Thanks very much, Carla. Hello, everybody. It's great to welcome you to our second quarter, first half 2025 results call. As usual, I'm joined on the call by our CEO, Vakhtang Butskhrikidze, and our CFO, Giorgi Megrelishvili. We'll start with a presentation, then we'll move to Q&A. With that, I'll hand over to Vakhtang. Thank you.
Yeah, thank you, Andrew. Hello, everyone, and thank you for joining us today. I am pleased to present another strong set of results for the second quarter. As you can see, our gross net profit reached GEL 346 million, up by 5% year-on-year, while the return on equity was about 24%. In Georgia, we maintained high profitability with double-digit growth in our loan book and operating income, whilst maintaining a solid capital position. Over the same period, Uzbekistan's operating income increased by an excellent 86%, while our loan book more than doubled year-on-year. We also surpassed 2 million registered users, a great achievement. We continue to build out a digital ecosystem in Uzbekistan. In the second quarter, we launched the country's first fully digital insurance service. We also agreed to acquire Builds, which is Uzbekistan's leading B2B SaaS platform for businesses serving the retail sector, thus strengthening our business banking proposition.
In addition, I am proud to share that TBC Uzbekistan became the first and the only business from Uzbekistan and Central Asia to be included in the world's top fintech companies list of 2025 by CNBC and Statista, which is excellent recognition for what Nika, Oliver, and the team are building. Thanks to our strong profits and the solid capital position, the board has declared the second quarterly dividend of GEL 1.75 per share, bringing the total first half 2025 dividend to GEL 3.25. We have also announced a GEL 75 million share buyback, which reflects our commitment to returning excess capital to shareholders. Now turning to Georgia. Georgia's economy continues to perform very well. Real GDP growth reached 7.1% in the second quarter, bringing the first half of growth to 8.3%. Our macro team has upgraded its 2025 GDP growth forecast to 7.1%.
The inflation rate reached 4% in June, surpassing the NBG's 3% target. Even so, inflation is expected to ease over the next few months. On the next slide, I want to highlight the consistent and high profitability that our Georgian business delivers quarter- after- quarter. Over the past three years, average return on equity has been about 25%, with the loan book growing on average at 17%. As we see on slide 8, we continue to be a leading player in Georgia. In the second quarter, our gross loans increased by 11% year-on-year, and I'd like to highlight the excellent progress we are making in one of our key focus areas of unsecured consumer lending. As our first consumer loans increased by 45% year-on-year in the second quarter, we continue to gain market share in this segment. Over the same period, our total customer deposits grew by 10% year-on-year.
We continue to hold strong positions across both lending and deposits, and we are consistently improving the way we serve individuals and businesses. This leads nicely on to slide nine, which shows the growing trend of digital engagement within our retail customer base in Georgia. As of June, our digital monthly users exceeded 1.1 million, with 66% penetration in our active customers. Over the same period, our daily active users to monthly active users ratio stood at a very decent 47%. I'd also like to highlight that our monthly active users have been consistently growing by around 50,000 quarter- over- quarter over the past year. Our growing share of fully digitally issued consumer loans and retail deposits shows that our customers are highly engaged with our digital channels. Digital consumer loan issuance surpassed 80%, while deposit offloading reached 70%.
Now, on slide 10, I'm pleased to share that TBC Bank has been recognized as the best digital bank in Georgia by Euromoney, reflecting our ongoing commitment to innovation and digital excellence. For example, in the second quarter, we introduced a number of improvements to our mobile bank application, focused on personalization, seamless onboarding, smarter financial tools of PFM and Robo Advisory, and improved user accessibility across key digital banking services. Now, let's move to our Uzbekistan business and its economy. Like Georgia, the Uzbek economy also remained very strong, with real GDP growth of 7.5% in the second quarter, bringing the first half of 2023 growth to 7.2%. Inflation is also easing, dropping to 8.7% in June, supported by tighter monetary policy. Slide 13 provides an excellent snapshot of the great progress we have made over the past few years in Uzbekistan across all the major metrics.
