© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day and welcome to the TCS Group Holding Second Quarter 2021 IFRS Results Call. At this time, I would like to turn the conference over to Mr. Oliver Hughes, CEO. Please go ahead, sir.
Thank you, and hello to everybody. I'm pleased to report on another quarter of significant growth in Tinkoff. In the second quarter of 2021, we reached 16.7 million total customers, up 5.5 million from a year ago and delivered RUB 16.1 billion of net profit, up 57% year-on-year and amounting to an ROE of 46.1%. The Tinkoff flywheel continues to gain momentum. We're attracting millions of customers by offering a best-in-class financial and lifestyle services, which in turn opens an increasing range of ways to engage and monetize them. And this, in turn, means we can invest more in making our products a notch or 3 above anything else our competitors can provide.Before we move on to key financial and operational results for the second quarter, I'd like to stress the importance of the recent movement and changes. We're swiftly moving towards building a world-class governance structure that will not only [indiscernible] of interest with minority investments but also provide strategic guidance and insight in things like [ management ] [indiscernible] [ as we grow the business in Russia ] [indiscernible]. Our expertise and experience in new business verticals, M&A [ and work ] [indiscernible] particular value [indiscernible] complexities [indiscernible]. We've become one of the few [indiscernible] with a one share, one vote structure.We brought on board 5 new independent nonexecutive directors, bringing the total share environment on the Board to 2/3 and increasing the Board's breadth and depth. We formed 2 new committees, the Strategy and Sustainability Committees, both of which have hit the ground running and have already had several meetings since they were created.To increase transparency, we've improved our segmental disclosure and kick-started a series of strategy sessions to give the market more clarity and insight into where and how we create value at Tinkoff. We've held sessions on investments, SME and acquiring, and we plan more for the rest of this year and into 2022.On the sustainability side, we appointed a new head of sustainability, published our first sustainability report according to GRI. We became a signatory to the UN Principles for Responsible Banking, have launched a project to assess and reduce our carbon footprint and are looking to ingrain more ESG principles into the strategic objectives of the group.But we're not done yet. Over the next few weeks, we plan to announce 3 more directors as we ultimately target a Board of 9 to 10 members. All in all, we're confident that our high-quality independent Board of Directors and government structures will be instrumental to creating and cementing value for Tinkoff shareholders for many years to come.And now on to the business and second quarter results. Our growing engaged customer base remains a strategic imperative for Tinkoff. In the second quarter alone, we added 1.9 million total customers to reach 16.7 million. This represents an active customer base of 11.5 million customers, making us confident that by the end of 2021, we'll be able to reach the 14 million active customers mark. Our efforts to engage with these customers go hand in hand with the growth of the customer base. Our MAU reached 12.5 million; our DAU, 4.2 million; and our products per customer metric reached 1.5, so that's up from 1.4 last time we spoke.Key to this is the continued growth in Tinkoff Black, our viral debit card product, which is adding 1 million active customers per quarter, having reached 6.8 million at the end of the second quarter. Customers now entrust us with more than RUB 375 billion of balances, transacting more than RUB 500 billion per quarter. This product remains the main gateway into the ecosystem as customers increasingly move on to using other products like brokerage, credit, insurance and many more.But this increase in customer numbers and engagement is also due to the continued development of our super app. We're improving the customer journey, providing increasingly intuitive UI and UX, targeting and tailoring contextual advice and offers and encouraging organic opening of new products and services. We're well on track to meet and exceed our 2023 strategic target of over 16.5 million active customers and 1.7 products per customer.Tinkoff Investments had a very busy second quarter. We launched a sizable brand building marketing campaign in April, enabling our customers to top up their accounts through Apple and Google Pay; launched Tinkoff Private, our product line for higher net worth individuals; continued refining our customer journey and the functionality of the Pulse social network; participated in several ECM and DCM deals; launched 3 new funds to our in-house asset manager Tinkoff Capital; and launched a derivatives offering.Our assets under custody continue to grow and exceeded RUB 0.5 trillion with our active customer base reaching 1.6 million customers. This continued diversification of product development enables us to grow pretax profit by more than 10% quarter-on-quarter despite a noticeable 17% quarter-on-quarter drop in trading volumes on the back of lower volatility in global markets.The product pipeline remains very active, and we're confident this business will continue to drive customer and bottom line growth for many years to come. At 2023, we aim to exceed RUB 40 billion of revenues and deliver stable to improving margins.Tinkoff Acquiring, our B2B payments business, had a stellar quarter as we continue to ride the wave of growing digital payments with products that offer best-in-class integration, UX and conversion. Our TPV grew 40% quarter-on-quarter and 2.6x year-on-year with stable acquiring commissions driven by continued growth in merchants and transactions per merchant. This delivered a quarterly record of RUB 5.5 billion of gross revenues and RUB 1.1 billion of pretax profit. As e-commerce penetration grows and merchants look for efficient and effective ways to move online, we continue to see huge opportunities to partner with marketplaces and merchants of all types and sizes through the Tinkoff [ CASA ] platform as well as through our subsidiary cloud payments.Continuing to unlock synergies with our SME business and offering partners a complete set of merchant solutions, we're well on track to deliver 50% TPV CAGR between 2020 and 2023, as we announced a few weeks ago. And we also have an international payment strategy in the works. It's still taking shape, and it's a bit too early to provide details, but we're excited about the transferability of our know-how outside Russia's borders.A few words also on our BNPL service, Dolyame, which is also developing nicely. We launched in April 2021 and have already signed up 20 large online merchants and expect several hundred more merchants to sign up by the end of the year, including some of the large merchant marketplaces. In the off-line space, we're currently testing an integrated offering with our newly acquired subsidiary, Koshelek, which will enable customers to pay with Dolyame, our BNPL solution, in app at any merchant that has a loyalty card available with Koshelek app. It's still early days, but we're very optimistic that this service can gain a meaningful position in the Russian payment landscape.Tinkoff Business, our digital offering for Russia's SMEs, continues to make progress in the segmentation of its customer base and in tailoring our financial products and business services to the needs of various sectors. This is driving more efficient customer acquisition and monetization. [indiscernible] newly registered individual entrepreneur in Russia opens their first account at Tinkoff. For larger businesses, we continue to make their life easier, for example, better and faster payout options, shorter wait times for opening new financial products and an acceleration in SME lending, with our portfolio more than doubling this year-to-date to over RUB 5 billion. All this is resulting in active customer base growth that is accelerating and reached 332,000, with revenue and pretax profit growing 40% year-on-year. This gives us confidence that we can grow our active customer base to over 0.5 million by 2023 and our revenue by 30% CAGR.Our credit business continues to evolve in both size and diversification. In the first half of the year, we've already exceeded our full year guidance for loan growth by delivering 35% year-to-date net loan book growth. We're particularly happy with this result because it's increasingly coming through cross-sell. In fact, our fastest-growing channel for new disbursements is cross-sell to existing Tinkoff Black debit cardholders. This has a positive effect on the economics of our credit business because acquisition costs are lower. We have more data and can calculate more precisely the credit risk and NPV of each new loan disbursed. This is particularly visible in the personal loan part of the portfolio, which is largely disbursed to existing customers.Our loan book is also increasingly diversified. For the first time ever, credit cards no longer represent the majority of our loan book, and collateralized loans represented more than 1/5 of our credit card portfolio -- sorry, of our credit portfolio. We remain positive on the outlook of our credit business given increasingly precise underwriting and scoring models, still low penetration of [ what's called ] consumer lending, room for market share growth, driven by our more efficient direct-to-consumer and cross-selling channels and through the launch of new products such as mortgage.Last but not least, I want to say a few words on our international plans. As of a few days ago, it's now in the public domain, and we've created a subsidiary based in the Philippines, and we'll be applying for a digital bank license over the coming weeks. The Philippines is an attractive market, and the credit penetration is low. It has a sizable and digitally predisposed population where we see a road to obtaining a license that gives us the flexibility of offering a comprehensive set of financial services. And this should enable us to build a solid monetization capability. It therefore ticks the boxes that we've flagged in the past and that we believe are necessary to build a long-term sustainably profitable fintech business.With that, I'll pass the word to Ilya for a more detailed analysis of our financial results. Ilya?
