial liabilities at FVTPL.
For financial assets that are originated or purchased credit-impaired, the effective interest rate is the rate
that discounts the expected cash flows (including the initial expected credit losses) to the fair value on initial
recognition (normally represented by the purchase price). As a result, the effective interest is credit-
adjusted.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial
assets, except for:
i) financial assets that have become credit-impaired (Stage 3), for which interest revenue is calculated by
applying the effective interest rate to their AC (net of the ECL provision); and
ii) financial assets that are purchased or originated credit-impaired, for which the original credit-adjusted
effective interest rate is applied to the AC.
Customer acquisition expense recognition. Customer acquisition expenses are represented by the
costs incurred by the Group on services related to attraction of the client, mailing of advertising materials,
processing of responses etc. Those costs, which can be directly attributed to the acquisition of a particular
client, are included in the effective interest rate of the originated financial instruments; the remaining costs
are expensed on the basis of the actual services provided.
Other income and expense recognition. All other income is generally recorded on an accrual basis by
reference to completion of the specific performance obligation assessed on the basis of measurement of
the Group’s progress towards complete satisfaction of that performance obligation.
All other expenses are generally recorded on an accrual basis by reference to completion of the specific
transaction assessed on the basis of the actual service provided as a proportion of the total services to be
provided.
Other similar income. Other similar income represents interest income recorded for debt instruments
measured at fair value through profit or loss (“FVTPL”) and is recognised on an accrual basis using nominal
interest rate.
Other similar expense. Other similar expense represents finance cost related to the discounted lease
payments using the incremental borrowing rate.
Fee and commission income and expense. Fee and commission income is recognised over time as the
services are rendered, when the customer simultaneously receives and consumes the benefits provided
by the Group’s performance. Such income includes SMS fee, part of SME services commission, part of
brokerage fee and income from MVNO services which represents fixed monthly payments.
112
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
Variable fees are recognised only to the extent that management determines that it is highly probable that
a significant reversal will not occur.
Other fee and commission income is recognised at a point in time when the Group satisfies its performance
obligation, usually upon execution of the underlying transaction. The amount of fee or commission received
or receivable represents the transaction price for the services identified as distinct performance obligations.
Such income includes acquiring commission, part of SME services commission, brokerage fee and income
from MVNO services, which represents payments for each transaction, fee for selling credit protection,
interchange fee, cash withdrawal fee, foreign currency exchange transactions fee, fee for money transfers
and other.
All fee and commission expenses are generally recorded on an accrual basis by reference to completion
of the specific transaction assessed on the basis of the actual service provided as a proportion of the total
services to be provided.
Customer loyalty program. The group operates loyalty programs where retail clients accumulate points,
which entitle them to reimbursement of purchases made with credit and debit cards.
A financial liability is recognised for the amount of fair value of points expected to be redeemed until they
are actually redeemed or expire with the corresponding entries to interest income calculated using the
effective interest rate method or commission expenses depending on whether the points were accumulated
by credit card clients or debit card clients respectively.
Insurance contracts. Insurance contracts are those contracts that transfer significant insurance risk.
Insurance risk exists when the Group has uncertainty in respect of at least one of the following matters at
inception of the contract: occurrence of insurance event, date of occurrence of the insurance event, and
the claim value in respect of the occurred insurance event. Such contracts may also transfer financial risk.
Non-life insurance (short-term insurance). The below items from the consolidated statement of financial
position of the Group are accounted within Other financial assets and Other financial liabilities lines, the
below items from the consolidated statement of profit or loss and other comprehensive income of these
consolidated financial statements are accounted within Income from insurance operations and Insurance
claims incurred lines.
•
Premiums written. Premiums (hereafter – “premiums” or “insurance premiums”) under insurance
contracts are recorded as written upon inception of a contract and are earned on a pro-rata basis
over the term of the related contract coverage. Reduction of premium written in subsequent periods
(under amendments to the signed original contacts, for example) is accounted by debiting of
premiums written in current period.
•
•
Claims. Claims are charged to the consolidated statement of profit or loss and other comprehensive
income as compensation is paid to policyholders (beneficiaries) or third parties.
Claims handling expenses. Claims handling expenses are recognised in profit or loss for the period
as incurred and include direct expenses related to negotiations and subsequent claims handling, as
well as indirect expenses, including expenses of claims handling department and administrative
expenses directly related to activities of this department.