We have now over 20 million unique registered users, out of which almost 6 million are monthly active users. Our loan book has more than doubled year-on-year and now tops $900 million, while our deposits increased by 86%, reaching almost $500 million. Our operating income reached a record $62 million in the second quarter, doubled year-on-year in the first half, which is a testament to the strength of our core business. Net profit came in at $12 million, up over 35% year-on-year. Now, let's turn to some of our recent achievements in Uzbekistan. The uptake of our core daily banking product, Salom Card, has been excellent, with over half a million cards issued since its launch last November. At the same time, we have issued around 70,000 Osmon credit cards as we roll out the new and innovative product for the Uzbek market.
In the second quarter, we also launched a fully digital insurance offering, starting with the Credit Life Insurance, and we plan to expand the portfolio to introduce a comprehensive suite of personal insurance products. To date, we have issued over 180,000 policies. Another major recent milestone was the partnership with Builds, Uzbekistan's leading B2B SaaS platform for businesses serving the retail sector, serving more than 4,000 merchants. This will further strengthen our business banking proposition. Finally, slide 15 shows how our business in Uzbekistan continues to gain market share and is now a material contributor to the group. By the end of the second quarter, we held over 5% in the retail loans and over 4% in the retail deposits. Uzbekistan also generated 20% of the operating income and 9% of the group's net profit in the second quarter. With that, I want to pass to Giorgi, please.
Thanks, Vakhtang, and thanks all for joining our Q2 and H1 call today. I will go through our financials, and if we can move to the next slide, I'll start with slide 17. As you can see, it has been another very strong quarter from the profitability side. Our net profit has been GEL 346 million, up by 5% year-on-year. This growth is particularly notable because if you remember last year, we had a few elevated income, for example, for Epix, when the Epix was quite actually volatile, and also a GEL 10 million recovery from the provision. Despite that, we still delivered 5% growth in net income that translated very nicely into 24%+ ROI. If we go to the next slide to go through the key drivers, our top line growth is very strong, 23% year-on-year, and that's driven by all revenue lines.
Net interest income is up by 27%, non-interest income by 15%. That's driven by our very strong fee and commission income growth, 26% year-on-year, and that's contributing to our payment businesses in both countries. If we go to the next slide, slide 19, that shows another driver of our profitability growth. We see that NIM actually exceeded the 7% level. It's been a while since we've seen this level, and we do hope to remain at this level for a while in the foreseeable future. The 40 basis points quarterly growth was driven by two factors. One, of course, TBC Uzbekistan is growing its portfolio that is much higher yield, higher margin loans. On the other side, we're also very pleased to see that NIM increased in Georgia as well. It was up by 40 basis points to 5.9%, and that's driven by kind of increasing loan yields.
Vakhtang mentioned our consumer loans are going up. That's one of the drivers. We are very happy to see our strategy working out, and also continuous management of our balance sheet. That also supports our NIM increase. Now, if we go to the next slide, slide 20. Our cost problem dynamics remain, I'd say, quite stable. We increased 22% year- over- year because we are scaling up business both in Georgia and into TBC Uzbekistan. 45% cost growth coming outside Georgia. On the other hand, we are growing our revenues as well because, as you can see, our cost-to-income ratio remained almost flat. Actually, it's even slightly ticked down to 37.6%. If we go to the next slide, slide 21. Again, we are seeing, now I would like to discuss our cost of risk dynamics. In Q2, our group's cost of risk stood at around 1.6%.