Thank you, Oliver. Hello, everyone. I would now like to describe some of the main trends that we observed in our business throughout the second quarter of 2021. Additionally, I will start with the balance sheet composition on Slide 7. After a relatively flat first quarter, total assets of the group grew by 10.6% in the second quarter due to the solid 17.6% growth of the net trade book as well as some rebalancing we did in the asset composition. A portion of our treasury position was sold with the product during the second quarter in order to free up some of the capital to adequately address growing loan portfolio.As a result, net loan book increased to 63% of the total assets, while treasury position declined to 24%. Much of the cash proceeds from the bonds sale [ designed ] on the corresponding account of the bank, therefore, pushing the cash balance of the group to 11% of the total.Our funding base is depicted on Slide 8. The seasonal slowdown at the beginning of this year across retail and SME client segments gave way to a healthy 10.3% growth, mirroring the growth on the asset side. Yes, I have to mention an outstanding 14% growth in the current accounts and 33.4% step increase in the balance on brokerage accounts.On Slide 9, you can see shareholders' equity increased by 11.3% in the second quarter to RUB 147 billion, thanks to strong quarterly profit and absence of the dividend. Our Basel ratios were all flat for the quarter at very comfortable levels. RWA density decreased from 93% of the real assets to 89% as risk-weighted assets grew 40% slower than the total assets of the group.Next slide shows that statutory ratios were basically flat during the quarter despite the solid growth of the credit book and the annual remeasurement of the operational risk, with total capital adequacy going down 20 basis points to 12.2% and core capital adequacy going up 20 basis points to 10%. We reiterate our intention to keep reasonable buffer over the prescribed Central Bank minimums. The recent regulatory changes in RWA calculations will bring some additional pressure on our capital ratios. Nothing dramatic though, taking into account our ability to generate profit and manage the speed of growth of the loan book.Now I will turn to the income statement, starting on Slide 11, where you can see the breakdown of our revenue by major business verticals. It's a graphical representation of what you can see in more detail in Note 4, Segment Analysis on our financial statements. You can see that the split between credit and noncredit components of the revenue steadily shifts towards noncredit, which now represents 44% of total. Revenue grew 29% year-on-year to RUB 121.8 billion on a [indiscernible] basis, but most reasonably in the second quarter of 2021, 14.3% compared to the first quarter of the year.Our next slide is on cost management, where you can see that we stepped up our investment into growth as customer acquisition costs comprised RUB 10.7 billion or 44% of total costs for the quarter. This is more than 2.5x acquisition of the same period last year, which explains the V-shape curve of the cost-to-income graph in the middle due to the pandemic slowdown a year ago. Our OE increased our acquisition effort compared to the beginning of this year as the strong momentum in our -- all our businesses encouraged us to onboard more customers also through intensive TV advertising. In terms of customer unit economics, we do not see neither the increase per customer cards nor the deterioration of the individual [indiscernible].Second part of the cost story is the growth in the salary expenditure. It comes both from the growth in personnel where we still have some backlogs and therefore, we will have to continue to hire more professionals in IT and analytics, as well as the growth in the compensation per person. Both base salary and long-term incentive programs have to be in line with leading technology peers.Slide 13 shows the dynamics of our net income and the contribution that created in noncredit businesses due to that growth. You can see that the second quarter net income climbed over RUB 15 billion, which is a record number in our history. Consumer Finance was the main contributor, thanks to low credit risk and growing revenue. Noncredit part develops multidimensionally with current account business, coping with significant investments into growth, resulting in segment losses.Before acquisition, our current account business is near breakeven. It should be noted that in our segment reporting, the benefit of lower acquisition costs when cross-selling to debit cardholders accrues entirely to our consumer finance, InvestTech, payments and short-term businesses, given that we do not use any internal transfer of acquisition costs. This means that in spite of the negative result, the current account business is still accretive to earnings.On the next few slides, I will cover the results of each business segment one by one, starting with our bread and butter credit business on Slide 14. Our loan portfolio showed a solid 15.3% growth during the second quarter on a gross basis and 17.6% growth on a net basis. We continue to explore the opportunity for healthy and fast growth. It was driven by all components of the trading book, including unsecured and collateralized loans. All segments contributed to the growth, but secured loans, SME loans and personal loans grew faster from a lower base. Therefore, the share of credit cards fell for the first time to less than 50% of the total book. Still, credit cards remain a key core product for us, and we still see huge potential in this market. In the second quarter, we added 890,000 new activated credit cards.The economics of our credit business is shown on Slide 15 and 17. In the second quarter of 2021, interest income amounted to almost RUB 40 billion. It is 22% growth year-on-year, but the growth really happens from the second half of 2020. Our headline gross interest yield on the credit portfolio decreased from 29.8% to 25.5% year-on-year, mostly due to the growing part of noncredit card loan portfolio. The reduction does not happen easily. For example, there was none quarter-on-quarter due to the accelerated growth of the portfolio. It is safe to assume that towards the end of the year, gross yield will continue to gradually move down to the 24%-plus area as a result of the changing portfolio mix.Our blended cost of borrowing declined from 4.6% to 3.3% year-on-year and was this low, thanks to large inflows of cheap SME, retail and brokerage accounts. In the second quarter, cost of funding picked up 20 basis points as we marginally increased our rates on deposits and current accounts following the Central Bank's decision to higher base rate. General expectation should be that funding costs will continue to increase a little bit in the second half of the year as well -- but for the year, it will stay within the guidance announced earlier.Net interest margin declined year-on-year by 3.6% to 16.1% because of the reduction of the gross yield, softened by the reduction of cost of funding. Cost of risk continued to improve during the first half of the year, continuing the trend on the second half of 2020. The reduction in issuance of credit products during the pandemic period last year played an important role in bringing down cost of risk, and our portfolio statistics are now largely dependent on this best of the best vintages. Now we are issuing much more and may expect some manageable increase in the cost of risk during the second half of the year. The improvement in cost of risk allowed our risk-adjusted net interest margin to get to 13.7%.The next slides give more granular information about the unsecured and secured parts of the loan book, including gross yield and cost of risk. Slide 18 shows the unsecured loan book, where you can see a continued improvement in asset quality and still very attractive risk-adjusted margins.Slide 19 shows the secured part of the portfolio, split by car and home equity loans. The average yield is stable at 14%, and cost of risk slightly picked up on car loans due to the front-loading effect as this car portfolio grew very fast in the first half of the year.Now some comments on our noncredit businesses on Slides 20 to 24, starting with our debit card business. It was another record-breaking quarter in terms of customer acquisition as we added 1.7 million customers to get to 10.6 million in total and 6.8 million active. TPV of purchases increased greatly and reached RUB 539 million, which is 31% quarter-on-quarter growth, and balances also grew notably to RUB 375 million. Our MAU added RUB 1 billion to end at RUB 8.1 billion for the quarter, net of the cash back that we returned to our customers. Bottom line result is a loss but a bit over RUB 3 billion, coming mostly from acquisition of new customers.Specifically in this quarter, we started an extensive yet very -- extensive but very successful marketing action with no annual fee forever, which has converted into new customers subsequently in July. We see more value in growing the customer base and in the potential synergetic effects with other businesses -- business lines rather than a source of pure net income.Our SME business has found ways to increase profitable customer acquisition in big numbers after a [ drenching ] period for a few quarters, but has improved its churn statistics. You can see from Slide 21 that at the end of the quarter, we had 547,000 total customers and 332,000 active. We earned revenue of RUB 4.2 billion in fees, treasury income, some interest on SME loans and almost doubled that income number to RUB 2.1 billion. After a seasonal -- the balances on accounts also grew in the second quarter to RUB 93 billion.Our investment business had a solid quarter in terms of customer acquisition. At the end of the quarter, we had 2.3 million total customers and 1.6 million active. We are the clear #1 in the country, both by registered and active customers, but there is a lot of room to grow. Our customers already hold RUB 0.5 trillion in assets under custody. After an astonishing first quarter, with lots of marketing promotions and [ taking ] [indiscernible] volume retracted a bit, but we expect it to resume growth in the second half of the year.Lastly, profitability did not suffer as we were able to hold on revenues at RUB 4.6 billion level and increase quarterly profit before tax to RUB 1 billion or 10% quarter-on-quarter.If you would please turn to Slide 24. Acquiring is a business line, which is benefiting from the acceleration -- accelerated transition to e-commerce. Our Internet acquiring business is the second largest in Russia, providing best-in-class conversion metrics for our merchants. Including our off-line acquiring business, we processed RUB 329 billion of TPV in the second quarter, which represents 2.6x growth year-on-year and 40% quarter-on-quarter. Combined with a stable commission of 1.7%, this led to revenue of RUB 5.5 billion for the quarter and profit before tax of RUB 1.1 billion. This business works both with large aggregators as well as individual merchants in a roughly 50-50 split. It's also an important part of value proposition to many of our SME customers.Now to the final slide of my presentation. You have already seen our quarterly profit number. To reiterate, it's another quarterly record of RUB 16.1 billion and landmark RUB 30 billion plus for the first half of 2021. Return on equity is over 46% for the quarter despite heavy investments into customer acquisition and hiring and, in my view, such returns justify our decision not to pay dividends. Return on assets went up to 7% for the quarter and to 6.7% for the first half of the year.Now back to Oliver for closing remarks.
