TCS Sinks in London on Concern Slower Growth to Boost Bad Loans

Apr 03, 2014 2:23 pm ET

April 3 (Bloomberg) -- TCS Group Holding Plc, owner of Russia’s third-largest card issuer, fell the most in four months in London after JPMorgan Chase & Co. said the company may boost its bad-debt provision amid forecasts of economic slowdown.

TCS, which trades at about a third of its initial public offering price, sank 18 percent to $6.60 in London yesterday. The stock has dropped 58 percent this year.

Two months after TCS’s founder Oleg Tinkov criticized fund managers for acting as speculators in sending the stock 28 percent lower, Chief Executive Officer Oliver Hughes told analysts in London today that the bank may increase its annual target of delinquencies, according to JPMorgan and VTB Capital. Darya Ermolina, spokeswoman at TCS, declined to comment on the details of the meeting. Russia’s $2 trillion economy will probably expand less than 1 percent this year, from 1.3 percent in 2013, central bank Chairman Elvira Nabiullina said yesterday.

“The banking sector is getting hit by slowing economic growth in Russia,” Ivan Manaenko, head of research at Veles Capital in Moscow, said by phone. “The retail banking sector, where TCS is the most active, is getting hit the most as consumer demand weakens.”

The lender, founded as Tinkoff Credit Systems in 2007 and part-owned by Goldman Sachs Group Inc., has issued more than 4 million cards in Russia, according to the company. The bank is modeled on Capital One Financial Corp., which pioneered the distribution of credit cards through direct mail.

“We see risks to the 2014 earnings targets,” Alex Kantarovich, the head of Russian equity research at JPMorgan in Moscow, wrote in a note to investors. “Delinquency rates among the customers not delinquent in the previous month are unusually high, a telling leading indicator.”