It's up by 20 basis points, but breaking down by the countries, Georgia's cost of risk remains stable on a quarterly basis, 80 basis points. No change, very stable, very healthy level. While the cost of risk in Uzbekistan stood at 9.9%. That's obviously a higher level than we actually expected, but that's driven by a few factors. Over the past few quarters, we have been testing our new CNA files, less data-rich customer segments in our core ICL products. As well, we actually also grew into our post-merchant partners into the longer tail. This is part of our data-driven test and learn approach, and although much of this new business is profitable, in H2, we will ease down a bit in some of the newer segments and will remain focused on profitable growth. We have also seen some, let's say, operational issues around collections.
That's mainly due to telecoms capacity, which is basically a function of very strong loan growth, but we have sorted out this issue already. Overall, we do expect our cost of risk to remain around 7%- 10% range over the next few quarters, but we will ensure the business delivers high profitability. One thing I also would like to highlight is that we are seeing now positive trends. Both first payment defaults, second payment defaults are coming down. July dynamics, the initial numbers are also showing us a better trend, and probably Q3, we should expect to be lower than Q2. If I move to the next slide, here we see our portfolio dynamics. Both loan and customer funding are growing very nicely. Loan growth is 16% year-on-year. Customer deposits are 14%, both on cost and currency basis. Probably if we go to the next slide, Andrew, 23.
I now will move back to TBC Uzbekistan. Here, again, we see very strong performance. Our top line is up by 100%. Our operating income doubled. It is to $120 million. Our net profit also grew very nicely. It was up by 36%. Maybe not as strong as 100%, but still very strong growth. The difference is driven by provisions that we expect to, again, stabilize quite shortly, and we do expect very strong profitability growth over the next quarter or a few quarters. Our return on equity is 20%, and again, we target to go our like mid-20 or higher 20s starting even from next quarter levels. Next slide. I'll continue on the TBC Uzbekistan slides. Like the NIM was very healthy, 23%, although slightly softer compared to the last quarter, and there are a few drivers.
We have always kind of guided or communicated that maintaining into mid-20s is probably not realistic, but we do expect and are confident to remain 20%+ NIM territory. The tickdown is driven by general market dynamics that drive loan yields down, and as well as we diversify into products more and more, we will see like our again is coming down. However, on the other hand, we also see the funding costs coming down, customer letter deposits coming down. Overall, this more or less offsets each other, but again, as I mentioned, probably it will continue coming down if we call 20%+ NIM coming down. I already covered the risk side quite extensively, so I won't stop here and move to the next slide. On the loan side, another phenomenal outcome, our loan book doubled year- over-y ear. It's already $900 million+ .
As you remember, our target is $1 billion by year-end. We are almost there, so we don't have any like again doubt achieving or let's say even overachieving this target. Our growth continues very strongly. On the right-hand side, it's the first time we are showing this data. Our portfolio breakdown, our core product, how we started in Uzbekistan, is that cash loans still 78%. We are also seeing that other products are their share are also going up. Post-lending 11%. Very pleased to see business lending is 7% and credit cards, Vakhtang already mentioned, is now 4% around. This trend will continue. Our portfolio will shape and we'll show you the progress quarter- over- quarter. Now, next slide, Andrew. Not much to say on the slides rather than we have very strong capital positions in both countries, comfortably above regulatory limits. We remain very well capitalized in both countries.
If we go to the slide, exactly this very strong capital positions combined with very high profitability that I have been talking throughout my presentation allowed us to pay $75 million share buybacks that will start in the second half of August and also to declare GEL 1.25 per share lari dividend. That brings total...
GEL 1.75.
That brings our overall dividend for H1 2025. That's a significant increase compared to H1 last year. We continue to generate very strong profitability, have high capital positions, and are giving capital back to our shareholders. On this note, I will hand back to Vakhtang for some final comments before we open for Q&A.
To conclude the part of the call, I'd like to revisit our strategy targets. I'm confident that we are well on track to meet our group's net income target for this year. As for Uzbekistan, it remains our plan to and the expectation that we will hit our earnings target. As our top line growth shows, it is still a very good operating environment in Uzbekistan. That said, the developments in the first half around the regulatory headwinds and cost of risk with the fraud in the first quarter and the software risk number in the second quarter make it more difficult to meet our earnings target, but I can assure you that the team is working extremely hard to achieve this.