Thank you, Ilya. The second quarter of the year showed good progress towards our 2023 strategic target of building the most comprehensive, engaging and innovative financial and lifestyle ecosystem, and we'll continue to do this while producing substantial and sustainable profitability. Our better-than-expected performance in the first half of this year has led us to upgrade our 2021 guidance. We are now targeting more than RUB 60 billion of net profit, driven by faster net loan growth, which is now expected at over 50%, and by lower cost of risk, which is now expected to be in the 5% area, all this while continuing to invest in those businesses that will enable us to grow in Russia for many years to come.The growth opportunity in Russia remains substantial, and we look forward to augmenting it with well-thought-out and research opportunities outside of Russia. We're confident that with the depth of our management team and guidance from our revamped Board, we'll continue to deliver value for all of our stakeholders.We're super excited to make our first international move. 15 years after Tinkoff was founded, we're now laying the foundations for continued growth for the next 15 years at least. If we see positive traction in our Philippines venture, we'll consider other markets as well. And with that, we'll be very happy to take your questions.
[Operator Instructions] And our first question today comes from Mikhail Shlemov of VTB Capital.
Congratulations on the great results. If I may ask the first question -- or actually, on the updated 2021 guidance, specifically on the loan growth and the cost of risk side. While it's very logical to see the upgrade of the loan growth guidance given the very strong performance in the first half, I'm somehow surprised by the fact that you are actually -- downgrade the cost of risk guidance, especially as the loan volumes are actually -- pick up.Once I actually look at the historic data of how the credit losses have actually stacked up across the credit cycle, I was coming at somewhat higher implied cost of risk numbers, and especially given the context that the cash loans are growing the fastest right now. And you were commenting earlier that the risk profile on those products have been -- and the unit economics from those products have been inferior to the credit card. I wonder what I'm missing here, so your comments would be appreciated. And I have some follow-up questions.
Thank you, Mikhail. I will answer this question. So our initial guidance was 7% to 8% for cost of risk. And with cost of risk at 4.5% in the first half of the year, to get into this guidance by the end of the year, we really have to have cost of risk in double digits in the second half just mathematically. Therefore, I understand that our initial guidance is now outdated.But your question really is the 5% area, is that [indiscernible] asset that's efficient? Could it be higher than that? Well, we have some statistical models that show that in the second half of the year, our cost of risk should be slightly higher than the first half.But we do not see this increase anywhere dramatically. So I think it should be -- the total for the year should be about 5%, maybe a bit more than 5%, which can give you an idea of what we expect to get in second half.
So actually, if we take it a little bit forward and actually, I think about 2022, do you think that this 5%, let's say, around 5% area cost of risk is a new sustainable cost of risk, which we should be looking at given the current loan mix?
Well, it's difficult to give -- to guide for the next year because it could go either direction. And it could go down for the reason of change in portfolio mix. For example, if we accelerate our secured lending and if we are successful in building -- in upcoming months building our mortgage part of the business, then cost of risk should go down. If the status quo in portfolio mix stays the same, then cost of risk should be at the same level or maybe a little bit higher than we see right now -- than we see in 2021. But again, if everything changes so fast in the economy, then -- sometimes it's just too difficult to -- that far ahead.
We'll give some guidance on that end of this year, beginning of next year as usual [indiscernible]
Okay. Just like -- perhaps you could give us a little bit of a more precise data. When you are going to scale up the mortgage issuances? I -- as far as I understand, you've been doing some pilots. But when do you think you could realistically start to scale up? So we could time our cost of risk assumptions into the models accordingly.
So we'll start according to our plan in October, November this year, offering them to real-life customers as opposed to internal test. And we won't -- as usual, we tend to have this kind of semipilot waiting for a while, while we're learning how to do the business, while we're understanding how the portfolio metrics look, understanding how the marketing funnel works, testing different channels, et cetera, et cetera.So we won't be putting our foot on any accelerators at all, but we'll offer a portfolio that you will see in our total portfolio. So it be visible, if all goes according to plan, in 12 [ to 18 ] months' time. But it won't be a number which makes a huge impact on any of our P&L, balance sheet, risk numbers or anything, in any channels like that [indiscernible] I think it's fair to say here.
Excellent. Just like -- the second question is actually about operating expenses. We have recently seen a trend of actually the underlying cost of risk -- sorry, cost-income ratio ex acquisition trending higher. And I think that just like in the press release, you were talking about hiring more 800 people into the IT, into the several development hubs.I wonder if you could give us some color on how big is this ramp-up in the development versus the current scale, so how many developers you have right now. And perhaps you could -- what is driving such a big hiring spree? Perhaps there's something which you should spending on the international expansion or something else.
Sure. I'll kick off and then Ilya can comment on numbers, maybe. The number was unfortunately not 800 or 1,800. That's the number of predominantly tech professionals that we're hiring this year into HQ in the development hubs. So we're currently around 7,000 people in HQ in development hubs. And that will increase probably by another 800 or so to the end of the year, so in the second half.That is before we start thinking of hiring for international. So this is just our need to continue building the platforms, supplement the existing product teams, the business lines as we call them, obviously maintain the systems that we have, so people to run the business, not just to develop the business, and this is interface on our mobile apps, our payments business, et cetera, et cetera.So there's a bit of an arms race going on out there in the market in terms of hiring tech talent. We're one of the participants in this. Tech talent is now very sought after. There's a certain scarcity, and it's getting more expensive. So at that point, I'll hand over to Ilya to talk about the numbers.
Well, actually, the numbers I can just reiterate from what [indiscernible] earlier that the assets, it's -- it grew to almost half of our costs and, I mean, the administrative staff costs. And the growth comes from hiring new people and increasing their salaries and compensation to the existing probably [indiscernible] recently.And yes, we are -- we will have to continue hiring people because we have in every of the businesses, we have to have a queue of different features of products that we want to implement. That's one thing. So that's the kind of a backlog that requires more hands basically to do. And second thing, we were trying to do the new releases faster, basically to stay ahead of the competition.