•
Reinsurance. The Group assumes and cedes reinsurance in the normal course of business. Ceded
reinsurance contracts do not relieve the Group from its obligations to the policyholders under
insurance contract. Amounts due from reinsurers are measured consistently with the amounts
associated with the direct insurance contracts and in accordance with the terms of each reinsurance
contract. Reinsurance assets arising from outward reinsurance contracts include reinsurers share in
paid claims, including claims handling expenses. Liabilities under outward reinsurance operations
are obligations of the Group for payment of premiums to reinsurers. Reinsurance assets include
premiums ceded to the Group under inward reinsurance contracts. The Group's liabilities under
inward reinsurance contracts are obligations to compensate the Group's share in paid claims,
including claims handling expenses to reinsurers.
113
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
The Group assesses its reinsurance assets for impairment on a regular basis. If there is objective
evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the
reinsurance asset to its recoverable amount and recognises that impairment loss in the consolidated
statement of profit or loss and other comprehensive income. The Group gathers the evidence that a
reinsurance asset is impaired using the same process adopted for financial assets carried at
amortised cost. The impairment loss is also calculated following the same method used for the
financial assets carried at amortised cost.
•
•
Subrogation income. The Group has a right to pursue third parties responsible for loss for payment
of some or all costs related to the claims settlement process of the Group (subrogation).
Reimbursements are recognised as income only if the Group is confident in receipt of these amounts
from these third parties. Under inward reinsurance contracts, amounts of reimbursement due to the
Group as a result of settlement of reinsurer's subrogation claims are treated as the Group's income
as at the date of acceptance of the invoice received from the reinsurer and including calculation of
the Group's share in the subrogation claim.
Deferred acquisition costs. Deferred acquisition costs (“DAC”) are calculated (for non-life
insurance contracts) separately for each insurance product. Acquisition costs include remuneration
to agents for concluding agreements with corporate clients and individuals and brokerage fees for
underwriting of assumed reinsurance agreements. They vary with and fully depend on the premium
earned under acquired or renewed insurance policies. These acquisition costs are deferred and
amortised over the period in which the related written premiums are earned.
They are reviewed by line of business at the time of the policy issue and at the end of each accounting
period to ensure they are recoverable based on future estimates. For the insurance contracts with
duration of less than one month and with automatic prolongation condition amortisation of one-off
acquisition costs occurs over the period determined based on statistical assessment of duration of
the insurance contract taking into account all of the expected future prolongations.
Insurance provisions
•
Provision for unearned premiums. Provision for unearned premiums (“UEPR”) represents the
proportion of premiums written that relate to the unexpired term of policies in force as at the reporting
date, calculated on a time apportionment basis. UEPR is recognised within liabilities on a gross basis.
•
Loss provisions. Loss provisions represent the accumulation of estimates for ultimate losses and
include outstanding claims provision (“OCP”) and provision for losses incurred but not yet reported
(“IBNR”). Loss provisions are recognised within liabilities on a gross basis. Estimates of claims
handling expenses are included in both OCP and IBNR. OCP is provided in respect of claims
reported, but not settled as at the reporting date. The estimation is made on the basis of information
received by the Group during settlement of the insured event, including information received after
the reporting date. IBNR is determined by the Group by line of business using actuarial methods,
and includes assumptions based on prior years’ claims and claims handling experience. IBNR is
calculated for each occurrence period as the difference between the projected maximum amount of
future payments resulting from the events that occurred during the period and the amount of future
payments resulting from the event already reported but not settled at the reporting date within the
same period. The methods of determining such estimates and establishing the resulting provisions
are continually reviewed and updated. Resulting adjustments are reflected in the consolidated
statement of profit or loss and other comprehensive income as they arise. Loss provisions are
estimated on an undiscounted basis due to relatively quick pattern of claims notification and payment.
•
Unexpired risk provision. Unexpired risk provision (“URP”) is recorded when unearned premiums
are insufficient to meet claims and expenses, which may be incurred after the end of the financial
year. To estimate the unexpired risk provision the Group uses historical experience and forward
looking assumptions of ultimate loss ratios (including claims handling expenses) and the level of in-
force portfolio maintenance expenses. The expected claims are calculated having regard to events
that have occurred prior to the reporting date. For the purposes of final presentation of consolidated
financial statements unexpired risk provision is written off against deferred acquisition costs.
114
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
•
Liability adequacy testing. As at each reporting date the adequacy of the insurance reserves is
tested. Testing of insurance reserves for non-life insurance is performed to ensure adequacy of
contract liabilities. In performing these tests, current estimates of future contractual cash flows,
claims handling and administration expenses are used. As a result of liability adequacy testing for
non-life insurance, the Group sets up its URP.