I'd also like to mention that we plan to outline our future plans and the new strategic targets for the next few years at our strategy day in early 2026, following the release of our full year 2025 results. Thank you for your attention, and we are happy to answer your questions.
Thank you. If you'd like to ask a question and have joined the call via Zoom, please press the raise hand icon on your screen. Alternatively, you can use the Q&A chat box to submit a written question. If you have joined us on the phone lines, please press star followed by one on your telephone keypad. When prepared to ask your question, please ensure your line is unmuted locally.
Thanks very much, Carla. The first question comes from Rahim at Investec. Rahim, please go ahead. Your line is open. I think you need to unmute yourself, Rahim.
Hi, good afternoon. Hopefully, you can hear me. Three questions, if I may. The first was just to try and get some guidance on the outlook for NIM. It's obviously a source of strong performance in the quarter, just to help us understand what the full-year outlook might be. It would be helpful. The second was, I guess, a little bit on the flip side, just the outlook for cost of risk. Obviously, Georgia's been quite stable, but how should we be thinking about Uzbekistan given the test and learn processes that have been going on there? Finally, just staying with Uzbekistan, the move into digital insurance service is quite an interesting one. Just your initial take on how that's being received by clients and what the source of kind of upside is in terms of the medium term and what we should be looking for next in that regard.
Thank you.
Thanks. I'll take the first two questions on the NIM and the cost of risk and that will cover the insurance business bit. To start with outlook for NIM, as I mentioned, would be to target to remain at 7%+ at group level. In Uzbekistan, we are at 23%. There will be some decline. It will be gradual, not immediate. Probably, as I mentioned, we are confident to be 20%+ , maybe a few pluses. It depends on the quarter, not very quickly as well. In Georgia, we landed 5.9%. Generally, in the medium term, we are comfortable with five levels. Next few quarters, it can easily be high fives. Our expectation will be again high fives. That's on the NIM side, and we do expect nice growth into net interest income both in Georgia and Uzbekistan at group level.
If I go to the cost of risk outlook in Georgia, the portfolio is very stable. We have very robust and decent credit quality. Again, as we guide, somewhere between 80 and 100 basis points is our normalized cost of risk, and we do expect to stay at this level, sometimes maybe a bit lower. On Uzbekistan, the cost of this year, a few moving parts, and I just would like to take some time to cover that because probably some of you may have questions and to kind of clear out this topic. First of all, I would like to highlight that it's a growth business in the frontier market, and we have been coming to this point without any bonds, but again, it's a frontier market. We need to grow business into new, less data-rich segments.
One thing I would like to highlight, for example, two thirds of the Uzbekistan population have never taken a loan. In credit bureau, we only have one third of the population. Therefore, we need to understand which segments are profitable. We can go gather the data. That's exactly our test and loan approach that we are taking, and that helps us to gather data, determine the most profitable segments that will fuel our growth profitably. We have done a lot of tests to understand which segments now we can do good business. We have quite a clear idea. Of course, these tests have a cost, and that's exactly the cost we are coming through, but they also have benefits that will be coming through next few quarters or actually in the longer period.
The bulk of the business also we book this profitably, just immediate short-term pains that we are taking at the moment. We have done our job, and now we are slowing down a bit also in some newer segments a bit, although we will focus on the kind of to continue our profitable growth. Now, also, that means that we are continuing the strategy in a disciplined, data-driven, and risk-aware lending strategy, and we will continue expanding into new segments to integrate new data sources, understand new customers. As I mentioned, we are already seeing our first payment defaults coming down, second payment defaults are coming down, and we are carefully looking at the profitability level. Generally, as I said, like probably somewhere 7%- 10% next few quarters is the right level to think about, and we need to see how business evolves.