And probably the last one on international expansion. Just like -- we appreciate, obviously, the announcement of the Philippines as the launchpad for the international expansion. And Oliver, you have talked about the international payments business strategy coming through.But once I read the press release, you talked directionally about several countries. So I wonder if you're thinking about the second country to test the digital bank concept outside of Philippines before the year-end of visit and this would be just like the payments.And the second one is when you would be building the bank in Philippines? To what extent you can leverage the IT development, which you have been already doing in Russia? Or you have to -- or actually, to replicate it outside Russia as well?
You called your fourth question, the second question. Now you're calling you're fifth question -- it's actually 6 questions in 1 mission. But I'll try and answer that.
Sorry, Oliver. Sorry. I mean...
Don't worry. They're good questions. So I'll break this down into -- try and break it down to bite-size chunks. So the first is I alluded in my introductory piece in this conference call to an international payments project, which is completely separate and will probably not be in the same market/markets as the neobank project, yes? So that's being worked on. And that's part of the Acquiring business, which we want to take international. So we'll leave that aside.Now moving on to your question about the neobank, which we want to build in the Philippines. So the Philippines is -- has already been announced. We had to announce because we've already submitted an application for additional banking license in the Philippines. You guys have already seen that. That, we believe, will be the first of more than several markets -- several, several markets, I should say, in our international neobank project.We're looking at a range of options for the second market. So we're just at the [indiscernible] stage, we're thinking, we're researching. So there's no decision being taken on that, if we launch a second market at all. So the Philippines, just by gut feeling, obviously, these things take a bit of time to build, will not launch this year, but obviously there'll be more information communicated on that this year, which means that there certainly won't be a second market launch this year, if at all.And then the third part of your question was on the tech stack. So there are certain things that we can -- certain components of the Tinkoff tech stack that we can use and will use for the international projects for the Philippines. And there'll be another line of tech stack that will be built specifically for the Philippines and if we launch in other market, will be used obviously for the markets. So it will be 2 stacks basically, what we take from Tinkoff in Russia and what we build to support our Asian initiative.
Our next question comes from Elena Tsareva of BCS.
Congratulations with very strong record results, and I was impressed with the acceleration of your customer number growth. I have first question on your capital position. So given that you already commented with high risk rates and also as the IFRS status and also given your international expansion, how comfortable are you on capital position going forward? This will be my first question.
Okay. That's -- I guess, that's a question for me. And right now, we have a very comfortable position. We have 2% over the prescribed minimum total capital. And even more than that on core, it's like 3% over. And we obviously are forecasting our capital position going forward, taking into account the development of our lending business in several directions. And we obviously have to have some capital available for the international expansion. Fortunately, it's not going to be huge for at least in the foreseeable few quarters. And also for our potential deals that, again, we have hinted on earlier. So that is why we are not -- we also have to have some capital available for purchase of some of our GDRs to fund our -- prefund our management incentive programs, by the way.Staying on that, we see that our bank, as an operational company, a stand-alone operational company, we will probably have sufficient capital for development. We also have other operational companies that are able to upstream some of their profit aimed in terms of dividend to their holding level, which will allow us to finance some of our new endeavors from that [indiscernible].We also obviously have to be [indiscernible] about the potential actions taken by our regulator in terms of increasing the burden on capital from the consumer lending business. The recent moves by the Central Bank will obviously have some drag on our capital requirements. Fortunately, not very significant. I expect that on a, I would say, 18 months horizon, the recent moves of the Central Bank will take up to 0.5% of our capital, something like that. But again, it's moving around. It could be changed again and again.And the last thing that I want to mention probably is that recently, subsequent to our quarter that we are reporting, we did an initial securitization deal on our home equity loans. And if we will be a frequent issuer of this securitization waivers, then it will -- we will have some ability to free up capital as well.
And just partially into the same -- to this question, are you going to return to dividends next year?
We are not going to pay dividends this year. And the decision about dividends next year will have to be announced later probably on our annual call as usual. So I don't have this kind of visibility right now. But I only hope that our stakeholders enjoy the returns that we have in our business here.
Understood. And my next question is on your cooperation with St. Petersburg Stock Exchange. So if you can just show how it contributes to product offering [indiscernible] and maybe some more details on this [indiscernible].
This is Sergei. The St. Petersburg Exchange is one of the keys where we see a lot of benefit of taking commercial relationship on to a strategic level. So the St. Petersburg Exchange in important and vital element of the capital markets infrastructure in Russia. They're a great provider [indiscernible] on a lot of securities in Russia, and they're key to our success in the implementation of our Tinkoff Investments growth strategy.So basically, we've taken this 5% position for strategic reasons in [indiscernible]. And in the foreseeable future, we have no plans of changing the quantity of our participation in their capital. So we're very happy with this relationship [ with them ]. [indiscernible]
Yes. And just maybe more question also that the SME loans got a bit [ reasonable ] on your loan book, if any data on [ product range ], maybe cost of risk in this segment?
Sure. So just very briefly, Elena, we have 3 types of lending products. We have very short term, basically overdraft facility, which is 1 to 3 months. And we have a slightly longer working capital loan, [ if you like ], 3 to 6 months, sometimes a bit longer. And we have a longer-term, basically business investment loan where people invest in growing their businesses. The third category is small, but we're beginning to build it. The first 2 loan categories are probably driving the growth in the loan book. And we currently have around RUB 5 billion, which I think I mentioned. So it's grown quite a lot but still tiny, obviously. So we kept it around RUB 1 billion to RUB 2 billion during the pilot phase. You can -- we didn't have the kind of formal end to the pilot, but basically ended about a year ago, 9 months ago.And now we're quitely confident that we know how to do this business. We're cautious still, we're still learning. There's obviously a very different underwriting approach to the one that we have for consumer loans. But we like what we see. We obviously have a very big SME customer base that we can use to cross-sell this type of product. And as we move up into the M segment, the medium-sized business segment, this is a bit of a must have as a prerequisite for growing our business. So early days. We like it, and we're going to cautiously grow this business over the next few years.Actually, just to complete this picture, we also have [indiscernible] product, which is guarantees for products -- sorry, guarantees for projects, state-owned companies between [indiscernible] [ policies ]. So state guarantees we call them for short. And that's still, again, a relatively small business but we would like to grow with us as well. It's a slightly different approach to lending.
Our next question today comes from Gabor Kemeny of Autonomous.
A few questions from me. Another follow-up on loan growth. I think in the first half, your growth annualized a bit above 80% and, let's say, 50% plus for the full year. So should we expect some slowdown in the second half? And would that be driven by the CBR regulation? Or do you see some changes in demand, perhaps?The second one is on payments. The Bank of Russia just published this other consultation paper on payments, which includes some recommendations on payment systems as well. And I understand that they will open up payments and acquiring to some nonfinancial companies. So my question is how do you think about the risk that some of the nonfinancial companies, like retailers, would potentially internalize acquiring, online acquiring as well, which is growing nicely at Tinkoff right now?And my final question is on the Philippines. If you could perhaps talk a bit about how are you -- what would be your strategy to crack this market? So what would you start off with? Would that be credit -- potentially your original flagship product of credit card? Or would you perhaps flag other opportunities?
Thank you, Gabor. I will start with the loan portfolio growth. And you're absolutely right, we will have a slightly slower growth as we have at least see ourself growing a little bit lower in the second half compared to the first half.We -- first of all, we are minding about our capital. Second, important thing that we run not just a number of products but a lot of different channels, subchannels. And we are mindful about their performance, basically their underlying economics in these channels. And we will be just managing our channel mix to basically to have it more profitable, especially taking into account that the gross yield is going down slightly and taking into account that we expect a certain increase in cost of risk in the second half of the year. So you are right, we will grow a little bit slower than the first half.