Foreign currency translation and operations. The functional currency of the Company and each of the
Group’s consolidated entities is the Russian Rouble (“RR”), which is the currency of the primary economic
environment in which each entity operates. Monetary assets and liabilities are translated into each entity’s
functional currency at the official exchange rate of the CBRF at the end of the respective reporting period.
Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities into
each entity’s functional currency at year-end official exchange rates of the CBRF are recognised in profit
or loss for the year as Net (losses)/gains from foreign exchange translation.
Foreign exchange gains and losses resulting from the settlement of transactions with foreign currencies
are recognised in profit or loss for the year as net gains/(losses) from operations with foreign currencies
(except for clients’ foreign currency exchange transactions fee, which is recognised in profit or loss as fee
and commission income).
Translation at year-end rates does not apply to non-monetary items that are measured at historical cost.
At 31 December 2020 the rate of exchange used for translating foreign currency balances was USD 1 =
RR 73.8757 (31 December 2019: USD 1 = RR 61.9057), and the average rate of exchange was
USD 1 = RR 72.1464 (2019: USD 1 = RR 64.7362).
Offsetting. Financial assets and liabilities are offset and the net amount reported in the consolidated
statement of financial position only when there is a legally enforceable right to offset the recognised
amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability
simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally
enforceable in all of the following circumstances: (i) in the normal course of business, (ii) the event of default
and (iii) the event of insolvency or bankruptcy.
Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to owners
of the Company by the weighted average number of participating shares outstanding during the reporting
year, excluding treasury shares. For the purpose of diluted earnings per share calculation the Group
considers dilutive effects of shares granted under employee share option plans.
Staff costs and related contributions. Wages, salaries, contributions to the Russian Federation state
pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits
are accrued in the year in which the associated services are rendered by the employees of the Group. The
Group has no legal or constructive obligation to make pension or similar benefit payments beyond the
payments to the statutory defined contribution scheme.
Segment reporting. Segments are reported in a manner consistent with the internal reporting provided to
the Group’s chief operating decision maker. Segments whose revenue, result or assets are ten percent or
more of all the segments are reported separately.
Equity-settled share-based payment. The expense is recognized over the vesting period and is
measured at the fair value of the award determined at the grant date, which is amortized over the service
(vesting) period. The fair value of the equity award is estimated only once at the grant date and is trued up
to the estimated number of instruments that are expected to vest. Dividends declared during the vesting
period accrue and are paid to the employee together with the sale proceeds of the vested shares upon a
liquidity event. Expected dividends (including those expected during the vesting period) are therefore
included in the determination of fair value of the share-based payment.
115
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
Cash-settled share-based program. The expense is recognized gradually over the vesting period and is
measured at the fair value of the liability at each end of the reporting period. The fair value of the liability
reflects all vesting conditions, except for the requirement of the employee to stay in service which is
reflected through the amortization schedule. The liability is measured, initially and at the end of each
reporting period until settled, at fair value, taking into account the terms and conditions on which the
instruments were granted and the extent to which the employees have rendered service to date.
Amendments of the consolidated financial statements after issue. The Board of directors of the
Company has the power to amend the consolidated financial statements after issue.
Changes in presentation. In 2020 because of significant growth in the brokerage operations and the
related balances and volumes of transactions, the Group made a detailed review of the relevant accounting
policies to achieve more relevant and reliable presentation. As a result of such review and because of
significantly increased balances the Group reclassified brokerage receivables and brokerage payables from
cash and cash equivalents and due to banks, respectively, into separate line items in the Consolidated
statement of financial position. Also the Group identifed that certain portion of brokerage operations fee
and commission income related to margin trading of Group’s clients has more characteristics of being
interest income rather than fee and commission income. Hence the Group made relevant reclassification
from fee and commission income into interest income in the Consolidated statement of profit or loss and
other comprehensive income. Similar reclassifications were made in the Consolidated statement of cash
flows. Management considers that the above reclassifications will result in a more reliable and relevant
presentation of the financial information which is more consistent with the market practice of many other
banks.
In September 2020 as a result of a detailed review of the marketing agreements with the payment systems
the Group changed its accounting policy in relation to income received under these agreements by
reclassifying it from Other operating income to reduce the Payment System fees accounted for in Interest
income and Fee and commission expenses. Part of the net payment system fees which relates to the
borrowers’ transactions is included in the effective interest income of the loans. Another part which relates
to the customer’s transactions was reclassified to Fee and commission expenses and presented on a net
basis within the payment systems. Management considers that this reclassification results in a more reliable
and relevant presentation of the substance of these agreements since such income from payment systems
primarily represents volume rebates, hence it could be offset against related expenses.