Our key focus will be, as I mentioned, next few quarters to kind of go back to mid to high 20% return on equity that's high profitability on a longer-term stabilized basis. 30%+ return on equity for this business remains untouched. That's the level we'll be targeting. That's about the cost of risk, and I hand it back now to Vakhtang for the third part.
Yes, as we mentioned already in our presentation, we began our insurance business just recently, a few months ago, and we are in the beginning of our journey. We sell only the credit life insurance product, but we have plans how to bring the new type of the insurance product as we are migrating the semi-businesses in addition to other products in the bank. Till now, it's a beginning. I mentioned in my part of the presentation, we sold only 180,000 insurance products to the market, but as the department is growing up, it's a huge potential for us. Not only insurance products, but also, as we mentioned in the presentation, we have more than 500,000 debit cards, Salom cards. We have more than 70,000 credit cards, and the business is growing up.
There is a huge potential in the fee and commission income, and probably in the coming quarters, we will see high growth in fee and commission income from the insurance and from the other type of the fee income. More details and the long-term views we will bring on our investor's day, what I mentioned in the beginning, in the first quarter of the next year.
That's great. Thank you both very much.
Thanks, Rahim. Next question comes from TJ Boyle. TJ, please go ahead. Your line is open.
Hi, good morning from the U.S., and thank you so much for the call. I have a question on Uzbekistan. I saw you share the chart of your market share in retail loans. Can you just clarify what is included in your definition of retail loans? Does that include both secured and unsecured and personal loans, credit cards? Just a little bit more color on how you define retail loans would be helpful, and I have a follow-up after that.
Definitely. It's all the loans that retail customers take. It's credit cards, secured mortgages as well. That makes 5% even more, I would say, impressive because we don't have any mortgage businesses or secured businesses at the moment. We just have ICL and credit cards, and we are already at 5%.
Okay, you intend to go into mortgages at some point?
Not in the immediate future. At the moment, we are happy with what we are doing. We see our products suit after a long period. Who knows what happens, it's not our focus.
Okay, 2026 minimum. Okay, does retail loans include car loans for you?
We have.
Like auto loans?
Yeah, yeah, auto loans. We have it, but a very small part. It's not material in the portfolio of those businesses.
It's over $1 million secured loans?
Yeah.
Okay, and what about microloans, SMEs? That is classified separately, right? Or is that part of retail loans?
It's separate.
It's separate. Okay, what do you think is the realistic? You're at 5% share of retail loans today. What do you think is realistic market share that you can gain, that you can have in Uzbekistan retail loans, say, three to five years from now?
Thank you for this question. As we mentioned already, we want to bring that next few years, I mean three to five years, plans, what we want to achieve in Georgia and Uzbekistan in probably February, March on the investor's day. We will have very ambitious plans. Minimum, we will target minimum to go to 8%- 10%, but more detailed and clear plans we'll bring in the first quarter of 2026.
Okay, thank you. Can I ask another question? Do I have? Okay, yeah, some of the, I'm still learning about the Uzbekistan banking sector, but one of the things that struck me was that liquidity is still like a challenge from a system-wide point of view. You have a system LDR that's about 200% based on the recent IMF report that I see, and correct me if I'm wrong, but that's the number that I saw, which means that to sustain at the pace of growth that you're in, that you're delivering, you have to continue to gain market share of deposits from the incumbents because system-wide liquidity is constrained. First of all, do you agree with that hypothesis? Can you elaborate a little bit more on your deposit strategy? Does that, as part of that, include targeting deposits of established conventional banks?
Thanks, and I'll take that question. To start with, I agree that customer funding is probably one of the areas we found a bit more constrained a few years ago when we entered. One of the strategies we took, we started as a deposit taker in the country, and since then, we have been, and then we added loans. Since then, we have been growing really nicely. As you already, we have 4% market share as a digital bank. It's very kind of, we are one of the fastest growing banks in the deposit market. Therefore, we are going to get a big actual market share. We don't see any issues. As the question comes, how the market is developing and how the market will grow, we see a very nice level. It's a frontier market. It just started.