And moving on to the second question. So your question is basically about the regulators' recent statements on opening up payments business even further. So it basically goes on along a continuum, yes? So it's a line told by the Central Bank for [ acquire one ]. So there's nothing new here. It's a logical extension. So basically, if we interpret this correctly, they're talking about opening up the SBP, the Faster Payments System, always been around now for over 2, maybe 3 years, I suppose, to noncredit organizations and nonfinancial institutions.So this is, as I said, consistent with what we've been saying for a long time. So it certainly not comes as a surprise. And it's consistent with our policy to bring the cost of acquiring or cost of payments down for merchants. So the erosion of interchange, which has been happening for a while, will continue, and it will happen over time. It won't be a big bang, but it will certainly happen over time. And it certainly could lead to some merchants internalizing acquiring.However, there's a few things, which give me cause to believe that this doesn't necessarily cast a cloud over our payments product. So the first is that large merchants get high volume discount interchange rates from the payment systems anyway. So if you're a large merchant, you qualify for this category called high-volume merchants, and you get a much lower interchange rate. And if you just think that there's a cost to do payments yourselves, that means if you're paying an interchange rate of 0.5, then you're probably not far off, if not better than, the level that you will be -- you'll be paying yourself if you're acquiring your own volumes. It's certainly not far off the SBP rate, basically equivalent. That's the first thing that comes to mind when we're discussing this.The second thing is that payments is a whole business. So in order to process, ensure stability and reliability, fraud management, connectivity to the various different payment systems, of whom there are many, updating your tables and making sure that you're in compliance with all the different payment systems requirements, which will change at different times and on a regular basis, et cetera, et cetera, the investment in infrastructure, it's something which you have to have a focus on doing and have to do well because, especially if you're an online merchant, your conversion rates, your final conversion rate, the bottom of the funnel, basically checkout is highly sensitive to losing sale -- losing sales.So it's something that is difficult to build, difficult to do well. And I'm not sure that it's quite as straightforward as maybe some people think. So it doesn't mean to say that some of the large merchants, particularly the online, let's say, marketplaces, won't try and do it. Some of them will, and they're going to anyway, yes? There's nothing new in that because we knew they're going to do it anyway.But the market will be big enough to accommodate all sorts of different players, especially if they're unaffiliated like us. So this doesn't do anything to dent our enthusiasm about payments. Over time, there's definitely going to be downward movement in interchange, and this is something that everybody expects, and it's something we have to deal with. But in terms of volume, scale, this is a business that we look and we'll be highly profitable as we go into the future.
Our next question comes from Andrew Keeley of Sber CIB.
A couple of questions. First of all, just a quick clarification, sorry, on the international business. So your international payments project is completely separate from the Asian neobanking. Can you just remind us where will that be? I mean is that stuff like cloud payments in Kazakhstan, the kind of CIS-based, or other locations? Then I'll ask another question after.
Sure. Thanks. I realize I rather rudely didn't answer Gabor's third question, which is our product entry strategy into the Philippines. So I'll deal with that just one second. Sorry, to hijack your question.So the question -- your question is on the international payments. And it's an acquiring/payments move internationally, which could include the CIS. So I'll keep it broad. But without -- we'd like to do a test in a particular market, but what -- we can't tell you what our market is yet, and that's about what we can say. But as you say, obviously, without reemphasizing, it's completely separate from the other international project, which is with neobank, which -- where we're starting in the Philippines.So in the Philippines, what does neobank mean? Coming back to Gabor's question, which I forgot to answer, sorry. This is a -- hopefully, a licensed entity, assuming we can get a license and we think we have visibility and a path to getting license, a digital banking license in the Philippines.It's a balance sheet business. It draws on the strengths and expertise of Tinkoff Group in Russia. We're not wedded to credit cards, but we like credit cards or credit card-like products. It could be something else, but if you take a step back from a consumer-driven, let's say, consumer lending-led entry into a market, with a strong debit card offering launched in parallel or soon thereafter.In other markets, for example, it could be an SME-led strategy, it could be a broker-led strategy. So it really depends on the market and what we think is going to fly and where, and obviously, results of tests as well. So that's not me explaining or describing to you our product entry strategy for the Philippines, just -- it's letting you into how we think about this, Andrew.
Okay. That's right. Okay. That's helpful. I have 2 other questions. One is on Tinkoff Pro. Over 750,000 users, it looks like you're gaining some nice traction there. Yes, any thoughts on kind of where you would be hoping, kind of user numbers to be in this -- on this kind of product over the next, I don't know, kind of year or 2?And I'm interested whether you kind of have any kind of color in terms of how it's impacting your revenues. I mean there's obviously various different kind of things at play here in terms of the kind of monthly subscription, but lower kind of specific product fees, higher cash backs, et cetera. And the funding costs as well, I mean, kind of slightly higher deposit rates. So just any kind of thoughts on how you actually see that impacting your financials would be good.And then the second or third question is on cost switch. Your message on the staff cost is very clear. Wondering what your thoughts are on the kind of strong growth in the kind of marketing-driven customer acquisition costs, whether you expect -- you talked about big marketing projects on the Tinkoff Investments side, whether you expect any kind of slowdown in those in the second half of the year.
I'll take the first question then. So Tinkoff Pro, our subscription program. So you mentioned that we have 750,000. It's actually probably not long before it's going to be 1 million. So the penetration of our products or that subscription program in our customer base is growing.We recently had a deep dive into this to understand the economics, but it's still pretty raw in terms of the data. It's still very new. So obviously, the reason why we're doing this is because we think this will positively affect lifetime value. So it affects cross-sell, stickiness, retention activity and behavior in all sorts of different ways.So we think that this is something which will cement our relationships, drive engagement with core parts of our customer base. And therefore, we're going to continue promoting it. But it's a little bit early to tell you exactly how it influences the economics of our business because as you implied in your question, in some areas, we give a bit more, but in some other areas, it enables us to optimize some of our costs related -- transactional costs, for example, or other costs, funding costs related to customers.So now, for example, to get -- to qualify for the higher rates on the deposits, you have to be a member of Tinkoff Pro or Tinkoff Premium via those subscription programs. If not, then you don't get the higher rates on the deposit.So there's certain -- as yet, not, let's say, definitively or clinically proven, but early signs that this could help us manage our economics in a number of different ways. That's basically what we have to say on it at the moment, but we like it, and that's why we're pushing it further. Ilya, on the second question, costs?
Well, the second question, which was what's the cost trajectory in terms of marketing and certain marketing actions will be in the second half of the year. And I would say that a part of -- from the lending, we have certain plans to actually -- to at least keep marketing effort on the same level for many of our products, for many of our business lines, including investments and current account business, to the same level or even maybe even intensified during the high season at the end of the year, that's basically fourth quarter, starting probably from September already.In terms of lending, yes, we already said that probably we won't be growing that fast in the second half compared to the first half. Therefore, the customer acquisition costs on lending business should be a bit lighter on that. But in general, we do not want to reduce our marketing effort.
Our next question today comes from Ravi Vish of Limiar.
Congratulations on the excellent results, guys. My question has already been answered, it was on the Philippines. It's already been answered. Thank you.
And we can move on to Mehmet Sevim of JPMorgan.
Congratulations also from my side. I have 3 questions, please. So first of all, on the investment business, although the growth looks very solid, it does look like there is some deceleration in the trend compared to the previous quarter. And especially looking at customers, the ratio of active to total customers is coming down now for second quarter. And I'm just trying to understand what's driving this widening in the gap between active and total. So do you think that's an actual development after the bumper growth seen last year? Or is there a visible difference in behavior of the different customer cohorts? Would you say, for example, that people who joined last year were more active versus the ones joining this year? So any color on that would be quite helpful.And secondly, on BNPL. So buy now, pay later. Could you please share any color from your initial experience with the product so far? Are customers liking it? Are the merchants liking it? And Oliver, I think you mentioned earlier that you could see that product as a customer acquisition channel rather than a monetization channel in the long term. And with the experience so far, is there any change in your thinking?And finally, on growth and capital. With the size of your balance sheet today, what do you think is the possibility that Tinkoff could be recognized as a systemically important financial institution sometime soon? And if that's possible, would that be within your capital budget?