In December 2020 given the increase in the related amounts the Group refined its accounting policy in
relation to recoveries received in excess of gross carrying amount of purchased loans and reclassified them
from Other operating income line to Credit loss allowance for loans and advances to customers and credit
related commitments line of consolidated statement of profit or loss and other comprehensive income.
The effect of changes described above on the consolidated statement of financial position for the year
ended 31 December 2019 is as follows:
As originally Reclassification
presented
As reclassified
In millions of RR
Cash and cash equivalents
Due to banks
57,796
(2,232)
(640)
55,564
23
663
Brokerage receivables
Brokerage payables
-
-
2,799
1,207
2,799
1,207
116
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
40
Significant Accounting Policies (Continued)
The effect of changes described above on the consolidated statement of profit or loss and other
comprehensive income for the year ended 31 December 2019 is as follows:
As originally Reclassification As reclassified
In millions of RR
presented
Interest income calculated using the effective interest
rate method
109,972
1,157
111,129
Credit loss allowance for loans and advances to
customers and credit related commitments
Fee and commission income
Fee and commission expense
Other operating income
(27,244)
36,042
(17,448)
4,713
693
(184)
2,325
(3,991)
(26,551)
35,858
(15,123)
722
The effect of changes described above on the consolidated statement of cash flows for the year ended
31 December 2019 is as follows:
As originally Reclassification
presented
As reclassified
In millions of RR
Interest income received calculated using the effective
interest rate method
Fees and commissions received
106,975
35,986
(17,492)
-
4,024
23,994
-
879
(184)
1,499
693
(2,887)
(2,232)
(2,799)
(640)
107,854
35,802
(15,993)
693
Fees and commissions paid
Recoveries from the purchased loans received
Other operating income received
Net increase in cash and cash equivalents
Net increase in brokerage receivables
Net decrease in due to banks
1,137
21,762
(2,799)
(2,685)
1,207
(2,045)
-
Net increase in brokerage payables
1,207
41
Adoption of New or Revised Standards and Interpretations
The following amended standards became effective from 1 January 2020, but did not have any material
impact on the Group:
•
•
•
•
Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and
effective for annual periods beginning on or after 1 January 2020).
Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for
acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020).
Definition of material - Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for
annual periods beginning on or after 1 January 2020).
Interest rate benchmark reform – Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on
26 September 2019 and effective for annual periods beginning on or after 1 January 2020).
42
New Accounting Pronouncements
Certain new amendments have been issued that are mandatory for the annual periods beginning on or
after 1 January 2021, which the Group has not early adopted:
117
TCS Group Holding PLC
Notes to the Consolidated Financial Statements – 31 December 2020
42
New Accounting Pronouncements (Continued)
IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning
on or after 1 January 2023)*. IFRS 17 replaces IFRS 4, which has given companies dispensation to carry
on accounting for insurance contracts using existing practices. As a consequence, it was difficult for
investors to compare and contrast the financial performance of otherwise similar insurance companies.
IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including
reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups
of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows)
that incorporates all of the available information about the fulfilment cash flows in a way that is consistent
with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an
amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers
will be recognising the profit from a group of insurance contracts over the period they provide insurance
coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity
will be recognising the loss immediately. The Group is currently assessing the impact of IFRS 17 on the
insurance contracts issued by the Insurance Company as well as the impact for credit cards and similar
loan products which may include insurance component.
Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for
annual periods beginning on or after 1 January 2023)*. The amendments relate to eight areas of IFRS
17, and they are not intended to change the fundamental principles of the standard. The following
amendments to IFRS 17 were made: effective date, expected recovery of insurance acquisition cash flows,
contractual service margin attributable to investment services, reinsurance contracts held – recovery of
losses and other amendments.
The following other new pronouncements are not expected to have any material impact on the Group when
adopted:
(a) Sale or contribution of assets between an Investor and its associate or joint venture - Amendments
to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on
or after a date to be determined by the IASB)*.
(b) Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January
2020 and effective for annual periods beginning on or after 1 January 2022)*.
(c) Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1
(issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023)*.
(d) Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the
Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual
Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued
on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022)*.
(e) Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after
1 January 2021).
(f)
Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 28 May 2020 and effective
for annual periods beginning on or after 1 June 2020).
* Denotes standards, interpretations and amendments which have not yet been endorsed by the European
Union.
118