People are learning on saving culture, and the regulator, the local government is again promoting this, and we do expect this trend to change and become better and better as time passes, as we've seen in many other countries. To summarize on one front, on the deposit side, we are expecting the deposit growth to actually accelerate in the country, and we continue getting the big share. On the other hand, the other question, how we are going to fund, because obviously our target growth can't be really funded, I'll be very frank and direct here, only through customer funding. We don't see any issues here because we are very capable on wholesale funding. There are a few streams on this. For example, in Georgia, we operate with every IFI eco name, honestly. Probably there's none we did not work.
Now we are working with IFIs to fund Uzbekistan business, and we have already more than a dozen deals with them. It's both in local currency, and again, the fund, this circle is going up and up and increasing. Another thing is the wholesale fund, the capital markets. We just printed $200 million, let's say, equivalent bond into some. So far, it was a tough option. So far, we only used $140 million. We still have $60 million to be used. If needed, Uzbekistan will become part of the capital markets. Therefore, we do have capacity, capability to fund any gap through, I would say, through wholesale funding. We don't foresee any challenges on that side.
Thank you. I have another question, but I'll go back to the Q&A so I can give other people an opportunity to ask the question.
It's fine, TJ. While you're on, you can just ask.
Okay, this will be my final one, I promise. On asset quality, I do recognize there's a massive opportunity for consumer and lending in Uzbekistan. You mentioned the statistics that only about a third of households have taken credit. One of the things that I read was that household credit has also expanded a lot over the last five years or so. We are now starting to see signs. It might be like pockets, but we see signs of stress. You had an incident in your last quarter. The central bank, it seems like it's trying to restrain consumer credits, certain segments.
What are you learning in the cause of the point that you made earlier about going into certain sectors to, I'm sorry, I'm missing the frame of what I used, but you were probably, you were indicating that you were taking lessons to be able to better serve the individual borrower. What are the key lessons that you've learned about credit in Kazakhstan in terms of mitigating risks?
Okay, probably I'll take that question. To start with, there are a few bits and I'll try to break them down. The first bit, like the fraud you mentioned in Q1, it was isolated. One of the incidents has nothing to do with the overall credit quality of the country or cycle. It was a very unfortunate event that we contained. We extensively discussed that in Q1, and we are confident that we closed all the loopholes from this perspective. I will just split that bit from the overall credit quality. On the credit quality side, we don't see any signs of the cycles. Like as I mentioned in the few questions, yes, our cost of risk is ticking up and also the regulator trying to put a cap on the consumer lending. I'll try again to split these two parts.
From a regulator perspective, putting a 25% cap is more easier to try and to push and somehow facilitate SME lending. Their key focus is to increase the business and the SME business. That's where their focus is, and they want to see more activity into there. That's probably one intention. Another one, as I mentioned, there's no signs, but in the future, there may be some signs. For example, they are somehow trying to preempt events, kind of like work, let's say, in advance to ensure that it is managed and controlled growth within the sector. These are the two aspects from the regulator side. Again, that's not happening because they see any credit quality or cost of risk upstick. On our side, I already mentioned it. Again, we don't see any issues in the high single digits where we stand. It's our test and learn approach. It's lessons.
I'd say we are actually investing into this to understand well the pocket and profitable segments. We are to grow, how to grow, and we are on top of these things at the moment. As I mentioned, now we are going to slow down in a few sectors that we found are not very profitable. We are going to grow into more sectors, like some other segments we found to be very profitable. You will see again our profit from our profitability numbers from the next few quarters and years to come.
Do you want to highlight any specific sectors that you probably would want to pull back from and sectors where you see more opportunities?