Thanks, Mehmet. Yes, so on investments, we had a bumper, I must say, anomalous first quarter, yes? And that means that it's not maybe a good baseline to just the second quarter. [ So ] the second quarter is a bit slower than the first quarter, and that's because of the global situation as opposed to anything that happened within signed Tinkoff Investments.And actually looking at it now, despite the third quarter being a seasonally slower quarter for investments in general for brokerage businesses, the third quarter is picking up. So I wouldn't read too much into the second quarter, to be honest with you.In terms of actives as a percentage of the total customer numbers, total accounts opened, brokerage accounts, for sure, yes, that's happening a little bit with us because we've done some whopping marketing campaigns. And when you do big marketing campaigns, especially things like bring a friend and whatnot, that brings in, let's say, one of a better term, a bit of noise where you get accounts, which are not then activated.So the number of actives has been growing nicely, continues to grow with a very good dynamic -- growth dynamic. But as a share of the total accounts opened, it goes up and down, depending on what we're doing with mass marketing campaigns. That's normal.What's important are the percentage of funded accounts from active. So you get an account that's opened, and it's activated, and then it's funded in order to be utilized, yes? So we look at funded accounts. That's the number that I chart the most. And that, as a proportion of open accounts and active -- activated accounts, that's continued to -- more or less at the same level despite the large marketing campaign we've done. So that's very encouraging in terms of looking at the vintages and looking at the funnel.On -- maybe just to add a little bit more color. So the volumes dipped in the second quarter. AUC was flattish, if I recall, maybe grew a little bit. But in terms of what we're seeing in quarter 3, AUC is growing nicely at the moment, yes? So obviously, we only just entered the third quarter, but just to put your mind at rest, there's nothing untoward happening there in terms of the growth dynamic or the metrics.On the second question, BNPL, Dolyame, which means paying bits basically. So it's very early days. We've had -- we're now in tens of thousands of applications received, but there's certainly hundreds of thousands. So it's very early in our development. But it's actually accelerating very quickly. So we're getting more and more data and more and more informational points in terms of the metrics, the funnel acquisition costs, which categories we're seeing the uptake in, what customers think or merchants think of it.So we've signed up 20 big merchants. I've been very active in this myself. I've been talking to the partners, talking to merchants in terms of trying to get them recruited and get them up and running. I think this is a really nice product line.It's a new muscle for us. So we have lots of B2B businesses, but this is a very different B2B business. So this is obviously more akin to our point-of-sale lending program, but it's a very different proposition. And so we are developing a muscle, working out. So far, I'd like -- I think merchants like it because they can see what's happening in other markets. And therefore, I think if the same thing happens in Russia, then this is obviously something that can drive their business. So it drives customer take-up. It drives average transaction size, and it drives repeat purchases.And your question as to whether this will be something which we use as an acquisition channel or monetization, it's definitely going to be something we use as an acquisition channel. It's not going to be a monetization business line for certainly sometime to come, if ever. But the only maybe slight footnote there is that we said that about our point-of-sale lending and longer installments.So when we talk about point-of-sale lending, it's classic sales finance, about 20% of the volume we do and 80% installments, but the longer installments or over 6 months as opposed to BNPL, which is basically be 6 weeks. And when we launched that -- actually, just one of the interesting piece of information as a quick aside is that we are now, I believe, #1, in terms of point-of-sale loan disbursements. We don't talk about it much, but we've actually become the biggest in the market, and it's a really nice business line for us.And when we launched our -- or relaunched it, let's say, 5 years ago, 4 years ago and talked to you guys about it on a more regular basis, it was a loss leader for us. So it was basically an acquisition channel for us to bring in customers, with negative NPV, typically it was about minus 2.5% and minus 3% on those customers, in order to cross-sell them the products, first and foremost, credit cards.But since then, it's become profitable in its own right. So as a stand-alone business line, point-of-sale lending has becoming increasingly profitable and actually make a nice contribution to [indiscernible] and as well as being a big channel for bringing customers to cross-sell the products. And actually debit cards now as well, not just lending products.So if you know this, over time, maybe BNPL will become that kind of product. But that's not what we're launching it for at the moment, certainly not for the foreseeable future. Over to Ilya on growth capital.
Right. So you -- I guess, it's the first time during our investment call when someone mentioned the systemically important banks, and that's a requirement of the Central Bank -- requirement. That basically means that systemically important banks have to have more higher capital adequacy.We certainly have to prepare to be included into the systemically important banks in the future. It's also important to understand that the Central Bank has developed a specific methodology, how we calculate when the bank is -- has to be included or invited, let's say, into this group.And actually, the formula for the -- there is a mathematical formula for that. It's -- again, it's in the public domain, where you have to calculate certain classes of your activities, including lending, including borrowing, including interbank, including your nonresident foreign activities. And then it's -- again, the formula is very elaborate and then you have to sort of mix up all these results together. And then it should be more than 1% of total banking market in this mix.And we sort of -- of course, I have this calculation. And in our forecast, in our business plan, we see that we will be -- we will reach that magic number somewhere in 2023. Nevertheless, we want to be -- unless Central Bank changes its regulations. Nevertheless, we want to be prepared ahead and satisfy for all the requests. It's not only capital requirements, but some administrative requirements as well. We want to be really -- for that elite club somewhere a year from now.
Maybe just to add to that point, Ilya. There seems to be kind of -- the formal list of criteria that Ilya was just explaining, there seems to be a kind of less formal trigger, if you like, which is when you cross the RUB 1 trillion asset threshold, which we're probably just about to do. And so formally, it will probably take place in 2023. Maybe it'll happen a bit sooner. But your question is spot on, Mehmet.
Great. That's all very helpful. If I may just follow up also on your comment, Oliver, on POS loans. Quite interesting to see that some of the growth uptick is in cash loans and POS, which were previously not very much maybe the focus areas. Is that just active push from your side? Or is that just related to demand currently because of the market dynamics?
Yes. Sometimes it's difficult to say where push and pull start and end. So they're very different beasts, yes? So cash loans is predominantly sold to our existing customers in our existing customer base and predominantly sold to Tinkoff Black customers, who are our debit card customers, but they also borrow from different institutions across the market. And they take mortgage, they take personal loans, cash loans as well as credit cards, et cetera.So we basically learned how to cross-sell in a very seamless way to -- and with a good product to our existing customer base. Basically in the mobile app, a customer can just press a button and get a cash loan. Obviously, we underwrite them, but a lot of it is preapproved. So most of our cash loan and personal loan volume is done organically to our internal customers, to our existing customers. So there it's not push. It's something which happens organically, it's called a pull. And it's something we like, it's something that will grow obviously [ on the quarter ]. And we're not -- certainly not going to be pushing up because as Ilya explained in an earlier answer, we actually are going to probably slow down a little bit in the second half.Point-of-sale lending is very different because it's a B2B2C product. And again, when I talk about point-of-sale lending, it's 20%, 30% classical sales finance, so basically a loan with interest charged, the other 70%, 80% are installments where it's interest-free to the customer, and it's subsidized by the merchant with a longer dated loan than the BNPL product.BNPL is basically deferred payment as opposed to a loan. And there, we've learned how to do it, learned how to calibrate it with the partners. We're the biggest in online sales finance. We're big in off-line partners where it's appropriate or where it's economically interesting to be. So we have our own broker -- [ TCB ] broker, which is high-tech, user off-line and online. We have paperless process, which helps us move volume. And basically, we're just more -- we have the technological edge. We move quicker with better UX for the merchant staff who are underwriters. We don't have anybody in the field of our own. And that's enabled us to quietly take over this market basically. And so it's something we're pushing on the B2B side, but we'd have to push it on the B2C side [indiscernible]. So they become big businesses, and they're growing very nicely with very positive economics.