It is all consumer and very specific internal credit segments. I don't think it's somehow very technical things, but we have our very technical, detailed split of different customers as a profile.
Okay, thank you. Thank you so much. I appreciate the time. Thank you.
Thanks, TJ. Jan from Wood, your line is open. Please go ahead. Hi, Jan, can you hear us?
Okay, now I think I'm unmuted. Thank you for this presentation. On Uzbekistan, actually, all my questions are on Uzbekistan. On monthly active users in the country, it looks like there's a decline Q1- Q2. Given the new product launches, what should we make of that? That's my first question. On NIM, can you maybe talk about the yields on new products that you launch so we can maybe get an idea about how the spreads on those look like? Finally, on cost of risk, I'm just trying to gauge how much of a correction you expect because the 7%- 10% range is pretty wide. I was wondering if you could narrow it a bit for us for modeling purposes. Thank you.
Yeah, thank you, Jan. Hi. I will take the first question and Giorgi will take the second question. About the MAU, the main reason of the MAU in Uzbekistan is the PayMe. In PayMe, the reason is the regulation. Regulations recently have changed the requirement on the customer. The bank's requirement is to ask the customer's IDs before, for the total market, and before it was just the name and the mobile number. If you look in the medium term, it's better for us because we will know customers better. We made already that changes and we are making a lot of promotions, services, and now we are bringing good customers. We have already July figures and the situation in PayMe stabilized and probably from the local growth will begin to grow up. It was the main reason.
To summarize, the reason was in PayMe, but in the bank, we continue to grow up the customers.
Okay, understood. Just to clarify, Vakhtang, the regulator requires more information from the customer's ID.
ID requirement came in the payment providers, which was not before. We were asking only name and the mobile number in the payment, but now it was.
Great, thank you.
Okay, thanks. I'll cover the second and third question. On the NIM side, probably it's like I'll cover these questions. You said, as I mentioned, for the new products, again, we just launched them. It's very early days. It's very premature because we are experimenting and trying to find the best sweet spot. I would say it's very early to speak and guide any kind of levels. Probably we need to wait before year-end and somewhere early next year. Our strategy, we will provide more details over the new products. In general, as I mentioned, 20% to plus is NIM in the short term and 20%+ at least in the medium to long term is something we expect on this side. On cost of risk, as I mentioned, it's a frontier market.
Many things are moving around and we make decisions on a daily basis on a profitability and risk-adjusted profitability basis. It's very difficult to say. One thing that we can assure is that our decisions are very data-driven, very conscious, whatever is coming. Within this range, we should focus on profitability. As I mentioned, mid to high 20% in the short term, next few quarters, and overall longer term, 30%+ . A few pluses for the business is the right level to see that correct just one input into this profitability.
Understood. Thanks, Giorgi.
Thanks, Jan. I think we have a couple of questions on the phone lines. Carla, I'll hand over to you.
Our first question from the phone lines comes from Simon G. Nellis with Citig roup.
Oh, hi. Can you hear me?
Yes.
Hello?
Hi, we can hear you.
Can you hear me? Yeah, actually, most of my questions have been answered. I just have one last technical one, which is the OCI was quite a large negative this quarter. If you could give some color on that.
Which area?
The other comprehensive income was a big negative.
I can't. At the moment, we had.
The other comprehensive income, Simon, yeah?
Yeah, it was like a negative $52 million. I'm just wondering what was behind that. I guess it's securities driven, but.
It's maybe a few sort of notices. It's only single. Nothing. It is security. I need to, again, I can't get on my because I don't recall such a magnitude number. Maybe I need to check this.
Yeah, Simon, we'll check and get back to you on that.
Thanks very much. Thank you.
The next question from the phone lines comes from Gustavo Campos with Jefferies.