Our next question comes from Andrzej Nowaczek of HSBC.
My questions have been answered, but I still would like to follow up on the brokerage business, simply because there's lots of moving parts here. You mentioned trading volumes dropped, which is true. But there's also something else happening, I think. The retail share in equity trading on [ malls ] has been declining for a while. It was 42% in Q1, 40% in Q2 and in July, just 38.5%.I just wondered if this declining engagement level by retail investors is a reflection of the rising interest rates, perhaps? You say revenue growth is to resume in H2 based on what you're seeing in July, but what really gives you this confidence over a longer term?
I really don't think so. I think it's global markets related. The volumes of trading have dropped across the market and across the globe because of what's happening in equity markets, nothing to do with local deposit markets.So if deposit rates have doubled, then maybe your comment would hold water. But further -- deposit interest rates have gone up a little bit. And in our case, they really [ aren't going up at all ]. But across the market, [ I've got it much ] -- I really don't think that's a driver for people not suddenly returning to deposits.
Okay. But then how do you explain the decreasing retail share in total trading?
Retail -- declining retail share of what? Sorry?
Equity trading [ to be more specific ].
Well, my colleagues, I hope, will jump in here. But my feeling is that when there's volatility, you get the higher volumes generated by a smaller number of very active traders. So when there's movements in the market either way, they tend to be much more active.So you've got gross oversimplification where you've got 3 segments, if you like. You've got your high net worth, buy and hold diverse instruments type of customers, let's call them, for the sake of large and private banking customers. Then you've got your retail, buy and hold lower ticket longer-term customers. And then in between them, you've got your higher frequency traders who [ are ] professionals, professionals or just people who do it as a hobby or an interest, better to put it that way, who jump in also in a market depending on what's happening in the market. So when [indiscernible] is going in one direction, then that means they'll be coming in. And so this is just a sign of what's something in the wider market. Because again, I reiterate that what we see now over the last month or so basically talks to the returning to the longer-term trend without the noise that we saw as a result of volatility in the second quarter. You'll see this coming in through the numbers in the third quarter itself.
The next question comes from Olga Veselova of Bank of America.
I have several questions. My first question is a follow-up on questions about capital. Given the high loan growth and the regulatory changes and potentially, inclusion into the list of systemically important banks, do you think that an SPO could be considered in 2022, maybe 2023? Or you would rather avoid considering this option?
Sergei here. I'll take that. Well, you're right. The pallet of options available to us is pretty broad. So we can triangulate between the various growth rates in -- on our credit side. And we can, of course, place in other [ subordinated action ]. We can do an SPO. So all those available sort of options are theoretically available to us.But as you have gathered from our prior history [ as we will be ] -- would not be our first choice under any circumstance. So basically, depending on what growth opportunities we see ahead of us in 2022, we will decide the optimal way to manage our capital position. We'll find an optimal growth rate. We'll see what dynamics there will be with respect to the CBR requirements related to secured and unsecured lending, and we'll find the right balance between the 2 types of products in our portfolio, and we'll take it from there.So should we see a reasonable -- a reasonably attractive way for us to step function our growth opportunities, yes, of course, we'll come back to this SPO idea, but it's not in the cards for now, for sure.
Sergei, that's very clear. My second question is about your net interest margin. We were very pleased to see a nice pickup in the margin in the second quarter, helped by -- mainly by the yield on treasuries. But also we noticed that the yield on credit portfolio was flattish quarter-over-quarter. So could you comment, please, on the pricing competition these days?And in the next quarters maybe, do you think the average yield will be flattish for some time? Or the pricing competition is still there, and the average yield will be going -- will likely be going down?
Well, I'll probably answer this question. Well, first of all, I'll touch on why the gross -- well, our net interest margin is largely dependent on our gross yield. So that's really what we have to talk about, not about the funding costs.And the -- actually, we were surprised as well as our gross yield was sort of resilient in the second quarter while my personal feeling that it should still continue to go down slightly every quarter because of the changing portfolio mix. And I attribute this to the area, high growth of our loan portfolio in this quarter. So basically, newer vintages, especially in the credit card business, they usually tend to be -- tend to hold higher gross yield.In terms of the price competition, well, it certainly exists in several products, whether in our product -- lending product mix. For example, if you talk car loans, for example, and when you -- in the dealership, you see it alongside with other credit organization, and obviously, you have to compete for price as well. Probably the same relates to the point-of-sale business, for example, where the merchant dictates the rate sometimes.But in some channels -- sorry, in some products, for example, credit cards, which is still our biggest product, we use -- mainly use push channels. And therefore, we feel less of the competition here. Obviously, there is a general understanding what the price or the total price of the credit card should be, but it differs from channel to channel, from person to person depending on the credit quality of people. And it's also sort of the product, which is purpose-driven and needs-driven. So different people use credit cards in different ways. And some sit in grace period and pay nothing, and some are -- some pay interest because they are revolvers.And in this product, for example, very important the size of the loan because some of the parts of our credit revenue is structured as commissions, for example, I don't know, cash withdrawal commission or annual fee, and therefore, on a smaller balance and credit card. And we are -- we like our approach of being a sort of low-and-grow approach where we really issue small ticket credit card loans, where yield is optically higher, especially in the beginning of the life of your newly acquired customer.Another interesting product is personal installment loans and where we sell -- where we mostly cross-sell to our current accounts customers. And again here, we -- in a sense, we can dictate the price ourselves. So again, to reiterate, it's different in different products and in different channels. And if we sort of weight -- find some sort of weighted average, I would say that the price competition is less important for us, less problem for us than for the general market.
That's great. My first question is about the regulatory changes from the Central Bank from October. Have you assessed the share of loans for which this quite will go up? Is it meaningful at all?
So I think it's mostly for the credit cards. So -- and it's -- again, it relates to the new lending. So it sort of have to migrate over time. So it's certainly mostly limited to sort of half of our portfolio, which are credit cards. And then again, it will take some time to migrate. So the initial burden wouldn't be very healthy, but then it will grow over time. Difficult to give some granular information on this right now.
That's fine. Yes. That's fine. That's fine. And my last question, if I can ask such a question. Have you made an assessment of share -- of TCS shares traded by your brokerage client base, if this is possible to track anyhow at all?
Last time we looked -- the last time I looked at this, which was probably a year ago, maybe longer, it was around 30%, if I recall [indiscernible]. So around 30% of daily trading volume was done by -- so if I recall, it's like 40%, 50% of daily trading volume was Moscow. And half of that, roughly speaking, was Tinkoff customers in Tinkoff Investments. But don't quote me on that. We need to update that.
This would be great to see the recent numbers. It would be interesting to track...
Sure. Sure. [indiscernible]
And the next question today comes from Andrey Mikhailov of Sova Capital.
I have several questions, and I'll ask them one by one. The first question is on your loan growth targets. Do I understand correctly that these are essentially targets for organic loan growth and any M&As or loan book acquisitions are not accounted for in these targets?
Sure. So it's organic. Consider there's no M&A in there.
All right. My second question is on funding costs. We have discussed the yields, but what's your -- what are your expectations for the funding costs going to next year in 2022, when the pressure of higher rates should be the highest? And what scenarios for the CBR [ tier rates ] are your expectations based upon?
It will obviously depend on this [ tier rate ]. And if it will go up, then obviously, it will have some pressure on our cost of funds. Right now, we do not see sort of any significant upward pressure for our cost of funds.Now in our planning, we plan for slightly higher cost of funds next year. Again, there are lots of moving parts there. And personally, we don't see funding costs as a sort of significant, sort of, part of our overall equation for our profitability. There are more -- well, there are much heavier components that might change the profitability of our products and our organization in general.
And the third question is perhaps on something even more [ major ] on the fee for current protection whose growth basically is quite modest compared to a growth of the loan book. Of course, that's comparing flows to balances, but still -- and how could you explain that? And what are your expectations for this line going forward? Is it tied to credit cards? And as the share of credit cards is falling, this line is also stagnating, and maybe perhaps customers are less willing to take part in credit insurance programs -- credit protection programs. And do you actually -- do you still view this line as the core line? Or you're -- would you be happy to see it fully dry out?
Sure. So I might need to double-check this, but my understanding is that penetration of the credit protection product is not falling. So it's pretty stable. But obviously, you have to take-up -- initial take-up then you have take-up within the first couple of months, additional take-up, and then you have attrition over a period of time.So the attrition rate from credit protection -- again, we could double-check this, but I'm pretty sure it's stable. So what you're seeing is total loan book growth versus growth in the credit protection fee income, which relates to the -- mainly to the credit card business, which is growing -- which is only part of the total loan book growth, yes? So I think that's the answer to your question, which I think you answered yourself. But maybe Ilya wants to add something to that. I think that's basically it.
[indiscernible] Ilya?
Thanks, Andrey. We think we have one more question from Mikhail.
Yes. Our final question today comes from Mikhail Butkov of Goldman Sachs.
So my first question is on -- actually on retail trading. So actually, Moscow Exchange had recently outlined plans to increase the number of international securities traded on its platform to 500 by the end of this year and more than 1,000 by the end of next year. So maybe could you provide some color how your cooperation in international securities looks like with MOEX right now? Is that any way different with how it traded with local securities? And maybe what can be the developments there? Yes.
Well, thanks, Mikhail. So obviously we welcome the fact that MOEX, the Moscow Exchange, is increasing its catalog of foreign equities. That's excellent because it wasn't long ago [indiscernible]. We're obviously in close contact with the Moscow Exchange on a regular basis. I meet Yury Denisov regularly. So we're very much in lockstep there. And obviously, the more increase in catalog, the more we'll be able to offer.Our primary partner, simply because we started with them earlier and because they've got a larger catalog of foreign equities, is obviously the St. Petersburg Exchange, as Sergei mentioned earlier in an earlier question. But over time, there may be a bit of a redistribution as Moscow Exchange grows its catalog.But if kind of take a step back from that, there's a question as to splitting up between Moscow and St. Petersburg, the split between equities and -- so within equities of foreign versus domestic and then between equities and other instruments, obviously, first and foremost, bonds. And it's something obviously we work with at the level of our broker, Tinkoff Investments. And in the longer term, you would expect that to be a far greater share of bonds.And the longer customers are with us in the retail buy and hold segment, the more likely they are to move from equities to bonds, but certainly from foreign equities to domestic equities and bonds. And so the older retail customer is more likely to have bonds. And the longer they are with us, the more likely they are to have bonds. So I think that kind of goes a long way to answer your question.
Yes. Another question here on retail trading is that like the key -- the policy rate has been increasing since the last year. So far, the deposit rates, like reported by CBR, they are broadly flat, not really increasing at the same pace. And one would -- may debate that there's going to be some negative correlation between retail investor interest in trading and the average rate for the deposit rates.So far, probably this could not be seen. But did you make any pause or like research among your retail trade investors? What are the biggest drivers for them to trade? And how important for them is -- might be the policy -- the average policy rate for the country?
To be honest, that would be a question that we can follow up on to our colleagues in Tinkoff Investments. I'm not aware that they made something like that, but they probably did. So I don't know the answer in terms of specific surveys of our customers.But I can just reiterate that we don't see any changes because I really don't think that our customers who are Tinkoff Black customers, potentially with [indiscernible] and also simultaneously, Tinkoff Investments brokerage customers, I don't think they're sensitive to a tickup of deposit rate by 0.5%. It doesn't change their behavior. As I said earlier, if it goes up by 5%, then maybe it will change their behavior, but not now. So we're seeing this drift and move of funds from deposits to investments.
All right. Yes. And the final question for me. Usually, quite a good chart in your presentation on the Page 31. It is on the retail loan share on the market up to 3 years. And for the first time, quite in EBIT, we can see some step-up in the market share of other banks. So do you see that as competition for you? And probably what is driving the demand there? Maybe how do you see this going forward? Do you so this as competition by any means?
Yes. So our market share has been going up over time, as you can see, 2019 to 2020, 2018 to 2019. So our market share has been -- sort of has remained the same for the first 6, 7 months of this year. You can see that other banks -- some of the leading banks in Russia have come out of COVID crisis and have restarted their lending programs, which probably means that our market share has remained flat. But I don't think there's really any much -- any read across -- that you can make meaningful read across in 6 months worth of data. So as you can see, we're growing our loan book very actively in all of the lending products without exception, but this just shows that other banks are as well, which shows that it's a healthy market.
Well, I think the question really is about the gray part of this chart, other banks. And they -- yes, they increased after 2020. But if you look at on a longer-term trajectory then, it's actually the same as in 2019 and a little bit less than 2018. So I think the question really is why other banks went down significantly in 2020 and then rebounded. And I think the answer here is because of the pandemic crisis. It's probably especially important for the banks who are not, sort of, consumer lenders and not the biggest players in the market. They work through the branches, and it has to do something with it, I think.
There's also some big banks in that gray box, yes? So there's Gazprombank; there's Rosselkhozbank, Russian Agricultural Bank; there's [ Promsvyazbank ]; and a few others. So -- Sovcombank. So they've just picked up again. That basically explains the numbers. [ So ] long term, that number is going down and has been and will continue to.
And maybe as a follow-up here. Do you think that the latest Central Bank decision on the increase of PTI -- PSK ratios relates more to this box? So -- yes. And I think relative to you, it -- the question had already been asked.
So I'm not sure I understood the question, Mikhail. So if -- so in what way does PSK relate to this box?
Yes. I mean in terms of the relative increase of the risk weights for unsecured loans, which is -- which should be in power from the October. There were highlighted some loans with the -- the particular area of concern for Central Bank for their loans at high -- at very high interest rates and for consumers with a higher level of credit indebtedness levels. So is that -- do you think it is mostly related to this part of the segment, other banks, so 25 -- which is 25% market share and not really to you and the rest of the named banks?
Sure. So I mean, I think basically, irrespective of the relative shares within this column on Slide 31, if you look at the number, in absolute terms, yes, RUB 3.5 trillion. It's got a lot of zeros on the -- which is a lot larger than the previous year's disbursements in total.So it's not about the gray box or the green box or any other box. It's about the total market that the Central Bank is looking at. So there's a bounce back effect after the COVID crisis as Ilya has explained, which is, I'd say, Central Bank at least is normal. So there's been a catch-up, but it's kind of like pent-up demand.But there's also an element of lots of different players in the market speeding up their lending programs in a market that is good for lending and not wanting medium term the market overheat, which is why the Central Bank is increasing cooling measures across the market. And the -- so I suppose by implication, we would expect, generally speaking, the players in the gray box to have less capital or less ability to deal with those risk weights.So they don't have organic capital generation capacity, they don't have the ability to raise capital, and they don't have the -- they tend to have less adequate capital buffers and therefore, it will affect them maybe disproportionately compared to the other colors in this column. But that's -- we'd have to go down into the details and into weeds to understand that.Thanks very much indeed to everybody. Have a good evening or day. Bye now.
Ladies and gentlemen, that will conclude today's conference call. We thank you for your participation. You may now disconnect.