Hello. Yes, thank you very much for the presentation. Congrats on the results. I had a few questions. First of all, given the trajectory of the lari, how do you see the contribution of lari deposits in your balance sheet? Do you expect more contribution of lari deposits compared to other currencies? Do you also expect it to potentially increase the percentage of dollars or euro loans in your loan portfolio? How do you see these two things evolving in the short term? Thank you.
That's okay. I'll take this as well. If you see and if you observe over the extended period, dollarization for some loan and deposit side has been coming significantly. Like a few years ago, there have been times that it used to be 80%. Now it's around 50% for some loans on the deposit side. That's a clear direction, intention, and target both for the bank and the regulator and for the system to decrease the dollarization in both areas. As I mentioned, we are seeing very good progress on the loan side. It's increasing. On the deposit side, we have some small changes in the trend in the last quarter when we have a currency volatility. The USD deposits increased, but now we are seeing the trend actually reversed and now local currency deposits are coming back and increasing.
The general direction, what we should expect is that local currency-ization will continue. Local currency-ization pace will increase. One thing we need to keep in mind is that Georgia is an open economy, so it can't become zero. Again, difficult to say which levels we should be. I don't know, 30%, 35%, or whatever. At the moment, we are at 50%. Over time, and it won't be like overnight, it will be a journey taking over three weeks in the time, you should expect local currency-ization on both sides to continue.
Also, to add what Giorgi is saying, you probably remember that recently a regulator in Georgia increased the minimum requirement for what could be disbursed in the local currency, and it went up to $800,000. The regulator in Georgia has a claim also that the threshold will grow up in 2026. The dollarization on the asset side, on the loan side, also helps to de-dollarize the liability side. In the medium term, we believe that trend will be continued by a minimum few percentage points.
Thank you very much. Just as a quick follow-up, from looking at your dollars and your euro loans, could you remind us if those are still majority extended to companies, to SMEs with no export revenues? Is that still the case?
Let's put it this way. It was very subtle. When we are doing the underwriting, we review the match on the ethics side. If there are some discrepancies between the income and the loan, we do take sufficient, I would say, buffer for the potential ethics evaluation. That is factored in also into the collateral. Therefore, what we can say is that from a credit risk perspective, probably the key driver is that lari and ethics loans have the same credit risk. That was very well confidential during COVID. On the retail side, there's a lot of, let's say, regulation. I won't go into details. We covered it a few times. Also, on the legal entity side, when lari devalued by 15%, we didn't see any kind of differences between the delinquency rates between ethics and lari.
Understood. Thank you for the caller. My last question is on the total amount of IFI loans you have that are maturing over the next 12 months. Could you please disclose the overall amount if you can?
Yes, probably it's not significant. From what I can say, for example, last year we repaid EUR 300 million eurobonds without taking a new one. We have sufficient liquidity. We are very strong because we did not need. We have a very strong pipeline with IFIs. All I can say is it's not a very material amount. We have a much larger pipeline already for the next year.
Okay, thank you very much.
Thank you. Just as a reminder, there's one on your telephone keypad to ask a question, or you can raise your hand if you are here on Zoom. We have no further questions in the queue.
We have covered everything. You and Andrew . That's correct.
Yeah, I think we don't have any other questions at the moment. I'm just coming back to Simon's question. I think it's just purely a reevaluation of the securities portfolio at fair value through other comprehensive income. It was about GEL 20 million in the first half of the year. Nothing extraordinary there.
Exactly, because $52 million, I could not remember of such numbers.
Yeah, that's yeah.
I would have known something else.
Yeah, that's not the movement.
Okay, great.
Okay. If there are no further questions, just to say thank you everybody very much for joining the call and following TBC in our story. Have a good summer. We look forward to seeing you in November with the third quarter results. Please keep in touch. Reach out if you have any questions, you want to speak to us. We're always around. Thank you very much. Thank you for joining the call. Goodbye.
Thank you.
Thank you.
Thank you, everyone. This concludes today's call. You may now disconnect. Have a great day.